Marriott v Attorney-General HC Auckland Civ-2008-404-001437 - [2010] NZHC 2455

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2008-404-001437

UNDER Section 172(a) of the Land Transfer Act

1952

BETWEEN

PETER JOHN MARRIOTT MICHELLE SANDRA TAYLOR COLIN JAMES BISHOP Plaintiffs

AND THE ATTORNEY-GENERAL
Defendant

Hearing: 3-5 and 10 February 2010

Counsel: D K Wilson for the Plaintiffs

J R Burns for the Defendant

Judgment: 4 August 2010

JUDGMENT OF WHITE J

This judgment was delivered by me on 4 August 2010 at 4.30 pm
pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registra.co.nz

SoliciMARRIOTT

Turner Hopkins, PO Box 33237, Auckland 0662 for plaintiffs Crown Law, PO Box 2858, Wellington for defendant

[email protected] james.burns(itcrownlaw.govt.nz

Counsel:

D K Wilson, PO Box 5153, Wellesley Street, Auckland dkw.barrister@xtira,cosiz

Table of Contents

Para No

Introduction [¹]

Factual background [6]

Pleadings [24]

Land Transfer Act 1952 provisions [31]

Issues [41]

A validly lodged caveat? [44]

Did the trustees sustain any "loss or damage" [53]

within the scope of s 172(a)?

Was any loss or damage sustained "through" [63]

the admitted omission and mistake?

Was any loss or damage "occasioned" by a [75]

breach of trust?

What was the amount of the loss or damage? [88]

Contributory negligence and/or failure to [105]

mitigate loss?

Result [114]

Introduction

Under s 172(a) of the Land Transfer Act 1952 (the LTA) a person who

sustains loss or damage through any omission or mistake in the performance of any duty, function or power imposed or conferred under the Act on the Registrar-General of Land (the Registrar-General) may bring an action against the Crown for recovery of damages. In this case there is no dispute that the Registrar-General through an employee of Land Information New Zealand (LINZ) omitted to notify a caveator that an application for lapse of a caveat had been made and then mistakenly treated the application for lapse of the caveat as a withdrawal of the caveat. The principal issues are whether the caveat was validly lodged and, if so, whether the caveator sustained any recoverable loss or damage "through" the acknowledged omission and mistake.

The caveator was the first plaintiff, Mr Marriott. Through his solicitors, he
lodged the caveat against dealings in a property which the trustees of his family trust had sold to a company called BRCB Limited (BRCB) on the basis of an alleged "buy back" agreement. The Registrar-General's omission and mistake occurred when BRCB applied for the caveat to lapse. The withdrawal of the caveat without notice to Mr Marriott enabled BRCB to sell the property to a third party.
The plaintiffs, the trustees of Mr Marriott's family trust, the Martay Family
Trust, claim that as a result of the wrongful removal of the caveat and the sale of the property without notice they were deprived of the opportunity to apply for orders that the caveat not lapse, specific performance of the "buy back" agreement and an interim injunction preventing BRCB from on-selling the property in breach of the agreement. They claim that if they had been able to take these steps they would not have lost the sum of $1.3 million payable to them by BRCB under the "buy-back" agreement. They obtained judgment against BRCB for that amount, but BRCB went into liquidation before they were able to enforce judgment. They have therefore now sought to recover their loss from the Crown under s 172(a) of the LTA.
The Crown has denied liability on the grounds that both the "buy back"
agreement and the caveat were invalid and unenforceable; the loss sustained by the trustees was caused by their own acts or omissions or the acts and omissions of other persons and not by the Registrar-General; the Crown has a complete defence under s 178(a) of the LTA, which precludes liability for loss occasioned by the breach by a registered proprietor of any trust; the trustees were guilty of contributory negligence; and the trustees are not entitled to recover damages from the Registrar-General for a lost chance.
The Crown also challenged the production of many of the documents and
much of the evidence for the trustees on the grounds that it constituted inadmissible hearsay evidence. In addition the Crown challenged the admissibility of the judgments which the trustees obtained against BRCB in this Court. I addressed these evidentiary challenges in my ruling (No 3) of 14 May 2010, which should be read with this judgment. For the reasons given in my ruling, the Crown's admissibility objections were not upheld. By memorandum dated 19 May 2010 Crown counsel indicated that there were no other admissibility matters that the

Crown wished to pursue. This means that the factual basis for the trustees' claim is contained largely in the evidence of Mr Marriott and the various documents which he was able to produce, together with the public records from LINZ.

Factual background

The family home of Mr Marriott and Ms Taylor at 257 Beach Road,
Campbells Bay, formerly occupied by them and their two sons, was registered in the names of the trustees of their family trust. After Mr Marriott and Ms Taylor agreed to live apart, they also decided to sell the family home (which had a Q.V. Capital Value of $2.65 million on 1 September 2005) in order to obtain funds to purchase separate properties.
Following negotiations with Mr Brian Stutt, a Barfoot & Thompson agent
apparently acting on behalf of a Mr Brown, the trustees agreed to sell the property to Mr Brown's company, BRCB, for $1.525 million. The trustees claimed that this was on the basis of a "buy back" agreement under which Mr Brown would endeavour to sell the property on their behalf for at least $2.7 million with the surplus over $300,000 being held in trust on their behalf and that, if Mr Brown was unsuccessful in reselling the property, it would be returned to them.
The "buy back" agreement was contained in a partly type written and partly
handwritten note dated 22 March 2005 that stated:
257 Beach Road, Campbells Bay
It is agreed between the parties that upon the above property being sold for any more than $300,000 the proceeds above this level will be held in trust for P J Marriott.
To BE SOLD IN SIX MONTHS AT MIN SALE PRICE OF 2,700,000 OR RETURNED TO P MARRIOTT WITH REIMBURSEMENT OF FINANCE COSTS.
It is further agreed that any agents fees incurred will be deducted from those proceeds held in trust for P J Marriott.
The agreement appeared to be signed by "Sara as appointed agent [for]
BRCB Limited or Nominee" and Mr Marriott. There was no evidence of the appointment of "Sara" as agent for BRCB, which was not incorporated until 24 March 2005, two days after the "buy back" agreement was apparently signed. Nor was there any evidence that BRCB had ratified the "buy back" agreement under

s 182 of the Companies Act 1993. A company search of BRCB Limited disclosed that a Mr Roy Victor Brown was the sole director and shareholder of the company.

A first version of "an agreement for sale and purchase" of the property for $1,525 million in the standard REINZ/ADLS printed form, also apparently signed by "Sara as appointed agent" for BRCB, was received by Mr Marriott on 22 March 2005 from the Barfoot & Thompson agent, but was not signed by the trustees. A second version of the agreement for sale and purchase in similar form was signed on 12 April 2005 by the trustees of the family trust as owners of the property, and, apparently, "R Brown" for BRCS. The agreement recorded that Donnell and Associates were the vendors' solicitors and Lovegroves were the purchaser's solicitors.
Mr Marriott gave evidence that he would not have agreed to the sale for $1.525 million without the "buy back" agreement of 22 March 2005. His evidence on this point was not challenged and, as indicated in my ruling (No 3) at [10] and [28], I accept it. There was, however, no reference to the "buy back" agreement in the agreement for sale and purchase and Mr Marriott took no legal advice about the agreement. On the contrary, prior to entering into the "buy back" agreement, he had received preliminary legal advice that a transaction of this kind should be avoided "at all costs" and that a mortgage would provide "exactly the same, or better, security".
The settlement of the sale of the property occurred on 15 July 2005 and the transfer from the trustees to BRCB was registered against the title to the property on 4 August 2005. The settlement statement from Donnell & Associates, the lawyers for the trustees, dated 15 July 2005 showed that the sale price of $1.525 million, after deductions for outgoings, land agents' commission, repayment of a first mortgage to ASB of $363,557.50 and legal costs, was divided equally between Mr Marriott and Ms Taylor.
For various reasons, Mr Marriott became concerned about delay in the resale of the property. Following receipt of letters dated 17 and 19 August 2005, apparently from Mr Brown, in which Mr Brown offered to sell the property back to

Mr Marriott for $1,967,624.00, Mr Marriott took legal advice and arranged to register a caveat against the title to the property.

The two letters apparently from Mr Brown dated 17 and 19 August 2005 were both marked "WITHOUT PREJUDICE", but I have already ruled that they were admissible and not protected by privilege under s 57(1) of the Evidence Act 2006: see my reasons for oral ruling (No 2) dated 14 May 2010, which should also be read with this judgment. On receipt of these letters, Mr Marriott consulted a solicitor, Mr John Stirling of Turner Hopkins, who wrote two letters dated 22 and 25 August 2005 to Lovegroves, the solicitors for BRCB, setting out Mr Marriott's position based on the "buy back" agreement: see reasons for oral ruling (No 2) at [31]—[35]. Mr Stirling gave evidence that no reply was received to either letter. Significantly, the existence of the "buy back" agreement was not challenged by or on behalf of BRCB.
Mr Stirling also gave evidence that he was instructed by Mr Marriott to register a caveat against the title to the property to protect the interests of Mr Marriott on behalf of his family trust and that he consulted Dr D W McMorland about the wording for the caveat. The caveat signed by Mr Marriott on 26 August 2005 and registered against the title to the property on 29 August 2005 stated that the estate or interest claimed by Mr Marriott in the property was:
Pursuant to a constructive trust arising out of a transaction entered into between the caveator as beneficiary and the registered proprietor BRCB Limited as trustee in or about March 2005.

By letter dated 30 August 2005 addressed to BRCB care of Lovegroves, the Registrar-General gave BRCB notice that the caveat had been lodged.

Following receipt of notice of the caveat, a solicitor for BRCB lodged an application for the lapse of the caveat under s 145A(1) of the LTA on 19 September 2005. By omission, the Registrar-General failed to give Mr Marriott, as caveator, notice of the application for lapse of the caveat as required by s 145A(2) of the LTA and instead, by mistake, treated the application for lapse of the caveat as a withdrawal of the caveat (under s 147 of the LTA). A withdrawal of caveat was registered against the title to the property on 22 September 2005.

[18] BRCB on-sold the property to a Mr Smith for $2.025 million on 7 October 2005 with the transfer of the sale from BRCB to Mr Smith being registered against the title to the property on 12 October 2005. BRCB was able to on-sell the property to Mr Smith because Mr Marriott's caveat had been wrongly withdrawn by the Registrar-General. BRCB was obviously aware that its application for the caveat to lapse had been treated as a withdrawal of caveat. BRCB was also aware from Turner Hopkins' letter of 30 September 2005 to its solicitors, Lovegroves, that Mr Marriott was unaware of the withdrawal of the caveat. BRCB knew from the letters of 22 and 25 August 2005 from Turner Hopkins to Lovegroves and from the lodging of the caveat that the trustees relied on the terms of the "buy back" agreement. BRCB took advantage of the Registrar-General's mistake to on-sell the property to Mr Smith in breach of the "buy back" agreement.

Mr Marriott gave evidence that he did not discover that the caveat had been withdrawn and the property on-sold until November 2005. His evidence on this point was not challenged and I accept it. His evidence was consistent with the letter of 30 September 2005 that Turner Hopkins had written to Lovegroves obviously in ignorance of the fact that the Registrar-General had already withdrawn the caveat. Mr Marriott's evidence was also consistent with correspondence from Bell Gully, whom he consulted in November 2005, advising him that the caveat had been withdrawn and the property sold to Mr Smith, and with correspondence between Turner Hopkins and LINZ in November 2005 giving notice of Mr Marriott's intention to take Court proceedings against BRCB and to look to the Crown for any shortfall.
In April 2006 the plaintiffs, as trustees, issued proceedings in the High Court against BRCB for breach of the 22 March 2005 "buy back" agreement. Judgment was entered against BRCB for $1.3 million plus costs and interest on 4 July 2007 by which time BRCB was in liquidation and the claim was not defended. As already noted, the Crown's challenges to the admissibility of the judgments that the trustees

obtained against BRCB in this Court were not upheld: see ruling (No 3) dated 14 May 2010 at [30]—[36] and [38].

No recovery was obtained from BRCB, which was struck off the Companies Register on 30 November 2007. This meant that the trustees had exhausted their remedies against BRCB for breach of the "buy back" agreement.
Turner Hopkins, on behalf of the trustees, wrote to LINZ in September and October 2007 seeking recovery of the judgment obtained against BRCB from the Crown, but liability was denied. The trustees therefore issued the present proceeding against the Attorney-General on behalf of the Registrar-General seeking compensation of $1,402,600 under s 172 of the LTA for their loss. They claim that their loss was caused by the Registrar-General's mistake in treating the application for the caveat to lapse as a withdrawal of caveat and the Registrar-General's omission to give Mr Marriott any notice of the application for the caveat to lapse.
The trustees called valuation evidence at the trial from Gordon Edginton, a registered valuer• and a director of Prendos Limited. He valued the property at 257 Beach Road as at 1 October 2005 at $3.1 million. Mr Edginton did not produce a detailed valuation and under cross-examination acknowledged that he had taken into account post October 2005 sales figures. Notwithstanding these criticisms of his evidence, Mr Edginton's valuation was broadly consistent with the Q.V. Capital Value of $2.65 million on 1 September 2005 and the minimum on-sale figure of $2.7 million in the "buy back" agreement of 22 March 2005 and did not support the figure of $2.025 million for the sale to Mr Smith on 7 October 2005. It is also established that hindsight evidence may be taken into account in a valuation exercise: Wood v Wood,' and Alan Hyam, The Law Affecting Valuation of Land in Australia.²

Pleadings

The trustees' original statement of claim contained two causes of action, the first under s 172 of the LTA and the second for negligence. At the hearing counsel for the trustees indicated that only the first cause of action would be pursued. The

Wood v Wood [1985] I FRNZ 576 at 584.

² Alan Hyam, The Law Affecting Valuation of Land in Australia (4th ed, Federation Press, 2009) at 131-134.

second cause of action was abandoned. The trustees' case also focussed on s 172(a) rather than s 172(b) of the LTA.

The original statement of claim was based solely on the allegation that the Registrar-General's mistake was in treating the application for lapse of caveat as a withdrawal of caveat. At the conclusion of the hearing on 10 February 2010, however, counsel for the trustees indicated that he would, if necessary, apply for leave to amend the statement of claim to add an allegation that the Registrar-General had also omitted to give the trustees notice of the application for the caveat to lapse as required by s 145A(2) of the LTA: minute of 11 February 2010, By memorandum dated 19 February 2010 the trustees sought leave to amend their statement of claim accordingly and, as the Crown did not oppose the application, the amendment was taken as accepted.
In the Attorney-General's statements of defence it was admitted that treating the application for lapse of caveat as a withdrawal of Caveat "constituted a mistake made by a person acting for the Registrar-General of Land", At the same time, however, the Attorney-General denied that the caveat was valid in that, it was claimed, neither Mr Marriott nor the trustees had a caveatable estate or interest in the property.
The Attorney-General also pleaded that the application for the lapse of the caveat:
...was lodged by the solicitor for BRCB Limited (Stephen McDonald of Greenlane, Auckland) under abstract prepared by that solicitor which abstract wrongly stated that the "Type of Instrument" lodged was "WX" which stands for withdrawal of caveat.

No steps were taken, however, by the Attorney-General to join Mr McDonald as a party to the proceeding. The ease proceeded on the basis that the Registrar-General admitted making a mistake in treating the application for the lapse of the caveat as a withdrawal of the caveat.

In the absence of any notice of opposition to the trustees' post-hearing amendments to the statement of claim, it may also be taken that the Registrar-General accepted that, subject to the question of the validity of the caveat, the failure

to give the trustees notice of the application for the caveat to lapse as required by s 145A(2) of the LTA was an omission on his part.

In addition to challenging the validity of the caveat, the Attorney-General pleaded two affirmative defences. First, that the cause of action under s 172(a) was barred by s 178(a) of the LTA on the ground that any loss was occasioned by a breach of trust by BRCB and/or the trustees. Second, the trustees were guilty of contributory negligence in entering into the agreement for sale and purchase with BRCB and transferring title of the land to BRCB without first properly and fully investigating all relevant matters and protecting their estate, rights or interests and, after transferring the land to BRCB, not taking all steps available to protect their interests. In particular, it was pleaded that Mr Marriott failed to take adequate steps in October or November 2005 to lodge a caveat against the title to the land on the Computer Freehold Register (the CFR) or obtain an injunction or other relief when he knew that the caveat had been withdrawn and that the land had been transferred by BRCB to Mr Smith and when he believed or suspected that the transfer was "a sham and a fraud" for the purposes of the LTA.
Both affirmative defences were denied by the trustees in a formal reply, They pleaded that although the caveat referred to an interest pursuant to a constructive trust they had a contingent contractual right to acquire from BRCB title to the land which gave them an equitable interest in the property owned by BRCB. They also pleaded that transferring title to BRCB was not negligent as they were contractually obliged to do so and they secured their contingent contractual right to acquire title (also described as a beneficiary entitlement under a constructive trust) by means of the caveat.

Land Transfer Act 1952 provisions

The relevant provisions of the LTA are ss 137(1), 141(1), 143, 145A, 147, 148A, 148B, 172(a) and 178.

Under s 137(1):

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:

(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.

[33] Under s 143:

Procedure for removal of caveat
(1)Any such applicant or registered proprietor, or any other person
having any registered estate or interest in the estate or interest protected by the caveat, may, if he thinks fit, apply to the High Court for an order that the caveat be removed.
(2)The Court, upon proof that notice of the application has been served
on the caveator or the person on whose behalf the caveat has been lodged, may make such order in the premises, either ex parte or otherwise, as to the Court seems meet.

Under s 141(1):
Effect of caveat against dealings
(1) Subject to the succeeding provisions of this section, so long as a
caveat under section 137 remains in force, the Registrar shall not make any entry on the register having the effect of charging or transferring or otherwise affecting the estate or interest protected by the caveat.

[35] Under s 145A:

Early lapse of caveat against dealings
(1)The registered proprietor of any estate or interest in the land protected
by a caveat against dealings (other than a caveat lodged by the Registrar) may apply to the Registrar for the caveat to lapse.
(2)The Registrar must give the caveator notice of an application under subsection (1).
(3)The caveat lapses with the close of the prescribed period after the date on which the notice under subsection (2) is given unless:
(a) the caveator has earlier given to the Registrar notice that an
application for an order to the contrary has been made to the High Court; and

(b) an order to that effect has been made and served on the Registrar within the prescribed period after the date on which the notice under paragraph (a) is given to the Registrar.

Under s 147:
Caveat may be withdrawn
Any caveat may be withdrawn by the caveator or by his attorney or agent under a written authority, and either as to the whole or any part of the land affected, or the consent of the caveator may be given for the registration of any particular dealing expressed to be made subject to the rights of the caveator:
Provided that where a registrable instrument purporting to give effect to the estate or interest of the caveator is presented to the Registrar for registration immediately following a withdrawal of a caveat previously lodged to protect that estate or interest, the authority of any agent executing the withdrawal on behalf of the caveator need not be in writing.
Under s 148A:
Registrar not required to verify caveator's entitlement to estate or interest claimed
Except to the extent of ensuring that a caveat lodged under any provision of this Act complies on its face with the requirements of this Act and with the requirements of any regulations made for the purposes of this Act, the Registrar is not required to be satisfied that the caveator is in fact or at law entitled to the estate or interest claimed in the caveat.
Under s 148B:
Registrar's powers if caveat does not comply with this Act
If a. caveat does not comply with the requirements of this Act, the Registrar may deal with it under section 43 as if it were an instrument not in order for registration.

[39] Under s 172(a):

Compensation for mistake or misfeasance of Registrar Any person:
(a)Who sustains loss or damage through any omission, mistake, or
misfeasance in the performance of any duty, function, or power imposed or conferred under this Act on the Registrar or an employee of the chief executive of the Department or person to whom a delegation has been made under section 5; or

(b)

•••

may bring an action against the Crown for recovery of damages.

Crown not liable in certain cases
The Crown shall not under any circumstances be liable for compensation for any loss, damage, or deprivation occasioned by any of the following things, notwithstanding that effect may have been given to the same by entry on the register:
(a)By the breach by a registered proprietor of any trust; or
(b)By the same land having been included in 2 or more grants from the Crown; or
(c)By the improper use of the seal of any corporation or company; or
(d)By the registration of any instrument executed by any person under any legal disability, unless the fact of that disability was disclosed on the instrument by virtue of which that person was registered as proprietor; or

(e) By the improper exercise of any power of sale or re-entry.
Issues

In this case, on the assumption that the caveat was validly lodged under s 137(1) of the LTA, there is no dispute that the Registrar-General (through LINZ):
had a duty under s 145A(2) to give notice to Mr Marriott of the application under s 145(1) by BRCB for the caveat to lapse and the failure to give such notice constituted an "omission" under s 172(a); and
b) had a duty under ss 137(1), 141(1), 145A and 147 to treat the
application by BRCB as an application for the caveat to lapse and not as a withdrawal of caveat by Mr Marriott and the failure to do so constituted a "mistake" under s 172(a).
On the basis of the "omission" and "mistake" admitted by the Registrar-General, the interrelated issues in this case are:
a) Was the caveat validly lodged under s 137(1) so that the Registrar‑
General was under the duties referred to in the preceding paragraph?

c)If the answer to (b) is "yes", was the loss or damage sustained
"through" the admitted omission and mistake of the Registrar-General under s 172(a)?
d)If the answer to (c) is "yes", was it "occasioned" by "the breach by a
registered proprietor of any trust" and so excluded by s 178(a)?
e)If the answer to (d) is "no", what was the amount of the loss or
damage?
Should the amount be reduced for any contributory negligence and/or failure to mitigate loss?

I propose to consider each issue in turn and to refer to the respective submissions for the parties on an issue by issue basis.

A validly lodged caveat?

For the trustees, Mr Wilson submitted that:
a)The agreement for sale and purchase of 12 April 2005 and the "buy
back" agreement of 22 March 2005 should be read together. The "buy back" agreement would have no meaning without the sale to BRCB.
b)Under the "buy back" agreement BRCB agreed to resell the property
to a third party in which event BRCB retained $300,000 of the sale proceeds and held the balance in trust for Mr Marriott. If the property was not sold within six months at a minimum sale price of $2,7 million, ownership of the property was to return to Mr Marriott less reimbursement of finance costs to BRCB. In either event Mr Marriott would meet any agent's fees.
c)The first part of the "buy back" agreement dealing with the possibility
of sale proceeds being held in trust for Mr Marriott would not have given rise to a caveatable interest, as identification does not connect to an interest in the land.

d)The second part of the "buy back" agreement, the return of the
property, does connect to an interest in land in that, on the face of it, it was an agreement for the sale back to Mr Marriott in the event that it was not resold within six months.
e)A conditional agreement for sale and purchase of this nature is an
interest in land that will or may support a caveat: Bevin v Smith³ and Hinde, McMorland and Sim Land Law in New Zealand.`
f)If the trustees had been notified of an application to lapse the caveat,
an application to sustain the caveat would have been made to the High Court and would have been successful because they would have established an arguable case for claiming an interest of the kind in
s 137 of the LTA: cf Sims v Lowe. ⁵
g)Alternatively, even if an application by the trustees to sustain the
caveat had been unsuccessful, they would have had notice of the application by BRCB Limited to lapse the caveat and consequently the opportunity to take proceedings for specific performance of the "buy back" agreement and to obtain an interim injunction to prevent the sale of the property in the meantime.

[45] For the Crown, Mr Burns submitted that:

a)The "buy back" agreement dated 22 March 2005 was unenforceable
against BRCB because BRCB was not incorporated until 24 March 2005 and there was no evidence that BRCB had ratified the agreement under s 182 of the Companies Act 1993.
b)Mr Marriott had no authority to lodge the caveat on behalf of the
trustees.
c)Until the expiry of the six month period refer^red to in the "buy back"
agreement occurred, the right to have the land returned was a bare

³ Bevin v Smith [1994] 3 NZLR 648 (CA).

⁴ Hinde, McMorland and Sim Land Law in New Zealand (looseleaf ed, LexisNexis) at [10.009](f).

⁵ Sims v Lowe 11998] 1 NZLR 656 (CA).

right of pre-emption which did not create any interest in land capable of supporting a caveat: Motor Works Ltd v Westminster Auto Services Ltd,⁶ Bruce v Edward; and Satnam Investments Ltd v Worger.⁸
d)The caveat claimed an interest in land pursuant to "a constructive
trust" arising out of the "buy back" agreement which was not a caveatable interest in land.
e)A caveat claiming an interest pursuant to a trust cannot be amended
after it has been accepted and be sustained on the basis of an option to purchase: Vincent v Vincent,⁹ and Bennion and others New Zealand Land Law.¹⁰

[46j To succeed in a claim under s 172(a) a claimant must establish that loss or damage was sustained through an omission, mistake, or misfeasance "in the performance of any duty, function, or power imposed or conferred" under the LTA on the Registrar-General or an employee of LINZ. The LTA imposes or confers a range of duties, functions or powers on the Registrar-General in respect of the lodging, lapsing, removal and withdrawal of caveats: ss 137-148B. For present purposes the relevant provisions are ss 148A and 148B. Under these provisions the Registrar-General is not required to verify the caveator's entitlement to the estate or interest claimed in the caveat except to the extent of ensuring that the caveat "complies on its face" with the requirements of the LTA. This means that the Registrar is exercising an administrative, not an adjudicative function: Holt v Anchorage Management Ltd,¹¹ Norrie v Registrar-General of Land1² and Bennion and others New Zealand Land Law.¹³ Once the Registrar-General accepts a caveat and it is noted against the title, it will prevent subsequent dealings with the land unless it is removed by order of the Court, lapses or is withdrawn: ss 141, 143145A and 147. This means that the first question for determination is whether Mr Marriott's caveat was validly lodged and accepted by the Registrar-General.

⁶ Motor Works Ltd v Westminster Auto Services Ltd [1997] 1 NZLR 726 (HC) at 765.

⁷ Bruce v Edwards [2003] 1 NZLR 515 (CA) at 530.

Satnam Investments Lid v Worger (2009) 10 NZCPR 235 (HC) at [32].

⁹ Vincent v Vincent HC Auckland M671/87, 19 October 1995.

¹⁰ Bennion and others New Zealand Land Law (2nd ed, Brookers, Wellington, 2009) at [4.4.06].

¹¹ Holt v Anchorage Management Ltd [1987] 1 NZLR 108 (CA).

¹² Norrie v Registrar-General of Land (2005) 6 NZCPR 94 (HC).

¹³ Bennion and others New Zealand Land Law, above n 10, at [4.3.12].

Under s 137(a) a person may lodge a caveat against dealings in any land if the person:
claims to be entitled to, or to be beneficially interested in, the land ... by virtue of any unregistered agreement..., or of any trust expressed or implied, or otherwise.

It is important to note that a caveat depends on a claim to entitlement to or a beneficial interest in the land. As the statutory provisions relating to removal, lapsing and withdrawal recognise, the question of the validity of the claim will be determined, after the caveat is lodged, by the Court and not by the Registrar-General. This means that unless and until the claim is held to be invalid or the caveat lapses or is withdrawn it will remain in force and prevent the Registrar-General from making any entry on the register having the effect of charging or transferring or otherwise affecting the estate or interest protected by the caveat: s 141(1).

In the present case Mr Marriott's caveat, signed on 26 August 2005, claimed the following interest in the relevant land:
Pursuant to a constructive trust arising out of a transaction entered into between the caveator as beneficiary and the registered proprietor BRCB Limited as trustee in or about March 2005.

Mr Marriott gave evidence that the caveat related to the "buy back" agreement of 22 March 2005 and was lodged on behalf of his family trust.

The caveat was lodged against the title to the land on the CFR on 29 August 2005. The Registrar-General (LINZ) did not question Mr Marriott's entitlement to lodge the caveat on the ground that it did not comply with the requirements of the LTA: ss 148A-148B. Instead the caveat was treated as validly lodged with effect under s 141(1) of the LTA. Any question relating to the validity of the claim in the caveat was left to subsequent determination by the Court in the usual way.
The submissions for the Crown raise various questions relating to the validity of the claim in Mr Marriott's caveat. They would have been relevant to the Court's determination of an application by Mr Marriott for an order that the caveat not lapse, but they are not relevant to the question whether the caveat was validly lodged against the title to the land on 29 August 2009. It was the valid lodging of the caveat

which resulted in the imposition of duties on the Registrar-General to protect the caveat until it was removed by order of the Court, lapsed or was withdrawn.

[51] This conclusion is supported by the approach of the Courts in Morrison Morpeth v Hanrahan," which involved a claim for professional negligence against lawyers who failed to register a caveat for their clients. The fact that the caveat would not have been sustained if the issues had gone to trial did not determine the question of damages for failing to register an arguably supportable caveat which would have provided leverage enabling a settlement: at 8 and 11. In the present case, largely for the reasons given by Mr Wilson, Mr Marriott's caveat would have supported an arguable case and may well have survived challenge because, at least in relation to the second part of the "buy back" agreement, the trustees were entitled to an interest in the land, namely its return to them. It is, however, not necessary to determine this point because, once it is accepted that the caveat was validly lodged and accepted by the Registrar-General, it remained in force unless and until it was removed, lapsed or withdrawn in accordance with the relevant provisions of the LTA.

[52] This means that the answer to the first issue in this case is "yes". The caveat was validly lodged under s 137(1) so that the Registrar-General was under the duty imposed by ss 145A(2) to give notice to Mr Marriott of the application under s 145A(1) by BRCB for the caveat to lapse and under the duty imposed by ss 137(1), 141(1), 145A and 147 to treat the application by BRCB as an application for the caveat to lapse and not as a withdrawal of caveat by Mr Marriott.

Did the trustees sustain any "loss or damage" within the scope of s 172(a)?

[53] For the trustees, Mr Wilson submitted in reliance on the decision in Registrar-General of Land v Marshall¹⁵ that s 172(a) envisages a broad scope for compensation or recovery for a wide range of damage. Mr Wilson then submitted that the trustees clearly sustained "loss or damage" within the scope of s 172(a) when they lost the opportunity to protect their position to obtain the return of their property from BRCB under the "buy back" agreement when the property had not been resold

¹⁴ Morrison Morpeth v Hanrahan CA81/93,17 December 1993 (CA).

^t5 Registrar-General of Land v Marshall [1995] 2 NZLR 189 (HC) at 195-196.

by BRCB within the stipulated six month period, that is by 12 October 2005, being six months after the sale and purchase agreement was signed on 12 April 2005.

[54] For the Crown, Mr Burns did not take issue with the decision in Registrar-General of Land v Marshall, but submitted that the trustees had failed to establish that they had sustained any loss or damage within the scope of s 172(a) because:

a)They failed to prove that they or BRCB entered into the "buy back" agreement with BRCB;
b)The "buy back" agreement was void in any event;
c)They failed to establish that the "buy back" agreement created any constructive trust;
d)They did not establish the alleged caveat;
e)They did not establish that BRCB breached the alleged contractual rights and obligations;
They did not establish that they were unable to enforce their alleged
rights and obligations against Mr Smith and/or the land.

[55] To the extent that a number of these submissions for the Crown were based on the alleged inadmissibility of the evidence for the trustees, I have already ruled against the Crown. This leaves for consideration each of the Crown's submissions in light of the evidence ruled admissible and summarised in the factual background section of this judgment.

[56] First, I do not accept that the trustees failed to prove that they or BRCB entered into the "buy back" agreement:

a) There is no dispute that the trustees owned the property at 257 Beach
Road, Campbells Bay, and sold it to BRCB whose sole director and shareholder was Mr Roy Victor Brown. The transfer was entered in the register on 4 August 2005.

b)Both Mr Marriott and Ms Taylor gave evidence that with Mr Varney
and then with Mr Bishop they were the trustees of their family trust (the Martay Family Trust). Mr Marriott produced copies of the trust deed dated 28 September 2000, a letter dated 12 November 2004 from Sue Stodhart, lawyer, to Mr Varney of McVeagh Fleming relating to his resignation as trustee, a trustee resolution dated 7 July 2005 relating to the sale of the property and signed by Mr Marriott, Ms Taylor and Mr Bishop, and the transfer of ownership of the property from Mr Marriott, Ms Taylor and Mr Bishop. The title for the property records that this transfer was also entered in the register on 4 August 2005 prior to the transfer to BRCB.
c)Ms Taylor gave evidence, which I accept, that at all material times Mr
Marriott was authorised to act on behalf of the trustees of their family trust. He was acting as agent for the trustees, not as principal. He did not claim otherwise.
The agreement for sale and purchase of the property dated 12 April 2005, which Mr Marriott produced in evidence, was in the standard REINZ/ADLS printed form and was signed by the three plaintiffs and apparently "R Brown" on behalf of BRCB. The vendors' solicitors were shown as Donnell and Associates and the purchaser's solicitors as Lovegroves. The purchase price was shown as $1,525,000, with a deposit of $50,000 payable to the vendors' agents, Barfoot & Thompson Ltd, and settlement on 15 July 2005.
e)Mr Marriott produced a copy of a Barfoot & Thomson tax invoice
dated 30 May for commission and advertising expenses which confirmed the price of $1,525,000, receipt of the deposit of $50,000 and deductions for commission of $41,062.80 and advertising expenses of $1,500, leaving a balance payable to Mr Marriott of $4,729.17.
f)Mr Marriott also produced in evidence two documents which he said
he received on 22 March 2005 from Mr Stutt of Barfoot & Thomson,

namely the first version of an agreement for sale and purchase and the "buy back" agreement. Mr Marriott's evidence relating to these documents is contained in my ruling (No 3) of 14 May 2010 at [6]—[8] and [12]. Mr Marriott's evidence was that he believed both of these documents had been signed by Ms Sara Batty, Mr Brown's secretary on behalf of BRCB: see ruling (No 3) at [24]—[26]. The similarities between the two versions of the agreements for sale and purchase, together with the sequence of events and the fact of the sale to BRCB whose sole director and shareholder was Mr Brown, support Mr Marriott's belief.

g)As already noted, Mr Marriott gave evidence that at a time when he
believed the property was worth some $3 million he would not have agreed to its sale to BRCB for $1.525 million without the "buy back" agreement which required BRCB to resell the property within six months or return it to the trustees. I have accepted his unchallenged evidence on this point: ruling (No 3) at [10] and [27]-[28]. It would be surprising, to say the least, if, in the absence of any other security, the trustees had sold the property for only $1.525 million without an agreement similar to the "buy back" agreement.
h)The fact that BRCB was not incorporated until 24 March 2005, two
days after the "buy back" agreement was signed by Ms Batty as "appointed agent [for] BRCB Limited or Nominee", does not mean that there was not or would not have been a valid contract binding on BRCB. As a pre-incorporation contract, it could have been ratified by BRCB itself under s 182 of the Companies Act 1993. A warranty would have been implied in the contract by s 183 of the Companies Act that BRCB would be incorporated and would ratify the contract within a reasonable time. Furthermore, if BRCB had failed to ratify it, the trustees would have been entitled to apply to the Court under s 184 of the Companies Act for an order validating the contract.

BRCB, through its lawyers and agents, Lovegroves, was aware from
the correspondence from Mr Stirling of Turner Hopkins and from the

lodging of the caveat in August 2005, from Turner Hopkins' letter of 30 September 2005 and from the subsequent High Court proceeding that the trustees relied on the terms of the "buy back" agreement. The Crown did not argue that Lovegroves' knowledge should not be imputed to BRCB: cf FMB Reynolds QC (ed) Bowstead and Reynolds on Agency. ¹⁶ From the absence of any response by or on behalf of BRCB disputing the existence of the "buy back" agreement and from the steps taken by or on behalf of BRCB for the lapse of the caveat and on the on-sale of the property to Mr Smith when the caveat was wrongly withdrawn, I draw the inference that BRCB accepted that the agreement existed and was prepared to take advantage of the Registrar-General's mistake to avoid compliance with the agreement.
When all of this relevant, admissible evidence is taken into account, I have little difficulty in concluding that the trustees have established on the balance of probabilities that the "buy back" agreement was entered into by Mr Marriott on their behalf and by Ms Batty as agent for BRCB. The evidence establishes the primary facts which enable me to draw the necessary inferences from those facts on the balance of probabilities: Donald L Mathieson (ed) Cross on Evidence." It was not necessary for the trustees to call evidence from Mr Stutt, Ms Batty, Mr Brown, or the third trustee to prove that they had entered into the "buy back" agreement with BRCB.

[57] Second, I do not accept that the "buy back" agreement was void in any event. Mr Burns argued for the Crown that the agreement was void and unenforceable because it omitted or was uncertain as to essential terms, namely the registered proprietor of the property when the property was still owned by the trustees and not by BRCB, the date on which the six month period was to commence and what the "agents fees" or "finance costs" related to or how they would be determined. It is true that uncertainties as to the interpretation of the "buy back" agreement arise on the face of the agreement itself, but it is well-established that the Courts will assist

FMB Reynolds QC (ed) Bowstead and Reynolds on Agency (18th ed, Sweet & Maxwell, London, 2006) at 477-492.

¹⁷ Donald L Mathieson (ed) Cross on Evidence (8th ed, LexisNexis, Wellington, 2005) at [3.12].

parties by giving effect to a contractual intention by finding a way to remove uncertainty and that uncertainty may be removed by objective means expressly agreed or implicit in what has been expressly agreed: Fletcher Challenge Limited v Electricity Corporation of New Zealand Limited¹⁸ and Wellington City Council v Body Corporate 51702 (Wellington)1⁹ and Burrows, Finn and Todd Law of Contract in New Zealand.2⁰ It is also well-established that in the context of contracts for the sale and purchase of land two or more writings clearly concerned with the same transaction may be read together as a memorandum without the need to find any internal reference from one signed writing to the other: Studds v Watson² and Sheers v Thuinbleby & Son²² and DW McMorland Sale of Land.²³ On this basis, the "buy back" agreement may be interpreted with reference to the subsequent agreement for sale and purchase between the trustees and BRCB dated 12 April 2005. When this is done, it is apparent that the "buy back" agreement was between the same parties and took effect when the agreement for sale and purchase was signed. The obligation on BRCB to resell the property for a minimum sale price of $2.7 million within six months commenced then when BRCB was in a position to do so. The reference to "reimbursement of finance costs" entitled BRCB to deduct its finance costs in the event that the property was not sold within six months and BRCB was obliged to "return" it to the trustees for the previous sale price of $1.525 million referred to in the agreement for sale and purchase. The reference to the deduction of "agents fees incurred" related to any proceeds from any resale over $300,000 held in trust by BRCB for the trustees.

[58] Third, I do not accept that the trustees failed to establish that the "buy back" agreement created a constructive trust. Interpreting the "buy back" agreement on the basis set out in the preceding paragraph, it is clear that it imposed obligations on BRCB, once it became the registered proprietor of the property, to endeavour to resell the property within six months for a minimum sale price of $2.7 million and to hold the proceeds from the resale exceeding $300,000 "in trust" for the trustees and,

¹⁸ Fletcher Challenge Limited v Electricity Corporation of New Zealand Limited [2002] 2 NZLR 433 (CA) at 444-446.

¹⁹ Wellington City Council v Body Corporate 51702 (Wellington) [2002] 3 NZLR 486 (CA) at 495.

²⁰ Burrows, Finn and Todd Law of Contract in New Zealand (3rd ed, LexisNexis, Wellington, 2007) at 77-79.

²¹ Studds v Watson (1 884) 28 ChD 305.

²² Sheers v Thimbleby & Son (1897) 76 LT 709.

²³ DW McMorland Sale of Land (2nd ed, Cathcart Trust, Auckland, 2000) at [4.05].

if the property was not resold within the six month period, to "return" it to the trustees. Either way, both contractual and trust obligations were imposed on, and accepted, by BRCB. To that extent, BRCB was subject to a constructive trust in dealing with the property: see Andrew Butler (ed) Equity and Trusts in New Zealand ²⁴

Fourth, I do not accept that the trustees have not established the alleged caveat. The evidence showed that Mr Marriott's solicitors lodged the caveat on behalf of the trustees on 29 August 2005. Mr Marriott did not claim that it was lodged for his own personal benefit. He signed the "buy back" agreement on behalf of the trustees and the beneficiary of the constructive trust was his family trust as the vendor of the property. The Registrar-General (LINZ) did not reject the caveat under s 148B of the LTA, but accepted it for registration as required by s 148A. As already noted, the question of the validity of the claim in the caveat is a separate question that would have been considered by the Court if the trustees had had the opportunity to apply to the Court for an order that the caveat not lapse: cf s 145A(3)(a) of the LTA.
Fifth, I do not accept that the trustees have not established that BRCB breached the alleged contractual rights and obligations. The evidence showed that BRCB on-sold the property to Mr Smith for $2.025 million on 7 October 2005. This sale was clearly in breach of the "buy back" agreement in that it was for less than the agreed minimum sale price of $2.7 million and precluded BRCB from returning the property to the trustees for $1.525 million less BRCB' s finance costs. Any doubt that BRCB was in breach of its contractual rights and obligations is dispelled by the judgment of this Court that the trustees obtained against BRCB for $1.3 million plus costs and interest on 4 July 2007.
Sixth, I do not accept that the trustees have not established that they were unable to enforce their alleged rights and obligations against Mr Smith and/or the land. This Crown submission assumes that the trustees had "rights and obligations" against Mr Smith and that the trustees were obliged to exhaust those rights before

proceeding against the Registrar•-General. Neither• assumption is correct. In the absence of compelling evidence of fraud or sham, the trustees were not in a position to seek to set aside the sale to Mr Smith whose title was indefeasible under s 62 of the LTA. Allegations of fraud and sham may not be lightly made: Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue.²⁵ Here, there was evidence that the trustees explored the possibility of fraud and sham in respect of the sale to Mr Smith, but did not find sufficient evidence to pursue these matters. In these circumstances they were under no obligation to exhaust remedies against Mr Smith: Stephen Todd (ed) The Law of Torts in New Zealand.²⁶ Once the Registrar-General had wrongly withdrawn the caveat and BRCB had been able to on-sell the property to Mr Smith on 12 October 2005, the trustees were entitled to proceed against the Registrar-General when they discovered in November 2005 that the caveat had been wrongly withdrawn and the property sold by BRCB in breach of the "buy back" agreement.

This means that the answer to the second issue in this case is "yes". Any "loss or damage" sustained by the trustees was within the scope of s 172(a).

Was any loss or damage sustained "through" the admitted omission and mistake?

For the trustees, Mr Wilson submitted in reliance on the decision in Registrar-General of Land v Marshal1²⁷ that loss was obviously suffered by the trustees as a result of the Registrar-General of Land's omission to notify Mr Marriott that an application for lapse of caveat had been lodged and his mistake in treating the application as a withdrawal of caveat because the trustees were thereby deprived of the opportunity of protecting their position. If the trustees had received notification of the application for lapse of caveat as required by s 145A(2) when it was lodged on 19 September 2005, the trustees would have been able to apply to the Court for an order that the caveat not lapse and take other steps to enforce the "buy back" agreement, including proceedings for specific performance of the "buy back"

²⁵ Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2009] 2 NZLR 289 (SC) at [32]—[39].

²⁶ Stephen Todd (ed) The Law of Torts in New Zealand (5th ed, Brookers, Wellington, 2009) at 1091.

²⁷ Registrar-General of Land v Marshall [1995] 2 NZLR 189 (HC) at 196-198.

agreement and an application for an interim injunction preventing BRCB from on-selling the property in breach of the agreement.

[64] For the Crown, Mr Burns did not take issue with the decision in Registrar of Land v Marshall on the issue of causation, but submitted that the trustees' own actions and omissions caused the loss they now seek to claim against the Registrar-General. In particular, Mr Burns submitted that the trustees' loss was caused by:

a) The transfer of the property to BRCB with the highly unusual "buy
back" agreement which was entered into not only without legal advice but also contrary to preliminary legal advice.

h) The failure to obtain any information before transferring the land
about Brian Stutt of Barfoot and Thompson, R V Brown or BRCB, or Ethnik Krasniqi, a person Mr Marriott had met at the Beach Road property before and after the sale to BRCB. Mr Marriott gave evidence that if he had been aware of Mr Krasniqi's bankruptcies, which he discovered in November 2005, he would not have considered entering into the transaction.
c)The failure to obtain any security, for example by way of guarantee,
for their interest in the land before transferring the land to BRCB.
d)The failure to take all reasonable actions following the transfer of the
land to Mr Smith on 12 October 2005, including failing to take action against Mr Smith and other persons, such as Mr Brown, or securing BRCB property.

[65] Hammond J considered the correct approach to the question of causation in Registrar-General of Land v Marshall. He began at 196 by asking:

what is the nature of the claim under s 172(a)? In my view, it is not appropriate to describe it as a "negligence" claim in anything but the loosest sense. And such a loose sense is, with respect, dangerous. For a claim — where it exists — is a statutory claim to compensation, upon the terms contained in the legislation itself.

...the word "through" is surely a major limitation on the subsection. It immediately separates the Registrar-General from the position of a guarantor of the system in respect of all actions of him or his officers. The word comprehends that there must be a causal nexus between the loss or damage sustained and the actions complained of. The mere fact that something "went wrong" does not trigger a right to compensation. There has to be a relationship between the Registrar's wrong and the result. The public purse is thereby protected in the sense that it is only the wrongful consequences of acts by public officials that redound in a public debit...

How the causal nexus is to be established in a given case under this provision may at times be no less difficult than in other areas of the law. As elsewhere in the law, causation is a necessary, but not a sufficient condition for liability. Traditional juristic thought has seen causation as being susceptible of judicial elaboration of rational principles, tested against the commonsense meaning of casual (everyday) language (see, eg Hart and Honore, Causation in the Law (1959)). But a more sceptical tradition this century has held that the ability of rational analysis to come to grips with the difficulties of causal arguments is such that {and in any event) causation should be subordinated to duty issues. The question of the proper scope of "the duty" is therefore paramount and the one on which a Court should expend its energies. To the same effect, the law and economics analysis is that the very exercise of attempting to determine "cause" is a waste of time because the problem is routinely one of a "reciprocal nature": see Coase, "The Problem of Social Cost" {1960) 3 Journal of Law and Economics 1, 2. (Now, apparently, the most widely read and cited law review article of all time.) There is the further difficulty that finding an appropriate doctrinal vehicle is very difficult: the familiar enough "but for" test can be over-inclusive, or under-inclusive: in the end, every jurist has to make her peace with the weasel-word "cause". But this much at least can be said: in the workaday world, the word is one of limitation. It is concerned with connections, with how far the law ought to go, and the articulated reasons why the line should be drawn in a particular place. This more sceptical tradition appears to have informed much of the thinking of the New Zealand Court of Appeal on both causation and remoteness in recent years. Thus (in a contract case), the President of the Court of Appeal said, in McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39, 43:

". . . Reasonable foresight or contemplation . . are always an important consideration. I doubt whether they are the only consideration. Factors including directness, 'naturalness' as distinct from freak combinations of foreseeable circumstances, even perhaps the magnitude of the claim and the degree of the defendant's culpability, are not necessarily to be ignored in seeking to establish a just balance between the parties . . In the end it may be best, and may achieve more practical certainty in the New Zealand jurisdiction, to accept that remoteness is a question of fact to be answered after taking into account the range of relevant considerations, among which the degree of foreseeability is usually the most important."

[66] The law relating to causation has continued to develop since the decision in Registrar-General of Land v Marshall in 1994, A recent summary of causation in tort law in the accident compensation context appears in the decision of the Court of Appeal in Accident Compensation Corporation v Ambros.²⁸ Glazebrook delivering the judgment of the Court, said:

[24]      Causation in tort law is usually split into two separate inquiries: causation in fact and causation in law (see Todd (ed), The Law of Torts in New Zealand (4th ed, 2005), para [21.2] (causation in fact) and para [21.3] (causation in law) and Hart and Honore, Causation in the Law (2nd ed, 1985), pp 109 — 110). Causation in fact relates to whether the tortious conduct has an historical connection with the injury. This is usually assessed on the basis of a "but for" test, although the courts have relaxed this test in some circumstances (see below at para [26]). The "but for" test poses the question whether the plaintiff would have suffered the injury without (in this case) the medical error. If it is more likely than not that, absent the error, he or she would have avoided the injury, then there is causation in fact.
[25]      The second stage of the inquiry, causation in law, requires an assessment of the appropriate scope of liability for the conduct. There is then a third level of inquiry into proximity (remoteness) between the cause and the damage, although this will often merge into the second stage of the causation inquiry. Under a no-fault accident compensation regime, the third stage is likely to be more important than the second stage. This is because the emphasis at the second stage is on the extent to which it is appropriate to assign responsibility to particular persons...
[26]      There have been a number of situations where dissatisfaction with the result of the traditional test of causation has led to calls for a modification to the "but for" stage of the inquiry. The challenges to the traditional test can be placed into three categories: industrial diseases, loss of chance and informed consent. In this section we describe these challenges, their success (or otherwise), and discuss whether they are applicable to the New Zealand accident compensation regime.
[37]    The next challenge to traditional causation principles has been the
call to extend the loss-of-chance principles to cover cases of medical negligence. For a recent discussion on loss-of-chance principles in New Zealand, see Benton v Miller & Poulgrain (Orin) [2005] 1 NZLR 66 (CA) and Barker's commentary on that case in "Damages for Loss of Chance" [2007] NZLJ 151. See also Tobin, "Apportionment of Liability for the Loss of a Chance: Barker v Corns a Recent Development in Asbestos Litigation" (2006) 12 NZBLQ 216; Coote, "Loss of a Chance, or the Chance of a Loss" (2007) 13 NZBLQ 15; Coote, "Recovery for Loss of a Chance: Could it be for All or Nothing at All?" (2006) 12 NZBLQ 127; and Peel, "Loss of Chance in Medical Negligence" (2005) 121 LQR 364.

²⁸ Accident Compensation Corporation v Ambros [2008] 1 NZLR 340 (CA) at [22]—[46],

[67] The question of causation in a statutory context has arisen in respect of claims for loss or damage under the Fair Trading Act 1986 where s 43 requires a claimant to prove loss or damage "by" the conduct of the defendant. In the recent decision of the Supreme Court in Red Eagle Corporation v Ellis²⁹ Blanchard J, delivering the judgment of the Court, said:

[29] Then, with breach proved and moving to s 43, the court must look to see whether it is proved that the claimant has suffered loss or damage "by" the conduct of the defendant. The language of s 43 has been said to require a "common law practical or common-sense concept of causation". The court must first ask itself whether the particular claimant was actually misled or deceived by the defendant's conduct. It does not follow from the fact that a reasonable person would have been misled or deceived (the capacity of the conduct) that the particular claimant was actually misled or deceived. If the court takes the view, usually by drawing an inference from the evidence as a whole, that the claimant was indeed misled or deceived, it needs then to ask whether the defendant's conduct in breach of s 9 was an operating cause of the claimant's loss or damage. Put another way, was the defendant's breach the effective cause or an effective cause? Richardson J in Goldsboro spoke of the need for, or, as he put it, the sufficiency of a "clear nexus" between the conduct and the loss or damage. The impugned conduct, in breach of s 9, does not have to be the sole cause, but it must be an effective cause, not merely something which was, in the end, immaterial to the suffering of the loss or damage. The claimant may, for instance, have been materially influenced exclusively by some other matter, such as advice from a third party.

[30] Another operating cause of loss or damage may perhaps have been the claimant's own conduct in failing to take reasonable care to look after his or her own interests. The court should therefore ask itself whether the claimant's carelessness, if there were any, should be regarded as the sole or• a contributory operative cause of the loss. The fact that the claimant may have contributed by carelessness to his or her own downfall does not disqualify the claim. Gleeson CJ remarked in Henville v Walker:
The purpose of the legislation is not restricted to the protection of the careful or the astute. Negligence on the part of the victim of a contravention is not a bar to an action under [the Australian equivalent of s 43] unless the conduct of the victim is such as to destroy the causal connection between contravention and loss or damage.

As the Goldsboro case has established, the court has a discretion under s 43 (it "may" make an order), and the proper exercise of that discretion may lead it to decide that part only of the amount of the loss or damage should be paid by the defendant to the claimant (or, in some cases of reckless behaviour by the claimant, even that no order for payment should be made).
(Footnotes omitted)

²⁹ Red Eagle Corporation v Ellis [2010] NZSC 20.

The similarity in the statutory language of s 43 of the Fair Trading Act 1986 ("loss or damage by conduct") and s 172(a) of the LTA ("loss or damage through any omission, mistake, or misfeasance") suggests that the approach of the Supreme Court to the question of causation in Red Eagle Corporation may be applied by analogy to the question in the context of s 172(a) of the LTA. The question then becomes was the Registrar-General's omission or mistake "the effective cause or an effective cause" of the loss or damage sustained by the trustees? Was there "a clear nexus" between the omission or mistake and the loss or damage, or was the Registrar-General's omission or mistake immaterial to the loss or damage sustained? The need for "a clear nexus" reflects the reference by Hammond J in Registrar-General of Land v Marshall to the need for "a causal nexus" between the loss or damage sustained and the actions complained of
Examples of cases involving claims against the Registrar-General and his overseas counterparts where a causal nexus has been found include:
a)          Gordon v Hipwell³⁰ where a majority of the British Columbia Court of
Appeal held that the plaintiff's loss (his right to reclaim his property for failure of consideration) was caused solely by the wrongful cancellation of a caveat he had lodged against the title to the property which had been procured without his knowledge by his wife who then fraudulently sold the property to an innocent third party.
h)             McNicholl v Attorney-General³¹ where the plaintiff's loss was caused
by an omission to note on the certificate of title that the land was limited to parcels.
c)                   Registrar-General v Cleaver³² where the Court of Appeal of New
South Wales held that the respondents' loss was caused by an omission by the Registrar-General to note a restrictive covenant on the register. The Registrar-General's argument on appeal that the loss was caused solely by a real estate agent's statement that the property

³⁰ Gordon v Hipwell (1952) 3 DLR 173.

31 McNicholl v Attorney-General (1996) 3 NZ ConvC 192,453.

³² Registrar-General v Clearer (1996) 41 NSWLR 713.

was protected by the restrictive covenant and the failure of the respondents' solicitor to inspect the certificate of title for the property was rejected. Clark JA said at 718:

Anyone searching that transfer, as the respondents' solicitor did, would clearly understand that the memorandum of transfer, with the covenant (which was annexed to the transfer), was entered in the register book. The searcher would, in my view, also consider that there was no need to search further to check whether the entries actually had been written up as stated.
It follows that the respondents understood that they had the benefit of the restrictive covenant, an understanding supported by their document of title, and as a consequence they purchased the property. Yet, because of the failure of the Registrar-General to enter the existence of the covenant on the title deed for lot 1, they were mistaken. The property they purchased lacked a quality which they believed it had and, in my view, they suffered loss. That loss, which it is presently unnecessary to specify, resulted, as a matter of commonsense, from the Registrar-General's omission.
Although there is no evidence justifying the making of a statement critical of the respondents' solicitor I am prepared to assume, for present purposes only, that the submission is correct. Those assumed facts do not, however, support the appellant's submission. That is because the causation inquiry requires that the court determine whether, in the light of all the accepted circumstances, the relevant loss was caused by the omission. One of those circumstances is the conduct of other parties but the mere fact that the solicitor's assumed failure was a cause of the loss does not negate a finding that the omission also was. In my opinion, having regard to the facts and the element of misrepresentation to which I have referred, it cannot be doubted that loss flowed to the respondents from the omission.

Handley JA and Abadee A-JA agreed. Abadee A-JA said at 725:

I agree with Clarke JA that there is no evidence justifying the making of a statement critical of the respondents' solicitor. However, even assuming that it were otherwise, such would not assist the appellant or an argument that the loss was due to the solicitor's acts or omissions. The omission of the appellant to do what he should have done was a causal factor which continued to operate despite the respondents retaining their own solicitor: see Bennett v Minister for Community Welfare (1992) 176 CLR 408 at 423, per Gaudron J and McHugh J (at 428-429); March vE&MH Stramare Pty Ltd (1991) 171 CLR 506. The existence of a causal connection is to be determined in accordance with commonsense notions of causation. The cause of the loss in commonsense terms was the fact that the appellant, by his relevant officers did, to use the respondents' counsel's words, "only half the job". His clerks noted the covenant on the title of the land which was intended to have the benefit of the covenant but stopped short of noting it on the title to the land which

was intended to be burdened, without which the covenant was ineffective. Again, to use the words of the respondents' counsel, a "half truth situation was created" by such conduct. Having regard to the facts and the element of misrepresentation referred to by Clarke JA, no loss would have been sustained by the respondents but for that omission. The plaintiffs proved all the required links in the chain of causation.

In the present case, there is a clear causal nexus between the Registrar-General's omission and mistake and the loss or damage sustained by the trustees. But for the Registrar-General's omission to notify Mr Marriott of the application for the lapse of the caveat and his mistake in treating the application as a withdrawal of the caveat, BRCB would not have been able to sell the property to Mr Smith in breach of the "buy back" agreement" and the trustees would not have lost the chance to enforce the "buy back" agreement and recover the property or damages. In other words, without the omission and mistake by the Registrar-General, the trustees would have avoided their loss or damage. The Registrar-General's omission and mistake were the effective or, at least, a cause of the trustees' loss. The Registrar-General's omission and mistake were not immaterial.
It is true, as the Crown submitted, that the trustees may not have suffered loss or damage if they had not sold their property to BRCB on the basis of the "buy back" agreement and had instead taken security for their interest in the property by way of a mortgage. But, having taken steps to protect their position by lodging the caveat, it cannot be said that they failed to take reasonable care to look after their own interests. Once the caveat was lodged to enforce the "buy back" agreement, any "failure" to take security by way of mortgage ceased to be an operating cause of their loss or damage. Furthermore, as the Supreme Court indicated in Red Eagle Corporation,³³ the fact that the trustees may have contributed by carelessness to their own downfall does not disqualify their claim. Whether there was any carelessness on the part of the trustees that amounted to contributory negligence warranting a reduction in the quantum of their claim is a separate question considered later in this judgment.
As the purpose of s 172(a) is to provide wide scope for compensation as part of the Torrens System, it is appropriate in circumstances such as those in the present

³³ Red Eagle Corporation at [301.

case that there should be liability: see Registrar-General of Land v Marshall.³⁴ Failure to notify a caveator of an application for the lapse of the caveat and wrongly treating the application as a withdrawal of caveat are paradigm examples of omissions and mistakes for which the Registrar-General should be liable. Loss of the opportunities to uphold the caveat or to protect the interests the caveat was lodged to protect are reasonably foreseeable consequences of the omission and mistake.

Significantly, there were no submissions for the Crown in this case challenging the approach to causation based on the decisions in Registrar-General of Land v Marshall, Accident Compensation Corporation v Ambros, Benton v Miller &

Poulgrain, Gordon v McNicholl v Attorney-General and Registrar-General
v Cleaver.

The answer to the third issue in this case is therefore "yes". The loss or damage was sustained by the trustees "through" the admitted omission and mistake by the Registrar-General under s 172(a) of the LTA.

Was the loss or damage "occasioned" by "the breach by a registered proprietor of any trust" and so excluded by s 178(a)?

For the Crown, Mr Burns submitted, on the assumption that the "buy back" agreement was held to be valid and enforceable, that the trustees' claim under s 172(a) was barred by s 178(a) because the transfer of the land by BRCB to Mr Smith constituted a breach by BRCB, as registered proprietor of the land, of the trust alleged in the caveat based on the "buy back" agreement. It was submitted that s 178(a) means that the trustees have no cause of action against the Crown in respect of any loss or damage occasioned by the transfer of the land by BRCB to Mr Smith.
For the trustees, Mr Wilson submitted in response to the Crown's affirmative defence based on s 178(a) that:
a) On an ordinary interpretation of s 178, it applies only where loss or

damage has occurred before the entry on the register of the cause of

³⁴ Registrar-General of Land v Marshall [1995] 2 NZLR 189 (CA) at 194-196.

the loss or damage. Some meaning has to be given to the words "notwithstanding that effect may have been given to the same by entry on the register." In the present case, as no breach of trust could possibly have occurred before the withdrawal of the caveat was entered on the register, s 178 was inapplicable. Only the erroneous entry of the withdrawal of the caveat enabled the registered proprietor, BRCB, to breach the contract and commit a breach of trust.

b) Looking at the substance of the trustees' rights against BRCB, their
loss was caused by a breach of contract and a breach of constructive trust. A contractual right to an interest in land may also give rise to an equitable interest: Bevin v Smith.³⁵On the Registrar-General's argument, no purchaser in an ordinary sale contract would ever be entitled to compensation for mistake as a specific performance claim could also be described as based on an equitable interest giving rise to a constructive trust. Here the trustees had a conditional contractual right to buy the property during the six month period after which it became an unconditional contractual right. The actions of BRCB can be described as a breach of its contractual obligations to the trustees. When the trustees sued BRCB, they brought a claim in contract, not for breach of trust.

[77] It is convenient to set out s 178 again: Crown not liable in certain cases
The Crown shall not under any circumstances be liable for compensation for any loss, damage, or deprivation occasioned by any of the following things, notwithstanding that effect may have been given to the same by entry on the register:
(a)By the breach by a registered proprietor of any trust; or
(b)By the same land having been included in 2 or more grants from the Crown; or
(c)By the improper use of the seal of any corporation or company; or
(d)By the registration of any instrument executed by any person under any legal disability, unless the fact of that disability was disclosed on
the instrument by virtue of which that person was registered as proprietor; or

³⁵ Bevin v Smith [1994] NZLR 648 (CA) at 664-665.

(e) By the improper exercise of any power of sale or re-entry.

The meaning and scope of s 178(a) does not appear to have been previously considered in any reported case in New Zealand.
Hinde McMorland & Sim Land Law in New Zealand³⁶ comment that s 178(a) is consistent with the general principle that no notice of any trusts may appear on the register by virtue of ss 128 and 129 of the LTA. Footnote reference is made to Koorootang Nominees Ply Ltd v Australia and New Zealand Banking Group Ltd³⁷ at 129-130 per Hansen J (obiter).
Koorootang Nominees Pty Ltd concerned s 109(2)(a) of the Victorian Transfer of Land Act 1958, which provided:
The Consolidated Fund shall not under any circumstances be liable—
(a) for any loss damage or deprivation occasioned by the breach of any
trust...

At 129-130 Hansen J accepted the plaintiff's submission that the loss in that case arose not from a breach of trust by Koorootang but from the fraudulent action of its managing director which produced a mortgage, the registration of which entitled the plaintiff to an indemnity under the Victorian equivalent of s 172(a). The Registrar of Titles' argument that s 109(2)(a) applied was rejected.

The meaning of s 178(a) is to be ascertained from its text and in the light of its purpose and other relevant indications in the LTA: Interpretation Act 1999, s 5. When this approach is followed it is apparent that s 178 contains five specific situations ("cases" or "things") when the Crown will not be liable for compensation for any loss, damage or deprivation under s 172: Hinde McMorland & Sim Land Law in New Zealand,³⁸ and Bennion and others New Zealand Land Law ³⁹ Each of the five specific situations reflects or reflected a statutory exception to the Registrar's obligations relating to entries on the register or other principles in the LTA:

³⁶ Hinde McMorland & Sim Land Law in New Zealand at [9.095].

³⁷ Koorootang Nominees Ply Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 16.

³⁸ Hinde McMorland & Sim Land Law in New Zealand at 9.095(a).

³⁹ Bennion and others New Zealand Land Law^, (2nd ed, Brookers, Wellington, 2009) at 182.

Paragraph (a) reflects the general prohibition under s 128 on entering notice of trusts on the register;
Paragraph (b) reflects the exception of indefeasibility in ss 62(a) and 63 (i)(e);
Paragraph (c) reflected the entitlement of a corporation to execute documents under seal in s 161 (since repealed);
Paragraph (d) was consistent with the principle that compensation should be given only for loss of a kind which would not have occurred if the land had not been brought under the LTA;
Paragraph (e) applied if a mortgagee improperly exercised the power of sale in a mortgage, or a lessor improperly re-entered and determined a registered lease, and the aggrieved mortgagor or lessee would have no claim under the compensation provisions of the LTA.

When the nature of each of the five situations is recognised in the context of these other statutory provisions, it is apparent that the purpose of s 178 was to make it clear that, notwithstanding s 172, the Crown would not be liable for compensation for any loss, damage or deprivation arising from any omission, mistake or misfeasance by the Registrar-General or LINZ employees in performing any duty, function or power under the LTA in any of these five situations. In other words, when enacting s 172, Parliament did not intend to alter in any way the exceptions to the Registrar's obligations for entries on the register in these five specific situations.
This approach to the interpretation of s 178 is consistent with the statement that the Crown's liability is excluded "notwithstanding that effect may have been given to the same [ie the specific situation] by entry on the register". In other words, an erroneous entry on the register does not create liability when it is otherwise excluded by one of the five exceptions.
This approach is also supported by the decision of the Court of Appeal in Re the Kaihu Valley Railway Conviction and John Owen^40° where, in relation to the situation covered by s 178(c), Williams J, delivering the judgment of the Court, said at 524:
...It is sufficient if the instrument is in proper form and the seal appears to have been properly affixed. If those conditions are complied with the Registrar should accept the instrument. Section 166 [ie s 161] provides that the seal affixed is to be sufficient proof to the Registrar that it was affixed under proper authority, and that the instrument is binding on the corporation

4 0

Re the Kaihu Valley Railway Conviction and John Owen (1890) 8 NZLR 522 (CA).

whose seal it bears. Section 185 [ie s 178(c)] is sufficient protection to the Assurance Fund if it turns out afterwards that the seal was not properly affixed, or that the instrument was not binding. It would be manifestly inconvenient if the Registrar were to be obliged to make the inquiries which it is suggested he ought to make; it would be also highly inconvenient if this Court had to decide whether a company has been acting within its powers or not, the company itself being no party to the proceedings.

When this approach to the interpretation of s 178 is followed, it is apparent that the exclusion of Crown liability for the situation in paragraph (a) is designed to ensure that any loss, damage or deprivation occasioned by breach by a registered proprietor of any trust which has by mistake been entered on the register contrary to s 128 is not covered by s 172. The exclusion is not designed to bar a claim for compensation under s 172(a) that is otherwise within that provision even although a breach of trust may have occurred as a result of the Registrar-General's omission, mistake or misfeasance. The exclusion clearly does not apply when a breach of contract occurs as a result of the Registrar-General's omission, mistake or misfeasance.
In the present case I consider therefore that s 178(a) does not constitute a bar to the trustees' claim under s 172(a). This ease does not involve breach of a trust entered on the register or loss, damage, or deprivation occasioned by breach by a registered proprietor of a trust in the sense contemplated by s 178(a). This case involves loss or damage caused by the admitted omission and mistake by the Registrar-General which led to the breach of the "buy back" agreement by BRCB. As Mr Wilson submitted, the breach by BRCB is able to be described as both a breach of contract and a breach of constructive trust. The availability of the latter description does not mean that the claim is barred by s 178(a).
The answer to the fourth issue in this case is therefore "no". What was the amount of the loss or damage?
As the question of the calculation of the quantum of the trustees' claim was left open at the conclusion of the oral argument on 10 February 2010, I gave the parties an opportunity to provide submissions by way of further memoranda on the question: minute of 11 February 2010. For the trustees, Mr Wilson provided a memorandum dated 19 February 2010 and, for the Crown, Mr Burns provided a

memorandum dated 5 March 2010. As Crown Counsel in his memorandum cited authorities not previously referred to, I gave counsel for the trustees an opportunity to respond: minute of 31 March 2010. Mr Wilson did so by way of further memorandum dated 16 April 2010.

[89] For the trustees, Mr Wilson submitted that:

a)The calculation of damages needs to take into account a comparison
of the chance or probability of success and the likelihood of settlement: Morrison Morpeth v Hanrahan.⁴¹
b)If the trustees had succeeded in a proceeding for specific performance
against BRCB, they would have recovered the property which would have been worth $2.9 million at the time. On the return of the property in terms of the "buy back" agreement, the trustees would then have been obliged to pay BRCB the sale price of $1.525 million and "finance costs" estimated at $76,250 (being $1.525 million x 10 per cent per annum x 0.5 years). As no provision needed to be made for agents' fees (they already having been met by the trustees), the gross amount would have been $1,298,750.
c)Making an assessment of the probable outcome of the hypothetical
proceeding and taking into account the likelihood of settlement, settlement would fix the upper and lower limits of recovery. For the trustees that would be 75 per cent of their claim or $974,062, while for BRCB that would be 25 per cent of the claim or $324,687. A two-thirds prospect of success is appropriate, giving a figure of $864,967.
d)Rejecting the lower end of the range, recognising the willingness of
BRCB to negotiate a settlement, and treating the matter in a rounded off way, the trustees' loss was in the range of $850,000 to $1 million plus interest from a date fixed by the Court in 2006 (Harrison J fixed 1 October 2006 in the judgment against BRCB of 4 July 2007) down to the present time, and costs.

⁴¹ Morrison Morpeth v Hanrahan CA81/93, 17 December 1993.

[90] For the Crown, Mr Burns submitted that:

a)The trustees had not pleaded or adduced any evidence to support their
claim for damages based on the alleged loss of a chance. It was therefore not open to them to obtain judgment in this proceeding for this new, unpleaded cause of action or claim.
b)Alternatively, the trustees had not proved on the balance of
probabilities, either the allegations of historical fact or the hypothetical actions they would have taken to establish their claim for loss of a chance as required by Benton v Miller & Poulgrain (a firm).⁴²The trustees had also failed to establish, as an evaluation of the probability of the event or action occurring, hypothetical actions by third parties. In particular, the trustees had failed to prove that the Court would have heard on a specific date and granted an application that the alleged caveat not lapse or that the Court would have heard and granted specific performance in a proceeding against BRCB. The trustees failed to call evidence from necessary witnesses and there are limits to the amount of hypothesising which is appropriate: cf Fletcher v Cavell Leitch Pringle and Boyle,⁴³Benton v Miller & Poulgrain (a firm),4⁴ and Morrison Morpeth v Hanrahan.⁴⁵ Furthermore, the trustees could not have lodged a second caveat without an order from the Court: Cotton v Keogh⁴⁶ and Attorney-General v Langdon.⁴⁷

e) In any event, the caveat was not sustainable and the Court would have
rejected the application and permitted the caveat to lapse under s 145A(3).
d)A proceeding for specific performance against BRCB was entirely
conjectural and the obstacles faced in pursuing it would have been

⁴² Benton v Miller & Poulgrain (a firm) [2005] NZLR 66 (CA).

⁴³ Fletcher v Cavell Leitch Pringle and Boyle HC Christchurch AP31/00, 27 July 2001 at [4].

⁴⁴ Benton v Miller & Poulgrain (a firm) at [51].

⁴⁵ Morrison Morpeth v Hanrahan at 7.

⁴⁶ Cotton v Keogh [1996] 3 NZLR I (CA).

⁴⁷ Attorney-General v Langdon [1999] 3 NZLR 457 (HC) at 461.

insurmountable because the "buy back" agreement was invalid and of no effect.

e) There was no evidence to support the trustees' submissions relating to
the value of the property or the amounts of the "agents fees" and "finance costs" or the alleged "base figure of $1,298.750". The whole exercise of seeking to assess the trustees' alleged damages for costs of a chance in this proceeding was entirely speculative.

[91] In response, Mr Wilson for the trustees, submitted that:

a)While the decision in Benton p Miller & Poulgrain (a firm) assisted
with principles in relation to the assessment of damages in a negligence case where there is a loss of chance factor, there are some substantial differences between the context in that case and this case because this is not a negligence ease. It is a statutory claim to compensation involving a wide concept of loss: Registrar-General of Land v Marshall. The question here is what is appropriate compensation for the wrongful loss of the caveat which immediately points to the probabilities had the wrong not occurred. Unlike Benton, which involved assessing how a husband and wife would have acted if the husband had been advised of relevant matters under the Matrimonial Property Act, the question here relates to the impact of the loss of the caveat security on the enforceability of the trustees' contractual rights and the assessment of the probable outcome of the enforcement of those rights.
b)Taking the approach in Benton here is not straightforward, but the
trustees have proved the relevant historical facts on the balance of probabilities, namely ownership of the property, the "buy back" agreement, the transfer to BRCB, the payment of money and the registration of the caveat. Turning then to how the trustees would have acted if the Registrar had not made the mistake and they had been given notice of BRCB' s application to lapse the caveat, it is a matter of inference for the court not a matter of speculative or

hypothetical evidence: cf Benton." The trustees' intentions were clear from their solicitors' correspondence before and after registering the caveat, registering the caveat and in fact suing BRCB. It is an overwhelming inference that had the trustees been given notice of the application to lapse the caveat they would have pursued their available remedies against BRCB, including an application to sustain the caveat and a proceeding for specific performance. In considering what relevant third parties would do, it is then a matter of assessing the probable outcome of the specific performance proceedings which the trustees would have taken following the approach in Morrison Morpeth and Fletcher. On a balance of probability basis the "buy back" agreement would have been upheld because the trustees would not have sold the property worth $2.7 million to $3 million for $1,525,000 without it and it is an historical fact that BRCB did not contest the claim against it based on the "buy back" agreement but went into liquidation.
c)The trustees were not obliged to plead loss of chance as a cause of
action. Their cause of action is for compensation under s 172 not loss of chance. Loss of chance is an approach to issues of uncertainty in the assessment of damages: Benton."⁹

[92] The question of the calculation of the quantum of the trustees' claim for compensation arises because of the answers to the previous issues which have established that the Registrar-General is liable for the trustees' claim for compensation under s 172(a). In other words, the trustees have shown that the caveat was validly lodged and that "through" the Registrar-General's admitted omission and mistake in withdrawing it without notice they have sustained loss or damage which was not barred by s 178(a). The trustees are entitled to compensation or damages. The question now is quantum. In calculating quantum it is not necessary to revisit arguments about the validity of the trustees' claim as suggested in several of the submissions for the Crown.

⁴⁸ Benton at [73].

⁴⁹ Benton at [43]—[44].

The trustees' claim is for compensation or damages under s 172(a). Their cause of action is their claim under s 172(a). Compensation or damages is the relief they seek in that cause of action. Contrary to the submissions for the Crown, it was not necessary for the trustees to plead "loss of a chance" as a separate cause of action. As was submitted for the trustees, "loss of a chance" is one aspect of approaching issues of uncertainty in the assessment of damages.
The starting point in the calculation of quantum of compensation or damages in this case is to recognise that it arises in the context of a statutory right to recover compensation when liability is established under s 172(a). It has been held that a successful claimant under s 172(a) is entitled to damages assessed on the normal basis for the assessment of damages in accordance with ordinary common law principles: McNicholl v Attorney-General.⁵⁰ In McNicholl Tompkins J cited a well-known statement made by Griffith CJ in Registrar of Titles v Spencer⁵¹ that:
...damages commensurate with the loss [the plaintiff] has sustained, that is to say, he is to be put in the same position, so far as money can do it, as if the wrongful act complained of had not been done.
The question of the date at which the damages are to be assessed in the case of a successful claim under s 172(a) appears to depend on the circumstances of the particular case. Unlike the assessment of damages for a successful claim under s 172(b) for wrongful deprivation of any land or estate or interest in land which is subject to s 179 restricting quantum to the value of the land, estate or interest to "the time" of the deprivation and interest to five per cent per annum to the date of judgment recovered, there is no equivalent provision relating to a successful claim under s 172(a). The absence of any equivalent provision enabled damages to be assessed in McNicholl⁵² as at the date of a consent order giving effect to a matrimonial property settlement under which the plaintiff took the land in question. In other cases damages have been assessed at the date of the hearing: Registrar-General v Behn⁵³ and Northside Developments Ply Ltd v Registrar-General. ⁵⁴

^5° McNicholl v Attorney-General (1996) 3 NZ ConvC 192,451 (HC) at 192,456.

⁵¹ Registrar of Titles v Spencer (1909) 9 CLR 641 at 645.

⁵² McNicholl at 192,451.

⁵³ Registrar-General v Behn [1980] 1 NSWLR 589 (CA) (affirmed (1981) 148 CLR 562).

⁵⁴ Northside Developments Ply Ltd v Registrar-General (1987) 11 ACLR 513 (reversed by Court of Appeal but reinstated by High Court (1990) 170 CLR 146).

In the present case the trustees are seeking damages assessed at the time their loss was incurred or when they would have obtained an order for specific performance against BRCB plus interest from that date to the date of judgment in this proceeding. The Crown did not argue that, in the event the trustees were entitled to damages, this approach to the date of assessment was wrong.
How then should damages be assessed in this case? In the absence of authority under s 172(a) in point, some assistance may be obtained from the approach of the Courts to the assessment of damages in professional negligence cases involving lawyers whose mistakes have led their clients to incur losses that involve hypothetical assessments and calculations.
In Morrison Morpeth v Hanrahan⁵⁵ the lawyers had failed to register a caveat to protect their clients' position. As already noted, the fact that the caveat would not have been sustained if the issues had gone to trial did not determine the question of damages in that case. The High Court Judge approached the question of damages by considering whether, if the caveat had been registered, it would have provided leverage enabling settlement and then by determining the probable range of outcome. The Court of Appeal upheld the High Court Judge's approach, but decided that the evidence did not establish on the balance of probabilities that settlement would in fact have been reached on the basis of the payment assessed by the Judge. It was possible, but also conjectural. In the judgment of the Court of Appeal, delivered by McKay J, it was said at 11:
The Relevant Principles
We think the Judge was entirely correct in his basic approach, which was to compare the Hanrahans' present position with that which would have applied if the caveat had been registered. That approach is simply an application of the principle that damages are intended to put the party who has been wronged in the same position as he would have been in if the wrong had not been committed. If registration of the caveat would have led to negotiation, and if a settlement would have resulted, then the amount of that settlement is the measure of the Hawaiians' loss. If there was a mere chance of settlement, the loss of that chance might be measurable in damages, as was the chance of a successful outcome front the Court in Cook v Swinfen [1967] 1 WLR 457 (CA).

⁵⁵ Morrison Morpeth v Hanrahan CA18/93, 17 December 1993.

[99] In Fletcher v Cavell Leitch Pringle and Boyle⁵⁶ the lawyers had failed to prevent a caveat from lapsing. In the District Court the plaintiff's claim for damages was rejected. On appeal to the High Court his claim was upheld. In considering the question of the assessment of damages, William Young J referred to the different "trial within a trial" and "loss of a chance" approaches in Johnson v Perez,⁵⁷ Kitchen

v Royal Air Force Association⁵⁸ and Morrison v Morpeth v Hanrahan and noted that the plaintiff had not called all the evidence available to him to support an "all for the plaintiff approach" which was therefore not appropriate. This meant that a loss of a chance approach was appropriate. The Judge said:

[75] For reasons already indicated, I think that the case falls, fundamentally, to be assessed by reference to the loss of a chance principles discussed in Kitchen. In the context of this case what is required to be compared is the value of the chance which Mr Fletcher would have had if the caveat had been sustained as against the value of the chance which he had once it lapsed. This involves a consideration of his bargaining position as it was, with the caveat lapsed, as against his bargaining position as it would have been if the caveat had not been allowed to lapse.
[76] So I see the case as being, in essence, a claim by Mr Fletcher for damages to compensate him for the impairment to his bargaining position caused by the lapsing of the caveat...

Rather than remitting the case to the District Court for rehearing, the Judge assessed the damages himself: [96]-41021

[100] In Benton v Miller & Poulgrain (a firm)⁵⁹ the lawyers had been negligent in not advising Mr Benton properly about the implications of the Matrimonial Property Act 1996. The Court held that uncertainties as to how Mr Benton would have acted had proper advice been given by the lawyers were to be dealt with on an "all or nothing" basis and decided on the balance of probabilities, while uncertainties as to the reaction to Mr Benton's actions by other parties fell to be determined on "loss of chance" principles: [43]—[49]. In the judgment of Glazebrook and William Young JJ, delivered by William Young J, it was then said:

[50] In making a "loss of chance" assessment, broad judgments are called
for. At one end of the spectrum, very low probabilities are unlikely to be reflected in an award of damages. So if the chance of avoiding an adverse event is as low as say one in ten, a Court will probably reject the claim rather

⁵⁶ Fletcher v Cavell Leitch Pringle and Boyle HC Christchurch AP31/00,27 July 2001.

⁵⁷ Johnson v Perez (1988) 166 CLR 351 and 372 (Brennan J dissenting).

⁵⁸ Kitchen v Royal Air Force Association [1958] 1 WLR 563 (CA) at 574-575.

⁵⁹ Benton v Miller & Poulgrain (a firm) [2005] 1 NZLR 66 (CA).

than fix damages at ten per cent of the cost to the plaintiff associated with those adverse events. At the other end of the spectrum that approach is sometimes, but not always, adopted. So a 90 per cent chance of avoiding an adverse event may result either in complete recovery of all losses associated with that adverse event (on the theory that the chance of not avoiding those losses was sufficiently speculative to be able to be ignored) or alternatively a discount of ten per cent for contingencies.
[51] When assessing damages, there are limits to the hypothesising which
is appropriate...

A detailed analysis of the relevant evidence and the uncertainties in the case for the purpose of assessing damages was then carried out. It was noted that there were various ways of approaching quantification and that assessing damages was not "a precise science": [84]—[85]. It was pointed out that there comes a point "when analysis must stop" and that it was appropriate to recognise that all uncertainties in the case were, ultimately, the result of the negligence of the lawyers: [85].

In the present case it is convenient to start the assessment of damages by recognising that the exercise is necessary and any uncertainties exist because of the admitted omission and mistake by the Registrar-General in failing to notify the trustees of the application for lapse of the caveat and in treating the application as a withdrawal of caveat. In terms of s 172(a) the trustees are entitled to damages which put them in the position that they would have been in if the caveat had not been wrongfully withdrawn.
Then assessing the damages on the basis of the decisions of the Court of Appeal in Morrison Morpeth v Hanrahan and Benton v Miller & Poulgrain (a firm):
a) The relevant historical facts proved on the balance of probabilities are
that the trustees owned the property at 257 Beach Road, Campbells Bay, estimated to be worth between $2.7 million and $3 million, entered into the "buy back" agreement on 22 March 2005, sold the property to BRCB on 15 July 2005 for $1.525 million on the basis of the "buy back" agreement, lodged the caveat that was entered against the title to the property on 29 August 2005 by the Registrar-General, and, when they discovered that the caveat had been wrongly removed, sued BRCB for breach of the "buy back" agreement and obtained judgment for $1.3 million, costs and interest on 4 July 2007.

b)If, instead of registering a withdrawal of caveat against the title to the
property on 22 September 2005, the Registrar-General had notified the trustees that BRCB had lodged an application for the caveat to lapse, there is no doubt that the trustees would have applied to the Court to sustain the caveat, and issued a proceeding for specific performance of the "buy back" agreement and, if necessary, sought an interim injunction to prevent BRCB from selling the property in breach of the "buy back" agreement. I accept Mr Wilson's submission that determining what steps the trustees would have taken is a matter of overwhelming inference from the evidence and well established on the balance of probabilities. It is not a matter of speculation, conjecture or undue hypothesising. The trustees' intentions were clear from their solicitors' correspondence before and after registering the caveat and from the proceeding they took against BRCB.
c)The trustees therefore lost the chance of taking proceedings to enforce
the "buy back" agreement. Having already decided that the "buy back" agreement was a valid and enforceable contract between the trustees and BRCB that would have been ratified by BRCB in terms of its implied warranty or validated by Court order, I accept Mr Wilson' submission that, on the balance of probabilities, there was every likelihood that the trustees would have succeeded in their proceeding to enforce the agreement. I do not accept the Crown submissions that it was necessary for the trustees to call more evidence.
d)On the basis that the trustees would have succeeded in that

proceeding, they would then have been able to prevent the sale of the property for less than $2.7 million and would have obtained the return of the property for $1.525 million less reimbursement of BRCB's "finance costs" estimated at $76,250. As no provision would need to be made for agents' fees (they already having been met by the trustees), the gross amount would have been $1,098,750 (being $2.7

million less $1.525 million and $76,250). I do not accept the Crown submission that there was no evidence before the Court to substantiate these figures. The figure of $2.7 million was the figure stated in the "buy back" agreement. The figure of $1.525 million was the sale price for the property which the trustees would have repaid to BRCB on the "return" of the property. The figure of $76,250 for reimbursement of BRCS's "finance costs" was based on 10 per cent per annum for 0.5 years and was accepted by Harrison J as an appropriate figure in his judgment against BRCB of 7 July 2007 at
[³].

The trustees did not argue that the gross amount (which they set at $1,298,750 based on a sale price of $2.9 million, and I have set at $1,098,750 based on the minimum sale price of $2.7 million) represented the amount of damages to which they were entitled. Instead, on the basis of the decisions in Morrison Morpeth v Hanrahan and Fletcher v Cavell Leitch Pringle and Boyle, Mr Wilson submitted that it was appropriate to recognise the likely willingness of the parties to negotiate a settlement so that the trustees' loss was in the range of $850,000 to $1 million plus interest and costs. Applying the approach mandated by the Court of Appeal in Benton v Miller & Poulgrain (a firm) and accepting Mr Wilson's submission that, on the balance of probabilities, the trustees would have settled their claim against BRCB Limited for $850,000, I have little difficulty in concluding, on loss of chance principles, that there was a high degree of probability that BRCB would also have been prepared to settle for that figure. Faced with the strength of the trustees' claim for $1.3 million and the risks of litigation, BRCB would have accepted that, with a discount of between 34 and 35 per cent, settlement for $850,000 was a more than satisfactory outcome.
I therefore consider that the sum of $850,000 represents the damages for the lost chance in this case.

Contributory negligence andlor failure to mitigate loss

a)Acting directly against preliminary legal advice received by Mr
Marriott, they transferred their property to BRCB (a company apparently formed for the particular transaction) in relation to which they made no inquiries or sought any professional advice and on the basis of the highly unusual "buy back" agreement in respect of which they sought no professional advice.
b)By transferring the property to BRCB, they gave that company full
power to deal with the property, making the on-sale to Mr Smith not only possible but probable.
c)They failed to take all appropriate actions following the transfer of the
property by BRCB to Mr Smith on 12 October 2005.

[106] For the trustees, Mr Wilson submitted that contributory negligence was not relevant because:

a)The circumstances in which they entered into the contract with BRCB
had no causal connection with the registering of the withdrawal of the caveat.
b)The trustees protected their position by the registration of the caveat.
This gave them a level of security for their claim. Questioning the value of the claim may be relevant to assessing damages, but not to whether contributory negligence occurred.
c)Once a party has entered into a contract, it could hardly be a matter of
negligence for the party to fulfil its obligations.

[107] There was no dispute between the parties that contributory negligence is available as a defence to a claim under s 172(a) of the LTA. The availability of the defence is well-established: Miller v Davy,^60° Registrar-General of Land v Marshall,⁶¹ and Hinde McMorland & Sim Land Law in New Zealand.⁶² The apportionment of liability for contributory negligence is governed by s 3(1) of the Contributory Negligence Act 1947 which provides:

^6° Miller• v Davy (1889) 7 NZLR 515 (CA).

⁶¹ Registrar-General of Land v Marshall [1995] 2 NZLR 189 (HC) at 201.

⁶² Hinde McMorland & Sim, Land Law in New Zealand at [9.098].

Apportionment of liability in case of contributory negligence
(I)Where any person suffers damage as the result partly of his own
fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the Court thinks just and equitable having regard to the claimant's share in the responsibility for the damage:
Provided that—
(a)This subsection shall not operate to defeat any defence arising under a contract:
(b)Where any contract or enactment providing for the limitation of liability is applicable to the claim, the amount of damages recoverable by the claimant by virtue of this subsection shall not exceed the maximum limit so applicable.

In ascertaining contributory negligence, the ordinary rules of causation and remoteness apply: Dairy Containers Ltd v NZI Bank.⁶³ Whether conduct constitutes contributory negligence is a question of fact, and is determined by whether the plaintiff acted reasonably in all the circumstances, or if want of care contributed to the plaintiff's own loss: Hooker v Stewart." The apportionable "damage" is recoverable. In deciding each party's "responsibility" the main emphasis is on comparative culpability or blameworthiness: Stephen Todd (ed) The Law of Torts in New Zealand.⁶⁵
In the present case, it is hard to see how the trustees contributed to the loss they sustained "through" the admitted omission and mistake by the Registrar-General. Their claim for damages under s 72(a) of the LTA is based solely on the Registrar-General's omission and mistake in withdrawing the caveat without notice. The trustees did not contribute to the loss or damage that resulted from that omission or mistake. Their loss was caused by the Registrar-General's omission and mistake, not by their entering into the "buy back" agreement and not taking security by way of mortgage or by the lodging of the caveat to protect their interests under that agreement. As already decided, if the caveat had not been wrongly withdrawn, the trustees would have been able to have taken timely steps to enforce the "buy back" agreement against BRCB in order to prevent the on-sale to Mr Smith.

⁶³ Dairy Containers Ltd v NZI Bank [1995] 2 NZLR 30 (HC) at 114-115.

⁶⁴ Hooker v Stewart [1989] 3 NZLR 543 (CA) at 547.

⁶⁵ Stephen Todd (ed) The Law of Torts in New Zealand (5th ed, Brookers, Wellington, 2009) at 996.

The Crown did not argue that the trustees were contributorily negligent in failing to search the register in the period between 22 September 2005, when the withdrawal of caveat was wrongly registered, and 7 October 2005, when BRCB on-sold the property to Mr Smith. This was presumably because the Crown accepted that the trustees were entitled to rely on the Registrar-General's letter of 30 August 2005 giving notice that the caveat had been lodged and the absence of any notice from the Registrar-General of either the application for the caveat to lapse, as required by s I 45A(2) of the LTA, or the wrongful withdrawal of the caveat. The present case may therefore be distinguished on the facts from Miller v Davy where the claimant's failure to search the register was held to be contributory negligence.
The present ease may also be distinguished on the facts from Registrar-General of Land v Marshall where the District Court Judge's apportionment of liability between the Registrar-General and the claimant, whose solicitor failed to produce the relevant documents to the Maori Land Court for noting and endorsement, was upheld. There is no suggestion in the present case that the solicitors acting for the trustees on the sale to BRCB or the lodging of the caveat were guilty of any act or omission which contributed to the trustees' loss.
For these reasons I do not accept the Crown submission that the trustees were guilty of contributory negligence in this case. The trustees were entitled to enter into the transaction with BRCB in the manner in which they did. The transaction may have had unusual features and might have been entered into differently, but that did not mean that they were contributorily negligent in selling their property to BRCB on the basis of the "buy back" agreement. The lodging of the caveat was a legitimate and appropriate step taken by Mr Marriott to protect the trustees' interests under the "buy back" agreement. They did not discover that the step they had legitimately taken was unsuccessful until November 2005 after the property had been on-sold to Mr Smith. At that point they pursued BRCB to judgment. In the circumstances there were no other steps open to them.
Nor do I accept the Crown submission that the trustees failed to take adequate steps to mitigate their loss when they discovered for the first time in November 2005 that the caveat had been wrongly withdrawn and the property already on-sold by

BRCB to Mr Smith in breach of the terms of the "buy back" agreement. The onus of proof was on the Crown: Burrows, Finn & Todd Law of Contract in New Zealand.⁶⁶ Bearing in mind that the transfer of the sale to Mr Smith was registered on 12 October 2005, in the absence of adequate evidence of fraud or sham, there was no ground on which the trustees could then have the sale set aside and the property returned to them. Their only remedy was to sue BRCB for damages for breach of the "buy back" agreement. They took this step and obtained judgment against BRCB for $1.3 million plus interest and costs on 4 July 2007. With the liquidation of BRCB, they were unable to enforce their judgment, but they had taken all reasonable steps to exhaust their available remedies. There was no basis for the trustees to take proceedings against Mr Brown, Mr Krasniqi or Mr Stutt personally. If the Attorney-General considered that any of these persons ought to have been a party to the present proceeding, he ought to have taken steps to join them, but he did not do so. It was not incumbent on the trustees to do so when they considered, rightly, that the Registrar-General was responsible for their loss under s 172(a).

Result

There will be judgment for the plaintiffs in the sum of $850,000 plus interest and costs.
As to interest, the plaintiffs referred to the judgment against BRCB where Harrison J awarded interest for the period 1 October 2006 to 4 July 2007 at 7.5 per cent, but otherwise there were no submissions on the appropriate period or rate of interest from the parties. If, taking into account s 87 of the Judicature Act 1908 and the Judicature (Prescribed Rate of Interest) Order 2008 which set the maximum rate for interest at 8.4 per cent on 1 July 2008, the parties are unable to agree on interest, the plaintiffs may file and serve a memorandum within 14 days of this judgment and the Crown may file and serve a memorandum in response within a further 14 days.
As to costs, I see no reason why the plaintiffs should not be entitled to costs on a 2B basis together with disbursements as fixed by the Registrar, but if the parties

are unable to agree, costs should be dealt with by way of memoranda in the same sequence as for the question of interest.

D^J White J.

D J White J