O'Regan v Public Trust
[2016] NZHC 2084
•2 September 2016
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
CIV-2015-454-69 [2016] NZHC 2084
BETWEEN BYRON OʼREGAN
Plaintiff
AND
PUBLIC TRUST First Defendant
AND
REGISTRAR-GENERAL OF LAND Second Defendant
AND
HILLS PROPERTY HOLDINGS LIMITED
Third Defendant
Hearing: 1 June 2016 Appearances:
G A Paine for the Plaintiff
G Mason for the First and Third Defendants
J Burns for the Second DefendantJudgment:
2 September 2016
JUDGMENT OF NICHOLAS DAVIDSON J
Introduction
[1] These proceedings concern the plaintiff, Mr O’Regan’s claim to a section of
Land near Samson, previously designated as Lot 322 DP13, having an area of
1,012m2 (the Land).1
1 In 2010, the land was amalgamated with adjacent land by the Environment Court and a new identifier was subsequently issued in 2011.
OʼREGAN v PUBLIC TRUST & ORS [2016] NZHC 2084 [2 September 2016]
[2] Until his death in 1939, the Land was owned by Mr William Knowles. Before then, the Land was farmed by the plaintiff’s grandfather. Since then, Mr O’Regan says he and his family have used the Land and paid the rates.
[3] In 2009, he unsuccessfully applied to the Registrar-General for Land (the second defendant) for a grant of prescriptive title. Subsequently, the Public Trust (the first defendant), as the administrator of Mr Knowles’ Estate, obtained transmission of the Land into its name, and then the Land was sold to Hills Property Holdings Ltd (the third defendant). The plaintiff seeks to undo that sale, and has levelled various claims against the three defendants to that end.
[4] The plaintiff seeks a number of far-reaching orders in his statement of claim, including orders imposing a trust on the defendants, return of rates paid to date, substantial exemplary damages, and costs. Essentially, Mr O’Regan claims that he had an interest in this Land which should have been recognised and respected, and that interest has been defeated by the actions of the first, second, and third defendants.
Defendants’ applications
[5] The first and third defendants apply for summary judgment and/or strike out against the plaintiff on the basis that the plaintiff’s second amended statement of claim (statement of claim), discloses no arguable causes of action. The second defendant applies for strike out on the same basis.
[6] These applications overlap and stand or fall according to similar principles.
The applicable principles
[7] Under the High Court Rules, this Court may strike out part or all of a pleading if, for relevant purposes, no reasonably arguable cause of action is
disclosed.2
2 High Court Rules, r 15.1(1)(a).
[8] The principles applicable to an application for summary judgement are well-settled, reflected by the Court of Appeal in Attorney-General v Prince and Gardner, summarised as follows:3
(a) Pleaded facts, whether or not admitted, are assumed to be true. (b) The cause of action or defence must be clearly untenable.
(c) The jurisdiction is to be exercised sparingly, and only in clear cases.
(d)The jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument.
(e) The court should be particularly slow to strike out a claim in any developing area of law.
[9] These principles, relevant also to applications for strikeout, have been affirmed by the Supreme Court, in Couch v Attorney-General,4 and most recently in Carter Hold Harvey Ltd v Ministry of Education.5
[10] The defendants must demonstrate that none of the plaintiff’s causes of action
can succeed.
The causes of action
[11] The plaintiff pleads several causes of action against various combinations of the first, second, and third defendants.
[12] The plaintiff says that the Public Trust “allowed” him and his family to pay the rates. He seeks orders under the Trustee Act 1956 in relation to its decision to sell, on the basis that he is beneficially interested in the property. He seeks
reimbursement of all rates paid.
3 Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267.
4 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
5 Carter Holt Harvey Ltd v Ministry of Education [2016] NZSC 95 at [10].
[13] Against the Registrar-General, the plaintiff levels serious allegations of improper, indeed fraudulent conduct, and seeks orders designed to convey the property into his name, together with exemplary damages.
[14] As against Hills Property Holdings Ltd, the plaintiff seeks a declaration that it holds the Land in trust for the plaintiff, and says that it engaged in misleading and deceptive conduct in conjunction with the Public Trust so as to deliberately defeat his interests.
[15] In addition to his pleaded causes of action, the plaintiff points to three factual matters which are said to be subject to genuine dispute, and thus preclude summary judgment or strike out. The first concerns the interpretation of the Registrar-General’s letter rejecting the plaintiff ’s application for prescriptive title. The second concerns the valuation of the Land prior to its sale to the third defendant. The third involves whether or not the plaintiff personally paid any of the applicable rates on the Land.
Does the Plaintiff have an interest in the Land?
[16] It is clear that Mr O’Regan’s claim to a prescriptive title did not reach the stage of requiring a decision by the Registrar-General as it was a work in progress. Whether he had adverse possession of the kind required by s 3(1)(b) of the Land Transfer Amendment Act 1963, did not reach the point of a decision by the Registrar-General. The facts simply do not demonstrate that his case in that regard might have succeeded had he met the Registrar-General’s request for further information.
[17] In any event, any such claim was superseded by the further dealings with the
Land and his claim to an interest is thus addressed on the bases pleaded by him.
[18] The plaintiff seeks to establish an equitable interest in the Land by several routes. First, the interest is said to arise because the Public Trust allowed the plaintiff and his descendants to pay the rates as they fell due. That proposition begs the question. The interest, if it arises at all, must stem from the payment of rates
per se, irrespective of whether the Public Trust “allowed” such payments. Its case is
that it was unaware of the Land, or payment of rates in respect of it, until 2009.
[19] Mr Mason says that there is no evidence that the plaintiff personally paid any rates, and in any case, the rates were “modest to negligible”. However, aside from quantum, the issue of what effect (if any) the payment of rates has on the plaintiff’s interest is one of principle. I have not been advised of any authority which suggests that the payment of rates can found a constructive trust, but it is not inconceivable. To claim any sort of constructive trust based on payment of rates, there must have been a contribution to acquisition, preservation or maintenance of the property where such contribution has manifestly exceeded the benefits. The rates were very modest. The District Council rates for 2008/2009 were $52.90 plus the Horizons Regional Council Levy.
[20] I think counsel is quite right to submit that it was the O’Regan family’s choice to pay the minimal rates on land owned by another, being the Estate. That cannot found an equitable interest sustained by a constructive trust.
[21] Even if it were sufficient to establish an equitable interest, for the reasons which follow, I do not consider any such interest to have survived the subsequent dealings with the Land.
[22] As an alternative to his claim based on payment of rates, the plaintiff says that the Land was gifted to him either expressly or by implication, although the terms of Mr Knowles’ last Will do not support that. Furthermore, support for this claim does not appear in the plaintiff’s affidavit filed in support of his claim. In any case, equity does not assist volunteers.6 As against the third defendant, which acquired the Land as a bona fide purchaser for value, the plaintiff cannot assert an equitable interest arising by way of gift, and there is nothing alleged to impinge on the
purchaser’s conscience if Mr O’Regan could point to an equitable interest.
6 Meagher, Gummow, and Lehane Equity Doctrines & Remedies (5th ed, LexisNexis, Sydney,
2015) at [3.260].
Public Trust
[23] For the Public Trust, counsel refers to the allegation that the plaintiff, through his family, had an equitable interest in the Land for over 50 years. There is otherwise no basis pleaded or explained for the application. There is no suggestion of a breach of fiduciary duty owed to the plaintiff, nor a promise, which might give rise to a trust, and the plaintiff’s sense of grievance is insufficient in itself to found an equitable interest.
[24] The allegation that the Public Trust “negligently” failed to transfer the Lot as executor of the Estate of William West Knowles after his death until 2009, does not help the plaintiff. There is no claim by him for loss arising from the Land not having been transmitted. He was not a beneficiary under the Estate.
Subsequent dealings with the Land
[25] The legal framework surrounding the dealings with the Land is comparatively straightforward. The Public Trust was the administrator of Mr Knowles’ Estate, and thus able to apply to the Registrar-General for transmission of the title. Pursuant to its powers under the Public Trust Act 2001, the first defendant produced a Certificate of Administration dated 8 July 2009.7 This was definitive proof as its right, as administrator, to apply for a transmission of the Land under s 122 of the Land Transfer Act, and the second defendant accordingly registered it as proprietor.8
[26] Following transmission, the plaintiff’s rights in the Land, if any, were significantly curtailed. As Mr Mason submits, the plaintiff’s interest was not caveatable so as to prevent the registration of the first defendant as proprietor.9
A proprietor by transmission does hold subject to equities, but the plaintiff must have some clear equitable interest for that to avail him. A mere claim to prescriptive title would not suffice. At any time after transmission, the first defendant could have prevented the plaintiff from applying for a grant of prescriptive title. As the holder
of the legal interest in the Land, it could have lodged a caveat preventing such an
7 Public Trust Act 2001, s 144.
8 Land Transfer Act 1952, s 123.
9 Land Transfer Act 1952, s 141(5)(a).
application.10 Accordingly, Mr Mason says that at this point, the plaintiff’s equitable
interest, if any, came to an end.
[27] In any case, the interest is said to have been extinguished when the Public Trust sold the Land to the third defendant. The sale was a function of the Public Trust’s duty to account to the beneficiaries of Mr Knowles’ Estate, and it otherwise had the statutory power to do so.11 The defendants submit that the sale was at arms length, and for fair value, and the consideration paid reflected a valuation of the Land properly obtained. As discussed below, that valuation is the subject of
strong objection by the plaintiff. In the normal course, title to the Land passed indefeasibly to the third defendant at this point.
[28] As expressed above, I cannot identify on the case pleaded how an equitable interest could arise in favour of the plaintiff in relation to this land. A claim based on payment of the rates is at best a very tenuous claim at law. There is scant evidence to suggest that the plaintiff had an equitable interest by way of gift, and the statutory context demonstrates that he did not have an interest merely because of his application for prescriptive title. On the whole, I am not persuaded that such an equitable interest arose, and it is not truly arguable.
[29] In any case, however it might have been derived, the operation of law and the principle of indefeasibility meant that the plaintiff ’s interest was extinguished either when the Land was transmitted to the first defendant, or when it was sold to the third defendant. The majority of the plaintiff’s claims centre around the exceptions to this, and for the purposes of this application, I address them on the basis that the plaintiff could, at least initially, have shown an equitable interest in the Land.
Claims against the second defendant
[30] The plaintiff’s claims against the Registrar-General can be addressed and answered in short order. In essence, the plaintiff submits that the second defendant
“improperly exercised a discretion” in relation to the plaintiff’s application for
10 Land Transfer Amendment Act 1963, s 8(1), Boskett v Drummond CA190/05, 21 December
2006 at [33]-[35].
11 Trustee Act 1956, s 14(1)(a).
prescriptive title. Further, he says that it deliberately “stalled” the plaintiff’s application, and misled him as to its status, the implication being that it was complicit in the further transactions involving the first and third defendants which the plaintiff says were fraudulent. These are very serious allegations, but I find them to be without any merit.
[31] The plaintiff also says that the second defendant “improperly exercised his discretion by approving the first defendant’s application for a transmission and therefore sale”. First, in respect of transmission, the statutory framework provides that if the evidence is such that it appears to the Registrar that a party is entitled to the claimed interest, then the Registrar “shall register the applicant as proprietor”. The Certificate provided by the first defendant was indisputable evidence of that interest. Secondly, I do not consider there to be anything “improper” in the second defendant’s actions. The documentary evidence simply does not bear these allegations out.
[32] While pleaded facts are assumed to be capable of proof, that is not the case where they are without foundation. The impropriety must be founded on more than a broad allegation. However, the actions taken by the Registrar-General relate to the plaintiff’s three sequential applications for prescriptive title and the bare pleading referred to is contrary to the documentary record, and the allegations of impropriety should not have been made.
[33] In approving the Public Trust’s application for transmission, the factual record set out in the affidavit of Mary Gordon dated 7 December 2015 demonstrates that the plaintiff’s second application for prescriptive title was rejected on
3 July 2009 and transmission took place on 13 July 2009, with transfer on
21 July 2009. Then on 18 August 2009 a further application was lodged.
[34] To a suggestion that the plaintiff provide the Registrar-General with further information as required by way of statutory declaration, the plaintiff provided a letter from the Manawatu District Council with related rating records, but that is all. The Registrar-General had required the plaintiff to provide statutory declarations from
disinterested persons. The allegation of stalling the application is demonstrably contrary to the indisputable facts established by the documentary record.
[35] Mr Burns for the Registrar-General says that the amended statement of claim does not disclose any cause of action. It is not for a defendant to work out what the amended statement of claim might plead, but in any event the allegations are contrary to indisputable facts on the documentary record. There is simply nothing to demonstrate any unlawful action alleged.
Second defendant’s letter of 3 July 2009
[36] The interpretation of the second defendant’s letter rejecting the plaintiff’s initial application for prescriptive title is said to be in dispute. Essentially, the plaintiff says that it did not constitute an outright refusal which brought the process to an end. Rather, it highlighted deficiencies in the plaintiff’s application which could be remedied. On this interpretation, the plaintiff’s application remained alive, and therefore he says that the second defendant was wrong to transmit the land to the first defendant, and likewise for the first defendant to sell it to the third defendants.
[37] On the other hand, the defendants submit that the rejection of the plaintiff’s application brought the process to an end for the time being. I do not consider the plaintiff’s interpretation to be correct as a matter of law. The plaintiff’s initial application was deficient, and remained so, despite the Registrar-General giving indications as to what the plaintiff was required to provide. The evidence and pleading shows he could only have provided evidence insufficient to found a claim to a prescriptive title.
[38] It follows from what I have said about the legitimacy of the parties’ actions in transmitting the Land to the first defendant, that the plaintiff ’s interest, if any, was extinguished at that point. However, if I am wrong in that regard, I go on to consider the nature of the sale transaction between the first and third defendants.
Claims against the first and third defendants
[39] The allegations are of fraud, or conduct said to be misleading or deceptive.
Exceptions to indefeasibility
[40] The principle of indefeasibility recognises two exceptions, namely fraud, and in personam claims. Both involve a high threshold.
[41] For fraud, there must generally be actual dishonesty of some sort,12 which can be levelled at the registered proprietor,13 in respect of a prior identifiable interest in the property.14
[42] However, there may be a case for land transfer fraud where “the purchaser has cause to suspect a competing claim to the title of the property but deliberately refrains from making further inquiries”.15 The plaintiff says that is the position here.
[43] In relation to in personam claims, the Court of Appeal has said:16
…the centrality of the Land Transfer Title has always been dominant. Its in personam exception should be confined to cases that truly engage the conscience of the party whose registered priority is challenged.
[44] The plaintiff says those circumstances are met here. However, I find the opposite to be the case. As Mr Mason submits, there was no affirmative act on the part of the first or third defendants that would constitute express or implied acceptance of the plaintiff’s interest. Indeed, for the reasons above, I do not consider the plaintiff to have had an interest in the Land.
[45] I do not consider that the circumstances of the sale, which engage the mandate for the first defendant’s actions and the consideration paid by an arms-length purchaser, are such as to so affect either party’s conscience so that the transaction might be voided by reason of fraud.
[46] The plaintiff contends in his statement of claim that the Land was valued at
$40,000 but sold to the third defendant for $1,700, a mere fraction, and that this
12 Jessett Properties Ltd v UDC Finance Ltd [1992] 1 NZLR 138 (CA).
13 Conlan v Registrar of Titles [2001] WASC 201, (2011) WAR 299.
14 Waller v Davies [2007] NZCA 51, [2007] 2 NZLR 508.
15 JEB Management Ltd v Grubz United Whanau Trust [2015] NZHC 157, (2015) 15 NZCPR 705.
16 Cashmere Capital Ltd v Crossdale Properties Ltd [2009] NZCA 185, [2009] 3 NZLR 612 at [18].
supports his characterisation of the transaction as fraudulent. The valuation is said to involve a dispute as to fact.
[47] There is evidence that the Land was valued at $1,770, the price ultimately paid for it, by a Mr Jason Humphrey, a registered valuer, in 2009. As Mr Mason says, the various rates assessments annexed to the plaintiff’s affidavit record the capital value at $4,500. The plaintiff says that as far as the valuation evidence is concerned, there is a genuine dispute of fact. However, the evidence simply does not support a claim that the property was valued at $40,000. The plaintiff appears to be misguided in his belief as to valuation, and in part, this may stem from valuations of a greater parcel of land with which the Land is now associated after its amalgamation in 2011. I find that the evidence as to the registered value of the Land at the relevant time is broadly consistent with the price paid by the third defendant.
[48] Furthermore, as Mr Mason points out, a sale at an under value is not sufficient by itself to support an allegation of fraud. The plaintiff must show that he had some rights in the property, which I have found he did not. Further, but contingent on that fact, the plaintiff would have to show an intent on the part of the first and third defendants to defeat that interest, whatever it might be. As Mr Mason submits, an (unfounded) complaint about the valuation does not constitute misleading or deceptive conduct.
[49] Against the third defendant, the plaintiff claims that the payment of rates means that the third defendant holds the Land in trust for the plaintiff. I do not accept that proposition. I am doubtful that the mere payment of rates can, as a matter of law give rise to a prescriptive interest or any more than a possible claim to recovery of rates where they were paid to benefit a third party. Here Mr O’Regan had the use of the land. In any case, such an interest as that might create could not as a matter of law, and subject to the allegations of fraud discussed above, operate to defeat the third defendant’s title, which it holds indefeasibly.
Claims under the Trustee Act 1956
[50] The plaintiff seeks an order that the Public Trust holds the Land in trust for him, and seeks to hold it to account in respect of its decision to sell the Land.
[51] These points can be disposed of in short order. As to the first, title now vests in the third defendant, because there is nothing to suggest that the transaction was fraudulent. A declaration in respect of the first defendant would, in these circumstances, be futile. As to the second, a review order under s 68 of the Trustee Act 1956 is only open to parties beneficially interested in trust property. For the above reasons, the plaintiff has no such interest. Regardless, any order made under s
68 must not disturb the distribution of trust property where that distribution was made “without breach of trust before the trustee became aware of the making of the application to the court”,17 and further must not “affect any right acquired by any person in good faith and for valuable consideration”.18
[52] As Mr Mason submits, and consistent with the findings of this judgment, both of those provisos are applicable here. Finally, an application in respect of the first defendant’s actions is out of time, and thus barred by the relevant statute of limitations.19
Conclusion
[53] The history to this Land, and the plaintiff’s association with it, demonstrate that there were only ever the slenderest of grounds for the plaintiff to claim an interest. To that end he sought prescriptive title, but on the evidence there was no basis for a successful application.
[54] Whatever interest the plaintiff might have had was superseded when the Public Trust, well within its rights and above-board, applied for and was granted transmission of the Land into its name. The Registrar-General was bound to execute the transmission.
[55] At that point, the sun set on the plaintiff’s ability to obtain a grant of prescriptive title, if he could have established facts sufficient to content for that.
17 Trustee Act 1956, s 68(1)(a).
18 Trustee Act 1956, s 68(1)(b).
19 Limitation Act 1950, s 21.
[56] Then, in the exercise of its function as administrator, the Public Trust sold the Land as part of its duties, to a third party purchaser for value. A valuation for the Land was obtained prior, and the sale reflected that valuation.
[57] The plaintiff has sought to establish some kind of equitable interest, and from that impugn the various dealings with the Land on the basis of fraud. The multiple revisions and amendments to the plaintiff’s initial statement of claim reflect the difficulty of this task.
[58] I consider that in all likelihood, as a matter of law, title to this Land passed indefeasibly to the first defendant following transmission, but in any case passed by its sale to the third defendant. Fraud involves proof of fact and the evidence must be commensurate with such a serious allegation. The plaintiff has had, through the process, ample opportunity to adduce evidence that would demonstrate this, but has not been able to do so. I do not consider the factual matters said to be matters of such contention do constitute a genuine dispute that would be sufficient to invalidate the strike out process.
[59] It follows that none of the plaintiff’s claims can succeed.
Disposition
Against the first and third defendants
[60] The statement of claim discloses no reasonably arguable causes of action against the first or third defendants, and those claims are accordingly struck out.
Against the second defendant
[61] The plaintiff’s statement of claim discloses no reasonably arguable causes of
action against the second defendant, and the strike-out application is granted.
Leave
[62] Leave is reserved for the defendants to seek further orders and directions to effect this judgment.
Counsel
[63] I am grateful to counsel for their submissions. I am also grateful to Mr Paine for making submissions in difficult circumstances which allowed the hearing to proceed to conclusion.
Costs
[64] Costs are reserved. Failing agreement, the parties may submit memoranda within 10 working days of this judgment should the defendants seek costs.
……………………………………..
Nicholas Davidson J
Solicitors:
Denham Bramwell, Manukau for the Plaintiff, G Mason, Palmerston North for the First and Third
Defendants, Crown Law, Wellington for the Second Defendant
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