Perkins v Purea
[2009] NZCA 541
•18 November 2009
IN THE COURT OF APPEAL OF NEW ZEALAND
CA365/2008
[2009] NZCA 541BETWEENALAN STANLEY PERKINS AND ADRIENNE ROSEMARY PERKINS
Appellants
ANDTERE MOANA PUREA
First RespondentANDTOM TANGI-TUAKE AND JUNE TANGI-TUAKE
Second Respondents
Hearing:2 April 2009
Court:William Young P, Chambers and Ellen France JJ
Counsel:N W Woods for Appellants
D G Smith for First Respondent
W G C Templeton and P J Stevenson for Second Respondents
Judgment:18 November 2009 at 9.30am
Reissued:20 November 2009: see minute of 20 November 2009
Effective date of judgment 18 November 2009
JUDGMENT OF THE COURT
AThe appeal is dismissed.
B The cross-appeal by the first respondent is dismissed.
C Costs are reserved.
REASONS OF THE COURT
(Given by Chambers J)
Table of Contents
Para No
A family arrangement unravels [1]
Issues on the appeal [16]
Was the Judge correct to find that an agreement was reached in 1988under which Mrs Tangi-Tuake would potentially become the
owner of the property? [21]
Mrs Tangi-Tuake was wrong as to who the contracting parties
were[25]
Miscalculation of the amount paid by the Tangi-Tuakes [27]
The Judge ignored cross-examination [28]
The Tangi-Tuakes’ case was inconsistent with John Mansfield’s
evidence [37]
Mr Purea’s medical records [46]
Issebell Purea’s evidence should have been given more weight [49]
Mrs Purea’s will [52]
The pleadings [55]
Conclusion[58]
Must the Perkins’ equitable interest in the property defeat
Mrs Tangi-Tuake’s because of s 182 of the Land Transfer
Act 1952?[61]
Whose equitable interest should prevail? [70]
Onus on the Perkins? [77]
Proposition not put to Mr Perkins [79]
Mrs Tangi-Tuake’s delay in lodging a caveat [83]
Mrs Tangi-Tuake’s failure to check on Mr Mansfield [90]
Conclusion[99]
Was the Judge correct to grant Mrs Tangi-Tuake specific performance? [101]
Was the Judge correct to refuse the Perkins damages under
clause 3.10(2)? [110]
Result and costs [123]
Two unresolved matters [127]
A family arrangement unravels
[1] In 1970, Keri and Tere Purea, the latter being the first respondent, bought a property at Rowandale Avenue, Manurewa. In 1988, they decided they wanted to live primarily in the Cook Islands, Mr Purea’s homeland. They owned some land there and wanted to build a house on it. To raise the money, they rearranged their borrowings on the Rowandale Avenue property. It was by then worth about $85,000. ASB Bank agreed to lend them $47,000, to be secured by first mortgage. For this deal to work from the Pureas’ point of view, of course, they needed someone who would pay off the mortgage. Renting the house out would not bring in enough income and further the Pureas wanted to be able to use the house whenever they returned to New Zealand to visit family and friends. Obviously, if all of the Pureas’ wishes were to be fulfilled, some arrangement was required with a family member living in Auckland.
[2] According to June Tangi-Tuake, the Pureas’ daughter, her parents at that stage offered the Rowandale Avenue home to their children on the basis that, if they moved in and met the mortgage payments to the bank and the other outgoings, the property would be theirs once the loan was repaid. The Pureas were to be able to stay in the house whenever they were in New Zealand. Only June Tangi-Tuake and her husband Tom were interested in or in a position to take up the offer. According to the Tangi-Tuakes, they agreed to the proposal and moved into the Rowandale Avenue property. They have lived in the family home ever since, bringing up their family there and, since 1995, also looking after the two children of Mrs Tangi-Tuake’s deceased sibling, Kamate. Whether the Tangi-Tuakes’ account of the nature of the arrangement between them and the Pureas is correct is a central feature of this litigation.
[3] Mr and Mrs Purea, before shifting to the Cook Islands, travelled to Australia to visit Mrs Purea’s sister. At this point, their plans fell apart, as the Pureas decided to separate. Instead of going to the Cook Islands, Mrs Purea returned to New Zealand and went to live with the Tangi-Tuakes at Rowandale Avenue. She continued to live there with them until her death in 2002. Mr Purea, following the separation from his wife, lived mainly in the Cook Islands until 2004.
[4] From 1988, the Tangi-Tuakes, in accordance with the agreement they say they made with the Pureas, met all the mortgage payments to the bank and other outgoings on the property. They also made various improvements to the home. From 1988, neither Mrs Purea nor her husband ever contributed to the upkeep or maintenance of the home or to repayment of the loan secured against it.
[5] After Mrs Purea’s death, Mr Purea, who acquired Rowandale Avenue by right of survivorship, offered to sign the property over to Mrs Tangi-Tuake. Indeed, in March 2003 he signed a transfer and sent it to Mrs Tangi-Tuake’s solicitor. For reasons not currently relevant, that transfer was never registered. Legal title to the property accordingly remained in his name.
[6] Later in 2003, it was discovered that the Pureas, when taking out the ASB loan, had contracted for an insurance policy which repaid the balance of the loan in the event of the death of one of them. A claim was made on that policy and the ASB loan was repaid. If the 1988 agreement were in the terms the Tangi-Tuakes asserted, they were now entitled to legal ownership of the property.
[7] In 2004, Mr Purea returned to New Zealand and started living with the Tangi‑Tuakes at Rowandale Avenue. At first, relations were friendly. Mrs Tangi‑Tuake continued in her endeavour to have the property transferred into her name. That process became unduly complicated by reason of muddled thinking on the part of her then solicitor, the details of which do not currently matter. The transfer had still not been sorted out by May 2005. By that time, relations between the Tangi-Tuakes and Mr Purea had seriously deteriorated. In May, two things happened. First, Mr Purea ceased living at Rowandale Avenue; the circumstances of his leaving are in dispute. Secondly, Mr Purea advised that he no longer intended to transfer Rowandale Avenue to his daughter. He denied there was any agreement between him (and his late wife) and the Tangi-Tuakes regarding the property. Indeed, he instructed his lawyer to have the Tangi-Tuakes evicted from “his” home.
[8] Some time later in 2005, he listed the property for sale. Alan and Adrienne Perkins, the appellants, saw the property and bought it. Their agreement was due to settle on 2 December 2005. On 30 November 2005, however, the Tangi‑Tuakes’ lawyer lodged a caveat to protect what was said to be Mrs Tangi‑Tuake’s interest in the property.
[9] A stalemate ensued. The Tangi-Tuakes refused to budge. The Perkins were unable to settle their transaction and take possession. Mr Purea was not only out of occupation but also without the proceeds of his sale.
[10] Eventually, when it became clear the dispute would not settle amicably, the Perkins sued Mr Purea for specific performance of their agreement. Mr Purea joined the Tangi-Tuakes to the litigation, seeking an order that their caveat be removed and an order that they vacate the property. The Tangi-Tuakes defended that claim and asserted that they had an equitable interest in the property, which preceded the Perkins’ interest in time and outranked it in priority.
[11] The hearing came before Asher J. In a reserved decision ((2008) 9 NZCPR 266), he held that in 1988 the Pureas and the Tangi-Tuakes had reached an agreement, which was in terms of the Tangi-Tuakes’ evidence. (There was some confusion in the evidence as to whether the property was to become the joint property of Mr and Mrs Tangi-Tuake or Mrs Tangi-Tuake’s alone. In the end, the Judge concluded the arrangement was with Mrs Tangi-Tuake: at [65]‑[66].) The agreement was that Mrs Tangi-Tuake and her husband would take over responsibility for the mortgage and any outgoings and maintenance. In consideration for that, she would have the property transferred into her ownership on repayment of the mortgage. The Pureas could stay at the property when they wished: at [67].
[12] His Honour went on to hold that Mrs Tangi-Tuake, as purchaser of the property, had an equitable interest in the property, which Asher J characterised as “in the nature of an institutional constructive trust”: at [73]. Mr Purea held the property subject to that trust. His purported sale of the property to the Perkins was a breach of that trust.
[13] Of course, the Perkins too, as purchasers under an agreement for sale and purchase, also acquired an equitable interest in the property: at [84]. An issue for the Judge was whose competing equitable interest should prevail. The Judge held Mrs Tangi-Tuake’s interest should prevail: at [111]. The consequence of that finding was that the Perkins’ claim for specific performance failed: at [112]‑[116]. The Perkins were entitled to damages against Mr Purea for his inability to settle. The Judge fixed their loss at $88,000.
[14] In order to regularise the position between Mr Purea and the Tangi-Tuakes, the Judge made a declaration that Mr Purea held the property on trust for Mrs Tangi‑Tuake and ordered him to transfer the property to her: at [131]‑[132].
[15] From that judgment, the Perkins have appealed. Mr Purea cross-appealed.
Issues on the appeal
[16] Five issues arise for our consideration. It is convenient to deal first with the principal issue arising on the cross-appeal. This was whether the Judge was correct to find that Mrs Tangi-Tuake and her parents had reached an agreement in 1988 under which Mrs Tangi-Tuake and her husband would take over responsibility for the mortgage and, in return, on the mortgage’s repayment, would take the property as her own. We shall find that he was correct.
[17] Mr Woods, for the Perkins, did not really become involved with the first issue: he let Mr Smith, for Mr Purea, and Mr Templeton, for the Tangi-Tuakes, the second respondents, slug that out. Mr Woods’s position was that, even if there was an agreement as contended for by the Tangi-Tuakes, that did not avail them as against the Perkins. His first argument was that, even if Mrs Tangi-Tuake did acquire an equitable interest in the property by virtue of the 1988 agreement and subsequent developments, that interest could not prevail against the Perkins’ equitable interest because of s 182 of the Land Transfer Act 1952. Section 182, if properly interpreted, Mr Woods said, protected purchasers who had relied on the register against prior unregistered interests in the land, in the absence of fraud. Asher J had rejected a similar argument and held that the provisions of s 182 were not an answer to Mrs Tangi-Tuake’s claim: at [95]. While Mr Woods accepted that the Judge’s interpretation of s 182 was in line with earlier authorities, those authorities, Mr Woods submitted, needed review as they left purchasers who had relied on the register dangerously exposed to unknown competing equities in the period prior to registration. These authorities undermined, he said, a fundamental tenet of the Torrens system which underpinned the Land Transfer Act. The second issue on the appeal is, therefore, whether we should review those authorities and whether s 182 means the Perkins’ interest must trump the Tangi-Tuakes’.
[18] The Judge had weighed the Perkins’ and Mrs Tangi-Tuake’s competing equities and concluded that Mrs Tangi-Tuake’s equitable interest should prevail. Mr Woods submitted that the Judge had incorrectly applied the principles for determining priority of competing equities and had made findings of fact which were unjustified. The third issue on the appeal is therefore whether the Judge was right to conclude that Mrs Tangi-Tuake’s equitable interest should prevail.
[19] The fourth issue is whether the Judge was correct to grant Mrs Tangi-Tuake specific performance of her agreement. Mr Smith argued that Mr Purea should be allowed to complete his sale to the Perkins and that Mrs Tangi‑Tuake should be restricted to compensation from the proceeds of that sale.
[20] The final issue concerns the Judge’s assessment of damages. The Judge ordered Mr Purea to pay the Perkins damages of $88,000, this amount being the difference between the sale price of the property and its market value at the date of hearing: at [119]. Mr Purea does not challenge that award in the event that he has lost on the preceding issues. The Perkins also sought interest under clause 3.10(2) of their agreement, being interest payable by a defaulting vendor during the “default period”. Asher J declined to make any award under this head: at [123]. Mr Woods submits the Judge was wrong so to rule. Mr Smith supports the Judge’s reasoning. Was the Judge correct to refuse to make an award under clause 3.10(2)?
Was the Judge correct to find that an agreement was reached in 1988 under which Mrs Tangi-Tuake would potentially become the owner of the property?
[21] At trial, Asher J was faced with two conflicting scenarios. The first, which we shall call “the purchase scenario”, was put forward by the Tangi-Tuakes, supported by some of Mrs Tangi-Tuake’s siblings. In essence, this scenario is that set out at [2] above.
[22] The alternative scenario, which we shall call “the rental scenario”, was that advanced by Mr Purea. According to his evidence, the Tangi-Tuakes asked to move into Rowandale Avenue. He and his wife agreed on the basis that the Tangi-Tuakes paid $40 a week rent. There was never any discussion about the Tangi-Tuakes eventually owning the property.
[23] The Judge seemed to have little difficulty in concluding that the purchase scenario was to be preferred to the rental scenario. He provided detailed reasons for his conclusions. It is unnecessary for us to repeat them other than in brief summary form. In short, he preferred Mrs Tangi‑Tuake’s evidence to Mr Purea’s. The Judge found Mr Purea a vague and unreliable witness. Further, Mrs Tangi-Tuake’s evidence was corroborated in important respects by her husband’s evidence and the evidence of two of her brothers. Most importantly, the purchase scenario found support in what had happened after Mrs Purea died. Mr Purea told Mrs Tangi-Tuake that the house was hers and that he would transfer it to her. Mrs Tangi-Tuake saw a solicitor, who wrote to Mr Purea enclosing a transfer. Mr Purea, as surviving joint tenant, signed the transfer to his daughter. Why would Mr Purea have made the offer and signed a transfer of the property to his daughter if, as he now asserted, the Tangi-Tuakes were always only tenants? He had no convincing explanation for that.
[24] Mr Smith advanced eight reasons in support of his submission that the Judge had wrongly preferred the purchase scenario. We shall take those reasons in the order Mr Smith presented them.
Mrs Tangi-Tuake was wrong as to who the contracting parties were
[25] Mr Smith’s first argument was that the Judge was not entitled to find that it was the Pureas who had approached their children to see whether one of them would be prepared to take over responsibility for the mortgage. The basis for this submission appears to be that the Judge’s finding was inconsistent with Mrs Tangi‑Tuake’s evidence that the agreement was with her and her husband. With respect, Mr Smith’s submission raises a trifling point. It is not surprising, given their relationship, that Mrs Tangi-Tuake used “I” and “we” rather interchangeably. No doubt, when she and her parents discussed the possibility of the Tangi-Tuakes moving to Rowandale Avenue and making it their family home, she discussed the matter with her husband and they made the decision together. In addition, by the time of trial, Mrs Tangi-Tuake would have regarded the paying off of the mortgage as a joint venture to which she and her husband had both contributed. Of course she would have regarded the house, given that it was their matrimonial home, as “theirs”. There is nothing at all surprising in the fact that all the witnesses were non-specific as to whom exactly the Pureas had made the agreement with in 1988: the Tangi‑Tuakes jointly or Mrs Tangi-Tuake alone? It was unimportant to them.
[26] In the end, Asher J concluded “that as [Mrs Tangi-Tuake] was the Pureas’ child, the arrangement was with her”: at [65]. In actual fact, nothing very much turns on whether the arrangement was with the Tangi-Tuakes jointly or just with Mrs Tangi-Tuake; certainly Mr Tangi-Tuake takes no issue with the Judge’s finding. The fact that the Judge ultimately preferred a conclusion that Mrs Tangi-Tuake alone was the contracting party does not in any way undermine her evidence or the Judge’s conclusion that the Pureas were seeking to enter into an arrangement with one of their children. The crucial point of this case was never the identity of the person or persons with whom the Pureas made an agreement in 1988. Rather, the crucial point was the nature of that agreement: were the Tangi-Tuakes to be paying off the mortgage with a view ultimately to acquiring the property or were they to be merely tenants?
Miscalculation of the amount paid by the Tangi-Tuakes
[27] Mr Smith’s second reason was that the Judge had “miscalculated the monies paid by June and her husband”. The Judge found the Tangi-Tuakes had paid $181,792 to the bank in respect of the mortgage. Mr Smith submitted that the maximum that could have been paid towards the mortgage was $106,806. It may well be the Judge’s figure is wrong, but again that in no way detracts from the Judge’s conclusion that the arrangement was one for purchase, not a rental agreement.
The Judge ignored cross-examination
[28] Mr Smith’s third submission was that the Judge had “ignored the cross‑examination” of the Tangi-Tuakes’ witnesses. In this regard, Mr Smith highlighted various parts of the cross-examination of the Tangi-Tuakes and of Tu and Tai Purea, Mrs Tangi-Tuake’s brothers. Mr Smith submitted the answers given in cross-examination were inconsistent with the Judge’s finding.
[29] So far as Mrs Tangi-Tuake’s evidence was concerned, Mr Smith again pointed to the alleged inconsistencies as to whether the 1988 agreement was with the Tangi-Tuakes jointly or just with Mrs Tangi-Tuake. We have dealt with that issue above and say no more about it. His second point related to Mrs Tangi‑Tuake’s evidence as to how the figure of $200 a week which she and her husband paid, she said towards the mortgage, had been fixed. Mr Smith also referred to cross‑examination where Mrs Tangi-Tuake accepted the money she and her husband paid went into her mother’s account, not to the bank direct.
[30] With respect, none of that cross-examination detracted from the Judge’s conclusion; on the contrary, in our view, it supported his conclusion. Mrs Tangi‑Tuake had seen the ASB’s reducing loan repayment schedule, which showed that the first monthly payment was $833, thereafter reducing at about $2 a month. Because the amount was changing each month, Mrs Tangi-Tuake and her husband concluded that they would pay into the Pureas’ account $200 a week. That would cover the mortgage repayments; indeed, right from the start it was slightly more than the monthly repayment figure. After Mrs Purea returned to live with them, Mrs Tangi-Tuake appeared to be relaxed about whether her mother used the surplus. At this point, Mrs Tangi-Tuake and her husband had assumed responsibility for looking after Mrs Purea, who was not working. Paying $200 a week to cover the mortgage was consistent with the agreement Mrs Tangi-Tuake said she and her parents had reached. What is more, it is entirely inconsistent with Mr Purea’s alleged rental arrangement at $40 a week. Indeed, what is striking is that Mr Smith never put to Mrs Tangi‑Tuake what Mr Purea had said in his evidence-in-chief, namely that the agreement was that the Tangi-Tuakes could live in the Rowandale Avenue home “provided they paid $40 per week rent”.
[31] We, like the Judge, see no significance in the fact the Tangi-Tuakes put the money into Mrs Purea’s account rather than paying the bank direct; the mortgage responsibility was, after all, from the bank’s perspective, the Pureas’, not the Tangi‑Tuakes’. It is likely that the Pureas were required, as a condition of the loan agreement, to maintain an account with the bank from which monthly payments were to be deducted.
[32] We turn now to Mr Tangi-Tuake’s evidence. The Judge held that Mr Tangi‑Tuake confirmed his wife’s version of events: at [34]. The Judge added: “He gave his evidence carefully and I found him a credible witness.” Mr Smith submits that this overlooks the fact that he had established in cross-examination that Mr Tangi-Tuake was not present at the discussions in 1988 during which an agreement was made. As a consequence, Mr Smith submitted, “Tom Tangi-Tuake’s evidence [was] of no use to the Court whatsoever”; his evidence “was total hearsay reliant entirely upon his wife June’s advice to him”.
[33] We reject that submission. First, even if Mr Tangi-Tuake’s understanding of the arrangement came from his wife, his evidence as to what his wife told him in 1988 would not be hearsay under the Evidence Act 2006, his wife having given evidence in the proceeding. Further, it was highly relevant that this is what his wife told him the arrangement was; it completely refuted the suggestion that Mrs Tangi-Tuake had made up the alleged agreement much later. In any event, notwithstanding Mr Tangi-Tuake’s acceptance in cross-examination of the proposition that he had learnt of the proposal from his wife, we think it almost inconceivable that he would not have been privy to general family discussions in 1988 about what was to happen to the Rowandale Avenue property. It is absolutely clear that Mr Tangi-Tuake never thought that he and his wife were to be merely renters and, in this regard, we once again see it as significant that Mr Smith never put the rental scenario to Mr Tangi-Tuake.
[34] We turn now to Tu Purea’s evidence. The Judge found Tu to be a “measured and credible” witness: at [36]. The Judge considered he corroborated the Tangi‑Tuakes’ account. Mr Smith disputed that. He submitted Tu’s evidence‑in‑chief was undermined by his cross-examination, which demonstrated Tu was unclear about the details of the arrangement.
[35] We accept Tu was vague about the details, a fact we find unsurprising given that the conversations took place twenty years ago and did not affect him personally. But what was significant was that he said, in answer to questions, that he could recall his parents “talking to June and Tom about them paying for the mortgage”. The Judge then asked, “What were they saying about the mortgage?” Tu answered: “If they moved in, they were going to pay for the mortgage and then take on the house after they paid it off.” He could also recall that the weekly payments were to be $200, which was in line with the Tangi-Tuakes’ evidence and inconsistent with Mr Purea’s assertion of $40 a week rent. In those circumstances, we believe the Judge was justified in accepting Tu’s evidence as supportive of the Tangi-Tuakes’ case.
[36] Next, Mr Smith was critical of Tai Purea’s evidence. We need spend little time with him, as the Judge himself found him to be a vague witness: at [37]. He did confirm, albeit the Judge said in “an imprecise way”, that all the children were offered the same opportunity to take over the house on repayment of the loan. That was consistent with the Tangi-Tuakes’ case and inconsistent with Mr Purea’s.
The Tangi-Tuakes’ case was inconsistent with John Mansfield’s evidence
[37] Mr Smith’s fourth submission was that the Judge’s finding as to the nature of the agreement was inconsistent with what she had told her solicitor, John Mansfield, in 2003.
[38] The Judge found that what happened from 2003 on provided “further confirmation” of Mrs Tangi-Tuake’s account: at [41]. In reaching that view, the Judge did have regard to Mr Mansfield’s evidence, though noting he “did not have a good recollection of the exact events”: at [41]. The Judge also noted that at times Mr Mansfield had carried out the legal processes entrusted to him by Mrs Tangi‑Tuake in an “inconsistent and … inexplicable way”: at [53]. Mr Mansfield himself gave evidence as to “professional difficulties” he was suffering at the relevant time, which led in May 2005 to his suspension as a barrister and solicitor. In his own words, “I was not really thinking professionally at that time.” This necessarily means that Mr Mansfield’s recollection of events must be treated with caution; it also means that it is dangerous to draw from what he did inferences as to what Mrs Tangi-Tuake told him or instructed him to do.
[39] Before detailing Mr Smith’s precise complaint, we need to set out some further facts. Mrs Purea died on 10 December 2002. Mr Purea travelled from the Cook Islands to attend her funeral. After the funeral, according to Mrs Tangi-Tuake, her father said to her, “Girl [he always called her “girl”], look after your house, you know this is your house.” According to Mrs Tangi-Tuake, her father suggested she should get the house transferred to her. The Judge accepted that evidence: at [41].
[40] Mrs Purea’s will was located. Under that will, Mrs Tangi-Tuake was executor. Mrs Tangi-Tuake took the will to Mr Mansfield, a solicitor she did not previously know. She showed him the will and told him what her father had said. Following that meeting, on 8 January 2003, Mr Mansfield wrote to Mr Purea in the Cook Islands in these terms:
I understand that you have spoken to your daughter, June Tuake, who is the executor who has advised you that the home is to be transferred into June’s name with the consent of the other members of the family.
[41] Mr Mansfield enclosed a transmission and a transfer. Under the transfer, Mr Purea transferred to Mrs Tangi-Tuake the fee simple in the Rowandale Avenue property. Mr Purea signed the transfer and returned it.
[42] With that background, we now turn to Mr Smith’s submission. He submitted that, had Mrs Tangi-Tuake referred to the 1988 agreement, Mr Mansfield would have referred to it in his letter of 8 January 2003. The fact he did not mention that agreement was, Mr Smith submitted, “a direct denial of there being any agreement in respect of the property”.
[43] We do not accept that submission. It is entirely possible that Mrs Tangi‑Tuake did not mention the 1988 agreement at her first meeting with Mr Mansfield. (She herself thought she did not mention it until a later meeting.) There was no reason to mention it at that stage because she and her husband were not by then entitled to the property. The mortgage still had many years to run. No one at that stage knew about the mortgage repayment insurance. The Tangi-Tuakes continued to make the loan repayments until much later in the year, as it was not until early October 2003 that it was discovered there was mortgage repayment insurance. Mr Mansfield lodged a claim on the policy in October that year.
[44] What Mrs Tangi-Tuake was relying upon in January 2003 was not the 1988 agreement but rather her father’s offer to transfer the property to her then. Mr Purea honoured his offer by signing the transfer. The fact, of course, that he made this offer is, however, supportive of the Tangi-Tuakes’ claim based on the 1988 agreement: why would he offer to transfer the property, which was now his alone by right of survivorship, were it not for the underlying agreement whereby the Tangi‑Tuakes were ultimately to get the property in consideration of their having paid the mortgage and met all outgoings since 1988?
[45] In short, therefore, what Mr Mansfield wrote supports what Mrs Tangi-Tuake said her father said to her after the funeral. What Mr Purea said after the funeral is entirely consistent with the purchase scenario. Mr Mansfield’s evidence was not inconsistent with the Tangi-Tuakes’ case; on the contrary, as the Judge found, it was supportive of it.
Mr Purea’s medical records
[46] Mr Smith’s fifth submission involved an attack on the following finding made by the Judge:
[44] I did not find Tere Purea to be a credible witness on these issues. For instance, he gave evidence indicating that his wife had separated from him against his wishes, while I have no doubt that in fact he left his wife to take up another relationship. He maintained that he suffered a stroke more recently than 1997, but the medical records do not disclose this. His portrayal of himself as a kindly duped man was not convincing. I consider that vagueness suited his purposes, and that he made no real effort to bring forth inconvenient memories.
[47] Mr Smith submitted that the Judge had failed to examine the medical records properly. He accepted Mr Purea had been “vague about all matters and historical detail”, but disputed the Judge’s finding that the loss of memory was contrived.
[48] We see this as a non-issue. What is not in dispute is that Mr Purea’s recollection of events was vague in all respects. It does not matter why he was vague. Even if his vagueness stemmed from a stroke, the fact remains that the Judge felt little weight could be put on his evidence, especially where it conflicted with the Tangi-Tuakes’ evidence and the evidence of Tu and Tai.
Issebell Purea’s evidence should have been given more weight
[49] Issebell Purea was the daughter of Tere Purea and Tu Coles. She gave evidence that Keri Purea had told her in 1988 and again in 2002 that the Tangi‑Tuakes were renting Rowandale Avenue. Obviously, this evidence was helpful to Mr Purea’s case, but in the end the Judge considered it was overwhelmed by evidence to the contrary: at [39].
[50] Mr Smith submitted the Judge should have given Issebell’s evidence more weight. We do not accept that submission. Issebell was not living at Rowandale Avenue in 1988. She was not a child of Keri and Tere, so the offer to the children was not made to her. Significantly, she accepted in cross-examination that she did recall an occasion when her father had said he would give the property to the Tangi-Tuakes. It seems this was in 1995, at the time Kamate, Mrs Tangi-Tuake’s brother, was killed.
[51] In our view, the weight the Judge attached to Issebell’s evidence was in the circumstances justified.
Mrs Purea’s will
[52] Mr Smith’s seventh submission was that Mrs Purea’s will was inconsistent with the purchase scenario. The will did not refer to the 1988 agreement. Mr Smith submitted it would have if the agreement had been in the terms that Mrs Tangi‑Tuake asserted.
[53] Mr Smith made a similar submission to Asher J. The Judge rejected the submission on the basis that the will was “not necessarily inconsistent” with the Tangi-Tuakes’ evidence, as the property remained jointly owned by the Pureas until such time as the Tangi-Tuakes repaid the mortgage: at [60]. We agree. Rowandale Avenue was not Mrs Purea’s to give. She and Mr Purea held the property as joint tenants. If she predeceased Mr Purea, it would pass to him by right of survivorship. He would then hold the property on trust. The Tangi-Tuakes were not entitled to the property until the mortgage was repaid. In 1996, when Mrs Purea made her will, probably she assumed that it would be many, many years until the mortgage was repaid. Probably, like everyone else, she was unaware of the fact that mortgage repayment insurance had been part of the deal when the mortgage financing was arranged.
[54] The terms of Mrs Purea’s will do not assist Mr Purea’s case one jot. Nor do they assist the Tangi-Tuakes’ case. The will casts no light on whether the purchase scenario or the rental scenario is correct.
The pleadings
[55] Finally, Mr Smith submitted that the terms of the agreement as found by the Judge differed from the way the Tangi-Tuakes had pleaded the case. Presumably the implication was that Mrs Tangi-Tuake had given to her lawyers a different version of what had been agreed from the account she gave in court, with the consequence that the truthfulness of what she asserted in court was to be doubted.
[56] The Tangi-Tuakes’ pleadings, which the Tangi-Tuakes’ lawyers amended many times, were, with respect, poorly drafted at the start and still poorly drafted in their final form, filed by consent after the hearing was concluded while judgment was reserved. We do not consider the deficiencies in the pleadings reflect on the Tangi-Tuakes; rather, they reflect on the lawyers concerned. The fact the pleadings were still far from perfect even after the case suggests that the amendments did not arise from the Tangi-Tuakes changing their story but rather from uncertainty on the lawyers’ part as to how the claim should be pleaded legally.
[57] In our view, the pleadings’ deficiencies were not relevant to an assessment of the credibility and reliability of the Tangi-Tuakes’ case.
Conclusion
[58] We have now considered all of Mr Smith’s submissions challenging the Judge’s finding as to the nature of the agreement reached in 1988. We do not uphold any of the challenges.
[59] We may also indicate that we have considered afresh the evidence, in so far as that can be done from the transcript and the exhibits and without the benefit of seeing and hearing the oral evidence being given. We are satisfied that the Judge’s finding as to the nature of the agreement was well made.
[60] On this first issue, therefore, we find in favour of the Tangi-Tuakes. For the record, we note that there was no argument before us as to the lack of a “sufficient memorandum in writing”. Asher J had dealt with an argument about this, but concluded that “the fact that there was no statement in writing documenting the contract in 1988 [was] not fatal to this claim” for reasons he set out: at [82]. No party challenged that finding.
Must the Perkins’ equitable interest in the property defeat Mrs Tangi-Tuake’s because of s 182 of the Land Transfer Act 1952?
[61] Neither in the High Court nor before us was there any dispute as to the nature of the Perkins’ interest in the property. They were, as Asher J found, “purchasers under an agreement for sale and purchase” and as such they had “an equitable interest in the property”: at [84], citing Bevin v Smith [1994] 3 NZLR 648 (CA). The Perkins have never been able to settle and acquire a legal interest in the property because of Mrs Tangi-Tuake’s caveat.
[62] The Judge found that Mrs Tangi-Tuake was “in the position of a purchaser”: at [72]. As a purchaser, she too acquired “an equitable interest in the land”: at [73], citing Bevin at 665. The Judge held this equitable interest was “in the nature of an institutional constructive trust”: at [73], citing Bevin at 659.
[63] The Judge considered his task was to determine whose competing equitable interest should prevail. Mr Wood submits that, in adopting that approach, the Judge erred. Mr Woods submitted that the Perkins’ position was protected by s 182 of the Land Transfer Act, which provides as follows:
182Purchaser from registered proprietor not affected by notice
Except in the case of fraud, no person contracting or dealing with or taking or proposing to take a transfer from the registered proprietor of any registered estate or interest shall be required or in any manner concerned to inquire into or ascertain the circumstances in or the consideration for which that registered owner or any previous registered owner of the estate or interest in question is or was registered, or to see to the application of the purchase money or of any part thereof, or shall be affected by notice, direct or constructive, of any trust or unregistered interest, any rule or law or equity to the contrary notwithstanding, and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud.
[64] Mr Woods argued that the Perkins were entitled to rely on Mr Purea’s registered title in the absence of fraud. No party had alleged the Perkins had been fraudulent.
[65] Asher J dismissed this submission in these terms:
[95] The provisions of s 182 of the Land Transfer Act 1952 are not an answer to June Tangi-Tuake’s claim. Section 182 has been consistently interpreted to extend its protection to a purchaser only from the time of registration by that purchaser and thereafter. This view was taken in Solicitor-General v Mere Tini (1899) 17 NZLR 733 (CA), and has been recognised in many more recent decisions: NZ Meat Nominees Limited v Sim (1990) NZ ConvC 190,478 at 190,481: Duncan v McDonald [1997] 3 NZLR 669 at 681 (CA). Up to registration the purchaser has only an equitable interest in the land. It becomes a legal interest on registration.
[66] Mr Woods did not assert that Asher J had misstated the law. Rather, he asserted that the law had long ago taken a wrong turn, with the consequence that s 182, as it has been interpreted, had led to a situation which was inconsistent with “the purposes of the Torrens system”. It was essential, he submitted, that “the commercial world” should be able to rely on “the security of the Torrens system in ensuring conveyancing transactions proceed in reliance on the truth of the registry”. The difficulty which had arisen from the traditional interpretation of s 182 was highlighted, Mr Woods submitted, by Potter J in Mercury Geotherm Limited (In Receivership) v McLachlan [2006] 1 NZLR 258 (HC):
[138] The troublesome gap that is created for purchasers and mortgagees between the time of settlement and the time of registration requires a legislative response, as has occurred in Australia and Canada, rather than a judicial response. That must be so particularly where the legislature by the 1982 amendment to the Land Transfer Act has intervened by inserting s 172A, which provides a measure of relief to purchasers and mortgagees who obtain and rely upon a guaranteed search.
[67] Mr Woods submitted that, contrary to Potter J’s view, we should not “permit a hole requiring legislative reform to go unchecked”.
[68] Mr Woods will be disappointed to learn this panel is, at least on this topic, in the category of “timorous souls”: see Candler v Crane, Christmas & Co [1951] 2 KB 164 at 178 (CA). We acknowledge the difficulties the traditional interpretation of s 182 causes purchasers in the period prior to registration. But it is too late now for a judicial change of course, at least at the level of this Court. It would be particularly inappropriate to resolve the difficulties judicially when the Law Commission, in conjunction with Land Information New Zealand, is currently working on reform of the Land Transfer Act. The Law Commission’s Issues Paper (Review of the Land Transfer Act 1952 (NZLC IP10 2008)) deals with problems arising from the courts’ interpretation of s 182, but makes clear that the solution is neither simple nor obvious.
[69] In short, therefore, we agree with Asher J’s summary at [95]. We also agree with what he said at [96], namely that “the contest between the Tangi-Tuakes and the Perkins must … be seen in terms of competing equities”.
Whose equitable interest should prevail?
[70] Asher J commenced his discussion on “the competing equities” by noting that “the starting point is the established equitable rule that the first equitable interest in time prevails”: at [97]. He went on to say:
[98] But equally, the fact that an equity is first in time is not necessarily conclusive. Unsurprisingly, a Court exercising its equitable jurisdiction will look at all relevant circumstances to determine equitable priority.
[71] If temporal priority is to be displaced, the onus, Asher J said, “lies on the equity holder later in time”: at [99].
[72] The Judge then went on to consider the competing equities and concluded “that a comparison of the equities between June Tangi-Tuake and the Perkins leads to a result in her favour”: at [111]. We do not need to set out all the considerations that weighed with His Honour. Some will be mentioned below when we consider Mr Woods’s challenge to the Judge’s assessment.
[73] As we understand Mr Woods’s submissions, he did not challenge the principles to be applied; rather, he challenged the way Asher J had applied and weighed them. It is not surprising Mr Woods did not challenge the principles themselves because, as Potter J remarked in Mercury Geotherm, they “are relatively straightforward”: at [140]. Indeed, we have found her Honour’s summary of the principles so helpful that we reproduce and endorse them:
·The holder of the equitable interest that is first in time, all other things being equal, is entitled to priority.
·The burden of proof lies on the person seeking to deprive the holder of the earlier equitable interest of priority, that is, the person seeking to reverse the order of temporal priority.
·The overriding question is: Who has the better equity, bearing in mind the conduct of both parties and all other relevant circumstances?
·The conduct of both the first equity holder and the second equity holder must be considered; the whole conduct of each party is to be looked at.
·The Court can have regard to the conduct of the parties subsequent to the creation of the second equitable interest.
·In New Zealand the postponement of the first to the second equitable interest is not based exclusively on the doctrine of estoppel but on a more general and flexible principle that preference should be given to what is the better equity in an examination of the relevant circumstances. The question involves general considerations of fairness and justice.
·Authorities from other jurisdictions must be treated carefully.
·Under the general law the holder of an equitable interest may suffer the postponement or loss of that equitable interest if the holder of an equitable interest which was created later in time becomes the bona fide purchaser for value of the legal estate in the land without notice of the prior equitable interest.
·Under the Land Transfer system the holder of an unregistered instrument may suffer the postponement or loss of his or her equitable interest if the holder of an equitable interest which was created later in time registers an adverse instrument, which was acquired for valuable consideration, without fraud within the meaning of the Land Transfer Act.
·The holder of an unregistered interest can never improve his or her priority by lodging a caveat.
·Failure to lodge a caveat promptly to notify an equitable interest is just one of the circumstances to be considered in determining whether it is inequitable that the prior equitable owner should retain his priority.
[74] At [141]‑[143], her Honour cited the authorities on which she had relied in preparing her list. Among those authorities was this Court’s decision in Australian Guarantee Corporation (NZ) Limited v CFC Commercial Finance Limited [1995] 1 NZLR 129, the case which Mr Woods accepted was “the lead authority in New Zealand regarding competing equities”. So there is no dispute about the principles to be applied.
[75] In essence, Mr Woods challenged Asher J’s analysis on four grounds:
(a)The Judge had wrongly placed “an evidential onus of proof” on the Perkins;
(b)The Judge’s finding that the Perkins knew there was some sort of contest or dispute as to the ownership or control of the property between Mrs Tangi-Tuake and Mr Purea was not put to Mr Perkins when he gave evidence;
(c)The Judge gave too little weight to Mrs Tangi-Tuake’s delay in lodging a caveat;
(d)The Judge wrongly concluded that Mrs Tangi-Tuake was under no obligation to check whether her lawyer had lodged a caveat.
[76] We shall consider those submissions in order.
Onus on the Perkins?
[77] Mr Woods submitted Asher J had erred when he stated that the onus lay on the equity holder later in time. This was contrary, Mr Woods submitted, to “the underlying tone contained in Australian Guarantee Corporation”. This submission is wrong. This Court expressly held in Australian Guarantee Corporation at 137:
The onus rests on the second equity holder as the party seeking to reverse the order of temporal priority. If, contrary to the normal rule, the later claimant is to be preferred, the onus lies on that claimant to demonstrate why.
[78] Potter J was quite correct in picking up that principle as her second bulletpoint (see above at [73]). So too was Asher J correct in what he said on this topic at [99].
Proposition not put to Mr Perkins
[79] In evaluating the conduct of the parties, Asher J considered “highly relevant” the Perkins’ state of knowledge of Mrs Tangi-Tuake’s position: at [104]. The Judge summarised his findings on that topic as follows:
[105] Mr Perkins said in his brief that he was aware that Tere Purea’s daughter occupied the property. He said that he had been told this by Mr Singh before signing the agreement. He recounted that Mr Singh said that Tere Purea had had a stroke, had gone to the Islands, and when he returned had been “kicked out of his own house by his daughter, and so had decided that he would sell it”. While Mr Singh in his evidence did not recount such a conversation, and said he was unaware of any claim to an interest by Mr and Mrs Tangi-Tuake, Mr Perkins did not seek to retract his evidence. It was a statement by Mr Perkins against his interests, and I accept it as true.
[106] There might of course have been a number of explanations for the daughter’s conduct as far as the Perkins were concerned. Her action may have been entirely unreasonable. However, the recounted action suggests some sort of a claim by June Tangi-Tuake to the property. It was more than simple advice that there was a tenancy. It was advice indicating some sort of contest or dispute as to the ownership or control of the property between the daughter and Tere Purea. Mr Perkins was involved in property dealing and had completed approximately twenty property transactions. He would have known that such an action was inconsistent with a mere tenancy. The Perkins chose not to follow up the information, and make any inquiries.
[80] Mr Woods submitted that these findings were unfair as this issue had not been put to Mr Perkins when he gave evidence.
[81] We reject this submission. The Judge’s finding was largely based on Mr Perkins’s evidence-in-chief. Ms Stevenson, the Tangi-Tuakes’ trial counsel, was not obliged to tackle Mr Perkins on evidence she no doubt accepted. Ms Stevenson did question Mr Perkins on whether the real estate agent had said anything to him “about there being a tenancy agreement for the house”. Mr Perkins accepted the agent had not mentioned a tenancy agreement. Ms Stevenson also questioned Mr Perkins about it being odd that here was a house for sale which potential purchasers were not allowed to look inside. In our view, the Judge was entitled to conclude that Mr Perkins had been put on enquiry that Mr Purea might not be entitled to sell the property and that Mr Perkins consciously chose not to follow that up.
[82] In the circumstances, we consider Ms Stevenson put sufficient questions to Mr Perkins on this topic. What one was to make of what Mr Perkins knew or did not know or did or did not do was a matter for submission, not further cross-examination.
Mrs Tangi-Tuake’s delay in lodging a caveat
[83] Since Mr Purea had returned to live with the Tangi-Tuakes in 2004, Mrs Tangi-Tuake had been trying to get the necessary documents signed so that the property could be registered in the Tangi-Tuakes’ names. This process had been hindered by Mr Mansfield’s failings. As the Judge found, the course he was following was “inexplicable”. By May 2005, matters were still not resolved.
[84] It was on 23 May 2005, Mrs Tangi-Tuake said, that Mr Purea, while all the family was out at work, moved his belongings out of Rowandale Avenue and then advised Mrs Tangi-Tuake that he had changed his mind and was not going to sign the house over to her. Several days later, Mrs Tangi-Tuake received a letter from Ikipa Tongatule, Mr Purea’s then solicitor, advising that the Tangi-Tuakes were to vacate the property. Mr Tongatule also advised that Mr Purea intended “to sell the house on the open market”. That was the first Mrs Tangi-Tuake knew of her father’s plan to sell.
[85] Mrs Tangi-Tuake immediately went to see Mr Mansfield. Mr Mansfield suggested she should register a caveat, which she instructed him to do. Mr Mansfield promptly wrote to Mr Tongatule, advising him that Mr Purea was not entitled to sell the property. He also advised that he had “registered a caveat against the property to stop further dealing with the property” until matters were resolved. A copy of that letter was sent to Mrs Tangi-Tuake. In fact, Mr Mansfield had not lodged a caveat. He did not finally get around to lodging one until 30 November 2005, by which time the Perkins were unconditionally committed to their purchase from Mr Purea.
[86] Asher J considered Mrs Tangi-Tuake’s conduct in the circumstances was reasonable. As soon as she was aware that her father might or intended to breach trust, she instructed her solicitor to lodge a caveat and reasonably believed he had done so.
[87] Mr Woods respectfully challenged the Judge’s reasoning on this topic. He submitted that the Judge failed to consider Mrs Tangi-Tuake’s “failure to lodge a caveat between the period 1988 to May 2005”.
[88] We do not consider the Judge erred in that respect. All parties assumed that, if we found the Judge was right to find an agreement in the terms asserted by the Tangi-Tuakes, then Mrs Tangi-Tuake had a caveatable interest from 1988; that is, from a time prior to repayment of the mortgage. There being no submissions to the contrary, we assume that is correct. Even if Mrs Tangi Tuake did have a caveatable interest from 1988, there was no indication while her mother was alive that the Pureas were not going to honour the agreement. Nor was there any indication of a possible breach of trust in the period from November 2003, when the loan was repaid, to May 2005. Those entitled to equitable interests are under no obligation to lodge caveats to protect those interests at the earliest opportunity. In the same way that the Perkins did not lodge their caveat until settlement failed to occur, Mrs Tangi-Tuake is not to be criticised for failing to lodge her caveat prior to her father’s indication that he would not honour the agreement.
[89] In short, therefore, we do not regard Mrs Tangi-Tuake’s conduct in failing to lodge a caveat prior to May 2005 as in any way disentitling.
Mrs Tangi-Tuake’s failure to check on Mr Mansfield
[90] Before Asher J, Mr Woods had advanced an argument that Mrs Tangi-Tuake was at fault in failing to check that Mr Mansfield had lodged the caveat he said he had lodged. The Judge rejected that criticism and said he did not consider the Tangi‑Tuakes “can be blamed for not double-checking that Mr Mansfield had in fact lodged the caveat”: at [110].
[91] Before us, Mr Woods renewed this submission. He said the Judge had failed to turn his mind to “whether an ordinary and reasonable person ought to have been put on notice” by certain events that occurred between June 2005 and November 2005. These events, Mr Woods submitted, should have caused Mrs Tangi-Tuake to reflect on whether Mr Mansfield had in fact lodged the caveat.
[92] Before we consider the events in question, we note that those who have entrusted their affairs to a lawyer are in general entitled to take for granted that what a lawyer says he or she has done has indeed been done. The Tangi-Tuakes are not experienced in legal matters; they would have had very limited knowledge of their legal rights and obligations. They relied on Mr Mansfield. It is much to be regretted that Mr Mansfield let them down. It was the Tangi-Tuakes’ misfortune that their crisis with Mr Purea coincided with Mr Mansfield’s personal crisis leading to Law Society intervention.
[93] So what is it that Mr Woods says should have put Mrs Tangi-Tuake on notice as to the truthfulness of what Mr Mansfield had told her he had done? The events fall into two categories. The first category comprised two letters Mr Tongatule sent to Mr Mansfield dated 17 June 2005 and 6 July 2005. In both those letters, Mr Tongatule referred to Mr Purea’s continuing intention to sell, but did not mention the caveat. We do not accept these letters should have caused Mrs Tangi-Tuake to question whether a caveat was in place. Rather, they would have caused a reasonable person in her position to conclude that Mr Purea (or his lawyer) disputed the alleged justification for the caveat and intended to press on with trying to sell the property. There was nothing in the letters to the effect that Mr Tongatule had checked the register and no caveat had been lodged.
[94] The second category comprised visits to the property by real estate agents: an agent from First National in Manurewa and later one from Howick Realty. These were agents whom Mr Purea had apparently retained. Mr Woods submitted that the fact that they were involved should have alerted Mrs Tangi-Tuake to the fact there was no caveat in place.
[95] We do not accept that submission. On the contrary, this evidence helps Mrs Tangi-Tuake's case. Mrs Tangi-Tuake said that, after they discovered First National had put a “for sale” sign on their fence, they contacted First National and said to them, “Do your homework. There’s a caveat on the place.” Presumably something similar was said to the Howick Realty agent. According to Mrs Tangi‑Tuake, and she was not cross-examined on this point, both those real estate agencies “pulled the plug after finding out about the house issues and our interest in the home”. The fact they disappeared from the scene would have encouraged the Tangi-Tuakes to believe that not only was the caveat in place but also that it was effective in deterring Mr Purea’s ambition to sell.
[96] The sale to the Perkins was conducted by a third agent. He never even got round to putting up “for sale” signs. Indeed, he sold the property even before Mr Purea had signed the listing contract appointing him as agent.
[97] Mr Woods finally in this regard referred to “the doctrine of imputed knowledge” and submitted that, even if Mrs Tangi-Tuake did not have actual knowledge of Mr Mansfield’s failure to lodge the caveat, her agent, Mr Mansfield, must have. His knowledge was imputed to her. Mr Woods cited in support of this proposition Mercury Geotherm at [144]‑[152].
[98] What Potter J was there considering was whether Contact Energy Limited was fixed with notice of the McLachlans’ prior equitable leasehold interest by virtue of an agent’s knowledge of such interest. She noted that the law was that “any actual or constructive notice received by an agent will be imputed to the principal”: at [148]. That reasoning would be applicable here if it was asserted that an agent of the Perkins had notice of Mrs Tangi-Tuake’s prior equitable interest. That has no relevance to the present case because the Perkins did not have any agent working for them up to the time they first acquired their equitable interest. It is irrelevant that Mr Mansfield must have known he had not lodged the caveat; that knowledge is irrelevant to the enquiry in this case. “The doctrine of imputed knowledge”, as Mr Woods termed it, has no relevance on the facts of this case.
Conclusion
[99] In our view, none of Mr Woods’s criticisms of the Judge’s reasoning on this topic can be sustained.
[100] We have reconsidered all the reasons the Judge gave for his conclusion that Mrs Tangi-Tuake’s interest should prevail over the Perkins. We agree with his assessment. This ground of appeal accordingly fails.
Was the Judge correct to grant Mrs Tangi-Tuake specific performance?
[101] We have now reached the position where we have upheld the Judge’s decision that Mrs Tangi-Tuake’s equitable interest was rightly held to prevail over the Perkins’. What should be the consequences of that? Asher J determined that the Perkins’ claim for specific performance should fail. Mr Purea should have to compensate them by a payment of damages for his breach of his agreement with them. Mrs Tangi-Tuake should get an order for specific performance, requiring Mr Purea to transfer title to the property to her.
[102] Mr Smith submitted that the Judge was wrong to make those orders. He submitted that Mrs Tangi-Tuake’s interest in the property should be restricted to a return of “the monies that [the Tangi-Tuakes] had paid off the principal with a modest increase to compensate for loss of interest and/or increase in property values during that time”. Mr Smith did not specify in his written submissions what amount that should be. Nor do his pleadings help in identifying quantum.
[103] The rationale appeared to be that it was in some way unfair that the Tangi-Tuakes should now acquire a mortgage-free house when half the equity had initially been provided by the Pureas. So specific performance must be refused, even if the 1988 agreement was in the terms the Tangi-Tuakes asserted.
[104] We see nothing unfair in the outcome. The 1988 agreement had huge advantages for the Pureas as well as, potentially, for the Tangi-Tuakes. The advantages to the Pureas were these. They wanted to have properties available to them in both New Zealand and the Cook Islands. While the intention seems to have been that they would be primarily based in the Cook Islands, they no doubt intended to travel frequently back to New Zealand to see their family, all of whom were here. They needed to raise money to build a house on the property they owned in the Cook Islands. The obvious way to do that was to increase their borrowings, using the Rowandale Avenue property as security. They needed some member of the family, however, to agree to meet the mortgage repayments and all the other outgoings on Rowandale Avenue. They also needed to ensure that a room in Rowandale Avenue would be available to them whenever they returned to Auckland. The Tangi-Tuakes were prepared to accept their terms so that the Pureas could fulfil their dream. The deal was advantageous to both sides.
[105] As it turned out, the dream was not fulfilled as the Pureas’ marriage broke up. The advantages to the Pureas nonetheless were fulfilled. Mrs Purea returned to live in the old family home, where she stayed until she died. She never had to meet any mortgage payments or other outgoings on the property. Her daughter helped look after her. Mr Purea benefited from this as well, as he was never called on to provide or contribute to accommodation for his wife. And, of course, after his wife’s death, he returned to live at Rowandale Avenue with the Tangi-Tuakes. At no stage after 1988 did he have to contribute in any way to mortgage repayments or outgoings on the property.
[106] We acknowledge that, since the flare-up in 2005, Mr Purea has not been able to live at Rowandale Avenue. It is possible that the Tangi-Tuakes have obligations to him which have not been fulfilled. That is a matter which does not appear to have been raised in the current proceeding. We deal with that further in the final section of these reasons.
[107] For these reasons, we reject Mr Smith’s submission that the Tangi-Tuakes should be accorded a lesser remedy than specific performance. Under the 1988 agreement, the mortgage having been repaid, they are entitled to the fee simple in Rowandale Avenue. We have already held that their equitable interest should prevail over the Perkins’. In those circumstances, we consider Asher J was correct to order Mr Purea to transfer the property to his daughter.
[108] We should add that Mr Woods did not join issue on this matter. He appeared to accept that, if the cross-appeal failed and if his arguments on s 182 and on the competing equities did not find favour, then the property should be transferred to Mrs Tangi-Tuake. He did suggest that Mrs Tangi-Tuake might be entitled to some or all of the proceeds of sale, but that submission was advanced in a context where Mrs Tangi-Tuake had established the 1988 agreement but had failed to establish that her equity should prevail over the Perkins’ equitable interest. On our findings, as on Asher J’s, that situation has not come to pass.
[109] The Tangi-Tuakes win on this issue. We hold that Asher J was right to award specific performance in their favour.
Was the Judge correct to refuse the Perkins damages under clause 3.10(2)?
[110] We come now to the final issue. As we have said, there is no dispute about Asher J’s award of $88,000 in the Perkins’ favour, representing the difference between the sale price of the property and its market value at the date of hearing. What is in dispute, however, is the Perkins’ additional claim under clause 3.10(2) of their agreement with Mr Purea. That clause reads as follows:
If this agreement provides for vacant possession but the vendor is unable or unwilling to give vacant possession on the possession date, then, provided that the purchaser is not in default:
(a)the vendor shall pay the purchaser at the purchaser’s election, either:
(i)compensation for any reasonable costs incurred for temporary accommodation for persons and storage of chattels during the default period; or
(ii)an amount equivalent to interest at the interest rate for late settlement on the entire purchase price during the default period; and
(b)the purchaser shall pay the vendor an amount equivalent to the interest earned or which would be earned on overnight deposits lodged in the purchaser’s solicitor’s trust bank account on such portion of the purchase price (including any deposit) as is payable under this agreement on or by the possession date but remains unpaid during the default period less:
(i)any withholding tax; and
(ii)any bank or legal administration fees and commission charges; and
(iii)any interest payable by the purchaser to the purchaser’s lender during the default period in respect of any mortgage or loan taken out by the purchaser in relation to the purchase of the property.
[111] Clause 3.10(1) defined the expression “the default period” for the purposes of clause 3.10(2) as “the period from the possession date until the date when the vendor is able and willing to provide vacant possession and the purchaser takes possession”.
[112] The parties agree that, if clause 3.10(2) applies, the sum Mr Purea would have to pay to the Perkins is $47,609. Asher J incorrectly referred to the amount as $30,800: at [122]. His Honour, in mentioning that figure, overlooked an amendment to the pleadings made by consent at the start of the trial.
[113] The Judge declined to award the Perkins anything under this clause for three reasons, which to an extent overlapped: at [123]. First, the Perkins had had the benefit of substantial inflation in the value of the property over the last two years; that in itself would give them a return of in excess of approximately 20 per cent on their investment. Secondly, this clause was drafted “with an ultimate settlement in contemplation and not in contemplation of no settlement at all”. Thirdly, to award this sum as well as damages for lost profit would result in “double recovery”.
[114] Mr Woods challenged this reasoning. Messrs Smith and Templeton supported the Judge’s reasoning, although Mr Smith conceded that the $47,609 would have been payable had the Perkins been granted specific performance.
[115] Mr Smith’s concession was well made. Had the Judge awarded the Perkins specific performance, then, at settlement, Mr Purea would have been bound to pay the sum specified under clause 3.10(2). It was a contractual entitlement. But it does not follow they are entitled to that sum in circumstances where specific performance has been denied, with the consequence that settlement will not take place. The contractual entitlement was dependent on the vendor eventually being able and willing to provide vacant possession and the purchaser taking possession. Neither has come to pass; neither will come to pass. All the Perkins were entitled to, once specific performance was refused, was equitable damages, as now provided for in s 16A of the Judicature Act 1908. The damages of $88,000 were damages of that kind. There is, of course, a significant difference between damages and contractual entitlements.
[116] It may be that the Perkins might have been able to establish other loss arising from Mr Purea’s default which could have given rise to a damages award. But none was pleaded or proved.
[117] In any event, we consider the Perkins have been rather generously rewarded by the damages award they did get. We say that for the following reasons.
[118] First, it was at least arguable that the Perkins acted unreasonably in pursuing specific performance in the circumstances that arose. Mr Purea’s house was not going to be their family home, except perhaps on a temporary basis while they sorted out their Auckland affairs. They were planning to move to Christchurch, and indeed did so in 2007. They could easily have bought another property as a rental investment if they wanted to keep a foothold in the Auckland market, as they said. In those circumstances, it may well have been arguable that their loss on the bargain should have been calculated as at the date of proposed settlement (December 2005), not at the date of hearing, as it was.
[119] Secondly, the Perkins did not commence their claim until January 2007, more than a year after Mr Purea’s failure to settle. In Malhotra v Choudhury [1980] Ch 52, the English Court of Appeal declined specific performance, although accepting the buyer’s attempt to compel the vendor specifically to perform had been reasonable and proper. In calculating the damages, however, the Court of Appeal utilised a valuation moved back from the date of judgment by a year because the buyer had delayed in pursuing his claim. Such adjustment might well have been justified in the present case as well.
[120] Thirdly, the damages award made no allowance for the fact that the Perkins did not have to outlay $220,000. It is true that, by the date of hearing, the Perkins would have had a property worth, according to the Judge, $308,000: at [119]. To have acquired that property, however, the Perkins would have had to expend $220,000 in December 2005. If they had that money, then for the period between December 2005 and the date of hearing (April 2008) they were able to earn interest on it. Alternatively, if they did not have the purchase money and were intending to borrow it, they were saved the cost of borrowing. Either way, there is a strong argument that the advantage they derived from not having to settle in December 2005 should have been deducted from the loss in value they suffered.
[121] Mr Purea did not challenge the damages award, however. Accordingly, we do not adjust it. We mention this point only to emphasise that we do not consider the outcome for the Perkins is unfair.
[122] The Perkins were not entitled to the contractual entitlement under clause 3.10(2) for the reasons we have given.
Result and costs
[123] The answer to this final issue means, therefore, that the Perkins have failed on all their grounds of appeal. Accordingly, we dismiss their appeal. We also dismiss Mr Purea’s cross-appeal.
[124] Counsel made no submissions to us concerning costs in the event the appeal and cross-appeal were both dismissed. A complication is the fact that Mr Purea is legally aided. In these circumstances, we reserve costs.
[125] If Mr Purea had not been legally aided, we would almost certainly have awarded the Tangi-Tuakes costs for a standard appeal on a band A basis, plus usual disbursements, the liability to be met by the Perkins and Mr Purea jointly and severally. As between the Perkins and Mr Purea, we would have ordered the Perkins to contribute half and Mr Purea half. Mr Purea’s being legally aided may mean this is not appropriate, however.
[126] This indication may enable the parties to resolve costs among themselves without troubling us further. If, however, costs cannot be resolved, we will receive memorandums and determine costs on the papers.
Two unresolved matters
[127] Two matters remain unresolved.
[128] The first concerns Mr Purea’s entitlement to live at Rowandale Avenue for the rest of his life. This has not so far been the subject for argument, either in the High Court or here.
[129] A central feature of the 1988 agreement was that the Pureas could return to live at the Rowandale Avenue property whenever they wished. The Tangi-Tuakes honoured that obligation with respect to Mrs Purea from 1988 until her death in 2002. They also honoured the obligation so far as Mr Purea is concerned until 2005.
[130] The Pureas always envisaged they would have a room to stay in with the Tangi-Tuakes whenever they wanted one. It is arguable that the Tangi-Tuakes have not honoured that obligation since 2005. We cannot pronounce definitively on that, as it is not before us. But we are anxious to try to help the parties bring this dispute to a close as quickly as possible and with as little additional expense as possible.
[131] One solution might be for the parties to heal the family rift and for the Tangi‑Tuakes to welcome Mr Purea back to their home. Obviously, no court is going to order the Tangi-Tuakes and Mr Purea to live together again if either side finds that unpalatable. If living together again is not practical, it may be the Tangi‑Tuakes should be renting a flat for Mr Purea so that he has accommodation in Auckland. If Mr Purea now lives primarily elsewhere, the Tangi-Tuakes may fulfil their obligation by, say, booking him into a motel when he visits Auckland.
[132] These are merely ideas to assist the parties. What we are making clear is that an important part of the arrangement was that the Pureas would always have accommodation available to them in Auckland without charge.
[133] Another unresolved matter is Mr Mansfield’s responsibility to the Tangi‑Tuakes. Perhaps this has already been taken care of. There can be no doubt that the Tangi-Tuakes, despite their victory, will have suffered a substantial loss. If they have been paying their legal fees, the costs awards in their favour will not have provided a complete indemnity. If they have been on legal aid, then no doubt the Legal Services Agency has taken a charge over Rowandale Avenue. We cannot comment on what liability Mr Mansfield might have to the Tangi-Tuakes, as that issue is not before us; nor, of course, is Mr Mansfield a party to this appeal. We do note, however, that from the evidence Mr Mansfield gave in this case he appears to accept that Mrs Tangi-Tuake did instruct him to lodge a caveat in May 2005 and that he did not carry out those instructions until November that year, although telling Mrs Tangi-Tuake he had lodged a caveat back in May. Had Mr Mansfield lodged the caveat when instructed, it seems likely that this litigation would never have ensued. Either the Perkins would never have entered into an agreement to buy the property or, even if they did, they would immediately have recognised their chances of claiming priority were low to non-existent.
[134] Again, these comments are made in the hope that they will assist ultimate resolution of loose ends without the need for further time-consuming and expensive litigation.
Solicitors:
Rice Craig, Papakura, for Appellants
Frost & Sutcliffe, Auckland, for First Respondent
Sellar Bone & Partners, Auckland, for Second Respondents
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