Powell v Dakota Holdings Limited
[2016] NZHC 1510
•2 July 2016
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV-2015-419-0367 [2016] NZHC 1510
BETWEEN JUDITH FAY POWELL
Plaintiff
AND
DAKOTA HOLDINGS LIMITED First Defendant
WAIROTOROTO INVESTMENTS LIMITED
Second Defendant
Hearing: 2 June 2016 Appearances:
Mr S McKenna for Plaintiff
Mr G Brittain for First Defendant
Mr C Andrews for Second DefendantDate:
2 July 2016
JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE
This judgment was delivered by me on
02.07.16 at 4 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
POWELL v DAKOTA HOLDINGS LIMITED & ANOR [2016] NZHC 1510 [2 July 2016]
Introduction
[1] In this proceeding the plaintiff, Ms Powell, claims damages on separate causes of action against each defendant.
[2] As against Dakota Holdings Limited (“the First Defendant”), the background to the claims is as follows. Ms Powell entered into a contract with the First Defendant whereby she transferred a property described in the Statement of Claim as the "Coast Block" in Certificate of Title SA46B/857 to the First Defendant in October 2007. The sale was agreed on terms that Ms Powell would be able to effect a subdivision of the Coast Block to create a new title for an area of approximately 2 hectares adjacent to Thames Coast Road; and that Ms Powell would be able to compel the First Defendant to register the subdivision title documents and transfer back to her the newly created lot ("Lot 2"). The case is therefore concerned with a situation where a party who did not own land entered into an agreement to subdivide the land with its owner on terms that when the subdivision was completed, the new lot which had been subdivided off from the owners land would be transferred to her.
[3] Ms Powell alleges that the First Defendant unjustifiably delayed lodging the subdivision documents for registration in breach of that term, entitling her to the damages that she claims in this case. She claims that the delay on the part of the First Defendant led to delays in completing the subdivision and loss to her because of the fact that she had to carry additional finance charges for a further period of time before she could settle the contract for on-sale of the property. She claims from the First Defendant $97,947.54 for finance costs which she claims were unnecessarily incurred due to delays in registration at LINZ of subdivision title documents and
$20,210.51 for "additional legal fees" said to have been incurred for the same reason.
[4] Wairotoroto Investments Limited (“the Second Defendant”) owned land known as the “Wool Shed Block” adjacent to the Coast Block which the First Defendant owned and which was to be the subject of the subdivision application. Against the Second Defendant, Ms Powell alleges that it acted without reasonable cause in lodging a caveat against the Coast Block on 26 January 2012 which was not removed until 14 March 2012. She says that the caveat prevented registration of the
subdivision title documents in the interim. She claims compensation from the Second Defendant under s 146 of the Land Transfer Act 1952 ("LTA") for damages which she claims she incurred due to the delay in registration of the subdivision plan as well as the issue and transfer to her of the newly issued title to Lot 2.
[5] From the Second Defendant, Ms Powell claims damages of $89,636.22 for alleged unnecessary finance costs, and the same amount of legal fees, $20,210.51. Ms Powell claims that the First Defendant's unreasonable delay allegedly dates from
29 September 2011 and the Second Defendant's from 27 January 2012 – the day after its lodgement of a caveat.
[6] Each of the defendants has filed a defence to Ms Powell's claims. The First Defendant denies that it is in breach of the contract it had with Ms Powell and, essentially, relies upon the same primary ground of defence as the Second Defendant. That is, that any delay in registration such as it was, was caused by Ms Powell's own failure to satisfy a precondition to her entitlement to seek and obtain issue of the subdivision title. That precondition had been agreed with both of the defendants in a written agreement dated May 2010, the Fencing and Covenant Agreement (“FCA”). As a result of the FCA, Ms Powell was able to procure the Second Defendant's assent to a resource consent enabling the subdivision. The specific condition in the FCA that the Second Defendant says Ms Powell failed to satisfy was her promise to complete construction of a boundary fence around the perimeter of Lot 2. In its defence the Second Defendant says that Ms Powell was not entitled to require completion of the subdivision until she had carried out the construction of the boundary fence around the new Lot 2.
[7] The Second Defendant also says that it had reasonable cause to lodge and maintain its caveat to protect its interest in having a land covenant created and registered as part of the subdivision title issue (as also agreed in the FCA). The land covenants were designed to control, for the benefit of the Second Defendant, matters such as what type of housing could be constructed on Lot 2.
[8] The Second Defendant accepts that the caveat that it lodged was based upon the non-completion of the caveating obligations under the FCA and does not make
any reference to the obligation to fence. Ms Powell asserts that from the time when the land covenant was created and registered the Second Defendant ought to have withdrawn its caveat and could not support the continuation of the caveat by referring to a collateral matter not stated in the notice of caveat, namely non- completion of the boundary fence.
[9] Additionally, the Second Defendant pleads in its defence that the existence of its caveat between 26 January and 14 March 2012 was not a proximate cause of any delay in the registration of subdivision documents causing Ms Powell loss, and notes that she only effected lodgement of the subdivision title documents on 27 March
2012.
Principles
[10] There are before the court applications for both strike-out and defendant’s summary judgment. I consider that the following submission which Mr Andrews made on behalf of the Second Defendant accurately states the approach that the court is to take when considering the summary judgment application which is brought by the defendants:
16.The decisions in Westpac Banking Corp v MN Kembla NZ Limited [[2001] 2 NZLR 298 (CA)] and A-G v Jones [(2001) 16 PRNZ 715 (PC)] establish that:
16.1A defendant must produce evidence establishing that a plaintiff's claim against it cannot succeed, in its entirety.
16.2If there are material disputes of fact which cannot be resolved on affidavit, summary judgment will have to be refused.
16.3As with the plaintiffs' summary judgment applications, the question resolves itself as to whether there is an absence of any real question to be tried.
16.4But, adopting the words of Lord Diplock in Eng Mee Yong v Letchumanan [[1980] AC 331 at 341] the court is not bound "to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same component, or inherently improbable in itself it may be".
16.5On clear cut legal issues where a point can be decided as well on a summary judgment application as at trial, there is no reason the court should not do so.
[11] I further accept the summary of the approach that the court is to take on a strike-out application which Mr Andrews set out in his submissions in the following terms:
18.As to strikeout applications, McGechan on Procedure summaries the applicable principles as follows:
18.1Pleaded facts, whether or not admitted, are assumed to be true.
18.2 The cause of action (or defence) must be clearly untenable.
18.3The jurisdiction is to be exercised sparingly and only in clear cases.
18.4The jurisdiction is not excluded by the need to decide difficult questions of law requiring extensive argument.
18.5The court should be particularly slow to strike out a claim in a developing area of law.
Claim against the First Defendant in more detail
[12] The First Defendant entered into an agreement to acquire the Coast Block from Ms Powell on terms that there would be a subdivision of the Block and that one of the new titles, Lot 2, would be transferred to Ms Powell for nominal consideration. It was a term of the arrangements that it would be the vendor, Ms Powell, who would make application for a resource consent permitting the subdivision. A further provision of the agreement was that the resource consent and consequent plan of subdivision were to make provision for a right of way in favour of another contiguous title to pass over the proposed Lot 2 on a line which was to be agreed. All costs of the application for resource consent and consequent deposited plan of subdivision were to be borne by the vendor, that is, Ms Powell. The vendor and the purchaser were to share equally in the costs of forming the right of way to the standard required by the local authority. The agreement contemplated that the terms of the application for resource consent which would be submitted for approval would be those normally anticipated for the creation of an additional title such as Lot
2 and the right of way through it.
[13] Ms Powell says that the First Defendant was subject to an implied obligation requiring it to promptly and without delay submit the subdivision plan to LINZ for registration. The First Defendant does not dispute that an implied term of agreement required it to “take reasonable steps to cooperate”.
[14] Ms Powell alleges that the subdivision plan was in all respects ready to be submitted to LINZ on 29 September 2011. However because of the alleged delays on the part of the First Defendant, allegedly in breach of the implied term, the subdivision plan was not submitted to LINZ until 27 March 2012. Ms Powell claims that as a result of the delay she has incurred additional finance servicing charges and also additional legal expenses.
Application for summary judgment by First Defendant
[15] The First Defendant’s application for summary judgment sets out
commendably brief grounds for supporting the applications which it makes: (a) the cause of action against the First Defendant cannot succeed;
(b) the First Defendant did not breach any contractual obligations owed to
Ms Powell;
(c) if there was a breach of an implied contractual obligation on the part of the First Defendant in any way related to the progress of the subdivision (denied), that delay was de minimis and had no material influence on the overall delay in completing the subdivision, which was due to Ms Powell.
The contractual obligations of the parties
[16] The claim which Ms Powell brings against the First Defendant asserts a breach of contractual obligation. It is necessary to discuss what those obligations were in order to determine whether there has been a breach.
[17] In this case, there is no dispute that a term can be implied requiring the First Defendant to cooperate. In his submissions on behalf of the First Defendant, Mr Brittain asserted that any such obligation would be described in the following way:
26.Therefore, the terms that ought to be implied in the present case are: (a) “The vendor shall take all steps that are necessary to secure
deposit of the subdivision plan and to obtain a new
certificate of title for Lot 2.”
(b) “The purchaser shall take all reasonable steps to co-operate with the vendor so that the vendor can secure deposit of the subdivision plan and obtain a new certificate of title for Lot
2.”
[18] Mr McKenna for Ms Powell did not dispute that that was an accurate statement of the position. If that statement of the nature of the implied term, as it is applicable to the purchaser, is taken as being correct, then it will be noted that there is no explicit reference to the First Defendant being required to take steps expeditiously or promptly or in some other way which conditions the timing of the action on the part of the First Defendant. I would accept, though, that inclusion of a requirement of reasonableness would extend to the reasonableness of how long the First Defendant took to discharge its express and implicit obligations under the contract.
[19] It was at least implicit in the argument for the First Defendant that the duty of reasonable cooperation was also implied in respect of the obligations that were imposed on the First Defendant by the FCA from the point when it was executed by the parties.
The Fencing and Covenant Agreement
[20] The Second Defendant as the owner of the Wool Shed Block title was a party who was affected by the application for resource consent. Therefore Ms Powell was required to seek its consent if the subdivision was to proceed on an unopposed basis.
[21] Essentially, because of the involvement of the Second Defendant, the steps for completion of the subdivision were not entirely under the control of Ms Powell and the First Defendant. There were now to be three parties involved.
[22] The Second Defendant was prepared to give consent on conditions that: (a) Ms Powell would fence the proposed lot;
(b) some trees would be removed from the proposed lot;
(c) certain restrictive covenants would be registered on the title for the proposed lot.
[23] Following negotiations, the parties entered into a tripartite agreement, the
FCA. The FCA included the following clauses:
1.Prior to any subdivision of the title to the Subject Land pursuant to a resource consent obtained by Williams and Powell, Williams and Powell will:
(a) Will have a “seven or eight wire fence” as that type of fence is defined in Schedule 2 of the Fencing Act 1976 erected around the whole of the perimeter of Lot 2.
(b) Remove all pine and macrocarpa trees:
(i) between the creek (“Dairy Creek”) where it passes through the Subject Land and the Wairotoroto Land; and
(ii) between the Subject Land and the carriageway on
State Highway 25.
2.Contemporaneously with the Subdivision of the Subject Land into Lot 1 and Lot 2 a land covenant will be registered against the title to Lot 2 to issue from the subdivision which provides covenants in a form to be agreed between the parties hereto in favour of Lot 1 and the Wairotoroto Land that:
(a) No non native trees will be planted on Lot 2.
(b) No building will be erected or left upon Lot 2 other than a new dwelling and associated outbuildings built on Lot 2 with the construction thereof using nothing but new materials.
(c) That the registered proprietor of Lot 2 shall not at any time object to any resource consent application made in relation to either Lot 1 or the Wairotoroto Land.
(d) No cattle, sheep, horses, pig, poultry, llamas, emus, ostriches or any other livestock will be permitted on Lot 2 at any time.
(e) No temporary buildings other than a builders shed and that only during the course of construction of any dwelling or associated outbuilding will be permitted on Lot 2 at any time.
[24] I agree with the submission of counsel for the First Defendant to the effect that a consequence of the FCA was that the obligations of Ms Powell and the First Defendant under the existing agreement for sale and to apply for resource consent were varied.
[25] The point is further made, and correctly, that matters were left as a result of the FCA which were still to be agreed, and in particular, the parties agreed that land covenants would be required “in a form to be agreed between the parties”.
[26] In summary, the FCA represented a potential obstacle to prompt completion of the subdivision. The First and Second Defendants were entitled to require “prior to any subdivision” that there be completion of the following matters:
(a) erection of the fence; (b) removal of trees
(c) settlement of the terms of covenants which would affect the future use
of Lot 2.
The issues
[27] Ms Powell claims that the First Defendant caused loss by failing to reasonably cooperate in the creation of the subdivision. The First Defendant says that the delay was of Ms Powell’s making. It says that there was no obligation on the First or Second Defendants (both of whom had to cooperate in the lodging of the necessary documents to complete the subdivision) until certain steps had been taken by Ms Powell. Principal amongst these was the obligation for Ms Powell to erect the fence which the FCA contemplated. Ms Powell was prepared to erect a new fence on three sides of the land which was to become Lot 2 but she contended that on the fourth side, that to the south, the parties had impliedly agreed that an existing fence,
although not on the boundary, would be sufficient. Her counsel also takes other points which will need to be discussed.
[28] Therefore the issues which Ms Powell raises are the following:
(a) as stated above, there was no obligation to fence the south boundary of the new subdivision contiguous to the Wool Shed Block;
(b)the provisions of the FCA containing the fencing agreement and provision to settle the land covenants were not inserted for the benefit of the First Defendant and therefore it is not open to the First Defendant to rely upon those provisions;
(c) the First Defendant did not provide any consideration to support the
FCA.
[29] The overall position which Ms Powell takes is that the First Defendant unjustifiably delayed the completion of the subdivision because the reasons it put forward for the delay were not open to it. It was not entitled, she says, to insist on construction of the fence to the south of the new Lot 2 before proceeding further with the subdivision. Nor was it entitled to wait until she and the Second Defendant had agreed terms for the specific land covenants that were going to be brought down onto the title.
Responsibility for the delay
[30] The approach that Ms Powell takes is to review the steps that needed to be taken to obtain the subdivisional consent. Ms Powell says that as at 29 September
2011 she had supplied the First Defendant with a copy of the territorial authority approval certificate which had been issued by the local authority that same day. She correctly states that the certificate confirmed that all of the conditions of the resource consent had been complied with and the subdivision could be registered.
[31] Mr McKenna submitted that at that stage there was no good reason for the
First Defendant not to submit the subdivision plan for registration. He submitted:
20.… The first defendant says there were two reasons it could not register the subdivision documents both of which related to the covenant and fencing agreement. They are;
20.1. The wording of the covenants was not agreed; and
20.2.The fence on the boundary with the second defendant was not yet constructed.
21. Both of these were obligations owed to the second defendant.
Though the first defendant would benefit from the covenants it was not in a position to enforce the covenant agreement due to a lack of consideration in procuring the promise to register the covenants. In any event it appears from the facts that the covenants were the concern of the second defendant. The first defendant agreed that the covenants be registered in the form as set out in the covenant agreement and did not seem itself to have any concern over the form of these covenants (bundle page 316).
22.In regards to the fence it was not even on a boundary with any property to be held post subdivision by the first defendant. It would appear that the first defendant took it upon itself to police the plaintiff’s compliance with obligations owed by the plaintiff to the second defendant.
[32] The breach of contract which Ms Powell pleads against the First Defendant alleges a failure on the part of the First Defendant to submit the subdivision plan to LINZ on 29 September 2011 by which time it is claimed it was ready. The plan was in fact submitted to LINZ on 27 March 2012. The alleged delay is therefore approximately 6 months.
An obligation to fence the Lot 2 boundary?
[33] Even though there was an obligation arising from the FCA for Ms Powell to carry out fencing, as late as November 2011 the parties were still arguing about this issue. Ms Powell was putting forward the argument that a fence which had been erected by the Second Defendant in the approximate area of the agreed fence referred to in the FCA constituted substantive compliance with the obligation. There was therefore no need for a further new fence to be put up, she argued.
[34] It is this issue that I next consider.
[35] In March 2006 or thereabouts the then owner of the entirety of the land, including the Coastal Block, erected a fence in the vicinity of the Wool Shed Block
which was even then owned by the Second Defendant. The Second Defendant has remained the owner of that Block ever since. There is no argument that the original fence did not follow the legal boundary between the two properties. Evidence has been given by a director of the Second Defendant that the fence was only ever intended as a stock control fence. It was not important for that function that it be actually placed on the boundary between the two properties. There was a fence to the south of Lot 2, which was to come into existence later as part of the subdivision. That fence did not mark the meeting point between Lot 2 and the Wool Shed Block.
[36] There is evidence that the fence was placed where it was because the previous owners apprehended that there were practical difficulties arising from the nature of the terrain in actually following the legal boundary line between the two properties.
[37] When the boundary between the two properties was re-pegged in March
2012, the comparison between the actual boundary and the location of the existing fence was substantially discrepant. The maximum deviation between the two fence lines was 30 metres approximately.
[38] Mr Wright, a director of the Second Defendant who was involved in the original fencing exercise, explains that the then owner of the other property (now Lot
2) was financially constrained and that was one of the reasons why there was an agreement to put the fence where it was. However when the current subdivision was being considered and the consent of the Second Defendant was sought the opportunity was taken to correct the position and to locate the fence on the actual boundary line. Mr Wright was of the opinion that unless a proper fence was constructed and correctly positioned on the boundary line then there would have been an effective borrowing of almost an additional quarter hectare of land belonging to the Second Defendant. What is more, the pre-existing fence line would have created a false visual impression that the distance from the coastal boundary to Lot 2 was some 124 metres in length rather than its surveyed length of 94 metres.
[39] This evidence gives the appearance of being reliable. While Mr Wright was involved in the original discussions and agreement about where the stock control fence was to be located, Ms Powell who seeks to contradict him was not.
[40] The events concerning the construction of the original fence and its location are relevant background matters that the court is able to take into account in assessing the meaning which is to be given to the fencing provisions of the FCA.
[41] I accept that the subjective expectations and wishes of Mr Wright and his company are not so relevant.1
[42] However in this case, the parties are in dispute as to what was intended when they agreed that there would be a seven or eight wire fence erected around the whole of the perimeter of Lot 2. The point of view that Ms Powell puts forward is that the words ought to be read as meaning that a new fence would be erected on three sides of Lot 2 but the fourth side – the boundary with the Wool Shed Block to the south – would not require to be re-fenced and the parties intended that the fence erected in
2006 would suffice. The Second Defendant is of the view that the words of the contract meant that Lot 2 would be fenced on all sides in their entirety. It says that there are reasons which bear upon why the parties might have adopted such an interpretation. Those reasons were the ones put forward by Mr Wright, namely that it was desirable that the fence actually reflect the legal boundary and the existing stock control fence did not do so. It does not contravene the prohibition against having regard to evidence of the subjective intentions of the parties to take cognisance of this evidence in this case. When parties have commercial reasons for taking a certain course, it will commonly be the case that those commercial or other reasons will suit the interests of one party rather than the other and that for that reason one party rather than the other puts forward the proposal which both parties then adopt. To act on this type of evidence is in my view permissible. It is not giving effect to the outcome promoted for the reason that one party wishes that to be so. Rather, the evidence explains why the proposal might have been made in the first place. It would explain why the parties considered that the proposal was one that
ought to be included in the FCA, even if one party was more anxious to secure its inclusion than the other.
[43] There is no doubt that Mr Wright’s evidence can be taken as honestly given. If that is so, it is plain that he had good reason for wishing to have the boundary line fenced between the Second Defendant’s property and Lot 2. In contrast, Ms Powell gives evidence in her affidavit that she did not understand that the FCA required the construction of a boundary fence along the Wool Shed Block. She effectively repeated Mr Wright’s statement that the earlier fence was put where it was by agreement. She also said that the existing fence deviated from the boundary and that this was done as a matter of practicality because of the terrain. That evidence, to the extent that it is admissible, simply reinforces why the parties agreed to the placement of the original fence in the first instance. It says nothing about the reasons that might have borne on whether the parties intended in 2010 that there should be a new fence located on the boundary with the Wool Shed Block. The upshot of the evidence is that the court can conclude that there are understandable reasons why the FCA may have intended that the fence between the two properties would now be along the “perimeter” of Lot 2, meaning the boundary of Lot 2 with the Wool Shed Block. It would explain in other words why it was no longer acceptable to rely upon a fence which was not on the perimeter but lay inside the Second Defendant’s property.
[44] Against that background, I consider the wording of the contractual provision. Clause 1(a) referred to a fence which would be:
… erected around the whole of the perimeter of Lot 2.
[45] On its face, such wording would indicate that on all four sides there would be a new fence constructed. There were no words excepting from this provision that part of the perimeter which comprised the boundary with the Wool Shed Block to the south. The parties could easily have added words to explain that in place of erecting a new fence along the southern boundary they would continue to rely on the stock control fence. But they did not do so.
[46] In some cases of contractual interpretation the court has reached the conclusion that a less obvious meaning should be attributed to the literal words
which the parties used because, on consideration of the background circumstances, what at first sight appeared to be a plain statement of intention was not what the parties actually intended. The converse position applies in this case. The plain wording used indicates that a new fence should be constructed right around the perimeter, which necessarily includes along the boundary with the Wool Shed Block. There are no background or contextual reasons put forward which might persuade the court to consider that the parties’ intentions were different from those apparently revealed by the express words adopted. To the contrary, there are background matters of context which if anything reinforce what would seem to be the obvious meaning of the words that the parties chose to express their bargain. It seems self- evident that while internal fences on a rural property can be put wherever consideration such as convenience of stock management and other factors mean they will be most effective, boundary fences are in an altogether different category. The boundary fence marks where the neighbour’s property comes to an end and the area of exclusive possession of the other neighbour begins. Having clarity about that issue is self-evidently desirable. So long as the boundary fence mistakes the position as to where the boundary is, inconvenience and confusion can arise. In an extreme case, it could even lead to the assertion of a prescriptive title after the passage of many years.
[47] For all of these reasons, I consider that it is plain that what was intended was a new fence along the boundary between Lot 2 and the Wool Shed Block.
Was the First Defendant entitled to enforce the obligation for the erection of the new fence?
[48] Ms Powell put forward an argument that the fencing obligation was owed to the Second Defendant only and therefore could not be used by the First Defendant as a justification for not cooperating with the subdivision.
[49] Mr McKenna, after referring to the covenants in the FCA,2 submitted that:
…[t]hough the first defendant would benefit from the covenants it was not in a position to enforce the covenant agreement due to a lack of consideration
in procuring the promise to register the covenants. In any event it appears from the facts that the covenants were the concern of the second defendant.
[50] He submitted at para 22 of his submissions (which I now, for convenience, repeat):
22.In regards to the fence it was not even on a boundary with any property to be held post subdivision by the first defendant. It would appear that the first defendant took it upon itself to police the plaintiff’s compliance with obligations owed by the plaintiff to the second defendant.
[51] The submission does not wholly state the correct facts relating to the fence. The FCA did not bind Ms Powell only to fence the boundary between Lot 2 and the Wool Shed Block. The FCA actually contemplated the erection of a fence right around Lot 2. The fence would therefore be placed on the line which recognised the boundary between Lot 2 and the residual land from the Coast Block. I assume that it is not being suggested on behalf of Ms Powell that the First Defendant had no interest in any part of the fence at all. Such a contention could not be correct because after creation, Lot 2 would abut the Coast Block which the First Defendant would continue to own.
[52] The rights of the defendants under the agreement were expressed in the same language. They were both entitled to erection of the fence in its entirety. The FCA did not say, as it could have, that Ms Powell covenanted or agreed with the First Defendant to provide a fence on one side of Lot 2 and with the Second Defendant for erection of the fence on other sides of the proposed Lot 2. When counsel for Ms Powell speaks of “the fence” in the above submission, he is apparently to be understood as addressing the uncompleted side of the rectangle which was to be fenced, the side which represented the boundary between the new Lot 2 and the Wool Shed Block. For his submission to be correct, the court would first have to reach the view that the defendants each had a contractual right to enforce erection of only part of the fence rather than the whole. I do not consider that the language which the parties used in the FCA is amenable to analysis in such a way.
[53] The question that is central to the dispute is whether the obligation which the
First Defendant accepts was incumbent upon it to reasonably cooperate in
progressing the subdivision was deferred until the requirements of the FCA had been complied with. The operative provision of the FCA opens with the words “[p]rior to any subdivision of the title to the subject land pursuant to a consent obtained [Ms Powell] will” (erect the new fence).
[54] Quite apart from anything else, a construction along the lines of that which Ms Powell puts forward would mean that one possible outcome of the FCA would be that the First Defendant may have had an obligation to proceed with steps to progress the subdivision before there was any obligation on the Second Defendant to do so, because such part of the fencing obligation as was owed to the First Defendant could be completed at a different time from that part of the fence in which the Second Defendant had an interest.
[55] This, I consider, is contrary to what the parties would have expected to occur. While there is no express evidence on the point, it would seem to have been tacitly understood by the parties that, in the usual way, lodgement of the subdivision documents and the issue of the new title would involve simultaneous action by all parties. Until they had all cooperated, the objective of issuing the new title could not be achieved. There would therefore be no advantage in practical terms in adopting the alternative type of construction of the FCA which the submission for Ms Powell contemplates.
[56] The text of the agreement makes clear that the parties’ intention is to defer performance of an obligation that was necessarily a joint one on the part of both defendants who would be required to carry out their obligations before a subdivision could be progressed. It could not be advanced by one of the defendants acting individually and other than in concert with the other defendant.
[57] My conclusion is therefore that the obligation of the First Defendant to progress the subdivision by lodging the relevant documents was suspended until the fence in its entirety was completed. I do not accept the corollary of the submission which counsel for Ms Powell made which involves the proposition that the suspension of the contractual obligation of the First Defendant expired once an appropriate fence had been erected on the only boundary that it had with the new lot.
[58] My conclusion is that Ms Powell is not correct in stating that the First Defendant did not have any interest in the carrying out of the fencing obligation. Further, that obligation was an entire one and Ms Powell did not have any contractual right to call upon the First Defendant to take steps towards completion of the subdivision until the fencing had been completed.
[59] The issue about consideration is the next one which I will deal with.
Consideration moving from the First Defendant to Ms Powell?
[60] I have already referred to the submission by Ms Powell that the First Defendant did not have rights which it could enforce under the FCA because of lack of consideration.3 I understand that Ms Powell’s submission is, in effect, that if the First Defendant had no enforceable rights under that agreement, then it could not claim that the original agreement for sale and purchase had been varied by Ms Powell (as vendor) and the First Defendant (as purchaser) entering into the FCA. Therefore, the argument apparently runs, it was not open to the First Defendant to claim that its implied obligation to reasonably cooperate in implementation of the
agreement for sale and purchase was suspended because of the effect of the FCA. However, I do not accept that there was an absence of consideration.
[61] If the obligation of Ms Powell under the FCA included, as I have found that it did, an obligation to erect a fence around the perimeter of Lot 2 as a precondition to the subdivision, then the part of the First Defendant as the owner of the Coast Block in that operation needs to be considered.
[62] I consider that the obvious intention of the parties was that the fence between Lot 2 and the Wool Shed Block was to be a boundary fence which, as that description suggests, was to be a fence placed on the boundary. That could not however be achieved before settlement without the cooperation of the First Defendant for the following reasons.
[63] Section 8 of the Fencing Act 1978 provides as follows:
8 Fence not to encroach without consent or court order
(1) Notwithstanding anything in this Act, no person is entitled to erect a fence that encroaches to any degree whatever upon any land of which he is not the occupier, except—
(a) with the consent of the occupier of that land; or
(b) pursuant to an order of the court made under section 24.
(2) Where any fence erected otherwise than in accordance with subsection (1) encroaches upon any land of which the person who erected the fence is not the occupier, the occupier of that land may apply to the court for an order that the fence be removed; and the court shall order the removal of the fence (at the expense of the person who erected it) unless it is satisfied—
(a) that the degree of encroachment is minimal; and
(b) that the encroachment in no way adversely affects the use and enjoyment of his land by the applicant.
(3) Nothing in this section applies in respect of a fence erected before the commencement of this Act.
[64] In his judgment in Gosney v Ngai Tahu Property Ltd Gendall J noted that the wording adopted by the legislature when enacting s 8 had the following effect:4
[14] The plain words of this section make clear that, quite apart from any other provisions in the Act, a fence is not permitted to encroach on a neighbour’s property to “any degree whatever”. This must be taken to mean any encroachment however minor, is prohibited, and irrespective of how that encroachment arises, including from the placement of a fence on a boundary, except by consent or court order. Thus, a person seeking to construct a fence must either obtain consent of the landowner or they must obtain an order of the Court before that person is entitled to erect a fence. JF Corkery addressed this point as follows:
Now, under the 1978 Act, even if not seeking contribution to the cost of fencing, one must get the consent of the neighbour or a court order if the fence “to any degree” encroaches upon the neighbour’s land. Fences erected right on the boundary must to some degree encroach on the neighbour’s land, the middle of the fence being on the boundary line. The legislature was concerned that especially in urban areas the adjoining owner should have some control over boundary fences, whether or not he is paying a proportion of the cost.
[65] In my view the FCA which, as I have found, entailed a fence being placed on the boundary of the Coast Block, carried with it the further necessary implied term that Ms Powell would be entitled to come onto the property of the First Defendant for the purposes of constructing the fence and, further, that the First Defendant impliedly consented to the fence encroaching onto the Coast Block. Ms Powell
could not construct the fence without these concessions.5 They on their own provide
consideration which moved from the First Defendant to Ms Powell to support the
FCA.
[66] The argument that Ms Powell puts forward, therefore, to the effect that the First Defendant could not rely upon the FCA as suspending its obligations to perform the agreement for sale and purchase because there was no consideration moving from the First Defendant to Ms Powell to support the FCA is unfounded.
The effects of delays in completing the fencing
[67] Ms Powell and her lawyers engaged in correspondence with the First Defendant's lawyers variously claiming that the FCA was not binding; that the terms of the sale agreement between Ms Powell and the First Defendant had to be performed in isolation without reference to the FCA; and threatening litigation. These arguments were still unresolved as at the end of 2011.
[68] By March 2012 the matter had still not been resolved. However, apparently because progress had been made with having the fenceline surveyed, the Second Defendant released the caveat on 14 March 2012. Thereafter the fenceline was pegged. However Ms Powell did not, in the end, fence off Lot 2. That matter was eventually attended to by Mr Wright, a director of the Second Defendant and Mr Spicer, a director of the First Defendant in early 2013.
[69] Ms Powell could not compel the First Defendant to proceed until the obligation to fence in its original form or as varied had been satisfied. As it turns out, the First Defendant was prepared to carry out the fencing itself, as I have noted. For the purposes of the present application, I would also be prepared to assume that
the Second Defendant consented to that approach as well. No time appears to have
5 At least without obtaining a court order under the Fencing Act 1978.
been agreed within which the First Defendant would perform, in place of Ms Powell, the obligation which she had assumed under the FCA. The statement of claim is silent on some of these key issues. The narrative contained in the statement of claim ends at the point where Ms Powell pleads that the surveyor visited the site on 15
March 2012 at 11.00 am. Ms Powell does not plead that she herself carried out the obligation to fence in the FCA. Her pleading tacitly assumes that she did not have to do that but had to arrange the surveyor so that the boundary could be located. There does not seem to be any disagreement that the above date is the approximate date when that obligation was carried out. She does not allege that having made the varied agreement to fence that the First Defendant or Second Defendant unduly delayed in seeing to the fencing arrangements. She does not plead what was to happen after the surveyor had fenced the boundary.
[70] What appears to have happened is that the communications and conduct of the parties evidence a common understanding that the First Defendant would carry out the fencing but that that obligation was not going to be required to be completed before the various consents and other documents that were to be registered to implement the subdivision work had in fact been submitted. At least for the purposes of this application it can be assumed that a reasonable time after the date when the surveyor relocated the boundary, when the First Defendant and possibly the Second Defendant had had a reasonable opportunity to consider the information about that, that Ms Powell would be taken to have discharged her residual obligations in regard to the fence. In fact, on 15 March 2012 the Second Defendant withdrew the caveat. There is no reason to believe that the additional 12 days which elapsed before the issue of the new title occurred could be described as resulting from a breach of contract by the First Defendant.
[71] Therefore, the key allegations which Ms Powell makes in that the First
Defendant breached the contract by failing to submit the subdivision on 29
September 2011, thus breaching the implied term that the First Defendant would promptly and without delay submit the subdivision plan to LINZ, cannot succeed. The evidence, coupled with the documentary trail which closely tracks the narrative accounts which the deponents have given in their affidavits, simply rules out Ms
Powell’s claim as being a real question that needs to be tried as between Ms Powell
and the First Defendant.
Causation
[72] Even if it is correct that a duty was not owed to the First Defendant to fence the new title, it was always the case that the Second Defendant was entitled to insist upon that part of the obligations under the FCA being carried out before it would co- operate in progressing the subdivision.
[73] Because there was to be no settlement in any event until the Second Defendant was prepared to cooperate (which did not occur until March 2012), even if the First Defendant had not insisted on completion of the fence, and therefore even on Ms Powell’s approach was not in breach of the contract, the loss through delay would still have occurred because of the intransigence of the Second Defendant.
[74] Mr Brittain referred me to Price Waterhouse v Kwan, in which the Court of
Appeal stated the general principles of causation:6
Plaintiffs in this field must show that the defendant’s act or omission constituted a material and substantial cause of their loss. It is not enough that such act or omission simply provided the opportunity for the occurrence of the loss. The concept of materiality denotes that the act or omission must have had a real influence on the occurrence of the loss. The concept of substantiality denotes that the act or omission must have made more than a de minimis or trivial contribution to the occurrence of the loss.
Looking at the question in this dual way is both a reminder of the difference between opportunity and cause, and a touchstone for distinguishing between them. In some instances the words used have been material or (as opposed to and) substantial. It is preferable, for the reasons just mentioned, to focus on both concepts for they are each relevant for causation issues. No form of words will ultimately provide an automatic answer for what is essentially a question of common-sense judgment.
[75] Applying those considerations, it seems inevitable to me that the court has to conclude it cannot be said that, but for the assumed breach of contract on the part of
the First Defendant, the loss would not have occurred.
6 Price Waterhouse v Kwan [2000] 3 NZLR 39 (CA) at [28].
Conclusion concerning the effect that the FCA had upon the obligations of the
First Defendant to provide reasonable cooperation
[76] As a consequence, it follows that by refusing to erect a fence corresponding with the requirements of the FCA, Ms Powell had not discharged her obligation to do so “prior to any subdivision”. The terms of the FCA can only mean that the parties had agreed that the right to insist upon completion of the subdivision would not accrue until that obligation had been satisfied.
[77] It therefore follows that the First Defendant has been able to establish that there is no real question to be tried as between Ms Powell and the First Defendant. Any refusal on the part of the First Defendant to complete performance of the subdivision agreement did not amount to a breach of contract and was therefore not actionable by way of a claim of damages against the First Defendant. That being so, the First Defendant has made out its entitlement to summary judgment on the claim which Ms Powell brings against it and there will be judgment accordingly.
Claim against the Second Defendant of wrongful caveating
[78] Ms Powell’s claim against the Second Defendant is based on s 146 of the
LTA, which reads:
146 Person entering caveat without due cause liable for damages
(1) Any person lodging a caveat without reasonable cause is liable to make to any person who may have sustained damage thereby such compensation as may be just.
(2) Such compensation as aforesaid shall be recoverable in an action at law by the person who has sustained damage from the person who lodged the caveat.
[79] Ms Powell says that the Second Defendant’s caveat was lodged on 26
January 2012 for the ulterior motive of forcing her to construct a boundary fence.
[80] I will consider the first of all whether it is open to the Second Defendant to successfully strike out the claim under s 146 on the basis that there is no triable issue that Ms Powell has an entitlement to compensation for wrongful caveating. Thereafter I will consider the issue of whether, in any case, any breach of s 146 in fact was causative of loss on the part of Ms Powell.
Contentions for Ms Powell
[81] Ms Powell concedes that the interest stated in the caveat is a legitimate caveatable interest. Ms Powell says however that the Second Defendant did not register the caveat for the bona fide purpose of protecting that interest but rather for the ulterior purpose of forcing her to construct a boundary fence. The capacity in which the Second Defendant lodged the caveat was described thus:
Wairotoroto Investments Limited claiming an interest as covenantee under an undated agreement to create a land covenant between The First Defendant the registered proprietor of [the Coast Block] of the first part, Ross Williams and Judith Fay Powell of the second part, and this caveator of the third part.
[82] Counsel for the Second Defendant, Mr Andrews, set out a summary of the law as it relates to a claim for damages under s 146. For Ms Powell, Mr McKenna took no exception to those submissions. Mr McKenna said that it was common ground that, as counsel for the Second Defendant submitted:
The existence of a caveatable interest does not itself justify the lodgement of a caveat, if it is not lodged bona fide for the purpose of the protecting of the interest claimed[.]
[83] Mr McKenna agreed that showing an ulterior motive alone is not enough however, as the presence of an ulterior motive is permissible if the caveator is simultaneously acting to protect the legitimate caveatable interest.
[84] It was Ms Powell’s position that she must only show the following, to the standard required to defeat a summary judgment application, to avoid summary judgment in favour of the Second Defendant:
a)That the second defendant was not acting to genuinely protect its interest in the land covenants; and
b)That the second defendant was acting to advance an ulterior motive, namely procuring the construction of the boundary fence.
[85] On the basis of the way in which Ms Powell has pleaded the claim against the Second Defendant, it is relevant to appreciate that the caveat did not make any explicit reference to the fencing obligation. The caveat which the Second Defendant
lodged referred only to protecting the position of the Second Defendant with regard to the land covenants which were those agreed as part of the FCA.
[86] In Mr McKenna’s submission, the timing of the lodging of the caveat in this case presented:
32.… uniquely compelling prima facie evidence that the second defendant was not genuinely acting to protect the interest established by the land covenants.
33.The caveat was lodged on 26 January 20127. This is the same day that the exact wording of the covenants were agreed between the plaintiff and the second defendant.
34.The fact that the caveat was lodged at the exact time that the risk of the covenants being lodged in an incorrect from was resolved is strongly suggestive of the second defendant not acting to genuinely protect that interest.
[87] Further, it was the case for Ms Powell that the Second Defendant had not presented any evidence that would rebut that suggestion to the high standard required for the purposes of an application for summary judgment by a defendant, which was to establish that Ms Powell could not succeed on that point. As well, Ms Powell asserted that:
36.The evidence is equally compelling that the second defendant used the caveat to procure the construction of the boundary fence. This is conceded at paragraph 29 of the Affidavit of Ian Wright (page 36 of the bundle). Also at page 136 of the bundle it is established that is was (sic) when a commitment to construct the fence was made and the boundary pegged that the second defendant finally released the caveat.
Contentions of the Second Defendant
[88] Mr Andrews made the following submissions:
15.[The Second Defendant] summarises as follows the basis on which it submits that Ms Powell's claim against it relying upon a single cause of action under Section 146 of the LTA can be seen - sufficiently unarguably for summary judgment purposes - to be so untenable in fact and law as to be unable to succeed and/or, as pleaded, the claim is incapable of amounting to a tenable cause of action therefore justifying it being struck out as an abuse of process:
7 BD 111.
15.1Under section 146 of the LTA, for Ms Powell to succeed she carries an onus of establishing that [the Second Defendant]:
(a) Lodged a caveat against the Coast Block;
(b) That [the Second Defendant] did so without
"reasonable cause"; and
(c) In doing so [the Second Defendant] caused Ms Powell loss for which she should be compensated as the Court sees just;
15.2If [the Second Defendant], has an arguable caveatable interest (which does not appear to be contested) then to show lack of reasonable cause, Ms Powell must further establish that [the Second Defendant] lodged its caveat for an improper purpose, sometimes described as an "ulterior" purpose.
15.3It is [the Second Defendant]'s case that even on the causation point, based on Ms Powell's own pleading, her case is illogical and untenable on the grounds pleaded by [the Second Defendant] in the affirmative allegations in its statement of defence. Any delay in registration post dated withdrawal of the caveat and was due to other matters, including her failure to pay The First Defendant the LINZ registration fees/costs she was required to, under her contractual arrangements with The First Defendant.
15.4More tellingly though, it cannot reasonably be argued by Ms Powell that in lodging its caveat on 26 January 2012 and maintaining it for approximately seven weeks to 14 March
2012, [the Second Defendant] was acting for an improper or ulterior purpose because:
(a) As is not contested, [the Second Defendant] had a caveatable interest in ensuring that upon the registration of title of any subdivision of the Coast Block, a concurrent land covenant was registered against the subdivided titles in [the Second Defendant]'s favour.
(b) The terms and content of the land covenant arose from the Covenant Agreement entered into between Ms Powell, The First Defendant, and [the Second Defendant] in May 2010 which included terms not only that Ms Powell and The First Defendant would grant and abide by the Covenant to be lodged on the issue of title, but that before any subdivision title was to be issued and thus the land covenant registered as part of that issue of title, Ms Powell was at her own cost to construct a 7 or 8 wire fence along the boundary of the intended New Lot.
15.5Even though Ms Powell claimed prior to the caveat's lodgement, and continues to claim, that the fence constructed close to the Coast Block boundary (but not on it) in 2006 prior to the Covenant Agreement, amounted to fulfilment of her fencing obligation and subdivision pre condition, [the Second Defendant] at all times held a patently reasonably honest belief that she had not. It therefore cannot arguably have been acting for an improper purpose in lodging and maintaining its caveat.
15.6 Under the terms of the Covenant Agreement, as between Ms
Powell (as intending transferee of the New Lot and affected
'complainant' for the purposes of Section 146 of the LTA)
and [the Second Defendant], and for that matter as between The First Defendant (as registered proprietor) and [the Second Defendant], construction of the fence was a pre condition to Ms Powell's entitlement to obtain registration of the subdivision title, contemporaneously with lodgement and registration of the land covenant protected by [the Second Defendant]'s caveat.
15.7Accordingly, it cannot reasonably be argued that it was an improper purpose for [the Second Defendant] to insist on fulfilment of this pre condition before it would withdraw its caveat permitting the registration of the subdivision title instruments;
15.8On the same basis, it cannot be said to be an "ulterior" purpose for [the Second Defendant] to have asserted its reasonably held belief that Ms Powell, and by extension The First Defendant, had not fulfilled that pre condition to the issue of title. [The Second Defendant]'s purpose in ensuring the other parties' fulfilment of that pre condition was fundamental to the issue of title and registration of the land covenant, and thus not in any sense unrelated so as to suggest an ulterior purpose and consequential abuse of the caveat process.
Principles and authorities
[89] To enable the court to assess the submissions that are made concerning the propriety or otherwise of lodging the caveat, it is necessary to briefly review authorities on the meaning and effect of s 146 of the LTA, as set out at [78] above.
[90] The appropriate test under s 146 is described in Hinde, McMorland and Sim
Land Law in New Zealand:8
8 Hinde, McMorland and Sim (eds) Land Law in New Zealand (looseleaf ed, LexisNexis) at
[10.022] (footnotes omitted).
(c) Reasonable cause
The test of liability under s 146 is absence of reasonable cause. The Court of Appeal pointed out in Couchman v Taylor that the exercise of the power to lodge a caveat against dealings given by s 137 of the Land Transfer Act
1952:
… [I]s not conditional on the caveator actually having the entitlement or interest. Rather the caveator must claim such an entitlement or interest. [Emphasis in original.]
It follows that: “By way of defence [to a claim under s 146] it is not
necessary to show that the caveator actually had a valid claim to an interest”.
In a statement that now “reflects the accepted view” in New Zealand and in
Australia Wootten J said in Bedford Properties Pty Ltd v Surgo Pty Ltd:
I think the foundation for reasonable cause must be, not the actual possession of a caveatable interest, but an honest belief based on reasonable grounds that the caveator has such an interest. That, of course, may not be enough.
The first part of this test (honest belief) is subjective, but the second part
(reasonable grounds) is objective.
[91] With regard to the liability of both the First and Second Defendants I propose to be guided by decision of the Court of Appeal in Gordon v Treadwell Stacey Smith.9 Blanchard J’s judgment for the Court included the following passage:10
Section 146: Reasonable Cause
It does not follow that solicitors, their employees and registration agents are exposed to liability under the section where they have acted reasonably and in good faith. The statute contains its own test, one of absence of reasonable cause. What is reasonable will depend upon the information available to the person whose conduct is challenged under s.146. The position is best demonstrated by an illustration. Suppose a client seeks advice from a solicitor about whether an interest exists in land sufficient to support a caveat but deliberately or inadvertently conceals from the solicitor a crucial fact (e.g. that the client previously had an interest but has already assigned it absolutely to someone else). If the solicitor then advises that an interest may exist and that a caveat should be lodged and proceeds to undertake that task, the solicitor will not share the client's liability under s.146. The client had no reasonable cause; the solicitor, on the information available, did. The agent is not rendered liable under s.146 merely because the client principal has acted improperly. The liability of each person who participates in the lodgment of a caveat as an agent (solicitor, solicitor's clerk or registration agent) is to be examined separately and will depend upon what they knew or ought to have known of the facts and whether from their viewpoint the lodgment was done honestly and with reasonable cause. In the case of a registration agent or other person whose function is mechanical, liability is
9 Gordon v Treadwell Stacey Smith [1996] 3 NZLR 281 (CA).
10 At 288.
most unlikely to arise. Where the solicitor acts on the basis of incomplete information and it cannot be said that in the circumstances the solicitor ought to have taken inquiries further, there will be no liability.
A solicitor cannot, however, hide behind the existence of an instruction from the client to lodge a caveat if to do so was otherwise to act without reasonable cause in the circumstances confronting the solicitor. In our view s.146 makes solicitors or other agents responsible for their actions in lodging a caveat where they act dishonestly or without reasonable cause notwithstanding that on the basis of their advice to their client they have received instructions to caveat the title. If this were not so the client might be protected by taking advice from the solicitor, however wrong the advice proved to be, and the solicitor would be protected by acting in accordance with the instruction which was given because of the incorrect advice. It would be unsatisfactory if in this circular way a person affected by the lodging of a caveat could be deprived of any claim under s.146.
[92] The question of the effect that an ulterior motive might have on the propriety of lodging a caveat was considered in obiter remarks in the same judgment:11
[93] It been held in New Zealand that a claimant under this section must establish, first, that there has been a caveat lodged by the defendant; secondly, that such a caveat was lodged without reasonable cause; and thirdly, that he has sustained damage thereby.12
[94] The first of these requirements is not in dispute in the present case. The second is the one that I will focus on in this part of the judgment. That is the requirement that the caveat be lodged without reasonable cause.
[95] Decided cases, particularly in Australian jurisdictions have determined that that the fact that the party had an honest and reasonable belief in the existence of a caveatable interest is not sufficient. The caveat must further be lodged bona fide in order to protect the interest claimed in the caveat.13
[96] Examples are provided in the text quoted of cases where the caveator may well have a reasonable and honest belief that he has a caveatable interest to lodge the
11 At 290.
12 Amalgamated Finance Limited v Wyness HC Wellington CP156/86, 30 November 1987 per Eichelbaum J; following Deputy Commissioner of Taxation v Corwest Management Pty Ltd [1978] WAR 129 per Brinsden J.
13 Shannon Lindsay Caveats against Dealings in Australia and New Zealand (The Federation
Press, Sydney, 1995) at p 241.
caveat, not bona fide in order to protect the interest stated in the caveat but for some improper purpose. One such example is Bedford Properties Pty Limited v Surgo Pty Limited.14 It would appear that in that case a director of a company borrowed money and promised that his company would grant a mortgage to secure it. A caveat was placed on the title of property owned by the company. The Supreme Court of New South Wales concluded that the company did not actually owe the money and that the purpose of the caveat was to force the director to pay a debt he owed “by holding up the settlement of the subject land”.15 This was an example of a caveat being lodged for an improper purpose.
[97] In the circumstances of this case it is argued that at the time that the caveat was lodged, the Second Defendant had an honest and reasonable belief that it was entitled to do so. The source of the right to caveat was presumably to support the contractual right of the Second Defendant to obtain a registrable covenant affecting the land, which right arose out of the FCA which the parties had entered into.
[98] However, at the time when the caveat was lodged, Ms Powell claims that the parties had reached agreement about the terms of the covenant which was to be carried forward onto the title to be issued for Lot 2. Therefore, it is claimed, there was no need for the caveat and therefore it had been lodged without reasonable cause.
[99] From Ms Powell’s point of view, the date when the covenants were agreed represents the point from which the Second Defendant was no longer entitled to caveat the title of the Coast Block because it did not need to. In other words, the Second Defendant would by that date have obtained everything that the caveat would have secured.
[100] There was no detailed analysis put forward by the parties on this point at the hearing before me. However, it would seem at least arguable that if the land covenants gave rise to an entitlement to caveat (a point which was not disputed for
Ms Powell), then the relevant period for which a caveat would be justified ran from
14 Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106.
15 At 108.
the date when the agreement was finalised and the date that the instrument recording those agreements could be brought down onto the title of the property.
[101] During that period, the caveator would have an interest that would support a caveat. That does not of course answer the question directly of whether the caveat was used for some improper purpose. However, if the caveator was entitled to maintain its caveat for the protection of the interest stated in the caveat, then it is difficult to see how it might be the object of the claim for wrongful caveating. It might have been that the continuation of the caveat would serve other interests of the tactical kind which the caveator was pursuing in the commercial context in which the dispute arose. That is to say, it might have been the case that the Second Defendant did not have any genuine apprehension that it was not going to be able to obtain a covenant running with the land to protect the interests that it wanted covered by such a caveat and that rather that its interest was in putting pressure on Ms Powell to complete erection of the fence - a matter that would not give rise to an entitlement to caveat. But that would not seem to me to convert what was a justifiable caveat into one that was not and give rise to a claim for compensation.
[102] The point however has not been sufficiently explored in the present proceeding to come to the required level of certainty that is needed before summary judgment could be entered, effectively ending Ms Powell’s claim for damages.
[103] The caveat was, as I have noted, stated to be lodged “under an undated agreement to create a land covenant between” Ms Powell and the Second Defendant. In other words it contemplated the parties reaching an agreement on a land covenant which could be registered against the title. Whether the caveat is available to protect such a right is not a matter that needs to be decided in the current decision. The distinction that is being drawn is between an agreement to arrive at terms about a covenant, on the one hand, and a completed agreement stating what the land covenants are to be, on the other. This issue may affect the question of whether the Second Defendant had a right to caveat.
[104] Another issue that will have to be explored is whether Ms Powell is mistaken in her belief that the entitlement to maintain a caveat protecting the FCA expired at
the point where the parties agreed the terms of the covenants. But that is a matter that cannot be finally resolved in the context of the present case. If there was a genuine concern to prevent a transfer of the property without making provision for the covenants, it might have been expected that the caveat would be kept in place right up until the point of settlement of the transaction which took place in March
2012.
[105] The court has not reached the point of required certainty, both as to factual matters and the legal position applicable to those facts.
[106] As well, I consider that there is force in the point that Mr McKenna made for Ms Powell that the coincidence that the caveat was allegedly lodged on the same day when the parties successfully concluded agreement on what was to be included in the covenants suggests that the caveat was not intended for the purpose of protecting the position with regard to the covenants. That in turn may suggest that the real purpose was to put pressure on Ms Powell to complete the fencing agreement.
[107] For those combined reasons it cannot be said that there is no real issue to be tried in the proceeding brought for the purposes of compensation for the wrongful caveating of the title.
Causation
[108] The position which the Second Defendant took was that the alleged wrongful caveating did not in any case cause loss.
[109] To summarise the issue in a succinct way, it seems useful to me to enquire whether any of the supposed delay which Ms Powell suffered in breach of contract would have been caused but for the lodging of the caveat by the Second Defendant. In fact there was another factor that caused delay which was that, quite apart from requiring certainty on the covenants, the defendants were holding out for the completion of the fence (or the obligation to peg the boundary into which that obligation became transmuted).
[110] It is the contention of Ms Powell that the land covenant impasse was solved by agreement on 25 January 2012. There would seem to be a reasonable argument available to Ms Powell if that was the case.
[111] However up until that date, the Second Defendant had good reason not to cooperate in the completion of title issues because the FCA did not require it to. There was no breach of contract therefore on the part of the Second Defendant up until 25 January 2012.
[112] The next question is whether the lodging of the caveat on 26 January 2012 caused loss to Ms Powell. There was another cause operating after that date which delayed completion and that is the one that I have already referred to the defendants holding out for completion of the fencing. In the event, the fencing dilemma was not resolved until approximately 13 March 2012.
[113] Mr Andrews pointed to other causes which brought about the delay. In submissions he said:
26.[The Second Defendant] says that 27 February 2012 must be the earliest date on which Ms Powell can possibly claim any delay was caused to her because:
26.1She confirms in her affidavit that was the date on which she resolved issues with [the First Defendant] concerning right of way construction costs, and that [the First Defendant] confirmed it had signed the A&I form for the subdivision title documents;
26.2It was only on 20 February 2012 that Ms Powell's lawyers wrote to [the Second Defendant]'s lawyers tendering an A&I form and requesting that [the Second Defendant]'s directors sign it, not only authorising the withdrawal of the caveat, but also signing approval and certification of easement and land covenant instruments for the purposes of the subdivision[.]
[114] I accept that that is an accurate summary of the effect of the evidence and that it is correct in fact. However, the later date when the parties resolve the question about the fence puts back even later the point at which Ms Powell could claim that she suffered loss because of delays on the part of the Second Defendant and for the purposes of this part of the judgment I will adopt that date, namely, 14 March 2012.
[115] Ms Powell in her statement of claim alleges that the delays continued until 27
March 2012 which is the date when the title issued. However the evidence is clear that the additional short period (from the point where the fencing matter was resolved) has not been shown to be due to delay on the part of the defendants. Ms Powell has not adduced evidence showing why it was attributable to the breaches of obligation on the part of the defendants. Taking a practical view of matters, it would seem to me that the additional short period of delay is to be attributed to the mechanics of implementing registration of the various documents required for the new title to issue.
[116] The question that arises is whether compensatable loss occurred to
Ms Powell.
[117] If the principles that are set out in Price Waterhouse v Kwan16 are applied in this context, common sense suggests that the inevitable conclusion of the court is that there was two factors which common sense dictates were the explanations for the delays in completion of the subdivision. They were that there was a failure on the part of Ms Powell and the Second Defendant to reach agreement on the terms of the covenants up until 26 January 2012. Concurrently with that defect and subsequent to it, there was the additional failure on the part of Ms Powell to satisfy her obligation to fence right up until the parties accepted that the re-pegging of the boundary was a sufficient discharge by Ms Powell of her obligation. That did not occur until approximately 13 March 2012.
[118] The result of applying that approach compels the conclusion in this case that irrespective of the existence of the caveat, the parties were not going to consensually complete the subdivision until the fencing obligation had been resolved. As I have found elsewhere in this judgment, Ms Powell’s apparent belief that she did not have to provide a new fence on the boundary with the Wool Shed Block was legally wrong and she was effectively acting inconsistently with her contractual obligations up until the time that the parties resolved the matter by agreement in March 2012. There are therefore insuperable difficulties in the way of Ms Powell establishing that
the claimed wrongful caveating caused her loss.
16 Price Waterhouse v Kwan, above n 6.
[119] I appreciate that it will only be an exceptional case that the court will come to the conclusion that Ms Powell’s claim does not give rise to a real issue to be tried. In this case, though, there are not the same difficulties present as there are in other cases where summary judgment has been disallowed to the defendant. In this case, the key issues on which liability turns are substantially legal ones. The court is able to come to conclusions about the legal position which rest on secure factual foundations because the production of considerable numbers of contemporaneous documents taken from the solicitors’ files provide a confident understanding that the court has before it a reasonably comprehensive and reliable account of the facts upon which the issues turn. For those reasons I consider that it is appropriate to enter summary judgment against Ms Powell on this part of the claim as well.
Strike-out application
[120] Because the court has been able to resolve the matter on the basis of the summary judgment application which the Second Defendant has brought, there is no need to consider the strike-out application which that party also filed. The strike-out application is dismissed.
Costs
[121] At the hearing, the parties agreed that costs ought to be ordered on the basis that the party who did not succeed would pay costs and that costs would be according to category 2B. That being so, the defendants will be entitled to costs on a
2B basis against Ms Powell with disbursements as allowed by the Registrar.
J.P. Doogue
Associate Judge
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