Queen Elizabeth the Second National Trust v Green Growth No 2 Limited

[2014] NZHC 2860

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-004592 [2014] NZHC 2860

BETWEEN

QUEEN ELIZABETH THE SECOND

NATIONAL TRUST Plaintiff

AND

GREEN GROWTH NO. 2 LIMITED Defendant

Hearing:	17 November 2014
Appearances:	W A McCartney for Applicant/Defendant F B Collins for Plaintiff/Respondent
Judgment:	17 November 2014

ORAL JUDGMENT OF VENNING J

Solicitors:           Gibson Sheat, Wellington

Carson Fox Legal Limited, Auckland

Copy to:            W McCartney, Auckland

QUEEN ELIZABETH THE SECOND NATIONAL TRUST v GREEN GROWTH NO. 2 LTD [2014] NZHC

2860 [17 November 2014]

[1]     This case has a fixture to commence on 24 November 2014.   The defendant/applicant seeks leave to file an amended counterclaim.  The amendment sought consists of:

(a)       deletion of the sixth cause of action relating to the capacity of the original covenantee;

(b)amendment to the fourth cause of action to include an allegation of fraud in terms of s 81 of the Land Transfer Act 1952;  and

(c)       the addition of a new cause of action seeking rectification of the covenant by the defendant.

[2]      Leave is required given the state the case is at.  The close of pleadings date was 19 September.  This application for leave comes very late in the piece.  It was only filed on 12 November.

[3]      For present purposes I take Mr McCartney’s explanation of the background (it may be Mr Collins and the plaintiff do not accept the background entirely).  The original covenantor, to whom the defendant is a successor in title, signed several covenants in favour of the plaintiff.   The covenants are known as open space covenants. They run with and bind the land.

[4]      The  last  version  of  the  covenants  was  registered  against  the  title.    The defendant takes issue with the way the covenant containing the third schedule ultimately  came  to  be  registered  against  the  title.   Although  it  is  accepted  the schedule was initialled by the original convenantee, the defendant says the plaintiff swapped the third schedule for an existing schedule and in doing so acted wrongfully in registering the substantive covenant with that latest version, the third schedule.

[5]      It  has  always  been  the  defendant’s  position  that  the  covenant  should  be

removed from the title.

[6]      The difference between the parties is, as usual, a practical one.  The plaintiff takes the view that the block of land of approximately 400 ha is entirely protected

save for the limited right to build a house and associated buildings.  The defendant wants to subdivide the land.

[7]      The plaintiff does not oppose the leave insofar as it relates to deleting the existing cause of action as to the original convenantee’s capacity.

[8]      The plaintiff opposes the application for leave in relation to the proposed pleading that the covenant was fraudulently obtained or retained and also opposes the application in relation to rectification.

[9]      In support of the application for leave Mr McCartney refers to the Court of Appeal decision of Elders Pastoral Ltd v Marr1  and the comment that amendment should be granted if necessary for the purpose of determining the real controversy between the parties, unless to do so would result in an injustice to one or more of the parties.  He notes that s 81 of the Land Transfer Act refers to both fraudulently or wrongfully and submits the defendant should be allowed to rely on Land Transfer Act fraud to avoid the consequences of indefeasibility.  The same evidence is relied on.

[10]     As discussed with counsel I am not minded to grant the amendment sought insofar as it relates to add a pleading of Land Transfer Act fraud.

[11]     The  plaintiff  is  a  charitable  Trust  with  a  national  profile.    The  general principle in relation to a pleading of fraud, even Land Transfer Act fraud, is that it should only be pleaded  where there is clear evidence of fraud.   Counsel has a responsibility in that regard.

[12]     In the present case it is difficult to ascertain exactly what the fraud may be said to be.  It appears from the existing pleadings, (and I understand the evidence to be consistent), that it is accepted the former proprietor initialled the third schedule in question.  The complaint is that that third schedule was wrongfully lodged with the

covenant for registration.

1      Elders Pastoral Ltd v Marr (1987) 2 PRNZ 383 (CA).

[13]     As Mr Collins pointed out it is difficult to see in those circumstances how there could properly be an argument of fraud  by the plaintiff against either the original covenantee or the Land Registrar.

[14]     However, to the extent that the actions of the plaintiff in arranging for such lodgment are relevant, s 81 covers it to the extent that it refers to “fraudulently or wrongfully” obtained or retained.  At most it might be said the registration had been wrongfully obtained.  If the defendant carries the day on that that will be sufficient for its purposes.  An allegation of fraud adds nothing to the potential relief.   The defendant does not need the leave sought to add the serious allegation of fraud for the purpose of determining the real issue between the parties, nor will declining that aspect of the application deny the defendant relief that it otherwise might be entitled to.

[15]     Further if, as Mr McCartney submits, it is now sought to allege the fraud on the basis of the existing evidence, then it is a matter that should have been raised at a much earlier time.

[16]     For  those  reasons  and  given  the  very  late  application  for  leave,  the application for leave in relation to alleging fraud under s 81, Land Transfer Act is declined.

[17]     That leaves the application insofar as rectification is concerned.

[18]     The  existing  causes  of  action  and  the  counterclaim  seek  removal  of  the covenant from the title.  Mr McCartney explained the defendant now also seeks to plead rectification.  He considered there was a possibility the Court might reject the existing third schedule, in which case an earlier version of the schedule may become relevant.  That schedule identified protected and managed areas by reference to an aerial photograph.  The defendant would seek to argue for rectification on that basis. He noted that the plaintiff itself seeks rectification in these proceedings.

[19]     As I understand it the plaintiff’s case is the third schedule correctly records

the position as to the agreement between the parties but the body of the covenant

itself was not redrawn after completion of the third schedule so that there are provisions in it which the plaintiff seeks rectification of.

[20]     Mr  Collins  also  opposes  the  application  in  relation  to  leave  to  grant rectification.  He notes that it is very late in the piece to seek to introduce such a new cause of  action  and  that  there is  no  direct  evidence  in  relation  to  the  areas  in question, namely the protected or managed areas.

[21]     He also raised in submission that at the time the defendant purchased the property, the existing covenant was already registered against the title and queried the ability of the defendant to seek rectification in those circumstances.

[22]     Counsel were not able to refer me to any particular case on the issue of rectification where a successor in title was seeking rectification.

[23]     However, given that the plaintiff seeks rectification itself and given that the defendant seeks to rely on the existing evidence and all that will be required if leave is granted is a pro forma pleading by the plaintiff in response to the defendant’s rectification claim, I propose to grant leave to the defendant to plead rectification without giving any indication either that it might be an available remedy as a matter of jurisdiction or an appropriate remedy in terms of the existing evidence.

[24]     For  the  above  reasons  the  application  for  leave  to  file  the  amended counterclaim  is  granted  but  only  in  relation  to  deletion  of  the  cause  of  action involving Mr Russell not having capacity and in relation to the proposed pleading by the  defendant  for  rectification.    Leave  is  granted  in  accordance  with  the  draft proposed amended statement of defence as amended accordingly.   It is to be filed and served forthwith.

[25]     The plaintiff has leave to file and serve an amended statement of defence. That is to be filed and served by Friday, 21 November 2014.

Costs

[26]     Although leave has been granted on a limited basis, despite Mr McCartney’s submission that it was 50 per cent successful, the Court has given an indulgence to the defendant.  The application has been made very late in the piece and the plaintiff has been put to unnecessary expense to respond.

[27]     The defendant is to pay the plaintiff’s costs on a 2B basis, together with any

reasonable disbursements.  The costs are payable forthwith.  They are not to be costs in the cause.

Venning J