Savage v Paul
[2020] NZHC 743
•14 April 2020
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE
CIV 2019-463-000100
[2020] NZHC 743
IN THE MATTER OF an application under Part 19 of the High Court Rules and the Trustee Act 1956 BETWEEN
MOLLY TE AUE SAVAGE, TRACEY WALTERS and DANIELLA TEREU as
Trustees of the NEREHANA WHANAU TRUST
ApplicantsAND
LEONARD GERRADE PAUL
First Respondent
AND
BEVERLEY MARINA PAUL
Second Respondent
Telephone Conf: 09 April 2020 Appearances:
N N Geiger for the Applicants
Judgment:
14 April 2020
JUDGMENT OF GWYN J
(ancillary order removing caveat)
This judgment was delivered by me 14 April 2020 at 2.00pm Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
Solicitors:
D G Law, Auckland
SAVAGE v PAUL [2020] NZHC 743 [14 April 2020]
Background
[1] This matter originally came before me as an originating application to remove one of the trustees of the Nerehana Whanau Trust (the Trust) and replace her with another trustee and to vest the trust property at 39 Baberton Street, Tokoroa (the property) in the applicants and the newly appointed trustee.
[2] The full factual background to that application is set out in my judgment of 4 March 2020 (the judgment),1 but the key aspects can be summarised as follows:
(a)The applicants are the trustees of the Trust.
(b)The second respondent was a trustee of the Trust.
(c)The first respondent is the second respondent’s son.
(d)The registered proprietor of the property was the first respondent. The trustees of the Trust had a beneficial interest in the property.
[3]In the judgment I made orders in terms of the applicants’ application:2
(a)Removing Beverley Marina Paul as a trustee of the Trust;
(b)Appointing Gary Tuteiti Paul as a trustee, in substitution;
(c)Vesting the property in the trustees, Molly Te Aue Savage, Tracey Walters, Daniella Tereu, and Gary Tuteiti Paul, as joint tenants.
[4] I also gave leave to the trustees to return to the Court to seek ancillary orders if any are necessary to vest the property in the Trust.3
[5] On 8 April 2020 counsel for the applicants filed an urgent memorandum seeking ancillary orders. The memorandum refers to the caveat placed on the property
1 Savage v Paul [2020] NZHC 364.
2 At [31].
3 At [32].
by the then trustees on 1 March 2017 (the caveat).4 The caveat remains in place with the effect that the trustees are not able to sell the property without its removal.
[6] The memorandum was filed while COVID-19 alert level 4 was in place. Although not amongst the category of priority cases announced by the Chief Justice on 25 March 2020, the application concerns an ancillary matter arising out of my earlier judgment, which can be dealt with on the papers. The Level 4 alert meant that I dealt with some questions of clarification with counsel for the applicants, Mr Geiger, by way of a telephone conference on 9 April 2020, rather than by appearance in Court.
[7] Mr Geiger explained that the applicants sought an order for removal of the caveat under s 142 of the Land Transfer Act 2017 and for the application to be heard without notice.
[8] As I recorded in the judgment the trustees registered the caveat against the title to protect what was, at that time, the Trust’s equitable interest in the property.5
[9] Although the trustees did not seek removal of the caveat as part of the originating application, it is a natural and consequent step to do so, now that I have ordered that the property be vested in their names and the original ground for lodging the caveat no longer exists. It is a necessary step to enable the trustees to sell the property to Andrew William Paul, a beneficiary of the Trust, as has been their longstanding intention.6 Mr Paul has lived at the property for the entire time the Trust has had the property in a trust.
The High Court Rules
[10] An application under s 142 for removal of a caveat is governed by Part 19 of the High Court Rules 2016. Rule 19.10 applies various rules concerning interlocutory applications to originating applications, with appropriate modifications, including provisions regarding supporting affidavit(s) and service of the application. In
4 That is caveat no. 10717066.1.
5 At [16].
6 See [18].
particular, r 7.22 requires prompt service of the application for removal on the caveator.
[11] Here the applicants for removal are the current trustees. At the time the caveat was lodged the trustees included Ms Beverley Paul. The question is whether service of this application on Beverley Paul is required. While Ms Paul was a trustee at the time the caveat was lodged, as a result of my orders of 4 March 2020, she is no longer a trustee and is not among the trustees who are now the registered owners of the property.
[12] Counsel initially suggested that I might invoke s 24 of the Epidemic Preparedness Act 2006 to modify the service requirements and dispense with service on Ms Paul.
[13]Section 24 provides:
24 Judges may modify rules of court during epidemic
(1)While an epidemic notice is in force, a Judge to whom subsection (2) applies …. May in any particular case modify any rule of court, and to any extent, that he or she thinks necessary in the interests of justice to take account of the effects of the quarantinable disease stated in the notice.
[14] Cooke J considered the phrase “rule of court” in White v Police and said “it plainly includes all rules and regulations in relation to the procedures of the Court, and potentially includes statutory provisions to that effect as well.”7 The Judge referred to some provisions of the Criminal Procedure Act 2011 as being in the latter category.
[15] During our discussion it became clear that reliance on s 24 is not necessary in this case. Rule 19.10 imports “with all necessary modifications” the allowance under r 7.46 for the Court to determine an application without notice in certain circumstances, including where the judge is satisfied that the application only affects the applicant or that the interests of justice require the application to be determined without it being served. While the application was not explicitly brought on that basis, that is because Mr Geiger considered the orders he sought were ancillary to the
7 White v Police [2020] NZHC 684 at [12].
previous originating application, and this became clear during our telephone conference. As such, I note that r 1.5 gives the Court a broad discretion when confronted with a failure to comply with particular requirements of the rules, including to “allow any amendments to be made and to make any order dealing with the proceeding generally as it thinks just.” This serves to prevent failures of technical compliance causing disproportionately severe outcomes.
[16] In considering whether to modify or dispense with the relevant requirements in order to proceed with the application, I note that the circumstances of this case are somewhat unusual. The caveat was lodged by the trustees to protect the Trust’s then equitable interest in the property. Beverley Paul was named as one of the caveators only by virtue of her role as a trustee. In the judgment I removed her as a trustee, on the basis that she had not been available or willing to carry out her duties as a trustee since 2012. Tracey Walters, one of the trustees, gave evidence that she had not seen Beverley Paul since 2012 and does not know where she lives.8 In the originating application for orders seeking Ms Paul’s removal and vesting of the land, Associate Judge Andrew directed that substituted service on Ms Paul’s daughter, Ms Marissa Hoani, constituted sufficient steps to bring the proceedings to Ms Paul’s attention and personal knowledge. Ms Walters has confirmed by affidavit of 9 April 2020, in support of this application for an ancillary order, that she has had no contact with Beverley Paul since the judgment was issued and still does not know where Ms Paul lives or how to contact her.
[17] I am satisfied that this application only affects the applicants. On that basis I am prepared to allow service on Beverley Paul of the application seeking removal of the caveat be dispensed with.
Urgency
[18] Ms Walters’ affidavit of 9 April 2020 also sets out the reasons why urgency is sought in relation to the application:
8 As I recorded at [15] of the judgment.
(a)The trustees wish to sell the property to Andrew Paul, as has been their longstanding intention.
(b)There is a mortgage registered against the property; KiwiBank Ltd is the mortgagee. The trustees do not have an up to date figure of the amount outstanding under the mortgage but know that as at 13 June 2018 it was $66,192.29. Andrew Paul pays rent on the property to the Trust at the rate of $222.78 per fortnight and the Trust then pays that sum into the first respondent’s mortgage account in order to make the mortgage payments. Based on that, the trustees estimate that the amount currently owing on the mortgage is approximately $62,000-
$63,000.
(c)In addition to that outstanding principal, the trustees believe, but have not been able to confirm, that Leonard Paul may have borrowed against the security of the property and that there might be further sums outstanding.
(d)The trustees’ lawyers have made inquiries of Landonline which indicate that, if the trustees were to apply to the Registrar for lapse of the caveat under s 143 of the Land Transfer Act 2017, the COVID-19 situation would mean that process would take three to six months to complete. Depending on how the situation develops, that timeframe could be longer.
[19] Ms Walters says that the lengthy uncertainty and financial hardship for both the Trust and Andrew Paul could be avoided if the Court were to exercise its power under s 142 to remove the caveat.
General principles on applications to remove a caveat
[20] In Holt v Anchorage Management Ltd, McMullin J stated the purpose of a caveat against dealings:9
9 Holt v Anchorage Management Ltd [1987] 1 NZLR 108 (CA) at 113.
Once lodged, a caveat is notice to all who search the title to the land against which it is registered and to the registered proprietor of the land (to whom notice of its receipt is given pursuant to s 142) that the caveator claims the estate or interest the subject of the caveat. It is both a warning to the persons mentioned that the caveator asserts rights against the land and a protection of those rights. (Section 143(1) uses the phrase "protected by the caveat"). Once the caveat is lodged the Registrar is prohibited from making any entry on the register which has the effect of charging or transferring or otherwise affecting the estate or interest protected by the caveat (s 141).
[21] Although Holt was heard under the Land Transfer Act 1952, McMullin J’s statement equally applies to caveats under the Land Transfer Act 2017.
[22]Section 142 of the Land Transfer Act 2017 provides:
142 Removal of caveat against dealings
The Court may, on application by a person who has an estate or interest affected by a caveat against dealings, order that the caveat is removed.
[23] Section 142 is silent on the criteria or principles to be applied in exercising the power, but the applicable principles have been decided by case law and are well- settled:10
(a)The rights of the parties must not be determined on an application for removal;
(b)The caveator must show a reasonably arguable case;
(c)The balance of convenience (in exceptional cases);
(d)Special provisions apply where a mortgagee is exercising a power of sale;
(e)Effectively drafted caveats will generally be removed or allowed to lapse; and
10 DW McMorland and others Hinde McMorland and Sim Land Law in New Zealand (online ed, LexisNexis) at [10.020].
(f)In some cases the caveat may be preserved where an undertaking as to damages is given.
[24] As is apparent, those principles have developed having regard to the “usual” case, that is a situation where the identity and interests of the caveator, on the one hand, and the registered proprietor, on the other, are different. The established principles do not readily fit the current situation, notwithstanding that it comes within a strict reading of the section.
[25] Where it is sought to remove a caveat protecting an interest under s 138(1), it must be patently clear that the caveat cannot stand either because there was no ground for lodging it at the outset or because any such ground no longer exists.11 The Court has a residual discretion not to uphold a caveat but that is exercised cautiously, as when the caveat could serve no useful purpose or alternative safeguards are available. In Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd the Court of Appeal said:12
We are of the view that in the dictum in Sims v Low, Somers and Gallen JJ were concerned with the situation which was then before the Court and were not putting their minds to a situation in which there is no practical advantage in maintaining a caveat lodged by someone who could properly claim a caveatable interest. In such circumstances, the Court retains a discretion to make an order removing a caveat though it will be exercised cautiously. An order will be made for removal only where the Court is completely satisfied that the legitimate interests of the caveator will not thereby be prejudiced. If, on the facts of a case, it can be seen that the caveator can have no reasonable expectation of obtaining benefit from continuance of the caveat in the form of the recovery of money secured over the land or specific performance of an agreement or if the caveator’s interest can be reasonably accommodated in some other way, such as by substituting a fund of money under the control of the Court then it may be appropriate for the caveat to be removed notwithstanding that the right to a claimed interest is undoubted.
Discussion
[26] Here, as I have recorded above, the caveat was lodged by the then trustees of the Trust at a time when Leonard Paul was the registered proprietor, to protect what was at the time the Trust’s equitable interest in the property. The trustees are now the registered proprietors of the property and the caveat no longer serves any purpose.
11 Sims v Lowe [1988] 1 NZLR 656 (CA), at 659–660.
12 Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656; cited in
Stewart v Kaipara Consultants Ltd [2000] 3 NZLR 55 (CA) at [22].
The test of patent clarity is met: the ground on which the caveat was originally sought no longer exists. Ms Paul, the only one of the trustees who lodged the caveat who is not party to this application had no interest protected by the caveat other than in her role as a trustee. She is no longer a trustee.
Outcome
[27] Accordingly, I order that the caveat registered against Certificate of Title SA35A/506 on 1 March 2017 be removed.
Gwyn J
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