Seed Housing Limited v Harness Racing New Zealand Incorporated
[2023] NZHC 1705
•4 July 2023
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2023-412-20
[2023] NZHC 1705
UNDER the Land Transfer Act 2017 IN THE MATTER
of an application to sustain caveat number 11993260.1
BETWEEN
SEED HOUSING LIMITED
Applicant
AND
HARNESS RACING NEW ZEALAND INCORPORATED
First Respondent
AND
FORBURY PARK TROTTING CLUB INCORPORATED
Second Respondent
Hearing: 31 May 2023 Appearances:
M J Hammer and B S Rorrison for Applicant
J R Pullar and R M Tinson for First Respondent No appearance for Second Respondent
Judgment:
4 July 2023
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 4 July 2023 at 3.30 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
SEED HOUSING LTD v HARNESS RACING NEW ZEALAND INC [2023] NZHC 1705 [4 July 2023]
Table of Contents
Para No
The facts [7] Relevant principles
[28]
Standing
[32]
SEED’s equitable interest in the land
[37]
Does s 21 apply?
The submissions
[49]
What is retrospectivity?
[57]
My analysis
[66]
The effect of Harness Racing refusing its consent
[81]
Should the Court exercise its discretion and remove the caveat?
[89]
Result
[99]
[1] This is an application by SEED Housing Ltd (SEED) under s 143 of the Land Transfer Act 2017 (LTA) to sustain its caveat 11993260.1 lodged over land owned by the second respondent, Forbury Park Trotting Club Inc (Forbury).
[2] SEED filed this proceeding in response to an application made to the Registrar- General of Land (the Registrar) by the first respondent, Harness Racing New Zealand Inc (Harness Racing), to lapse the caveat.
[3] The caveat was lodged by SEED to protect its interest under an agreement with Forbury to purchase an area of land comprising part of the Forbury Park Trotting Club in Dunedin. The subdivision of the land was necessary to produce new titles for the land SEED was purchasing and the balance of the land that was to remain with Forbury.
[4] Before new titles were obtained, the Racing Industry Act 2020 (the Act) was enacted. Harness Racing says that pursuant to s 21(1) of the Act Forbury must obtain its consent to transfer the land to SEED, and it has refused its consent. Harness Racing contends that because of the refusal of its consent, the agreement between SEED and Forbury is void for illegality or has been cancelled. It requires the caveat be removed so the land can be transferred to it under the Act’s surplus venue provisions.
[5]Forbury has taken no position in relation to the application.
[6]The issues that arise are as follows:
(a)Did Harness Racing have standing to apply to the Registrar to lapse the caveat?
(b)Did the agreement confer upon SEED an equitable interest in the land sufficient to support its caveat?
(c)Is Harness Racing’s consent required to transfer the land to SEED?
(d)If so, what is the effect of Harness Racing refusing its consent?
(e)Should the Court exercise its discretion to remove the caveat?
The facts
[7] Forbury is a racing club for the purposes of the Act.1 It owns, and until recently operated, Forbury Park, a racecourse located at Victoria Street, St Kilda, Dunedin.
[8] Harness Racing is a racing code for the purposes of the Act with functions to govern racing clubs, racing venues and certain participants in the racing industry under s 15 of the Act.2
[9] Mr Gary Todd, a registered architect and the sole director of SEED, entered into negotiations with Forbury to purchase land comprising part of Forbury Park, intending to develop it for affordable housing.
[10] On 20 December 2019, Forbury and Mr Todd (as agent) entered into an agreement for sale and purchase in respect of an area of 9,300 m2 of land (subject to survey) of Forbury Park on the ninth edition of the Real Estate Institute of New Zealand Inc and Auckland District Law Society Inc standard form. The terms included that:
(a)both Forbury and SEED would undertake due diligence;
(b)SEED would obtain a resource consent to subdivide the land that was subject to the agreement from the land to be retained by Forbury by 30 September 2020, upon which it would deposit the subdivision plan with Land Information New Zealand (LINZ) and obtain new titles;
(c)SEED would pay a deposit on the completion of due diligence and following the grant of resource consent;
1 Racing Industry Act 2020, s 5(1) definition of “racing club”.
2 Section 5(1) definition of “racing code”, para (6).
(d)there was a process by which the purchase price would be agreed, and the agreement was subject to and conditional on the parties agreeing on the purchase price within 40 days from the date of the agreement;
(e)the settlement date was to be the later of 10 working days following the issue of new titles or completion of agreed ancillary works; and
(f)SEED was granted a first right of refusal in respect of any sale of the balance of the land, but the exercise of such right would be subject to any relevant statutory requirements and restrictions imposed on Forbury if the proposed Racing Industry Bill 2019 became law.3
[11] The agreement also contained a sunset clause allowing SEED or Forbury to cancel the agreement should title not have issued by 30 June 2021. It is not suggested either SEED or Forbury cancelled the agreement on this basis, and I need not consider it further.
[12] The terms of the agreement were subsequently varied. The key variation was that in June 2020 the land to be purchased by SEED was reduced to 6,400 m2. The purchase price of the land was agreed at $1.33 million plus GST.
[13] On 29 June 2020, both Forbury and Mr Todd, by their solicitors, confirmed satisfaction of the due diligence conditions and agreed that to the extent that any other conditions affecting the agreement remained unsatisfied they had been waived.
[14]The Act received Royal assent on 30 June 2020.
[15] Section 21 of the Act came into force on 1 July 2020.4 Section 21 relevantly provides:
21Restriction on dealing with racing venue
(1)Despite any provision to the contrary in a racing club’s constitution, the racing club must obtain the written approval of the racing code with which it is registered before—
3 Racing Industry Bill 2019 [198 1).
4 Racing Industry Act, s 2(1).
(a)transferring or vesting the fee simple estate in the land comprising a racing venue owned by the club:
(b)leasing, mortgaging, giving a security interest in, or otherwise dealing with the land that comprises a racing venue owned by the club:
(c)extending any encumbrances in respect of the land that comprises a racing venue owned by the club.
(2)A racing code may grant approval under subsection (1) generally or specifically and subject to any conditions that the code thinks fit.
…
[16] Section 22 provides the Registrar’s obligations in respect of recording or removing notices that land is subject to s 21 of the Act as follows:
22Restriction on dealing must be recorded on record of title
(1)This section applies in respect of any land comprising a racing venue to which section 21 applies.
(2)The Registrar-General must, as soon as practicable after receiving notification from the relevant racing code, record on or remove from the record of title for the land that it is subject to section 21(1).
[17] On 14 July 2020, Mr Todd paid the deposit under the agreement. Mr Todd then applied for subdivision and related consents to the Dunedin City Council on 27 August 2020. They were granted on 25 September 2020, and the title plan for the subdivision was approved by LINZ on 23 December 2020.
[18] In late July 2020, Harness Racing became aware Forbury may have sold some of Forbury Park, and in August 2020 it was confirmed this was the case. Harness Racing lodged a notice under s 21 of the Act against the title of the land on 23 September 2020.
[19] Around this time, there were discussions between SEED’s lawyers, Anderson Lloyd, and Forbury’s lawyers concerning possible amendments to the agreement. In correspondence, Forbury’s lawyers suggested that certain works would be subject to Harness Racing’s consent under s 21. Anderson Lloyd did not accept such consent was required.
[20] On 30 November 2020, SEED was incorporated and it was nominated as purchaser under the agreement by deed of nomination dated 19 January 2021.
[21] In January 2021, Anderson Lloyd searched the title to Forbury’s land and learned Harness Racing had lodged a notice under s 22 of the Act. On 19 January 2021, Anderson Lloyd wrote to Forbury’s lawyers asking them to obtain Harness Racing’s confirmation it did not have any right of approval over, or ability to intervene in, the agreement and the resulting transaction. SEED also lodged its caveat.
[22] On 23 March 2021, Anderson Lloyd wrote to Harness Racing’s lawyers, Taylor Shaw, requesting that Harness Racing remove its s 21 notice. SEED’s position was as follows:
Our client’s agreement with the Forbury Park Trotting Club Incorporated (and we understand your client will have full details of that as forwarded to it by the Trotting Club), clearly pre-dates the inception of the Racing Industry Act 2020. It was also unconditional before that Act came into force. The Racing Industry Act 2020 is not expressed as being retrospective, and it is a general rule of Common Law, that no legislation can be retrospective unless clearly expressed as being so.
[23]Taylor Shaw conveyed Harness Racing’s position in a letter of 24 March 2021:
4.Section 21 and 22 came into effect on the day after the Act receiving Royal assent: 1 July 2020. The actions referred to in section 21(1) are all subject to the codes control from 1 July 2020.
5.The relevant action that [Forbury] needs written approval for is the “transferring or vesting the fee simple estate in the land comprising a racing venue owned by the club” (section 21(1)(a)). As the title was not transferred prior to the inception of the Act, the transfer will now require [Harness Racing’s] consent.
…
7.[Harness Racing] therefore cannot forgo their statutory obligation to have oversight over this Agreement. [Harness Racing] must also ensure that when exercising this function under the Act (i.e. to give written approval pursuant to section 21) that the Board is guided by the purposes of the Act (section 3).
8.To meet their obligations, [Harness Racing] must ensure that they receive all the relevant information to ensure that their final decision is based on all the facts, in their proper context.
9.[Harness Racing] is currently working through that process to ensure that they have all the necessary information. [Harness Racing] has committed to progress this urgently.
[24] In March 2021, Harness Racing determined that no further race dates would be allocated to Forbury Park from 1 August 2021, and Forbury Park was deemed a surplus racing venue pursuant to s 23 of the Act. The Act contains detailed provisions for the transfer of surplus venues to the racing code by agreement or Order in Council.5
[25] Notwithstanding the parties’ different views as to the application of s 21, there were attempts to resolve the matter pragmatically, including by SEED also acquiring the balance of the land which had become available for sale as a result of Forbury Park being closed as a racing venue. However, those discussions were not successful.
[26] On 27 February 2023, Taylor Shaw wrote to Anderson Lloyd advising that Harness Racing declined its consent to the transfer of the land to SEED under s 21 of the Act, and that they had been instructed by Forbury to write cancelling the agreement.
[27] Harness Racing says it decided not to approve the transfer of land to SEED because the sale did not align with the purposes of the Act that the value of racing property is retained by the industry and applied for maximum industry benefit. Further, it says that when Forbury Park was deemed a surplus venue, the provisions relating to the transfer of surplus venues came into play and it entered into an unconditional agreement with Forbury to purchase Forbury Park dated 27 February 2023. It wants the caveat removed so the land can be transferred to it.
Relevant principles
[28]Section 138 of the LTA provides:
138 Caveats against dealings with land
(1)A person may lodge a caveat against dealings with an estate or interest in land (a caveat against dealings) on the basis that the person—
(a)claims an estate or interest in the land, whether capable of registration or not; or
(b)has a beneficial estate or interest in the land under an express, implied, resulting, or constructive trust; or
5 Sections 26–33.
(c)is transferring the estate or interest in the land to another person to be held on trust; or
(d)is the registered owner of the estate or interest in the land and—
(i)has an interest that is distinct from that of registered owner; or
(ii)establishes to the satisfaction of the Registrar that at the time the caveat is lodged there is a risk that the estate or interest may be lost through fraud.
…
[29] As s 138(1)(a) makes clear, the interest does not have to be registrable, but a personal or contractual right is not enough. As noted in Staples & Co Ltd v Corby:6
Before a person can caveat under this section he must be a person who claims to be entitled to the land, or any estate or interest in the land, or to be “beneficially interested” in the land, or in any estate or interest in the land, and the person in either event must claim “by virtue of any unregistered agreement, or other instrument or transmission” … “or of any trust express or implied, or otherwise howsoever.”
[30] The relevant principles that apply to an application of this kind were summarised in Philpott v Noble Investments Ltd as follows:7
(a)The onus is on the applicants to demonstrate that they hold an interest in the land that is sufficient to support the caveat, but they need not establish that definitively;
(b)It is enough if the applicants put forward a reasonably arguable case to support the interest they claim;
(c)The summary procedures involved in applications of this nature are not suited to the determination of disputed questions of fact. An order for the removal of a caveat will only be made if it is patently clear that the caveat cannot be maintained either because there is no valid ground for lodging it in the first place, or because such a ground no longer exists; and
(d)When an applicant has discharged the burden upon it, the Court retains discretion to remove the caveat which it exercises on a cautious basis. Before it does so the Court must be satisfied that the caveator’s legitimate interest would not be prejudiced by removal.
6 Staples & Co Ltd v Corby (1900) 19 NZLR 517 (CA) at 536–537 in relation to a predecessor of s 138 (Land Transfer Act 1885, s 137); and Philpott v NZI Bank Ltd (1989) 1 NZ ConvC 190,246 (CA) at 190,248.
7 Philpott v Noble Investments Ltd [2015] NZCA 342 at [26] (footnotes omitted); and Botany Land Development Ltd v Auckland Council [2014] NZCA 61, (2014) 14 NZCPR 813 at [23]–[25].
[31]To these principles, I would add:
(a)Where there is a conflict between the affidavits, the Court will generally prefer the evidence of the caveator. However, the Court is not bound to accept uncritically statements in an affidavit that are equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable.8
(b)The Court will not finally determine the rights of the parties unless both parties consent or the facts are not in dispute and the law has been fully argued.9
Standing
[32]Section 143(1) of the LTA provides:
143 Lapse of caveat against dealings
(1)The following persons may apply to the Registrar for the lapse of a caveat against dealings affecting an estate or interest in land:
(a) a person who wishes to register an instrument affecting the estate or interest protected by the caveat; or
(b) the registered owner or a person acting for or on behalf of the registered owner of the estate or interest affected by the caveat.
[33] SEED argued that Harness Racing had no standing to apply to the Registrar to lapse its caveat, but its written submissions proceeded on the erroneous basis that Harness Racing had applied to the Registrar under s 143(1)(b) of the LTA. In fact, the application was made under s 143(1)(a).
[34] Harness Racing says s 143(1)(a) applies as it is party to an agreement to purchase Forbury Park from Forbury, and it wishes to register an instrument (namely a transfer of the land) affecting the estate or interest protected by SEED’s caveat.
8 Luo v Jin [2021] NZHC 709 at [21]. See also Macrae v Rapana HC Auckland M633/94, 17 June 1994.
9 Neil Campbell Campbell on Caveats (3rd ed, LexisNexis, Wellington, 2019) at [10.020(a)].
[35] SEED submits there may still be an issue as to Harness Racing’s standing because it can only be Forbury, as registered owner of the land, who may transfer the land and s 143(1)(a) does not therefore apply.
[36] Section 143(1)(a) applies to persons who wish to register an interest whether or not they are the registered owner of land. The section refers to “a person” whereas s 143(1)(b) refers to “the registered owner” or a person acting for them. Harness Racing is a “person” wishing to take title to the land and its ability to do is prevented by the caveat. It has standing under s 143(1)(a) to apply to the Registrar to lapse the caveat. Further, I note that in a routine conveyance, the transaction will be initiated in the e-dealing workspace of a law firm acting for the purchaser; in this case that is Harness Racing.10
SEED’s equitable interest in the land
[37] SEED’s primary premise is that an unconditional agreement for sale and purchase enforceable by specific performance creates an equitable interest in land sufficient to be protected by a caveat.11
[38] It argues the agreement between it and Forbury was made unconditional by the parties on 29 June 2020. It rejects Harness Racing’s contention the agreement was still conditional as, it says, all conditions were waived. It submits it follows that when the caveat was lodged on 19 January 2021 it had a caveatable interest in the land.
[39] Harness Racing argues the agreement was not unconditional and therefore SEED does not have an equitable interest in the land sufficient to support the caveat. Its starting point is the agreement, which required the subdivision of the land, was subject to s 225 of the Resource Management Act 1991.
[40]Section 225 reads:
225 Agreement to sell land or building before deposit of plan
10 Elizabeth Toomey (ed) New Zealand Land Law (3rd ed, Thomson Reuters, 2017, Wellington) at [3.4.04].
11 Concept Projects Ltd v Peak (1986) 2 NZCPR 468 (HC) at 477; and Associates Group Motels No 1 Ltd v Steen HC Auckland M367/94, 15 June 1994 at 14.
(1)Any agreement to sell any land or any building or part of any building that constitutes a subdivision and is made before the appropriate survey plan is approved under section 223, shall be deemed to be made subject to a condition that the survey plan will be deposited under the Land Transfer Act 2017 or in the Deeds Register Office, as the case may be; and no such agreement is illegal or void by reason that it was entered into before the survey plan was deposited.
(2)Subject to subsection (1), any agreement to sell any allotment in a proposed subdivision made before the appropriate survey plan is approved under section 223 shall be deemed to be made subject to the following conditions:
(a) that the purchaser may, by notice in writing to the vendor, cancel the agreement at any time before the end of 14 days after the date of the making of the agreement:
(b) that the purchaser may, at any time after the expiration of 2 years after the date of granting of the resource consent or 1 year after the date of the agreement, whichever is the later, by notice in writing to the vendor, rescind the contract if the vendor has not made reasonable progress towards submitting a survey plan to the territorial authority for its approval or has not deposited the survey plan within a reasonable time after the date of its approval.
(3)An agreement may be rescinded under subsection (2) notwithstanding that the parties cannot be restored to the position that they were in immediately before the agreement was made, and in any such case the rights and obligations of each party shall, in the absence of agreement between the parties, be as determined by a court of competent jurisdiction.
[41] Relying on Bevin v Smith, Harness Racing then argues that a conditional agreement for sale and purchase will not pass an equitable interest in land to the purchaser unless the condition is one that may be satisfied “as a matter of course”.12
[42] Applied to the facts of this case, it says the conditions in s 225 cannot be waived and that when the Act came into force resource consent had not been obtained nor had reasonable progress been made towards the deposit of a survey plan. Further, it contends that a resource consent for a planned subdivision is not available “as a matter of course” because it is subject to a broad discretion by the relevant authority, and there is always the possibility that conditions which were not contemplated by the parties may be imposed leading to “the agreement being essentially frustrated.”13
12 Bevin v Smith [1994] 3 NZLR 648 (CA) at 665.
13 Counsel for Harness Racing relied upon Steele v Serepisos [2006] NZSC 67, [2007] 1 NZLR 1 for this submission.
[43] It was not at all clear to me what would distinguish a condition that may be satisfied as “a matter of course” and one that would not. Mr Pullar argued, for instance, that an agreement for the sale of land that was subject to the purchaser obtaining finance would not support a caveat because conditions upon finance might be imposed by the bank. That is contrary to authority,14 and it would mean in the majority of cases, and, I would suggest, to the surprise of the parties, a purchaser under such an agreement would not have a caveatable interest.
[44] Bevin is not authority for the principle that Mr Pullar seeks to advance. The relevant statement of principle was set out by Gault J as:15
We agree with the recent Australian authorities to the effect that the equitable estate passes when equity will, by injunction or otherwise, prevent the vendor from dealing with the property inconsistently with the contract of sale, ie inconsistently with the purchaser’s contingent ownership rights. It will be sufficient if the Court will order specific performance of the contract subject to the contingency.
[45]Subsequently, in McDonald v Isaac Construction Co Ltd, Tipping J said: 16
It has recently been held by the Court of Appeal in Bevin v Smith … that equitable interests in land can be acquired pursuant to conditional contracts. The nature of the condition may be important. If it is such that until fulfilment it can be said that the parties did not intend to create any interest in land there will be no caveatable interest unless and until the condition is fulfilled. But, in the usual case where the parties intend to be bound and to remain bound subject to the fulfilment of the condition, equitable interests in land can arise by means of such a conditional contract.
…
The point, for present purposes, is that an equitable interest in land capable of sustaining a caveat can arise under a conditional contract before specific performance could be ordered of that contract. The equitable interest is, of course, subject to defeasance if the contract is lawfully cancelled or if it otherwise goes off for failure of a condition.
[46] I was referred to no authority for the proposition that an agreement which remains conditional under s 225 is incapable of conferring an interest sufficient to
14 Elizabeth Toomey, above n 10, at [4.3.03(1)(a)] citing Canterbury Finance Ltd v Sagar Trust Ltd
(1997) 3 NZ ConvC 192,571 (HC).
15 Bevin v Smith, above n 12, at 665.
16 McDonald v Isaac Construction Co Ltd [1995] 3 NZLR 612 (HC) at 619 (citation omitted).
support a caveat. The correct position is as stated by the author of Campbell on Caveats as follows:17
Contracts that are made subject to statutory consents being obtained, or to finance being raised by the purchaser … will generally pass the equitable estate and thus support caveats.
[47] I am satisfied it is arguable that certainly by 29 June 2020, SEED and Forbury intended to confer on SEED an interest in the land it was acquiring, notwithstanding that it may have remained conditional under s 225. Factors indicating that include that the agreement required SEED to conduct work and incur significant costs to effect to the intended subdivision. Under cl 10.8 of the agreement, any conditions were expressed to be conditions subsequent, and the parties purported to waive all conditions under the agreement intending to avoid interference by Harness Racing. I note, also, that Forbury had publicly announced the sale.
[48] I am equally satisfied that at the time the caveat was lodged, equity would have intervened to protect SEED’s interest in the land by injunction if necessary. The equitable estate in the land being acquired by SEED had passed to it sufficient to support its caveat.
Does s 21 apply?
The submissions
[49] SEED’s case is that Harness Racing’s consent under s 21 is not required for the land to be transferred, as to require Harness Racing’s consent would be to give s 21 retrospective effect contrary to s 12 of the Legislation Act 2019, which provides: “Legislation does not have retrospective effect”.
[50] SEED accepts that Parliament may enact laws with retrospective effect, either expressly or by implication, but says the general rule is that Parliament does not intend
17 Neil Campbell, above n 9, at [10.009] n 42 citing Canterbury Finance Ltd v Sagar Trust Ltd, above n 14. See also Bethell v Rickard [2013] NZCA 68 at [39]–[40]; NDM Construction Ltd v North Ridge Living No 3 Ltd [2022] NZHC 320; (2022) 22 NZCPR 985 at [29].
what is unjust and for that reason enactments are to be presumed not to be retrospective.18
[51] In support of its submission, SEED says there is no statement in the Act that s 21 is to have retrospective effect and no clear implication of retrospectivity. It contrasts s 21 with sch 1 cl 27 of the Act which (in respect of different subject matter) is expressly stated to have retrospective effect. SEED argues if s 21 was intended to have retrospective effect it would have been made similarly clear.
[52] SEED does not consider it of significance that Harness Racing may lodge notices restricting dealings with land under s 22 of the Act and submits the land it is acquiring was erroneously captured as part of a process by Harness Racing to lodge notices over 179 titles across the country.
[53] Harness Racing says that s 21 applies to any transfer of land comprising a racing venue owned by a racing club from 1 July 2020, when s 21 came into force. It says s 21 grants racing codes broad powers to approve dealings with racing venues. It relies on the plain words of s 21 and says no issue of retrospectivity arises because s 21 is forward looking, applying only to transfers of land that occur after it was enacted.
[54] Harness Racing contends that if the Act was not to apply in a case such as this then transitional or savings provisions could have been included in the Act, but there are no such provisions.
[55] It also submits the issue was considered by the Transport and Infrastructure Committee in its deliberations on the Racing Industry Bill 201919 and proposals for exemptions from the operation of the section were not adopted.20
[56] Harness Racing then submits there is nothing unjust about the facts of this case because SEED and Forbury were aware of the Racing Industry Bill when they entered into the agreement and made express provision for it. It says their actions in
18 Te Wake v Accident Compensation Corporation [2008] 1 NZLR 251 (HC) at [34].
19 Racing Industry Bill 2019 (198-1).
20 Racing Industry Bill 2019 Departmental Report (Te Tari Taiwhenua Department of Internal Affairs, 19 March 2020) at [143].
attempting to confirm or waive all conditions immediately before the Act came into force suggests a scheme “concocted to evade the clear dictate of Parliament”.21
What is retrospectivity?
[57] Counsel did not address the issue of what it means to say that a statutory provision has retrospective effect. The term is used imprecisely to describe a range of effects, both good and bad. For instance, it is commonly said that a statute that alters existing rights is retrospective, but almost all statutes alter existing rights or obligations in one way or another. By that reason alone a statute cannot be said to act retrospectively. That would only be the case if the statute purports to alter rights and obligations “as of a past time”.22
[58] As an example, West v Gwynne concerned a lease entered into in 1874 which contained a covenant against tenants subletting the premises without the consent of the landlord.23 In 1892, an Act was introduced that leases containing such a provision were, unless the lease contained an express provision to the contrary, deemed to be subject to a proviso that “no fine or sum of money in the nature of a fine shall be payable for or in respect of such licence or consent”. The issue was whether the 1892 Act applied to the lease executed years before the commencement of the Act. It was held that it did.
[59]Cozens-Hardy MR said:24
It was forcibly argued by Mr Hughes that a statute is presumed not to have retrospective operation unless the contrary appears by express language or necessary implication. I assent to this general proposition, but I fail to appreciate its application to the present case. ‘Retrospective operation’ is an inaccurate term. Almost every statute affects rights which would have been in existence but for the statute. … Sect 3 does not annul or make void any existing contract; it only provides that in the future, unless there is found an express provision authorizing it, there shall be no right to exact a fine. I doubt whether the power to refuse consent to an assignment except upon terms of paying a fine can fairly be called a vested right or interest. Upon the whole I think s 3 is a general enactment based on grounds of public policy, and I
21 NZI Bank Ltd v Euro-National Corporation Ltd [1992] 3 NZLR 528 (CA) at 538.
22 Gustavson Drilling (1964) Ltd v Minister of National Revenue [1977] 1 SCR 271 at 279.
23 West v Gwynne [1911] 2 Ch 1 (CA).
24 At 11.
decline to construe it in such a way as to render it inoperative for many years wherever leases for 99 years, or it may be for 999 years, are in existence.
[60]In the same case, Buckley LJ said:25
Retrospective operation is one matter. Interference with existing rights is another. If an Act provides that as at a past date the law shall be taken to have been that which it was not, that Act I understand to be retrospective. That is not this case. The question here is whether a certain provision as to the contents of the leases is addressed to the case of all leases or only of some, namely, leases executed after the passing of the Act. The question is as to the ambit and scope of the Act, and not as to the date as from which the new law, as enacted by the Act, is to be taken to have been the law.
[61] However, there will be cases where statutes which do not operate retrospectively interfere with existing rights in a manner that is so unjust that it may be presumed that was not Parliament’s intention. Of course, Parliament can enact any law it sees fit and such a presumption will not operate if its intentions are otherwise clear.
[62] In Wilson v First County Trust Ltd, it was noted that there is a presumption against legislation impairing rights that are described as “vested”, but what is meant by a vested right is unclear and the cases are not easy to reconcile:26
This lends weight to the criticism that the reasoning in them is essentially circular: the courts have tended to attach the somewhat woolly label “vested” to those rights which they conclude should be protected from the effect of the new legislation. If that is indeed so, then it is perhaps only to be expected since, as Lord Mustill observed in L’Office Cherifien des Phosphates v Yamashita-Shinnihon Steamship Co Ltd … the basis of any presumption in this area of the law “is no more than simple fairness, which ought to be the basis of every general rule”.
[63] Whether the issue concerns retrospectivity or the interference with existing rights, the Court’s approach to the construction of the statute is founded on the concept of fairness. In Secretary of State for Social Security v Tunnicliffe, Staughton LJ said:27
In my judgment the true principle is that Parliament is presumed not to have intended to alter the law applicable to past events and transactions in a manner which is unfair to those concerned in them, unless a contrary intention appears. It is not simply a question of classifying an enactment as retrospective or not
25 At 11-12.
26 Wilson v First County Trust Ltd (No 2) [2003] UKHL 40, [2004] 1 AC 816 at [196] (citation omitted).
27 Secretary of State for Social Security v Tunnicliffe [1991] 2 All ER 712 (CA) at 724.
retrospective. Rather it may well be a matter of degree–the greater the unfairness, the more it is to be expected that Parliament will make it clear if that is intended.
[64] The authors of Craies on Legislation note the trend is away from the application of formulaic presumptions and the application of common sense in searching for legislative intention by having regard to all the circumstances.28 They suggest the Court must consider the degree of unfairness that might be thought to be suffered if the provision were applied with retrospective effect. The greater the unfairness the stronger the presumption will be that Parliament did not intend it and the greater the clarity of the language required to rebut it.
[65] Consistent with this, the authors of Burrows and Carter Statute Law in New Zealand note the matter is ultimately one of construction and that the language of the text, the purpose and scheme of the legislation, considerations of justice and convenience, and public policy may all be considered.29
My analysis
[66] The starting point must be that under s 10(1) of the Legislation Act the meaning of legislation must be ascertained from its text and in the light of its purpose and its context.
[67] SEED identified the issue of interpretation to be whether s 21 conferred on Harness Racing rights in respect of SEED’s interest under the agreement. In my view, this is not the issue.
[68] Section 21 does not confer on racing codes rights in respect to agreements between racing clubs and third parties. It makes no reference to such agreements. It does not by its terms prohibit racing clubs from entering into agreements to deal with their land or require that such agreements be on certain terms, or that the terms of such
28 Daniel Greenbert (ed) Craies of Legislation (12th ed, Thomson Reuters, London, 2020) at [10.3.8].
29 Ross Carter Burrows and Carter Statute Law New Zealand (6th ed, LexisNexis, Wellington, 2021) at 819 and 821 citing Prouse v Commissioner of Inland Revenue (1994) 16 NZTC 11,249 (CA) at 11,252, Re Matawhero B Block (1884) 2 NZLR 359 (SC) at 359, S v New Zealand Law Society [1944] NZLR 351 (SC) at 355 and Dental Council of New Zealand v Bell [1992] 1 NZLR 438 (HC) at 445.
agreements be subject to the racing code’s approval. What s 21 does do is confer on Harness Racing a power which it must exercise consistent with its statutory functions and the purposes of the Act.
[69] SEED’s objection to s 21 is that the power it confers upon Harness Racing may defeat its ability to take title to the land in circumstances where such power did not exist when the agreement was entered into, or (it would add) became unconditional. Applied in that manner, s 21 appears to alter to its detriment SEED’s rights under the agreement as they existed before the Act came into force. The question is whether such a consequence accords with Parliament’s intentions. I consider it does.
[70] SEED relies upon the absence of anything stating s 21 was to have retrospective effect. It is far more telling in my view that there are no savings or transitional provisions in the Act, the existence of which might evidence a recognition of Parliament’s intention to protect existing rights.
[71] While counsels’ submissions were very brief on this aspect, it appears that Parliament was aware of the possibility that existing rights might be affected by the exercise of the s 21 power. Mr Pullar referred me to the report of the Department of Internal Affairs to the Transport and Infrastructure Select Committee on the provisions of the Racing Industry Bill 2019.30 Importantly, there was no support to backdate the operation of what became s 21, but its possible effect on existing rights was recognised as follows:
143.The proposed backdating of clause 1731 to the introduction of the Bill is not supported. As discussed at clause 2, [Legislation Design and Advisory Committee] guidelines state legislation should have a prospective, not retrospective effect. While the effectiveness of the provision could be improved by backdating, it is considered that the impact on justice (people should know the law applying to them and this should not be changed retrospectively) is not outweighed.
144.The Bill provides the codes with sufficient flexibility to ensure the impact of clauses 17 and 1832 on property rights and the club independence is not significant. The only property transaction the codes are expected to block are those that would undermine the surplus venue provisions of the Bill.
30 Racing Industry Bill 2019 Departmental Report, above n 20.
31 Which ultimately was enacted as s 21 of the Act.
32 Which was enacted as s 22.
[72] There are other indications from the Act that the s 21 power is not limited in the way SEED contends. The purposes of the Act and the functions of racing codes under s 15 emphasise the financial management of racing clubs and their assets and the long-term economic viability of the racing industry. These objects would be undermined should there be uncertainty as to the circumstances under which the s 21 power was to be exercised.
[73]In this respect, I note that the purposes of the Act include:
3 Purposes
The purposes of this Act are to—
(a)reform the law relating to New Zealand racing in order to—
(i)provide effective governance arrangements for the racing industry; and
(ii) promote the long-term viability of New Zealand racing; and
(iii)facilitate betting on galloping, harness, and greyhound races, and other sporting events; and
(iv)ensure that the value of racing property is retained in the industry and is used for maximum industry benefit; and
…
[74]The functions of racing codes include:
15 Functions of racing codes
(1)The functions of each racing code are—
(a)to govern racing clubs, racing venues, and participants, including by—
(i) monitoring the performance and finances of those racing clubs and racing venues and their approach to managing risks under the Health and Safety at Work Act 2015:
…
(b)to develop and implement policies that are conducive to the overall economic development of racing conducted by the code and the economic wellbeing of people who, and organisations which, derive their livelihoods from that racing:
(c)to use its resources, including (without limitation) its financial, technical, physical, and human resources for purposes that, in the code’s opinion, will directly or indirectly benefit racing conducted by the code:
…
[75] I note, also, that only ss 21 and 22 (and cl 6 of sch 1) came into force the day after the Act received Royal assent, while the coming into force of other provisions was deferred.33 That meant the power to lodge notices under s 22 of the Act could be exercised immediately, and such power was not subject to any limitations.
[76] I also find support in the transfer of surplus venue provisions in pt 2 sub-pt 2 of the Act. The Act contemplates that surplus venues owned by a racing club may be transferred to the racing code by agreement, under s 26, or by Order of Council, under s 27. Importantly, in the case of a transfer pursuant to Order of Council, the racing club, racing code and officers, employees or agents of them are protected from civil liabilities, including for breach of contract.34 That appears to be an express acknowledgment that the exercise of powers under the Act may affect existing rights and in the manner that has arisen in this case. Harness Racing’s evidence is that as Forbury Park has been deemed a surplus venue the statutory processes are matters that have a bearing on the exercise of its s 21 power.
[77] While one can have sympathy that SEED may suffer losses as a result of Harness Racing withholding its consent to the transfer of the land, it is difficult to see in the circumstances of this case any obvious injustice that would justify the Court adopting a strained interpretation of s 21 to avoid that result.
[78] Both SEED and Forbury were aware of the Racing Industry Bill and its terms before they entered into the agreement. Copies of what became ss 21 and 22 of the Act were forwarded to Mr Todd by the Chairman of the Board of Forbury on 16 December 2019 with advice that Mr Todd should show them to his lawyer. While it appears the parties’ focus was the effect the passing of the Act might have on SEED’s first right of refusal, Mr Paddon says it was known that ss 21 and 22 of the Act
33 Racing Industry Act, s 2.
34 Section 32(13) and 32(14).
restricted a racing club dealing with a racing venue which was why the agreement was confirmed as unconditional on 29 June 2020. Mr Todd does not dispute that evidence.
[79] It certainly appears SEED was on notice that once the Act came into force Forbury might need to obtain Harness Racing’s consent to the transfer of the land and its haste to confirm or waive all the conditions in the agreement was thought likely to insulate the parties from any such requirement.
[80] In summary, I do not accept that s 21 operates retrospectively. I also consider s 21 means what it says, and from the date it came into force Forbury was required to obtain Harness Racing’s consent to the transfer of the land to SEED. I do not see any support in the text, purpose or scheme of the Act for SEED’s position that s 21 did not operate in this case, nor do I see any injustice that would lead to a view that Parliament intended s 21 to be applied in the manner SEED contends.
The effect of Harness Racing refusing its consent
[81] Harness Racing accepts the agreement was entered into lawfully but it submits that it is now an illegal contract and unenforceable because any attempt at performance would be contrary to s 21. It also argues that in circumstances where the agreement cannot be performed, Forbury was entitled to cancel it. To my mind, Harness Racing’s arguments are incorrect.
[82] The relevant law relating to illegal contracts is within the Contract and Commercial Law Act 2017. Section 73 provides that every illegal contract is of no effect and that no person is entitled to any property under a disposition made by or under an illegal contract.
[83]An illegal contract is defined in s 71 as:
(a)means a contract governed by New Zealand law that is illegal at law or in equity, whether the illegality arises from the creation or the performance of the contract; and
(b)includes a contract that contains an illegal provision, whether that provision is severable or not.
[84]Section 71 is subject to s 72,35 which provides:
72 Breach of enactment
A contract lawfully entered into does not become illegal or unenforceable by any party because its performance is in breach of an enactment, unless the enactment expressly so provides or its object clearly so requires.
[85] A contract can be illegal from inception or at performance. If the contract was entered into lawfully, as is the case here, the question is whether a breach of the statute in the course of performance of the contract has the effect to render the contract illegal. This depends on whether the statute expressly provides or the statute’s purpose impliedly so requires.36
[86] There is no express provision in this case, nor do I consider the Act impliedly requires a finding that the agreement became illegal. As I noted above, s 21 is not directly concerned with the existence or terms of agreements between racing clubs and third parties. Certainly, if a racing club enters a contract to give effect to a transaction to which s 21 applies it must seek the racing code’s consent, but that does not mean the statutory purpose requires such contracts to become illegal if consent is not forthcoming. The racing code can prevent such a transaction by the simple expedient of lodging a notice under s 22 of the Act. As to the parties, they may well have provided for the risk of consent not being forthcoming. Even if they do not, there is no reason why their positions at law, such as the right to seek damages (the payment of damages being a substitute for performance), should be jeopardised.
[87] It follows, in my view, that the agreement did not become illegal when Harness Racing refused its consent and the attempt by Harness Racing to cancel it on Forbury’ behalf was ineffective.
[88] However, even if I am wrong in this regard, it will not alter the outcome of this application because SEED argues Harness Racing’s decision to withhold its consent
35 Contract and Commercial Law Act 2017, s 71(2).
36 Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022) at 499.
to the transfer of the land is unlawful and the Court should not remove the caveat until that issue is determined in other proceedings. I now turn to this issue.
Should the Court exercise its discretion and remove the caveat?
[89] SEED has established an equitable interest in the land under the agreement sufficient to support its caveat. I have found also that the agreement did not become an illegal contract by virtue of the refusal of Harness Racing to give consent under s 21 and has not been cancelled.
[90] Harness Racing advances a further argument that the caveat should be removed in the exercise of the Court’s discretion because SEED can have no reasonable expectation of obtaining any benefit from the continuance of the caveat when there is no prospect of it obtaining an order for specific performance.
[91] The Court has a discretion to remove a caveat notwithstanding that the right to the interest claimed is confirmed. The discretion will only be exercised cautiously and where the Court is completely satisfied that the legitimate interests of the caveator will not be prejudiced.37
[92] I am not satisfied that SEED’s legitimate interests will not be prejudiced should the caveat be removed. SEED has raised the prospect that it may seek a declaration the s 21 should not be applied in a manner that defeats existing rights or for judicial review of Harness Racing’s refusal to provide consent. Its position is that if the caveat is removed the land will be transferred to Harness Racing who intends to sell it, and it will lose any realistic prospect of obtaining the land and all the time, costs and effort it has put into the development will be wasted.
[93] I understood Mr Pullar to accept that Harness Racing’s decision is of a kind that may be open to challenge by way of judicial review,38 but he submits the possibility of such a claim was raised for the first time in SEED’s submissions and
37 Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.
38 See for instance Royal Australasian College of Surgeons v Phipps [1999] 3 NZLR 1 (CA) at 11- 12 and Wilson v White [2005] 1 NZLR 189, (2004) 17 PRNZ 270 (CA) at [21].
there is no basis in the evidence upon which the Court could make an assessment that grounds for judicial review exist. I do not accept these submissions.
[94] SEED’s argument that the caveat should be maintained while the parties’ rights are determined in other proceedings is raised in its application and in Mr Todd’s first affidavit.
[95] In relation to the submission that there is no arguable basis for judicial review proceedings, Mr Todd set out in his second affidavit what he considers are significant factual errors in the information that Harness Racing relied upon in deciding to refuse its consent. In addition, in light of SEED’s intentions for the use of the land for affordable housing, he says Harness Racing failed in the requirement of s 15(3)(b) of the Act to “exhibit a sense of social responsibility by having regard to the interests of the communities in which it operates”. I note, also, there are other provisions of the Act that emphasise the community interest in racing venues including in relation to the disposal of surplus venues.39 Further, it does appear from the affidavit of the general manager corporate of Harness Racing, Elizabeth Bishop, that the decision by Harness Racing to refuse consent was driven entirely by financial considerations and may not have taken these community interests sufficiently into account.
[96] On what is before me, I cannot dismiss the possibility that SEED may be successful in proceedings for judicial review of Harness Racing’s decision to refuse consent under s 21. I accept that the case for judicial review is not well articulated and does not appear strong, but as the Court of Appeal noted in Green & McCahill Holdings Ltd v Ara Weiti Development Ltd, when allowing an appeal from a decision of the High Court declining to make an order that caveats not lapse:40
However the fundamental difficulty for the respondents is that we cannot conclude that this sub-issue is inarguable, merely that it is weak. An application to sustain under s 143 is not the place to resolve bona fide disputed issues of fact. We repeat what this Court said in Philpott v Noble Investments Ltd in 2015:
The summary procedures involved in applications of this nature are not suited to the determination of disputed questions of fact. An order for the
39 Racing Industry Act, s 28(3).
40 Green & McCahill Holdings Ltd v AA Weiti Development Ltd (2022) NZCPR 259 at [98].
removal of a caveat will only be made if it is patently clear that the caveat cannot be maintained …
[97] Against the obvious prejudice to SEED if the caveat is removed, it is not clear that Harness Racing will suffer any prejudice if the caveat is sustained. While Ms Bishop says Harness Racing is unable to direct funds from the sale of surplus venues to “refurbish retained harness venues”, she provides no further evidence of how the absence of funds has in fact affected specific projects. Her evidence does, however, highlight that Harness Racing’s interest in Forbury Park is now economic.
[98] I am satisfied this is not a case where I should exercise my discretion to remove the caveat.
Result
[99] There shall be an order that pending further order of the Court caveat number 11993260.1 lodged against Record of Title 420811 shall not lapse.
[100] The order is conditional upon SEED commencing proceedings in a court of competent jurisdiction within 21 days of the date of this judgment against Harness Racing (and such other parties as it sees fit) to determine whether Harness Racing validly withheld its consent to a transfer of the land by Forbury to SEED. Such proceedings are to be pursued with due diligence. I reserve leave to Harness Racing to apply further for the removal of the caveat if they are not.
[101] I reserve costs. Counsel shall confer and attempt to reach agreement on costs. In case there is disagreement, counsel may file memoranda of no more than five pages and I will determine the matter on the papers.
O G Paulsen Associate Judge
Solicitors:
Anderson Lloyd, Dunedin Taylor Shaw, Christchurch
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