Waikene Station Limited v Kydell Downs Limited
[2023] NZHC 1937
•24 July 2023
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2023-409-17
[2023] NZHC 1937
UNDER the Land Transfer Act 2017 IN THE MATTER
of a caveat
BETWEEN
WAIKENE STATION LIMITED
Applicant
AND
KYDELL DOWNS LIMITED
Respondent
Hearing: 23 May 2023 (further written submissions completed 27 June 2023) Appearances:
H C Matthews for Applicant
P A Cowey and V A Reid for Respondent
Judgment:
24 July 2023
JUDGMENT OF ASSOCIATE JUDGE SKELTON
[1] This is an application by Waikene Station Ltd (applicant) for leave to lodge a second caveat under s 146 of the Land Transfer Act 2017. The application relates to a section of land adjoining the boundary between Waikene Station and the neighbouring property, Green Hills, owned by Kydell Downs Ltd (respondent).
[2] A first caveat was lodged on 9 December 2022 which wrongly described the nature of the interest. The respondent lodged a notice under s 143 of the Land Transfer Act on 22 December 2022. The applicant made an application to sustain the caveat on 26 January 2023. However, the caveat lapsed on 28 February 2023.
WAIKENE STATION LIMITED v KYDELL DOWNS LIMITED [2023] NZHC 1937 [24 July 2023]
Background
[3] On 15 September 2009, Ross and Wendy Webb (the previous owners of Green Hills) entered into an agreement for sale and purchase with Mark Edwards (the previous owner of Waikene Station) for the sale of 16.74 hectares being part of the Green Hills title, adjoining the southern boundary of Waikene Station (Agreement).
[4]The Agreement provided that:
(a)the purchaser would lease the property from the vendor at rental of
$1 per annum payable in arrears, if demanded;
(b)the purchaser could at any time during the lease at their option seek to apply for a resource consent to subdivide the property from the vendor’s land and either obtain a new certificate of title for the land or amalgamate it with the purchaser’s existing property;
(c)the lease arrangement was to be for approximately 35 years from the date of the agreement;
(d)the purchase price of $20,000 was to be paid in three tranches, with the final tranche to be paid on the date two years from the date of the agreement; and
(e)the purchaser had a caveatable interest in the vendor’s land to the extent of the 16.74 hectares.
[5]I hereafter refer to the 16.74 hectares section of land as the Adjoining Land.
[6] On 16 March 2011, the applicant purchased Waikene Station from Waikene Adventures Ltd (owned by Mr Edwards). Mr Greg Summerton is the director of the applicant.
[7] On 6 May 2011, the Webbs, Mark Edwards and the applicant entered into a deed of assignment in which Mark Edwards assigned all of his interest (as purchaser)
in the Agreement to the applicant. The deed recorded that the consideration required to be paid pursuant to the Agreement by the purchaser to the vendor had been paid and satisfied in full.
[8] On 14 March 2013, the respondent purchased Green Hills from the Webbs. At that time the directors of the respondent were Ms Judith Hurndell and Mr Bob Kyle (Ms Hurndell’s partner). Mr Kyle died in 2019 and Ms Hurndell is now the sole director of the respondent.
[9] At some point in 2017 there was a discussion between Mr Summerton, Mr Kyle and Ms Hurndell in relation to the properties.
[10] In or around May 2022, Mr Summerton says that he was contacted by Mr George MacFarlane who told him he was Ms Hurndell’s son-in-law. Mr MacFarlane made enquiries with Mr Summerton. Mr Summerton did not respond to the enquiries.
[11] On 19 October 2022, the applicant’s solicitors sent an email to the respondent’s solicitors, attaching a copy of the Agreement. The email advised that the applicant wished to proceed with subdivision of the Adjoining Land and amalgamation into Waikene Station’s title.
[12] On 9 December 2022, the applicant lodged the first caveat (12632012.1) against the respondent’s title, but the caveat wrongly described the nature of the interest.
[13] On 22 December 2022, the respondent applied under s 143 of the Land Transfer Act for the lapse of the caveat.
[14] On 26 January 2023, the applicant filed an originating application for an order that the caveat not lapse.
[15] On 3 February 2023, the respondent’s solicitors wrote to the applicant’s solicitors pointing out that the nature of the interest claimed in the caveat was incorrect and requesting that the applicant withdraw the application that the caveat not lapse.
[16] On 8 February 2023, the applicant applied to Land Information New Zealand (LINZ) to withdraw the caveat and lodge a caveat which correctly described the claimed interest. However, LINZ advised that the caveat withdrawal would not be processed while there was an outstanding application for the caveat to be sustained.
[17]On 28 February 2023, caveat 12632012.1 lapsed.
[18] On 1 March 2023, the applicant filed an amended originating application seeking an order that a second caveat may be lodged. The claimed interest is as follows:
A cestui que trust following from an Agreement for Sale and Purchase dated 15 September 2009 for the sale of part of the land in record of title MB4D/92 comprising 16.74 hectares or thereabouts (the subject land) between the then registered proprietors of record of title MB4D/92, Ross Gardner WEBB and Wendy Suzanne Gaye WEBB, and the then registered proprietor of the caveator’s property (now comprised in record of title 751408) and/or alternatively that Kydell Downs Limited took ownership of the subject land in the knowledge of and subject to the equitable interest of the caveator.
Second caveat applications – legal principles
[19]Section 146 of the Land Transfer Act provides:
146 Second caveat against dealings may not be lodged
Unless the court orders otherwise, a caveat against dealings must not be lodged by or on behalf of the same person to protect the same estate or interest as a caveat against dealings that has been removed under section 142 or lapsed under section 141(2)(a) or 143.
[20] To justify the making of an order under s 146 the applicant must at least establish “the arguable case necessary to sustain a caveat”.1 It is not necessary for the applicant to show an exceptionally strong, or strong prima facie, case for the estate or interest claimed.2
1 Mortimer v Bayliss (1991) 1 NZ ConvC 190,846 at 190,849; and see also, for example, Kendon v Hoyle (1984) 2 NZCPR 160.
2 Muellner v Montagnat (1986) 2 NZCPR 520; and Don McMorland and others Hinde McMorland & Sim Land Law in New Zealand (looseleaf ed, LexisNexis, Wellington) at [10.021(d)].
[21] The approach to second caveat applications (albeit referring to the equivalent section in the Land Transfer Act 1952) was summarised in Lowther v Kim as follows:3
[18] The Court of Appeal has held that an order under s 148 will not lightly be made. It is an indulgence and the applicant’s claim is “scrutinised carefully”: Cotton v Keogh [1996] 3 NZLR 1 at p 8. In Muellner v Montagnat (1986) 2 NZCPR 520 at pp 523-524, Thorp J reviewed previous authorities. He determined that the Court is given an unfettered discretion under s 148 but the Court will generally have regard to:
(a)the strength of the case made by the applicant to support the claimed interest in the land;
(b)any explanation for the failure to exercise the caveator’s rights under s 145;
(c)whether unavoidable prejudice would be suffered by those who have acted in reliance on the register and in belief that the caveator was not pursuing the claim.
[19] Thorpe J, rightly in my view, did not accept the submission made to him that an order under s 148 should only be made in exceptional cases. In considering the strength of the applicant’s claim to an interest in the land, it is appropriate to adopt the standard of a reasonably arguable case as identified in Sims v Lowe [1988] 1 NZLR 656 (CA) at pp 659-660, but with the reminder that careful scrutiny is required where leave to lodge a second caveat is sought.
[22] This approach has been approved in the context of an application under s 146 of the Land Transfer Act 2017 in McCully v McCully.4
[23] In Kiwi Trustee Ltd v Qing Lin, Associate Judge Bell found that where there are allegations of fraud or reprehensible conduct, then it is necessary to show a prima facie case rather than a reasonably arguable case for the interest claimed.5 This view was based on comments made by Court of Appeal in Schmidt v Pepper New Zealand (Custodians) Ltd.6
[24] However, in Paulgra Holdings Ltd (in liq) v Harvestfield Holdings Ltd, a caveator claimed an interest arising from an institutional constructive trust as a result of fraud. The Court of Appeal upheld the caveat, holding that the caveator had put forward a “reasonably arguable case”.7 Therefore, the better view may be that the
3 Lowther v Kim [2003] 1 NZLR 327 (HC).
4 McCully v McCully [2022] NZHC 3124 at [9].
5 Kiwi Trustee Ltd v Qing Lin [2016] NZHC 595 at [8]-[10]; and see also Blundell Concrete Ltd v Hodgins [2017] NZHC 2359 at [12].
6 Schmidt v Pepper New Zealand (Custodians) Ltd [2012] NZCA 565 at [15].
7 Paugra Holdings Ltd (in liq) v Harvestfield Holdings Ltd [2014] NZCA 164 at [38].
seriousness of the allegations made by the caveator is a matter to be taken into account in assessing whether the reasonably arguable standard has been met.8
[25] In Blundell Concrete Ltd v Hodgins, Associate Judge Bell commented on the summary nature of caveat applications: 9
[11] Caveat applications are summary and are therefore not suitable for deciding disputed questions of fact. On the other hand, the court is not required to accept uncritically as raising a dispute of fact which calls for further investigation, every statement in an affidavit, however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent or inherently improbable it may be. …
[12] To establish a reasonably arguable case there must be evidence tending to prove the facts relied on. Assertion, whether in pleadings or affidavit, is not enough. The evidence need not be as extensive as that given in a hearing on the substantive merits. It may be circumstantial. But if there is no evidence to prove the facts contended for, the caveator will not have made out a reasonably arguable case for those facts. …
Applicant’s case to support the claimed interest
[26] Mr Matthews, for the applicant, submits that the underlying contractual arrangements prior to the respondent’s purchase of Green Hills, are unequivocal, and the applicant had an appropriately documented and enforceable claim. He submits that:
[17]If Kydell in purchasing Greenhills had “knowledge” that there were contractual arrangements of that nature with Waikene then either:
(a)Under s 6 LTA Kydell was “fraudulent” in acquiring Greenhills with the actual knowledge or wilful blindness of Waikene’s unregistered interest, and intended to defeat that registered interest; or
(b)Acquired the title to Greenhills with notice of Waikene’s unregistered interest and therefore held (that part of the property) subject to a constructive trust in favour of Waikene.
8 Hinde McMorland & Sim Land Law in New Zealand, above n 2, at [10.020(b)].
9 Blundell Concrete Ltd v Hodgins [2017] NZHC 2359 at [11]-[12]; and see also Cube Building Solutions Limited v Kingloch Holdings Limited HC Christchurch CIV-2009-409-000935, 15 October 2010 at [13(c)].
Land transfer fraud
[27] The applicant contends that it has a caveatable interest in the land on the basis of land transfer fraud.10 Both parties rely on the definition of fraud in s 6 of the Land Transfer Act which provides:11
6 Meaning of fraud
(1)For the purpose of this Act, other than subpart 3 of Part 2, fraud means forgery or other dishonest conduct by the registered owner or the registered owner’s agent in acquiring a registered estate or interest in land.
(2)For the purposes of subsection (1), the fraud must be against—
(a)the registered owner of an estate or interest in land; or
(b)the owner of an unregistered interest, if the registered owner or registered owner’s agent,—
(i)in acquiring the estate or interest had actual knowledge of, or was wilfully blind to, the existence of the unregistered interest; and
(ii)intended at the time of registration of the estate or interest that the registration would defeat the unregistered interest.
(3)For the purpose of subpart 3 of Part 2, fraud means forgery or other dishonest conduct by any person.
(4)The equitable doctrine of constructive notice does not apply for the purposes of deciding whether conduct is fraudulent.
Institutional constructive trust
[28] Alternatively, the applicant claims that there is an institutional constructive trust in its favour.12
10 See s 52(1)(a) of the Land Transfer Act 2017.
11 The Land Transfer Act 2017 was not in force at the time the respondent purchased Green Hills in 2013. However, the requirements of actual knowledge or wilful blindness and intention to defeat the unregistered party’s interest were essentially the same – see JEB Management Limited v Grubz United Whanau Trust [2015] NZHC 157 at [28]-[30].
12 Land Transfer Act, s 138(1)(b); and Hinde, McMorland & Sim Land Law in New Zealand, above n 2, at [10.009(d)]; and Fortex Group v MacIntosh [1988] 3 NZLR 171 (CA), at 172-173.
[29] Mr Matthews cites the following passage from Equity and Trusts in New Zealand with regard to institutional constructive trusts:13
The common factor in all of these scenarios would appear to be the unconscionability of the defendant in denying the plaintiff an equitable interest in the relevant property because of a previous understanding, whether subjectively agreed upon between the parties or more commonly deemed by the law to have been appropriate in the circumstances. It is the element of consent or intention (or lack of either of these as the case may be) that triggers the institutional constructive trust which arises to reverse the defendant’s unconscionability.
[30] The applicant is relying on institutional constructive trust as a claim or right in personam which may be protected by a caveat and provide an exception to the indefeasibility of title.14
[31] In Regal Castings v Lightbody, Tipping J said this about the in personam exception in the context of the Land Transfer Act 1952:15
The cardinal feature of the indefeasibility principle is that, absent fraud, it entitles the registered proprietor and those dealing with the registered proprietor to rely on the register. Sections 62 and 63 allow the registered proprietor to deny unregistered interests and resist claims for possession. Sections 182 and 183 allow purchasers and others dealing with the registered proprietor to rely on the register for the purpose of gaining assurance as to what the registered proprietor can convey. On this basis those dealing with the registered proprietor do not have to go behind the register to ascertain the state of the registered proprietor’s title.
An in personam claim against a registered proprietor looks to the state of the registered proprietor’s conscience and denies him the right to rely on the fact he has an indefeasible title if he has so conducted himself that it would be unconscionable for him to rely on the register. Such a claim is concerned with the personal obligations of the registered proprietor rather than with the sanctity of their title. A successful in personam claim indirectly affects the registered proprietor’s title, such as when a decree of specific performance is made; but the claim is not a claim to the land as such. It is a claim that the registered proprietor perform the contract of sale.
The in personam jurisdiction must not, however, be allowed to impinge on the fundamental purpose of the Torrens system. In terms of s 62, that purpose is
13 Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at [13.2.1].
14 Paugra Holdings Ltd (in liq) v Harvestfield Holdings Ltd, above n 7, at [37(b)]; JEB Management Limited v Grubz United Whanau Trust, above n 11, at [28]-[30]; and Kiwi Trustee Ltd v Qing Lin, above n 5, at [42]-[43].
15 Regal Castings v Lightbody [2008] NZSC 87, [2009] 2 NZLR 433 at [147]-[149] (footnotes omitted).
to make the registered proprietor’s estate (or title, as it is usually put) paramount against interests which are not notified on the register. …
[32] It is apparent therefore that rights in personam may be enforced against a registered proprietor whose conduct falls short of land transfer fraud.16 However, in JEB Management Limited v Grubz United Whanau Trust, the respondent Trust sought a declaration of constructive trust over a property in Manakau on the basis of a claim of knowing receipt of trust property. The Court held that:17
[46] On the strength of this Australian authority and the New Zealand cases, I am persuaded that the position in New Zealand also should be that, in order for the Trust to establish a reasonably arguable case that it has a caveatable interest in the land, it must show that it is reasonably arguable that JEB committed fraud to the land transfer standard. It is not enough to say that it is liable under the principles of knowing receipt.
[33] The Court of Appeal has said that in personam claims should not be used “to consume the indefeasibility rule”.18 The exception “should be confined to cases that truly engage the conscience of the party whose registered priority is challenged”.19
[34] A relevant case is Lyus v Prowsa Developments Ltd.20 In that case, the plaintiffs contracted to purchase a plot of registered land, which was part of an estate being developed by the vendor company. The plot was to be transferred to the plaintiffs when a house had been built on it. The vendor company became insolvent before the house was completed. The land was mortgaged to a bank and the bank, although not subject to the contract, sold the mortgaged land to the first defendant. The contract included a clause that the land was sold “subject to and with the benefit of” the plaintiffs’ contract. The first defendant then sold the land to the second defendant with a special condition that it was subject to the plaintiffs’ contract so far as it might be enforceable, if at all.
[35] It was held that the first defendant, on taking the land subject to the positive stipulation in favour of the plaintiffs’ contract, became subject to a constructive trust in favour of the plaintiff, and the second defendant, accordingly, was similarly bound.
16 JEB Management Limited v Grubz United Whanau Trust, above n 11, at [39].
17 At [46].
18 Cashmere Capital Ltd v Crossdale Properties Ltd [2009] NZCA 185, [2009] 3 NZLR 612 at [18].
19 At [18].
20 Lyus v Prowsa Developments Ltd [1982] 2 All ER 953; [1982] 1 WLR 1044 (Ch D).
The Court found that it would be a fraud on the part of the first defendant to renege on stipulation in favour of the plaintiffs, and for the second defendant to rely on the transfer of land to them as conferring an absolute title freed from that stipulation.
[36] Mr Matthews also relies on the High Court decision in Laboyrie v Mills.21 This was a case dealing with a type of institutional constructive trust known as a common intention constructive trust. Four siblings (Pauline, Wayne, Mary and Stephen) had signed a trust deed to acquire and own their late mother’s home. They also signed a memorandum of guidance setting out their intentions and each contributed to the purchase of the property. The objectives of the trust were to provide accommodation for one sibling (Stephen) for his lifetime and then to afford benefits to the siblings’ children and grandchildren. Unbeknown to the other siblings, the property was registered solely in Stephen’s name. On his death, Stephen’s will purported to leave the property to another sibling (Terry) as executor of Stephen’s estate, and an issue arose as to whether Stephen was both the legal and beneficial owner of the property.
[37] The Court held that the four siblings (trustees) intended the property to be owned by them and subject to the terms of the trust. In reliance on that arrangement, Pauline, Wayne and Mary had acted to their detriment and to Stephen’s advantage, such that it would be unconscionable to allow Stephen’s estate to assert ownership of both the legal and beneficial interest in the property.
Evidence and submissions
[38] First, the applicant relies on a Bayleys property/information brochure that it says was made available to prospective purchasers of Green Hills in 2013.22 The “summary” section of the brochure includes the following:
The adjacent 1600 ha farm is also available and has both excellent summer country and large areas suitable for forestry, and together the two properties could carry over 9,500 stock units, with scope to diversify and expand. An inaccessible area at the south eastern corner of the farm of approximately
21 Laboyrie v Mills [2020] NZHC 700; upheld on appeal in Mills v Laboyrie [2022] NZLR 258 (CA).
22 This brochure was included as Annexure A to the Second Affidavit of Gregory Summerton sworn 17 May 2023. The respondent objected to this affidavit being filed as any further affidavits were to be filed and served by 14 April 2023 and were to be strictly in reply. I granted leave to the applicant for the affidavit to be filed out of time, and also granted leave to the respondent to file a further affidavit in reply.
16 ha, being largely steep scrub land, is leased to the neighbour on a long term basis.
[39] The applicant says that the respondent and its then directors would have seen this brochure as part of their due diligence for the purchase of Green Hills, and this section of the brochure would have alerted them to an interest by the applicant in the Adjoining Land.
[40]Ms Hurndell states in her supplementary affidavit sworn on 29 May 2023 that:
I do not recall ever seeing the Bayley property brochure Mr Summerton annexed as his Annexure A.
I have searched my own documents relating to the purchase of Green Hills and cannot find a copy of it. I have also caused my solicitors to review the Lane Neave file relating to our purchase of Green Hills in 2013. I am advised and believe that there is no copy of that Bayley Property Information Brochure in that file, nor is it referred to.
….
I am certain that neither the Bayley’s agent nor the Webb’s lawyer ever mentioned Mr Summerton’s lease or sale and purchase agreement to us. We had no idea that the 16 hectare Area of Green Hills Farm was subject to a lease, let alone a sale and purchase agreement when we bought it in 2013.
….
Following out due diligence, Bob and I believed that we were buying the full 835.2711 ha of land with clear title. …
[41] Mr Matthews submits that Ms Hurndell’s responses do not sit well with the documents contemporaneous with the marketing and sale of the property.
[42] Mr Cowey, for the respondent, notes that there is no evidence put forward from the Bayley’s real estate agent as to whether the brochure was provided to Ms Hurndell and Mr Kyle. He further submits that the paragraph from the brochure relied on by the applicant is ambiguous, as it can be construed as referring to a 16 ha area on the adjacent farm that was available, rather than Green Hills.
[43] Mr Cowey also refers to a solicitor’s certificate provided to Rabobank New Zealand Limited signed by the respondent’s solicitor dated 5 April 2013 in which the solicitor certifies at paragraph 5(e) that:
We are not aware of any outstanding interests, circumstances, unregistered mortgages, charges or interests likely to prejudice or defeat your interests.
[44] However, as submitted by Mr Matthews, it is not clear that the solicitor’s certificate covers the Green Hills property.
[45] Secondly, the applicant relies on clause 19(e) of the agreement for sale and purchase dated 14 March 2013 between the Webbs and respondent. Clause 19(e) provides:
The parties acknowledge that as is common in rural New Zealand the boundary fences may not be erected exactly on the surveyed boundary line. The Vendors will not be liable if it is found that any fence is not erected on the true boundary of the Property. The purchaser acknowledges and accepts that a small parcel of rough land on the property’s southern boundary is fenced into the neighbouring property being the most practical fence line available.
[46] Mr Matthews submits that at the very least the respondent was aware of an issue with this piece of land by way of its contractual acknowledgement in clause 19(e). He also notes that Ms Hurndell makes no reference to this clause in her affidavits.
[47] However, Mr Cowey submits that the contractual acknowledgment at clause 19(e) cannot support a submission that the respondent knew of the applicant’s claimed interest based on the Agreement.
[48] Thirdly, the applicant relies on a discussion between Mr Summerton and Ms Hurndell and Mr Kyle at some stage in 2017. Mr Summerton describes the discussion as follows:
…I recall a meeting which took place at the Greenburn homestead with both Bob and Judith which was probably during 2017. I was there to discuss the wilding pine project, it was a friendly neighbourly discussion. During that discussion Bob mentioned the Waikene/Greenburn boundary adjustment and said to me that he didn’t know why the Webbs had agreed to that. Bob’s statement was an acceptance and acknowledgement of the agreement that had previously been reached for that boundary adjustment. Judith was present during that part of that meeting when Bob made that statement.
[49]In response to this, Ms Hurndell says that:
As regards [16] of Mr Summerton’s affidavit dated 26 January 2023, I remember sometime after he purchased the property, Greg, Bob and myself had a discussion. It may have been in 2017. However, we were discussing the limestone feature on the south-eastern boundary of the Property. At no time, did we discuss the fence line nor the Agreement of Sale and Purchase between the Webbs and Edwards.
[50] Mr Cowey submits that, even on Mr Summerton’s account, this is not evidence that the respondent knew of the applicant’s interest at the material time, 14 March 2013, and cannot be relied on as evidence of fraud.
[51] Fourthly, the applicant relies on a discussion that Mr Summerton says he had with Ms Hurndell’s son-in-law, George MacFarlane, in May 2022. Mr Summerton states:
In May 2022, I was contacted by George McFarlane who told me he was from Greenburn, and was Judith’s son-in-law. He told me that he was trying to help Judith with the Property and was potentially interested in Greenburn himself. He was asking me to explain the arrangements for the lease/purchase of the Adjoining Land. I did not respond to his enquiry.
[52]In response, Ms Hurndell states:
I became interested in erecting a new fence that followed the correct boundary for the 16 ha Area in 2022, when I was considering a forestry venture over that part of Green Hills. Mr George MacFarlane made inquires with Mr Summerton about equally sharing the costs of a new fence that would follow the boundary. I understand that Mr Summerton did not respond.
[53] Fifthly, the applicant relies on an exchange between its solicitors and the solicitors for the Webbs in October 2022. Mr Summerton states:
Also, in October 2022 my solicitor enquired of the solicitors for the Webbs if the Webbs could confirm whether:
(a)They did receive the balance of the purchase price under the Agreement;
(b)Whether Bob Kyle and Judith Hurndell (directors and shareholders of the respondent) were aware of the arrangements for the sale of the Adjoining Land at the time Kydell purchased Greenburn.
The response from the Webbs was that the purchase price had been paid and that the purchaser of Greenburn (from the Webbs) (i.e. the respondent) was aware of the arrangements for the Adjoining Land.
[54] Although affidavits by the applicant’s solicitors have been filed in respect of other issues, there is no affidavit evidence verifying this exchange. Mr Matthews properly accepted that the statement as to the response from the Webbs is hearsay and little weight can be given to it.
[55] Mr Cowey submits that, even if the statement was admissible, it is ambiguous as to the “arrangements” for the Adjoining Land.
Discussion – land transfer fraud and institutional constructive trust
[56] The key issue is the knowledge or extent of knowledge that the respondent (through its directors) had of the applicant’s claimed interest (set out above at [18]) at the time that the respondent purchased Green Hills in March 2013.
[57] The primary contemporary evidence relied on is the Bayleys property/information brochure. This refers to the Adjoining Land being “leased to the neighbour on a long term basis”.23 However, Ms Hurndell states that she does not recall ever seeing this brochure, and she is advised and believes that her lawyers do not have a copy of the brochure on their file. Ms Hurndell is certain that neither the Bayley’s agent nor the Webb’s lawyers ever mentioned the lease or sale and purchase agreement to her and Mr Kyle. She says she and Mr Kyle had no idea that Green Hills was subject to a lease or a sale and purchase agreement when they purchased the property, and believed that they were buying the full 835.2711 ha of land with a clear title.
[58] In my view, Ms Hurndell’s evidence is supported by the agreement for sale and purchase between the Webbs and the respondent dated 14 March 2013. Clause 19(e) provides that the purchaser “acknowledges and accepts a small parcel of rough land on the property’s southern boundary is fenced into the neighbouring property being the most practical fence line available”. There is no reference in that clause or the agreement to that parcel of land being leased nor to any agreement for sale and
23 A lease creates an interest in land and will support a caveat - see Hinde McMorland & Sim Land Law in New Zealand, above n 2, at [10.009(s)].
purchase of the parcel of land. The clause is simply acknowledging that the fence line does not follow the legal boundary for practical reasons.
[59] The subsequent discussions in 2017 and 2022 referred to in the first affidavit of Mr Summerton took place well after the purchase of the property in March 2013. While Mr Summerton construes the discussions as being an acknowledgment by representatives of the respondent of the Agreement, it seems to me on the evidence that the discussions were more likely relating to the fence line issue.
[60] Lyus v Prowsa Developments Ltd (discussed above at [34]-[35]) can be distinguished because in that case there was an express stipulation in the agreements for sale to the first defendant and the second defendant that the land was sold subject to the plaintiffs’ contract.
[61] Laboyrie v Mills (discussed above at [36]-[37]) can be distinguished because in that case there was an agreement and common intention between the four sibling trustees, which was relied on by three of the siblings to their detriment and to the advantage of the fourth. In the present case, there is no such agreement or common intention between the applicant and the respondent giving rise to unconscionability.
[62] In my view, based on the legal principles and authorities reviewed above, the affidavit evidence falls short of establishing the requisite knowledge and intention such that the applicant has a reasonably arguable case for land transfer fraud. To the extent that an institutional constructive trust may arise in these circumstances based on unconscionability (without the need to establish fraud to the land transfer standard), my view is that the affidavit evidence falls short of establishing a reasonably arguable case for the requisite unconscionability.
Explanation for the lapse of the first caveat
[63] The applicant has adduced affidavit evidence from its solicitors explaining why the first caveat lapsed. It seems that mistaken use of the LINZ on-line form (including the incorrect use of the drop-down boxes) meant that the caveat was lodged with the wrong description and the nature of the interest claimed was incorrect. When this became apparent to the applicant and its solicitors, the applicant lodged a request with
LINZ to withdraw the caveat on the basis that it would lodge a caveat in which its claimed interest was correctly described. However, LINZ advised that they would not register the caveat withdrawal while there was an outstanding application for it to be sustained, and the application for a second caveat would not be processed until the caveat had lapsed.
[64] The applicant relies on a number of cases where oversights or errors have resulted in the first caveat lapsing, and a second caveat has been allowed.24
[65] In the circumstances I do not consider that the error in relation to the lodging of the first caveat can be visited upon the applicant. Once the issue was recognised, instructions were given by the applicant to take steps promptly. The lapse of the caveat has been adequately explained.
[66]However, I do not consider this to be a determinative factor in this case.
Prejudice to the respondent or any third parties
[67] The respondent has not put forward any evidence of specific prejudice to it if leave was granted to the applicant to lodge a second caveat.
[68] However, Mr Cowie submits that the Court should not permit the applicant to use the caveat procedure now as a lever to acquire the relevant parcel of land from the respondent. He also submits that Mr Summerton did not take any action to preserve the applicant’s rights under the Agreement between May 2011 and October 2022 and has therefore “slept on his rights”.
[69]There is no evidence of any potential prejudice to third parties.
[70]However, I do not consider this to be a determinative factor in this case.
24 See, for example, Lowther v Kim above n 3, at [39]; Kapoor v Te Namu HC Napier CIV-2006-441-684, 11 September 2006; Dormer Holdings Ltd v Allan HC Hamilton CP254/86, 17 December 1986; Muollo v Natoli HC Wellington CP451/87, 28 August 1987; Cube Buildings Solutions Ltd v Kingloch Holdings Ltd, above n 9.
Conclusion
[71] Overall, because the applicant has not established a reasonably arguable case for land transfer fraud or for an institutional constructive trust, I am not satisfied that the applicant should be granted leave to lodge a second caveat.
Result
[72] The applicant’s application for an order granting leave to lodge a second caveat is dismissed.
[73] With regard to costs, my preliminary view is that the respondent is entitled to costs on a 2B basis. If the parties are unable to agree on costs, then they may file memoranda (not exceeding five pages) and I will deal with costs on the papers.
Associate Judge Skelton
Solicitors:
White Fox & Jones, Christchurch for Applicant ParryField Lawyers, Christchurch for Respondent
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