Watson v Steenkamp

[2022] NZHC 2324

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2022-485-199

[2022] NZHC 2324

UNDER

the Land Transfer Act 2017

IN THE MATTER

of an application that a second caveat against dealings may be lodged under s 146 of the

Land Transfer Act 2017

BETWEEN

STEPHEN MATTHEW WATSON, CHRISTINE MARGARET WATSON, CHRISTINE ALISON CARDNO and JANINE ELEANOR CARDNO

Applicants

AND

NAOMI JANE STEENKAMP, NICHOLAS FRANS STEENKAMP and RICHARD MATHEW FLINN

Respondents

Hearing:	1 September 2022
Appearances:	M Wolff and A Cotterill for Applicants R M Flinn for Respondents
Judgment:	13 September 2022

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]    The applicants are the trustees of the Long Gully Station Trust. The respondents are the trustees of the Steenkamp Family Trust. By originating application, the former seek an order pursuant to s 146 of the Land Transfer Act 2017 for leave to lodge a second caveat against the title to property owned by the respondents.

[2]The factual background is not contentious.

WATSON v STEENKAMP [2022] NZHC 2324 [13 September 2022]

[3]    The applicants owned land in Wellington. The land was formerly part of Long Gully Station, a 940 hectare property that lay, as the crow flies, between Sinclair Head and Wright’s Hill, which the applicants purchased in 1994, and which has since been the subject of three subdivisions in 1996, 2009 and 2013.

[4]    On 13 April 2016, the applicants entered into an agreement to sell a 44-hectare block that had been created in the 2013 subdivision (Lot 2 on Deposited Plan 462620) to the respondents. The ‘Further Terms of Sale’ included provisions that anticipated the parties entering into a deed of agreement which both say was intended to govern settlement and impose continuing obligations on the respondents and their successors in title.

[5]Materially, cl 2 provided:

A deed will be prepared by the vendor’s [sic] solicitor and at the vendors [sic] expense which will be executed by both parties prior to settlement.

This deed will record the following:

…

(ii) The partie’s [sic] agree that any land sale is subject to the ownership of all rights of way and electricity easements being retained by Long Gully Station Trust. All costs associated with survey and registration to satisfy this clause to be met by Long Gully Station Trust.

[6]    The deed anticipated in the sale and purchase agreement was executed by the parties on 17 August 2016.

[7]    Clause 3 of the deed provided that the rights and obligations of the parties as set out therein were to bind the parties’ successors in title and that the respondents were to ensure that any future transferee of all or part of the land executed a deed committing that transferee to corresponding obligations.

[8]Clause 5 was is in the following terms:

Further to the said Agreement for Sale and Purchase, it is acknowledged by and between the parties that the land to be transferred to the Purchasers is to be subject to the ownership of all rights of way (access ways and roads) and electricity easements being retained by the Vendor. All costs of survey and

title registration in connection therewith are to be paid by the vendors as are the Purchasers’ reasonable legal and bank fees as the case may be.

[9]Clause 6 provided:

The purchasers for themselves and so as to bind any successors in title undertaken and agree in due course to sign all necessary documents as the proprietors of the land to enable the above described rights of way and easements to proceed and if required to procure and supply to the Vendor or its nominee the consent of the Purchasers’ mortgagee (inter alia) and any other documents agreements or signatures that may be required for registration.

[10]   Clause 9 provided in effect that the applicants were entitled to secure their interests under the same by lodging a caveat against the title to the land:

Long Gully Station Trust may protect the provisions of this agreement by the registration of a caveat against the title to the land, provided that a caveat would be registered only after the transfer to the Purchasers and after their mortgage so as not to inhibit the registration of that transfer in mortgage. Should a caveat be registered, the caveator shall be required for a good and proper reason consent to the registration of a subsequent dealing provided that such a subsequent dealing does not adversely affect the substance of this Deed.

[11]   It is common ground that the deed was prepared by the applicants’ solicitors around the time of the 2013 subdivision in anticipation of it being used for the sale of the various lots created, and was not specifically prepared for the purposes of the sale and purchase of Lot 2.

[12]   As at the date of the contract of sale and purchase and the deed there were two relevant impediments on the title to Lot 2 in favour of the applicants, namely easements in the form of rights of way over areas marked “GA” on the western border and “A” on the north western corner. What the contract and the deed both appear to have anticipated was easements in gross enforceable by the applicants against the owner of the land.

[13]   In early 2021, the applicants became aware that the respondents were proposing to subdivide Lot 2, presumably for on-sale in whole or in part.

[14]On 6 April 2021 the applicants lodged a caveat against the title to the land.

[15]    The applicants’ caveat described the rights being asserted in the following terms:

The caveators claim an interest in part or parts of the land … as purchasers of the land … pursuant to a deed of agreement dated 17 August 2016 between the caveators as vendors … whereby ownership of that part or those parts of the land subject to rights of way and easements, is or are retained by the caveators.

[16]   In short then, the applicants claim was to equitable ownership of the areas over which the easements existed.

[17]   On 17 March 2022, at the behest of the respondents, the Registrar-General of Land gave notice to the applicants, through their solicitors, that the respondents had filed an application that the caveat lapse.

[18]   For reasons which are not important for the disposition of this case, the applicants did not take the necessary steps within the statutory time limit to apply for an order that the caveat not lapse, with the result that the caveat lapsed on 1 April 2022 pursuant to s 143(3) of the Act.

[19]   Now the applicants seek leave to file a second caveat. Section 146 of the Act provides that a caveator whose caveat has lapsed may not lodge a second caveat without the Court’s leave.

[20]   Counsel were agreed as to the issues that arise on any application pursuant to s 146. Relying on Lowther v Kim, Mr Wolff, counsel for the applicants, identified the issues as being:1

(a)whether there was a reasonably arguable case to support the claimed interest in the land;

(b)whether there was a reasonable explanation for the failure of the caveator to exercise the rights conferred by the Act to apply for an order sustaining the caveat; and

1      Lowther v Kim [2003] 1 NZLR 327 (HC) at [18].

(c)whether unavoidable prejudice would be suffered by the respondents or any other party who has acted in reliance on the register and in the belief that the caveator was not pursuing the claim in question.

[21]   Mr Flinn, counsel for the respondents, did not disagree with that description of the issues. He went further, and said that the respondents accept that there is a reasonable explanation for the applicants having failed to apply for an order sustaining their first caveat within time. Nor did he assert that the respondents or any other party would be prejudiced by the applicants being permitted to lodge a second caveat.

[22]   Thus, the only issue for determination is whether, arguably, the applicants have a caveatable interest. Whether an estate or interest is one capable of supporting a caveat is determined by s 138 of the Land Transfer Act 2017 which 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

(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.

(2)A caveat against dealings document must be executed by the caveator or the caveator’s agent.

(3)A caveat against dealings document must contain the prescribed information.

[23]   The overwhelming majority of cases involving caveats that come before the Court are applications pursuant to s 143 of the Act in which the applicant caveator is inviting the Court to make an order sustaining an existing caveat.

[24]   In this case, because the applicants failed to make such an application within time, the issue is whether they should have leave to file a second caveat. As already indicated, there is no contest that, provided they can demonstrate that, arguably, they have a qualifying estate or interest as defined by s 138, they should have leave to lodge a second caveat.

[25]   Counsel parted company as to whether the Court should assess the applicants’ claim to a caveatable interest by reference only to the interest identified in their notice of application (which is expressed in precisely the same terms as their first caveat) or whether the Court may consider whether there is some other caveatable interest that the applicants may have.

[26]   In relation to this point, Mr Flinn referred me to the Court of Appeal’s judgment in Philpott v Noble Investments.2 That was a case of the more common type in which the issue was whether the Court should make an order sustaining an existing caveat. Thus the Court’s focus was on whether the existing caveat was sustainable, and not whether a differently framed caveat might be sustainable.3

[27]   Mr Flinn argued that the applicants in this case should not be in a more advantageous position because they had failed to take the necessary steps to apply to sustain their original caveat within time. Although he did not put the point in quite this way, he might have added that this is especially the case here, where, in their application, the respondents sought a caveat in precisely the same terms as were used in their original caveat, and their submissions to the Court, were, for the most part, framed on that basis.

[28]   The counter argument is that, in a case such as this, the Court ought not to ignore the possibility of the applicants having an estate or interest capable of sustaining

2      Philpott v Noble Investments [2015] NZCA 342.

3 At [56].

a caveat, albeit different from the one described in their application. Notwithstanding the Court of Appeal’s focus, in the different circumstances with which the Court was dealing in Philpott, on the interest that was claimed, in my view, given that the overall question is whether there is a reasonably arguable case that the applicants have a caveatable estate or interest in the terms required by s 138 of the Act, it is appropriate for the Court to assess any available argument that is advanced. I do not view Philpott as proscribing this.

[29]   The first issue, then, is whether the applicants have a caveatable interest of the sort described in their application.

[30]   The applicants submit that in cl 5 of the deed the parties agreed that the applicants would transfer Lot 2 to the respondents, but retain ownership — in equity at least — of the part or parts of land subject to any rights of way or other easements.

[31]The respondents’ position is that all that was ever agreed was that:

(a)the applicants would have the benefit of any easements over the land; and

(b)a contractual entitlement to require the respondents, if and when they came to alienate all or any part of the land, to ensure that any transferee also agreed to the arrangements set out in the deed.

[32]   Mr Wolff relied heavily on the use of the term ownership in cl 5 which he contended showed that the parties’ agreement was designed to enable the subsequent transfer to the applicants by the respondents of the areas over which the easements operated. He told me — and I accept — that the relevant areas are clearly delineated in the instruments creating those easements so that there can be no question of uncertainty as to the land in question. He argued that to refer to ownership of rights of way or easements would be a misnomer, and therefore that the term “ownership” must have been intended to relate to the land itself. He made the point that, as at the date of the sale and purchase agreement, the easements were already in place, so that if the clause was intended to say no more than that the applicants were to have the

benefit of these, those aspects of the clause relating to the creation of and payment of the costs of creating easements would have been unnecessary and redundant.

[33]   Mr Flinn submitted that although it might not be conventional to use the term ownership in reference to rights of way or other easements, it is not inapt to do so. He reminded the Court that the deed was what is colloquially referred to as a “boiler-plate” document — in that it was created at the time of the 2013 subdivision and intended for use in relation to the sale of all of the lots created then, at which time there were no easements. That, he said, explained why the clause was structured in the way it was. Mr Flinn referred back to the sale and purchase agreement, pointing out that cl 2 expressed the position slightly differently from the deed – saying simply that the sale and purchase agreement would be subject to ownership of all rights of way and electricity easements being retained by Long Gully Station Trust, and going on to say that Long Gully Trust was to take responsibility for the costs associated with survey and registration. He also referred to cl 6 of the deed, which was clearly predicated on the assumption that the rights of way and other easements were to come into existence in the future.

[34]   In my judgment, the caveatable estate or interest that the applicants claimed in their first caveat, and which they again assert in their application in this case, is not reasonably arguable.

[35]   The applicants are, in my view, asking too much of cl 5 of the deed. Easements are ‘non-possessory rights’, albeit that they are rights that attach to the subservient land. The use of the word ownership in the overall context of the dealings between the parties cannot be taken to mean that the applicants retained a title of any nature to the land referred to. What they retained was a right to enforce the easements (as already said, these were easements in gross), together with a right to require the respondents not to alienate the land or any part of it except on terms that bound any transferee to similar obligations.

[36]   The transaction between the parties was neither unusual nor complex. The applicants had carried out a subdivision. The subdivision resulted in a number of lots. The lots were all interdependent in the sense that the enjoyment of any one of them

depended on the efficacy of various easements. There was a need to ensure that there was a mechanism for this.

[37]   It is not obvious why a developer would attempt to achieve that via easements in gross enforceable by the developer rather than by the registration of easements enforceable by the owners of the dominant tenements or relevant utilities. This meant that the only long term protection was agreement between the vendor and the purchaser that the latter would replicate the agreement with any transferee of part or all of the property in the future.

[38]   In any event, the conclusion I have reached is that all the parties agreed was that the easements would operate over the property and that if and when the purchasers alienated all or any part of the property they would ensure that the transferee assumed to the same responsibilities as are set out in the deed.

[39]   Accordingly, in my judgement, the applicants are unable to establish even an arguable case for an estate or interest in the land in the terms contained in their first caveat and replicated in the application before the Court, that is to say ownership of the land.

[40]   However, as already said, it appears to me to be open to the Court to consider whether the applicants are in a position to establish any other arguable estate or interest capable of supporting a caveat.

[41]   The alternative would be to dismiss the application and for the applicants to then have to make a further application, thereby subjecting both parties to additional delay and costs.

[42]   Whatever else it did, the deed imposed an obligation on the respondents as purchasers of the property to procure any transferee to whom they propose to sell or otherwise alienate all or any part of the land to enter into a corresponding deed for the benefit of the applicants.

[43]   Although Mr Flinn submitted that any such rights created by that mechanism would be rights in personam, it appears to me to be open to the applicants to argue that the deed confers on them an equitable interest in Lot 2.  It is important to recall that  s 138 of the Act, unlike its predecessor in the 1952 legislation, refers to estates or interests making it clear that interests that do not qualify as estates may be caveatable. Clause 5 expressly refers to the applicants retaining the right to enforce the easements over the land, which would carry with it the right to assign any such rights. Additionally, cl 9 of the deed expressly entitles the applicants to caveat the title in support of the interests conferred on them, so that the creation of an interest in the land was at least within the contemplation of the parties at the time the deed was entered into.

[44]   A summary process such as this is not the appropriate forum finally to determine the nature of those rights and whether or not they are capable of supporting a caveat. However, I have reached the view that the applicants have at least an arguable case to that effect.

[45]   Ironically, the evidence before the Court includes an exchange of correspondence between the parties’ solicitors in which the respondents’ solicitors drafted a caveat said to be acceptable from their perspective, properly registerable and to which they would not object.

[46]The respondents’ solicitors draft was in these terms:

The caveators, Stephen Matthew Watson, Christine Margaret Watson, Christine Alison Cardno and Janine Eleanor Cardno, claim an interest in part or parts of the land comprised in Record of Title 610706 pursuant to a deed of agreement dated 17 August 2016 between the caveators as vendors and Nicholas Frans Steenkamp, Naomi Jane Steenkamp and Richard Matthew Flinn as purchasers of the land in Record of Title 610706, whereby the purchasers are obliged to procure that any transferee executes a deed governing the maintenance and repair for rights of way.

[47]In my judgment, the applicants have a caveatable interest in those terms.

[48]For those reasons:

(a)there will be an order under s 146 of the Land Transfer Act 207 granting leave to the applicants to register a second caveat over the property in the terms identified at [46] (above or other terms agreed between the parties);

(b)unless the parties agree that the applicants have the interest in the land reflected in the caveat lodged, and confirm such agreement by joint memorandum, the applicants are to commence a substantive proceeding to establish the same within 20 working days;

(c)costs are reserved. I expect counsel will be able to agree on these. If not then they may file memoranda in the usual way.

Associate Judge Johnston

Solicitors:

Morrison Kent, Wellington for Applicants Wootton Kearney, Wellington for Respondents