Zwarst v Saxton

[2012] NZHC 448

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2012-409-000047 [2012] NZHC 448

IN THE MATTER OF     Section 145A of the Land Transfer Act

1952

BETWEEN  RONALD J ZWARST, LISA T SAXTON AND CHRISTOPHER J SAXTON Applicants

ANDDAVID ANTHONY SAXTON Respondent

CIV-2012-409-000053 [2012] NZHC 448

AND IN THE MATTER OF Section 145A of the Land Transfer Act

1952

BETWEEN  RONALD J ZWARST, LISA T SAXTON AND CHRISTOPHER J SAXTON

First Applicants

ANDHELIVENTURES LIMITED (IN LIQUIDATION)

Second Applicant

ANDDAVID ANTHONY SAXTON Respondent

Hearing:         15 March 2012

(Heard at Christchurch)

Counsel:         J P Forsey for Applicant

S B Isherwood for Heliventures Limited (in liquidation) H C Matthews and J A Frampton for Respondent

Judgment:      15 March 2012

ZWARST V SAXTON HC CHCH CIV-2012-409-000047 [15 March 2012]

JUDGMENT OF ASSOCIATE JUDGE OSBORNE UPON CAVEAT LAPSING PROCEEDINGS

Background

[1]      This is another part of the sad story which has befallen the Saxton family. These caveat proceedings involved different branches of the family.  The respondent, David Andrew Saxton, whom I will call David, owned a West Coast property which, in 2001, he decided in conjunction with members of his family to subdivide.

[2]      On 7 November 2001 a number of agreements for sale and purchase were entered into, three of which are affected by these proceedings.  The first contract was entered into with a family company, Heliventures Ltd, in relation to proposed Lot 1, for a consideration of $50,000. The second contract, in relation to Lot 3, was entered into with the family trust of David’s son, Morgan, the M D Saxton Family Trust for a consideration of $20,000.  The third contract, in relation to Lot 4, was entered into with the family trust of David’s daughter, Lisa, (then Saxton, now Zwarst) the L T Saxton  Family Trust,  in  relation  to  the  proposed  Lot  4,  again  $20,000.      The composition of the trustees and the trusteeships has slightly altered but that is not material.  In Heliventures, at the time of contract David had 60 per cent of the shares, Lisa 20 per cent and Morgan 20 per cent.  Heliventures was subsequently placed into liquidation at a time when Ronald, Lisa and another Saxton, Christopher Saxton, who was an accountant, and in this context generally a professional trustee, were directors.

[3]      The subdivision was undertaken.  A certificate under s 224C of the Resource Management Act 1991 was issued on 4 March 2004.  Titles issued on 26 May 2004. Copies were sent to Lisa and others on 29 June 2004.

[4] In October 2004, David and Morgan were arrested and charged with theft. On 29 October 2004, the Crown placed restraining orders on the titles to all the affected properties pursuant to the provisions of the Proceeds of Crime Act 1991.

[5]      David  and  Morgan  were  subsequently  convicted  at  their  trial  in  2007. David’s conviction was upheld on appeal in 2009.   Morgan had in the meantime died.

[6]      On 2 October 2011, Lisa, Ronald, and Christopher were parties at a hearing into a forfeiture application made by the Crown.  The District Court on 18 February

2011 ruled on the forfeiture application holding that the Crown’s application failed on a threshold test.  In June 2011 the restraining orders over the subject titles were released.  In late 2011 the present applicants took steps through solicitors to call for completion of the contracts. They issued settlement notices.

[7]      David had the District Land Registrar issue notice of lapse pursuant to the Land Transfer Act 1952. The applicants’ present applications followed.   The applications were in the names of Ronald, Lisa and Christopher.  The applications related to seven caveats.  One caveat was lodged for each of the three contracts.  The Heliventures caveat had been lodged prior to that company’s liquidation. Heliventures, by its liquidators, had also caveated the subject title in relation to improvements that Heliventures had made to the land.   The applicants had also lodged three further caveats which secured loans made in a period of refinancing around July 2010.

A preliminary point in relation to Heliventures

[8]     When the matter was first called in Court, counsel took the usual and understandable course of asking for interim orders to be made that the seven caveats not lapse.  This enabled those orders to be lodged with the District Land Registrar within the time required under the Land Transfer Act.   It subsequently became apparent to counsel that Heliventures had not in name been an applicant for orders. That led to David asserting as one ground of opposition to the present applications that Heliventures had made no application.  Heliventures in turn filed an application to be joined in this proceeding.  The position of the liquidators is that they seek a final order sustaining the two caveats.  The grounds of opposition of David relate to the fact that at the time Ronald, Lisa and Christopher purported to seek the two

orders  effectively on  behalf  of  Heliventures,  they no  longer had  the powers of directors by reason of the liquidation of Heliventures.

[9]      Given the position adopted by Heliventures, there has been ratification of the steps taken by the three nominal directors.   I refer to Commercial Law in New Zealand Specific Contracts (online ed) at 19.3.3:

19.3.3  Ratification

Where a person purports to act on behalf of another, but in fact has no authority to do so, the unauthorised act may be ratified by the person on whose behalf the act was purportedly performed.  If this occurs, the effect is the same as if there had been a prior authorisation given by the principal to do the act which the agent has in fact already done. Although the principal is not  bound  by  the  agent’s  unauthorised  act  unless  or  until  the  principal chooses to ratify or adopt it, the ratification, when it occurs, takes effect from the time  of the agent’s act, and not from the time  of ratification.   The authority is, in effect, thrown back to the time of the unauthorised act.

...

...Ratification may be brought about by the express words of the principal. It may also be implied from conduct, such as where the principal acts on, or takes advantage of the agent’s unauthorised act....

[10]     The failure of the three nominal directors to name Heliventures formally as an applicant is a defect which amounts to an irregularity in terms of r 1.5(1)(a) of the High Court Rules.  It is appropriate in the circumstances to grant the order sought by the Heliventures, namely to join Heliventures as a party in the -53 proceeding. There is an order accordingly.

[11]     As I explained to Ms Isherwood at the conclusion of the brief preliminary argument  which  took  place  on  this  matter,  I  regard  the  order  granted  as  an indulgence to Heliventures.  Costs will lie where they fall on that application.

The application that the caveats not lapse

The principles

[12]     The principles which I adopt in relation to the present applications are these:

(a)      First, the burden of establishing that the applicant has a reasonably arguable case for the interest claimed is upon the caveator.

(b)Secondly, the caveator must show an entitlement to the beneficial interest in the estate referred to in the caveat, by virtue of an unregistered agreement or an instrument or transmission or any trust express or implied, under s 137 of the Land Transfer Act 1952.

(c)      Thirdly, the summary procedure involved in an application of this nature is wholly unsuitable for the determination of disputed questions of fact and an order for removal of the caveat will not be made unless it is clear that the caveat cannot be maintained either because there was no valid ground for lodging it or that such valid ground as then existed no longer does so.

(d)Fourthly,  when  an  applicant  has  discharged  the  burden  upon  the applicant, the Court retains a discretion to remove the caveat which it exercises on a cautious basis and the Court must be completely satisfied   that   the   caveator’s   legitimate   interest   would   not   be prejudiced  by  removal  per  Blanchard  J  in  Stewart  v  Kaipara

Consultants Ltd.[1]

[1] Stewart v Kaipara Consultants Ltd [2000] 3 NZLR 55 (CA) at [23].

(e)      Fifthly, the Court has jurisdiction to impose conditions in making orders.

The limitation/laches defences

[13]     The notices of opposition recited a number of grounds all but one of which fell away after I had given the preliminary ruling on the joinder of Heliventures (above at [10]).  The remaining and the live issue for this judgment is in relation to limitation or laches issues. The notice of opposition said:

3.1The Agreements for Sale and Purchase relied on by the Applicants are unenforceable by virtue of provisions of the Limitation Act 2010.

3.2Accordingly the Applicants have no legal or equitable interest in the land which is the subject of the caveats.

[14]     It  is  common  ground that  the correct  reference should  be to  s  4  of  the

Limitation Act 1950 (being the legislation in force in relation to the contracts).

[15]     Section 4(1) of the Limitation Act 1950 deals with limitation of actions in relation to simple contracts and other matters in these terms:

4   Limitation of actions of contract and tort, and certain other actions

(1)       Except as otherwise provided in this Act [or in subpart 3 of Part 2 of the Prisoners' and Victims' Claims Act 2005], the following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued, that is to say,—

(a)       Actions founded on simple contract or on tort: (b) Actions to enforce a recognisance:

(c)       Actions to enforce an award, where the submission is not by a deed:

(d)       Actions to recover any sum recoverable by virtue of any enactment, other  than  a  penalty  or  forfeiture  or  sum by  way  of  penalty  or forfeiture.

[16]     Of more direct relevance to this case is s 4(9) of the Act:

(9) This section shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any provision thereof may be applied by the Court by analogy in like manner as the corresponding enactment repealed or amended by this Act, or ceasing to have effect by virtue of this Act, has heretofore been applied.

[17]     This Court has on a number of occasions dealt with the interplay between ordinary common law actions on contracts (as covered by s 4(1)) and contract claims specifically seeking specific performance (as covered by s 4(9)).  In my judgment in McLachlan v Meyers,[2]    I dealt with that relationship at [37] – [47].  I reviewed the authorities and concluded at [47]:

[2] McLachlan v Meyers (2009) 10 NZCPR 625.

...I do not consider that this Court, in its equitable jurisdiction, would find that the six year limitation period under the Limitation Act automatically applies to an action for specific performance in the present case.  ...this Court in equity would consider that it has a discretion in the matter.

The accrual of the cause of action

[18]     In  relation to either analysis, whether at  common law or in equity,  it is relevant to first identify when the cause of action, that is to say the plaintiff’s right to sue, arose.  This contract adopts the REINZ/ADLS form (7th  ed (2), July 1999).  It provides,  in  the  context  of  clause  9  which  contains  provisions  for  settlement notices, -

9.7Nothing in this clause shall preclude a party from suing for specific performance without giving a settlement notice.

[19]     Clause  9.7  is  thus  a  provision  which  denies  a  potential  defendant  the opportunity to oppose a claim for specific performance on the basis that the plaintiff did not serve some form of settlement notice.   Clause 9.7 means that the cause of action accrues at the point the plaintiff is entitled to issue such a notice.  In this case, therefore, the cause of action accrued was at a point around the time that titles issued, and certainly no later than 29 June 2004 when copies of the relevant titles were sent to Lisa.

[20]     Mr Forsey had presented submissions on the basis that the time that the cause of action may have accrued was at a later point when the applicants came through their solicitors to issue settlement notices late in 2011.  Mr Forsey placed reliance on the decision of this Court in Hay v Laurent Construction Ltd[3] as followed in O’Sullivan v The New Zealand Land Development Company Limited.[4]   Section 4(9) of the Limitation Act does not appear to have been cited in Hay.   Both Hay and

[3] Hay v Laurent Construction Ltd [1987] 2 NZLR 184 (HC).

[4] O’Sullivan v The New Zealand Land Development Company Ltd HC Christchurch CP 696/90, 13 March 1991.

O’Sullivan involved contracts which required instalment payments.   In each case payments had stopped without full payment being made.  I doubt that the decision in Hay is authoritative in relation to a claim for specific performance covered by s 4(9). To the extent that Hay and O’Sullivan may appear in support of a proposition that a cause of action does not accrue until a recipient is in breach of a settlement notice, I would view them as cases on their facts and particularly facts relating to instalment

payments.  There were no instalment payments in the contract in this case. If the six

year limitation period were applied in the present case, it would have expired by the end of June 2010.

Laches

[21]     Equity does not strictly observe such periods.  Equity approaches concepts of delay through the doctrine of laches which has at its heart the concept of an applicant sleeping on his or her rights.  In the speech of Lord Blackburn in Erlanger v New Sombrero Phosphate Co which is one of the leading cases in this area, his Lordship observed:[5]

[5] Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218 at 1279; [1874-80] All ER Rep 271 at 286.

...a Court of Equity requires that those who come to it to ask its active interposition to give them relief, should use due diligence, after there has been such notice or knowledge as to make it inequitable to lie by.

[22]     Equity responds to delay by weighing considerations of justice.  I adopt as an accurate summary of the law in relation to delay the passage from Laws of New Zealand Specific Performance at [95] (Janet November):

95.  Delay and the balance of justice.  In every case involving the defence of laches, the validity of the defence must be tried on substantially equitable principles.  The onus of showing that on balance it would be inequitable to allow the claim to proceed is on the defendant.   Equity can condone or excuse delay where the justice of the case so requires.  The real inquiry is always the balance of justice.

[23]     Reference may also be made to what was said by Cooke J in Hunt v Wilson:[6]

[6] Hunt v Wilson [1978] 2 NZLR 261 (CA) at 276.

In its equitable jurisdiction this Court has been ready to condone or excuse delay where the justice of a case so requires: see, for example, Re Bragg [1977] 2 NZLR 137; Boote v R T Shiels & Co Ltd [1978] 1 NZLR 445, 452.

Analysis of the justice of this case

[24]     I turn to examine the facts of this case and in particular where the justice of the case lies.

[25]     The predominant feature of the history of this case is the imposition of the Crown’s restraining orders in October 2004, the year in which the titles were issued. The restraining orders were not released from the titles until June 2011.

[26]     At a point when his submissions had been predominantly focussed on the common law contract position under s 4(1) of the Limitation Act, Mr Forsey placed reliance on the decision of the English Court of Appeal in Bell v Gosden.[7]  The Court of Appeal was there dealing with a case in which emergency legislation rendered rents unrecoverable during the period of an evacuation.  The Court as a matter of statutory  interpretation  found  that  the  emergency  legislation  read  alongside  the

[7] Bell v Gosden [1950] 1 All ER 266.

Limitation Act meant that the operation of the otherwise six year limitation period was  suspended.    While  Bell  v  Gosden  is  not  directly  applicable,  the  Court  of Appeal’s  conclusion  also  resonates  in  an  equitable  analysis.     Underlying  the approach of the Court in Bell v Gosden is the recognition that Parliament would not have intended, in enacting the emergency legislation, to have the limitation period running against the landlord during the period when rent was unrecoverable.

[27]     Mr Matthews submitted that the situation faced by the applicants in this case was unlike the suspension of rights which was imposed in Bell v Gosden.   He suggested that the present applicants had at least two ways to overcome any suspension of their entitlement to take title.   The two examples he gave were the right of the applicants to file a formal claim for specific performance and the right of the applicants to approach the Crown for some relaxation of the restraining orders.  I do not find the second example of assistance to David Saxton given that there is no evidence that the Crown would have resiled during the period that the restraining orders were in force from preserving the full extent of its potential recovery under those orders.

[28]     Turning to the first example (applying to the Court for specific performance orders while the restraining orders were in place), I also find difficulty with that proposition.  A Court faced with an application for specific performance, while the proprietor was himself debarred from passing title, may well have said that such a

proceeding was premature.  It is the defendants’ circumstances at the time an order

of specific performance is concluded which are relevant to whether such an order should be made.  The proceeding would be futile if the Crown were to succeed on a later forfeiture application.  A Court in equity would not expect the caveators in the position of these caveators to file a proceeding and to then park it.

[29]     The period during which I find the applicants were effectively precluded from obtaining title is the predominant feature of this case.

[30]     As it happens, the applicants’ case in equity is stronger than that.  When the criminal proceedings against David and Morgan came towards their conclusion, relief against forfeiture then became an issue. The record is that these applicants supported David Saxton’s application for relief against forfeiture with affidavit evidence which clearly asserted their expectation that they would take title to the subject properties. Similarly, David Saxton himself filed evidence in support of that application which recognised the continuing force of the contracts.  The existence of the contracts was a significant point in support of relief against forfeiture.  In the case of those who borrowed money in the refinancing of July 2010 there was further reliance on the expectation of title through granting security over their expected equity in those properties.

[31]     Finally, in relation to Heliventures only, the record is that the 2001 planning for subdivision related significantly to plans which the family had for the site as a base of operation for Heliventures itself.  That involved construction of facilities to support the helicopter operation.  Those facilities were duly completed.  A booking office was in the process of construction at the time the contracts in 2001 were negotiated  and  appears   to  have  been  completed  shortly  afterwards.     More importantly, Heliventures proceeded in 2004 and 2005 with the construction of a hangar costing some $80,000.   It is the combination of that hangar and the earlier booking  office  that  led  the  liquidator  to  place  Heliventures’  second  caveat specifically in relation to improvements.

[32]     I add, for completeness in relation to that particular caveat, that as a matter of law it is affected only by considerations of laches that claim is based on a trust.  The claim would not on any approach be subject to s 4(1) of the Limitation Act.

[33]     On the facts of this proceeding, the caveators must establish a reasonably arguable case that –

(a)      they hold the interest claimed (which they clearly do in relation to the sale and purchase contracts, and which they arguably do in relation to the loan contract and the trust claim in relation to improvements); and

(b)their claim on the agreements for sale and purchase has not been rendered unenforceable by reason of their delay.

[34]     Bringing all the facts together I find to the extent that there has been delay by these applicants in relation to the agreement for sale and purchase, that it is delay which this Court in its equitable jurisdiction must at least arguably condone.  There have been good and very sensible reasons for the applicants’ not moving to enforce their contractual rights for the period that they did.  The applicants are entitled to the final orders they now seek in relation to the caveats, so as to protect their contractual and trust claims.

Orders

[35]     I order that Caveats numbered

8547320.1,   8547268.1;   8548779.1;   8904573.1;   8151702.1;   8151675.1;

8152132.1

not lapse.

Costs

[36]     I have heard briefly from counsel at the conclusion of this judgment.  Costs must follow the event.  It is common ground that they should be on a 2B basis.  It is appropriate that there be one set of costs for the applicants given the way these applications have been handled on a common basis.  There is therefore an order that the respondent pay the costs of this proceeding on a 2B basis with disbursements to be fixed by the Registrar.

Associate Judge Osborne

Solicitors:

Duncan Cotterill, PO Box 5, Christchurch – Email: [email protected] /

[email protected]

Chapman Tripp, PO Box 2510, Christchurch 8140 – Email:  [email protected] /

[email protected]

White Fox & Jones, PO Box 1353, Christchurch – Email: [email protected] / [email protected]