IN THE COURT OF APPEAL OF NEW ZEALAND
CA732/2013
[2014] NZCA 61
BETWEEN
BOTANY LAND DEVELOPMENT
LIMITED
Appellant
AND
AUCKLAND COUNCIL
First Respondent
AND
MARGARET ELLEN PALLISTER,
WENDY JUNE PALLISTER AND
JILLIAN MARY MENZIES
Second Respondents
Hearing:
18 February 2014
Court:
O'Regan P, Stevens and Asher JJ
Counsel:
N R Campbell QC and R D Butler for Appellant
B J Upton and T K Cunningham-Adams for First Respondent
No appearance for Second Respondents
Judgment:
13 March 2014 at 10.00 am
JUDGMENT OF THE COURT
A
The appeal is dismissed.
B
The appellant must pay the first respondent costs for a standard appeal
on a band A basis and usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Stevens J)
BOTANY LAND DEVELOPMENT LIMITED V AUCKLAND COUNCIL & MARGARET ELLEN
PALLISTER, WENDY JUNE PALLISTER AND JILLIAN MARY MENZIES CA732/2013 [2014] NZCA 61
[13 March 2014]
A caveat to protect the Council’s interest
[1]
This appeal concerns the proposed sale of a 1.9 hectare parcel of land at
Umupuia Beach near Maraetai. The land has been owned by members of the Duder
family for more than 150 years.
It is currently owned by the trustees of the
Margaret E Pallister Family Trust (the trustees). Mrs Pallister is a member of the
Duder family and is one of the trustees.
[2]
On 5 November 2012 the trustees entered into a conditional agreement,
which later became unconditional, to sell the land to the appellant, Botany Land
Development Ltd (Botany Land). Completion of the sale, due to settle on the
24 June 2013, cannot proceed because the Auckland Council (the Council) has
lodged a caveat against the title to the land.
[3]
The Council filed a proceeding in the High Court seeking to sustain the
caveat, contending that the trustees are obliged to offer to sell the land to the Council
by virtue of a covenant in gross, contained in a memorandum of encumbrance
registered against the title in February 1988. The Council says it has a contractual
right to receive that offer and argues that it is entitled to protect its interest in the land
pursuant to that covenant by a caveat. Botany Land and the trustees argue that the
caveat should be removed so that the agreement for sale and purchase might be
completed.
[4]
In the High Court, Lang J granted the Council’s application for an order that
the caveat be sustained.1 The order was made conditional upon the Council issuing a
proceeding seeking specific performance of the relevant obligations secured by the
covenants in the encumbrance.2 We were told that such proceeding has been issued
and is awaiting a hearing.
[5]
Botany Land appeals against the High Court decision of Lang J.
[6]
There are two issues to be determined:
1
2
Auckland Council v Pallister [2013] NZHC 2717, [2014] 2 NZLR 405 [High Court judgment].
At [55].
(a)
Whether the Council has a reasonably arguable case for a caveatable
interest in the land; and
(b)
Whether the Council’s existing registered interest under the
encumbrance means that it was not entitled to lodge the caveat.
Some further background
[7]
The land now owned by the trustees was once part of a larger block, in excess
of 3.46 hectares, owned as tenants in common by Mrs Pallister and her brother
John Duder. The title to this land was divided between the two siblings in November
1987 and it was at that time that both Mrs Pallister and her brother gave an
encumbrance in favour of the Council.3
The encumbrance is created
[8]
The division of the land resulted in John Duder owning the beachfront land at
200 Maraetai Road, Mrs Pallister owning beachfront land at 184 Maraetai Road and
the two siblings owning a half share each of adjacent land (at 185V) running in front
of both 184 and 200. An encumbrance in similar terms was entered into in respect of
each of the three properties.
[9]
The encumbrance was registered against the title to the land in question on
18 February 1988. The circumstances which led to the creation of the encumbrance
are expressly described in the Third Schedule of the encumbrance as follows:
THE THIRD SCHEDULE (the Circumstances)
Application has been made to the Council for consent to the subdivision of
the land for the occupation of the Encumbrancer, their spouses, children and
mother only, and in support of such application the Encumbrancer has
offered to enter into this Memorandum and the covenants of the Fourth
Schedule which are desirable having regard to the Designation of the land in
the Council’s district scheme as a proposed reserve.
[10]
The parties to the memorandum of encumbrance were the Council and
“encumbrancer”. This latter entity was described as follows:
3
The encumbrance was entered into with the Manukau City Council, whose assets and interests
were subsequently acquired by Auckland Council.
Encumbrancer: JOHN DUDER of Dargaville, Farmer and MARGARET
ELLEN PALLISTER of Brookby, Married Woman as tenants in common in
equal shares (in this Memorandum called “the Encumbrancer”)
[11]
The recitals and operative parts of the encumbrance are:
WHEREAS:
(1)
The Encumbrancer is registered as proprietor of an estate in fee
simple in the land described in the Second Schedule.
(2)
The land is situate in the district of the Council.
(3)
As a result of the circumstances disclosed in the Third Schedule the
Encumbrancer has agreed:(a)
to grant and make the rent charge with the Council as set
out, and subject to the conditions expressed, in the First
Schedule; and
(b)
to enter into the covenants in the Council’s favour as set out
in the Fourth Schedule.
NOW THIS MEMORANDUM WITNESSES that the Encumbrancer
ENCUMBERS the land for the benefit of the Council as set out in the First
Schedule AND COVENANTS with the Council as set out in the Fourth
Schedule.
IN WITNESS WHEREOF this Memorandum has been executed this
[30] day of [November] 1987.
SIGNED by the said JOHN
DUDER and MARGARET
ELLEN PALLISTER
[12]
The covenants said to have been entered into “in the Council’s favour” are set
out in the Fourth Schedule:
THE FOURTH SCHEDULE (the Covenants)
1.
THAT the land and the dwellings thereon shall be principally
occupied and used as a residence only by the said JOHN DUDER and
MARGARET ELLEN PALLISTER, their mother, their respective spouses
and children (hereinafter called “the Family”).
2.
UPON the land, or any part thereof for which there is, or may be a
separate Certificate of Title, being no longer occupied as to the dwelling or
dwellings thereon by a member or members of the family, then the land in
that Certificate of Title shall forthwith be offered for sale to the Council by
notice in writing setting out the price and terms of the offer. The offer shall
be open for acceptance by the Council for not less than 90 days from the date
of its receipt and in default of such acceptance the Encumbrancer may
thereafter sell the land and dwellings to any other person or persons but only
at the same price and on the same terms as it was offered to the Council.
These provisions shall also apply to any revised or amended offer which the
Encumbrancer may subsequently make to the Council.
3.
THE said dwellings on the land shall not be in any way extended or
materially altered or improved by the Encumbrancer provided that nothing
herein shall prevent the carrying out of normal maintenance work or interior
alterations to permit the continued enjoyment of the dwellings by the
Encumbrancer.
…
[13]
It is these provisions, together with the context applying in November 1988,
that will inform the interpretation of the encumbrance. That task will arise in the
determination of the specific performance proceeding begun by the Council in the
High Court to enforce the encumbrance against the trustees. We do not need to
express any view on the issues of interpretation involved.
[14]
The obligations of the encumbrancers in the Fourth Schedule are covenants in
gross. They are owed to the Council and not to an owner of a dominant tenement.
Covenants in gross cannot run with the land.4 As Lang J correctly noted, “an
instrument containing such obligations would not normally be registrable against the
title to the land under the Land Transfer Act 1952.”5 It was no doubt for this reason
that the encumbrance also contained a rent charge of one dollar payable to the
Council each year. The conditions relating to the rent charge are contained in the
First Schedule and include the following:
4
5
3.
The covenants of the Fourth Schedule shall be enforceable only
against the owners and occupiers for the time being of the land and
not otherwise against the Encumbrancer and his successors in title.
4.
Section 104 of the Property Law Act 1952 applies to this
Memorandum of Encumbrance but otherwise (and without prejudice
to the Council’s rights of action at common law as a rentchargee:(a)
The Council shall be entitled to none of the powers and
remedies given to Encumbrancees by the Land Transfer Act
1952 and the Property Law Act 1952; and
(b)
No covenants on the part of the Encumbrancer and his
successors in title are implied in this Memorandum other
ANZCO Foods Waitara Ltd v AFFCO New Zealand Ltd [2006] 3 NZLR 351 (CA) at [76] per
William Young J.
High Court judgment at [11].
than the covenants for further assurance implied by Section
154 of the Land Transfer Act 1952.
[15]
The rentcharge meant that the encumbrance could be treated as a mortgage
for the purposes of the Land Transfer Act 1952 and the Property Law Act 1952 (now
2007 Act). Thus the encumbrance could be registered against the title to the property
and would bind successors in title.6 As Lang J observed:7
Encumbrances of this type have long been used as a conveyancing device to
enable covenants in gross to be registered when that would not otherwise
have been possible.
Agreement to sell the land
[16]
The Council purchased the land at 200 Maraetai Road and the half share of
the land at 185V owned by John Duder in May 2013. The executors of the estate of
John Duder had approached the Council in early 2013, when the executors had an
agreement to sell the land to a third party, conditional on the Council’s right under
the encumbrance. As a result, the Council agreed to purchase the land at 200 and the
half share of the land at 185V in May 2013.
[17]
Mrs Pallister had also initiated contact with the Council in 2011. She knew
that the Council had always wanted the land at 184 and she also preferred that it be
in public ownership. She says she was not, however, aware of the encumbrance so
did not know the trustees were under any obligation to the Council. It seems that her
dealings with the Council did not progress as smoothly as had those involving the
executors of John Duder. We are not concerned with the detail. It is sufficient to say
that the trustees, including Mrs Pallister, were not satisfied with the way the Council
representatives dealt with the discussions. They ceased dealing with the Council
and, on 5 November 2012, entered into an unconditional agreement for the sale of
the land at 184 to Botany Land. This subsequently became unconditional in March
2013. The agreement was not made conditional on any right to purchase held by the
Council under the encumbrance.
6
7
Property Law Act 1952. s 104 and Property Law Act 2007, s 203.
High Court judgment at [12].
[18]
The Council is clearly interested in acquiring the land at 184. It wishes to
enhance the public open space at the eastern end of Umupuia Beach in an area
situated between Duders Regional Park and the Umupuia Coastal Reserve.
Mr Duder’s land provided a physical connection to the existing public land held by
the Council. Mrs Pallister’s land would further enhance those areas.
Correspondence between solicitors
[19]
When the Council became aware of the unconditional agreement between the
trustees and Botany Land, correspondence between the solicitors for the parties
ensued. The solicitors for the Council referred to the encumbrance and the fact that
the trustees had not complied with clause 2 of the Fourth Schedule to offer the land
for sale to the Council by “setting out the price and terms of the offer”.8
[20]
Such correspondence prompted a reply by the solicitors for the trustees on
27 May 2013, stating the following:
Traversing, first, the suggestion in your letter that an offer in terms of the
relevant encumbrance be made to the Council the short point is that our
clients are no longer at liberty to do so. As your client is aware, the relevant
land is the subject of an unconditional sale and purchase agreement which
for both legal and equitable reasons, precludes the notice contemplated by
the encumbrance.
Be that as it may, the Council is aware not only of the purchaser and the
settlement date but, also, the agreed purchase price of $2.35m. Irrespective
of whether or not there was any obligation upon our clients to offer the land
to the Council at that price (which is, of course, denied), it is apparent it has
had sufficient time to decide whether or not it wishes to take steps to
purchase it for that amount. That being the case, absent intervening
circumstances, our clients will be completing the sale to Mr Morgenstern
when called upon by him to do so on (or after) 24 June 2013. They have no
choice in that regard. It is a matter for Council what, if any, action it wishes
to take in the intervening period.
(Emphasis added).
[21]
The letter added that any application for injunctive relief would be opposed.
In the event, the Council lodged a caveat against the title on 7 June 2013 resulting in
the present proceeding.
8
At [12] above.
[22]
Botany Land accepts that it would acquire the land subject to the
encumbrance. It says it intends to develop the land and will deal with the Council at
a time of its choosing. Botany Land says that the obligation in clause 2 of the Fourth
Schedule has not been triggered as Mrs Pallister has not yet ceased to occupy the
dwelling and will not do so until the sale of the land is concluded – at which point
Botany Land will be the new owner.
Principles governing the lapse of a caveat
[23]
As this Court has previously held, applications under provisions such as
s 145A of the Land Transfer Act are “quite unsuitable to determine the rights of the
parties”.9 This is particularly so where there are disputed questions of fact. That
said, there is no dispute between the parties as to the applicable principles.
[24]
The onus is on the caveator to demonstrate that it holds an interest in the land
which is sufficient to support a caveat.10 The caveator must put before the Court a
reasonably arguable case to support the interest it claims.11 An order for the removal
of a caveat will only be made if it is clear that there was either no valid ground for
lodging it in the first place or, alternatively that such ground as then existed has now
ceased to exist.12 There is a residual discretion, once a reasonably arguable case has
been established as to whether to make an order removing the caveat. This will be
exercised only cautiously, for example, where the Court finds there is no practical
advantage to maintaining a caveat and the caveator will not be prejudiced.13
[25]
Finally, any application to lapse a caveat, and any challenge to that
application, does not preclude a claimant from seeking other remedies such as an
interim injunction preventing dealing with the land.14
9
10
11
12
13
14
New Zealand Limousin Cattle Breeders Society Inc v Robertson [1984] 1 NZLR 41 (CA) at 43
per Somers J.
Sims v Lowe [1988] 1 NZLR 656 (CA) at 660.
Castle Hill Run Ltd v NZI Finance Ltd [1985] 2 NZLR 104 (CA) at 106.
Sims v Lowe, above n 10, at 659–660.
Pacific Homes Ltd v Consolidated Joineries Limited [1996] 2 NZLR 652 at 656 (CA).
Staples & Co Limited v Corby (1900) 19 NZLR 517 at 519 (CA).
High Court judgment
[26]
On the question of whether the Council had a caveatable interest in the land,
Lang J considered that the right given to the Council in the Fourth Schedule to the
encumbrance was analogous to a right of first refusal.15 As to whether such a right
amounted to an interest in land capable of supporting a caveat, Lang J considered the
principles identified by Tipping J in Motor Works Ltd v Westminster Auto Services
Ltd.16 Applying such principles, Lang J accepted that the Council would ordinarily
have no caveatable interest in the trustees’ land until such point as Mrs Pallister
ceased to occupy it. The obligation on the trustees to offer the land to the Council
would not be triggered until that occurred.
[27]
Lang J considered that, because the triggering event had not occurred, the
facts of the present case were different from those in Motor Works.17 But the Judge
accepted the proposition that the issue could be decided by establishing a caveatable
interest if the trustees had arguably repudiated their obligations under the Fourth
Schedule by entering into a contractual obligation to provide Botany Land with
vacant possession of the land upon settlement of the existing unconditional
agreement.18
[28]
The question, then, was whether there is a reasonable argument that the
Council has the right to obtain an order for specific performance, given that
repudiation. The Judge referred to the Privy Council decision in Hashan v Zenab19
and a Supreme Court of Canada decision in Kloepfer Wholesale Hardware and
Automotive Company Limited v Roy20 and concluded:
[32]
These cases persuade me that the Court has the equitable jurisdiction
to make an order for specific performance prior to the anticipated occurrence
of an event that will leave a party in breach of his or her contractual
obligations. In the present case it can reasonably be anticipated that such an
event will occur when Mrs Pallister ceases to occupy the land when the
trustees complete the sale to Botany Land. Prima facie, therefore, there is
15
16
17
18
19
20
High Court judgment at [20].
Motor Works Ltd v Westminster Auto Services Ltd [1997] 1 NZLR 762 (HC) at 765.
High Court judgment at [17].
High Court judgment at [25].
Hashan v Zenab [1960] AC 316 (PC).
Kloepfer Wholesale Hardware and Automotive Company Limited v Roy [1952] 2 SCR 465.
arguably nothing to stop the Council now seeking an order requiring the
trustees to offer to sell the land to it when Mrs Pallister ultimately vacates it.
[29]
On the second question of whether the Council’s existing registered interest
under the encumbrance (relating to the rentcharge) disentitles the Council from
lodging the caveat, the Judge concluded it did not. Applying the principles in s 137
of the Land Transfer Act, Lang J examined the competing arguments and said this:21
[40]
I consider, however, that the terms of the encumbrance arguably do
not achieve the object that the drafter intended. This is because the operative
part of the encumbrance only encumbers the land “for the benefit of the
Council as set out in the First Schedule.” The only substantive right
contained in the First Schedule is the Council’s right to demand and receive
the rentcharge. The remaining terms in the First Schedule do not create
rights or obligations on the part of either party. In particular, the First
Schedule does not contain the obligation on the part of the owner and
occupier of the land to offer the land to the Council upon the last member of
the Duder family ceasing to occupy it. That obligation is contained in the
Fourth Schedule. The only reference to the Fourth Schedule in the First
Schedule is in Clause 3. Clause 3 does not, however, create any substantive
rights or obligations. It merely restricts the Council’s rights in respect of
persons against whom the Council may enforce the covenants in the Fourth
Schedule.
[30]
Accordingly Lang J concluded it was arguable that the land is not
encumbered by the covenants contained in the Fourth Schedule.
The interest
claimed by the Council under the caveat is “distinct and different to that protected by
the encumbrance.”22 Thus s 137 of the Land Transfer Act would not operate to
prevent the lodging of the caveat.
Submissions of appellant
[31]
Botany Land submits first that the Council has no caveatable interest in the
land. This is advanced on the basis that specific performance cannot be ordered
because there was no repudiation of the obligations contained in the encumbrance,
and the terms were insufficiently certain to ground an order of specific performance.
21
22
Footnote omitted.
High Court judgment at [41].
Was there an act of repudiation?
[32]
Mr Campbell QC for Botany Land argues that under the agreement for sale
and purchase, the trustees were obliged to give vacant possession only when
settlement occurs. The trustees are therefore obliged to fulfil the terms of the
covenant only when the land ceases to be the dwelling place of Mrs Pallister.
Botany Land submits that possession and settlement, where contemporaneous, are
interdependent. Vacant possession will occur only when the settlement occurs, on
payment of the balance of the purchase price. Accordingly, the land will not cease to
be the dwelling place of Mrs Pallister until after title has passed to Botany Land. At
that point, it will be Botany Land that is bound by the covenant, not the trustees. The
trustees cannot therefore be said, at the present time, to be indicating an intention to
repudiate their obligation to offer the land to the Council, because when the
obligation arises, it will no longer be an obligation of the trustees.
[33]
Mr Campbell also developed careful submissions supporting the suggestion
of Lang J at [25] that the triggering event in clause 2 of the Fourth Schedule will not
occur until Mrs Pallister ceases to occupy the land. These submissions were in
response to an argument advanced by counsel for the Council that the triggering
event was linked to the “true intention” of Mrs Pallister, as opposed to an actual
physical ceasing of occupation. This was advanced alongside the argument that
Lang J’s conclusion at [32], that the anticipated repudiation arguably gave rise to a
caveatable interest, was correct.
[34]
For reasons we explain shortly, this appeal can be decided on a narrower
basis, similar to that followed by Lang J. There is therefore no need to engage with
these competing arguments. They are best dealt with at the substantive hearing when
all relevant facts are known to the Court and the merits can be dealt with
comprehensively.
Were the terms sufficiently certain?
[35]
Botany Land also submits that specific performance is not available to the
Council as the terms of the contract to be performed are not sufficiently certain.
Clause 2 of the Fourth Schedule places no control on the price or terms of the offer
to be made to the Council. Botany Land says that Lang J’s conclusion, relying on
the finding in Motor Works, which noted the requirement for the certain terms put
forward by the vendor as that upon which he or she would be willing to sell be
sufficiently certain, is erroneous. This is because it related specifically to the right of
refusal provision in Motor Works, and was not a principle of general application.
The obligations contained in the covenant between the parties in this case are
different.
[36]
On the question of the application of s 137 of the Land Transfer Act,
Botany Land submits that the memorandum of encumbrance and the covenants it
contained are binding on the trustees.
As the encumbrance was a registrable
instrument, and was in fact registered, this precluded the lodging of a caveat under
s 137.
[37]
Section 203 of the Property Law Act 2007 requires that a transferee of land
subject to a mortgage is personally liable for the payment of all amounts and the
performance of all obligations secured by the mortgage. Its predecessor, s 104 of the
Property Law Act 1952, was to the same effect. An encumbrance is a mortgage for
the purposes of these sections.
On that basis, Botany Land submits that the
obligations in the covenant run with the land, as it is secured by the mortgage.
Under s 137 of the Land Transfer Act, no further caveat may be lodged.
Our analysis
[38]
To determine the appeal, we do not need to decide whether a triggering event
under clause 2 of the Fourth Schedule has already occurred. We agree with the
conclusion of Lang J, relying on the dictum of Tipping J in Motor Works, that the
Council would “ordinarily have no caveatable interest in the trustees’ land until such
point as Mrs Pallister ceased to occupy it”.23
23
High Court judgment at [20].
[39]
We accept that the Council’s right enshrined in clause 2 of the Fourth
Schedule differs from the right contained in the lease in Motor Works. The relevant
clause in Motor Works provided, under a heading “Right of First Refusal”:24
In the event the landlord wishes to sell the premises it shall first offer the
premises to the tenant at a price the Landlord is prepared to accept from any
third party (…)
[40]
But this distinction between the covenant in this case, and the right of refusal
referred to in Motor Works, does not determine the matter.
A reasonably arguable case?
[41]
We consider the crucial question in this case is whether the Council has a
reasonably arguable case for an equitable interest in the land, arising from a right to
an order for specific performance of the obligations in clause 2 of the Fourth
Schedule. Mr Upton for the Council submitted that the trustees have repudiated their
obligations in advance, by entering into the contract to sell the land to Botany Land
and to provide it with vacant possession on settlement.
[42]
On this question we agree with the view expressed by Lang J, noted at [28]
above, that arguably there is nothing to stop the Council seeking an order now,
requiring the trustees to offer to sell the land to it whenever Mrs Pallister does
eventually vacate it in the future. 25
[43]
We are reinforced in our view by the terms of the letter from the trustees’
solicitors on 27 May 2013. The Council was told unequivocally that the trustees
would be completing the sale when the purchaser called upon them to do so and that
the land would not be offered to the Council. The agreement for sale and purchase
provided at clause 3.1 of the general terms of sale that the property was sold with
vacant possession and as such “the vendor shall so yield the property on the
settlement date”. Therefore it was arguable that the Council could anticipate a
breach by the trustees, that breach being the family vacating the premises at the time
24
25
At 764.
Referring to the High Court judgment at [32].
of sale, without having offered the land to the Council. The letter could be construed
as a statement of an intention on the trustees’ part not to perform their obligations.
[44]
Our view is supported by the principles discussed in Mercury Geotherm
Ltd v McLachlan.26 The case concerned whether a vendor had derogated from its
obligations under a right of first refusal contained in a lease. Although no breach
was found and the caveator had no interest in the land, the following observations of
Potter J in the High Court involving consideration of the Motor Works case are
relevant in the present context:27
[68]
When the grantor of a pre-emptive right takes a step such as offering
for sale to a third party, which would put out of the grantor’s control the
ability to honour the contractual obligation created by the pre-emptive right,
the right of pre-emption or first refusal may be “out-flanked”, as Tipping J
expressed it in Motor Works. In Motor Works, notwithstanding that on the
facts the triggering event had passed or lapsed (an offer had been [made] to
the grantee and declined), so there was no interest to sustain the caveat, His
Honour was prepared to continue an injunction (at p766) –
“so as to restrain Westminster Auto from taking any steps in
derogation of the first right of refusal”.
[45]
We conclude that the appellants have not shown error in the approach of
Lang J. Like him we are satisfied that on the facts as presently known, the Council
arguably might obtain an order for specific performance requiring the trustees to
offer to sell the land to it when Mrs Pallister ultimately ceases to occupy the land.
The nature of the obligations in the encumbrance
[46]
In the course of argument counsel for Botany Land referred to the definition
of “Encumbrancer” in the encumbrance and the nature of the obligations undertaken
therein. The circumstances applying at the time (as set out in the Third Schedule)
are likely to be important in addition to the words used in other parts of the
encumbrance. 28 The same is true of other contextual features applying at the time of
entry into the encumbrance. These matters will be the subject of evidence in the
High Court.
26
27
28
Mercury Geotherm Ltd (In Rec) v McLachlan HC Auckland M129-IM00, 14 June 2002.
Approved by the Privy Council on appeal in McLachlan v Mercury Geotherm Ltd (In Rec)
[2006] UKPC 27, (2006) 7 NZCPR 135 at [19]–[20].
Referred to at [9] above.
[47]
In his reply, Mr Campbell referred us to the provisions of s 239 of the Land
Transfer Act.
He submitted that this section was relevant to the scope of the
covenant and what entities may be bound by its terms. Section 239 provides, in
summary, that in any form under the Act, the description of any person as proprietor,
transferor, having or taking estate interests in land includes the heirs, executors,
successors, and assigns of that person.
[48]
We have no difficulty accepting that the encumbrance in this case is a form
under the Land Transfer Act. But the meaning and application of the substance of
the section is another matter. On its face it does not apply to an “encumbrancer”.
Moreover it is open to argument that the application of this provision to include a
personal representative and successors in title may arguably be defeated by a clear
intention to the contrary.29 This is an issue which no doubt will be explored in the
substantive proceeding.
Certainty of terms
[49]
Mr Campbell also argued that before a Court could make an order for specific
performance. it would need to be satisfied that the terms upon which the trustees are
to offer the land to the Council are sufficiently certain to enable that order to be
made. This issue also arose in Motor Works, where Tipping J held that the Court
cannot order specific performance without sufficient certainty of terms. Tipping J
said:30
Thus, if there has been no overt manifestation of the terms which the vendor
is prepared to accept elsewhere the matter can hardly proceed any further.
The Court cannot tell the vendor what the terms should be.
[50]
In the High Court Lang J saw no particular difficulty about the question of
certainty in this case. He was of the view that the Court would be entitled to proceed
on the basis that the trustees are satisfied with the terms on which they have already
agreed to sell the land to Botany Land.31 Any order requiring the trustees to offer to
sell the land to the Council could be on such terms.
29
30
31
Taylor v George [1963] NZLR 628 (SC) at 630. See also Griffith v Pelton [1958] Ch 208 (CA).
Motor Works Limited v Westminster Auto Services Limited, above n 17, at 766.
High Court judgment at [33].
[51]
We are not inclined to go as far at this present preliminary stage. Whether the
Council is able to meet the requirement for sufficient certainty of terms is another
issue that will arise in the substantive hearing. Much may turn on the specific type
of relief sought by the Council upon proof of breach of any clause 2 of the Fourth
Schedule.
[52]
The pleading in the substantive proceeding was not before us. Mr Upton for
the Council accepted that the current pleading would require amendment. This is an
aspect on which we can make no further comment. The issue will need to be more
fully explored in the High Court.
Application of s 137
Finally, we deal with the issue of whether the Council’s existing registered
[53]
interest under the encumbrance means that it is not entitled to lodge the caveat.32 We
agree with the conclusion of Lang J that it is at least arguable that the land is not
encumbered by the covenants contained in the Fourth Schedule.33 There is an
available argument that the operative part of the encumbrance only encumbers the
land “for the benefit of the Council as set out in the First Schedule”. As already
noted, the only substantive right contained in the First Schedule is the Council’s right
to demand and receive the rentcharge.
[54]
While we appreciate that there are arguments to the contrary, the appellant
has not shown that there is any error in the conclusion reached by Lang J on this
issue.
Discretion
[55]
It remains for us to consider whether we should exercise a discretion to refuse
to sustain the caveat. We are satisfied that there is an obvious practical advantage to
maintaining the caveat in the present circumstances. Moreover, even if the caveat
ought not to be sustained, we consider that the Council would have a case for
obtaining an interim injunction to protect its position pending the hearing of its
32
33
Referred to at [29]–[30] above.
High Court judgment at [41].
application for specific performance in the High Court. We note that in the Motor
Works case, although the Judge ordered that the caveat should lapse, nevertheless the
interim injunction previously granted was renewed.
Result
[56]
The appeal is dismissed.
[57]
The appellant must pay the first respondent costs for a standard appeal on a
band A basis and usual disbursements.
Solicitors:
Gregory Simon Law, Auckland for Appellant
Simpson Grierson, Auckland for First Respondent