Buying and Selling Land

Question 1

Re Richards

Answer 1

BUYING AND SELLING LAND

Mr R leaves in his Will Opie Street house to his wife. Mr R decides to sell Opie Street and purchase another house. After properties became unconditional but prior to settlement, Mr R dies.

Held wife is not entitled to the purchase money because gift was adeemed and she could not trace into the money because at law purchase money is different to the house, so the money belongs to his estate.

At time of death Mr R was a trustee of the house for Mr E and therefore could not leave it to his wife.

When contract becomes unconditional equitable title passes and purchaser can seek specific performance for transfer - therefore even though vendor has died contract still go to settlement.

Question 2

Re Rudge

Answer 2

BUYING AND SELLING LAND

Unconditional contract gives rise to an equitable interest.

Question 3

Clarke v Ramuz

Answer 3

VENDOR DUTIES

There is a duty on the vendor in the in between stage to take reasonable care and keep property in a reasonable state of preservation.

Analogy to trustee is accepted - Blanchard J observes that a vendor is in some senses a trustee.

Vendor knew that someone was coming in and removing soil (trespass) and done nothing about it - this would be included in DOC.

Question 4

Englewood Properties v Patel

Answer 4

VENDOR DUTIES

Vendor trustee obligations are limited to preserve the property in the state it was at the time the contract was made.

Vendor can still entitled to some benefits.

Question 5

Southland District Council v McClean

Answer 5

ADLS UNTENABILITY

Purchaser only wanted to buy the forestry block due to the age variation of the trees which meant they could harvest over a number of years. A storm then destroyed the trees prior to settlement.

Held that purchaser could get out of contract because the forestry block was deemed untenantable because the purpose they purchased the land for had been affected.

The test of tenantable considers the whole property and is subjective by taking into consideration the purpose of the purchase. Something is untenantable when there is substantial interference with the ability to enjoy, use and operate, the premise.

Ask: Can what they brought it for still be achieved? If not then untenable.

Question 6

Hamilton Snowball

Answer 6

Distinguishes between owners personal benefits and benefits of the land.

Question 7

Bevin v Smith

Answer 7

VENDOR DUTIES

Sale of farm by Bevin to Smith. A paper road through the farm was not owned by B and belonged to the Crown and B had a license to occupy. B and S had a falling out and when Crown offered freehold of paper road B brought it but refused to include it in sale to S in an attempt to bring contract of sale to an end.

Held that vendor could not get out of contract because the vendor is in some way a trustee and it would be a breach of their duty not to profit to get ownership of the paper road. The purchase of the road should be for the benefit of the “beneficiaries” and ultimately they have purchased it on trust for the purchaser (imposed a constructive trust).

Using ownership to profit when purchaser had equitable interest is a breach of duty not to profit.

B had represented that Smiths were buying the whole farm. Denying ownership of strip would disrupt occupation. But for the delays in settlement caused by B the Crowns offer to purchase paper road would have been made to Smiths.

Vendor as trustee still entitled to some benefits but not entitled to take advantage of remaining legal ownership in a way that prejudices equitable owner.

Bevin v Smith extended Nicholson v Fowler reasoning if ASP is conditional is upon statutory requirement purchaser can be regarded as having equitable interest.

Question 8

Batchelar Center Ltd v Westpac NZ

Answer 8

VENDOR DUTIES

Westpac (owner of mortgage) entered into ASP with B conditional to the purchaser getting finance and no better offer being made to the vendor. Westpac continued to advertise the property, got another offer and cancelled agreement with B.

B argues that Westpac owed a duty to advice them they had received another offer to give them the option to reconsider and raise a counter offer.

Held that vendor duties do not extend to a good faith/loyalty duty because ASP agreements are routine commercial situation and purchasers can look after themselves. A clause should have been added that the were obliged to advise when received better offer.

Question 9

Palm Gardens Consolidated v PG Properties

Answer 9

OPTION TO PURCHASE

Palm gardens were granted an option to buy various units in a village but this right to buy only arose when all units were build and occupation licenses were granted. The developers build some units but then decided to sell them out right to someone else. Palm Gardens sought to lodge caveat to prevent someone else from registering ownership.

Issue was whether Palm Gardens actually had a covetable interest allowing them to do this (e.g., do they have an equitable interest)?

Court held that they do not have equitable interest because the option to purchase was a condition precedent therefore developer had full freedom to sell until such conditions were met (conditions were not met because not all units were build and occupation licenses not yet issued). Thus there wasn’t even a contract and for sure no equitable interest.

Question 10

Nicholson v Fowler

Answer 10

If a contract is conditional based on a condition for the sole benefit of the purchaser they can waive it at any time. Therefore, equitable interest likely gained on contract agreement rather than when unconditional.

Question 11

Motor Works Ltd v Westminster Auto Services

Answer 11

Four stage of option to purchaser:

(1) = right granted
(2) = triggering event
(3) = offer made to grantee
(4) = ASP

1 and 2 merely contractual, unless know exact terms of when the right will be granted.

3 and 4 give equitable interest

Question 12

Cousins v Wilson

Answer 12

Neighbor cut down trees prior to settlement of property. Court concluded that the damage to the trees did not reduce the value of the land therefore ADLS clause (old) no applicable as no financial loss.

Held that purchaser has no claim because cannot make a trespass claim against third party without having possession of the property and cannot make a reversionary claim because an equitable interest is not a common law interest.

Purchaser has no claim against vendor as no breach of DOC and ADLS clause no applicable.

Vendor would be able to sue trespasser but because no loss damages will be nominal.

Question 13

Rice v Rice

Answer 13

ONUS of rebutting priority is on the second in time interest - must prove equities were not equal with regard to conduct and knowledge.

Question 14

Emslie v Genuine Investments

Answer 14

COMPETING EQUITIES

Emslie transferred property as part of an investment scheme to Maxwells/Genuine, but remained in occupation of the property. Contract included a buy back agreement after scheme was complete. Emslies instructed solicitor to lodge caveat (Court held that buy back agreement was an equitable interest). Solicitor did not lodge caveat. Property was transferred to R S Trust.

Emslie held to have priority as equitable interest from buy back agreement was first in time to R S Trust equitable interest from unconditional ASP.

Onus on Trust to rebut.

Trust knew about occupation but had no knowledge of buy back. No duty for them to check on a just in case basis with previous owners because that defeats the purpose of Torrens System.

Emslie should have caveated because it was an unusual interest that a purchaser would not expect. The fact that solicitor failed to caveat is irrelevant (Emslie can sue solicitor).

Held that failure to caveat is just one consideration but the nature of the interest may result in failure to caveat being fatal - here that was the case.

Priority reversed and R S Trust can register their interest.

Question 15

Dixon

Answer 15

Said that if you give someone else the power to act like they own something, then their action can result in you losing your right/interest.

This was cited in Emslie because their consensually decision to give Maxwell/Genuine ownership represented that they no longer had an interest and to prevent this representation they needed to caveat.

Question 16

Perkins v Purea

Answer 16

COMPETING EQUITIES

Mr and Mrs Purea agreed that their daughter June can inherit their property that she occupies conditional to discharging the mortgage.

Mother dies and her insurance policy discharges the mortgage. Father moves into property with June, they have falling out and then he sells property.

Immediately after falling out June instructs solicitor to lodge caveat but solicitor fails to do so until after ASP (too late to put purchasers on notice).

Junes right to purchase was first in time to the Perkins unconditional ASP.

Perkins did not have actual knowledge of caveat but held they did have constructive knowledge due to knowing about Junes occupation and the fathers comment that “daughter kicked me out” should have alerted them to a dispute about ownership and gave rise to duty to make inquiries.

Held the failure to lodge caveat was not determinative because in a family relationship no expected to be necessary and when the risk did arise June took all necessary steps to protect her interest.

Priority not reversed = June can register interest.

Question 17

Mercury v McLachlan

Answer 17

COMPETING EQUITIES

McLachlan has equitable lease to continue grazing on some of his land he has sold to Mercury for a power plant. Mercury goes into receivership and receivers sell land to Contact Energy.

McLachlan caveats after the ASP (too late to give notice).

Contact had constructive knowledge because knew of M occupation and thus that he had some kind of interest.

Contact did make inquiries to receives but this did not reveal the lease. Contact did not make reasonable inquiries to the right people and could have asked McLachlan because was on property.

Priority not reversed = McLachlan can register interest.

Question 18

AGC V CFC

Answer 18

COMPETING EQUITIES

Director of company wanted a new Mercedes on finance. Got loan agreement from AGC conditional to them have security over his land, so gave AGC mortgage. Did not get duplicate of title and did not caveat immediately.

The next day also gave CFC mortgage over land and they got duplicate certificate of mortgage (prior to electronic registration) and intended to register but AGC caveats before they do.

CFC has priority but took so long to go to court to remove AGC caveat.

AGC failed to reverse priority due to not caveating immediately and had they done so CFC would not have got mortgage (they checked the register and saw nothing). Therefore, CFC can register interest.

You can look at both parties conduct and subsequent conduct may be relevant.

Question 19

Frazer v Walker

Answer 19

INDEFEASIBILITY / MORTGAGE FRAUD

Mrs F forged husbands signature on a mortgage for 3rd party who then sell property to Walkers.

Mr F claims that because he never signed anything Walkers do not have indefeasible title.

Held that fraud must be against the previous RO, thus in this case the fraudulent act was too far removed from Walkers to be LTA fraud. Rationale being that a purchaser should not bear the risk of all previous owners conduct.

Established there is immediate indefeasibility upon registration (means as soon as you are no longer RO you loose indefeasibility).

Question 20

Assets Co

Answer 20

Has to be actual fraud or constructive fraud but not constructive knowledge or equitable fraud.

The mere fact that he might have found out fraud if he had been more vigilant and had made further inquiries which he omitted to make, does not of itself prove fraud on his part. But if it can be shown that his suspicions were aroused, and that he abstained from making inquiries for fear of learning the truth, the case is very different, and fraud may be properly ascribed to him (= Wilful Blindness).

Question 21

Waimea Swamilling

Answer 21

Test of dishonesty - if you have reason to think that their may be another interest then you are required to make enquiries, if you do not then you are consciously turning a blind eye to the fact (wilful blindness is equivalent to actual knowledge).

Wilful blindness is very fact dependant.

Has to be object of transfer to cheat the person - intent at time of registration has to be to deprive other person of their interest.

Question 22

Burmeister v O’Brien

Answer 22

Elderly couple were subjects of a complex scam - they were cheated into thinking they were placing home on family trust but they actually transferred home to O’Brien. New RO (O’Brien Trust) granted a mortgage to ASB.

O’Brien held to be guilty of fraud because object of registrtaion was to cheat and knew B were not willing sellers. Court imposed a constructive trust and obligated O to transfer title back to B.

ASB kept mortgage because they were bona fide and B granted compensation for this.

Question 23

Efstatiou

Answer 23

Husband and wife jointly held house on trust but it was registered solely under husbands name. There was a breakdown in relationship and husband moved away. He returned a year later to find wife living in house with a new man. Husband then instructs agent to urgently sell the house. Purchase settled within in 3 days, for a cheap price and sight unseen.

Held that purchasers guilty of LTA fraud because they had reasonable notice that something was wrong because sale was so out of the ordinary and thus acted wilfully blind.

Also a possible claim for dishonest assistance of the real estate agent.

Question 24

Satnam Investments v Worger

Answer 24

Satnam had an unregistered lease and ROFR over post shop. The post shop was sold to Worger Family Trust who knew of their occupation but not of the ROFR.

Held that Satnam had equitable interest from ROFR once decision to sell property was made. S caveats.

Worger sees caveat, so pauses process of purchase, goes on hoilday and leaves S and previous RO to sort it out. When S returned advised by solicitor that the caveat was no longer on register (it had lapsed). Thus presume issue been sorted out and could register their interest.

Held that purchasers did not commit LTA fraud because they truely believed there was no competing interest, thus had no intention to deprive S of their rights. Not reasonable to say they needed to make inquiries.

Didn’t want to register if there was going to be any problems - investment property.

It is reasonable for a layperson to rely on the advice of a solicitor.

Question 25

Bunt v Hallinan

Answer 25

H purchased property with knowledge of B occupation of shed under a lease of some sort. Solicitor saw nothing on register and advised that fine to go ahead because their is no competing interests.

Held not to be fraud because did not acquire title with intent to deprive Bunts of their rights because he had been advised that they had none.

However judgement made important comment that you are not entitled to ignore your own knowledge that may lead you to be suspicious just because you got legal advice because to do so would defeat the doctrine of wilful blindness.

When there is something suspect in solicitors advice then you have to keep making further inquiries.

Question 26

Tuscany v Gill

Answer 26

RO grants lease to Gill to fit our building for restaurant, with a demolition clause that cannot be exercised for 6 years.

RO sells reversion to Tuscany but documents did not contain demolition clause. However T visits building and Gill expressly mentions demolition clause. T says to Gill “you’re a friend I wouldn’t do that to do”.

He knew there was an interest but intended to defeat it.

Comment was sufficient assurance that gave rise to an estoppel claim and would be sufficient unconscionable conduct that gives rise to an in personam claim.

Held that T guilty of LTA fraud.

Question 27

Potts v Anderson

Answer 27

Potts sells land to Andersons with clause that he retains access to water reservoir by easement. Anderson say they don’t need a legal easement because they are friends and promise to recognize it. A transfers land to family trust and after a falling out between parties wants to stop P from accessing water.

Court conclude that A was bound by a personal/equitable obligation to recognise the water right and court created a water easement through successful in personam claim.

Shows that a successful in personam claim can create an interest in land (as well as recognising a pre existing interest).

The transfer to trustee was with knowledge of water interest and with intention at the time of honouring it.

Question 28

Smith v Hugh

Answer 28

Labour party bought itself a hall, who then sold it to an society (trust) for fear it would be taken over by the national headquarters. Structure of society changed meaning that Labour Party was essentially cut out as beneficiaries and ability to use hall.

Court imposed a constructive trust and held there was a breach of trust because did not uphold obligation to use hall in a way that isn’t inconsistent with the benefit of the Labour Party.

Was critical that the society had knowledge that the rules changes/restructure meant they would be breaching their trust duties by excluding labours members use/enjoyment of the hall.

Successful In personam claim through breach of fiduciary duty, and by imposing constructive trust.

The Society had sold the hall and used the money to purchase an apartment and court held that the trust money can be traced.

Question 29

Dollars & Sense

Answer 29

Son forges mothers signature for finance guarantee.

Mother sought to invoke fraud against the finance company and also raise’s an personam claim.

Court held that it was clearly fraud and that son was the finance companies agent for the purposes of fraud.

Makes a lot of obiter comments on in personam claim including you may have one without there being a direct relationship between parties (controversial and said to be taking it too far).

Held that in personam requires something more than negligence or forgery (because that’s what we have LTA fraud for).

Unconscionable conduct relates to obtaining or taking advantage of registered interest, but does not need to involve dishonest conduct

Question 30

Scott v Rawenata

Answer 30

Maori land court made order to register for the wrong land to be transferred. Used manifest injustice to claim for error to be corrected (didn’t have to do it this way but tested the scope of the claim).

Court widens interpretation of section 54 (void or voidable instrument). Held that the instrument itself does not have to be void or voidable and an error in the transaction will be enough.

Held it was manifestly unjust for them to remain RO and a mistake in registration can be rectified via manifest injustice claim.

Question 31

Mah Whena Incorporated v Shelly Bay Investments

Answer 31

Claim that former RO transferred in breach of trust.

Held that just because breached trust does not give rise to manifest injustice claim.

Void/Voidable means something has legally gone wrong.

–> Manifest Injustice only applies in very rare and extreme cases.

Question 32

Warin v Register-General

Answer 32

Held that the 1993 TTWMA does not override the LTA because had Parliament intended for it to do so they could have easily expressly said so but did not do so.

For a statute to override the LTA you have to show that it completely contradicts the other such that they cannot be applied together.

Question 33

Barlow v Phillips

Answer 33

Phillips made gift for some of land to go to Marae and to society. Land preferred class of alienees ROFR was not given effect prior to land being transferred to society.

However, it was held that society got indefeasible title and no exceptions applied therefore could not be removed from register.

Tried to argue in personam due to a breach of trust but was unsuccessful because ROFR does not amount to a trust.

It was not LTA fraud because a mere and innocent breach of Act is not fraud.

Question 34

Mercury NZ v Māori Land Court

Answer 34

Indicated that a shift is possibly occurring where the TTWMA does override LTA - arguable claim.

This is due to the re drafting of 2019 LTA which now says “overrides or limits” rather than just limits. This may be the mechanism for change.

Question 35

Stratulatos v Stratulatos

Answer 35

ESTOPPEL

Mother makes representation that son will inherit property. Gave the son and future daughter in law exclusive occupation of the house she owned until she dies. Son and wife undertook renovations of the house (reliance) on the basis that the investment will benefit them in the future. Mother knew about the renovations. Son dies and there was a falling out between mother in law and wife - mother in law tries to remove her from house.

Held that mother in law estopped from recognising the interest.

Established that estoppel is not limited to granting interest in property, where it is more appropriate mere compensation may be granted.

In this case although the court said that mother was estopped from denying there was an interest, court did not give the wife interest (son died) and concluded that monetary awards more appropriate (representation was made to son alone).

Question 36

Carroll v Bates

Answer 36

ESTOPPEL

Mum and Dad have 2 sons who were helped in establishing businesses and to make things fair they gave their daughter a property which she is free to develop into a rental property. Both parents died and there had been no transfer of the property. One of the sons claim the property in their estates.

held that the daughter is entitled to the property because there was a representation of parents intent given and relied upon by the daughter.

Court imposed a constructive trust.

Held that an equitable interest survives death.

Question 37

Harvey v Prangley

Answer 37

IN PERSONAM

Parents transferred farm to daughter and parent, then leased back to remain in occupation, also given grazing rights to keep their stock and continuing farming. Daughter wished to sell, parents lodge caveat over their leased block. Daughter applied to have caveat removed and argued that “lease” is an actually a license due to lack of certainty of term.

Accepted that it is a license and therefore not an interest in the land.

This case shows that the court is prepared to create a constructive trust to enforce a license.