EPSOM WOODS LIMITED v WAITAKERE FARMS LIMITED [2020] NZSC 99

EPSOM WOODS LIMITED v WAITAKERE FARMS LIMITED [2020] NZSC 99 [23 September 2020]IN THE SUPREME COURT OF NEW ZEALANDI TE KŌTI MANA NUISC 51/2020[2020] NZSC 99BETWEEN EPSOM WOODS LIMITEDApplicantAND WAITAKERE FARMS LIMITEDRespondentCourt: Glazebrook, O'Regan and Ellen France JJCounsel: D G Hayes for ApplicantA A H Low for RespondentJudgment: 23 September 2020JUDGMENT OF THE COURTA The application for leave to appeal is dismissed.B The applicant must pay the respondent costs of $2,500.____________________________________________________________________REASONSIntroduction[1] The applicant, Epsom Woods Ltd (Epsom), brought proceedings in theHigh Court seeking orders and declarations upholding interests Epsom says it has in a51-hectare forestry lot (the property) owned by the respondent, Waitakere Farms Ltd(Waitakere). Waitakere then sought and was granted summary judgment.1 Epsom's1 Epsom Woods Ltd v Waitakere Farms Ltd [2019] NZHC 1374 (Associate Judge Bell)[HC judgment].appeal against that judgment to the Court of Appeal was unsuccessful.2 Epsom nowseeks leave to appeal from that decision to this Court.Background[2] The factual history is fairly complicated but for present purposes thebackground can be summarised as follows. Nags Head Horse Hotel Ltd (Nags Head)sold the property to Addam Buttling, under Nags Head's power of sale as a registeredmortgagee. Waitakere subsequently became the registered proprietor in March 2017,taking title as Mr Buttling's nominee.[3] The interests which Epsom claims are said to stem from an agreement to leasedated 15 December 2009 (the lease agreement) between Richard Vesey as trustee ofthe Doug Vesey Trust (Mr Vesey was the registered proprietor of the property at thetime) and North Kaipara Nominees Ltd (North Kaipara) as trustee of the Anzac ValleyForestry Trust (AVF Trust). Peter Mawhinney, director of North Kaipara, signed thatagreement for the lessee. The lease relevantly provides that the lessee "shall foreverbe the owner of [a]ny trees or growing crops presently standing on the land [and]which may at any time during the term of the lease be planted or growing on the land".3Epsom took an assignment for $1, dated 29 October 2018, of the lease agreement fromthe Trustee of the AVF Trust (2018 assignment). Mr Mawhinney signed theassignment as trustee of the AVF Trust.[4] Any interests arising from the lease agreement were not registered against thetitle to the property.The judgments in the courts below[5] In the High Court, Epsom relevantly pleaded that Waitakere was estopped fromdenying Epsom's ownership of the trees and sought an order that Waitakere owned the2 Epsom Woods Ltd v Waitakere Farms Ltd [2020] NZCA 226 (Courtney, Ellis and Brewer JJ)[CA judgment].3 The relevant provisions of the lease agreement are set out in full in the HC judgment, above n 1,at [8].property subject to a constructive trust in Epsom's favour for the trees on the property.4The main argument was that Waitakere took title with notice of Epsom's rights underthe lease agreement.5 Epsom relied in this respect on interests in the land it saidalready existed before Waitakere took title.[6] Given that the interests claimed were not registered and Epsom was not relyingon its own dealings with Waitakere, Associate Judge Bell said that questions ofindefeasibility arose. The Associate Judge referred to the Land Transfer Act 1952; inparticular, s 62 (indefeasibility of title), s 182 (purchaser not affected by notice) ands 105 (protection for purchasers from mortgagees).6 In concluding Waitakere wasentitled to summary judgment, the Associate Judge found there was nothingpreventing Waitakere from acquiring a clear title under s 105. The Associate Judgeconsidered that Nags Head's mortgage had priority over any interest arising from thelease agreement; any interests arising from the lease agreement were not interests towhich Nags Head (as mortgagee) consented to; and there was no conduct onWaitakere's part suggesting that Epsom had been "lulled into" a sense of assurancethat it had an interest in land.7 The best Epsom could claim was that Waitakere tooktitle where the purchaser (Mr Buttling) knew of the interest, but mere notice did notpreclude Waitakere from taking clear title.[7] On appeal to the Court of Appeal, Epsom argued that an in personam claimshould be able to be brought, despite s 105, if a purchaser had knowledge of anunregistered claim or interest in the land.[8] The Court rejected this submission. It said the law was clear that mere noticeof an unregistered interest was insufficient to found an in personam claim, noting that4 In its other cause of action, Epsom sought a declaration relating to occupancy rights over theproperty. The High Court granted summary judgment to Waitakere on this cause of action andthat aspect has not been pursued further by Epsom.5 In terms of notice, Epsom relied on a caveat lodged in July 2013 claiming an equitable estate andinterests arising from the lease agreement (subsequently ordered to be removed by the High Court)and a letter dated 16 February 2017 from Mr Mawhinney to Mr Buttling's lawyers noting that thepurchaser would not be entitled to any of the forestry crops that were the subject of the leaseagreement. It is unclear whether this letter was actually sent, but for the purposes of summaryjudgment, it was assumed that it was.6 The Courts below and the parties rely on the Land Transfer Act 1952 because the transactions tookplace before the Land Transfer Act 2017 came into force.7 HC judgment, above n 1, at [37].s 62 was the starting point.8 Rather, the Court said that an in personam claim requiresthree elements:9(a) it must not be inconsistent with the objects of the Torrens system;(b) it must involve unconscionable conduct on the part of the currentregistered proprietor; and(c) it must be a recognised cause of action.[9] The Court found that Epsom's claim failed because there was no pleadedallegation of unconscionable conduct and no evidential foundation for such a claim.The only pleading was that the person who nominated Waitakere as purchaser hadnotice of the claimed lease agreement. The evidence did not support anything morethan that. Waitakere was accordingly entitled to summary judgment where Epsom'sclaim could not succeed on the facts or on the law as it applied to those facts.The proposed appeal[10] Epsom says the proposed appeal raises a question of general or publicimportance, namely: whether indefeasibility prevents a claim to recover losses where the partyhad notice of another's interests. As it stands the law appears to be there is nocivil right to recover losses on land transactions without proving actualdishonesty. The current law would appear to be capable of being used as aninstrument of fraud and so allowing in personam claims to be unaffected byindefeasibility would be in the public interest.[11] In developing the submissions on this point, Epsom says first that the Courtsbelow have erroneously imposed a requirement of actual dishonesty to establishunconscionability. Reference is made in this respect to the conclusion in the Court ofAppeal that mere notice was insufficient. Second, Epsom contends that therequirement of unconscionability was met because the purchaser was on notice and/or8 CA judgment, above n 2, at [16] and [19], citing Nathan v Dollars & Sense Finance Ltd [2007]NZCA 177, [2007] 2 NZLR 747 at [139].9 At [18], citing Dollars & Sense, above n 8, at [137].made no further inquiry once notified.10 Third, Epsom seeks to distinguish its claimon the basis that it is simply seeking compensation for the loss of trees, rather thantitle. Finally, there is also a suggestion in the application for leave that a miscarriageof justice may arise if the proposed appeal is not heard because it is "repugnant tojustice that a party knowingly" deprives another party to its property relying on theindefeasibility provisions in the Land Transfer Act.[12] In opposing leave, Waitakere says that Epsom's submissions ignore the clearlanguage of ss 62, 105 and 182 of the Land Transfer Act. Waitakere also submits thatEpsom misstates the effect of the judgments below as requiring actual dishonesty tofound an in personam claim. Rather, Waitakere says the Court of Appeal simplyapplied the settled three-limb test for an in personam claim to the facts. Finally, inseeking an uplift of costs, Waitakere refers to what it describes as "the note of caution"sounded by the Court of Appeal in relation to costs which Epsom has ignored by filingthe present application.11Our assessment[13] For the reasons that follow, we do not consider the proposed appeal raises anyquestion of general or public importance or of general commercial significance.12 Thefirst point to note is that Waitakere is right that Epsom's submissions misstate theeffect of the Court of Appeal judgment.13 The Court did not say in personam claimsrequire actual dishonesty. Rather, the Court said that unconscionability was required,as is apparent from the Court's application of the three-limb test for in personam10 The submission relating to the need for inquiry is made in reliance on Efstratiou v Glantschnig[1972] NZLR 594 (CA).11 In responding to Waitakere's submission there should be an uplift from scale costs in that Court,the Court of Appeal said that it "under[stood] the reason for the submission but in thecircumstances decided a standard award is best": CA judgment, above n 2, at [25].12 Senior Courts Act 2016, s 74(2)(a) and (c).13 As we have noted, the High Court resolved the case on the application of s 105 of the LandTransfer Act.claims.14 The way in which that test was applied to this case is a fact-specificexercise.15[14] Nor does anything raised by Epsom suggest an error in approach in the Courtof Appeal's conclusion that, on the facts, Epsom could not show unconscionableconduct sufficient to found an in personam claim. The high point of Epsom's case isthat the purchaser had notice of Epsom's unregistered interests but ignored them. Anargument that mere notice constitutes unconscionability has insufficient prospects ofsuccess to justify a grant of leave.16 As to reliance on a failure to investigate, that toois a question of fact and degree which does not raise any issue of general or publicimportance.17[15] Epsom's attempt to distinguish its claim on the basis it is simply seekingcompensation for the loss of trees, rather than title, also has insufficient prospects ofsuccess to warrant an appeal to this Court. Epsom still has to meet the requirementsfor an in personam claim.[16] Finally, nothing raised by Epsom gives rise to the appearance of a miscarriageof justice in the Court of Appeal's assessment that there was no evidential basis forany allegation of unconscionability.1814 The three-limb test was confirmed by this Court in Regal Castings Ltd v Lightbody [2008]NZSC 87, [2009] 2 NZLR 433 at [157]–[158] and [160] per Tipping J and [78] per Blanchard andWilson JJ. Contrary to Epsom's submission on this point, there is no need for the Court to grantleave in order to determine the question, which Tipping J in Regal Castings considered a "mootpoint" (at [147]), of whether an in personam claim is a true exception to indefeasibility or whetherit simply describes a situation to which that principle does not reach.15 Cases such as Duncan v McDonald [1997] 3 NZLR 669 (CA) at 683–684 are authority for theproposition that actual dishonesty is not required.16 Dollars & Sense, above n 8, at [139] is clear that mere notice does not constitute unconscionableconduct to found an in personam claim. This was confirmed by this Court in Green GrowthNo 2 Ltd v Queen Elizabeth the Second National Trust [2018] NZSC 75, [2019] 1 NZLR 161 at[101] per William Young and O'Regan JJ, [139] per Elias CJ, [151] per Glazebrook J and [162] perEllen France J.17 Duncan, above n 15, at 683.18 Senior Courts Act, s 74(2)(b); and Junior Farms Ltd v Hampton Securities Ltd (in liq) [2006]NZSC 60, (2006) 18 PRNZ 369.Result and costs[17] For these reasons, the application for leave to appeal is dismissed. Epsom hasnot had any opportunity to respond to Waitakere's submissions as to an uplift in costsand, in the circumstances, we consider the usual award of costs is appropriate. Epsommust pay Waitakere costs of $2,500.Solicitors:Hunwick Law Ltd, Hamilton for ApplicantAlexandra Low & Associates, Auckland for Respondent