HOOLE and PITFIELD as receivers of CLAN NA GAEL HOLDINGS NZ LIMITED (In Receivership) v PICKENS [2014] NZHC 620

HOOLE and PITFIELD as receivers of CLAN NA GAEL HOLDINGS NZ LIMITED (In Receivership) v PICKENS [2014] NZHC 620 [31 March 2014]IN THE HIGH COURT OF NEW ZEALANDWHANGAREI REGISTRYCIV-2013-488-460[2014] NZHC 620UNDER the Companies Act 1993BETWEEN GARETH RUSSELL HOOLE andKEVIN DAVID PITFIELD as receivers of CLAN NA GAEL HOLDINGS NZ LIMITED (In Receivership)First PlaintiffsROTOITI TRUST SERVICES LIMITEDSecond PlaintiffAND JOSEPH WARREN PICKENSFirst DefendantELAINE VAN VEENSecond DefendantJ A BLAIRThird DefendantHearing: 24 March 2014Appearances: N F D Moffatt with L McNeely for PlaintiffsJ W Pickens First Defendant in personE Van Veen Second Defendant in personNo appearance for Third DefendantReasons: 31 March 2014REASONS FOR JUDGMENT OF ASSOCIATE JUDGE BELLSolicitors:Bell Gully (Nicholas Moffatt/Liam McNeely) Auckland, for Plaintiffs[1] I heard this summary judgment application on 24 March 2014. At the end of the hearing I gave judgment for the plaintiffs against the first and second defendants. I ordered the first and second defendants to vacate and deliver up possession of the property described in identifier 130488 by 14 April 2014. I awarded costs to the plaintiff. I give reasons for my decision.[2] The land in identifier 130488 is Lot 2, Deposited Plan 331773 with an area of 59.7792 hectares more or less. It is at the Ohawini end of Oakura. Part of the land is used as a campground. The registered proprietor is Clan na Gael Holdings NZ Ltd.[3] Mr Hoole and Mr Pitfield are receivers of Clan na Gael. The mortgagee who appointed them is Rotoiti Trust Services Ltd, formerly called Asteron Trust Services Ltd. Rotoiti said that it is entitled to possession of the property under its mortgage. The receivers said that they have the same right to possession. Mr Pickens, the first defendant, and Ms van Veen, the second defendant, both claimed rights to occupy the campground property. The matter to be decided was whether the rights they asserted can prevail against the claim of Rotoiti to have possession of the property.[4] These questions need to be answered:(a) Does Rotoiti have a right to possession of the property?(b) Can Mr Pickens and Ms van Veen rely on a lease that Elizabeth Lambert granted to Mr Pickens and his late wife and a sub-lease by Mr Pickens and his late wife to Ms van Veen's company?(c) What is the effect of disclaimers by the Official Assignee under Ms Lambert's bankruptcy?(d) If Mr Pickens and Ms van Veen establish any interest in the land, can they prevail over Rotoiti's rights to possession?(e) Does Mr Pickens have any argument that the property is Maori customary land?Preliminary matters[5] The plaintiffs also sought orders for another property to be vacated, a property in the name of Limerick Ltd at the intersection of Old Russell Road and Oakura Road. The third defendant, Mr Blair, was said to occupy that property. He has not been served. At the start of the hearing, Mr Moffatt advised that the plaintiffs discontinued their claim against Mr Blair, and have discontinued their claim against Mr Pickens that he vacate the property at the corner of Old Russell Road and Oakura Road. Those claims were accordingly withdrawn. Mr Moffatt explained that Rotoiti had entered into an agreement to sell that property in the exercise of its power as a mortgagee, and that that sale had now settled although title had still to be transferred.[6] There is another matter that does not require decision. Mr Pickens has a property at 43 Ohawini Road that adjoins the campground property. He complains that the receiver entered onto his land. In this proceeding the plaintiffs have not said that they have any right to enter onto Mr Pickens' own land. I am required to decide whether the plaintiffs' claim to possession of the property in identifier 130488 can prevail over Mr Pickens' claim to have possession of that property. Mr Pickens' right to occupy his own adjoining property is not in issue.[7] When the application was first called on 7 February 2014, I queried whether the receivers had standing to apply for an order that the defendants vacate the campground property. I had in mind the normal rule that when a company is in receivership, any proceedings are brought in the name of the company since the right of action belongs to it.11 Peter Blanchard and Mike Gedye The Law of Private Receivers of Companies in New Zealand, (LexisNexis, Wellington, 2008) at [10.26].In their written submissions, the plaintiffs referred to provisions of the mortgage, which include the power to appoint receivers upon default by the mortgagor. The mortgage includes clause 8.3:Subject to any restriction imposed by NZGT a receiver is to have all the rights conferred on receivers and managers by law (including the Receiverships Act 1993), all the rights of NZGT whether or not those rights are yet enforceable by NZGT and all the rights which the mortgagor itself may have in relation to the earnings and the other secured property.2[8] This showed that the receivers were invoking the mortgagees' rights to possession, not rights of the mortgagor. In response to my minute of 13 March 2014, the receivers applied for Rotoiti to be joined in the proceeding. Mr Pickens and Ms van Veen did not object and I made an order joining Rotoiti as a further plaintiff.[Emphasis added.][9] While clause 8.3 of the mortgage purported to confer on the receivers all rights of the mortgagee - which would include any right to possession - it was not clear to me that the receivers alone could sue for recovery of possession, when the mortgagee had not been joined in the proceeding. I am now satisfied that that is not a problem. There is Court of Appeal authority that one person entitled to possession may sue a third party for trespass to land, even though he has not joined in the proceeding all others who share possession with him.3 Another case on point isRoberts v Rodney District Council.4[10] In any event, the joinder of Rotoiti as a plaintiff is helpful as it puts in focus the issue of the mortgagee's rights to possession. The receivers' rights are no more extensive than the mortagee's.If only one of a number of people entitled to possession has standing to sue for trespass, I see no reason why one of several people entitled to possession may not bring a proceeding for recovery of land against third parties.Facts[11] In 2006 Clan na Gael bought the campground property from the trustees of the Kauri Property Trust. Mr Pickens was one of the trustees. Clan na Gael became registered proprietor. The vendors left money in. There is a suggestion that Clan na Gael gave a mortgage to the trustees, but the title to the property is clear that no such2 "NZGT" means New Zealand Guardian Trust, the original mortgagee. Rotoiti is an assignee of Guardian Trust's mortgage.3 Watt v Wilson (1910) 29 NZLR 627 (CA).4 Roberts v Rodney District Council [2001] 2 NZLR 402 (HC) at [52]-[55].mortgage was registered. Mr Pickens is not relying on any rights as a former owner of the campground property.[12] At the same time, the trustees of the Kauri Property Trust sold the property at the intersection of Old Russell Road and Oakura Road to Limerick Ltd. It is not, however, necessary to consider that aspect of the transaction, because the plaintiffs have discontinued their claim for that property.[13] Clan na Gael (and Limerick Ltd) raised finance from New Zealand Guardian Trust Co Ltd. The loan was successively refinanced. The last refinancing was in December 2009. The loan was repayable on 31 March 2010. The amount of that term loan was $4,310,000. NZGT had security which included a general security agreement under the Personal Property and Securities Act 1999 given by Clan na Gael and a first-ranking registered mortgage over the campground property. The remedies for default under the general security agreement include the power to appoint a receiver of Clan na Gael, who is to be the agent of Clan na Gael. The mortgage also contains remedies for default. These include the usual rights to take possession of the property and to sell it. In addition, the mortgagee may appoint receivers. While a receiver is the agent of Clan na Gael, clause 8.3 in [7] above also confers on the receivers all the rights of NZGT.[14] On 25 November 2010 the loan agreement, the mortgage and the security agreement were assigned to Asteron Trust Services Ltd. While the deed of assignment does not specifically name the loan agreement and the mortgage in this case, it is clear that they were assigned. The LINZ records show that the registered mortgagee in this case is Asteron Trust Services Ltd, reflecting the change of mortgagee under the assignment. Asteron Trust Services Ltd has since changed its name to Rotoiti Trust Services Ltd. By virtue of the assignment Rotoiti holds and can exercise all the powers given to New Zealand Guardian Trust Ltd under the mortgage given by Clan na Gael.[15] Clan na Gael did not repay the loan when it fell due on 31 March 2010. Notices under s 119 of the Property Law Act 2007 were served in 2011. Rotoiti served fresh notices under s 119 on 28 February 2013. The notices identified theamount payable under the mortgage as $6,799,834.54. That reflected the default interest that had accrued since the date for repayment of the mortgage. Clan na Gael did not remedy the default by 3 April 2013, the date fixed in the notice under s 119.[16] In March 2013, Rotoiti entered into an agreement to sell the campground property for $2,500,000 plus GST (if any). It also entered into a collateral agreement for the sale of the Oakura Road property. The sale of the campground property has not settled, pending the outcome of this proceeding.[17] In the meantime, there have been other transactions affecting the campground property. In April 2011 Clan na Gael entered into an agreement to sell the property for $5,500,000 plus GST if any. The purchaser was Ms Elizabeth Mary Lambert. She is already well known for trying to help distressed mortgagors by lodging caveats and taking similar action to slow down or block mortgagees from enforcing their rights against mortgaged properties.[18] Ms Lambert's agreement to buy the campground property provided for her to pay a deposit of 10 per cent of the purchase price. But she did not pay it. Settlement was to take place and possession was to pass on 3 June 2011. Ms Lambert did not pay any of the purchase price and the sale did not settle.[19] In November 2011 Ms Lambert signed a deed of lease with Mr Pickens and his wife.5[20] In August 2011, Mr and Mrs Pickens entered into a deed of sub-lease to Elmor Holdings Ltd. That is the company associated with Ms van Veen. She signed the lease as director of that company. The term of the sub-lease is 95 years, beginning 1 September 2011 and ending 1 September 2106. The annual rent was to be 50 per cent of net profit per year. It is through the lease granted by Ms Lambert to Mr and Mrs Pickens and the sub-lease by Mr and Mrs Pickens to Elmor HoldingsUnder this deed of lease she granted a lease over the campground property to Mr and Mrs Pickens for 99 years beginning 11 November 2011 and ending on 28 October 2111. The annual rent was to be 10 per cent of the net proceeds of yearly income but not less than $10,400 per annum.5 Mr Pickens' wife has since died.Ltd that Mr Pickens and Ms van Veen claimed rights to occupy the campground property.[21] Ms Lambert was adjudicated bankrupt on 29 May 2012. The Official Assignee has made disclaimers under s 117 of the Insolvency Act 2006. For this case there are two relevant disclaimers. On 23 November 2012 the Official Assignee disclaimed the agreement for sale and purchase between Ms Lambert and Clan na Gael dated 20 April 2011. On 31 March 2013 the Official Assignee disclaimed the deed of lease of 10 November 2011 under which Ms Lambert purported to lease the campground property to Mr and Mrs Pickens.[22] Rotoiti appointed Mr Hoole and Mr Pitfield receivers over all the assets and undertakings of Clan na Gael on 12 December 2012. The letter of appointment provides that the receivers are to be the agents of the grantor (Clan na Gael), not the appointor (Rotoiti).[23] There is uncontested evidence that New Zealand Guardian Trust and Rotoiti did not consent to any leases of the campground property to Mr Pickens or to any other person. Mr Hoole says that the receivers have not been able to obtain possession of the campground property. The receivers have given notices under the Residential Tenancies Act 1986 terminating any tenancies under that Act. Those notices make it clear that the receivers do not consider that there are any valid tenancies under the Residential Tenancies Act but have given the notices out of caution. The notices were given on 9 October 2013 and provided that any tenancies were terminated with effect from 12 January 2014 at the latest.[24] In response to the claims by the receivers, Mr Pickens has served a notice against the receivers under the Trespass Act 1980. His Trespass Act notice requires them to keep off the campground property, the Oakura Road property, as well as his own property adjoining the campground. Similarly, Ms van Veen continues to occupy the campground property, relying on the sub-lease from Mr and Mrs Pickens.Do the plaintiffs have a right to possession of the campground property?[25] Rotoiti has established a right to possession of the campground property. It has proved the mortgage over the property and that the mortgage is registered against the title as a first mortgage. It has shown that the mortgage contains remedies for default, including the right to take possession of the property. It has proved default under the mortgage in that the loan was not repaid when it fell due. It has given a valid notice under s 119 of the Property Law Act. On the expiry of the time for remedying defaults, the mortgagor had not remedied them. Rotoiti's right to possession accrued on the expiry of the notice. As Rotoiti has proved its right to possession of the property, the receivers have established, by virtue of clause 8.3 of the mortgage, that they are also entitled to possession of the property. The right to possession includes the right to quiet enjoyment of the property and to evict others.Can Mr Pickens and Ms van Veen rely on the lease that Ms Lambert granted to Mr Pickens and his late wife and the sub-lease by Mr Pickens and his late wife to Ms van Veen's company?[26] Mr Pickens claims that his right to occupy the campground property derives from the lease granted by Ms Lambert. In response, the plaintiffs say that that defence is misconceived because Ms Lambert could not grant a lease over the property.[27] An essential characteristic of the lease is that it confers a right of exclusive possession on the lessee.6 Ms Lambert could grant exclusive possession by way of the lease only if she had the right to exclusive possession of the property: nemo dat quod non habet. In support, the plaintiffs cited Kay v Lambeth London Borough Council.76 Fatac Ltd (In Liq) v Commissioner of Inland Revenue [2002] 3 NZLR 648 (CA) at [66]-[68].In that case a local authority had given licences over premises to the London and Quadrant Housing Trust (LQHT). That Trust had, in turn, granted tenancies of the premises. It was held that as the Trust had no estate in the premises, it could not give a lease. That meant that the Trust's tenants were trespassers, as7 Kay v Lambeth London Borough Council [2006] UKHL 10, [2006] 2 AC 465.against the local authority, once the Trust's licence was terminated. Lord Scott of Foscote put the matter this way:8But the Mellor v Watkins principle and the Pennell v Payne principle can have no relevance to a case in which a tenancy has been granted by someone without any estate in the land in question. The Bruton tenancies are all of that character. LQHT was, when it granted the Bruton tenancies, merely a licensee of Lambeth. The tenancies were not granted by Lambeth and were not carved out by LQHT out of any estate that Lambeth had granted to LQHT. They were not derivative estates. LQHT, prior to the grant of the 1995 lease, had no estate in the land. It merely had a contractual licence. In these circumstances, the Mellor v Watkins point that the intermediate landlord cannot by consensual surrender give away an interest that belongs to a sub-tenant has no substance. True it is that LQHT could not by a surrender of its licence give away or prejudice the rights of the Brutontenants against itself, LQHT. But these rights never were enforceable against Lambeth. Once the LQHT licence had been terminated the appellants were trespassers as against Lambeth.[28] The defendants' case is that Ms Lambert's right to grant a lease over the campground property derives from the agreement of 20 April 2011 under which she agreed to buy the property from Clan na Gael. Their argument is that the agreement provided for a possession date of 3 June 2011. Ms Lambert says that she took possession of the property on 3 June 2011 and that enabled her to grant the lease of the campground to Mr and Mrs Pickens on 10 November 2011.[29] While the agreement for sale and purchase fixed a possession date, that does not mean that Ms Lambert became entitled to possession on that date. The agreement for sale and purchase uses the form approved by the Real Estate Institute of New Zealand and the Auckland District Law Society (3 rd edition 2011). In an open agreement for sale and purchase (where detailed provisions as to settlement and possession are not spelt out), settlement and possession are interdependent. A purchaser only takes title upon payment of the purchase price in full. The purchaser only becomes entitled to possession upon taking title.98 At [143].9 Lysaght v Edwards [1876] 2 Ch D 499 at 506, followed in Kauri Developments Ltd v Nicholson(1986) 2 NZCPR 532 and Somervilla Orchards Ltd v AK Investments (2003) Ltd(2004) 6 NZCPR 40 (HC). See also D W McMorland Sale of Land (2nd ed, Brookers, Wellington, 2009) at [11.14(c)] and [12.04].[30] In this case, the agreement for sale and purchase relevantly provided that the purchaser did not become entitled to possession until payment in full of the purchase price:5.12 Purchaser default: late settlementIf the vendor is not in default and if any portion of the purchase price is not paid upon the due date for settlement:(2) the vendor is not obliged to give the purchaser possession of the property or to pay the purchaser any amount for remaining in possession [31] The plaintiffs' submissions also noted that another provision, clause 5.13(3), provides that when a purchaser does enter into possession before the purchase price is paid in full, the purchaser is a licensee only. Under Kay v Lambeth London Borough Council, a licensee cannot grant a lease. Because Ms Lambert never paid anything under the agreement for sale and purchase, she was never in a position to complete the settlement. She could never call for a transfer of title. She was never entitled to possession of the property.[32] As Ms Lambert never had an estate or interest in the campground property that gave her exclusive possession, she could not confer exclusive possession of the property by way of lease on Mr and Mrs Pickens. Mr and Mrs Pickens sub-leased the property to Ms van Veen in August 2011. At that time, they did not have any right or interest in the property that gave them exclusive possession. They could therefore not confer possession on Ms van Veen or her company. Even when they took the lease from Ms Lambert, they did not acquire the right to exclusive possession of the property vis-à-vis Clan na Gael. As between them and Ms Lambert, they did have a right to exclusive possession but that could not prevail against Clan na Gael which had never given Ms Lambert a right to exclusive possession. Accordingly neither Mr Pickens nor Ms van Veen can rely on the lease by Ms Lambert to Mr and Mrs Pickens or the sub-lease by Mr and Mrs Pickens to Elmor Holdings Ltd as giving either of them any right to possession of the campground property to the exclusion of Clan na Gael or anyone deriving a claim to possession from Clan na Gael.What is the effect of the disclaimers by the Official Assignee?[33] To refresh. There are two disclaimers by the Official Assignee. In November 2012 the Official Assignee disclaimed Ms Lambert's agreement for sale and purchase of 20 April 2011. In March 2013, the Official Assignee disclaimed the lease of the campground property to Mr and Mrs Pickens. The disclaimers have not been challenged. There was no appeal under the Insolvency Act 2006 against the decision of the Official Assignee to disclaim. No one argued that the Official Assignee was not entitled to treat the agreement for sale and purchase of 20 April 2011 and the lease of the campground property of 10 November 2011 as onerous property under s 117 of the Insolvency Act.[34] Sections 118 and 119 of the Insolvency Act deal with the effects of a disclaimer.118 Effect of disclaimerA disclaimer by the Assignee—(a) brings to an end, on and from the date of the disclaimer, the rights, interests, and liabilities of the Assignee and the bankrupt in relation to the property disclaimed:(b) does not affect the rights, interests, or liabilities of any other person, except in so far as is necessary to release the Assignee or the bankrupt from a liability.119 Position of person who suffers loss as result of disclaimer(1) A person suffering loss or damage as a result of disclaimer by the Assignee may—(a) claim as a creditor in the bankruptcy for the amount of the loss or damage, taking account of the effect of an order made by the Court under paragraph (b):(b) apply to the Court for an order that the disclaimed property be delivered to, or vested in, that person.(2) The bankrupt may also apply for an order that the disclaimed property be delivered to, or vested in, the bankrupt.(3) The Court may make an order under subsection (1)(b) or (2) if it is satisfied that it is fair that the property should be delivered to, or vested in, the applicant.[35] On her adjudication, all Ms Lambert's rights in the agreement for sale and purchase and the lease vested in the Official Assignee.10[36] The same approach applies to the Official Assignee's disclaimer of the November 2011 lease to Mr and Mrs Pickens. Ms Lambert's right under the lease to be paid rent came to an end. So also did her covenant that Mr and Mrs Pickens would enjoy the property free from disturbance. With that, any leasehold interest in the land fell away.The effect of the Official Assignee's disclaimer of the agreement for sale and purchase of April 2011 was to bring to an end all Ms Lambert's rights, interests and liabilities under the agreement. There was no longer a contractual obligation to pay the deposit or to pay the balance of the purchase price. Correspondingly, any rights that Ms Lambert had to call for a transfer of title or to take possession of the property also came to an end. Just as Ms Lambert had rights and liabilities under the agreement, Clan na Gael had correlative liabilities and rights. It could no longer call for payment of the purchase price nor was it obliged to grant possession. Once the Official Assignee disclaimed the agreement, neither party to it could call on the other to perform. All rights and liabilities had fallen away. Even if Ms Lambert had had any right to possession ahead of payment of the purchase price for the property, the disclaimer brought it to an end.[37] Hindcastle Ltd v Barbara Attenborough Associates Ltd11[38] In Willmott Growers Group Inc v Willmott Forests Ltd,dealt with the disclaimer of a tenant's interest in a lease. That decision, especially the speech of Lord Nicholls, is valuable guidance, because the disclaimer provisions of New Zealand's Insolvency Act 2006 and Companies Act 1993 are modelled on the disclaimer provisions of the English Insolvency Act 1986 which were the subject of that decision.1210 Insolvency Act 2006, s 101.the High Court of Australia dealt with disclaimer of a lessor's interest under a lease. The relevant disclaimer provision was s 568D(1) of the Corporations Act 2001 (Cth), which is not materially different from s 118 of our Insolvency Act. The majority drew on the11 Hindcastle Ltd v Barbara Attenborough Associates Ltd [1997] AC 70 (HL).12 Willmott Growers Group Inc v Willmott Forests Ltd [2013] HCA 51.approach taken in Hindcastle. They found that the disclaimer of the lessor's interest in the lease brought to an end any interest claimed by the tenant. French CJ, Hayne and Kiefel JJ said:[54] Each lease created an estate or interest in land. But the relevant question is whether the effect of the operation of the statute is that the estate or interest is brought to an end. In that respect, it is critically important to recognise that the tenants do not stand as third parties divorced from the rights, interests and liabilities of the company which are to be brought to an end. In every case the tenant is the party that has the liability, interest or right, which is correlative to the relevant right, interest or liability of the company. And contrary to the submissions of WGG, the company's rights, interests and liabilities in respect of the leases cannot be brought to an end without bringing to an end the correlative liabilities, interests and rights of the tenants. That is, to adopt the closing words of s 568D(1), "in order to release the company from liability", it is necessary to terminate the tenants' rights under the leases. This operates to terminate the tenants' estates or interests in the land.[39] Similarly Gageler J said:[74] Disclaimer operates to terminate all of the company's rights and obligations as a lessor. Those terminated obligations centrally include the obligation of the company to continue to give exclusive possession. If the obligation of the company to continue to give exclusive possession is terminated, the correlative right of the lessee to continue to have exclusive possession is necessarily also terminated. The consequence of the termination of the lessee's right to have exclusive possession is that the leasehold estate or interest must cease to exist.[40] I apply that approach here. Even if Ms Lambert did have any right to grant possession of the campground property, any obligation on her under the lease was terminated and the Pickens' correlative right to continue to have exclusive possession also terminated. Their interest under the lease, such as it was, came to an end.[41] In Hindcastle, Lord Nicholls was of the view that when a lessee's interest in a lease had been disclaimed, the sub-tenant's interest would continue.1313 Hindcastle, above n 11, at 89.He took that view because determination of the sub-tenant's interest was not necessary to free the tenant from liability.[42] While that might be the case when a lessee's interest is disclaimed, I do not accept that the same applies when the lessor's interest in a lease is disclaimed. If the effect of a disclaimer of a lessor's interest in a lease is to bring to an end any interest of the lessee, because the lessee can no longer hold the lessor to his obligations under the lease – including the right to enjoy quiet possession – then any claim of the sub-tenant to enjoy quiet possession would likewise fall away. Accordingly the effect of the disclaimer of the agreement for sale and purchase and of the lease to Mr and Mrs Pickens is that from the dates of the disclaimers any claim that Mr Pickens and Ms van Veen might otherwise have had to possession of the premises, derived from the agreement for sale and purchase and the lease, came to an end.If Mr Pickens and Ms van Veen establish any interest in the land, can they prevail over Rotoiti's rights to possession?[43] Even if Mr Pickens and Ms van Veen could show that any of the transactions on which they rely were effective to give them an interest in the campground property which they could assert against Clan na Gael, that would still not give them a defence to Rotoiti's right to possession of the property. That is because Rotoiti's right to possession under the mortgage given by Clan na Gael takes priority.[44] Rotoiti has a registered first mortgage which is not subject to any prior interest, barring Clan na Gael's right to call for a discharge upon payment of all sums secured under the mortgage. Its priority vis-à-vis those claiming under leases is made clear under ss 105 and 119 of the Land Transfer Act 1952 and s 138 of the Property Law Act.105. Transfer by mortgageeUpon the registration of any transfer executed by a mortgagee for the purpose of exercising a power of sale over any land, the estate or interest of the mortgagor therein expressed to be transferred shall pass to and vest in the purchaser, freed and discharged from all liability on account of the mortgage, or of any estate or interest except an estate or interest created by any instrument which has priority over the mortgage or which by reason of the consent of the mortgagee is binding on him.119. Lease not binding on mortgagee without consentNo lease of mortgaged or encumbered land shall be binding upon the mortgagee except so far as the mortgagee has consented thereto.138. Mortgagee may not enter into or take physical possession if mortgagee has consented to lease(1) If a mortgagee has consented to a lease of all or part of the mortgaged land or goods, the mortgagee may not, in accordance with section 137(1)(a), enter into or take physical possession of any land or goods that are subject to the lease, except in the exercise of a power conferred by section 147.(2) Subsection (1) applies whether the consent was given, or the lease was entered into, before or after—(a) the mortgagee entered into the mortgage; or(b) the default occurred; or(c) the goods became at risk.[45] It is necessary to note s 58 of the Residential Tenancies Act. Under that, a mortgagee who becomes entitled as against the landlord to possession of premises, subject to a residential tenancy, takes the premises subject to the tenancy. The mortgagee has the same rights as the landlord to terminate any tenancy agreement. It was on account of that provision that the receivers gave notice terminating any residential tenancies on 9 October 2013. In doing so they reserved their position that there was no valid lease of the campground property. The fact that they gave that notice does not count as a concession by them that there was in fact a valid residential tenancy or that they, or Rotoiti, had consented to a residential tenancy. As the campground property is more than 50 hectares, it is hard to see how the leases that Mr Pickens and Ms van Veen rely on could be residential tenancies under the Residential Tenancies Act.[46] With any question of residential tenancies cleared out of the way, the provisions of the Land Transfer Act and the Property Law Act give Rotoiti priority over the interests asserted by Mr Pickens and Ms van Veen. In particular, the mortgage over the campground property was granted before Clan na Gael sold the property to Ms Lambert and Ms Lambert purported to lease the property to Mr andMrs Pickens. The defendants do not suggest that Rotoiti did consent to the sale of the property by Ms Lambert or to the Pickens' sub-lease to Elmor Holdings Ltd. Rotoiti has given relevant evidence that it never consented to any of these transactions. In Cashmere Capital Ltd v Carroll,14[47] None of the transactions arranged by Ms Lambert, nor the sub-lease to Ms van Veen's company, can prevail against Rotoiti's right to possession as mortgagee.McGrath J made it clear that a mortgagee who is aware of a third party's interest, and passively stands by making no objection, cannot be held to have consented. This case does not even reach that position.Does Mr Pickens have an argument that the property is Maori customary land?[48] Mr Pickens' written submissions for the hearing had addressed the receivers' case on the questions above. But in the hearing, Mr Pickens conceded all these points. Instead he submitted that the campground property was Maori customary land, customary title had not been extinguished and because Maori customary land is inalienable the plaintiffs could have no interest in the land. Those are submissions sometimes made by Maori in land cases.15[49] Mr Pickens began with the Whakaputanga of 1835, referred to Article 2 of the Treaty of Waitangi and dwelt on those parts of the judgments of the Court of Appeal in Attorney-General v Ngati Apa that emphasised the need for clear and plain proof of extinguishment of customary title.But Mr Pickens is Pakeha. Coming from him, the submissions were incongruous.16[50] Mr Pickens is correct that no person has the capacity to alienate any interest in Maori customary land. Section 145 of Te Ture Whenua Maori Act 1993 so provides. Mr Pickens did not explain how he had come by way of an interest in the campground in the light of this provision. The definition of "alienation" in Te Ture Whenua Maori Act is wide enough to cover most forms of disposition including14 Cashmere Capital Ltd v Carroll [2010] 1 NZLR 577 (SC) at [79].15 For example, Kereopa v Te Roroa Whatu Ora Custodian Ltd [2013] NZCA 327.16 Attorney-General v Ngati Apa [2003] 3 NZLR 643 (CA).granting any lease or licence, although one of the exceptions from the definition is a lease or licence for up to three years.17[51] He is wrong however in claiming that the campground is Maori customary land. It is general land under s 129(1)(d) of Te Ture Whenua Maori Act. It has been brought under the Torrens system under the land transfer legislation and now has a computer identification in LINZ records. It has been in non-Maori ownership at least since his family trust owned it.His claim to occupy the land seemed to be for a longer period.[52] While the land may have once been Maori customary land, it has long since been the subject of a Crown grant or its equivalent. Its status as Maori customary land has long been extinguished.18[53] First, as the land is registered under the Land Transfer Act it is possible to take judicial notice that registration entails that customary status has been extinguished. In Maori Land Law there is a helpful explanation:There is no direct evidence as to when it ceased to be customary land. It may be possible to find out by historic research, which may require going into records kept under the old deeds registration system. Such an enquiry is not needed for this proceeding. That is because the property has been registered under the Land Transfer Act. That is significant for two reasons.194.2.1 (b) Conversion of customary title to freeholdThe core process was one of tenurial substitution, involving the cancellationof the Māori allodial tenure and its replacement by classical English feudaltenure. English land law is built around the concept of the Crown grant, by which the Crown, the only true "owner" of land, grants estates in land to its subjects. Theoretically (and to a large degree, practically), the Native LandsActs feudalised Māori land tenure. The Native Land Court carried out only the first step, that of identifying the rightful customary owners. This process of identification did not of itself change the tenurial relationship. Under the current Act, consistently with this, orders of the Land Court create only equitable and not legal rights. Tenurial substitution only occurred with the issue of the Crown grant – or its modern equivalent, a certificate of title17 Te Ture Whenua Maori Act 1993, s 4.18 ANZ National Bank v Uruamo [2012] NZHC 1895 at [24].19 Andrew Erueti "The Evolution of Māori Land Law 1862-1993" in Richard Boast and othersMāori Land Law (2nd ed, LexisNexis, Wellington, 2004)70 at [4.2.1(b)].under the land transfer system. In England itself, Crown grants are fictional: seldom can the original grant actually be traced. However, in New Zealand, as in other British colonies, the Crown grants are very real: in fact all titlesin New Zealand, including all Māori freehold land, can be traced back to anactual grant or, the equivalent, an initial certificate of title under the Land Transfer Acts.[Emphasis added.][54] The second comes from the indefeasibility provisions of the Land Transfer Act. These include ss 62, 63, 64, 75 and 78 of the Land Transfer Act and s 34 of the Land Transfer (Computer Registers and Electronic Lodgement) Amendment Act 2002. Under s 62, a registered proprietor of land holds that interest in land free of other interests, except those that are noted on the register.20 Alleged customary rights deriving from antiquity cannot survive under s 62 and the other indefeasibility provisions of the Land Transfer legislation.21[55] Mr Pickens has taken the Court of Appeal's decision in Ngati Apa out of context. That case concerned rights in foreshore and seabed, land that typically is not registered under the land transfer system. It is because such land was outside the Torrens system that the question of continued customary rights was possible. Nothing in Ngati Apa supports an argument for continued customary rights in general land brought under the Land Transfer Act.For completeness I add that the LINZ computer record for the campground does not show registration of any saved Maori customary interests.[56] Mr Pickens' arguments relying on claims of customary title are misconceived and must fail.Ms van Veen[57] Ms van Veen explained that she had taken the sub-lease of the campground at Mr Pickens' request and she had done so in reliance on his say-so that he was able to give her company a sub-lease. That is very understandable. She would of course respect the title of her sub-lessor. But Mr Pickens' claims to occupy the campground and to grant a sub-lease are not sound in law and cannot stand up against the right of20 Other exceptions to the indefeasibility principle are not relevant here.21 Kereopa, above n 15, at [28].the mortgagee to possession. Ms van Veen cannot be in a better position than Mr Pickens.Outcome[58] For the above reasons I was satisfied that the plaintiffs have shown that Mr Pickens and Ms van Veen do not have any defence to the claim that they must vacate the campground property. Accordingly I made these orders:(a) By 14 April 2014 Mr Pickens and Ms van Veen must vacate and deliver up possession of the property described in identifier 130488, being Lot 2, Deposited Plan 331773 with an area of 59.7792 hectares more or less.(b) The defendants shall pay the plaintiffs costs on a 2B basis. If the parties cannot agree costs, memoranda may be filed. The defendants shall file their memoranda within five working days of receiving the plaintiffs' memorandum.(c) Leave is reserved to apply for further directions............................................R M BellAssociate Judge