LI v FORDE [2017] NZCA 426

LI v FORDE [2017] NZCA 426 [22 September 2017]IN THE COURT OF APPEAL OF NEW ZEALANDCA102/2017[2017] NZCA 426BETWEEN HU JIAN LIAppellantAND CAVAN JAMES FORDE AND MARTINCAVAN MCLEOD FORDERespondentsHearing: 27 July 2017Court: French, Simon France and Toogood JJCounsel: R J M Sim for AppellantL A Andersen for RespondentsJudgment: 22 September 2017 at 11.30 amJUDGMENT OF THE COURTA The application for leave to appeal is granted on the question:"Whether the purchaser of a title that is limited as to parcels canrequisition the location of improvements contracted for when part of suchimprovements appear to lie within an adjacent guaranteed title."B We answer the question: no.C The appeal is dismissed.D The appellant must pay the respondents costs for a standard appeal on aband A basis and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Simon France J)Introduction[1] The appellant as purchaser entered into a sale and purchase agreement with therespondents for a residential property. The title in question was limited as to parcels.Upon inspection it appeared to the purchaser that part of the house being purchasedwas in fact on the neighbour's property. The purchaser requisitioned the vendors inrelation to the apparent defect. The vendors took the view that the requisition wasinvalid because of the limitation as to parcels, and declined to act. The purchaserthereupon cancelled, an action not accepted by the vendors. The matter eventually ledto proceedings. The District Court agreed with the purchaser,1 but the High Courtallowed the appeal holding the requisition to be invalid, and therefore the cancellationalso to be invalid.2[2] Leave to appeal is granted on the following question:3Whether the purchaser of a title that is limited as to parcels can requisition thelocation of improvements contracted for when part of such improvementsappear to lie within an adjacent guaranteed title.Facts[3] The agreement for 9 Brunel Street, Dunedin was signed on 15 May 2013. Thetitle is limited as to parcels although that was not noted on the unconditional agreementfor sale and purchase. On 30 May the purchaser's solicitor viewed aerial photos heldby the Dunedin City Council on what is known as "Webmap". Those photos have the1 Li v Forde [2015] NZDC 15375.2 Forde v Li [2016] NZHC 219, (2016) 17 NZCPR 299.3 The process of granting leave became unfortunately complex. Aspects of the leave granted in theHigh Court were considered problematic. In a minute of 12 July 2017 designed to redress theseaspects, leave was stated to have been given. However, it would appear leave cannot be given bya single judge so, for the avoidance of doubt, we confirm leave to appeal is granted on the questionas set out. We also note that the respondent sought to argue in the alternative that the requisitionwas not made in time. Not surprisingly that factual issue was not a matter on which leave to appealwas given, and we decline to address it.apparent boundaries superimposed on them. They showed a portion of the housesituated at 9 Brunel Street to be located on the neighbouring property.[4] The purchaser requisitioned the vendors in these terms:We hereby requisition the title. The house is not within the boundaries. Pleasefind included aerial photograph.[5] The vendors replied that the grounds set out did not give rise to an ability torequisition, and no steps would be taken. On 12 June 2013 the purchaser purported tocancel the contract; the vendors did not accept the cancellation and served a settlementnotice. The purchase was not settled and the purchaser sued for return of the deposit.[6] It can be noted that the leave question refers to "an adjacent guaranteed title".At some point there had been subdivision of the adjacent site on which the house at9 Brunel Street seemed to be encroaching. By clerical error the new title that wasissued did not have a memorial recording it was limited as to parcels, thereby creatingthe impression that the title was guaranteed. However, as a consequence of the presentissue bringing this to light, the notation was reinstated on the title in July 2013. Butat the time of the dispute it seemed a guaranteed title.[7] We are advised that subsequent to this dispute the issues around the titles in thestreet have been resolved with the formal boundaries now reflecting the long standingoccupational boundaries. However, the question of whether the purchaser was entitledto requisition remains relevant to the issues between the parties.Decision[8] The starting point is that an agreement for sale and purchase of residential landwill be taken to include the improvements to the land.4 So here, absent an expressreservation, the sale of 9 Brunel Street is to be taken to be a sale of both the land andthe house on it. When there is a limitation as to parcels, and when at the same time it4 D W McMorland Sale of Land (3rd ed, Cathcart Trust, Auckland, 2011) at [8.06]; andPeter Blanchard A Handbook on Agreements for Sale and Purchase of Land (4th ed,Handbook Press, Auckland, 1988) at [205].appears the house being purchased may in part be situated on the neighbouringproperty, two competing rules arise.[9] First, where it appears that an improvement on the land to be purchasedencroaches onto a neighbouring property, that is a matter that can be the subject ofrequisition. Professor McMorland observes of this situation:5 the vendor must be in default through being unable to convey title to theencroaching portion, and to that extent there is a defect in the vendor's title inrespect of which the purchaser should object and requisition. This is so evenif the vendor has a possessory title or an easement for the encroachment; inneither case does the vendor have the title described in the contract.[10] There can be no dispute here that the purchaser — based on the facts that theneighbouring land appeared to have a guaranteed title, and that the aerial photographsheld by the Council appeared to show encroachment — had a sufficient basis on whichto requisition unless the fact that the title was limited as to parcels affected this. Thisis where the second rule applies.[11] A title may be limited as to title, or as to parcels, or both.6 It is well-settled thata limitation as to parcels cannot be the subject of requisition. It is a purchaser'sresponsibility, not a vendor's, to obtain a survey and perfect the title if he or shewishes. The following passage from Blanchard's A Handbook on Agreements for Saleand Purchase of Land accurately sets out the law, and explains the different rulesapplying to limitations as to title and limitations as to parcels:7MATTERS INCAPABLE OF BEING REQUISITIONED(a) Limitations as to parcelsA limitation as to parcels is not a title defect. It indicates that theboundaries and the area of the property are not guaranteed in terms ofthe Land Transfer Act but, equally, it does not necessarily mean thatthere are discrepancies in those measurements. A purchaser who isprepared to go to the expense of having the property surveyed mayfind that there are discrepancies and may be able to claimcompensation from the vendor under the compensation clause. In anextreme case the survey may show that the vendor has no title to alarge part of the property which is the subject of the contract. Thiswould enable the purchaser to cancel. However, in the absence of5 McMorland, above n 4, at [9.09(d)(ii)] (footnotes omitted).6 Land Transfer Act 1952, s 191.7 Blanchard, above n 4, at [818] (footnotes omitted).such proof by the purchaser he cannot requisition for removal of thelimitation as to parcels. A limitation as to title is, of course, a matterof title. Section 54 of the Property Law Act 1952 requires a vendor athis expense to do such acts, prove such matters and comply with suchrequisitions as are necessary to remove the title limitation. Thissection would not be overridden by a standard requisitions clause.Relatively few such limitations now exist.[12] To like effect is a passage from Dr Brookfield who, relying on earlier opinionsby S I Goodall and E C Adams, observed there is "no doubt" that a limitation as toparcels does not constitute a defect to which a purchaser can object.8 The memorialas to parcels is merely a warning to those searching the title that its area and boundariesare not guaranteed under the Land Transfer Act 1952.[13] Section 41 of the Property Law Act 2007 also makes the distinction clear. Byvirtue of that section a vendor is obligated to perfect a title limited as to title, but notas to parcels. It provides:941 Vendor must ensure register not limited as to title (whether or notregister is also limited as to parcels)(1) This section applies to an agreement for the sale and purchase of landcomprised in a register that—(a) was created before the making of the agreement; and(b) is limited as to title under Part 12 of the Land TransferAct 1952 (whether or not the register is also limited as todescription of parcels under section 191 of that Act).(2) The vendor must, before the time of settlement, and unless theagreement provides otherwise,—(a) do all acts (for example, prove all matters and comply with allrequisitions by the Registrar-General) necessary to cause theregister to cease to be limited as to title (whether or not theregister remains limited as to description of parcels); and(b) meet the expenses of complying with paragraph (a), includingpayment of any fee prescribed under the Land Transport Act1952.8 F M Brookfield "The Requisitions Clause in Agreements for Sale and Purchase" (1977)3 New Zealand Recent Law 114 at 121. Referring to S I Goodall The law and practice relating toconveyancing in New Zealand, with precedents (Butterworths, Wellington, 1935) at 366;E C Adams and S I Goodall Goodall's law and practice relating to conveyancing in New Zealand,with precedents (2nd ed, Butterworths, Wellington, 1951) at 558; and E C Adams The LandTransfer Act 1952 (2nd ed, Butterworths, Wellington, 1971) at 165.9 Emphasis added.[14] The question in the present case is whether the requisition concerning theimprovements, permissible in relation to a guaranteed title, remains permissible wherethe title is limited as to parcels. We are satisfied that because of the essential natureof the requisition, it does not. Although the requisition purports to demand assurancesas to clear title for the fixtures on the land, the reality is that it seeks to have the vendorssort out the limitation as to parcels by arranging a survey and establishing the correctboundaries. Whether there is in fact an issue with title because of a defect in theownership of the improvements will only become clear by that process of survey. Anysuch survey is the responsibility of the purchaser.[15] We do not consider the outcome would have been altered by the fact theproperty over which the encroachment was apparently occurring seemed to have aguaranteed title. That fact strengthens the case for an apparent flaw in title and makesplain there is a basis to requisition, but it does not alter the nature of the requisitionrequest which is necessarily a requisition to prove the boundaries.[16] We accept Mr Andersen's analysis of what was required. The purchaser didnot have to complete the transaction prior to the issue being clarified, as long as thepurchaser chose to have a survey undertaken. Adopting the approach set out in Holmesv Booth, the purchaser would at that point be entitled to defer settlement until thesurvey result was known.10 What options were next available would depend on theresult of the survey — that is whether there was encroachment and, if so, what its scalewas. If the purchaser chose not to have a survey done, then the purchaser would beobliged to settle as contracted.Result[17] The application for leave to appeal is granted on the question stated in [2]. Weanswer the question: no.[18] The appeal is dismissed.10 Holmes v Booth (1993) ANZ ConvR 491 (CA).[19] The appellant must pay the respondents costs for a standard appeal on a band Abasis and usual disbursements.Solicitors:Gallaway Cook Allan, Dunedin for AppellantAlistair D Paterson Lawyer, Dunedin for Respondents