BURMEISTER V REGISTRAR-GENERAL OF LAND HC TAU CIV-2008-470-000912

BURMEISTER V REGISTRAR-GENERAL OF LAND HC TAU CIV-2008-470-000912 3 May 2011IN THE HIGH COURT OF NEW ZEALANDTAURANGA REGISTRYCIV-2008-470-000912IN THE MATTER OF the Land Transfer Act 1952AND IN THE MATTER OF a claim for compensation pursuant to s172 of the Land Transfer Act 1952BETWEEN KENNETH SIDNEY BURMEISTER ANDVALERIE JOAN BURMEISTERPlaintiffsAND REGISTRAR-GENERAL OF LANDDefendantHearing: 25 March 2011Counsel: D G Chesterman for PlaintiffsJ A L Oliver for DefendantJudgment: 3 May 2011JUDGMENT OF ASHER JThis judgment was delivered by me on Tuesday, 3 May 2011 at 11ampursuant to r 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors/Counsel:D G Chesterman, Bankside Chambers, Level 22 Lumley Centre, 88 Shortland Street, Auckland 1010. Email: damian@chestermanlaw.co.nzJ A L Oliver, Crown Law Office, PO Box 2858, Wellington 6140.Email: john.oliver1@xtra.co.nzIntroduction[1] The plaintiffs claim compensation against the Registrar-General of Landfollowing the registration of documents arising from fraudulent transactions thatdeprived them of title to their property. They have agreed that a limitation pointraised as a complete answer to the claim by the Registrar-General is sensiblydetermined as a preliminary issue before the possibly needless cost of a full hearing.[2] This proceeding follows a lengthy round of litigation between the plaintiffsKenneth and Valerie Burmeister and a number of defendants including John andGillian O'Brien and Geoffrey Clayton. The Burmeisters obtained judgment againstthe O'Briens and Mr G Clayton on causes of action which included deceit.However, despite that success they have lost ownership of their home and it may bethat their only way of achieving redress will be to succeed in this present proceedingagainst the Registrar-General. It is necessary to set out how the state of affairs hasarisen.Background[3] The background to the Burmeisters' present situation is set out fully in the substantive judgment in their proceedings against the O'Briens and others.1 Theparties have accepted the factual findings in that judgment. I will summarise therelevant facts drawn from the judgment. It is necessary to set out certain aspects indetail, as they are relevant to the issues to be determined.[4] In 2001 the Burmeisters were a retired couple living in Mt Maunganui. They owned their home at 1 Lotus Avenue, Mt Maunganui, having purchased the propertyin 1990. There was a mortgage still on the title, but it had been repaid.Mr Burmeister was receiving the community wage. He and Mrs Burmeister werenot at that time eligible for superannuation and were barely managing on theirincome. They were susceptible to any proposals or ways to improve their financiallot.1 Burmeister v O'Brien [2010] 2 NZLR 395 (HC).[5] In mid-2001 a Mr John Clayton made contact with the Burmeisters.Mr J Clayton had previously been Mr Burmeister's superior in his work. He hadbeen a benevolent and helpful presence in their lives, and was considered to be atrusted friend. He had previously given the Burmeisters advice on a number ofmatters.[6] Mr J Clayton was himself retired. He advised and encouraged the Burmeisters to enter into an investment scheme into which he had placed his home. The scheme was promoted and organised by a number of people including his son,Mr G Clayton, who had been a church pastor. Mr J Clayton was very pleased withthe return he was getting. I found that Mr J Clayton sincerely believed in his son'sscheme and he ultimately lost his own home as a result.[7] Mr G Clayton was known to the Burmeisters as the son of Mr J Clayton.They had previously had contact with him as a teenager and Mr Burmeister had oncegiven him a holiday job as a rating clerk. They were aware that he was a pastor inthe Hawkes Bay. They thought him to be a trustworthy person.[8] The Burmeisters met with Mr G Clayton and other promoters of the scheme. It was said that the proposal would involve the Burmeisters placing their title toLotus Avenue into a ―secure family trust in return for receiving weekly paymentsover three years and a lump sum. At the end of the three-year period the Burmeisterswould have the option of remaining in the scheme or leaving it. The ―secure familytrust meant that the home would be held for them and their benefit. In a way theynever really understood, it would be used to make money for them.[9] In the judgment I described the Burmeisters' position and understanding atthis time as follows:2[T]he Burmeisters were, in a commercial sense, quite naive. They had never enjoyed any particular financial success, and lacked any significant commercial experience, and they assumed that there were others more astute in the commercial world who were able to make money in ways that they did not comprehend. They were prepared to put their trust in Mr Geoffrey Clayton and those with whom he was associated, in the expectation that they would be sufficiently clever to make money without risk to them.2 At [288].[10] After the initial discussions and a meeting at the Papamoa Sports Club, inmid to late July 2001, the Burmeisters went to a second meeting at the same venue.There was a short address by Mr G Clayton following which the Burmeistersindicated that they wished to join the investment scheme. Mr G Clayton presentedthem with what appeared to be a one-page blank A4 sheet of paper and advised themthat if they signed it they would be acknowledging their commitment to joining thescheme. They signed this document.[11] In fact the document was far more than an acknowledgement. By afraudulent sleight of hand they had been fooled into signing a blank memorandum oftransfer. Following the meeting the transfer was filled in by Mr G Clayton or hisassociates showing a purchase by the O'Briens who are business associates ofMr G Clayton and involved with him in the business of obtaining properties. APatricia Patterson, who was the O'Briens' accountant, was also shown as apurchaser. The Burmeisters were persuaded to obtain a discharge of mortgage fromtheir bank, which they gave to Mr O'Brien at the request of Mr G Clayton. Theythought that Mr O'Brien was a friendly associate of Mr G Clayton. The O'Brienshad been entirely unknown to the Burmeisters. Unbeknown to the Burmeisters theO'Briens then proceeded to obtain a mortgage from the ASB for $172,000 on thesecurity of the property that was to be transferred to them. The O'Briens presentedthemselves to the ASB as purchasers for value from the Burmeisters.[12] I found that the Burmeisters were not told by Mr G Clayton, and did notrealise, that they were signing a document that was a transfer of Lotus Avenue, orindeed a transfer of any type.3 I also found that a statement made by Mr G Claytonat the second meeting that the property would go into a secure family trust was adeliberate lie.4 The Burmeisters may have contemplated some sort of transfer to asecure family trust for their benefit, but I found that they would not have signed ablank transfer or any document which enabled the transfer to an unnamed thirdparty.5 I found that the transfer of the property to the O'Briens without any benefit3 At [72].4 At [86].5 At [74].to them was a fraud on them, and that they had been tricked into signing the transfer.6[13] In early September 2001 a false sale and purchase agreement was drawn upwhich showed a sale and purchase by the Burmeisters to the ―O'Brien Trust and/ornominee. This agreement was drawn up without the Burmeisters' knowledge andtheir signatures were forged on the sale and purchase agreement. Copies of theirsignatures were in some unknown manner copied from the blank transfer documentonto that agreement.7 The false agreement may have been drawn up to persuade theASB that there was a genuine purchase, although in the end it does not appear tohave been used for any purpose.[14] On 8 October 2001 the solicitor acting for the O'Briens sent a solicitor'scertificate and other relevant documents to the ASB confirming that he had compliedwith their instructions. On that day the ASB advanced $172,000 into the solicitor'strust account and that money was then paid to a company associated withMr G Clayton and the O'Briens, ICMG Holdings Ltd (―ICMG). By this timeMs Patterson was no longer shown as one of the purchasers.[15] Thus, within the space of approximately a month from the Burmeisterssigning the blank document at the Papamoa Sports Club in early September theirproperty had been transferred to the O'Brien Trust, mortgaged to the ASB and$172,000 had been advanced on the security of that mortgage and paid to ICMG.This was entirely without the Burmeisters' knowledge.[16] The Burmeisters were to receive $220 per week as part of the trustarrangement. The payments were made but rather intermittently. In April 2002 theywere asked to sign some further documents. By this time they had been expressingsome concerns about the payments, and various apparently ―legal documents wereput to them as a way of appeasing those concerns, and to mislead them into believingthat everything was all right.6 At [76].7 At [33]–[34].[17] The Burmeisters were not getting regular payments as promised and becameconcerned. In September 2002 Mr Burmeister by telephone checked with the LINZoffice in Hamilton and discovered that the property was in the name of the O'Briens.Mr Burmeister requested a meeting with Mr G Clayton and others involved in thescheme. The meeting took place on 14 October 2002 at Lotus Avenue. TheBurmeisters were present as was Mr G Clayton. There were three other personsconnected with ICMG.[18] The Burmeisters gave evidence that during the meeting there was some heatgenerated, but they were assured that their house was safe in a trust which wassecure. They gave evidence, which I accepted, that the assurances led them tobelieve that the house was safe and they received a letter the day after whichconfirmed this. I summed the matter up in this way in my judgment:8At that meeting, although it became heated for a while, they were assured that their house was safe and had been placed in a trust as had been agreed, and that it was perfectly secure. They were given a document that stated that―your property is safe and the qualification ―(ie always under the management of the group) would have been glossed over. It said that the relationship was based on partnership. Geoffrey Clayton and Mr Daniels'assurances led the Burmeisters to believe that the house was still theirs, buttemporarily held in a trust called the O'Brien Trust. They were persuaded toaccept the position, which they continued to do through the months that followed. It was not until 14 April 2003 when their attention was drawn to an article published in the Sunday Star Times on 13 April 2003, that theyrealised that they had been, as Mr Burmeister described it, the ―victims of a scam. This newspaper article outlined how ICMG had caused families to lose their homes, and how ICMG was being investigated. Mr Geoffrey Clayton was mentioned by name as one of those responsible. Lawyers thenbecame involved, and in June 2003 there was a meeting with the O'Briens toendeavour to reach some arrangement for the O'Brien Trust to transfer thetitle to Lotus Avenue back to the Burmeisters. The meeting was unsuccessful.[19] Right through this period of 2001 and 2002 the Burmeisters continued to livein the house. There was no challenge to their occupation and they continued toreceive payments, although on an intermittent basis. Consistent with this, everythingthat Mr G Clayton and others connected said to the Burmeisters led them to believethat they were still the owners of the property subject to there being a secure familytrust in their ultimate favour in place.8 At [270].[20] In considering the defence of laches in the substantive judgment I observed:9At all times after they discovered the true situation, the Burmeisters' positionthat they considered that they owned the property and had had it wrongly taken from them, was clearly expressed. While in hindsight these proceedings might have been filed more promptly, and taken a different course to ensure a quicker hearing, these circumstances do not amount to unreasonable delay on their part. Given that they had been defrauded bythose against whom they will succeed, the O'Briens and Mr GeoffreyClayton, it would be most unfair for them to be deprived of a remedy. Theydid not take steps earlier because of Geoffrey Clayton's fraudulent assurances.[21] I found that it was not until about 14 April 2003 when the Burmeisters read an article exposing a scam by Mr G Clayton and others, that they went to see lawyers. Only then did they realise that they had been defrauded.[22] There was through the latter part of 2003 a Serious Fraud Office investigationinto the affairs of ICMG. On 10 February 2004 the ASB served a s 92 Property LawAct notice on the Burmeisters. On 16 June 2005 the Burmeisters filed a substantiveproceeding against seven defendants including the ASB.[23] The ASB applied to be struck out and succeeded on this on 30 August 2006.10On 2 September 2008 the High Court declined the Burmeisters' application for areview of that decision.11 On 13 November 2008 the High Court declined theBurmeisters' application for leave to appeal to the Court of Appeal against the strike-out decision.12[24] The trial then commenced in March 2009 and continued later part-heard,culminating in judgment being delivered on 1 December 2009.[25] These proceedings were filed on 22 October 2008.[26] The ASB, as I have noted, was struck out from the proceedings commencedagainst it. With interest the mortgage arrears amount to in excess of $500,000, andthe ASB as mortgagee could take steps to take possession of, or sell, the property.9 At [274].10 Burmeister v O'Brien (2006) 11 TCLR 737 (HC).11 Burmeister v O'Brien [2008] 3 NZLR 842 (HC).12 Burmeister v O'Brien HC Tauranga CIV-2005-470-396, 13 November 2008.Despite the strength of its legal position, the ASB has chosen not to take steps to enforce its rights as mortgagee up to this point in time. The Burmeisters are at present still allowed to occupy their home.The issue[27] The preliminary issue this Court should determine:―Is the plaintiffs' claim time-barred by s 180 of the Land Transfer Act1952?[28] There are five possible dates when the limitation period commences to run. These can be summarised as follows:(a) 14 November 2001 being the date of the actual deprivation of ownership when the transfer from the Burmeisters to the O'Briens and discharge of mortgage, and the mortgage between the O'Briensand the ASB, were registered.(b) September/October 2002 when the Burmeisters discovered that the title to the house was no longer in their names, but in the name of theO'Briens, and then proceeded to have further discussions withMr G Clayton and his associates.(c) April 2003 when the Burmeisters read the Sunday Star Times article and went to see solicitors.(d) Either 30 August 2006 (when the Burmeisters' claim against the ASB as mortgagee was struck out) or 13 November 2008 (when leave toappeal was declined).(e) 1 December 2009 when the substantive judgment finding for the Burmeisters in deceit against the O'Briens and Mr G Clayton was delivered.[29] If time began to run at either of options (a) or (b) the Burmeisters will be out of time. If it began to run at any of options (c), (d) or (e) the Burmeisters will be in time.Legal framework[30] The claim is based on s 172 of the Land Transfer Act 1952 (―the Land Transfer Act) which provides:172 Compensation for mistake or misfeasance of RegistrarAny person—(a) Who sustains loss or damage through any omission, mistake, or misfeasance in the performance of any duty [, function, or power imposed or conferred] under this Act on the Registrar or an employee of the chief executive of the Department [or person to whom a delegation has been made under section 5]; or(b) Who is deprived of any land, or of any estate or interest in land, through the bringing of the land under the Land Transfer Acts, or by the registration of any other person as proprietor of that land, or by any error, omission, or misdescription in any certificate of title, or in any entry or memorial in the register, or has sustained any loss or damage by the wrongful inclusion of land in any certificate as aforesaid, and who by this Act is barred from bringing an action for possession or other action for the recovery of that land, estate, or interest—may bring an action against the Crown for recovery of damages.(Emphasis added.)[31] This is a claim brought under s 172(b). The Burmeisters claim to be deprivedof land by the registration of the ASB as a ―proprietor of that land, and claim to be barred by the Land Transfer Act from bringing an action for possession of recovery of the land. They assert that they are barred because of the Land Transfer Actconcept of indefeasibility of title, and in particular by s 182 which protects a personwho takes an interest in the land in reliance on the Registrar from the claims of otherpersons except in the case of fraud. Thus, it will be said the Land Transfer Act hasprotected the ASB from the Burmeisters' claim and they can claim in turn from theRegistrar-General.[32] Mr Oliver for the Registrar-General accepts for the purposes of consideringwhether the action is time-barred that there is an arguable cause of action based on s172(b).[33] Section 180 of the Land Transfer Act imposes a limitation period. It provides:180 Limitation of actions(1) No action for recovery of damages as aforesaid shall lie or be sustained against the Crown unless the action is commenced within the period of 6 years from the date when the right to bring the action accrued; but any person being under the disability of infancy or unsoundness of mind may bring such an action within 3 years from the date on which the disability ceased.(2) For the purposes of this section, the date when the right to bring an action accrued shall be deemed to be the date on which the plaintiff becomes aware, or but for his own default might have become aware, of the existence of his right to make a claim.(Emphasis added.)The parties' respective positions[34] The issue is whether the effective proviso to the start of the limitation periodconstituted by subsection (2) applies. Both Mr Oliver for the Registrar-General andMr Chesterman for the Burmeisters accept that the limitation issue to be determinedunder s 180(2) is the date on which the Burmeisters became aware, or but for theirown default might have become aware, of the existence of the right to make a claimagainst the O'Briens. Mr Oliver accepts that time does not run from the date of thefraudulent transfer on 14 November 2001 as the Burmeisters were unaware of thetrue nature of the transaction, and the fraud that was being perpetrated on them.There is therefore no suggestion by either party that option (a) applies.[35] The ―claim to be considered is the statutory claim for compensation unders 172. Mr Chesterman first submitted that the date of becoming aware of the claimcould have been the date of the substantive judgment where the Burmeistersestablished deceit against Mr G Clayton and the O'Briens on 1 December 2009.This turns on the assumption that it was not until then that the Burmeisters wereactually deprived of the property. Mr Chesterman also submitted that under s 180(2)time does not begin to run until the party receives advice of the existence of thestatutory right to compensation, which would have been about that time.[36] Mr Chesterman alternatively submitted that the Burmeisters could not have become aware of their right to make the claim until the judgment on the strike-out claim was delivered. It was only then that the loss was sustained. Until then it was a contingency. It was necessary, he submitted, for the Burmeisters to have exhausted their rights against the ASB. Until the judgment it could not be said that the Burmeisters were actually ―deprived of their land in terms of s 172(b). Mr Chesterman placed the strongest emphasis on this as the correct time when thelimitation period began to run.[37] Finally Mr Chesterman submitted as the final possibility that time began to run when the Burmeisters first became aware that the land had been permanently taken away from them and a mortgage registered against it, and that this was notuntil April 2003 when they read the Sunday Star Times article. It was submitted thatthe Burmeisters did not have knowledge of their loss until after April 2003 whenthey first visited their solicitors.[38] Mr Oliver submitted that the only correct time was September 2002 when the Burmeisters learned from LINZ that the O'Briens were registered against the title.He submitted that a prudent person on discovering that the property was no longer intheir names would have immediately taken legal advice and taken action.Interpretation of s 180(2)[39] The concept behind the compensation provisions in the Land Transfer Actwas well explained by Sir Robert Torrens himself when he said:13[A]s we cannot give the land to one and the improvements to another, thereis no way of avoiding injustice other than that adopted in the SouthAustralian Act, giving compensation and money to the rightful proprietor13 Sir Robert Torrens The South Australian System of Conveyancing by Registration of Title,(Adelaide, Land Titles Office, 1859) at 9 quoted in Tom Bennion & Others New Zealand LandLaw (2nd ed, Brookers, Wellington, 2009) at [2.11.01].indefeasibility of title is a necessary corollary to the [abolition of the respective investigation of titles], and from this again follows the necessityof providing a fund from which rightful heirs and others may becompensated for the value of land which they are debarred from reclaimingagainst persons who have acquired title by registration.[40] Thus, while indefeasibility lies at the core of the Land Transfer Act, as a corollary those who are innocently deprived of a title they would otherwise enjoy by the application of that doctrine are provided with a basis on which to claimcompensation against the Registrar-General.[41] Section 180(1) was originally the sole limitation provision. There was nopostponement of the time running, even if there was no knowledge on the part of theowner that there had been a dealing that had deprived that owner of title. This wasseen as harsh in the particular context of claims against the Registrar-General, wherethere might be no discovery of mistakes by the Registrar-General until long after themistakes had been made. That was generally when a claimant who thought it hadgood title later innocently sought to register a dealing only to find its interestsuperseded or compromised by an earlier unknown dealing.[42] To meet this injustice s 180(2) was added by s 5 of the Land Transfer Amendment Act 1959. It constituted a statutory recognition of the now widespread principle of reasonable discoverability.14 The Hansard extracts relating to the first and second readings of the Bill show that the focus of Parliament was on claims against the Registrar-General for omissions, mistakes or misfeasance, rather than claims arising from deprivation of land because of the application of theindefeasibility provisions.15[43] Under s 180(2) the plaintiff's time runs from when the plaintiff:(a) Became aware; or(b) But for his or her own default might have become awareof the existence of a right to make a claim.14 Melville-Smith v Attorney-General [1996] 1 NZLR 596 (HC) at 600–601.15 (13 August 1959) 320 NZPD 1251.[44] Hammond J had occasion to consider s 180(2) in Melville-Smith v Attorney-General. He observed:16Discovery provisions in limitation enactments raise their own kinds of difficulties. In theory, they could be constructed around (1) knowledge of the harm sustained; (2) knowledge that the harm was attributable in some degree to the conduct of another; (3) knowledge of the identity of the person (the defendant) referred to in (2) above; (4) knowledge that the harm (considered alone) was sufficiently serious to have justified bringing an action; and (5) knowledge that an action against the defendant would, as a matter of law, have a reasonable prospect of success. Section 180(2) appears to encompass at least (1), (2) and (3), supra, and probably (4). For, the "right to make a claim" necessarily requires known harm; known to be attributable in some degree to the conduct of the Registrar; and of such a degree as would sustain an action.It may also be arguable that, on the wording of s 180(2), it is not until a party receives advice of the existence of the statutory right to compensation that time begins to run. (See my theoretical (5), supra.) If so, the amendment was extremely liberal. But I need not decide that point. It is sufficient to dispose of this issue for the Court to hold that knowledge of the first necessary prerequisite — harm — did not arise until late 1987. Hence the claim is in time by several months.[45] The categories set out will be considered. Mr Chesterman placed somereliance on the fifth category.Options (d) and (e)[46] Mr Chesterman's most ambitious argument was that option (e) applied, and that time ran from when the substantive judgment was delivered on 1 December 2009, when it was established that the O'Briens and Mr G Clayton had defrauded theBurmeisters. Mr Chesterman submitted that until the deprivation of the interestreferred to in s 172(b) actually takes place and is confirmed by legal decision, theability to successfully claim under s 172(b) does not arise.[47] However, the deprivation suffered by the Burmeisters of their propertythrough the fraud of the O'Briens and Mr G Clayton had occurred in terms ofs 172(b) at the time of the registration of the person with a competing interest as a16 At 602.proprietor. That person was the ASB and its mortgage was registered on14 November 2001. That was the event that deprived the Burmeisters of the land.[48] Mr Chesterman emphasised that s 180(2) was a remedial measure designed toovercome a limitation regime that was seen as too harsh. He argued that it was notreasonable to join the Registrar-General from the outset because of the potentialexposure to costs such a course would entail. He pointed out that should the primaryclaims against a fraudulent party succeed and the title be restored to the claimant onthe basis of those causes of action then there would have to be a discontinuanceagainst the Registrar-General with attendant costs. He placed particular emphasis ons 174 of the Land Transfer Act which provides:174 Liability of plaintiff for costsIf in any such action judgment is given in favour of the Crown, or the plaintiff discontinues or becomes nonsuit, the plaintiff shall be liable to pay the full costs of defending the action; and those costs, when taxed, shall be levied by the Crown by the like process of execution as in other actions.[49] Mr Chesterman argued that the Burmeisters would have been liable to pay possibly indemnity costs to the Registrar-General for defending the action, should ithave been prematurely joined.[50] I am not certain that it necessarily follows that the ―full costs referred to ins 174 equate to indemnity costs. In any event, the costs of filing a statement ofdefence and then awaiting the outcome of the substantive proceedings (presumablyabiding the decision of the Court in the initial rounds against the primary defendants)will be modest. It is a very common occurrence for defendants to be joined in theknowledge that judgment will only be obtained against them in the event of thecauses of actions against other defendants failing. There is always the possibilitythat the unsuccessful defendants can be ordered to pay the successful defendants'costs.[51] There are formidable practical considerations which support the opposingproposition of the Registrar-General that the time of the judgment was far too late. Ifplaintiffs could wait before joining the Registrar-General for all the substantiveproceedings to be determined, the wait could be very long indeed. The generallimitation period under the Limitation Act 1950 for actions to recover land was 12 years.17 So the substantive proceedings could have commenced at the end of the 12-year period and might well not have been determined for another three or four years.The plaintiffs would then have six years to seek to recover damages against theRegistrar-General. It could be more than 15 years before any claim against theRegistrar-General came to light and more than 20 before it was time-barred. Thiswould be an unreasonably long period and contrary to the apparent intention of thelimitation provisions, even taking into account the fact that it is a Government entitythat is the defendant.[52] I see no great injustice in time being seen as running from when all the facts which constitute a cause of action under s 172(b) were known. I was informed by Mr Oliver from the bar that it is not uncommon for the Registrar-General to be joined in proceedings such as these at the outset, so that the claim against theRegistrar-General can be pursued if the primary claims based on fraud fail. I acceptthat is so.[53] I do not, with respect, favour extending the limitation period by incorporating the fifth category suggested by Hammond J in Melville-Smith v Attorney-General of time running from when the defendant was advised of a reasonable prospect ofsuccess. Such a timeframe would depend on the vagary of the quality of advice. Itwould be open-ended. It is not supported by authority. Indeed I do not takeHammond J to have endorsed it.[54] I therefore conclude that the delivery of the substantive judgment which found the fraud was not the start point for the limitation period.[55] Mr Chesterman's second argument (option (d)) was that time ran from30 August 2006 when the Burmeisters' claim against the ASB as mortgagee wasstruck out or 13 November 2008 when leave to appeal that decision was declined.[56] However, the strike-out judgment did no more than recognise the fact that theASB had not got its title as mortgagee by fraud and was not party to any fraud.17 Limitation Act 1950, s 7.While it is correct that if the judgment had concluded that the ASB had been party to the fraud, the Burmeisters would not have been deprived of the land as the fraud exception to indefeasibility would have applied, such a conclusion would have again only recognised a situation that had already occurred. The strike-out decision did nomore than recognise a past event, namely, that the ASB when it obtained its title in2001 had done so without fraud. As such that strike-out decision was not the eventwhich deprived the Burmeisters of their land.[57] I am not convinced that there is any particular hardship or any significantpractical considerations that militate in favour of the interpretation urged byMr Chesterman, and for time to run from the determination of the strike-outapplication. For the reasons already given there could be unacceptable delays iflimitation periods did not begin until after Courts had processed and determinedpreliminary litigation.[58] Thus, I cannot accept Mr Chesterman's submission that time ran from thedate of the delivery of the substantive judgment on 1 December 2009 (option (e)) orfrom the date of the delivery of the strike-out decision on 30 August 2006(option (d)).Option (b)[59] I now turn to consider whether time ran from September 2002 when theBurmeisters learnt that the O'Briens were registered on the title (which is option (b) and the date supported by Mr Oliver).[60] The consideration of these arguments requires analysis of what was meant bythe words ―becomes aware, or but for his own default might have become aware, ofthe existence of his right to make a claim. It is necessary to examine the meaningof these words and to apply that meaning to the facts.The words "becomes aware ... of the existence of his right to make a claim"[61] Becoming ―aware must involve the acquisition of actual knowledge of thefacts which constitute the cause of action. The concept is similar to the familiarnotion of ―discovery of the right to make a claim which often arises in the limitationcontext. The concept of discoverability was considered by the Privy Council inCollier v Creighton.18 in the context of the now repealed s 28 of the Limitation Act1950 (requiring discovery of the fraud or the mistake). Lord Steyn delivering thejudgment said:The Court of Appeal observed, and their Lordships respectfully agree, that what must be discovered are all the facts which constitute the cause of action.[62] Discoverability (in the context of reasonable discoverability) was consideredby the Supreme Court in relation to s 43(5) of the Fair Trading Act 1986 inCommerce Commission v Carter Holt Harvey.19 Tipping J discussed the extent ofknowledge required to constitute discovery. He observed:20For present purposes, the concept of discovery entails finding something out, in the sense of becoming aware of it. An applicant discovers the loss or damage when he or she acquires knowledge of it. In the Court of Appealthere was some discussion about the ―extent of knowledge required. Extentin this context is not concerned with the quality of the necessary knowledge. Rather it is concerned with the subject-matter of that knowledge. Is that subject-matter the certainty of loss or damage, the possibility of its having occurred, or some intermediate position? It is neither necessary nor desirable to attempt some qualitative description of the knowledge inherent in the concept of discovery. Put simply, an applicant either is or is not aware of the loss or damage.[63] Under s 180(2) more is required than just the knowledge of loss. Knowledgeof the other facts that establish the ―right to make a claim is also required. This isthe broader type of knowledge reflected in s 28 of the Limitation Act 1950 and nowin ss 14 and 48 of the Limitation Act 2010. In the context of this case the awarenessmust involve knowledge by the Burmeisters that a fraud had been perpetrated onthem, that they had as a consequence of that fraud been deprived of their property,and to whom this was attributable or who was involved.18 Collier v Creighton [1996] 2 NZLR 257 (PC) at 261.19 Commerce Commission v Carter Holt Harvey [2009] NZSC 120, [2010] 1 NZLR 379.20 At [29].[64] In relation to the Burmeisters' awareness in September and October 2002,they did not know that they had been deprived of their property, or that they hadbeen subjected to a fraud. The concern that had led them to check with LINZ arosenot because of any knowledge that they had lost the ownership of their home throughfraud, but because they were not getting the payments they had been promised on aregular basis. When they discovered that the property was in the name of theO'Briens they immediately sought a meeting with Mr G Clayton and his associates,whom they had trusted throughout. They were then assured that the property wassafe and in a family trust. They were informed in writing that it was ―secure. Thiswas consistent with what they had been told of the property going into a ―trust.They were persuaded that the O'Briens' being on the title was a temporaryarrangement of convenience. They did not know that they had a claim that they hadbeen wrongly deprived of their land.[65] Therefore it cannot be said that the Burmeisters were ―aware of the right tomake the claims at this time. As a matter of fact they were persuaded that they hadno basis for any claims and that everything was all right.The words "or but for [their] own default might have become aware"[66] Section 180 in referring to ―his own default is different to the more familiarnotion of reasonable discoverability. It can be contrasted with s 28 of the LimitationAct 1950 (―could with reasonable diligence have discovered), s 14 of the Limitation Act 2010 (―ought reasonably to have gained knowledge) and s 43(5) of the Fair Trading Act 1986 (―ought reasonably to have been discovered). These tests areobjective. The assessment under these provisions is made from the perspective of areasonable person situated as the plaintiff was situated.21 At least under s 28 of theLimitation Act 1950 the standard of diligence is high.2221 See for example Commerce Commission v Carter Holt Harvey at [29].22 Laws of New Zealand Limitation of Civil Proceedings: Extension or Postponement of (online ed)at [306], cited with apparent approval in Amaltal Corporation Ltd v Maruha Corporation [2007]1 NZLR 608 (CA) at [151]. See also the discussion at [151]–[161] of that case.[67] In contrast to these references to objective reasonableness, s 180(2) isexpressed in subjective terms: ―but for his own default. Default is a strong word.23The word ―fault connotes some sort of blameworthy failure to take steps on the partof the claimant. The use of the word ―his indicates that it must by the fault of theparticular claimant in that particular claimant's circumstances. The specificknowledge and understanding of the claimant is therefore at issue.[68] In this regard, the concept of ―deflection is relevant. It arose in Inca Ltd vAutoscript (New Zealand) Ltd24 and was applied in Amaltal Corporation Ltd vMaruha Corporation25 in the context of s 28 of the Limitation Act 1950 as part ofthe courts' assessment of whether the plaintiffs' actions constituted reasonablediligence. It was held in both cases that where the plaintiffs were ―deflected fromfurther action by parties on whom they were entitled to rely no more was required ofthem.[69] In Amaltal Corporation Ltd v Maruha Corporation, Maruha Corporation hadestablished deceit against Amaltal. The Court of Appeal had to determine whetherthe Judge's finding that the claimant Maruha relied on Amaltal's fiduciary obligationto it and could accept the truth of the fiduciary's representation and was not bound tomake further enquiry for limitation purposes, was correct. The relevant limitationprovision was s 28 of the Limitation Act 1950. Referring to earlier New Zealandauthority it was stated:26The authority referred to in Laws NZ for the propositions as stated by that treatise is Inca Ltd v Autoscript (New Zealand) Ltd [1979] 2 NZLR 700 (Mahon J). That was a commercial case... Mahon J held that the claim was not statute-barred. There was a special duty of disclosure inherent in the supply contract between the plaintiff and the defendant, and the plaintiff hadnot complied with that duty of disclosure. The defendant's rights of actionfor breach of contract, which would successively arise on each delivery of goods, were concealed fraud within the meaning of s 28(b) of the Limitation Act. For the reasons given at pp 712 and 713 Mahon J found it impossible to say that the plaintiff ought reasonably to have discovered the breach of contract in 1968 if he had exercised due diligence. This was in part becausethe plaintiff had been ―deflected, to use the Judge's expression (at p 712) bywhat the defendant had said. Inca Ltd v Autoscript was referred to with23 See Melville-Smith v Attorney-General at 602.24 Inca Ltd v Autoscript (New Zealand) Ltd [1979] 2 NZLR 700 (SC).25 Amaltal Corporation Ltd v Maruha Corporation [2007] 1 NZLR 608 (CA).26 At [154].approval by this Court in Official Assignee of Collier v Creighton [1993] 2 NZLR 534 at p 538.[70] The Court concluded that there was the kind of ―deflection which concernedMahon J in Inca Ltd v Autoscript (New Zealand) Ltd and that as a matter ofreasonable diligence Maruha did not have to make further enquiries on being giventhe assurances.[71] Mr Oliver emphasised that those were cases concerned with fraud by thedefendant rather than a third party. He submitted that deflection by a third partycould not assist the Burmeisters against the Registrar-General.[72] The concept of deflection as described did not involve a concept akin to estoppel, prompted by a defendant seeking to rely on a failure to discover that hasbeen caused by that defendant's own actions. Rather, it turned on the concept of what in the circumstances constituted reasonable diligence on the part of the claimant. By applying this latter reasoning, it can be seen that there has been no default on the part of the Burmeisters. The Burmeisters trusted Mr G Clayton andhis advisors. They were alerted by what they found, but then went to the meetingand were persuaded by the fraudsters that there was nothing in their alarm, and thatall was well.[73] While the concept of deflection can be applied to these facts, my decisionultimately turns on the plain words of s 180(2). Section 172 was a remedialmeasure, and s 180(2) a remedial amendment, passed to avoid the draconianconsequence of the innocent registered proprietor, deprived of title by the doctrine ofindefeasibility, being time-barred because a cause of action that had, without default,not been discovered. The legislature is unlikely to have wished the amelioratingeffects of s 180(2) to be limited because a plaintiff believed the lies of a fraudster.[74] Parliament when it enacted the Land Transfer Act in 1952 could have usedthe same sort of language of ―reasonable discoverability that was used in s 28 of theLimitation Act 1950, but it did not do so. Rather it used and has retained wordsconnoting subjective error in providing for ―his own default. It is not the default ofa reasonable person in the position of the claimant. It is, to paraphrase, ―fault on hispart that must be considered. Parliament also could have amended s 180(2) to bring it into line with the fraud exception at s 48 of the Limitation Act 2010 which limits the exception to fraud by the defendant, but did not do so. I conclude that there must have been fault by the Burmeisters in their particular circumstances.Was there default?[75] As a matter of fact there was no doubt that the Burmeisters' enquiry andconcern was deflected by the lies of Mr G Clayton and others. I found that theBurmeisters from the outset had some awareness that there could be a temporarytransfer to a trust involved, so the fact that the property was in the name of theO'Briens was not necessarily inconsistent with a trust in their favour being in place.Mr G Clayton's father was very well known to them as a former boss and trusted bythem. The father had introduced the Burmeisters to the scheme and had entered intoit himself and his endorsement had been very important to them. There was nothingto indicate that Mr J Clayton's endorsement had in any way ceased. Mr G Claytonwas a former pastor and had been known to the Burmeisters since he was a teenager,and he assured them that their home was secure. Given the history of trustingassociation with the Claytons, and the Burmeisters' relative inexperience incommercial matters, it is not surprising that they were deflected from further enquiryand persuaded that their home was safe. They were not at fault.[76] Thus I conclude that the Burmeisters' knowledge did not fall into any of thefirst four categories of knowledge referred to in Melville-Smith v Attorney-General.They were neither aware of the existence to the right to make a claim, or in default infailing to become so aware in September or October 2002. It was fraud thatoriginally cost them their good title, and a second fraud should not deprive them ofany benefits of s 172(2) which they might otherwise claim. Time did not begin torun in September/October 2002.Option (c)[77] The situation was very different in April 2003 when the Burmeisters read aSunday Star Times article and obtained legal advice (option (c). This is the third datesupported by Mr Chesterman.[78] By then there had been yet further defaults in the making of payments to the Burmeisters. On 14 April 2003 a representative of those involved in the fraud had telephoned Mrs Burmeister and told her not to take any notice of an article published in the Sunday Star Times on 13 April 2003. As a result of the telephone call the Burmeisters sought out the newspaper article and read it. The article referred to the scheme organised and mentioned families who had lost their homes as a result of joining the scheme. It was then that they realised, as Mr Burmeister described, thatthey were the ―victims of a scam. They went and saw lawyers and no longeraccepted any of the statements made to them by Mr G Clayton and his associates.[79] I am satisfied that at that point they did become aware of the existence of theright to make a claim. It could be expected that when they ceased to trustMr G Clayton and his associates they would see lawyers, which is indeed what theydid. It could be expected that as a result of seeing lawyers they would or shouldhave become aware of the existence of the right to make a claim against theO'Briens and Mr G Clayton.[80] I conclude therefore that the limitation period commenced to run in April 2003 (option (c)). The proceedings, having been issued on 22 October 2008, aretherefore within the limitation period set out in s 180(1) of six years. I thereforeanswer the preliminary question ―no.Result[81] The question ―Is the plaintiffs' claim time-barred by s 180 of the LandTransfer Act is answered ―no.[82] Costs are reserved and I will receive submissions, although I anticipate thatcounsel will not wish to have costs determined until the conclusion of the finalhearing.Asher J