REGISTRAR-GENERAL OF LAND V BURMEISTER AND BURMEISTER COA CA332/2011

REGISTRAR-GENERAL OF LAND V BURMEISTER AND BURMEISTER COA CA332/2011 [2 August 2012]IN THE COURT OF APPEAL OF NEW ZEALANDCA332/2011[2012] NZCA 340BETWEEN THE REGISTRAR-GENERAL OF LANDAppellantAND KENNETH SIDNEY BURMEISTER ANDVALERIE JOAN BURMEISTERRespondentsHearing: 2 May 2012Court: O'Regan P, Ellen France and White JJCounsel: J R Burns for AppellantD G Chesterman for RespondentsJudgment: 2 August 2012 at 11.30 amJUDGMENT OF THE COURTA The appeal and cross-appeal are dismissed.B The appellant must pay the respondents costs for a standard appeal on a band A basis and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Ellen France J)Table of ContentsPara NoIntroduction [1]Background facts [4]The relevant statutory provisions [17]The High Court judgment [19]The approach to s 180(2) [25]The competing contentions [27]Our analysis [31]The application of the test to the present case [52]Knowledge of registration of the ASB mortgage? [53]Were the Burmeisters in default as at September 2002? [59]Did time start to run earlier, in April 2002? [68]Other possible dates for the commencement of the limitation period [71]1 December 2009 [72]30 August 2006, 2 September 2008 or 13 November 2008 [75]Result and costs [77]Introduction[1] At the start of 2001, Kenneth and Valerie Burmeister owned their own home in Mt Maunganui. By November 2001, as a result of fraudulent transactions, the title to their land had been transferred out of their names and the property mortgaged to a bank. The Burmeisters brought various proceedings against those involved in the fraudulent dealings. This appeal concerns their claim for compensation against the Registrar-General of Land. That claim was commenced on 22 October 2008.[2] A claim for compensation must be brought against the Registrar-General within a six-year period from the date on which the right to bring the action accrued.1 Section 180(2) of the Land Transfer Act 1952 (the Act) provides that the date when the right to bring the action accrued is the date on which the plaintiffbecomes aware, "or but for his own default might have become aware, of the existence of his right to make a claim".[3] The parties agreed to a hearing on a preliminary issue, namely, whether theBurmeisters' claim was time barred by s 180 as the Registrar-General of Land said it was. Asher J concluded the claim was not time barred as the limitation period did not start to run until April 2003.2 The Registrar-General appeals this decision. TheBurmeisters' cross-appeal against the Judge's decision that time did not start to rununtil 30 August 2006 or later. The appeal and the cross-appeal turn on the interpretation and application of s 180(2).1 Land Transfer Act 1952, s 180(1).2 Burmeister v Registrar-General of Land [2011] 2 NZLR 678 (HC).Background facts[4] The factual background is discussed fully in the decision of Asher J inrelation to the Burmeisters' proceeding against John and Gillian O'Brien and others,who were the alleged perpetrators of the fraud (the substantive judgment).3 The parties have accepted the factual findings in that judgment. We need only set out the relevant facts from that judgment as summarised by Asher J in the judgment under appeal.4[5] In 2001 the Burmeisters, who had retired, were living in Mt Maunganui. They owned their home at 1 Lotus Avenue, Mt Maunganui, which they bought in 1990. A mortgage remained on the title although it had been repaid. TheBurmeisters' income was limited to the community wage received by Mr Burmeister. The couple were not at that time eligible for superannuation.[6] In mid-2001, John Clayton, a trusted friend of the Burmeisters, made contact with them. He had previously given the Burmeisters advice on a number of matters. John Clayton advised the Burmeisters to enter into an investment scheme into which he had placed his home. The scheme was promoted and organised by a number ofpeople including Geoffrey Clayton, John Clayton's son. Geoffrey Clayton had been a church pastor. The Judge found that John Clayton sincerely believed in his son'sscheme and ultimately lost his own home as a result.[7] The Burmeisters met with Geoffrey Clayton and other promoters of the scheme. It was said that the scheme would involve the Burmeisters placing their title to Lotus Avenue in a "secure family trust".5 In return, the Burmeisters would receive weekly payments over a three-year period and a lump sum. At the end of the three years the Burmeisters could leave the scheme or remain in it. Asher J found that the Burmeisters never really understood how their home would be used to make money for them. He described their position and understanding at the time in this way:63 Burmeister v O'Brien [2010] 2 NZLR 395 (HC) [the substantive judgment].4 At [3]–[26].5 Burmeister v Registrar-General of Land, above n 2, at [8].6 The substantive judgment at [288].[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.[8] After some initial discussions in mid-2001, the Burmeisters went to a meeting in September where they indicated that they wished to join the investment scheme. Geoffrey Clayton presented them with what appeared to be a one-page blank sheet of paper and told them that if they signed it they would be acknowledging their commitment to joining the scheme. They signed this document. In fact, the document was a blank memorandum of transfer, which the Burmeisters were fooled into signing.[9] Following the meeting the transfer was completed, showing a purchase of Lotus Avenue by the trustees of the O'Briens' trust. The O'Briens were business associates of Geoffrey Clayton. The O'Briens then obtained a mortgage from ASBfor $172,000 on the security of the property. The Burmeisters had been persuaded to get a discharge of the mortgage to their bank and they gave that to Mr O'Brien atGeoffrey Clayton's request. The O'Briens had presented themselves to ASB aspurchasers for value from the Burmeisters. Accordingly, not long after the Burmeisters signed the blank document in September 2001, the property at Lotus Avenue had been transferred to the trustees of the O'Briens' trust, mortgagedto the ASB and $172,000 had been advanced on the security of that mortgage.[10] Asher J found that while the Burmeisters may have contemplated some sort of transfer to a secure family trust for their benefit, they would not have signed a blank transfer or any document which enabled the transfer to an unnamed third party.[11] The Burmeisters were to receive $220 a week as part of the investment scheme. This money was paid intermittently. In April 2002, the Burmeisters were told to sign some further documents that they did not understand, but thought recorded their participation in the scheme. These had been put to them to appease their concerns about the regularity of payments. The documents recorded abuy-back arrangement in respect of the Lotus Avenue property and an acknowledgement of debt. By September 2002, the Burmeisters were becoming concerned about the lack of payments. They telephoned LINZ. At that point, they discovered that the property was registered in the name of the O'Briens. Theysought a meeting with Geoffrey Clayton and others involved in the scheme. This meeting took place on 14 October 2002. Asher J found that although the meetingbecame "heated for a while", the Burmeisters were "assured that their house was safeand had been placed in a trust as had been agreed, and that it was perfectly secure this led the Burmeisters to believe that the house was still theirs".7[12] Asher J found that it was not until about 14 April 2003, when the Burmeisters read an article in the Sunday Star Times exposing the scam, that they went to see lawyers and realised that they had been defrauded.[13] On 16 June 2005 the Burmeisters filed a proceeding against seven defendants including the ASB. ASB applied successfully to be struck out on the basis the claim against it had no reasonable prospect of success.8[14] In striking out the claim against ASB,9 the High Court found that the mortgage to ASB was not a security interest taken in connection with a buy-back transaction (in this case, the fraudulent investment scheme) for the purposes of s 119 of the Credit Contracts and Consumer Finance Act 2003.10 Second, registration ofthe mortgage meant the ASB's interest as a bona fide mortgagee was indefeasibleunder the Land Transfer Act, which prevailed over the Credit Contracts and Consumer Finance Act. Third, the knowledge of the solicitor who acted for the parties to the mortgage could not be imputed to the ASB. Leave to appeal from the decision to strike out the ASB was declined.117 The substantive judgment, at [270].8 Burmeister v O'Brien (2006) 7 NZCPR 440 (HC); upheld on review: Burmeister v O'Brien[2008] 3 NZLR 842 (HC).9 Burmeister v O'Brien, above n 8.10 Relevant to this case, the Credit Contracts and Consumer Finance Act 2003 regulates buy-backtransactions of land. Section 119 of that Act provides that security interests taken in connectionwith a buy-back transaction are to be treated as part of the transaction. Section 102 states thatsuch security interests cannot be enforced if the disclosure required by the Act in relation to buy-back transactions has not been made.11 Burmeister v O'Brien HC Tauranga CIV-2005-470-396, 13 November 2008.[15] The sum owed to ASB (including interest and legal fees) now exceeds $500,000. Asher J noted that the ASB had not chosen to take steps to enforce its rights as mortgagee.[16] The proceeding against the other defendants was resolved on 1 December 2009 with Asher J finding against the O'Briens for Land Transfer Act fraud andknowing receipt and finding against Geoffrey Clayton for deceit, breach of the Fair Trading Act 1986 and dishonest assistance.The relevant statutory provisions[17] The Burmeisters' claim for compensation is made under s 172(b) of the Land Transfer Act.12 Section 172 deals with two situations in which compensation is payable. The first of these is where a person suffers loss or damage through an omission or other mistake by the Registrar and other employees.13 Second, s 172(b) provides for the payment of compensation for someone deprived of any land by, amongst other things, the registration of any other person as proprietor of that land, where the Land Transfer Act bars an action for recovery of the land. Section 172 provides as follows: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 for12 The statement of claim pleads a further cause of action under s 172(a) of the Land Transfer Act.Asher J referred only to the claim under s 172(b): Burmeister v Registrar-General, above n 2, at [31].13 Section 172(a).possession or other action for the recovery of that land, estate, or interest—may bring an action against the Crown for recovery of damages.[18] The provision limiting the time within which claims for compensation may be made is found in s 180 of the Act. That section is in these terms:180 Limitation of actions against the Crown(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.The High Court judgment[19] Asher J concluded that the Burmeisters' claim was not time-barred. In reaching that conclusion, the Judge rejected the Registrar-General's argument thatthe limitation period started to run in September 2002 when the Burmeisters discovered that the title to the house was no longer in their names.[20] The Judge said the first limb of s 180(2) did not apply. That was because inorder to have "become [] aware", the Burmeisters had to know a fraud had been perpetuated leading to their deprivation of property and to whom this was attributable or who was involved. Asher J found the Burmeisters did not have thatknowledge. Instead, they had been "persuaded they had no basis for any claims" and that "everything was all right".14[21] In terms of the second limb of s 180(2), the Judge said the wording, "his own default", imposed a different test from that of reasonable discoverability undergeneral limitation provisions. Under s 180(2), the issue was whether there had been14 At [65].fault "of the particular claimant in that particular claimant's circumstances",15 not thedefault of a reasonable person in the claimant's circumstances. "Fault" in thiscontext was described as involving some culpability on the claimant's part.[22] In the Burmeisters' case, Asher J made a finding of fact that there had been no default as at September 2002. That was because, first, the Burmeisters were aware that there could be a temporary transfer of title to a trust. Hence, when theydiscovered that the title was in the O'Briens' names that was not necessarily inconsistent with their understanding of the scheme. Second, while the Burmeisters were put on alert by the information they obtained from LINZ, they then met with the fraudsters and were persuaded by them there was nothing to be alarmed about and all was well. Given the remedial nature of s 180(2), the Judge considered it unlikely that the legislature intended to limit its ameliorating effects because"a plaintiff believed the lies of a fraudster".16 In this context, Asher J described theBurmeisters as having been "deflected" in their search for the truth.17[23] The Judge agreed that by April 2003, the time the article exposing the scheme as a scam appeared in the Sunday Star Times, the Burmeisters were aware they were the victims of a scam. The limitation period started to run from that point.[24] In reaching this view, Asher J rejected the Burmeisters' argument that thelimitation period did not start to run until one or other of 1 December 2009 or 30 August 2006. The first date, 1 December 2009, was the date of delivery of the substantive judgment. As we have noted, the second date, 30 August 2006, waswhen the Burmeisters' claim against the ASB as mortgagee was struck out.The approach to s 180(2)[25] There is no disagreement about how s 180 fits into the scheme of the Land Transfer Act. Asher J cited Sir Robert Torrens himself who said:1815 At [67].16 At [73].17 At [75].18 At [39] citing from Robert Torrens The South Australia System of Conveyancing by Registration of Title, (Land Titles Office, Adelaide, 1859) at 9 quoted in Tom Bennion and othersNew Zealand Land Law (2nd ed, Brookers, Wellington, 2009) at [2.11.01]. [a]s we cannot give the land to one and the improvements to another, there is no way of avoiding injustice other than that adopted in the South Australian Act, giving compensation and money to the rightfulproprietor indefeasibility of title is a necessary corollary to the [abolitionof the respective investigation of titles], and from this again follows the necessity of providing a fund from which rightful heirs and others may be compensated for the value of land which they are debarred from reclaiming against persons who have acquired title by registration.Hence, other commentators describe the principles of indefeasibility and guarantee as complementary.19 Other jurisdictions with a Torrens system of land registration make provision for compensation in similar circumstances.20[26] The dispute relates to what is meant by the phrase "the plaintiff becomesaware, or but for his own default might have become aware, of the existence of his right to make a claim" in s 180(2) and whether that test is met in this case. We deal first with the meaning of s 180(2) and then apply our approach to the facts of the case.The competing contentions[27] The Registrar-General says that a plaintiff becomes aware of the right to make a claim when the facts giving rise to a right of action under s 172(b) exist and the plaintiff has discovered those facts. On this analysis, Asher J was wrong to say that the Burmeisters had to know that a fraud had been perpetrated on them and that as a consequence they had been deprived of their property. All that is required under s 172(b) is discovery that another person has become the registered proprietor.[28] In terms of the second part of s 180(2), that is, the reference to "but for his own default", the Registrar-General contends that the standard is the same as that19 Bennion and others, above n 18, at [2.11.01]; Avenel Mitchell "Torrens title compensation forloss – the Real Property Amendment (Compensation) Act 2000 (NSW)" (2001) 9 APLJ 40 at 40; Elizabeth Toomey "State Guarantee of Title – An Unguided Path?" (1995) 6 Canta Law Rev 149 at 163; Jonathan Flaws "Compensation for Loss under the Torrens System – Extending StateCompensation with Private Insurance" in David Grinlinton (ed) Torrens in the Twenty-first Century (LexisNexis, Wellington, 2003) 397 at 400; New South Wales Law Reform CommissionTorrens Title: Compensation for Loss (Issues Paper 6, 1989) at [6.5]; see also the discussion ofthe public policy considerations by Hammond J in Registrar-General of Land v Marshall [1995]2 NZLR 189 at 194.20 For example: Real Property Act 1900 (NSW), ss 118–120, 129–131, and 134; Land Title Act 1994 (Qld), ss 188–189; and Land Titles Act RSA 2000 c L-4, ss 168, 170, 175, and 178.applicable to the general limitation statutes. Hence, the focus should be on what would be expected of a prudent registered proprietor. Accordingly, the Registrar-General submits that the Judge was wrong to describe the test as a subjective one. In developing this submission Mr Burns for the Registrar-General says that a subjective test for discoverability is an anomaly in limitation law. Mr Burns argues that in only one situation has such an anomaly been contemplated. That is in the circumstances of child sexual abuse, as discussed in W v Attorney- General.21 Further, Mr Burns points out that in its review of the Land Transfer Act, the Law Commission considered the provisions of what is now the Limitation Act 2010 were sufficient to deal with time limits for claims under the land transfer legislation.22[29] It is also submitted that "default" in this context has its ordinary dictionarymeaning, namely, any failure in performance or failure to act.23 Mr Burns points outthat this approach is consistent also with the use of the word "default" elsewhere in the Land Transfer Act and indeed other statutes. For example, s 63 of the Land Transfer Act protects the registered proprietor against ejectment except in theenumerated circumstances. Those circumstances include the case of "a mortgagee asagainst a mortgagor in default".24[30] The Burmeisters support the reasoning of the Judge.Our analysis[31] Section 180(2) envisages two possible scenarios. The first scenario anticipates that the Burmeisters had actual knowledge of the relevant facts. In other words, they knew of or had discovered the existence of their right to make a claim. The second scenario envisages that the Burmeisters might have become aware of or discovered the existence of their right to make a claim, if not for their own default.21 W v Attorney-General [1999] 2 NZLR 709 (CA).22 Law Commission A New Land Transfer Act (NZLC R116, 2010) at [4.34].23 John Simpson and Edmund Weiner The Oxford English Dictionary (2nd ed, Clarendon Press, Oxford, 1989).24 There is a similar provision in s 63(1)(b), which refers to a lessor as against a lessee in default. Section 106, now repealed, dealt with the ability of a mortgagee "upon default in the payment of principal sum etc" to enter into possession. See also ss 126, 176 and sch 3.[32] In terms of the first scenario, the knowledge required is linked to the right to make a claim. The claim under s 172(b) is that the Burmeisters have been deprived of land through registration of ASB's mortgage and that they are barred from bringing an action for recovery. That combination, on the present facts, must at least involve knowledge of the registration of the mortgage on 14 November 2001 because that is the action that had the effect of barring recovery. If the mortgage had not been registered the Burmeisters could have recovered their property from theO'Briens.[33] We should note at this point that the Registrar-General's position before thisCourt is that the Burmeisters do not have a right of action under s 172. The inter- relationship between the limitation period and the claim suggests that there are difficulties in the course the parties have pursued, that is, in separating out one aspect of the dispute and dealing with that as a preliminary issue. However, we deal with the matter as it has been advanced to date.[34] Hammond J in Melville-Smith v Attorney-General observed that discovery provisions like s 180(2) "raise their own kinds of difficulties".25 His Honour suggested a number of theoretical possibilities for construing such provisions, namely:26... 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) wassufficiently 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).[35] Hammond J was dealing with a claim under s 172(a), which raises different considerations. For present purposes, though, we agree that knowledge of (1), (2) and (3) were required. Knowledge of (4) is not in issue in this case. We add that we agree with the Registrar-General that requiring knowledge of (5) in a claim under s 172(b) would undermine s 180 because the timeframe would run not from the discovery or discoverability of the existence of the claim but from the date of advice25 Melville-Smith v Attorney-General [1996] 1 NZLR 596 at 602.26 At 602.about the prospects of success. Further, as Asher J said, that timeframe woulddepend "on the vagary of the quality of advice".27[36] We turn then to the second situation envisaged by s 180(2), that is, not actual knowledge but the possibility that the Burmeisters but for their own default might have become aware of the existence of their right to make a claim. This scenario inevitably introduces a requirement to assess the conduct against some standard. That is because it envisages a state of mind other than actual knowledge. In similar situations in general limitation statutes, that standard is expressed in terms of reasonableness.28[37] The question in this case is the extent to which the reference to their "own"default tempers the reasonableness standard by allowing some personalising of the characteristics of the reasonable person and, if so, what characteristics are relevant.[38] On the face of it, the reference to the claimant's "own" default suggests theparticular circumstances of the claimant are relevant.[39] Section 180(2) was enacted as part of the Land Transfer Amendment Act 1959. As Asher J said, when enacting s 180(2) the legislature could have used the language of the Limitation Act 1950 but did not do so. We acknowledge that the legislative history suggests that not a great deal of importance was attached to the wording. The choice of wording seems to have had its genesis in a suggestion for reform from Professor I D Campbell of Victoria University, Wellington. Professor Campbell wrote to the Law Revision Committee on 25 June 1957.29He suggested s 180 should be changed so that time started to run when the claimantknows, "or but for his own default might have known" of the existence of his claim.27 Burmeister v Registrar-General of Land, above n 2, at [53].28 We have in mind s 28 of the Limitation Act 1950 (now repealed), which provided that for causes of action based on fraud, the limitation period did not begin to run until the plaintiff haddiscovered the fraud "or could with reasonable diligence" have discovered it. The equivalent provision in the Limitation Act 2010, uses the phraseology knew, or "ought reasonably to havegained knowledge": ss 14 and 48.29 The establishment of the Committee is discussed by B J Cameron "Law Reform inNew Zealand" (1956) 32 NZLJ 106 at 106.Professor Campbell noted this proposal followed the terms of the United Kingdom equivalent, then, s 83(11) of the Land Registration Act 1925.30[40] The Law Revision Committee, having had a report from D A Young, the then Registrar-General of Land, approved the amendment suggested by Professor Campbell at a meeting in March 1959. Mr Young agreed that Professor Campbell's suggestion merited consideration. The fact that the Law Revision Committee had considered the topic was referred to in the parliamentary debates on the Land Transfer Amendment Bill.31[41] Accordingly, it seems the approach taken was simply to adopt the United Kingdom wording. Wording along the lines of s 180(2) has been seen in the law reform context as introducing some form of discovery regime. The Joint Land Titles Committee in Canada noted the unfairness of the requirement that claims be brought within limitation periods which commence when the claimant is deprived of an interest in land. The Committee noted its proposal was that a discovery rule apply. Accordingly, the Committee said:32 the Model Act will start the time running when the claimant 'knows or ought to know of the loss' and will give the claimant two years to settle withthe Registrar General or commence action. Lest the approach of the time limit constrain a claimant to commence action when settlement is still possible, the section will permit the Registrar General to agree to extend the time.[42] The reference to what the claimant "ought" to know was treated by the Committee as protecting a claimant from losing the right to claim before theclaimant "could be reasonably expected to know of the loss." 3330 The Land Registration Act 1925 (UK) provided relevantly that the cause of action was deemedto arise "at the time when the claimant knows, or but for his own default might have known, ofthe existence of his claim". These words are still in force under the Land Registration Act 2002(UK), Schedule 8, para 8(b). We were not referred to any authorities which contained anyrelevant discussion of these provisions.31 Hon H G R Mason, Attorney-General, and Hon J R Marshall MP, on the second reading debate: (13 August 1959) 320 NZPD 1251 and 1252 respectively.32 The Joint Land Titles Committee Renovating the Foundation: Proposals for a Model Land Recording and Registration Act For the Provinces and Territories of Canada (Edmonton, 1990) at 33–34.33 At 34. See also Manitoba Law Reform Commission Private Title Insurance (Report #114, 2006) at 157 and L A McCrimmon "Compensation Provisions in Torrens Statutes: The ExistingStructure and Proposals for Change" (1993) 67 ALJ 904 at 918.[43] However, the fact is that the wording chosen focuses on the claimant's "own"default. Some meaning has to be given to that wording. Further, adopting an interpretation that allows for some personalisation is consistent with the purpose of the 1959 amendment which, as we now explain, was remedial.[44] Prior to the Land Transfer Amendment Act 1959, the limitation period ran from the date when the cause of action accrued, subject only to special provision for"the disability of infancy or unsoundness of mind" (that is, as now found in s 180(1) of the Land Transfer Act with no equivalent to s 180(2)). In the context of considering a claim under s 172(a), Hammond J in Melville-Smith v Attorney General noted the suggestion in the leading text that "prior to the passing of this sub- section, many claims which had been made against the Fund had been dismissed asbeing out of time".34[45] The potential injustice of the operation of the provision prior to the 1959 amendment was a point made by Professor Campbell. Professor Campbell noted that his suggestion for change was prompted by Canadian Pacific Railway Co Ltd v Turta.35 That was a claim involving a mistake by the land registry office. The mistake was not discovered until 35 years after it was made and by then the time to bring the claim had expired. The Canadian Pacific Railway Company was deprived of land valued at more than $5 million. Professor Campbell referred to an article by Ivan Head which discussed the Turta decision and was critical of the inequity of the provision in Alberta equating to s 180 of the Land Transfer Act.36[46] The parliamentary debates record the remedial purpose although it has to be said that the primary focus was on the impact on claims under s 172(a) rather than those under s 172(b). On the introduction of the 1959 amendment the then Minister of Justice said:3734 Melville-Smith v Attorney-General, above n 25, at 601 citing E C Adams Land Transfer Act 1952(2nd ed, Butterworths, Wellington, 1971) at [489] and citing also Peehi v Davy (1890) 9 NZLR134.35 Canadian Pacific Railway Co Ltd v Turta [1954] SCR 427.36 Ivan Head "The Torrens System in Alberta: A Dream in Operation" (1957) 35 Can Bar Rev 1 at21–23.37 (23 July 1959) 319 NZPD 664 and see the observations in the second reading debate (13 August 1959) 320 NZPD 1251.At present there is provision for a claim to be made against what used to be the Assurance Fund. I think that has been abolished, the moneys being paid into the Consolidated Fund, so the claim now would be against that fund. The Statute of Limitations rather defeats the purpose of that provision, because the mistake might be made by the Registrar, and who outside his office would know anything about it? It might be 20 years later before a person went in to deal with this property and discover the mistake, and as the law stands at present the time within which a claim could be made would have elapsed. This provision simply says that the right to bring an action accrues from the time when the person becomes acquainted with what the Registrar has done.[47] In our view both the text, particularly the use of the word "own" and the remedial purpose support an interpretation that allows for some personalisation of the characteristics of the reasonable person. By this we mean that the standardagainst which "default" is assessed is a standard reflecting the characteristics of thefraud victim in the circumstances he or she finds herself in. We consider this is what Asher J meant when he referred to the test as a subjective one. If that is not what Asher J meant, we disagree. Our approach does not give "default" anything but itsordinary meaning.[48] The next issue is to decide what characteristics are relevant. In this case, thefactual findings suggest that the relevant characteristics are the Burmeisters' lack ofworldliness, the relationship of trust that existed between them and John Clayton (extending to his son Geoffrey Clayton), and the nature of the transaction.[49] There are some parallels between this case and the position of the plaintiff inPeco Arts Inc v Hazlitt Gallery Ltd.38 The issue in Peco Arts was whether the claim was time-barred under the Limitation Act 1980 (UK). That question turned onwhether the plaintiff could "with reasonable diligence" have discovered the mistake.The plaintiff in Peco Arts bought a drawing from a well-known and reputable art gallery. Both parties believed the drawing was an original by a famous 19th century artist. Ultimately, it was discovered the drawing was a reproduction. The plaintiff sued the gallery.[50] In determining the plaintiff's claim was not time-barred, Webster J took into account the plaintiff's lack of expertise. One witness described the plaintiff as "an38 Peco Arts Inc v Hazlitt Gallery Ltd [1983] 3 All ER 193 (QB).enlightened amateur: someone who would not have been able to spot the lack of authenticity".39 The Judge also placed some evidence on the reputation and recommendation of the gallery owners, who were specialists in art of the relevant period and on the reputation of the person who acted as an intermediary in the sale.[51] It is, we consider, fairly self-evident that the nature and extent of inquiries to be made by a person with commercial or business expertise dealing with a stranger would be different from the reasonable inquiries expected of the Burmeisters. We turn then to the application of the test to the Burmeisters' case.The application of the test to the present case[52] The primary focus of this appeal is on whether Asher J was right that time didnot begin to run in September 2002 when the Burmeisters learned that the O'Brienswere the registered proprietors of the Lotus Avenue property. There are two issues, first, whether the Burmeisters had actual knowledge at that time and, second, whether, but for their own default, they might have discovered the relevant facts at that time. The first question turns on whether it can be concluded from the agreed facts that in September 2002 the Burmeisters knew about the registration of the ASB mortgage.40 The second question requires consideration of whether the Burmeisters'acceptance of Geoffrey Clayton's answer to their inquiry was a default on their part, and whether they should have done more. We deal with each question in turn.Knowledge of registration of the ASB mortgage?[53] Mr Burns contends that when the Burmeisters contacted LINZ in September 2002 they would have ascertained that the ASB mortgage was registered. Mr Chesterman for the Burmeisters said we should not consider this submission because he said that in making it the Registrar-General was departing from the39 At 200.40 Andrew McGee Limitation Periods (6th ed, Sweet & Maxwell, London, 2010) at [21.010]–[21.013].parties' agreed approach to the facts and from the way in which this point had been pleaded by the Registrar-General.41[54] As we have noted, the parties agreed that the matter in the High Court wouldbe dealt with on the basis of the Judge's factual findings in the full unreportedversion of the substantive judgment. The parties also agreed that affidavits could be filed in the High Court. Affidavits were filed by the Burmeisters. The point now raised by the Registrar-General was not directly addressed in any of this evidence. There was no cross-examination of the Burmeisters on their affidavits. Nonetheless, given the importance of the issue, we address the submission.[55] In the substantive judgment, the Judge stated that by August or September 2002, problems had arisen again with the weekly $220 payments. Mr Burmeister complained to Geoffrey Clayton about the situation and there was an email exchange. Asher J continued:[24] Mr Burmeister started to think that something was seriously wrong. He visited the LINZ office in Hamilton to obtain a search of the title for Lotus Ave. He discovered that the property had been transferred to atrust known as the O'Brien Trust. The owners were shown as John Leslie O'Brien and his wife Gillian Sandra O'Brien.[56] Mr Burmeister said in his affidavit that the date they were first informed of the existence of their right to make a claim against the Registrar-General or the possibility of doing so was some time after 14 April 2003. That was the date of theSunday Star Times article. Importantly, for present purposes, Mr Burmeister referred in his affidavit to the passage we have just cited from Asher J's decision. He saidthat the correct position was that he telephoned LINZ; he did not in fact visit LINZ. Mrs Burmeister confirmed that she agreed with Mr Burmeister's affidavit. There was no evidence that the Burmeisters saw or were told that the ASB was registered as the mortgagor on the title.[57] We do not accept Mr Burns' submission that we can infer from these factsthat the Burmeisters would have been told that the ASB was a registered proprietor.41 The relevant part of the amended statement of defence pleaded that the Burmeisters becameaware in or about September 2002 that "their property was recorded as being registered in thename of Mr and Mrs O'Brien".We do not have, for example, any evidence from the LINZ official confirming his or her usual practice when asked about these matters over the phone. Indeed, the scope and terms of Mr Burmeister's inquiry are unclear. It is unfortunate that this pointwas not explored fully in the evidence placed before the High Court. Again, that perhaps reflects the limits of dealing with the matter on a preliminary basis.[58] Accordingly, for the purposes of the present appeal, we will proceed on the basis that as at September 2002 the Burmeisters knew only that the trustees of theO'Briens' trust were registered on the title. On that analysis the Burmeisters did not have actual knowledge of the existence of their right to make a claim at that time.Were the Burmeisters in default as at September 2002?[59] The Registrar-General's position is that at this point any person exercisingreasonable diligence would have immediately sought legal advice, at the least to obtain a full search of the title. The Burmeisters support the approach taken by Asher J.[60] For the reasons which follow, we have concluded the Judge was right. Therewas no default on the Burmeisters' part as at September 2002 that prevented themfrom otherwise discovering the existence of their right to make the claim.[61] The first point supporting Asher J's conclusion that the Burmeisters were not in default as at September 2002 is that the Judge found that the Burmeisters:42[75] from the outset had some awareness that there could be atemporary transfer to a trust involved, so the fact that the property was in thename of the O'Briens was not necessarily inconsistent with a trust in theirfavour being in place.That finding obviously affects the extent to which the Burmeisters were put on alert by the results of the inquiry to LINZ.[62] Mr Burns takes issue with this finding. The argument is based on Asher J's conclusion in the substantive judgment that "[a]ny transfer of the property that the42 Burmeister v Registrar-General of Land, above n 2.Burmeisters signed in blank was a fraud on them".43 The conclusion is reflected inthe Judge's statement that he had found "that the Burmeisters never agreed to transfer their property to the ICMG group or the O'Briens".44 Mr Burns says it is inconsistent with this finding of fraud to allow for the possibility that the Burmeisters had some awareness that there could be a temporary transfer. The Registrar-General relies also on the evidence as recorded by Asher J about the conditions on which the Burmeisters were willing to enter the scheme. This was put in various ways but the essential proposition relied on by Mr Burns is that the Burmeisters were only willing to join the scheme on the basis that their property would not thereby be at risk.[63] There is some tension between the various findings identified by Mr Burns. However, that tension is not left unresolved. We say that because, in the evidence from the substantive proceeding referred to by the Judge, the Burmeisters refer to the possibility of the house being put in a family trust. Their understanding was that this would not put their house at risk. In other words, they contemplated some form of transfer but not what actually occurred. Obviously, they were mistaken about the effect of the transfer to the O'Brien interests but there was a basis for the Judge to conclude that the possibility of a temporary transfer was within the contemplation of the Burmeisters.[64] The second factor influencing our conclusion that Asher J was right is that, when faced with information from LINZ, the Burmeisters did take some steps. As this Court said in the context of s 28 of the Limitation Act 1950 dealing with the postponement of the limitation period for fraud, "reasonable" not "exceptional"diligence is required.45 In the circumstances as we have discussed and, particularly, given the Burmeisters' naivety and trust of the Claytons, it was not unreasonable to approach Geoffrey Clayton initially. It is relevant also to the extent of the inquiries they should have made that the Burmeisters had continued to live in their house and there was no suggestion of their not doing so. Having made inquiries of Geoffrey43 At [76].44 At [127]. The monies advanced on the ASB mortgage were paid to a company in the ICMG group.45 Amaltal v Maruha [2007] 1 NZLR 608 (CA) at [159].Clayton, the Judge found that the Burmeisters were deflected by the response they received.[65] The Registrar-General submits that it is not right to rely on the concept of deflection in this context. Mr Burns says the concept exists where there is an equitable relationship between the particular plaintiff and the particular defendant. The submission is that it is wrong to use that concept to deprive an innocent third party of a limitation defence which is otherwise available.[66] Asher J was not using the word "deflection" in the conceptual sensesuggested by Mr Burns. Rather, in referring to deflection, the Judge was simply saying the Burmeisters accepted what they were told. That belief put them off the need to make other inquiries.[67] In summary, we accept that when the Burmeisters were told the O'Brienswere registered proprietors, it was incumbent on them to make further inquiry. We also accept that whether the inquiries they made were sufficient to avoid default is a fairly close call. However, in the end, given their particular circumstances as identified we agree with Asher J and do not consider that they had to do more at that stage. In the circumstances, and against a pattern of ongoing reassurance, it was reasonable to ask Geoffrey Clayton first about the effect of what the Burmeisters had learned. Having done that, the Burmeisters were reassured by the answers they received making it unnecessary to take further steps at that point. We add that if, on making inquiries, the Burmeisters had been told of something clearly outside what they contemplated would occur as part of the scheme, that would have altered our view. In particular, if they were told of the ASB mortgage, that would have triggered the need to consult a lawyer.Did time start to run earlier, in April 2002?[68] The Registrar-General alternatively says that time started to run after the date in April 2002, at the latest 24 April 2002, on which the Burmeisters signed the documents they believed recorded their participation in the transaction. At the least, it is submitted, the Burmeisters should have consulted a lawyer.[69] Mr Chesterman objects to the Court considering this ground of appeal because it is not one that has been raised earlier. He also objects to the use of some of the evidence relied on by Mr Burns on the basis its admission is outside of theparties' agreed facts.[70] We do not see any basis for the suggestion the limitation period started to run at this point. It is not realistic, given the factors we have already discussed, to ascribe any default to the Burmeisters at this time. They were, as the Judge found, naive and placed their trust in the Claytons but were duped. In any event, for present purposes, the trigger point for the existence of any claim is the later registration of the ASB mortgage.Other possible dates for the commencement of the limitation period[71] In their cross-appeal, the Burmeisters advance three other possible dates for the commencement of the limitation period. We need only deal with thesepossibilities very briefly because the effect of our upholding the Judge's decision isthat the claim has been filed within time.1 December 2009[72] This is the date of the judgment finding Land Transfer Act fraud and knowing receipt were proved against the O'Briens and findings of deceit, breach of the FairTrading Act and dishonest assistance made against Geoffrey Clayton.[73] We agree with Asher J that time had started to run prior to 1 December 2009. That must be so given that the event potentially depriving the Burmeisters of their property occurred at the time of the registration of the ASB mortgage in November 2001.[74] We also agree with the Judge that practical considerations militate against the proposition that time did not run until the date of the judgment. Asher J put it in this way:46[51] If plaintiffs could wait before joining the Registrar-General for all the substantive proceedings to be determined, the wait could be very long indeed. The general limitation period under the Limitation Act 1950 for actions to recover land was 12 years. 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 the Registrar-General. It could be more than 15 years before any claim against the Registrar-General came to light and more than 20 before it was time-barred. This would be an unreasonably long period and contrary to the apparent intention of the limitation provisions, even taking into account the fact that it is a Government entity that 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 the Registrar-General can be pursued if the primary claims based on fraud fails. I accept that is so.30 August 2006, 2 September 2008 or 13 November 2008[75] As a further alternative, the Burmeisters submit that time did not start to run until the claim against ASB as mortgagee was struck out (30 August 2006 and 2 September 2008) or 13 November 2008 when leave to appeal from that decision was declined.[76] Again, for the reasons given by the Judge, we agree with his conclusions on this point. As the Judge said:[56] the strike-out judgment did no more than recognise the fact that the ASB had not got its title as mortgage by fraud and was not party to any fraud. 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 the situation that had already occurred. The strike-out decision did no more than recognise a past event, namely, that the ASB when it obtained its title in 2001 had done so without fraud. As such that strike-out decision was not the event which deprived the Burmeisters of their land.46 Citations omitted.[57] I am not convinced that there is any particular hardship or any significant practical considerations that militate in favour of the interpretation urged by Mr Chesterman, and for time to run from the determination of the strike-out application. For the reasons already given there could be unacceptable delays if limitation periods did not begin until after Courts had processed and determined preliminary litigation.Result and costs[77] For these reasons, we agree with Asher J that the Burmeisters' claim unders 172(b) of the Land Transfer Act is not time-barred. The appeal and cross-appeal are dismissed.[78] The Registrar-General did not seek costs in the event of a successful appeal. The respondents sought costs on an indemnity basis or alternatively increased costs, namely, an uplift of 50 per cent. That uplift was seen as necessary to reflect the complexity and significance of the case and/or the effect on costs of the Registrar-General's change in position as noted in this judgment.47[79] There is a novelty aspect to the case but, in reality, the issues are confined. The case is not therefore in the complex category. The respondents have succeeded in upholding the High Court judgment although the outcome is reached on a slightly different basis. However, their cross-appeal has been unsuccessful. In these circumstances, standard costs are appropriate. We make an order that the appellant pay the respondents costs for a standard appeal on a band A basis and usual disbursements.Solicitors:Crown Law Office, Wellington for AppellantSharp Tudhope, Tauranga for Respondents47 Noted at [53] and [69] above.