Li v Forde [2017] NZCA 426 (22 September 2017)

Last Updated: 29 September 2017

IN THE COURT OF APPEAL OF NEW ZEALAND
CA102/2017 [2017] NZCA 426
BETWEEN	HU JIAN LI Appellant
AND	CAVAN JAMES FORDE AND MARTIN CAVAN MCLEOD FORDE Respondents

Hearing:	27 July 2017
Court:	French, Simon France and Toogood JJ
Counsel:	R J M Sim for Appellant L A Andersen for Respondents
Judgment:	22 September 2017 at 11.30 am

JUDGMENT OF THE COURT

1. The application for leave to appeal is granted on the question:

“Whether the purchaser of a title that is limited as to parcels can requisition the location of improvements contracted for when part of such improvements appear to lie within an adjacent guaranteed title.”

2. We answer the question: no.

100. The appeal is dismissed.

4. 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 Simon France J)

Introduction

[1] The appellant as purchaser entered into a sale and purchase agreement with the respondents for a residential property. The title in question was limited as to parcels. Upon inspection it appeared to the purchaser that part of the house being purchased was in fact on the neighbour’s property. The purchaser requisitioned the vendors in relation to the apparent defect. The vendors took the view that the requisition was invalid because of the limitation as to parcels, and declined to act. The purchaser thereupon cancelled, an action not accepted by the vendors. The matter eventually led to proceedings. The District Court agreed with the purchaser,^[1] but the High Court allowed the appeal holding the requisition to be invalid, and therefore the cancellation also to be invalid.^[2]
[2] Leave to appeal is granted on the following question:^[3]

Whether the purchaser of a title that is limited as to parcels can requisition the location of improvements contracted for when part of such improvements appear to lie within an adjacent guaranteed title.

Facts

[3] The agreement for 9 Brunel Street, Dunedin was signed on 15 May 2013. The title is limited as to parcels although that was not noted on the unconditional agreement for sale and purchase. On 30 May the purchaser’s solicitor viewed aerial photos held by the Dunedin City Council on what is known as “Webmap”. Those photos have the apparent boundaries superimposed on them. They showed a portion of the house situated at 9 Brunel Street to be located on the neighbouring property.
[4] The purchaser requisitioned the vendors in these terms:

We hereby requisition the title. The house is not within the boundaries. Please find included aerial photograph.

[5] The vendors replied that the grounds set out did not give rise to an ability to requisition, and no steps would be taken. On 12 June 2013 the purchaser purported to cancel the contract; the vendors did not accept the cancellation and served a settlement notice. The purchase was not settled and the purchaser sued for return of the deposit.
[6] It can be noted that the leave question refers to “an adjacent guaranteed title”. At some point there had been subdivision of the adjacent site on which the house at 9 Brunel Street seemed to be encroaching. By clerical error the new title that was issued did not have a memorial recording it was limited as to parcels, thereby creating the impression that the title was guaranteed. However, as a consequence of the present issue bringing this to light, the notation was reinstated on the title in July 2013. But at the time of the dispute it seemed a guaranteed title.
[7] We are advised that subsequent to this dispute the issues around the titles in the street have been resolved with the formal boundaries now reflecting the long standing occupational boundaries. However, the question of whether the purchaser was entitled to requisition remains relevant to the issues between the parties.

Decision

[8] The starting point is that an agreement for sale and purchase of residential land will be taken to include the improvements to the land.^[4] So here, absent an express reservation, the sale of 9 Brunel Street is to be taken to be a sale of both the land and the house on it. When there is a limitation as to parcels, and when at the same time it appears the house being purchased may in part be situated on the neighbouring property, two competing rules arise.
[9] First, where it appears that an improvement on the land to be purchased encroaches onto a neighbouring property, that is a matter that can be the subject of requisition. Professor McMorland observes of this situation:^[5]

... the vendor must be in default through being unable to convey title to the encroaching portion, and to that extent there is a defect in the vendor’s title in respect of which the purchaser should object and requisition. This is so even if the vendor has a possessory title or an easement for the encroachment; in neither case does the vendor have the title described in the contract.

[10] There can be no dispute here that the purchaser — based on the facts that the neighbouring land appeared to have a guaranteed title, and that the aerial photographs held by the Council appeared to show encroachment — had a sufficient basis on which to requisition unless the fact that the title was limited as to parcels affected this. This is where the second rule applies.
[11] A title may be limited as to title, or as to parcels, or both.^[6] It is wellsettled that a limitation as to parcels cannot be the subject of requisition. It is a purchaser’s responsibility, not a vendor’s, to obtain a survey and perfect the title if he or she wishes. The following passage from Blanchard’s A Handbook on Agreements for Sale and Purchase of Land accurately sets out the law, and explains the different rules applying to limitations as to title and limitations as to parcels:^[7]

MATTERS INCAPABLE OF BEING REQUISITIONED

(a) Limitations as to parcels

A limitation as to parcels is not a title defect. It indicates that the boundaries and the area of the property are not guaranteed in terms of the Land Transfer Act but, equally, it does not necessarily mean that there are discrepancies in those measurements. A purchaser who is prepared to go to the expense of having the property surveyed may find that there are discrepancies and may be able to claim compensation from the vendor under the compensation clause. In an extreme case the survey may show that the vendor has no title to a large part of the property which is the subject of the contract. This would enable the purchaser to cancel. However, in the absence of such proof by the purchaser he cannot requisition for removal of the limitation as to parcels. A limitation as to title is, of course, a matter of title. Section 54 of the Property Law Act 1952 requires a vendor at his expense to do such acts, prove such matters and comply with such requisitions as are necessary to remove the title limitation. This section would not be overridden by a standard requisitions clause. Relatively few such limitations now exist.

[12] To like effect is a passage from Dr Brookfield who, relying on earlier opinions by S I Goodall and E C Adams, observed there is “no doubt” that a limitation as to parcels does not constitute a defect to which a purchaser can object.^[8] The memorial as to parcels is merely a warning to those searching the title that its area and boundaries are not guaranteed under the Land Transfer Act 1952.
[13] Section 41 of the Property Law Act 2007 also makes the distinction clear. By virtue of that section a vendor is obligated to perfect a title limited as to title, but not as to parcels. It provides:^[9]

41. Vendor must ensure register not limited as to title (whether or not register is also limited as to parcels)

(1) This section applies to an agreement for the sale and purchase of land comprised in a register that—

(a) was created before the making of the agreement; and

(b) is limited as to title under Part 12 of the Land Transfer Act 1952 (whether or not the register is also limited as to description of parcels under section 191 of that Act).

(2) The vendor must, before the time of settlement, and unless the agreement provides otherwise,—

(a) do all acts (for example, prove all matters and comply with all requisitions by the RegistrarGeneral) necessary to cause the register to cease to be limited as to title (whether or not the register remains limited as to description of parcels); and

(b) meet the expenses of complying with paragraph (a), including payment of any fee prescribed under the Land Transport Act 1952.

[14] The question in the present case is whether the requisition concerning the improvements, permissible in relation to a guaranteed title, remains permissible where the title is limited as to parcels. We are satisfied that because of the essential nature of the requisition, it does not. Although the requisition purports to demand assurances as to clear title for the fixtures on the land, the reality is that it seeks to have the vendors sort out the limitation as to parcels by arranging a survey and establishing the correct boundaries. Whether there is in fact an issue with title because of a defect in the ownership of the improvements will only become clear by that process of survey. Any such survey is the responsibility of the purchaser.
[15] We do not consider the outcome would have been altered by the fact the property over which the encroachment was apparently occurring seemed to have a guaranteed title. That fact strengthens the case for an apparent flaw in title and makes plain there is a basis to requisition, but it does not alter the nature of the requisition request which is necessarily a requisition to prove the boundaries.
[16] We accept Mr Andersen’s analysis of what was required. The purchaser did not have to complete the transaction prior to the issue being clarified, as long as the purchaser chose to have a survey undertaken. Adopting the approach set out in Holmes v Booth, the purchaser would at that point be entitled to defer settlement until the survey result was known.^[10] What options were next available would depend on the result of the survey — that is whether there was encroachment and, if so, what its scale was. If the purchaser chose not to have a survey done, then the purchaser would be obliged to settle as contracted.

Result

[17] The application for leave to appeal is granted on the question stated in [2]. We answer the question: no.
[18] The appeal is dismissed.
[19] The appellant must pay the respondents costs for a standard appeal on a band A basis and usual disbursements.

Solicitors:
Gallaway Cook Allan, Dunedin for Appellant
Alistair D Paterson Lawyer, Dunedin for Respondents

---

^[1] Li v Forde [2015] NZDC 15375.

^[2] Forde v Li [2016] NZHC 219, (2016) 17 NZCPR 299.

^[3] The process of granting leave became unfortunately complex. Aspects of the leave granted in the High Court were considered problematic. In a minute of 12 July 2017 designed to redress these aspects, leave was stated to have been given. However, it would appear leave cannot be given by a single judge so, for the avoidance of doubt, we confirm leave to appeal is granted on the question as set out. We also note that the respondent sought to argue in the alternative that the requisition was not made in time. Not surprisingly that factual issue was not a matter on which leave to appeal was given, and we decline to address it.

^[4] D W McMorland Sale of Land (3rd ed, Cathcart Trust, Auckland, 2011) at [8.06]; and Peter Blanchard A Handbook on Agreements for Sale and Purchase of Land (4th ed, Handbook Press, Auckland, 1988) at [205].

^[5] McMorland, above n 4, at [9.09(d)(ii)] (footnotes omitted).

^[6] Land Transfer Act 1952, s 191.

^[7] Blanchard, above n 4, at [818] (footnotes omitted).

^[8] F M Brookfield “The Requisitions Clause in Agreements for Sale and Purchase” (1977) 3 New Zealand Recent Law 114 at 121. Referring to S I Goodall The law and practice relating to conveyancing in New Zealand, with precedents (Butterworths, Wellington, 1935) at 366; E C Adams and S I Goodall Goodall’s law and practice relating to conveyancing in New Zealand, with precedents (2nd ed, Butterworths, Wellington, 1951) at 558; and E C Adams The Land Transfer Act 1952 (2nd ed, Butterworths, Wellington, 1971) at 165.

^[9] Emphasis added.

^[10] Holmes v Booth (1993) ANZ ConvR 491 (CA).