Kiwi Trustee Limited v Lin [2016] NZHC 595 (7 April 2016)

Last Updated: 27 April 2016

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-131 [2016] NZHC 595

UNDER	the Land Transfer Act 1952 section 145A(3)
IN THE MATTER OF	an application that Caveat numbered 10285408.1 not lapse.
BETWEEN	KIWI TRUSTEE LIMITED Applicant
AND	QING LIN Respondent

Hearing:	7 April 2016
Appearances:	P F Chambers for Applicant K Davenport QC and S J Callanan for Respondent
Judgment:	7 April 2016

_{ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL}

Solicitors:

Henley-Smith Law (Mark Henley-Smith), Auckland, for Applicant

Lewis Callanan, Browns Bay, Auckland, for Respondent

Copy for:

Paul F Chambers, Barrister, Auckland, for Applicant

Kate Davenport QC, Auckland, for Respondent

KIWI TRUSTEE LIMITED v QING LIN [2016] NZHC 595 [7 April 2016]

[1] Kiwi Trustee Ltd applies under s 145A of the Land Transfer Act 1952 to sustain caveat 10285408.1. The interest claimed in the caveat is:

an equitable estate and interest arising from an agreement dated

30 September 1974 to allow unrestricted access to easement area B on

Deposited Plan 73050 over the Servient Tenement that being Lot 2

Deposited Plan 73050 in Easement Certificate 292731.3 known to and binding on the registered proprietor Qing Lin.

[2] Kiwi Trustee Ltd owns an eight hectare property at 1343 State Highway 16, Reweti. It is Lot 2 Deposited Plan 129690 on title identifier NA76A/358. That is the dominant tenement for the easement it claims. Mrs S Hart is a director of the company.

[3] Ms Qing Lin owns a neighbouring property at 1331 State Highway 16, Reweti. It is some 72 hectares in area, Lot 2 Deposited Plan 73050, Lot 4 Deposited Plan 116372 and Lot 2-3 Deposited Plan 201803, all shown on title identifier NA130B/550. The former owner of Ms Lin’s property is Mr Hart, Mrs Hart’s husband. Ms Lin became the registered proprietor of her property in June 2013 under an agreement for sale and purchase of November 2012. The ANZ Bank sold the property to her as mortgagee, exercising its powers of sale.

[4] The title to that property shows two registered water easements recorded in two easement certificates. They covered different parts of the property. One was registered in 1974 and the other in 1987. The dominant tenement for those registered easements is the property of Kiwi Trustee Ltd.

[5] Both sides accept that Ms Lin’s property, as the servient tenement, is subject to those registered water easements, and that she cannot prevent Kiwi Trustee Ltd as the owner of the dominant tenement exercising its rights under those easements. Kiwi Trustee Ltd says however that in addition to those rights under the registered easement, it has other rights under an unregistered equitable easement. Two rights were mentioned in particular. The first is the right to pass over other parts of Ms Lin’s property to access the land the subject of the water easement, in particular the right to enter the property from State Highway 16 and to travel along a driveway

to the property to access a pump shed within the easement area. The other right claimed was the right to clear the stream on the property not only within the easement area but also upstream of the water intake. Although those rights were mentioned in particular, I did not understand Kiwi Trustee Ltd to say that those were the only rights covered by the equitable easement it claims.

Principles on applications to remove caveats

[6] In caveat applications under ss 143, 145 and 145A of the Land Transfer Act

1952, the caveator generally has the onus of showing a reasonably arguable case for the interest claimed. The interest must come within s 137(1) of the Act. A personal or contractual right is not enough. The caveator must show an entitlement to a beneficial interest in the land under the caveat. Something more than a potential interest is required. Caveat applications are summary and are therefore not suitable for deciding disputed questions of fact. On the other hand, the court is not required to accept uncritically as raising a dispute of fact which calls for further investigation. Every statement in an affidavit, however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent or inherently improbable it may be. For a caveat to be removed, it must be patently clear that the caveat cannot stand either because there was no ground for lodging it at the outset or because any such ground no longer exists. In addition, the court has a residual discretion not to uphold a caveat but that is exercised cautiously, as when the caveat could serve no useful purpose or alternative safeguards are available.

[7] To establish a reasonably arguable case there must be evidence tending to prove the facts relied on. Assertion, whether in pleadings or affidavit, is not enough. The evidence does not need to be as extensive as that given in a hearing on the substantive merits and it may be circumstantial. But if there is no evidence to prove the facts contended for, the caveator will not have made out a reasonably arguable case for those facts.

[8] There is a qualification to the reasonably arguable standard. Where there are allegations of fraud or other reprehensible conduct, it is necessary to show a prima

facie case. The authority for that is the Court of Appeal’s decision in Schmidt v

Pepper New Zealand (Custodians) Ltd:¹

Allegations of fraud or dishonesty are very serious. They must be pleaded with care and particularity. As the authors of Bullen & Leake & Jacobs Precedents of Pleadings emphasise, counsel must not draft any originating process or pleading containing any allegation of fraud unless they have reasonably credible material which, as it stands, establishes a prima facie case of fraud – that is, material of such a character which would lead to the conclusion that serious allegations could properly be based upon it. Fraud cannot be left to be inferred from the facts – fraudulent conduct must be distinctly alleged and as distinctly proved. General allegations, however strong the words may appear to be, are insufficient to amount to a proper allegation of fraud.

[9] That was a caveat case in which the caveators were alleging fraud against a person with a registered interest in the property. I have followed that decision in Trustees Executors Ltd v Steve G Ltd, Paugra Holdings Ltd v Harvestfield Holdings Ltd, S v XYZ Ltd and Virtual Spectator Ltd v Rothlander.²

[10] Kiwi Trustee Ltd cited Rarere v Phildagap Ltd.³ In that caveat decision, Mallon J found that fraud for the purpose of the Land Transfer Act could be made out only to a reasonably arguable standard. She did not require a higher standard. With respect to Mallon J, her decision appears to have been overtaken by the Court of Appeal’s decision in Schmidt v Pepper New Zealand (Custodians) Ltd.⁴ I do not follow the approach she took in Rarere.

Background

[11] Both the properties in this case were originally owned by a Mr John Fielding. In about 1971, he sold the servient tenement to a Mr Hector MacCallum. Mr Fielding retained part of the farm, which includes the land now owned by Kiwi Trustee Ltd. A water easement was created by easement certificate in 1974 and is

_{recorded on a subdivision plan. The wording of the easement is:}

¹ _{Schmidt v Pepper New Zealand (Custodians) Ltd [2012] NZCA 565 at [15].}

² Trustees Executors Ltd v Steve G Ltd [2013] NZHC 16 at [63]-[66]; Paugra Holdings Ltd v Harvestfield Holdings Ltd [2013] NZHC 1297 at [78] (overturned on appeal, but not on this point – Paugra Holdings Ltd v Harvestfield Holdings Ltd [2014] NZCA 164, (2014) 15 NZCPR

_{227); S v XYZ Ltd [2016] NZHC 26 at [6] and Virtual Spectator v Rothlander [2016] NZHC 499.}

³ _{Rarere v Phildagap Ltd (2011) 14 NZCPR 133 (HC).}

⁴ Schmidt, above n 1.

The full, free, uninterrupted, and unrestricted right, liberty and privilege for the grantee and his servants from time to time and at all times to take, convey, and lead water in a free and unimpeded flow from the source of supply or point of entry, as the case may be, across the land over which the easement is granted or created, together with the additional rights incidental thereto set out below, namely:

The full, free, uninterrupted, and unrestricted right, liberty, and privilege for the grantee and his servants for the purposes of the easement concerned –

(a) To use any line of pipes already laid on the land over which the easement is granted or any pipe or pipes in replacement or in substitution for all or any of those pipes;

(b) Where no such line of pipes exists, to lay, place, and maintain or to have laid, placed, and maintained, a line of pipes of a sufficient internal diameter and of suitable material for the purpose under or over the surface of the land over which the easement is granted or created.

(c) In order to construct or maintain the efficiency of any such pipe line, the full, free, uninterrupted and unrestricted right, liberty, and privilege for the grantee, his tenants, servants, agents, and workmen, with any tools, implements, machinery, vehicles, or equipment of whatsoever nature necessary for the purpose, to enter upon the land and to remain there for any reasonable time for the purpose of laying, inspecting, cleansing, repairing, maintaining, and renewing the pipe line or any part thereof and of removing any obstruction impeding the free flow of water in the stream providing the source of supply to the pipe line, and of opening up the soil of that land to such extent as may be necessary and reasonable in that regard, subject to the condition that as little disturbance as possible is caused to the surface of the land of the grantor and that the surface is restored as nearly as possible to its original condition and any other damage done by reason of the aforesaid operations is repaired.

(d) To install erect place and maintain on the land over which the easement is granted an electric pump of a capacity sufficient to maintain a free and unimpeded flow of water as aforesaid.

(e) For the operation of the said pump to erect lay place and maintain over or under the land over which the easement is granted a line or lines of cable for the conduction of electricity and to convey electricity along such line or lines of cable and to erect on the said land poles for the support of such line or lines of cable.

(f) In order to construct or maintain the efficiency of such electric pump poles or lines of cable the full free uninterrupted and unrestricted right liberty and privilege for the grantee his tenants servants agents and workmen with any tools implements machinery vehicles or equipment of whatsoever nature necessary for the purpose to enter upon the land and to remain there for any reasonable time for the

(g) purpose of laying placing erecting repairing maintaining and renewing the said electric pump, poles or lines of cable.

(Emphasis added)

[12] Another water easement was created in 1987 under a further easement certificate. That was on other land. The terms of the second easement are the same as the one registered in 1974.

[13] The servient tenement was the site of a dairy farm. Mr MacCallum, who now farms in Taupo, says that at the outset there was a pump on a stream through the servient tenement which provided water to both properties. After he took ownership, the Fieldings would access the pump-shed by driving onto the property from State Highway 16. Later, a driveway was formed, and the Fieldings used that for access. The significance of that evidence is that the driveway does not appear to be inside any part of the land the subject of the registered easements. Mr MacCallum explains that later he created a small lake on the property and that was used as a permanent water supply for stock for the farm. That left the Fieldings to use the water pump in the easement. Pipes were laid running up to a tank used to feed water onto the dominant tenement as water for stock.

[14] Mrs Paulsen, a daughter of Mr Fielding, has confirmed that her father had unrestricted access to the MacCallum farm to get to the water pump supplying her father’s property with water. She says that there was a small walkway across the stream so that they could get from the driveway over the stream to the pump-shed. The evidence also shows that the pipes on the property did not necessarily follow the area marked on the survey plans for the easement. No one seems to have made an issue of this at the time. Good neighbourly relations prevailed. In a fairly traditional farming way everyone regarded it as very much a “give and take” arrangement.

[15] Later, when Mr MacCallum sold the servient tenement to Mr Hart, those informal access arrangements appear to have continued. Similarly, when Kiwi Trustee Ltd came to own the dominant tenement, while there was not common ownership there was certainly associated ownership. It is readily understandable that easement rights were not strictly insisted upon and informal arrangements prevailed.

[16] Matters changed after Ms Lin bought the servient tenement. She employed a farm manager. According to her and her farm manager, there was a problem with animals from Kiwi Trustee Ltd’s property straying onto her property. They contend that the boundary between the two properties was not fenced. They arranged for a surveyor to come onto the property to define the boundary and also to define the area subject to the registered easements. After that, the farm manager arranged for the area subject to the easements to be fenced, making sure that the fence was built outside the easement area. It was found that the pipes to supply the dominant tenement were outside the easement area. He moved them so that they were within the area identified by the surveyor. Those changes were made in 2013.

[17] Kiwi Trustee Ltd objected and instructed lawyers to write taking issue with those steps. Its complaints went to the pipes having been moved from where they were originally laid, the construction of the fence and the behaviour of the farm manager. Kiwi Trustee Ltd says that it cannot now access the pump-shed if it is restricted to the area of the easement. It says that the area of the easement is only some three metres wide and that it runs across steep ground. An engineer has calculated part of the gradient at an average of about 44 per cent. It was submitted that that is hardly safe for vehicular access. It was stated that part of the ground is boggy, which would hinder access. Kiwi Trustee Ltd also says that in the light of trespass notices issued by the farm manager it can no longer use the driveway from State Highway 16 to access the pump-shed. Although this was not developed in evidence, it was submitted that there could be problems if Kiwi Trustee Ltd were not able to access parts upstream from the intake point, so as to maintain a free flow of the stream.

[18] Ms Lin does not necessarily accept the complaints made by Kiwi Trustee Ltd. Her position is that she has throughout acted within her rights under the registered water easements, and she has not interfered with the applicant’s exercise of its rights under those registered easements. She takes issue with the complaints as to the practicalities of using the area of the easement for access to the pump-shed and the stream. She points out that while the steps complained of occurred in 2013, Kiwi Trustee Ltd has apparently had unimpeded rights to the water from the stream and has been able to reticulate water successfully onto its own property without

interference. She points out that she has never been asked whether she would allow

Kiwi Trustee Ltd to get to the pump-shed by the driveway.

[19] As well as lodging the caveat, Kiwi Trustee Ltd has started other proceedings in this court against Ms Lin and the farm manager in CIV-2016-404-2. The causes of action in that proceeding include claims for nuisance for interference with the exercise of rights under the easement.

[20] The differences between Kiwi Trustee Ltd and Ms Lin are matters that ordinarily would be determined by establishing whether Ms Lin had interfered with the rights of Kiwi Trustee Ltd under the registered easement. Insofar as those rights might fall short of allowing the water easement to be used in a practical sense, there might also be grounds for modifying the easement under s 317 of the Property Law Act 2007.

[21] But here, Kiwi Trustee Ltd is saying something beyond that. It says that it has rights outside those contained in the registered easement and it already holds those rights without requiring the court to make an order under s 317 of the Property Law Act. These rights are said to be the right of access from the State Highway up the driveway to a point across the stream from the pump-shed, and also rights to clear the stream. These rights are said to exist under an unregistered, equitable easement.

[22] That approach assumes that the rights contended for are not covered by the existing registered easements. That part of the case makes sense when the terms of the easement are construed. The easement begins with conferring rights over the land over which the easement is granted or created. I regard the words “over which the easement is granted or created” as limited to the area of the easement identified in the subdivision plans rather than covering the entire area of the servient tenement. That would be an appropriate limitation to apply, bearing in mind that the purpose of the subdivision plan is to identify the area subject to the easements. “The land” in the easement certificate can accordingly be read as limited to the area marked on the subdivision plans. That is consistent with the wording under clause A, “the land over which the easement is granted”. “The land” is used also without that limitation, but

it can be taken as implicit that the rights granted do not apply outside the areas of the easement shown in the plan.

[23] Insofar as Kiwi Trustee Ltd wants to argue that it can enter onto those parts of the property not covered by the easement, it is arguing for rights outside the registered easement. That part of its case seems to be plausible although it should not be taken as limiting its ability to argue in its present substantive proceeding that it has those rights under the easement in any case. It is entitled to lodge a caveat on the basis that the rights under the registered easement might fall short of what it contends they would be under an alternative construction.

[24] It is not contested that an easement is an interest in land that may be caveated under s 137 of the Land Transfer Act. That seems to apply without difficulty, given that easements are capable of being registrable instruments. As for the contents of the rights asserted by Kiwi Trustee Ltd, the right to come onto land and pass over it is a very obvious form of easement. The right to clear a stream is, in my judgment, also equally capable of being the subject of an easement. In this regard, I follow the

English Court of Appeal’s decision in Re Ellenborough Park,⁵ as recording those

rights are all potentially able to come within the four characteristics identified in that decision.

An easement or a licence?

[25] A question can arise whether the rights contended for are an easement or a licence. The difference is significant. A licence does no more than confer a defence to a claim for trespass. It may be a bare licence or it may be a contractual. It does not give rise to an interest in land and is therefore not caveatable. On the other hand, as I have just mentioned, an easement does give rise to a caveatable interest. One

authority cited by counsel for Kiwi Trustee Ltd, Olo Ltd v KA No 3 Trustee Ltd,⁶

dealt with an argument whether an interest in land in that case was a licence or an easement. The default position is that if the rights contended for are capable of being an easement, and there are no countervailing considerations, the matter will prima

_{facie be regarded as an easement. For present purposes I regard the content of the}

⁵ Re Ellenborough Park [1956] Ch 131 (CA) at 163.

rights contended for by Kiwi Trustee Ltd as being easements, rather than mere licences.

Restricted to content of registered easement?

[26] Ms Lin referred to Dunningham J’s decision in Remarkable Wines Ltd v Camp Creek Ltd.⁷ The short point about that case was that the caveator had lodged a caveat in support of an equitable easement when the caveator already had a registered easement over the property. Dunningham J held that the caveator was restricted to the rights under the registered easement, however imperfect they might be, and could not claim extra rights. She said: ⁸

...The caveat cannot give greater rights or protection to the caveator than it would have under the claimed registrable interest. If a subsequent owner does not permit the full exercise of the easements rights granted to the owner of the applicant’s land, that would need to be the subject of separate proceedings to enforce those rights. It cannot justify the maintenance of the present caveat.

[27] That applies as far as it goes. If the question had arisen shortly after these easements had been created, then the registered easements would be held to govern the parties’ relationships – that is, the positions in 1974 and 1987. Kiwi Trustee Ltd however points to subsequent conduct after the easements were created to allege that rights were generated then.

[28] That argument does not align cleanly with the interest claimed in the caveat, which is said to arise from an agreement dated 30 September 1974. No agreement dated 30 September 1974 has been put in evidence. The reference to the date of

30 September 1974 appears to be a reference to the first easement certificate. An unduly technical approach would be to hold against Kiwi Trustee Ltd immediately on this point because it has not proved any agreement from which it can derive the interest for which it contends. Invariably, when such tight approaches are taken, the question arises whether leave should be granted under s 148 of the Land Transfer Act

_{to allow the caveator to lodge a new caveat. Invariably the exercise becomes one of}

⁷ Remarkable Wines Ltd v Camp Creek Ltd [2015] NZHC 2537.

considering whether there is a basis for a caveatable interest based on the evidence put in front of the court.

[29] The Court of Appeal’s decision in Zhong v Wang shows that a liberal approach should be taken to the construction of caveats.⁹ Applying that liberal approach, I will construe the wording of the caveat as allowing for equitable interests to arise from events that have followed from the easements created originally in September 1974 under the easement certificate lodged then.

[30] As the interests are said to arise as a result of events, that acknowledges that Kiwi Trustee Ltd cannot rely on the more usual means by which equitable interests are created. That is by instrument in writing, as was required under the Statute of Fraud 1677 and from 1981 onwards under s 49A of the Property Law Act 1952. Nor does it allow for any implied easements. I would point out that under Wheeldon v Burrows, where a vendor wishes to have an easement over land sold an express

reservation is required.¹⁰ In this case Mr Fielding sold land to Mr MacCallum. It

would be incumbent on Mr Fielding, as vendor, to expressly reserve for himself any rights he wished to retain over the land he had sold. There was an express reservation: as set out in the registered easements. It is not possible to argue for other rights outside those that were expressly reserved.

[31] Instead, the matter turns very much on the conduct of the prior owners. Such arguments would have to turn on matters of proprietary estoppel and acquiescence built on authorities such as Plimmer v City of Wellington Corporation¹¹ and Crabb v Arun District Council.¹² While Kiwi Trustee Ltd did not develop fully an argument based on these principles, for present purposes I will assume that it is arguable that

until Ms Lin became owner, the gentlemen’s agreement and informal access arrangements may have developed to the point where Kiwi Trustee Ltd could say that the owner of the servient tenement had allowed equitable easements to arise

_{outside the terms of the registered legal interests.}

⁹ Zhong v Wang [2006] NZCA 242; (2006) 7 NZCPR 488 (CA) at [58].

¹⁰ _{Wheeldon v Burrows (1879) 12 Ch D 31 (CA).}

¹¹ _{Plimmer v City of Wellington Corporation (1884) 9 App Cas 699 (PC).}

¹² Crabb v Arun District Council [1976] Ch 179 (CA).

Did Ms Lin take title free of the easement?

[32] The core of the case is instead whether any such equitable interests survived the transfer to Ms Lin. That is where the thrust of the defence came in. Ms Lin relies on having taken an indefeasible title under the Land Transfer Act.

[33] Although the parties had not considered it in their submissions, I raised with them s 105 of the Land Transfer Act:

105 Transfer by mortgagee

Upon the registration of any transfer executed by a mortgagee for the purpose of exercising a power of sale over any land, the estate or interest of the mortgagor therein expressed to be transferred shall pass to and vest in the purchaser, freed and discharged from all liability on account of the mortgage, or of any estate or interest except an estate or interest created by any instrument which has priority over the mortgage or which by reason of the consent of the mortgagee is binding on him.

[Emphasis added]

[34] Clearly the easements covered by the easement certificates were registered ahead of the mortgage to the ANZ Bank and under the sale by the bank to Ms Lin the land passed subject to those registered interests. The land, however, was transferred free of other interests. That includes any equitable interests. The equitable easements asserted by Kiwi Trustee Ltd were discharged upon the transfer. Under

s 105, Ms Lin took the land free of the interests now claimed by Kiwi Trustee Ltd.¹³

[35] Section 105 may be a specific instance of the operation of the indefeasibility provisions of the Land Transfer Act. The key provision is s 62:

62 Estate of registered proprietor paramount

Notwithstanding the existence in any other person of any estate or interest, whether derived by grant from the Crown or otherwise, which but for this Act might be held to be paramount or to have priority but subject to the provisions of Part 1 of the Land Transfer Amendment Act 1963, the registered proprietor of land or of any estate or interest in land under the provisions of this Act shall, except in case of fraud, hold the same subject to such encumbrances, liens, estates, or interests as may be notified on the folium of the register constituted by the grant or certificate of title of the

¹³ Zambuto v Kensington Park Holdings Ltd [2010] NZHC 2113; (2010) 12 NZCPR 395 (HC); Westpac New Zealand

Ltd v Set Kien Law [2012] NZHC 1065 and ANZ National Bank v Uruamo [2012] NZHC 1895,

13 NZCPR 643.

land, but absolutely free from all other encumbrances, liens, estates, or interests whatsoever,—

(a) except the estate or interest of a proprietor claiming the same land under a prior certificate of title or under a prior grant registered under the provisions of this Act; and

(b) except so far as regards the omission or misdescription of any right of way or other easement created in or existing upon any land; and

(c) except so far as regards any portion of land that may be erroneously included in the grant, certificate of title, lease, or other instrument evidencing the title of the registered proprietor by wrong description of parcels or of boundaries.

_{[36] In Regal Castings Ltd v Lightbody, Tipping J said:} ¹⁴

_And:¹⁵

Section 62 says that except in the case of fraud, the registered proprietor holds his interest in the land subject only to such encumbrances and other estates or interests as are notified on the register and absolutely free from all other encumbrances, estates or interests. It is the fact of becoming the registered proprietor without fraud that gives the estate of the registered proprietor paramountcy.

That section is simply expressed and deliberately so. Except in the case of fraud, the registered proprietor takes free of all interests that are not notified. The certainty and simplicity of that proposition should not be watered down by reference to whether the interest qualifies for registration. It is the fact of non-notification which is crucial. The absence of the interest from the register, for whatever reason, is what matters in a system which has from earliest times proceeded on the basis that as Edwards J put it in Fels v Knowles, “the register is everything”.

[37] There are exceptions to the indefeasibility principle. Under s 62(b) there is an exception in the case of easements but case law has recognised that the exception applies only in respect of easements that arose before the land was bought under the Land Transfer Act.¹⁶ Kiwi Trustee Ltd cannot use that exception in this case.

_{Instead it relied on exception for fraud and the in personam exception.}

¹⁴ _{Regal Castings Ltd v Lightbody [2008] NZSC 87, [2009] 2 NZLR 433 at [136].}

¹⁵ _{At [150].}

¹⁶ Sutton v O’Kane [1973] 2 NZLR 304 (CA).

Fraud

[38] The evidence as to fraud comes in a reply affidavit of Mrs Hart. She says that she saw Ms Lin and her family inspecting the property before buying it. That single piece of evidence was used to build a case for actual fraud by Ms Lin. Supposedly on the inspection of the property, Ms Lin was meant to infer the existence of an equitable easement that conferred rights in addition to those conferred by the registered easements which she should have ascertained from a search of the title. The argument went that she ought to have known that the rights available to the holder of the easements went beyond those shown in the registered easement and, because she ought to have known of that, it was fraudulent for her to acquire title and then to deny those rights.

[39] That argument is one based on constructive knowledge rather than actual knowledge. Here s 182 of the Land Transfer Act has particular importance:

182 Purchaser from registered proprietor not affected by notice

Except in the case of fraud, no person contracting or dealing with or taking or proposing to take a transfer from the registered proprietor of any registered estate or interest shall be required or in any manner concerned to inquire into or ascertain the circumstances in or the consideration for which that registered owner or any previous registered owner of the estate or interest in question is or was registered, or to see to the application of the purchase money or of any part thereof, or shall be affected by notice, direct or constructive, of any trust or unregistered interest, any rule of law or equity to the contrary notwithstanding, and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud.

Emphasis added.

[40] A purchaser from a mortgagee exercising a power of sale deals with the holder of a registered interest in land. Ms Lin is entitled to invoke s 182. She is not affected by notice of any unregistered interest in the land, whether the notice is actual or constructive. The mere fact that she knows of an unregistered interest cannot by itself be imputed to her as fraud. There are cases where purchasers with knowledge of unregistered interests have been held to be fraudulent in acquiring title and then denying the unregistered interest. Such a case is the decision of Woodhouse

J’s decision in McCrae v Wheeler.¹⁷ That case can easily be distinguished on the facts.

[41] I come back to the point I made earlier when referring to Schmidt v Pepper Custodians Ltd.¹⁸ To make good its allegation of fraud, Kiwi Trustee Ltd needs to establish a prima facie. Kiwi Trustee Ltd’s evidence is speculative at best. It is inherently improbable that a purchaser from a mortgagee, even on a physical inspection of the land, could become aware of unregistered instruments outside those recorded in registered easements. There is insufficient evidence in this case to

establish a proper foundation for believing that Ms Lin was fraudulent in acquiring title and then holding Kiwi Trustee Ltd to the terms of the registered easement.

The in personam exception

[42] In Regal Castings v Lightbody, Tipping J said this about the in personam exception:¹⁹

The cardinal feature of the indefeasibility principle is that, absent fraud, it entitles the registered proprietor and those dealing with the registered proprietor to rely on the register. Sections 62 and 63 allow the registered proprietor to deny unregistered interests and resist the claims for possession. Sections 182 and 183 allow purchasers and others dealing with the registered proprietor to rely on the register for the purpose of gaining assurance as to what the registered proprietor can convey. On this basis those dealing with the registered proprietor do not have to go behind the register to ascertain the state of the registered proprietor’s title.

An in personam claim against a registered proprietor looks to the stat of the registered proprietor’s conscience and denies him the right to rely on the fact he has an indefeasible title if he has so conducted himself that it would be unconscionable for him to rely on the register. Such a claim is concerned with the personal obligations of the registered proprietor, rather than with the sanctity of their title. A successful in personam claim indirectly affects the registered proprietor’s title such as when a decree of specific performance is made; but the claim is not a claim to the land as such. It is a claim that the registered proprietor perform the contract of sale.

The in personam jurisdiction must not, however, be allowed to impinge on the fundamental purpose of the Torrens system. In terms of s 62, that purpose is to make the registered proprietor’s estate or title as it is usually put paramount against interests which are not notified on the register. ...

¹⁷ _{McCrae v Wheeler [1969] NZLR 333 (SC).}

¹⁸ _{Schmidt, above n 1.}

¹⁹ Regal Castings, above n 14, at [147]-[149].

[43] It was submitted that there was conduct by Ms Lin that would arguably give rise to an in personam claim. The only matters referred to were the actions of Ms Lin and her farm manager in having the land surveyed, having the area of the easement identified, putting up a fence and the issue of trespass notices. That conduct is entirely consistent with Ms Lin asserting her rights, as she understands them to be, under the registered easement. If she is wrong in that, she may face liability in the substantive proceedings that have already been issued alleging interference with the registered easements. But it is not conduct which would touch her conscience such as to give Kiwi Trustee Ltd rights in addition to those already given under the registered easements. There is nothing in her conduct under which she has bound herself in conscience to recognise interests that go beyond those recorded in the registered easements. By that I mean conduct under which she has bound herself contractually or has created a trust or is bound by some form of proprietary estoppel. None of the actions alleged against her suggest that there is any conscience-based claim against her to give rise to an equitable interest beyond those recorded in the registered easements.

Outcome

[44] Accordingly, it is in my judgment patently clear that when she took title, and ever since she has held title, Ms Lin has held title subject only to the registered easements held by Kiwi Trustee Ltd as owner of the dominant tenement. She does not hold title subject to any additional interests by way of unregistered equitable easements. It follows then that the application must be dismissed.

[45] I make an order for removal of the caveat, but that order is not to take effect until 21 April 2016. I have fixed that period to allow Kiwi Trustee Ltd to take advice as to appeal. If Kiwi Trustee Ltd decides to appeal and wants to sustain the caveat pending the appeal, it will need to apply for relief under r 12 of the Court of Appeal (Civil) Rules 2005.

[46] I order costs to Ms Lin against Kiwi Trustee Ltd on the application. The case is category 2 for costs. Counsel should confer and agree costs but if they cannot,

memoranda may be filed and I will decide costs on the papers. The length of the hearing is half a day. I do not certify for second counsel.

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Associate Judge R M Bell