Gazumpted? - the importance of registering documents
Date: 28 July 2010 | Category: Property & Real EstateSource: NZ Lawyer Extra
The importance of registering documents
This article first appeared in NZLawyer Extra, 7 May 2010, Edition 1
The case of Perkins and Perkins v Purea [2010] NZSC 15 (Chief Justice Elias, and Justices Blanchard and McGrath) is important for practitioners on two fronts. First, it is important to complete the registration of documents process with Landonline as soon as the parties have been properly identified and the A and I forms completed where necessary. Second, if there has been no registration of the required documents on time, then be prepared that the Court will decide the dispute on which party has the stronger claims in equity.
Facts
The facts were quite straightforward and were summarised succinctly by Justice Asher when the case was heard in the High Court. Basically, Mr and Mrs Purea agreed that their daughter, Mrs Tangi-Tuaki, and her husband were to pay the balance of the existing mortgage over a property in Manurewa, Auckland, to ASB Bank. When that happened, Mr and Mrs Purea would transfer the property to their daughter. That agreement took place in 1988. The Pureas migrated to New Zealand from the Cook Islands.
In the intervening period, Mr Purea formally separated from Mrs Purea. At the time of Mrs Purea's death, she lived with Mrs Tangi-Tuaki and the latter's husband. The mortgage to ASB Bank was fully paid at the end of 2003, with assistance from the mortgage repayment insurance moneys paid to the estate of Mrs Purea. Mrs Tangi-Tuaki then arranged with her lawyers to transfer the property into her name. The required documents for the conveyance, including a transmission document, were prepared and sent to Mr Purea to complete. Mr Purea was living in the Cook Islands at the time. Unfortunately, the documents were neglected to be registered smartly.
Mr Purea returned to New Zealand in late 2005. He purportedly sold the property to a Mr and Mrs Perkins despite previously signing the transfer of the same property to his daughter. Aware of the purported sale to the Perkins, Mrs Tangi-Tuaki's lawyer lodged a caveat against the title to the property. Since the transfer to the Perkins was not registered with LINZ, the crucial issue for Justice Asher to decide was who had the stronger equitable claim.
Justice Asher ordered the defendant, Mr Purea, to transfer the property at 131 Rowandale Avenue to his daughter, Mrs Tangi-Tuaki. Among other costs, Justice Asher awarded damages to the Perkins in the sum of $88,000, being the difference between the sale price of the property and its market value at the date of hearing, and general damages of $5,000.
The Supreme Court was of the view that the High Court and the Court of Appeal had taken the orthodox approach in reaching their respective decisions in the present case, and declined to intervene.
Priority
At the Supreme Court level, the Perkins' lawyers argued that the interest of the Perkins had priority over that of Mrs Tangi-Tuaki because of section 182 of the Land Transfer Act 1952 (Act). It is usual that section 62 of the Act also applies, but there was no registration of any documents at LINZ by the Perkins to perfect their title and claim to the land. The Supreme Court did not see it that way; it would require an overhaul of the established law that Australia and New Zealand share in this area and that would be a huge task, and unnecessary here. The leading authority in this area is Frazer v Walker [1967] NZLR 1069. It must be remembered that in Frazer, the registration of a forged mortgage by an innocent third party was considered to be indefeasible by the Privy Council. Furthermore, a plaintiff would still have a claim against the registered proprietor in personam founded in law or equity, as was established in Frazer.
Constructive trusts
At the end of the day, Justice Asher considered a numbers of cases relating to constructive trusts. His Honour decided that Mr Purea held the land for Mrs Tangi-Tuaki on a constructive trust similar to what the English courts have decided in Clarke v Ramuz [1891] 2 QB 456 (CA) and Phillips v Lamdin [1949] 2 KB 33.
Again, as there was no registration at LINZ, the case was decided based on which party had the stronger claim in equity. There were a number of cases decided by Australian courts in the 1970s where the ranking of claims in equity was of paramount importance. Those cases included J & H Just (Holdings) Pty Ltd (in liq) v Bank of New South Wales (1971) 125 CLR 546 and Osmanoski v Rose [1974] VR 523.
Damages
The registered proprietor, Mr Purea, was held liable to pay damages to the Perkins for knowingly selling the land that had already been conveyed to his daughter, Mrs Tangi-Tuaki.
False colours
As a concluding remark, the case was decided correctly on its special facts.
The warning to practitioners is that they must be aware of their clients' shortcomings. Those clients that may have trouble with languages should have an interpreter for assistance. The practitioners must try to minimise the harm their clients may represent to the world under ‘false colours' because of the practitioners' lack of prompt action in a given situation, as in the present case.
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