Thornley v Ford - [2024] NZCA 154
Date of Judgment
09 May 2024
Decision
Summary
Indefeasibility of title - Title - Easement - Estoppel
In the early 1980s, underground pipes to convey water to neighbouring land (the benefitted titles) were laid by agreement on a route on the burdened land that differed from that described in the registered legal easement. In 1996, the owner of the burdened land, Dr Ford, transferred title to independent trustees of his family trust (of which he was a beneficiary). In 1999, title was transferred back to Dr Ford and his wife, Mrs Ford, who were by then trustees and beneficiaries of the trust (the first respondents). The first and second appellants purchased their benefitted titles without knowledge that the pipes did not follow the route of the registered easement.
From the time of the agreement to vary the route for the pipes on the burdened land until 2019, the benefitted titles continued to have the benefit of the easement over the varied route. However, following a dispute beginning in 2016, Dr Ford cut off the appellants' water supply in 2019. The burdened land was also transferred to the second respondent of which Dr Ford's son was the sole director and shareholder. The water supply was reinstated by High Court order pending the determination of the appellants' claim for rectification of the registered easement or for recognition of an equitable easement, or for a finding that the appellants were estopped from refusing to give effect to the equitable easement.
In the High Court, Peters J held that there was an equitable easement created when the pipes were laid, but that it "did not survive" transfer of title to the independent trustees. Had it survived, the Judge would have found the transfer of the burdened land to the second respondent to be affected by fraud and so not entitled to the protection of indefeasibility against unregistered interests under s 62 of the Land Transfer Act 1952 (the 1952 L TA). The Judge also rejected claims of estoppel and rectification. At trial, the appellants had further argued that an exception to indefeasibility applied to the burdened land when it was transferred to the independent trustees because the registered easement was a "misdescription of any ... easement created in or existing upon any land" pursuant to s 62(b) of the 1952 LT A. The Judge did not directly address this argument.
Following the filing of the appeal in this Court, the burdened land was sold to new owners who agreed to vary the legal easement so that it applied to the route of the pipes as laid. The first respondents pleaded that the appeal was moot because of this development. The second respondent, by this time in liquidation, took no part in the appeal.
Held: The appeal is allowed.
It was appropriate to consider the appeal because: its outcome could be financially important to the appellants; part of the appellants' claim was not directly addressed in the High Court; and the case could have general importance.
Section 62(b) of the 1952 LT A was not intended to apply to an easement that was correctly recorded on the title at the time it was entered on the register, and where there was a subsequent agreement for the easement to follow a different route but the registered legal easement was not varied to reflect the new agreed route.
The first respondents were bound by the equitable easement. The grantor of an equitable interest is bound by the terms of the grant while he or she remains the registered proprietor of the burdened land. The effect of s 62 of the 1952 LTA was that, when the burdened land was transferred to the independent trustees, the equitable easement was unenforceable had the independent trustees wished to assert their right to be free of it. However, it remained enforceable against Dr Ford when the land returned to his control. The protection from unregistered interests in s 62 of the 1952 LT A, and the indefeasibility principle of the Torrens system, did not protect Dr Ford from the enforcement in personam of the easement he had agreed to.
The claim of estoppel by silence was not established. The appellants detrimentally relied upon a mistaken state of affairs in purchasing their properties in the belief that there was a legal easement providing their water supply over the burdened land. However, as the High Court found, it was not clear how Dr Ford could have been under a duty to warn the appellants about this prior to their purchase when there was no evidence he knew any purchases were taking place. If a duty to speak arose subsequent to the purchase from a course of conduct up until 2016 as alleged, the appellants did not demonstrate any detrimental reliance.
In the early 1980s, underground pipes to convey water to neighbouring land (the benefitted titles) were laid by agreement on a route on the burdened land that differed from that described in the registered legal easement. In 1996, the owner of the burdened land, Dr Ford, transferred title to independent trustees of his family trust (of which he was a beneficiary). In 1999, title was transferred back to Dr Ford and his wife, Mrs Ford, who were by then trustees and beneficiaries of the trust (the first respondents). The first and second appellants purchased their benefitted titles without knowledge that the pipes did not follow the route of the registered easement.
From the time of the agreement to vary the route for the pipes on the burdened land until 2019, the benefitted titles continued to have the benefit of the easement over the varied route. However, following a dispute beginning in 2016, Dr Ford cut off the appellants' water supply in 2019. The burdened land was also transferred to the second respondent of which Dr Ford's son was the sole director and shareholder. The water supply was reinstated by High Court order pending the determination of the appellants' claim for rectification of the registered easement or for recognition of an equitable easement, or for a finding that the appellants were estopped from refusing to give effect to the equitable easement.
In the High Court, Peters J held that there was an equitable easement created when the pipes were laid, but that it "did not survive" transfer of title to the independent trustees. Had it survived, the Judge would have found the transfer of the burdened land to the second respondent to be affected by fraud and so not entitled to the protection of indefeasibility against unregistered interests under s 62 of the Land Transfer Act 1952 (the 1952 L TA). The Judge also rejected claims of estoppel and rectification. At trial, the appellants had further argued that an exception to indefeasibility applied to the burdened land when it was transferred to the independent trustees because the registered easement was a "misdescription of any ... easement created in or existing upon any land" pursuant to s 62(b) of the 1952 LT A. The Judge did not directly address this argument.
Following the filing of the appeal in this Court, the burdened land was sold to new owners who agreed to vary the legal easement so that it applied to the route of the pipes as laid. The first respondents pleaded that the appeal was moot because of this development. The second respondent, by this time in liquidation, took no part in the appeal.
Held: The appeal is allowed.
It was appropriate to consider the appeal because: its outcome could be financially important to the appellants; part of the appellants' claim was not directly addressed in the High Court; and the case could have general importance.
Section 62(b) of the 1952 LT A was not intended to apply to an easement that was correctly recorded on the title at the time it was entered on the register, and where there was a subsequent agreement for the easement to follow a different route but the registered legal easement was not varied to reflect the new agreed route.
The first respondents were bound by the equitable easement. The grantor of an equitable interest is bound by the terms of the grant while he or she remains the registered proprietor of the burdened land. The effect of s 62 of the 1952 LTA was that, when the burdened land was transferred to the independent trustees, the equitable easement was unenforceable had the independent trustees wished to assert their right to be free of it. However, it remained enforceable against Dr Ford when the land returned to his control. The protection from unregistered interests in s 62 of the 1952 LT A, and the indefeasibility principle of the Torrens system, did not protect Dr Ford from the enforcement in personam of the easement he had agreed to.
The claim of estoppel by silence was not established. The appellants detrimentally relied upon a mistaken state of affairs in purchasing their properties in the belief that there was a legal easement providing their water supply over the burdened land. However, as the High Court found, it was not clear how Dr Ford could have been under a duty to warn the appellants about this prior to their purchase when there was no evidence he knew any purchases were taking place. If a duty to speak arose subsequent to the purchase from a course of conduct up until 2016 as alleged, the appellants did not demonstrate any detrimental reliance.