Exam October 2018, questions and answers PDF

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Full exam questions with detailed examiner/markers notes....

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EXAMINATIONS – 2018 FULL-YEAR LAWS 301 PROPERTY LAW

Time allowed:

TWO HOURS PLUS 10 MINUTES READING TIME The first TEN MINUTES are READING TIME. DO NOT open the answer booklet during this time, but you may write on the question paper or other notepaper. You may open the answer booklet when the supervisor makes the announcement to begin writing your answers.

Permitted materials:

CLOSED BOOK (Selected Materials) Students are allowed one piece of A4 paper with writing or typing on either or both sides, and the Brookers Property Law Legislation Handbook 2018 into the examination room. Passages may be highlighted, underlined or flagged with post-it notes, but it may not be otherwise annotated or added to. A list of cases studied is appended to each Part. No computers or electronic devices are allowed. No calculators are permitted.

Instructions:

There are SIX QUESTIONS. Answer ALL questions. PART A QUESTION ONE: QUESTION TWO: QUESTION THREE: PART B QUESTION FOUR: QUESTION FIVE: QUESTION SIX:

22 marks 22 marks 6 marks 28 marks 16 marks 6 marks TOTAL: 100 MARKS

The examination is worth 60% of your final mark for LAWS 301. Write your STUDENT ID NUMBER on the front of your examination booklet. DO NOT write your name. THIS PAPER IS NOT TO BE REMOVED FROM THE EXAMINATION VENUE LAWS 301

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PART A Answer all THREE questions in this Part. QUESTION ONE Leah owns a large dairy farm in Otago which was first established by Leah’s great grandfather and passed into her hands through her grandfather and then her father. Jacob was the farm manager for Leah’s father. Jacob later studied law and became a lawyer. He handles Leah’s legal affairs. Jacob forged Leah’s signature, borrowed a large sum from the Bank of Middle Earth (“the Bank”) and mortgaged the farm to the Bank. The Bank did not know Jacob forged the signature. The Bank’s mortgage was duly registered. Jacob did not make any repayment and is bankrupt. The Bank now seeks to enforce its right for a mortgagee sale. Leah is heartbroken to receive the Bank’s notice. She wants to challenge the validity of the Bank’s registered mortgage and to have the registration cancelled. Advise Leah of the likelihood of success. Assume that the Land Transfer Act 2017 applies. (22 Marks) QUESTION TWO Saul owned the Olive Grove Estate (“the Estate”) in Waikanae. In 2013 he ran into financial difficulty and had to sell the Estate. Saul sold the Estate to David for $2,000,000. Saul and David reached an agreement that Saul could lease the Estate and continue to run the business. The agreement contained a clause that gave Saul the right to buy back the Estate at any time before 31 December 2018 at $2,300,000 (“the Buy-back Agreement”). In 2018 David suffered ill health and had a revelation that he should dispose of his wealth and live a simple life. After donating all his money to charities, David sold his last valuable asset, the Estate, for $1 to a local charity called Living Water. David told the Director of Living Water, Nathan, about the lease and the Buy-back Agreement with Saul, and added that “Saul is not doing very well. I am sure he cannot afford to buy back the Estate”. The Buy-back Agreement was not otherwise reflected in the agreement or any communication between David and Living Water. On 1 September Living Water became the registered owner of the Estate. The generosity of David became known and on 5 September the local newspaper reported his donations and the sale of the Estate to Living Water. Saul was alarmed to learn that David had sold the Estate. He immediately wrote to Living Water to inform Living Water of his intention to exercise his right of re-purchase. Living Water refused. Advise Saul whether he could successfully challenge Living Water’s registered title or compel Living Water to sell the Estate according to the Buy-back Agreement. Assume that the Land Transfer Act 2017 applies. (22 Marks) LAWS 301

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QUESTION THREE Section 55(4) of the Land Transfer Act 2017 provides: 55(4) In determining whether to make an order, the court may take into account — … (c) if the estate or interest is in Māori freehold land, failure by a person to comply with Te Ture Whenua Maori Act 1993; … Does this provision solve all problems that may arise from inconsistent results in applying the Land Transfer Act and the Te Ture Whenua Maori Act/Maori Land Act 1993? Why/why not? (6 Marks)

LAWS 301

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Appendix to PART A Gibbs v Messer [1891] AC 248 (PC). Assets v Mere Roihi [1905] AC 176 (PC). Beale v Tihema Te Hau (1905) 24 NZLR 883 (SC). Boyd v Mayor of Wellington [1924] NZLR 1174 (CA). Frazer v Walker [1967] 1 AC 569 (PC). Breskvar v Wall (1971) 126 CLR 376 (HCA). Westpac New Zealand Ltd v Clark [2010] 1 NZLR 82 (SC) Miller v Minister of Mines [1963] NZLR 560 (PC). Housing Corporation v Māori Trustee [1988] 2 NZLR 662 (HC). Warin v Registrar-General of Land (2008) 10 NZCPR 73 (HC). Loke Yew v Port Swettenham Rubber Company [1913] AC 493. Harris v Fitzmaurice [1956] NZLR 975 (SC). Efstratiou v Glantschnig [1972] NZLR 596 (CA). Sutton v O’Kane [1973] 2 NZLR 304 (CA). Dollars and Sense Finance Ltd v Nathan (2008) 9 NZCPRA 116 (SC). Cassegrain v Gerard Cassegrain & Co Pty Ltd [2015] HCA 2. Taitapu Gold Estates v Prouse [1916] NZLR 825 (HC). Bahr v Nicolay (No 2) (1988) 164 CLR 604 (HCA) Wilson, Toohey and Brennan JJ. Duncan v McDonald [1997] 3 NZLR 669 (CA). Nathan v Dollars and Sense Finance Ltd [2007] 2 NZLR 747 (CA). Regal v Castings Ltd v Lightbody [2009] 2 NZLR 433 (SC).

LAWS 301

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PART B Answer all THREE questions in this Part. QUESTION FOUR Adam owns a large 2-story building in Mt Victoria, with parking spaces at the front for tenants of the building, and a small garden at the back for tenants of the ground level. The ground level was leased to Language Perfect which ran language learning programmes for children. The term of the lease was 1 February 2008 to 31 January 2018. The second story was leased to Wellington Graphics which was a graphic design firm. In January 2010 Language Perfect assigned its lease to Dandelion Child Care Centre (“Dandelion”) with Adam’s consent. In July 2016 the lease of Wellington Graphics ended, and Adam leased the second story to a business called Party Ideas. It turned out that Party Ideas offered the premises for drinking parties, typically large gatherings of young people, including college students. Most of the parties were in the evenings or on the weekends. In the mornings staff of Dandelion often found smashed bottles in the garden, the carpark and outside its front door. The whole place constantly smelled of alcohol and rotting food. When the parties were held during week days, which seemed to be becoming increasingly often, they were very noisy and the dancing shook the ceiling of the ground level. After a couple of times when bottles narrowly missed children who were playing in the garden, the staff stopped taking the children to the garden. Sometimes drunk party-goers climbed or jumped down from the balcony, vomiting in the garden and wandering into the child care centre. They tried to offer a drink to the staff or the children, and to use the bathroom, despite staff protests. When a party was on, the party-goers took up the car parks, and Dandelion staff stopped parking there after their cars were scratched. Dandelion wrote to Adam a numbers of times complaining about Party Ideas, but Adam did nothing about it. As a result of the parties on the second story, a number of parents withdrew their children from Dandelion. Answer BOTH sub-questions below. (1) Dandelion found new premises in October 2017. Discuss whether Dandelion is entitled to give notice to Adam to cancel the lease. (20 Marks) (2) The deal with the new premises fell through, and Dandelion continued the child care business on Adam’s property. In December 2017 Dandelion stopped paying rent. After the lease expired in January 2018, no new agreement was reached between Dandelion and Adam. In October 2018 Dandelion was closed, its owner was bankrupt, and Adam regained possession of the ground level. Dandelion owes Adam rent for the period between December 2017 and October 2018. Adam sues Language Perfect for the outstanding rent, pointing to a clause in the lease agreement which states that “the lessee will pay the yearly rent on the days and in the manner prescribed in this agreement”. Discuss the liability of Language Perfect in terms of the rent arrears.

(8 Marks)

[TOTAL: 28 MARKS] LAWS 301

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QUESTION FIVE Answer EITHER (a) OR (b) below. (a)

Ruben and Joseph are neighbours in Ngaio, Wellington. Ruben’s property (Lot A) fronts the street, while Joseph’s (Lot B) does not. Lot B has a legal right of way over Lot A (“the Driveway”), which enables Joseph to drive the car to his double garage. Joseph has always wanted to expand his house but Lot B was too small. Opportunity came when a vacant lot at the back of his house, Lot C, became available for purchase. Lot C is half way up the hill. The only access to Lot C is by a narrow walking track at the back, which is about 400 metres long and rather steep. Joseph did not think too much of the access problem, since he had the access through the Driveway. He bought Lot C and started expanding his house. The plan was to add an en suite to the master bedroom (which was to be on Lot B), and to add another two bedrooms (which would be on Lot C). The builders use the Driveway to transport the building material. Ruben is not happy with it. Ruben seeks a declaration from the court that Joseph cannot use the Driveway for the building project. Joseph says he is entitled to use the Driveway because the building project is part of the expansion of his house on Lot B. He also argues that Lot C is landlocked and wants the court to grant relief. Advise Joseph of the likelihood of his arguments and claims being upheld by the court. (16 Marks)

(b)

Explain the statement of Lord Templeman in Downsview Nominees v First City Corporation: “The most basic principles were, first, that a mortgage is security for the repayment of a debt and, secondly, that a security for repayment of a debt is only a mortgage.” (16 Marks)

QUESTION SIX Explain the statement “a covenant must benefit land” in the context of freehold covenants, and to what extent this statement is altered by the Land Transfer Act 2017. (6 Marks)

LAWS 301

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Appendix to Part B Fatac Ltd (In Liquidation) v Commissioner of Inland Revenue [2002] 3 NZLR 648 City of London Corp v Fell [1993] QB 589 Kalmac Property Consultants Ltd v Delicious Foods Ltd [1974] 2 NZLR 631 Tram Lease Ltd v Croad [2003] 2 NZLR 461 (CA) Nordern v Blueport Enterprises Ltd [1996] 3 NZLR 450 (HC) Mobil Oil New Zealand Ltd v Development Auckland Ltd [2016] NZSC 89, [2017] NZLR 48 Roman Catholic Bishop of the Diocese of Christchurch v RFD Investments Ltd (in rec and liq) [2015] NZHC 2647, (2015) 17 NZCPR 43 Re Ellenborough Park [1956] Ch 131 Barry v Fenton [1952] NZLR 990 Peacock v Custins [2002] 1 WLR 1815 Kingfish Lodge (1993) Ltd v Archer [2000] 3 NZLR 364 (CA) Murray v BC Group (2003) Ltd [2010] NZCA 163, [2010] 3 NZLR 590 Squally Cove Forestry Partnership v Wagg [2013] 3 NZLR 793 (CA) Harnden v Collins [2010] 2 NZLR 273 (HC) Davey v Baker [2016] NZCA 313, [2016] 3 NZLR 776 Tulk v Moxhay (1848) 41 ER 1143 Jansen v Mansor (1995) 3 NZConvC 192,111 (CA) Big River Paradise Ltd v Congreve [2008] NZCA 78, [2008] 2 NZLR 402 ANZCO Foods Waitara Ltd v AFFCO New Zealand Ltd [2006] 3 NZLR 351 (CA) Westpac v Clark [2009] NZSC 73, [2010] 1 NZLR 82 (SC) Duncan v McDonald [1997] 3 NZLR 669 (CA) Fairclough v Swan Brewery Co Ltd [1912] AC 565 (HL) Knightsbridge Estates Trust Ltd v Byrne [1939] Ch 441 Jones v Morgan [2001] EWCA Civ 995 GE Custodians v Bartle [2010] NZSC 146, [2011] 2 NZLR 31 Downsview Nominees Ltd v First City Corp. Ltd [1993] 1 NZLR 513 (JC) Apple Fields Ltd v Damesh Holdings Ltd [2001] 2 NZLR 586 (CA)

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LAWS 301

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Laws 301 Property Law Final Exam 2018 Marker’s notes These notes are not a model answer. They provide some general observations on which aspects of the exam were generally completed well or poorly, and the different approaches taken by groups of candidates. The exam is divided into two parts, Part A on the Torrens System and Part B on interests in land. The study of each topic inevitably involves knowledge of the other topic, but prior to the exam students were told that the two Parts examined the Torrens System and interests in land respectively. Students have 10 minutes reading time at the start of the exam. A list of cases studied is appended at the end of each Part. This is deliberate, so that there is a clear indication that Part A examins the Torrens System and Part B interests in land. Part A consists of two problem questions and one short answer question. Part B consists of one problem question, one question where students can choose between a problem question and an essay question, and one short answer question. The questions test the ability to correctly identify the issues and the applicable legal principles with reference to legislation and case law, and (for problem questions) the ability to apply the legal principles to the given facts. Students need to draw a conclusion on the questions asked, but a wrong conclusion is not fatal, provided that the reasoning is sufficiently supported by the law and analysis. The problem is that a wrong conclusion is often the result of misinterpretation or omission of legal principles. Students who draw a correct conclusion need to demonstrate solid reasoning to achieve good marks. The best answers demonstrate familiarity with the materials and thorough understanding of the legal concepts, and answer the questions asked. Note however that longer answers are not necessarily better answers. Some scripts demonstrate familiarity with the materials, but do not address the problems presented (not answering the questions asked). Your clients need you to give advice on their problems, rather than a mere display of your knowledge. On balance, most students do better in Part B than in Part A. Question 5 contains a choice to “Answer EITHER (a) OR (b)”. Most students answered (a). A few answered (b). A very small number of students answered both (a) and (b). In such cases I have read both answers and the better mark of the two is adopted. Part A Question 1 (22 marks) This question asks whether Leah could “challenge the validity of the Bank’s registered mortgage and have the registration cancelled”. Discussions on two aspects of mortgage (personal covenant and security), and all obligations and fixed-sum loan, are outside the ambit of the question. This question tests students’ understanding of indefeasibility. The facts explicitly state that 1) Jacob, as Leah’s lawyer, forged Leah’s signature and obtained a large sum of money from the Bank of Middle Earth; 2) the Bank did not know of Jacob’s fraud; 3) assume the LTA 2017 applies. The key issue is the consequence of registration under a void instrument. Almost all scripts contain a statement to the effect that registration gives indefeasible title in the absence of fraud. But many fail, to various extents, to support the understanding through making reference to the 1

Land Transfer Act (LTA), case law, and the relevant changes to the law made by the LTA 2017, in particular the new s 55. Title by registration Section 51 of the LTA 2017 states that after registration a person obtains a title that cannot be set aside (indefeasible). Some scripts refer to s 24 which provides that registration confers title. This is OK but s 24 is about conferring title and s 51 is about title being rendered indefeasible. Void instrument The problem is that the instrument for registration was forged by Jacob, which rendered it void. We know that registration of a void instrument gives indefeasible title only through case law (Boyd/Assets/Frazer v Walker). Many students correctly identify that the fact scenario was similar to that in Fazer v Walker and Westpac v Clark, both are authorities of immediate indefeasibility, although in Westpac the bank’s mortgage was not registered (and Ellias CJ said that registration of a void instrument conferred indefeasible title did not mean an entitlement to register a void instrument). No exception applies Students then need to briefly note whether any of the exceptions apply. This needs not be lengthy. On the facts, it is clear that the Bank was not fraudulent, there was no in personam relationship between the Bank and Leah, and there was no conflicts of statutes. Many students discuss agency as per Dollars & Sense v Nathan, but it should be clear that the given fact does not touch on anything that would indicate an agency relationship may exist. One distinction between Leah’s case and Dollars & Sense is that in Leah’s case, Jacob borrowed fraudulently under Leah’s name, while in Dollars & Sense, Nathan was the borrower and he forged his mother’s signature as the mortgagor. If the 2017 Act was not in play, we could conclude that the Bank’s mortgage was made valid by the registration, and none of the exceptions apply. Therefore Leah could not challenge the Bank’s registered mortgage. LTA ss 54-57 However, ss 54-57 of the LTA 2017 provide the courts with the discretion to alter the register in cases of registration of void instrument (s 54) causing manifest injustice (s 55). Some students omit this important step altogether. Some students mention ss 54-57 or s 55 in passing only. Some students think the Bank was protected by s 56 (bona fide 3rd party). This is incorrect. While the Bank may be bona fide, Jacob was never on the title, and the Bank was hence person B, not person C, in this case. Therefore Leah is not prevented from making an s 54 application by s 56. Section 55(2) states that forgery does not of itself constitute manifest injustice – this does not mean that where forgery is present, s 54 remedy is automatically excluded; it only means that one cannot get s 54 remedy simply because someone has forged a key document for registration. Students need to consider the factors in s 55(4) to see whether there may be manifest injustice and whether state compensation was sufficient for Leah (s 55(3)). The most relevant factor are: Leah’s family has been in occupation for generations and hence (d) (identity of person in occupation), (f) (length of time) and (i) (significance) are potentially relevant. Leah 2

is the owner of the fee simple while the Bank has the mortgage, hence (e) (nature of the estate or interest) is relevant here. Some students also consider other factors and make very good arguments on the facts, eg, Leah’s business and livelihood, the circumstance of the acquisition of the mortgage by the Bank (s 55(4) (a)), eg, the Bank may be less suspicious because Jacob was Leah’s lawyer, and hence could be totally blameless. The policy discussion about the courts’ willingness to put stricter responsibility on banks in mortgage cases should be discussed with reference to (e) (nature of estate or interest), because even courts cannot impose liability without a legal foundation. Discussion of banks’ standard or practice responsibility to check identity can come under either (e) or (k) (other circumstances). There is no case law on manifest injustice, and it is likely that the threshold of manifest injustice is high. Students can draw conclusions either way. Comments on some other points made by students Some students mistakenly state that Leah’s interest was unregistered interest. Leah was still the RP, but her title was burdened by the Bank’s registered mortgage. Therefore correctly speaking, Leah was the RP of the fee simple, and the Bank was the RP of the mortgage. Some students find that s 55 was satisfied but conclude that the court could not alter the registration because of s 56. Jacob was never on the title (he pretended to be Leah and borrowed in her name) and th...