This article considers a recent New Zealand land law case of Jin v Knox Property Investment Ltd [2015] NZHC 2296, [2016] NZCA 565. The author notes that all of the numerous judges and counsel involved failed to consider the importance of the Land Transfer Act to the resolution of the dispute at the heart of the case. If this had been considered the case would have easily dismissed. The article observes that this is an example of a disturbing trend in New Zealand’s law and that, in light of the enactment of the Land Transfer Act 2017, it is timely to remember the importance of basic land law principles

France-Hudson, Ben

Te Tumu Eprints Repository

A timely reminder of the importance
of land law principles
Dr Ben France-Hudson, Faculty of Law, University of Otago, looks at
Jin v Knox Property Investment Ltd
INTRODUCTION
A
s the new Land Transfer Act nears the final stages of
Parliament, a recent Court of Appeal case highlights
the importance of appropriately framing land law
questions by identifying the relevant provisions of the pri-
mary statute, and any relevant equitable principles, before
undertaking any substantive analysis. In Jin v Knox Property
Investment Ltd [2015] NZHC 2296, [2016] NZCA 565
both the High Court and the Court of Appeal failed, in
deciding whether there were grounds to sustain a caveat, to
properly identify and apply the statutory exceptions to inde-
feasibility and also neglected to consider the court’s jurisdic-
tion inpersonam.ThisreflectsaworryingtendencyinNewZealand
for courts and counsel to overlook land law principles and
this article serves as a timely reminder of their importance.
BACKGROUND TO THE CASE
Mr Jin and Ms Luo were equal shareholders in a real estate
investment company, W&L Ltd. Although Ms Luo was the
sole registered shareholder of W&L, Mr Jin held an unreg-
istered 50 per cent shareholding in the company. In June 2013
Mr Jin and Ms Luo successfully bid at auction for a property
in Hamilton. W&L Ltd, or nominee, was identified as the
purchaser. The purchase price was $700,000. Mr Jin paid
$50,000 towards the deposit. Ms Luo paid the balance of
$20,000 (CA at [6]).
W&L was unable to secure sufficient finance by settle-
ment, at which point Ms Luo introduced Mr Jiang to the
transaction. She and Mr Jiang formed Knox Property Invest-
ment Ltd (Knox) as the body to complete the purchase.
Although Ms Luo was an equal shareholder in Knox, Mr Jiang
was the sole director. Knox was nominated by Ms Luo by
way of a Deed of Nomination (the Deed) as the purchaser.
The Deed recorded that a deposit of $70,000 had been paid
by W&L and the obligation for Knox to repay the deposit on
or before settlement date (CA at [9]). Settlement was com-
pleted in August 2013 at which point Knox became the new
registered proprietor. Although Knox did not repay the deposit
before settlement, it had been repaid to W&L by Janu-
ary 2014.
Mr Jin claimed an interest in the property. He claimed that
he was told that while Mr Jiang would obtain a 50 per cent
interest in the property, the balance would be shared between
him and Ms Luo. Moreover, Mr Jin claimed that while he
knew of Mr Jiang’s involvement he did not know that Jiang
and Luo had incorporated Knox Property Investment Ltd as
the body to complete the purchase. He also disputed Ms Luo’s
claim that the $50,000 paid by Mr Jin was actually in
satisfaction of an earlier debt. He accepted that Ms Luo had
placed $50,000 into his solicitor’s account at his request,
however, he denied his contribution to the deposit was a
repayment of this sum (CA at [7]).
After becoming convinced that his claimed interest was
not going to be recognised, Mr Jin caveated the title to the
property claiming to be beneficially interested in the property
by virtue of an “implied trust” arising out of his contribution
of funds towards the purchase (CA at [11]).
HIGH COURT DECISION
The High Court rejected the application to sustain the caveat.
It noted that while the description of Mr Jin’s claimed interest
was unclear, it appeared to be in the nature of a resulting trust
(HC at [9]). However, the Court held that a resulting trust
was “not literally applicable” in this case as W&L did not
become the purchaser (HC at [10]). That is, although Mr Jin
had made a payment to W&L, W&L held no property that
would serve as the foundation for the presumption underpin-
ning a resulting trust. The Court also noted that accurate
analysis of Mr Jin’s claimed interest was not a requirement at
the caveat stage of the matter. Nonetheless, any indication of
trust involved questions of the good conscience of the parties
to the transaction, and in this case, the basis upon which any
inference of a resulting trust may be drawn (HC at [10]–[11]).
This would not only involve considering the reasonableness
of Mr Jin’s expectations, but also whether these were known
to Knox (as the registered proprietor). In particular, the
Court noted that this would involve consideration of whether
it was fair and reasonable for Knox to be fixed with knowl-
edge of the events which give rise to Mr Jin’s expectation that
he would have an interest in the property, the circumstances
of his payment of the funds and other matters (HC at [11]).
The Court noted that W&L did not actually have the
funds to complete the purchase. An alternative company did
which was used to carry out the purchase. Even though funds
provided by Mr Jin and Ms Luo were used to complete the
purchase, Mr Jin could not have had a reasonable and
legitimate expectation of a beneficial interest in the property.
Moreover, there was no basis on which Mr Jin’s expectation
of a 25 per cent interest in the property could be put forward.
Indeed, the amount he had contributed did not amount to
25 per cent of the purchase price (HC at [16]). As a result, the
Court concluded that Mr Jin did not have an equitable
interest in the property. Moreover, the Court held that knowl-
edge of Mr Jin’s claimed interest could not be attributed to
Knox through Ms Luo as she was not a director of Knox (HC
at [19]).
New Zealand Law Journal June 2017 167
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[2017] NZLJ 167
COURT OF APPEAL
The Court of Appeal noted the parties’ agreement that the
two key issues in the case were whether the payment of
$50,000 by Mr Jin resulted in a trust in his favour regarding
the right to acquire the property, and, if so, whether Knox
knew about Mr Jin’s interest. The Court concluded that, on
the available evidence, there was a reasonably arguable case
for a type A resulting trust. In other words, it was arguable
that Mr Jin invested in the acquisition of the property assum-
ing that he and Ms Luo would jointly acquire the right to
purchase it. In support of this the Court noted: the prior
dealings between Mr Jin and Ms Luo; that Mr Jin could
document a 50 per cent shareholding in W&L; that Mr Jin
had attended the auction; that he had provided funds in his
personal capacity (by way of personal cheque to the vendor’s
solicitor); and the reference to “or nominee” in the sale and
purchase agreement (suggesting the vehicle for purchase was
a secondary consideration only) (CA at [19]).
The Court then noted (citing Foskett v McKeown [2001]
AC 102 (HL) at 180–109) that “it is necessary for Mr Jin to
show that [Knox] knew about his interest in order to be able
to maintain any form of equitable interest in the … property”
(CA at [22]). The Court then diverts into an analysis of what
Knox knew about Mr Jin’s interest. It notes that it was
unlikely that Ms Luo did not tell Mr Jiang about Mr Jin’s
deposit, that there is evidence that a solicitor engaged by both
W&L and Knox in relation to the Deed may have had a duty
to disclose any information giving rise to any conflict of
interest, that in the Deed itself Knox affirms it has under-
stood the implications of the transaction and also makes it
clear that the deposit was to be repaid to W&L. It concludes
this is an issue that could only be resolved at a substantive
hearing. It also noted that it is reasonably arguable that as
Ms Luo was in de facto control of Knox, her knowledge may
be attributed to it, but that whether the knowledge could be
attributed to Knox was an issue unsuitable to summary
disposition (CA at [25]–[26]).
Before allowing the appeal and sustaining the caveat the
Court of Appeal noted that “[i]n this case, as the argument
has been presented to us, the substantive rule is that a bona
fide purchaser for value without notice (of unregistered
interests) acquires indefeasible title” (CA at [27]). It sug-
gested that whether attribution of knowledge to Knox arose
in respect of this rule depended on a number of factors,
including what Ms Luo knew about Mr Jin’s interest, her role
in the establishment of Knox, what Mr Jiang was told, and
what he otherwise knew.
ANALYSIS
The Court of Appeal’s reasoning must be seen as weak. Knox
is the registered proprietor of the property in question. The
only way its title can be impeached is if one of the statutory
exceptions to indefeasibility apply, or if the court is prepared
to exercise its jurisdiction to set aside the title on equitable
grounds. In this case there are only two options. Knox’s title
can only be set aside if it acted fraudulently within the
meaning of the Land Transfer Act 1952 or, if it assumed some
sort of obligation in personam. It is a great pity that the
Court of Appeal did not address either of these arguments.
Whether Mr Jin has an arguable case is entirely dependent on
whether fraud or an in personam claim can be made out.
Indeed, it is very surprising that no mention was made of
s 182 of the Land Transfer Act which, among other things,
states:
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 affected by notice, direct or construc-
tive, of any trust or unregistered interest, any rule of law
or equity to the contrary notwithstanding, and the knowl-
edge that any such trust or unregistered interest is in
existence shall not of itself be imputed as fraud.
Thus, unless Knox acted fraudulently under the Land Trans-
fer Act, it has an indefeasible title. What will constitute fraud
against an unregistered interest can be a tricky issue to
determine involving the relationship between s 182 and
concepts of knowledge. However, there are a number of
well-known cases that could assist in determining whether
Knoxacted fraudulentlyornot, including:EfstratiouvGlantsch-
ing [1972] NZLR 594; NZ Meat Nominees Ltd v Sim (1990)
1 NZ ConvC 190,478; and, Tuscany v Gill (2001) 4 NZ
ConvC 193,446. Knowledge remains important in this con-
text to the extent it assists in determining whether the regis-
tered proprietor has formed a dishonest intent to defeat the
unregistered interest. However, the key question in this case
should have been whether it was reasonably arguable that
Knox (or possibly just Ms Luo if her actions could be
attributed) acted deliberately, dishonestly and with an intent
to cheat Mr Jin of a known existing right (Waimiha Sawmill-
ing Co Ltd v Waione Timber Co Ltd [1926] AC 101).
Moreover, as noted by Buckmaster LJ in Waimiha “[t]he act
must be dishonest and dishonesty must not be assumed solely
by reason of knowledge of an unregistered interest” (at 107).
On the recorded evidence it appears that it may have been
very difficult for Mr Jin to establish fraud and it is extremely
disappointing that the Court of Appeal did not appropriately
frame the question or reference the relevant authorities.
Mr Jin may have been on stronger ground with a claim in
personam, but again there is no reference to the principle in
the case. It is a basic proposition of land law that this option
was left open by the Privy Council in Frazer v Walker [1967]
NZLR 1069 in recognition that actions of a personal char-
acteragainst the registeredproprietormaybeadmitted (at1079).
No longer restricted to trust or contract cases, an in personam
claim may be recognised where it is not inconsistent with the
objectives of the Torrens system, it involves unconscionable
conduct on the part of the current registered proprietor, and
it involves a recognised cause of action (Dollars & Sense
Finance Ltd v Nathan [2007] NZCA 177, [2007] 2 NZLR
747 at [137]). Of course, if Knox was the trustee of a type A
resulting trust, and denied this, all three elements of a suc-
cessful in personam claim could probably be made out. It
appears from the Court of Appeal’s discussion that they
considered it was reasonably arguable that there was a
resulting trust, although it notes that this would involve an
assessment of any agreements reached and representations
made by Ms Luo to Mr Jin as to the precise nature of his
interest and the function served by W&L in the purchase (CA
at [20]). Given the presence of the different corporate bodies
involved, the repayment of the deposit and the importance of
the intentions of all parties in establishing a resulting trust
(see Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432
at [60]) some further analysis here would have been desir-
able. Regardless, it is accepted that the knowledge Knox had
of Mr Jin’s interest would be crucial to determining whether
it had acted unconscionably and whether there was a recognised
Continued on page 192
New Zealand Law Journal June 2017168
Copyright of the New Zealand Law Journal  is the property of LexisNexis NZ Ltd and its content may not be copied, saved or emailed to multiple sites 
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[2017] NZLJ 167
Continued from page 168
cause of action. However, the analysis could, and should,
have been put within the context of land transfer principles;
the question being was it reasonably arguable that Mr Jin
had an in personam claim against Knox. Certainly, framing
the question in terms of a substantive rule stating that “a
bona fide purchaser for value without notice (of unregistered
interests) acquires indefeasible title” (CA at [27]) is to state
the wrong rule. While knowledge may be a necessary element
of a claim of fraud or in personam under the land transfer
system it is not, on its own, sufficient. The Torrens system of
land transfer abolishes the nemo dat rule, abolishes the bona
fide purchaser without notice rule and substitutes its own
rules (now supplemented by the in personam exception). The
old law ought never to be talked about as the rules have now
changed.
CONCLUSION
Although this was simply an application that a caveat not
lapse it is disappointing that an Associate Judge of the High
Court, two High Court Judges and one permanent member
of the Court of Appeal can deliver two judgments and not
discuss the basic land law principles, and relevant sections of
the Act, that may have determined the case. While the Courts
were undoubtedly correct to focus to some extent on the
knowledge that could be attributed to Knox (and given this
was an application for a caveat, this is a substantive issue that
could not be resolved), their failure to consider this issue
within the framework set out by the Land Transfer Act and
equity was an unfortunate oversight. The decision may well
have had the effect of giving Mr Jin a stronger bargaining
position than he would have otherwise had. Unfortunately,
this is not an isolated case and many land law sagas in
New Zealand may have been avoided if land law principles
had been brought to the fore (see for example, the original
High Court decision in MacDonald v Duncan HC Auckland
CP1387/92, 22 July 1994 where the focus was on the Illegal
Contracts Act 1970 and the issue of indefeasibility of title
was not raised (indeed, it was not until the Court of Appeal’s
finding that the Illegal Contracts Act was subject to the
application of the Land Transfer Act in Duncan v McDonald
[1997] 3 NZLR 669 that land law principles were applied to
the case)). It is to be hoped that the passage of the new Land
Transfer Act goes some way towards refreshing the under-
standing of basic land law principles of both courts and
counsel, and reminding us all of the appropriate context in
which to frame arguments. ❒
New Zealand Law Journal June 2017192
Copyright of the New Zealand Law Journal  is the property of LexisNexis NZ Ltd and its content may not be copied, saved or emailed to multiple sites 
or posted to a listserv without the copyright holder's written permission. However, users may print, download or email articles for individual use. 
 
 
[2017] NZLJ 190
Continued from page 168
cause of action. However, the analysis could, and should,
have been put within the context of land transfer principles;
the question being was it reasonably arguable that Mr Jin
had an in personam claim against Knox. Certainly, framing
the question in terms of a substantive rule stating that “a
bona fide purchaser for value without notice (of unregistered
interests) acquires indefeasible title” (CA at [27]) is to state
the wrong rule. While knowledge may be a necessary element
of a claim of fraud or in personam under the land transfer
system it is not, on its own, sufficient. The Torrens system of
land transfer abolishes the nemo dat rule, abolishes the bona
fide purchaser without notice rule and substitutes its own
rules (now supplemented by the in personam exception). The
old law ought never to be talked about as the rules have now
changed.
CONCLUSION
Although this was simply an application that a caveat not
lapse it is disappointing that an Associate Judge of the High
Court, two High Court Judges and one permanent member
of the Court of Appeal can deliver two judgments and not
discuss the basic land law principles, and relevant sections of
the Act, that may have determined the case. While the Courts
were undoubtedly correct to focus to some extent on the
knowledge that could be attributed to Knox (and given this
was an application for a caveat, this is a substantive issue that
could not be resolved), their failure to consider this issue
within the framework set out by the Land Transfer Act and
equity was an unfortunate oversight. The decision may well
have had the effect of giving Mr Jin a stronger bargaining
position than he would have otherwise had. Unfortunately,
this is not an isolated case and many land law sagas in
New Zealand may have been avoided if land law principles
had been brought to the fore (see for example, the original
High Court decision in MacDonald v Duncan HC Auckland
CP1387/92, 22 July 1994 where the focus was on the Illegal
Contracts Act 1970 and the issue of indefeasibility of title
was not raised (indeed, it was not until the Court of Appeal’s
finding that the Illegal Contracts Act was subject to the
application of the Land Transfer Act in Duncan v McDonald
[1997] 3 NZLR 669 that land law principles were applied to
the case)). It is to be hoped that the passage of the new Land
Transfer Act goes some way towards refreshing the under-
standing of basic land law principles of both courts and
counsel, and reminding us all of the appropriate context in
which to frame arguments. ❒
New Zealand Law Journal June 2017192


A Timely Reminder of the Importance of Land Law Principles

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A Timely Reminder of the Importance of Land Law Principles

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