SUPREME COURT SITTINGS, Wednesday, June 28, 1848. Scott v. Grace.

New Zealand Spectator and Cook's Strait Guardian, Volume IV, Issue 305, 1 July 1848, Page 3

SUPREME COURT SITTINGS, Wednesday, June 28, 1848. Scott v. Grace.

His Honor Mr. Justice Chapman delivered the following judgment in this case : — ' This is a rule Nisi obtained by the counsel for the defendant, after a verdict against him in ejectment, calling on the plaintiff to show cause why execution should not be stayed, on the grounds set forth- in the defendant's affidavit, viz. : — that having expended money in building a house upon the land recovered, under a reasonable belief that the title was in himself, with the acquiescence of the plaintiff as well as that of the Crown, in whom alone the title was at the time, he is entitled to be reimbursed the amount of his outlay, or at least to the extent of tbe actual present value of his, improvements, before the plaintiff ought to be permitted to proceed to execution. This proceeding under the rules of this Court "by motion upon proper affidavit to stay proceedings in the cause," takes tbe place of the common injunction in England, to stay proceedings at law, until an equitable right supposed to reside in a defendant can be determined. This Court being a court of equity as well as a court of law, — (as the Court of Exchequer was until lately, and as most of the colonial courts are) this mode of proceeding has been deemed more convenient, less' expensive, and more in accordance with the general spirit of "our rules and the constitution of this Court than the mode of proceeding in the courts of equity at home. But although we have endeavoured to simplify our practice, and to assimilate the common law. and equity procedure with each other, chiefly on the basis and principles of the former, yet we have been cautious to abstain from encroaching upon any substantive rights either legal or equitable. It should, therefore, always be borne in mind, that notwithstanding any change of mere procedure which we may have introduced or may hereafter introduce, it is not tbe less incumbent on parties to place before the Court, for its due information, erery material fact necessary to support the particular motion, application, or suit before ir, as effectually, though not as verbosely, as would be necessary to sustain a bill, petition, or motion in England. In this case the legal right of the plaintiff has already been^tried and determined. At the last sittings he obtained a verdict in his favour, with damages for mesne profits ; and after a full argument of the law of the case by the counsel for the parties, the Court sustained that verdict. The facts now disclosed by Mr. Grace's affidavit in support of this rule are 'briefly these : In the year 1840 Mr. Giace purchased at public auction the piece of land embraced by the verdict, for the sum of £76 : 175. Mr. Grace was forthwith put in possession, and the land was afterwards conveyed to him by deed. His vendors made title, under a land order and certificate of choice of the New Zealand Company, and the defendant was professionally advised and believed that the Company had good right to a grant to the same from the Crown. So far Mr. Grace derives his belief from the parties through whom he claims ; in what follows his belief is traced to acts or omissions of Mr. Scott and his grantor the Crown. Mr. Grace further states that his belief in the validity of his title derived from the New Zealand Company's landorder and certificate was strengthened by the 7th section of the Land Claims' Ordinance which he sets oat, and still more particularly by the letter of Governor Hobsoh of the sth of September 1841, which he also sets out. I pass over so much of the affidavit at, relates to the money expended. in the first instance in buildings consumed by the disastrous fire of 1842, for no claim is made or could be made for such expenditure. Mr. Grace then state* that he expended £300 on the buildingi now standing on the said piece of land ; and that daring the time he was engaged in expending the same, the plaintiff, to the best of his belief,- was residing in-Wellington ; that he, the defendant, did not receive any notice of a claim to the said piece of land from the plajntiff, or from any other person, until Janu r

ary 1846 ; and that he continued iv possession of the said building and received rents for the same. Against the defendant's role no affidavit has been filed, bnt it has been opposed on the general ground that the facts stated are insufficient to give the Court equitable jurisdiction : that the general notoriety of Mr. Scott's adverse claim published in the Gazette, ought to have deterred a claimant under a title derived from the Company, from expending money ; that Mr. Grace never had such a title as would justify a person of ordinary prudence in laying out money ; that equity will not relieve him from the consequences of his own blunder ; and that his remedy is at law against his vendors or against the New Zealand Company ; whilst on the other hand Mr. Scott's right now rests, not merely on his Crown grant, but on the verdict of a jury and the deliberate affirmation of that verdict by a court of law. It is further urged that if any such equity as is contended resides in Mr. Grace, the Court can only give it effect, by way of-tquitable set off, in the event of Mr. Scott requiring the aid of the Court. The question for the Court to determine is this : Has Mr. Grace, the defendant in the action, shown, that the improvements were made on. the land under such circumstances of reasonable belief of good title on his part, and of acquiescence on the part of the plaintiff, or the Crown, or both, as to entitle him to compensation at the hands of Mr. Scott for the value of such improvements, according to the principles recognized by the court of equity in England ? It was the inflexible rule of the common law that every improvement "affixed to the freehold" belonged at once to the owner of the land. Lord Coke goes so far as to say that it is waste to build a house on the land of another ; and, having so built, it is waste to pull it down again (Co. Lit. 53 a.) Since the time of Lord Coke, and in some cases even before his time, the courts of law have, by their own vigour, broken in upon this barsh rule in numerous cases, and in favour of productive industry in general, a customary law has grown up, which not only permits the removal of many "things affixed to the freehold," but in case of disturbance of such customary right by the owner of the freehold would give the bond fide occupier compensation in damages. In such case the interference of equity has become unnecessary, but a great number of harsh and inequitable applications of the ancient rule still remain without remedy at law ; the progressive advance of equity jurisprudence in England has however in most cases provided remedies where the common law was silent, or incapacitated, by the stubborn nature of its pleadings and the simple nature of its judgments, from giving effectual relief. In a case like the present the common law affords no relief between the parties, and thus one of the essential conditions of equitable jurisdiction and relief is fulfilled. The general rule of equity, that where there is a remeJy by action at law the court will not interfere, is overridden by the higher rule — that where the equity jurisdiction once attaches the court will not stop, but in order to prevent multiplicity of suits, will go on to decree compensation. This often occurs in bills for the specific performance of agreements, where some damage has been suffered which mere performance wo«ld not compensate. In such cases compensation is superadded to the specific relief notwithstanding such compensation is recoverable at law. Another class of cases is where a party seeking relief is compelled to compensate the party against whom he seeks relief, on the principle " that he who seeks equity must do equity ;" as, where one of two joint tenants lays out money for the benefit of the joint estate, a court of equity ; will not decree a partition at the suit of him who has not laid out money, without compel- i ling him to pay the amount of his share of the improvements. I mention these two classes of cases, because the learned counsel for the plaintiff in the action contends, upon the authority of such cases, that the courts of equity never enforce, in a direct suit by the bond fide possessor, his claim for improving a property from which ha had been evicted by the true owner. For this position Mr. King cited an American authority, that of a case decided by Mr.. Chancellor .Walworth of the State of New York, as given in a note to the chapter upon " Compensation and Damages" in Mr. Justice Story's Commentaries on Equity Jurisprudence ; but giving full weight to that learned authority as being a clear statement of the result of the English cases, the learned judge's opinion will be found to comprise an exception which lets in the present case. "I have not been able to find any case" he says — ''either in this country or in England wherein the Court of Chancery has assumed jurisdiction to give relief to a complainant who has made improvements on the land, the legal title to which was in the- defendant, where there has been neither fraud nor acquiescence on the part of the , latter aftyi he had

knowledge of his legal rights." This is no doubt a correct statement of the result of the cases, but if acted upon to its fullest extent, it obviously goes no further than to answer so much of Mr. Grace's case, as rests upon his belief of title founded upon the representations of his own vendors and their grantors, coupled with his innocent outlay under that belief. This doctrine of the English courts of equi-v ty is certainly not so highly remedial as the* rule of the civil law, and those systems of jurisprudence which are based thereon. Jure natures aquum est, neminem cum alteritts detrimento et injurid fieri locupletiorem is the language of the Digests, Lib. L. Tit. xvii. § 206, and even this maxim scarcely expresses the full nature of the remedy ; for it was not, in all cases necessary to show that an amelioration made with perfect good faith actually enriched the true owner. Erskinein his institute of the law of Scotland, says, '-' the laws of all civilized nations have adopted this principle even in the case of pupils (minors) though they cannot be bound by any contract. It is on this principle (he continues) that though a house built on ground not the builder's own accrues to the proprietor of the ground, and not to the builder ; yet by the civil law the proprietor claiming the house, whether he was a gainer or not by the building, was liable to restore to the builder the full expense of the : materials and workmanship bestowed upon it." Ersk. Inst. Book iii., Tit. 1, § 11. But— " by the usage of Scotland" he afterwards says "the claim to recompense is restricted to such expenses as are profitable to the true owner." The old law of France and the law { of Canada are the same. "Un possesseur de bonne foi gui a construit un bdtiment, ou gui a augments la valeur dufonds dont il est, par la suite evince" peut demander leprix dcs amiHot ations qu'il a fait,jusqu' h concurrence neansmoins de cc que lefonds se trouve augmentepar la valeur." Denisari au mot possession, §21. And the modern code civil adopts the same rule. The doctrine of the English courts of equity in cases not including fraud or acquiescence has not been allowed to pass unquestioned in the United States. In a case in the Circuit ' Court of the Supreme Court over which Mr. Justice Story presided, that learned judge expresses his reluctance to admit the doctrine in terms which I cannot refrain from citing: "As to the right of the purchaser bond fide and for a valuable consideration to compensation for permanent improvements made upon the estate which have greatly enhanced its value under a title which turns out defective, he having no notice of the defect, it is one upon which, looking at the authorities, I should be inclined to pause. Upon the general principles of courts of equity acting ex etquo et bono, I own that there does not seem to me any just ground to doubt that compensation under such circumstances ought to be allowed to the full amount of the enhanced value upon the maxim of the common law, Nemo debet locupletari ex alterius incommodo ; or as it is still more exactly expressed in the Digest, Jure natures aquum est, neminem cum alterius detrimento et injurid fieri locupletiorem, I am aware that the doctrine has not as yet been carried to such an extent in our courts of equity. In cases where the true owner of an estate, after a recovery thereof at law from a bond fide possessor for a valuable consideration without notice, seeks an account in equity as plaintiff against such possessor for the rents and profits, it is the constant habit of courts of equity to allow such possessor (as defendant) to deduct therefrom the tull amount of all the meliorations and improvements which he has beneficially made upon the estate and thus to recoup them from the rents and profits, so if the true owner .of an estate holds only an equitable title thereto and seeks the aid only upon the terms of making compensation to such bond fide possessor for the amount of his meliorations and improvements of the estate beneficial to the owner. " In each of these cases the court rests upon an old and established mtxim in its jurisprudence, that he who seeks equity must do tquity. But it has been supposed that courts of equity do not and ought not to go further, and to grant active relief in favour of such a bond fide possessor^ making permanent meliorations and improvements by sustaining a bill brought by him therefore against the true owner after he has recovered the premises at law. I find that Mr. Chancellor Walworth in Putnam v. Ritchie* entertained this opinion, admitting at the same time that he could find no case in England or America where the point had been expressed or decided either way. Now if there be no authority against the doctrine, I confess that I should be most reluctant to be the first judge to lead to such a decision. It appears to me, speaking with all deference to other opinions, that the denial of all compensation to such bond fide purchaser in luch a case, where he has manifestly added to the permanent value of an estate by his meliorations . and improvements, without the slightest sus-i pipion of aay infirmity in his own title, is,

contrary to the firtt principlts of equity. Take the case of a vacant, lot in a city where a bond fide purchaser builds a house thereon, enhancing the value of the estate to ten times the original value of the land, under a title apparently perfect and complete ; is it reasonable or just that, in such a case, the true owner should recover and possess the whole, without any compensation whatever to the bond fide purchaser ? To me it seems manifestly unjust and inequitable thus to appropriate to one man the property and money of another who is in no default. — The argument, I am aware 4s, that the moment the house is built it belongs to the owner of the land by mere operation of the law, and that he may certainly possess and enjoy his own. But this is merely stating the technical rule of law by which the true owner seeks to hold what, in a just sense, he never had the slightest title to — that is, the house. It is not answering the objection, but merely and dryly stating that the law so holds. But then admitting this to be so, does it not furnish a strong ground why equity should interpose and grant relief ? I have ventured to suggest that the claim of the bond fide purchaser under such circumstances is founded in equity ; I think it founded in the highest equity, and in this view of the matter I am supported by the positive dictates of the Roman Law." [Bright v. Boyd, cited in a note to the xix chapter of Story's Equity Jurisprudence, 4th edition.] This admirable view, breathing as it does in every line, the largest and purist equity, was afterwards adopted and acted upon by the full Court, and may now, I presume, be deemed the settled rule of equity jurisprudence in America, applicable to cases stopping short of fraud or acquiescence. The Supreme Court has thus gone beyond what is said to be the utmost limits to which courts of equity in England extend relief, and has adopted the rule of the civil law as received and interpreted in France, Scotland, and other countries. To my mind the reasouing of Mr. Justice Story carries with it great weight. In the case now before me, however, it will not be necessary to decide upon similar grounds ; but I reserve to myself the privilege of considering the American rule as clearly open to the favourable consideration of this Court, should the question ever be raised. Idoso on the ground, that this Court being a mixed Court of law and equity, should render its remedies, so to speak, distributive ; the more especially as one of our rules enjoins the Judge, in settling the isssue, "to take notice of any defence that would be available by the law of England, as administered by courts either of law or equity." Indeed, it was in contemplation of this rule that I suggested the equitable right to compensation, as residing in the defendants; and it even occurred to me that such an equitable defence might be pleaded under our rule by way of set off. A court of equity, it is agreed, will compel a plaintiff who seeks its aid to do equity : ought not this Court, constituted as it is, to compel a plaintiff to do equity who has sought its aid, either at law or equity ? All that I deem it necessary now to say is, that I refrain from negativing the proposition. There is one class of cases which may be said to make a step towards the rule of the civil law ; I mean where specific performances and compensation are prayed, the Courts will decree the compensation though theyrefuse to decree specificperformance, and that too, even where compensation would be recoverable at law. In Cut v.Ruther, IP. Wms., 57, this was done ; and Lord Hardwicke in the City of London v. Nash, directed an issue of quantum damnificatus, though he refused a specific performance ; and in a case in the Supreme Court of the United States, Pratt o. Law, Story's En. Jurisp. xix 798 n., long before Mr. Justice Story's ruling, as already quoted, no doubt was entertained as to the correctness of these decisions. But there is an element in the case now under consideration which places the defendant's equitable claim to be compensated for the buildings erected with his money, and which will come into the plaintiff's hands, beyond all question. At the time Mr. Grace laid out his money, the absolute dominion of the land in question was in the Crown. He had been let into possession by parties who derived their title from the New Zealand Company. It is true the Company had no such title as they could bring into a court of law or equity ; neither, indeed, had Mr. Scott ; and when Mr. Grace says he was advised he had a good title, we ■must assume that it went no further than what he says in another place — that the Company had a right to a Crown grant. Mr. Grace mentions the Land Claims Ordinance as strengthening his belief. I have no doubt it did io ; and after looking at it over and over again, 1 think it was calculated to generate a reasonable belief, that the old claimants would be compensated by " lands elsewhere." In stating his impression at the time, I have not the least doubt that he really describes the ! general impression ; for otherwise, how would

shrewd and sober minded men of business, such as Johnson & Moore, Samuel & Josephs, and others, have erected expensive buildings on the land ? Mr. Grace, living in an atmosphere where that iirpression prevailed, could hardly resist its influence, though he and others may not at this date be able to state every minute fact which gave it birth, or imparted to it strength. His affidavit is certainly not as full as it might have been. Jt omits notorious facts, which I should, have supposed likely to have lived, in every man's memory. Still 1 think it contains enough to account for his belief. Mr. Hart has suggested that the Land Claims Ordinance of February, 1842, which was in force until February, 1843, had some share in producing the general belief in question. No doubt it had. Lord John Russell's agreement of November, 1843, could scarcely fail to have a similar effect ; but I think, without these, the belief was reasonable, in the known absence of a grant to any other person or body of persons. What are the terms of , Captain Hobson's celebrated letter, penned, and what is more, published in the Government Gazette, with the avowed objects of comforting and quieting the . minds of such as Mr. , Grace. Nothing can be well clearer or stronger than the terms of this letter, or of the moral obligations it involves : " Understanding that some doubt is entertained as to , the intentions of' the Government with respect to the land claimed by the New Zealand Company, in reference both to the right of pre-emption vested in the Crown, and to conflicting claims between the Company and other purchasers, it may, be satisfactory for you to know that the Crawn will iorego its right of pre-emption to the land comprised within the limits laid down in the accompanying schedule, and, that the Company will receive a grant of all such lands, as may by any one have been validly purchased from any natives; the Company .compensating all previous purchasers according to a scale to be fixed by a local ordinance. You are at liberty to give the utmost publicity to this letter." Hero, then, the Crown expressly and solemnly assures Mr. Grace and all similarly circumstanced, that the body through which he and they derived title, should receive a Crown grant, and that Mr. Scott and others in his position should receive — not the land itself, but compensation in land elsewhere. It was in accordance with this letter that the j -ordinance alluded toby Mr. Hart was passed. That Mr. Scott himself stood quietly by "while Mr. Grace laid out his money, and gave no notice of his claim until January 1 846, is a circumstance to which I think but little weight ought to be attached. There is a case in 2 Chan, cases, 128 Hobs v. Norton,, which, if it does not absolutely decide, at any rate assumes that a purchaser will not, be relieved against the title of the true owners, who being ignorant of his own title at .the "time, encourages ths purchaser to lay out money. This is broadly laid down in Mr. Hovenden's work on Frauds (vol. 2, 184.) The Land Claims Ordinance, Captain Hobson's letter, and the Land Claims Amendment Ordinance, passed'to give it effect, and other documents, cannot fail .to have weakened Mr. Scott's confidence in his own claim. Mr. Wakefield says Mr. Scott's claim was not worth five pounds, and certainly Mr. Scott was_ justified in estimating it as not worth much trouble or formality. It is true Mr. Scott was well aware of bis own mere claim ' at the time, but the title was not in him, nor did it then appear likely to be. Leaving out of account his omission to give special notice of his claim, I think the act of Captain Hobson, the then Governor, was such as to bring the case within the rule that " where the true owner stands by and suffers (and oi fortiori where he encourages and permits) improvements to be made on an estate without pressing his claim, he will not be permitted to enrich himself by the loss of another, but the improvements will constitute a lien on the estate." Clothed with this lien the estate came into Mr. Scott's hands. He it is who will enjoy the benefit of the ameliorations, and it is for him to compensate the, defendant — not to the extent of every shilling which may have been expended, whether judiciously or injudiciously — but on the more equitable principle of the value which comes into his hand. It should also be observed that Mr. Scott received his grant after the improvements were placed on the land ; his grant is silent as to messuages and tenements, and in goingjo the jury for mesne profits he did jiot ask for more than the annual value of the land. The learned counsel have. ur,ged that Mr,. Grace has his remedy against his .vendors or the Company. Perhaps',so ; but that is not such 'a remedy as the rule of equity" contem r plates. There is no legal remedy between the parties ; and a chain of actions by vendee against vendor up to the Company ultimately, is just such a " multiplicity of actions V as equity especially guards against, ' In considering this case, the learned counsel have drawn largely upon the equitable jur lisprudence of the United State? of America;

,and I. have thought it incumbent on mfeta.ex- I amine and remark upon the passages and de^ i cisionSi to which they referred, as v/ell as,, to some others which occurred to myself. This course has become not unusual in the courts at home, and one instance occurs to . my recollection, in which the Court of Exchequer took time to consider their judgment — "not that they felt any doubt at the time," as Mr. Baron Parke observed, "but from a desire to examine certain authorities to which the Court was referred in American text writers bearing on the subject," and the authorities in question, are mentioned in the course of the judgment. Vlierboom v. Chapman, 13 Mee. and W. 237. If this course be permitted to counsel, and pursued by the judges of the courts at Westminster, it certainly, ought not to be objected to here; for in applying the law of England to the circumstance of what is commonly called a new country, we cannot fail to derive incalculable advantage from the jurisprudence of America, and especially from such judges and writers as Kent, Marshall, Story, Greenleaf, and some others. If it be a source of honest pride to us that we have given our law 3 to that growing nation, may she, not reasonably entertain a similar feeling on reflecting, that she is enabled to repay the debt, by the assistance she affords the colonial courts in the construction of their jurisprudence ? For my own part, in applying the principles of our law to the circumstances of the colony, I am never quite satisfied unless I have succeeded in tracing those principles to their application in the United States, and certainly there is no author so well calculated to afford us assistance as the great and estimable judge, one of whose works has been so largely quoted in the argument of this case. As to the payment into Court of the damages given by, the jury, I cannot see either on the authority of the case quoted, or of any other, or according to the exigencies of this case, that such a condition ought to be imposed on the defendant. Where an executor or other accountable person admits a balance in a bill against him, he is generally ordered to bring in the money. But here, considering that a clear equity resides in the defendant, the value of the buildings on the one hand, and the amount of mesne profits on the ! other, may reciprocally stand as security for each other, as far as they go. Under this rule, I think I cannot do more than an injunction would warrant, namely, order a stay of proceedings, putting Mr. Grace upon terms forthwith to prosecute his suit for compensation to issue ; for the verdict of a jury will be necessary to determine the present value, unless the parties are willing to submit to the valuation of an -arbitrator or arbitrators, which I suggest. Rule absolute for a stay of execution upon terms as above.

'o the Colonies 'o jLondon 1 0 0 0 .. 1 10 0 0 .. 6 0