Cayman Shores Development Ltd and Palm Sunshine v Registrar of Lands, Proprietors of Strata Plan No. 79 (Lion’S Court), Proprietors of Strata Plan No. 147 (Regent’S Court), Proprietors of Strata Plan No. 215 (King’S Court) and Britannia Proprietors

• Jurisdiction: Cayman Islands
• Judge: (Goldring, P., Field and Beatson, JJ.A.)
• Judgment Date: 07 March 2023
• Court: Court of Appeal (Cayman Islands)

CAYMAN SHORES DEVELOPMENT LIMITED and PALM SUNSHINE

and

REGISTRAR OF LANDS, PROPRIETORS OF STRATA PLAN No. 79 (LION’S COURT), PROPRIETORS OF STRATA PLAN No. 147 (REGENT’S COURT), PROPRIETORS OF STRATA PLAN No. 215 (KING’S COURT) and BRITANNIA PROPRIETORS

(Goldring, P., Field and Beatson, JJ.A.)

Court of Appeal (Cayman Islands)

Land Law — easements — creation — agreements by owner of hotel and associated recreational facilities that land to be subject to right of owners of neighbouring residential properties to use recreational facilities, stated to be restrictive agreements, fell within definition of “easement” in Registered Land Act, s.2 and conformed to common law requirements for creation of easement and requirements of Registered Land Act, s.92(3) — however, not easements because not registered — parties did not intend to register grant of easements but only restrictive agreements

Land Law — restrictive covenants — creation — agreements by owner of hotel and associated recreational facilities that land to be subject to right of owners of neighbouring residential properties to use recreational facilities not restrictive agreements for purpose of Registered Land Act, s.93(1) — rights not capable of being registered as incumbrances on register — Register to be rectified

Held, allowing the appeal:

(1) The judge misconstrued cl. 3 and erred in finding that the agreements contained the restrictive agreement term. The judge’s construction of cl. 3 was at variance with the natural and ordinary meaning of the words used construed against the background of the whole agreement. It was also at variance with what the court was satisfied would have been the parties’ contemplation at the time the agreements were concluded, namely that the facilities would be available for the foreseeable future for at least as long as Cayman Hotel or its successors continued to operate the resort, and that over such time the facilities might well be modified or moved and not just for repairs and maintenance. The judge’s construction was at variance with the fact that the agreements did not contain any promises by Cayman Hotel not to do anything on its land. The judge’s construction of cl. 3 did not accord with commercial common sense because its consequence was that Cayman Hotel was prohibited from creating a new, larger and better facilitysuch as a swimming pool, in a different location on the site from where the existing pool was located, in order to raise the attractiveness of the swimming facility at the resort. The court also accepted the appellants’ submission that even if cl. 3 meant what the judge said it meant, he was wrong to hold that the restrictive agreement term was to be implied into the agreements. The restrictive agreement term was not a term that the parties would have regarded as being too obvious to need to be expressed in the agreement, nor was its implication necessary to give the agreement business efficacy. The court did not accept the respondents’ submissions in favour of the covenant not to build or develop pleaded in ground 1 of their respondents’ notice. The court agreed with the appellants’ submission that at the heart of the respondents’ case on ground 1 of the respondents’ notice was the proposition that, where there was a grant of rights of the sort granted in the agreements, the grantor was subject to a term that he or she would not interfere with the exercise of that right. The judge was right to reject this proposition for the reasons he gave. The court was also not persuaded by the respondents’ new submission. That interpretation of cl. 3 conflicted with the ordinary and natural meaning of the clause because it was strained and unnatural to read the words “subject to” as a limitation on the rules and regulations that could be imposed by the dominant owners. The words that followed “subject to” placed a limitation on the exercise of the rights, not a limitation of the rules and regulations that could be imposed. It followed that the court found that the agreements were not restrictive agreements for the purpose of s.93(1) of the RLA and therefore the rights were incapable of being registered as incumbrances on the register (paras. 79–84).

(2) Having regard to the substance of what was recorded in the instruments and the agreements, the wording used in these documents was capable of creating rights in the form of easements because it fell within the definition of an “easement” in s.2 of the RLA and conformed to the common law requirements for the establishment of an easement (set out in Megarry & Wade, i.e. (i) there must be a dominant and a servient tenement; (ii) the easement must confer a benefit on (or accommodate) the dominant tenement; (iii) the dominant and servient tenements must not be owned and occupied by the same person; and (iv) the easement must be capable of forming the subject matter of a grant) and the requirements of s.92(3) of the RLA (i.e. “The instrument creating the easement shall specify clearly—(a) the nature of the easement, the period for which it is granted and, any conditions, limitations or restrictions intended to affect its enjoyment; (b) the land burdened by the easement and, if required by the Registrar, the particular part thereof so burdened; and (c) the land which enjoys the benefit of the easement, and shall, if required by the Registrar, include a plan sufficient in the Registrar’s estimation to define the easement”). However, these rights were not easements in the full sense because they had not been perfected by registration as required by s.92(4), the parties having deliberately decided not to create or register easements. The judge erred in concluding that from an objective point of view, the partiesintended that the rights were property rights in the nature of easements that were intended to be binding on Cayman Hotel’s successors in title. It was to be inferred from (i) the way in which the required form RL 12 and later form RL 15 for the grant of easements was completed by the parties (in place of the words “grant of easement” were the words “restrictive agreement,” the word “easement” not appearing anywhere in the forms); (ii) the wording of the agreements that had been drafted professionally; (iii) the request the parties made to the Registrar only to note restrictive agreements in cl. 4(b); and (iv) the waiver of any right to lodge a caution against the parcels held by Cayman Hotel (cl. 6), that a reasonable person, with knowledge of the forms and documents in issue and the applicable requirements for the registration of restrictive agreements and easements, would undoubtedly have concluded that the parties did not intend to register the grant of any easements but intended only to register restrictive agreements (paras. 95–132).

(3) The judge erred in ordering rectification in favour of the respondents on the basis that the Registrar had made a mistake in not registering easements in the incumbrance section of the register, this mistake having been caused by the Registrar’s mistake in failing to appreciate that the rights granted easements as well as being protected by restrictive agreements. The judge’s conclusion that a rectifiable mistake had been made involved his considering what the Registrar would have done if she had appreciated that the rights were to be characterized as easements as well as being protected by restrictive agreements. If the Registrar had appreciated that the rights could be characterized as easements, she would not have been entitled to proceed without more to register the easements in the register. At the very least, given in particular that she was requested by cl. 4(2) of the agreements only to note restrictive agreements in the incumbrance section of the register, she would have had to have sought the parties’ confirmation that they wished to apply for the registration of easements. It was fundamental to the registration machinery created by the RLA and to the duties of the Registrar to ensure that the Registrar and her or his staff accorded a free choice to applicants as to which rights they wished to apply to have registered, in this case restrictive agreements and/or easements. No evidence was given by or on behalf of the original parties to the agreements as to how they would have responded to a request for confirmation that they wished to apply for the registration of easements and no inference could be safely drawn from the material before the court that the parties (no doubt after having taken advice from their legal advisers) would have authorized the registration of easements. It followed that the judge should have held that the respondents had failed to prove that the Registrar would have made the necessary entries in the register to register the easements granted by the rights if she had correctly concluded that the rights were in the nature of easements. The rectification order must be set aside. Even if the parties had confirmed to the Registrar that they wished to apply for the registration of easements, the Registrar would still have had to consider whether she could cure, pursuant to s.105(1), theparties’ failure to use the prescribed form for easements and whether there should be any amendments made to instruments and the agreements. Assuming that it was open to the Registrar to consider exercising the curative power, the Registrar could not have lawfully concluded that the parties’ failure to use the prescribed form should thereby be excused. The judge erred in holding that a decision to cure by the Registrar was unchallengeable and the court accepted the appellants’ submissions that the Registrar would have had to exercise this power consistently with her duty under s.5(1) of the RLA to administer the Land Registry in accordance with the Law, which would include the non-acceptance of documents containing confusing and/or misleading information. Given that (i) the instruments did not use form RL...