Cayman Shores Development Ltd and Palm Sunshine Ltd 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: (Segal, J.)
• Judgment Date: 09 June 2021
• Court: Grand Court (Cayman Islands)

CAYMAN SHORES DEVELOPMENT LIMITED and PALM SUNSHINE LIMITED

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

(Segal, J.)

Grand Court, Financial Services Division (Cayman Islands)

Land Law — restrictive covenants — creation — agreement by landowner that land to be subject to right of owners of neighbouring residential properties to use recreational facilities — agreement not to modify “facilities as constitute the Rights” or to suspend exercise of rights for any purpose other than repair and maintenance is restrictive agreement under Registered Land Act, s.93

Land Law — easements — creation — instruments creating rights for owners of residential properties to use recreational facilities effective to create easements but registered on Land Registry as restrictive agreements — Register to be rectified

	Held, ruling as follows:

	(1) The written agreements included a restrictive agreement within the meaning of s.93 of the RLA, either expressly or by implication, namely an agreement not to modify the “facilities as constitute the Rights” or their location or to suspend the exercise of the rights for any purpose other than the purpose of carrying out repairs and maintenance in respect of such facilities (“the restrictive agreement term”). Clause 3 could be construed as including an agreement by Cayman Hotel that its land would be subject to a restriction as to user (binding on it and its successors) that prevented any action which would have the effect of modifying the facilities or their location or of suspending their use for any purpose other than to carry out repairs and maintenance. This was a restrictive agreement within the meaning of s.93(1) of the RLA. Properly interpreted, this was what the parties expressly agreed. However, if the court were wrong in finding that the restrictive agreement took effect as an express term, it should be treated as an implied term (para. 95; paras. 97–99; para. 105; para. 108).

	(2) The court rejected the submissions of the Walkers defendants and White Dove that the written agreements (and the instruments) included a restrictive agreement “not howsoever to build on or otherwise develop or carry out works on the Properties in a manner that prevents or substantially interferes with the exercise of” the relevant right. By granting the rights, Cayman Hotel became subject to the rights and was required to permit them to be exercised but it did not follow that the terms of the written agreements must be understood as meaning that Cayman Hotel had agreed to be bound by or as including an additional agreement or covenant not to act in any particular way. Cayman Hotel did not assume a separate (negative) covenantnot to breach the rights. The grantor of a property right did not, by making his land subject to a property right, of necessity agree and assume an obligation not to interfere with or breach the right granted (paras. 89–91; para. 96).

	(3) The instruments were properly registered as, or as including, restrictive agreements. The references to the instruments in the incumbrances section of the register for the properties, together with the description of the incumbrances in the nature of incumbrance column as a restrictive agreement was sufficient to satisfy the requirements of s.93(1) and s.23 of the RLA (para. 109).

	(4) The instruments were effective to create easements within the meaning of and pursuant to s.92 of the RLA, however the rights had not been properly registered as easements and could not bind the plaintiffs in the absence of an order rectifying the register. The language of the written agreements made it clear that the parties intended that the lot owners be granted rights (to use the relevant facilities and the land on which they were located) which would subsist indefinitely and permanently attach to the land on which the facilities were located and to the lot owners’ properties. The intention was that the rights would subsist whether or not the hotel remained in operation. The court rejected the plaintiffs’ argument that the rights failed to constitute easements because they were precarious in the relevant sense. The court rejected the plaintiffs’ submission that the use of the form prescribed by the Registrar for the granting of an easement was mandatory. However, the entries made on the register were not sufficient to constitute the registration of the rights as easements. The entry made in the incumbrances section of the register did not record or constitute the registration of easements; on the contrary, in accordance with the request made by those applying for registration, the register recorded that the nature of the incumbrance which the Registrar had noted was a restrictive agreement. It could not therefore be said that the rights (and the instruments) had been entered on the register in the manner required for easements (in accordance with s.92(4) of the RLA). The rights could not without more, unless rectification of the register were permitted, be treated as binding on the plaintiffs as easements pursuant to s.23 of the RLA (paras. 142–195).

	(5) The Land Register should be rectified to add and include a reference to the rights as easements. Five main issues arose: (i) Was rectification to add a reference to the rights as easements precluded because the instruments did not comply with the mandatory provisions of s.92(1) of the RLA? (ii) When did the court have jurisdiction to order rectification for mistake? (iii) Was there a relevant mistake in this case? (iv) Did s.140(2) of the RLA preclude rectification so as to affect the plaintiffs’ title? (v) If there was a relevant mistake and s.140(2) did not preclude rectification, should the court exercise its discretion to grant rectification in this case?

	(i) The court rejected the plaintiffs’ argument that the rights could not be registered as easements because they were not created using the form prescribed by the Registered Land Rules and in compliance with themandatory provisions of s.92(1) of the RLA. The Registrar would be entitled and probably bound to register the rights upon receipt of a request for registration with a confirmation that the rights constituted easements. If the court concluded that the application for rectification made by the Walkers defendants (and White Dove) was to be granted, it should declare that the rights were easements and that the register should be rectified in the manner sought subject to the Registrar confirming that she was prepared to do so based on the instruments in their current form. If she were not satisfied, she would need to explain what more was needed and the parties and the Registrar would need to consider whether the Registrar’s requirements could be dealt with by agreement or whether further orders were required.

	(ii) Section 140(1) of the RLA allowed the court to order rectification “where it is satisfied that any registration including a first registration has been obtained, made or omitted by fraud or mistake.” Accordingly (a) there must be an incorrect registration (obtained) or entry (made) on the register or an entry that should have been made but was missing from the register, and (b) the reason why the incorrect registration or entry was made or the correct entry was not made was fraud or mistake. The Registrar must have been misled by the fraud of an applicant for registration or must have made a mistake when making the relevant entries. On the face of s.140(1) there was no distinction drawn between mistakes of fact and mistakes of law and, absent authority, the court would be disinclined to introduce one.

	(iii) The Walkers defendants relied on the Registrar’s mistake in omitting to refer to easements in the nature of incumbrances section of the register. The position was to be analysed as followed. The entries on the register were incorrect because they omitted a reference to valid easements which were granted by and included in the instruments; this omission was made because the Registrar was not asked to register the rights as easements and did not perform her own assessment as to whether the instruments included easements; and the reason why no application was made for registration of the rights as easements was not clear from the direct evidence but it could be inferred that it was based on legal advice received by the lot owners (and possibly Cayman Hotel and Ellesmere) that such registration was not permissible or appropriate in the circumstances. The properties were, following the execution of the instruments, subject to an incumbrance in the nature of easements, which incumbrance had been omitted from the register as a result of a mistake by the Registrar who failed to appreciate that the instruments created easements. The Registrar was induced to make her mistake by the mistake made by those applying for registration. This was a case where the Registrar would have done something different had she known the true facts at the time when the instruments were presented for registration. Had she appreciated that the instruments contained easements, she would have registered the rights as easements. In the circumstances, the court had jurisdiction to order that the register be rectified by correcting the omission of the registration of the rights as easements. The Registrar’s mistake of fact was critical. If the court werewrong that the operative mistake was to be characterized as a mistake of fact, and that instead it should be treated as a mistake of law, it was nonetheless a type of mistake within s.140(1) of the RLA which gave the court jurisdiction to order rectification of the register. A mistake by those applying for registration and the Registrar when reviewing such an application as to whether rights granted by an instrument were as...