INTERESTING WATER RIGHT CASE.

Otago Witness, Issue 2426, 12 September 1900, Page 20

INTERESTING WATER RIGHT CASE.

A DECISION BY WAEDEN M'CARTHY.

In the Warden's Court, Cromwell, on Thursday last, Zvlr Waiden M'Carlhy's decision in the case of A. C. M'Gcorge v. Henry Thomas, James Marshall, and D. A. Joliy was made known. This is an aciion wherein the plaintiff claims a certificate o£ abandonment m respect of £i certain, watei race, licen&e v.-he^efor is numbered 2156, and dated the 21st JSTovembsr. 1890, of which defendant is registered ovuier, or, m the sltciuative, that the defendants be lestraineel by order of injunction fi'om seating up .as against the plaintiff or hi« successors in tide thai, the right of the defendants by virtue of such water race license is prior to that hold by the plaintiff under an agreement with the defendant- Henry Thomas, dated May 2, 1893, in respect of a water right, license 'wberefor is dated the 3 2th December, 1890, of which the said defendant is the registered owner. The defendant D. A. Jolly is the mortgagee of both rights, and has only been joined in this action for the sake of co.iformity. The real dispute lies between the .plaintiff and the other two defendants. Under the agi cement before mentioned the defendant Henry Thcm-is, had, ri consideration of given the plaintiff an option to lease race No. 2169, expiring on the Ist November, 1000. The case was heaid at the May sitting of the cowrfc, when judgment was reserved. At the request of Mr M'Cavthy, the warden then presiding, and by consent of the parties, ! JVir James Fleming, c vk of the court, now ! lead the warden's decision, which is as follows: — "In the month of May, 1899, the defe.idant Henry Thomas was, and is now, the registered owner of p water race heading out; of B.triEockburn Creek, with light to divert three Government heads of water, license wheiefor is numbered 2163. ar.d dated the 12th December, 1890. This race had been kept in constant r.se, and, so far as the evidence discloses, was ii ot liable to forfeiture. In tho month of M?y there was also extant a license (No. 2156), cV-.tecl the 21st November, 1890. This latter race had not been in use since the beginning of January, 1899, and apart from the fact of a protection certificate ha 1 , ing been &-r.ute'l in^iespect thereof was deemed to have been abiucloued (pee section 148 of ' The MiningAct, 1586.' and section 7 of ' The Mining Act, 3R93,'). The license, however, continued to be annually renewed, and in the month of May, 1889, was registered in the respective names o£ the executors of Tippett's estate (of whom the defendant Marsha-11 is one), and the executors of~ Ritchie's estate. In or shortly prior to this month the plaintiff, being- in search of land, suitable for dredging operations under the last cited act, alighted on a piece in the vicinity of Bannockburn, near the Borough of Cromwell. An examination of the land disclosed the necessity of having a water right to supply the paddock or dam in which the dredge would have to work. "Without this water it would be impossible to dredge the land. Both the water rights "before referred' ~to command the land in question, but in a dry season there are only two heads .of water running in the Bannockburn, which would only be sufficient to supply one right. The defendant Marshall' is r registered mining agent, and has a practical knowledge of the working of the Mining Acts. In this capacity he, on behalf of the defendant, held license No. 2169 for renewal, and acted as the latter' s adviser in matters of mining law. Both of these defendants arc well acquainted with the various water rights heading out of Bannockburn Creek, and of the capacity of the waters of that creek to supply; them. The plaintiff, after he had discovered the land in question, waited on the defendant; with a view of purchasing race No. 2169, af;' the same time informing him he proposed acquiring a title to the land for the purpose of di edging, and that the water was essential to work the land. During Ihe progress of ths negotiations the defendant Thomas, represented to ihe plaintiff that lace No. 2169 wasi in first-class order, and that he could always depend on at least two heads of water being available in the driest season for the purposes; of that race. Keepinp, in view the facts well known to both defendants of there being only: two heads in the creek in a dry season, and o£ there being at least two races heading thereout,' one (license No 2169) for three heads, and the other (license No. 2156) for two heads, Thomas's representation involved the fiuther representation that license No. 2169 was the prior right. In any event, assuming the defendant did not? intend this inference to be drawn from" hia primary representation, he must have known) this latter to be untrue. As a result of the ne-" £>otiations between the plaintiff and the de- : fendant Thomas, the latter offered the former; an option of a lease ovei race No. 2169, to remaiu open for 18 months from the date of £,ienixi<> the necessary agreement. The plaintiff, after consulting those interested with hiaei

in taking up the land, and relying on the truth of the representation, accepted the defendant's offer, and an agreement was signed, dated the 2nd May, 1899. This agreement is expie&sed to have been made in consideration of the sum of JEIO paid by the plaintiff to the defendant Thomas, and this sum was actually so paid. There is in the agreement no express warranty as to title. Thereafter the plaintiff caused to he applied for, and obtained, a grant of a special dredging claim in the name of his biother ■Joseph, on behalf of the mining syndicate of which he and the plaintiff were members, a license for a special dredging claim in lespect of the land before alluded to. This license, owing to delays in the survey, was not finally granted until the 16th February, 1900. A fewdays after the execution of the agreement, the "defendant Marshall, as a result of a consultation with his co-defendant Thomas, instructed Mr Gilkison, solicitor, of Clyde, to institute a suit for the cancellation of -race No. 2156 on the ground of non-user. This suit was instituted on the 15th "May,. 1829 (PMiit No. S," 1899). On this' coming to the knowledge of The plaintiff, He waited on the defendant Thomas, who informed him the object of the suit was to get rid of an old race (meaning thereby race No. 2156), in existence prioj. to xace No. 2160, so as to make the latter lace the prior right. Thomas further said : ' What is the use in letting you have a race and water if I can't supply 'it? ' The plaintiff believed these statements, and proceeded with negotiations for" the flotation of the Bannockburn Creek Gold Dredging Company (Limited). After the institution of suit No. 8 of 1899, the defendant waited on one Archibald Ritchie, the unregistered owner of a share in race No. 2156, and told him someone (without disclosing ■whom) was seeking to cancel its license, but observed 'lie would not mind giving £5 for it.' Ritchie came to Cromwell, and consulted j Marshall, one of the trustee executors of Tip- ! pett's estate, who informed him Thomas was ! tihe plaintiff, and that Thomas had in&liucted i him "(Marshall) to take the necesspiy pioceed- • ings. In the result Marshall advised a sale to Thomas; which was subsequently effected i for the sum of JEIO. The_ suit No. 8 of 1899 ' •was withdrawn on the Bth J une. The Bannock- I bum Creek Dredging Company was registered j Tindei- ' The Companies Act, 1882/ on the I ISth July, 1899, and in this company the plain- , tiff applied for, and had allotted to him, a mim- [ ber of contributes y shares. Both the defen- i dants Marshall and Thomas, in common vitli the rest of the mining public in and p round I Cromwell, would become aware of the regis- j trptio.i of the company immediately after the 18th July. After the purchase of race No. j 2156 Ilia defendant took up the position that ; that \ac wns prio 1 - to laco No 216" 1 , and o:i j the 22nd July, "3899, Marshall, effecting to act j as agent for his" co-dafendant Thomas, wiote to the plaintiff, advising him of the purchase of race No. 2156, which he pointed out was a prior right to race No. 2163, and offering him the option of a lease thereof at £3 per week, at the same time further offering to dispose of the option foi a- lease over race No. 2163 I (a race he well knew, as the terms of his letter ! show, to be worthless) to the Electj ie Extended ] Company, which company was. he alleged, in , treaty for an ootion over iftce No 2TSP Tliia j letter was the first in+iraatio" t'i° --> I n -;->■• '-^ >->rl of the purchase of the last-mentioned race, • nvd in it Marshall discloses an intimate knowISSge of the water rights heading out of the 3?snncckburn. The plaintiff met Marshall and , Thomas at tli.e former's residence between the 23nd "?nd' 29th July. During this interview the plaintiff learned for the first time-that Mar-." shall was interested with Thomas- in. the race,.and asked these two defendants at what price they would sell race No. 2156 - The reply was some price between £800 and £1000. The interview' terminated without any definite understanding being' arrived at other than that Marsh nil and Thomas were to- submit some other offer in writing to the plaintiff. "-On the 29th July Marshall wrote the plaintiff on behalf of Thomas, placing race No. 2156 under oiler for £500. The letter contained oilier terms not material to the present case. This offer the plaintiff refused, and the parties have been at arm's length since the end of July, 1899. The ■assignment to Thomas of race No. 2156 is^daled the 18th September, ISO 9, and iva? registered at Cromwell on the 27th October following. In the month of Niovember, 1599, Thomas, through his co-defendant Marshall, made an application for the piotection of lace No. 2156, which was granted on the 16th Februaiy, 1900. No notice of this application was ever given to the plaintiff, whose interests were obviously affected. Meantime — namely, on the 11th January, 1900 — the defendant Thomas assigned to his co-defendant Marshal a halfinterest in race No 2156, and moitgaged to the defendant Mr Jolly all his interest in both races. These assignments were registered on the 22nd of the same month. It is heie to be noted that there is not a scintilla of pioof th?t Mr Jolly had any notice of the relations between the plaintiff and the remaining defendants. The present suit was not commenced till the 11th April, 19J)0. It is significant that under cross-examination Thomas declined to name the sum paid to him by 3larshr.ll for the assigrftnent of the half-interest in Race No. 2158, and that. Marshall, although piesent in rourl, advising counsel throughout the hearing, was neither called as a witness nor tendered ior cross-examination. Thomas attempts to explain his attitude to the plaintiff after the purchase of race No. 2156 by stating that the representation made by him to the plaintiff that the cancellation of puit No. 8 of 1P99 was to make race No. 2169~ the prior right, was only to apply if that suit was proceeded with and the license cancelled pursuant thereto, and itiiot having been so cancelled, but acquired by purchase, the representation had no effect. No intention to so limit the application of thi i representation was ever disclosed or even hirteel at by either Thomas or Marshall to the plaintiff. I am, after a careful perusal of the whole evidence, driven to the conclusion that from first to last the defendant Marshall has had full knowledge of the negotiations between his co-defendant Thcmas and the plaintiff, and of the various representations made by the foirner to the latter in lespect of race No. 2169. To summarise: The defendant Thc'nas, in order to induce the plaintiff to enter into the agieement of the 2nd May, 1899, represented to the latter that race No. 2169 was the prior right, or at least there were always two heads of water available for that race even in the diiest season. That whichever representation is taken Thomas well knew it to be untrue ; that the fact of the representations having been made, and of their untruth was known to the defendant Marshall, but not to the defendant Jolly ; that in consequence of these representations, and relying on the truth thereof, the ■plaintiff paid Thomas £10, and entered into the agreement of the 2nd May ; caused to be taken up a special dredging claim on which he remains liable for a poition of the lent, and m'on.oted a company to work it, in which he has taken tip contributory shares and incurred other liabilities. That on the 15th May, 1899, Thcmas commenced a suit to cancel race No. 2156, which is, in fact, and not race No. 2169, the prior right, and represented to the ■plaintiff that this suit was to make race No. 216") the iDrior light. That so far from making these representations good Thomas withdrew the suit, purchased race No. 2156 for £10, and after endeavouring to sell it to the plain tiff for various sums, ranging from £1000 down to .£SOO, now sets up that it is pi ior to the race No. 2169, contrary to the to the plaintiffs. Finally, with a view of preverting the plaintiff from taking any advnntago of the abandonment of race No. 215 G. Thomas, without notme to the plaintiff, and through his co-defendant Marshall, obtained

from. the waiden a certificate of piotection in respect of that race. Now, it is no pait of our piesent duty to inquire what aie Marshall's liabilities to the be-neficiaries of the trust estate of which he is executor, but coming to tho vital questions at issue there can be no doubt a certificate of protection only operates as a defence to a suit praying decree or forfeiture where the cause of action leliecl on arose during the period of protection, and that period, except in the case of protection by virtue oi section 133 of the Mining Act of 1596, cannot relate bock any earlier than the date fixed for the original hearing of the application, winch in the present case was the 30th November, 1599, whilst the nonuser relied on, and piovcd by the plaintiff m lespect of lacs No. 2156, extended continuously from the Ist January, 1899, to end October of the same yeai (see section 130 and 131, subsection 8 of the act of 1898). Race No. 2156 was granted on the 21st November, 1890, and was therefore subject to the provisions of ' The. Mnijvjg A.? f , 13*ifi ' (see section 7 r Aiming Act, IS9B '). fiy vie act of 188G it is piovidcd that 'if water is not allowed to flow m any water race along its entire couise, not being a catch water cr dry race, unless prevented by natural causes, or it is not u&ed for its puipose during any term of tluec consecutive months, it shall be deemed ta be abandoned (see section 148).' Section 143 of the act of 1898 will not avail to piotect either of the defendants Jolly or Marshall bcccxiso that section is confined m its operation to cases where the court is empowered to decree a forfeiture, and does not extend to cases of abandonment, either actual of constructive, in respect of which a certificate of abandonment is authorised to be issued. By the terms of section 148 of the act of 18S6 lace No. 2156 is ' deemed to have been abandoned,' in other words it is to be treated as if it had been intei.tionslly abandoned. Throughout the act of 389S a clear distinction is maintained between mere liability to forfeiture and intentional or constructive abandonment. Morcovei, there is not m the act of 1886 ?r.y provision identical with section 14S of the act of 1898. I am, theiefore, of opinion that notwithstanding the assignments to Messrs Jolly and Marshall a certificate of abandonment ought io issue in lespect oC race No. 2156. There is the loss difficulty in airivmg at this conclusion when it is borne in mind that neither of these gentlemen can derive ony greater title under their respective assignments than the defendant Thomas had io give. Assuming, however, =uch a ccitificate should not ispu>» it is vow our duty to inquire to what righr m the plaintiff's favouj doss tho fraud of the defendants — Thomas and Mai shall — give rise. The position is clearly laid down in 'Pollock on Contracts' (p. sdß). The paity who has been induced to elite-- into a contract by fraud may affirm the co ifcract, and insist, if that be possible, on bciiij, put in the same position as if the representation had been true. In the present c.i^e 11) is car be effected by restraining the defendants by injunction from setting tin any rights they may have uncle 1 * license No 2156, m against these to vhic'n the wlaintiff is entitled undrr license Nc. 2169, and the agieement oi the 2nd May. ]£99. There is ample evidence of the plaintiff having affhmed that agreemcxit, and the only qvestio.i remaining for °=olulioi> is whether the ramacly by injunction has been lost by delay. In the first place, we have the fact that behwe-u July, 1899, and the institution fo the present suit the rights of Jolly, who never was a party to the fraud of his co-defendants, have arisen. But' Mr Jolly has a mortgage over both races, and thoro is only water for one. It can therefore be of no importance to him which of these lights is held to be prior to Hie other.- To allow tho plea of delay m the present case would bs to permit the defendants Thomas and Marshall to shelter themselves behind the mortgagee without there being any advantage to the Jatter. Moreover, race No. 2156 still remains in the hands of those who hrAt, perpetrated the fraud on the plaintiff. Then as to the defendant Maishall it cannot bo urged that he was a bona fide purchaser, and owing to the silence of Thomas under cross-examination and to his own absence from the witness box, it equally cannot be urged that his purchase from Thomas was for valuable consideration. Notwithstanding the delay, the position between the parties has remained for all practical purposes unaltered, and the mle is clear that rneic delay in taking proceedings is not material, and does not amount to acquiescence, so longas matters remain in statu quo. (See ' Kerr on Injunctions,' p. 206, and the cases there cited.) But it was urged at the hearing that the plaintiff might have searched the mining register at Cromwell, and ascertained the respective priorities between races 2156 and 2169, and that the lule of caveat emptor appLes. Apart from the fact that the register would not readily afford the information indicated, the rule has thus been laid down by Lord Chelm«foid in the Central Railway Company of Venezuela v. Kisch (L.R. 2, House of Loids, 99, 120):

' When once it is established that there has been any fraudulent misrepresentation or wilful concealment by which a, person has been induced to enter into a contract, it is no answer to his claim to be relieved from it 4 to tell him he might have known the tiuth by proper lr.quirv. He has a right to retort upon his objector. You at least, who have stated what is untrue, or have concealed the truth for the purpose of drawing me into a contract, cannot accuse me of want of caution, because I relied implicitly upon your fairness and honesty.' An injunciioii will, therefore, issue restraining the defendants and their successors in- title from setting up or asserting as against the plaintiff or his successors in title that any rights they may have under license No. 2156 are prior or superior to those of the plaintiff or his successors in litle under license No. 2169 and the agreement of the 2nd May, 1899. A copy of the order of injunction, as well as the certificate of abandonment in respect of race No. 2156, will be ordered to be registeied against the record of the said lace in the mining register kept by the mining registiar at Cromwell. The defendants Hcnrv Thomas and James Marshall Will be ordered to pay the plaintiff's costs of incidental to and occasioned by this suit — namely, the sum of JCIO Is.