ABC Finance Limited v Madras Equities Limited HC Christchurch CIV 2010 409 786

[2010] NZHC 1736

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV 2010 409 000786

IN THE MATTER OF     the Land Transfer Act 1952

AND IN THE MATTER OF  of Caveat 5815919.1 (Canterbury

Registry)

BETWEEN  ABC FINANCE LIMITED Applicant

ANDMADRAS EQUITIES LIMITED Respondent

Hearing:         23 September 2010

Appearances: S J Savill for Applicant

B M Nathan for Respondent

Judgment:      27 September 2010

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

as to application for order that caveat not lapse

[1]      ABC Finance Limited sought an order that its caveat against a Christchurch property not lapse.  The proceeding was to be heard today.

[2]      As a result of the approach responsibly adopted by Mr Nathan at the hearing the Court is in a position to deal with the immediate application much more simply than had full argument proceeded and is able at the same time to put in place directions for a proceeding which counsel agree will enable the Court promptly to

adjudicate upon the substantive issues which affect the parties.

ABC FINANCE LIMITED V MADRAS EQUITIES LIMITED HC CHCH CIV 2010 409 000786 27 September

2010

The applicant’s asserted interest

[3]      ABC lodged a caveat against the property in November 2003.  It claimed an interest as a beneficiary under a trust whereby the registered proprietor, Madras Equities   Limited,  holds  the  land   as  trustee  under   a  Deed  of  Trust  dated

18 December 1990  for  nine  beneficiaries,  including  Matthew  Francis  Brownie. Matthews Francis Brownie had executed an assignment of his interest to ABC by a document dated 29 March 2001.

[4]      The reason for the assignment was that three companies associated with ABC Finance Limited had made loan advances to Mr Brownie on the security of his interest in the property and in other assets.

[5]      The 18 December 1990 Deed of Trust was a document signed by the nine partners of the Madras Equities Limited partnership.  They recorded in the Deed of Trust that they were the beneficial owners of the land and improvements comprising the property.  The Deed of Trust does not itself identify that their interests were each as to one ninth of the property but other documents, including those relating to the Madras Equities partnership, evidence their respective interests in one ninth shares.

[6]      One of the other nine partners/owners was Lionel Walter Hunter.

Mr Hunter’s asserted interest

[7]      It transpired  that within  three months of  executing an  assignment of  his interest to ABC Finance, Mr Brownie saw fit to execute a Deed of Assignment, dated 11 June 2001, in favour of Mr Hunter, in relation to “all that…share and interest of the Assignor and the Partnership and the Property to the intent that the Assignee shall hereafter be entitled to absolute ownership of that interest in the Partnership and the Property”.

[8]      On the same day Mr Brownie executed a share transfer form in favour of Mr Hunter in relation to 37 of his (50) shares in Madras Equities.  By the Deed of Assignment Mr Brownie undertook to transfer the remaining 13 shares if and when

called upon to do so “and upon the Assignor satisfying a third party interest in the said shares”.   The latter words were added in handwriting on the typed Deed of Assignment.  Mr Hunter has not explained what discussion took place surrounding the nature of the “third party interest”.

[9]      It  is  Mr  Hunter’s  evidence  that  Mr  Brownie’s  other  13  shares  were transferred to him on 11 December 2008, although he has not produced the documentation relating to the later transfer.   The search copies of the Register of Companies at the Companies Office indicates that the transfer of the 37 shares into Mr Hunter’s name was not registered until 3 December 2008.

The dispute

[10]     In the meantime, there had been correspondence between R A Fraser  & Associates, acting for ABC Finance, and Mr R W Ibbotson of Ibbotson Cooney Limited, whose firm was the registered office of Madras Equities, Mr Ibbotson also being one of the partners in the Madras Equities partnership.  In that correspondence, culminating in a letter from Ibbotson Cooney Limited to R A Fraser & Associates dated 8 December 2003, Mr Ibbotson explained that White Fox & Jones had advised him that their client, Mr Hunter, held a charge over Mr Brownie’s shares, which was prior to ABC’s security.    White Fox & Jones stated that they held an acknowledgment dated 7 May 1993 signed by Mr Brownie which specifically stated that his interest in the Madras Equities partnership as to a one ninth share was charged to Mr Hunter.   A personal guarantee and charge on 7 May 1993 were referred   to   in   the   recitals   to   the  Brownie/Hunter  Deed   of  Assignment   of

11 June 2001  and Mr Hunter has exhibited a letter dated 7 May 1993 signed by Mr

Brownie.

[11]     In his letter Mr Ibbotson noted that White Fox & Jones had (at that time) not produced any evidence to show that the charge given by Mr Brownie to Mr Hunter dated back to 7 May 1993.  Mr Ibbotson suggested that the rights of the parties could best be addressed by having the position resolved directly between R A Fraser & Associates as solicitors for ABC Finance and White Fox & Jones as solicitors for Mr Hunter.

[12]     No steps were taken by Madras Equities at that time to challenge the caveat which had been lodged by ABC the prior month.

[13]     Instead, some six years later Madras Equities initiated the Notice of Lapse of

Caveat procedure, bringing about the present application by ABC Finance Limited.

Application that caveat not lapse – the principles

[14]     The principles I adopt are these:

(a) The burden of establishing that the applicant has a reasonably arguable case for the interest claimed is upon the caveator;

(b) The caveator must show an entitlement to, or beneficial interest in, the estate referred to in the caveat by virtue of an unregistered agreement or an instrument or transmission, or of any trust expressed or implied: s 137 Land Transfer Act 1952;

(c) The summary procedure involved in an application of this nature is wholly unsuitable for the determination of disputed questions of fact – an order for removal of the caveat will not be made unless it is clear that the caveat cannot be maintained either because there was no valid ground for lodging it or that such valid ground as then existed no longer does so.

[15]     Given the clear view I formed on the papers and the concession appropriately made by Mr Nathan, there is no need to consider issues relating to the residual discretion.

Application of the principles

[16]     Against the background of the facts which are in evidence, ABC Finance has a reasonably arguable case for the interest it has claimed and it cannot be said in the

circumstances that there was no valid ground for lodging the caveat or that the valid ground which existed no longer exists.

[17]     Mr Brownie purported to assign his interest in the property to ABC Finance on 29 March 2001.  Mr Brownie then purported by deed to assign his interest in the property to Mr Hunter on 11 June 2001.  The deed referred to the earlier letter dated

7 May 1993 by which Mr Brownie agreed that a certain debt would be a first charge on his interest in the property.

[18]     There is clearly, as Mr Ibbotson identified as long ago as December 2003, a question of priority.

[19]     The competing interests are each identified to at least an arguable level. [20] The substantive rights and their priority need to be determined.

[21]     These  are  not  suitable  matters  for  or  intended  to  be  dealt  with  in  this summary jurisdiction.

Order

[22]     I  order  that  Caveat  5815919.1  affecting  the  land  in  Certificates  of  Title

CB31F/154 and CB7B/868 (Canterbury Registry) not lapse.

Costs

[23]     Mr  Savill  seeks  the  costs  the  proceeding  on  a  2B  basis,  together  with disbursements.

[24]     Mr Nathan accepted that he could make no sustainable submission against such an application.

[25]     I order that the respondent pay to the applicant the costs of this proceeding on a 2B basis, together with disbursements to be fixed by the Registrar.

Future steps to resolve the proceeding

[26]     Following a discussion between the Court and counsel, the Court is in a position to make timetabling directions relating to a proceeding which Mr Hunter will now commence in order to have the substantive issues between Mr Hunter and ABC Finance resolved.   Those involve an agreed adoption of the fast track and reinforce the Court’s judgment that the issues in this proceeding are appropriately to be resolved through a substantive trial and not through summary removal of a caveat on terms.

[27]     The timetabling arrangements will be the subject of a separate Minute.

Solicitors:

R A Fraser & Associates, Christchurch

White Fox & Jones, Christchurch