Aitken v AAL Holdings Limited
[2019] NZHC 1510
•2 July 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-000442
[2019] NZHC 1510
BETWEEN PETER JOHN AITKEN and PETER LOUIS FELSTEAD
ApplicantAND
AAL HOLDINGS LIMITED
Respondent
Hearing: 17 June 2019 Appearances:
T Lewis and B O’Callahan for the Applicants
D Chisholm QC for the Respondent
Judgment:
2 July 2019
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 2 July 2019 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors / Counsel:
MacDonald Lewis Law, Auckland Brown Partners, Auckland
AITKEN & Anor v AAL HOLDINGS LIMITED [2019] NZHC 1510 [2 July 2019]
[1] This proceeding concerns an application for an order that a caveat not lapse. On 13 June 2019, Whata J directed that in place of the defended fixture that had been allocated for the application (which he adjourned), there would be a hearing confined to a dispute that has arisen in the context of the application.
[2] The dispute unpacks into two issues. The first is whether (as claimed by the respondent) an agreement that was made by the parties on 9 May 2019, for resolving the caveat application had the effect of:
(a)requiring the applicants to file and serve substantive proceedings not later than 15 working days after the day that the agreement was reached; and
(b)entitling the respondent to an order that the caveat lapse if the obligation was not fully complied with.
[3] The second issue is whether (assuming the agreement had the effect claimed) there has been a failure by the applicants in fact to comply fully with the obligations for filing and service, and if so, whether an order lapsing the caveat should now simply follow, without a hearing on the merits of the application.
[4] It is agreed that the applicants filed substantive proceedings on 30 May 2019 (which the parties calculate is 15 working days after the day they reached agreement). It is also agreed that the proceedings were served by email and that no issue is taken on account of that method of service. The dispute arises from the fact (not disputed) that service did not occur until two working days later, on 4 June 2019.
[5] It is no longer argued (as it was before Whata J) that the alleged non- compliance has caused the caveat to lapse; rather it is said that an order lapsing the caveat would be consistent with the parties’ agreement.
[6] I have heard argument from counsel for the parties and this judgment sets out my ruling and my reasons. My ruling is that the agreement did not have the effect claimed and that it would be inappropriate to make the order sought without hearing the application on its merits.
Background
[7] It is necessary to refer first to matters of background and the actual basis of the agreement.
[8] On 14 March 2019 the applicants made an application for an order that Caveat number 1121945.1 not lapse. On 19 March 2019 Edwards J made timetable directions and allocated a fixture for a defending hearing for 17 June 2019.
[9] Documents in opposition were filed on 9 April 2019. However, on 9 May 2019 the parties reached an agreement to settle the application by consent orders without the need for a defended hearing.
[10] The proposed consent orders had originally been put to the applicants in an email of 28 March 2019 from the respondent’s counsel. The email pointed out that the respondent disputed the interest claimed in the caveat but took the view that the consent orders, with in-built conditions relating to the filing, service and timetabling of substantive proceedings, would be a pragmatic means of resolving the overall argument about the claimed interest quickly and cost effectively. The email laid out the text the respondent proposed for consent orders in four bullet points as follows:
• Caveat number 1121945.1 (the caveat) will remain in place on the condition that the applicants file and serve substantive proceedings within 15 working days to enforce the right to claim in the caveat.
• If substantive proceedings are not filed and served within 15 working days, the caveat will lapse.
• Following the service of substantive proceedings, the parties will cooperate to secure an expedited timetable and fixture for the substantive proceedings.
• Costs in respect of the caveat application are reserved and will be dealt with as costs in the substantive proceedings.
[11] The applicants did not respond until 9 May 2019. In fact, it was not until the third occasion that the respondent wrote concerning the proposed consent orders, that the applicants responded; and then agreed to them.
[12] It was the solicitor for the respondent who wrote on the third occasion. He expressed growing concern about the applicants’ inaction in relation to the commencement of substantive proceedings, indicating nevertheless a willingness on the respondent’s part to pursue a pragmatic resolution to the application on the basis of the proposal of 28 March 2019. In a clear indication that the consent orders proposed were being put to the applicants for acceptance in exactly the terms laid out in counsel’s email of 28 March, he stated:
… we are instructed to repeat the open offer contained in Mr Chisholm’s email dated 28 March 2019 to have consent orders made on the caveat application. The offer is open for acceptance for a further 5 working days from the date of this letter.
[13]He added what he understood would be the consequence of acceptance:
If accepted, the applicants would then be obliged to file and serve substantive proceedings within a further 15 working days.
[14] The repeated offer was accepted by the applicants’ solicitor’s email on 9 May 2019 in the following brief terms:
The trustees of the Aitken Family Trust accept the offer contained within your letter of 3 May 2019.
Consent Orders are to be made on the caveat application and our client is to file substantive proceedings.
Brent O’Callahan is in Court at present, however he will attend to preparing draft orders for your perusal.
[15] Mr O’Callahan did not prepare draft orders. Nor apparently was he asked by his instructing solicitors to prepare them despite the indication on the matter in their email. But it appears that the respondent’s lawyers also did not press for a draft consent memorandum for perusal or take the initiative themselves to prepare one. I can only assume both sides “went off the boil” and that all sense of urgency about putting the proposed consent orders to the court waned, as no such orders were in fact sought. There is no suggestion the parties took any steps in that regard or so much as
spoke about the matter for the following three weeks, until 30 May 2019 when Mr O’Callahan sent an email at 5:01 pm to the respondent’s lawyers and counsel advising that the substantive proceedings had been filed that day, and that service would be effected when the Court had returned the Notice of Proceeding.
[16] A copy of the statement of claim was served by email two working days later, on 4 June 2019. 1
[17] On 4 June terse advice was sent by the respondent’s solicitors to Mr O’Callahan:
Both Mr Chisholm’s email dated 28 March 2019 and our letter dated 3 May 2019 made the terms of the offer clear namely that the substantive proceedings had to be filed and served within a further 15 days, failing which the caveat would lapse.
Our letter expressly stated, “If accepted, the applicants would then be obliged to file and serve substantive proceedings within a further 15 working days”. The first two bullet points in Mr Chisholm’s email dated 28 March 2019 expressly referred to the need to file and serve substantive proceedings within 15 working days failing which the caveat would lapse…
As at the time of writing this letter substantive proceedings have still not been served….
….
[18] By this point any discussion about putting a consent memorandum to the court to seek the orders that had been agreed upon was well and truly over. The solicitors for the respondent asked the applicants to agree to the filing of a “consent memorandum confirming the parties’ agreement that the caveat forthwith lapse”. The request prompted service by email of the statement of claim. The applicants’ solicitors explained that they were waiting for the return of the service copies of the Notice of Proceeding and the notice of the first case management conference from the Court. As they saw it, the proceedings were “filed within the agreed 15 working days” but that on an “objective view, time could not be of the essence” in relation to service and it was not an essential requirement that service take place within that time frame. They
1 The respondent has still not received the notice of proceeding but it was agreed at the hearing that nothing turns on that.
went on to indicate that a draft consent order would be forwarded to sustain the caveat.2
[19] It has to be assumed that little of consequence happened until 10 June 2019 when counsel for the respondent filed a memorandum a week before the scheduled hearing for the caveat application, seeking an order lapsing the caveat in reliance on the agreement. He submitted that such an order would be consistent with the agreement.
Assessment
[20]It is common ground that the parties’ agreement is to be viewed objectively.
[21] The parties’ correspondence shows that there was agreement that the caveat application should be resolved by consent orders to take effect in the specific terms laid out in the four bullet points in the 28 March 2019 email. Distilling the four bullet points, there was to be an order that the caveat not lapse; and hand and hand with that order, there were to be orders that the applicants file and serve substantive proceedings “within 15 working days” to enforce the right claimed in the caveat; an order that “if the 15 working day time limit was not complied with, the caveat will lapse”; and an order requiring cooperation to secure an expedited timetable and a fixture. Finally, there was to be an order reserving costs on the application.
[22] In my assessment, this agreement does not have the effect the respondent contend.
[23] It is implicit in the agreement – to resolve the application by consent orders – that orders would be needed to give effect to the inchoate terms of the agreement, and that the parties would join in asking the Court to make the proposed orders to bring them into effect. The parties must therefore be taken to have known that the imposition of a 15 working day time period for filing and serving the substantive proceedings would take effect when the consent orders were actually made, and not (as the respondent contends) from the date of acceptance of the offer.
2 Service copies were posted out by the court on 6 June.
[24] It is also implicit in the agreement that the parties would take the necessary steps promptly to ask the Court to make orders. If they had done so, they might reasonably have anticipated that the orders would be issued within a few days, assuming of course the Court was satisfied with the terms of the proposed orders.
[25] For the respondent’s contention to be right, the proposed orders would have to have been made on 9 May 2019 in order for the period of 15 working days to expire on 30 May 2019. But neither party can have reasonably assumed that scenario would necessarily eventuate. Even if a consent memorandum had been filed on 9 May 2019
– and the parties showed no collective inclination to ensure that happened – orders would have been made that same day. (Though counsel for the applicants did not fulfil the indication he gave on 9 May 2019, that he would prepare draft consent orders, it could also be expected that the respondent’s lawyers would themselves follow up with a degree of urgency if they wanted orders filed and made on that day). The scenario also presupposes the Court would have issued orders that day.
[26] The more likely scenario is – and again, assuming the parties had acted promptly and collectively and filed a joint memorandum – that orders would have been made several days after 9 May 2019. Had a consent memorandum been filed by, say, 13 May 2019, and assuming the Court was satisfied with the content of the requested consent orders, orders would likely have followed within a matter of days, if not the same day. Tellingly there is no suggestion that orders could have been made before 13 May 2019; and if in fact consent orders were made on 13 May 2019, the date for filing and service of the substantive proceedings would have been 4 June 2019.
[27] I do not therefore accept the argument relied upon by counsel for the respondent that it would be consistent with the parties’ agreement to find that service of the substantive proceedings occurred outside of the timeframe the parties had agreed to. That argument (and the opinion expressed in the solicitor’s letter of 3 May 2019) assumes unrealistically a joint memorandum would or should have been filed on 9 May 2019 to ask the Court to make the proposed consent orders and that the orders would have been made that same day.
[28] Further, even assuming orders had in fact been made on 9 May 2019, and the time limit for filing was breached, the caveat would not have automatically lapsed. An argument to that effect appears to have been made initially before Whata J but not pursued; and the argument was not repeated before me. Counsel for the respondent recognised that despite the terminology intended to be used in the consent orders, an express order would be required to lapse the caveat. The concession is proper given the nature of the Court’s jurisdiction in s 143(6) and (7) of the Land Transfer Act 2017
- to order that a "caveat lapse" or a "caveat not lapse" - and the precision with which it is expressed in the present tense, which does not sit comfortably with an automatic lapsing of a caveat at a future time without the Court’s active direction. I view the expression “will lapse” that the parties agreed upon for inclusion in the consent order is akin to an ‘unless’ order.
[29] Whether or not an order to lapse the caveat in response to a breach is, as counsel also recognised, a matter of discretion. The claimed breach or transgression that counsel relies on is that the substantive proceedings were filed two days later than the claimed time limit. For reasons I have indicated, there has not been such a breach or transgression, but if there had been I am not persuaded an order lapsing the caveat would be a proportionate response.
[30]In these circumstances I decline to make an order lapsing the caveat.
What happens now?
[31] As matters stand, there is an extant application for an order to lapse the caveat. Counsel will need to confer and to decide whether that application is to proceed on a defended basis, or whether the parties now wish to seek appropriately modified consent orders.
[32] Nothing I have said in this judgment is intended to prevent the respondent from pursuing all of the grounds of its opposition to the caveat application, including the ground of delay. That ground is rather more broadly-based than the ground relied on in the dispute I have ruled upon.
[33] To cover the event that the parties do not wish to seek a fresh raft of consent orders, I allocate a half day fixture for the caveat application commencing at
10.00 am on 9 September 2019. If the parties do not require the fixture they are asked to advise the Registrar as a matter of urgency so the fixture is not wasted, and the Registrar is to allocate, as a matter of urgency, an initial case management conference for the substantive proceeding.
[34] There will be no order for costs on this particular aspect of the parties’ dispute. Though the respondent has been unsuccessful, the applicants did not take steps to prepare a draft consent order as they should have. In these circumstances though the applicants can claim to have been successful in terms of outcome, I think it would be unjust to award costs in their favour. I make this order pursuant to r 14(7) of the High Court Rules 2016.
[35] I add a postscript. Without wishing to tie the parties’ hands, if they intend to ask the Court to make an ‘unless’ order in relation to the caveat, that it be framed in terms that the relevant party has leave to seek an immediate order that “the caveat lapse”. In terms of s 143(7) of the Land Transfer Act 2017, the order would of course have to be served on the Registrar before it takes effect.
Associate Judge Sargisson
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