AMT Lifestyle Homes Limited v Fernandes

[2018] NZHC 520

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KOTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2017-470-165

[2018] NZHC 520

BETWEEN

AMT LIFESTYLE HOMES LIMITED

Applicant

AND

CLIVE MARIO FERNANDES and ELIZABETH SCOTT JOHNS

Respondents

Hearing:	21 March 2018
Appearances:	D Fraundorfer / T Carlisle for Applicant T C Waikato for Respondents
Judgment:	23 March 2018

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on

23.03.18 at 3.30 p.m., pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date ……………

AMT LIFESTYLE HOMES LIMITED v FERNANDES & ANOR [2018] NZHC 520 [23 March 2018]

[1]        The applicant (AMT) applies for an order to sustain its caveat registered over land owned by the respondents.

[2]        On 10 February 2016 the parties entered into a building contract to build a dwelling on the property at Tauranga. The parties’ agreement contained terms including:

(a)The building contract price was $336,496 (including GST);

(b)Clause 2.2 of the contract provided:

This Agreement is conditional upon the Council issuing a building consent, in respect of the works quoted and agreed upon that forms the value of this contract, within 30 working days from the date this Agreement is signed by both parties. This Agreement is to be read in conjunction with the strict terms and conditions detailed in the plans and specifications and/or other terms satisfactory and agreed to by both the Employer and the Builder and confirmed in writing.

(c)Clause 23.1 gave AMT the right to mortgage the property in the event the respondents failed to pay amounts owing under the Building Contract by the due date:

Where [the respondents] have failed to make payment of any portion of the contract price … [the respondents] will forthwith upon demand give and execute in favour of [AMT] a registerable Memorandum of Mortgage over the land to secure the amount owing from time to time from [the respondents] to the [AMT] under this agreement ….

[3]        No building consent issued within 18 months and on 21 August 2017 the respondents gave notice of cancellation of the contract pursuant to Clause 2.2. At that time they sought the return of the $26,919 deposit they had paid. At this time AMT had not issued any invoices.

[4]        AMT then issued invoices to the respondents through its solicitors. The total amount claimed exceeded the value of the deposit held. AMT’s position was that the contract had not and could not be cancelled.

[5]        The respondents disputed the invoice and AMT then lodged a caveat against the title of the land relying upon clause 23.1 of the contract.

[6]        On 27 October 2017 the respondents applied to the Registrar-General of Land for the caveat to lapse pursuant to s 145 of the Land Transfer Act 1952. On 30 October 2017 the Registrar-General gave AMT notice of the application to lapse the caveat.

[7]        When filing its application to sustain its caveat AMT sought and obtained an interim order that the caveat not lapse until further order of the Court.

Opposition to application

[8]        The respondents position is that the contract either lapsed for non-fulfilment of clause 2.2 (because the building consent was not obtained within 30 days of the date of the agreement), or was validly cancelled by the respondents by their notice given on 21 August 2017 for failure to satisfy clause 2.2.

[9]        The respondents say that issues concerning whether or not the applicant’s invoices are payable are separate to the question of whether there is a caveatable interest. The respondents say all of the services provided by the applicant were outside the scope of the contract and there was no oral or written variation of clause 2.2.

[10]      It appears the respondents do not deny that some work had been carried out for which AMT would be entitled to be paid, but that no invoices had issued and little reporting information had been provided.

Evidence

[11]      Following the notice of cancellation, correspondence ensued between the solicitors. The respondents say that they could have done nothing more to get the building consent to issue more quickly. They had purchased the property it having been recommended to them as suitable for building their proposed home by “My New Home”, a company which the respondents say was in a close business relationship with AMT. They say they had given approval to AMT for the engagement of an arborist in November 2016 so that issues concerning tree roots which had been raised by the Council could be dealt with but still no progress was made towards obtaining the resource consent or the building consent in relation to that “tree root” issue.

[12]      The respondents say that according to Council records there had been no communication from AMT to Council since 10 January 2017 when AMT had requested a one-month extension to the building consent application. Therefore the respondents’ claim AMT cannot take the position that they are entitled to claim that there has been an agreed variation to the building contract. Their position is that the building contract which included the agreement to mortgage [to cover payments due] was validly cancelled in August 2017.

[13]      Mr Thomas the managing director of AMT has sworn an affidavit in reply. Mr Thomas refers to AMT having prepared a claim for filing in the District Court. He is surprised therefore that the respondents choose to litigate the matter through the caveat proceeding process.

[14]      He says no invoices had issued because that only occurred at the completion of each stage of a build and given AMT was responsible for contracting to other parties such as the arborists, it was not feasible to issue an invoice until AMT had received the final invoice and disbursements from all other contractors.

[15]      Mr Thomas denies that there was little reporting information. To his affidavit he attached copies of eight email chains dated 30 August 2016 to 19 July 2017.

[16]      Regarding claims of delays by AMT with the Tauranga District Council Mr Thomas says any lack of progress was due to delays caused by the Council in obtaining the required information. He attached six email chains in that regard dated from 12 August 2016 to 2 November 2017.

[17]      It is AMT’s position that due to the nature of their work and the dependence on other contractors and the Council, much of the delay was out of AMT’s control.

[18]      AMT experienced difficulties he says due to unforeseen problems with trees and root systems on the property; that the respondents raised no objection to this and only sought to cancel a contract one and a half years later. Also he says that pursuant to condition 10.1(b) of the contract the respondents failed to provide all relevant and necessary information to AMT, and in particular the land covenant information that

was provided to another company My New Home Limited by email dated 14 December 2015, which was not provided to AMT until 7 September 2017 by My New Home.

The law

[19]      The Court’s focus is upon ss 143, 145 and 145A of the Land Transfer Act 1952. By those provisions an onus lies on a caveator, AMT to show there is a reasonably arguable case for the interest claimed.

[20]      The summary procedure for removal of a caveat is unsuitable for the determination of disputed questions of fact.1

[21]      Even if an arguable case for an interest is established, the Court retains a discretion to make an order removing the caveat although that will be exercised cautiously.2

Considerations

[22]      The dispute between the parties developed when the respondents purported to cancel the contract. In response to that AMT issued invoices for payment. Issues arise regarding whether AMT is able to complete the contract or instead whether the respondents have validly cancelled it.

[23]      The contract terms provided for a mortgage to be registered over the respondents’ property if the respondents failed to make payment of any portion of the contract “to secure the amount owing from time to time …”

[24]      AMT’s position is that its ability to mortgage the property if invoices were unpaid gave rise to a caveatable interest and that the registration of that interest should remain in place.

1 Sims v Lowe [1988] 1 NZLR 656.

2 Pacific Homes Ltd (in rec) v Consolidated Joineries Limited [1996] 2 NZLR 652.

[25]      Usually a Court will not make any order for removal of the caveat unless it is patently clear the caveat cannot be maintained either because there is no valid ground for lodging it, or that what such valid ground as that existed no longer does so.

[26]      The respondents rely on clause 2.2 of their contract which required AMT to obtain a building consent within 30 days. That was not done.

[27]      AMT’s position is that despite that clause the parties continued to perform the contract throughout 2016 and well into mid to late 2017.

[28]      AMT has now filed a proceeding in the District Court to recover what it says remains owing to it. That proceeding claims the parties either agreed to an extension of the consent clause or that there is an estoppel arising out of AMT continuing to perform the contract after March 2016 and into 2017.

[29]      It is apparent by that proceeding that AMT now relies on an alleged oral variation to the original agreement, which by its terms would have been required to have been in writing and agreed to by both parties. AMT’s position is that there are significant facts in dispute such that this Court should not consider an analysis of contractual terms except upon evidential enquiry, and therefore it remains arguable whether or not the building contract lapsed due to a failure to satisfy condition 2.2.

Summary

[30]      Of importance for present purposes is whether the claim of an caveatable interest should be sustained.

[31]      The Court’s firm view is that it should not. Those invoices delivered include AMT’s charges on invoices for “sales commission” ($9,067) and “copyrite” ($2,500).

[32]      Those appear not to have been for building works at all within the scope of the building contract or its specifications.

[33]      Significant questions arise regarding claims of a debt owing, or whether there remained an enforceable contract.

[34]      Contractual delays relate to issues in obtaining a building consent for reasons outside of the respondents’ control. Again it is not necessary for present purposes to go into background of these reasons but queries must rise in relation to an invoice charge for “sales commission”.

[35]      AMT’s right of recovery is not just dependent upon its building contract for it would be entitled to bring a “quantum meruit” claim. Indeed the amount of the claim suggests it might be disposable by disputes tribunal process. Regardless the matter is before the District Court where, as the focus should be, it is about the merit of claims of a debt owing in respect of works undertaken and provided.

[36]      In the Court’s view and even if it was accepted AMT has established an arguable case for the interest claimed, this is a proper case for the removal of the caveat.

Result

[37]      The application to sustain the caveat under s 145A of the Land Transfer Act 1952 is dismissed.

[38]      Costs are reserved for payment in the outcome of the District Court proceeding. Those are to be fixed on a 2B basis.

Associate Judge Christiansen