Bargrove v MSM Holdings NZ Limited
[2021] NZHC 322
•1 March 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-2084
[2021] NZHC 322
UNDER THE Land Transfer Act 2017 IN THE MATTER OF
an application that caveat not lapse pursuant to s 143
BETWEEN
JOSHUA PHILLIP BARGROVE
Applicant
AND
MSM HOLDINGS NZ LIMITED
Respondent
Hearing: 23 February 2021 Appearances:
J Donkin for the Applicant
No appearance by or for the Respondent
Judgment:
1 March 2021
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 1 March 2021 at 10.30am pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel:
DG Law, Auckland
J Donkin, Barrister, Auckland
BARGROVE v MSM HOLDINGS NZ LTD [2021] NZHC 322 [1 March 2021]
Introduction
[1] The applicant, Mr Joshua Bargrove, applies to sustain Caveat 11796820.1 (“Caveat”) registered against the title to Lot 5, 6 Shire Place, Papamoa (“Property”).
[2] The application is unopposed but I am still required to assess the application on its merits.1
Factual background
[3] On 6 December 2017, Mr Bargrove and MSM Holdings NZ Limited (“MSM”) entered into a sale and purchase agreement for “Lot 6, 5 or 9 – to be advised within 7 working days” in a new subdivision being undertaken by MSM (“Agreement”). Mr Bargrove deposes that before he entered into the agreement, MSM asked him to pay a deposit of $40,000 to “secure” the deal. He then paid the remainder of $180,000, together amounting to a total deposit of $220,000 on 8 December 2017, as required by the Agreement.
[4] When Mr Bargrove paid the remainder of the deposit, he advised by email that he would purchase Lot 5, choosing it from the three lots available under the Agreement.2
[5] The “deposit” was in fact the entire purchase price for the property. Mr Bargrove deposes that Mr Gerald Williams, a director of MSM at the time, told him that the whole price needed to be paid up front to allow the subdivision to be developed. MSM was to undertake the subdivision and settlement was to occur after title for Mr Bargrove’s property was issued.
[6] Clause 19.1 in the further terms of sale provided that MSM was entitled to utilise the deposit obtaining the necessary consents and completing such works as were necessary for the issue of a separate title to the property.
1 High Court Rules 2016 r 19.10 and Mihinui v Attorney-General [2017] NZHC 654 at [13].
2 Expanded on in [22] of the judgment below, leave was granted for Mr Bargrove to rely on his affidavit filed in statutory demand proceedings also before the Court. There, he deposes that he elected Lot 5 on 8 December 2017.
[7] There is no settlement date expressly set out in the Agreement. Clause 3.18, however, provides a method of calculating a settlement date where the agreement is for a new title. It provides:
New Title Provision
3.18(1) Where
(a)the transfer of the property is to be registered against a new title yet to be issued; and
(b)a search copy, as defined in section 172A of the Land Transfer Act 1952, of that title is not obtainable by the tenth working day prior the settlement date,
(c)then, unless the purchaser elects that settlement shall take place on the agreed settlement date, the settlement date shall be deferred to the tenth working day following the later of the date on which:
(i)the vendor has given the purchaser notice that a search copy is obtainable; or
(ii)the requisitions procedure under clause 5.0 is complete.
(2) Subclause 3.18(1) shall not apply where it is necessary to register the transfer of the property to enable a plan to deposit and title to the property to issue.
[8] Clause 21 of the further terms of sale included an apparent “sunset clause”. It provides that the Agreement is conditional upon the settlement date as defined in the agreement having been triggered by 30 September 2017 and, if that did not happen, then the Agreement could be cancelled by either party and the deposit would be refunded.
[9] The difficulty with the sunset clause is that the triggering date of 30 September 2017 is approximately 10 weeks before the Agreement was dated as having been entered into by the parties.
[10] Mr Bargrove deposes that Mr Williams advised that the development would take around 12 months to complete. The development failed to progress, however, and by around June 2020 Mr Williams told Mr Bargrove that MSM was running into financial difficulties. Mr Bargrove discussed his concerns with his solicitors, who determined that the search title to the property had been issued on 13 December 2019 and that a search copy was obtainable on 5 February 2020. Following this discovery, on 9 July 2020, Mr Bargrove lodged the Caveat against the title to the property.
[11] On 14 July 2020 Mr Bargrove’s solicitors sent a settlement notice to MSM. The notice stated that:
(a)pursuant to clause 3.18 the settlement date was 27 February 2020;
(b)MSM had failed to settle;
(c)Mr Bargrove was ready, willing and able to settle; and
(d)MSM was required to settle within 12 working days of service of the notice.
[12]MSM failed to settle by 30 July 2020 as required by the notice.
[13] On 22 September 2020 MSM purported to cancel the agreement in accordance with the sunset clause, cl 21, on the basis that settlement had not been triggered by 30 September 2017.
[14] MSM did not attempt to refund Mr Bargrove’s $220,000 as it was required to do if cancelling the Agreement in accordance with cl 21. Nor had this amount been repaid as at the date of the hearing of this application.3
[15] Mr Bargrove did not accept MSM’s purported cancellation and copies of emails to that effect sent to MSM’s lawyers were annexed to the affidavits filed in this proceeding.
[16] On 14 October 2020, Mr Bargrove’s solicitors received notice from the Registrar-General of Land that MSM had applied to lapse the Caveat.
[17]On 29 October 2020, Mr Bargrove filed this application to sustain the Caveat.
[18] An affidavit of service was filed in this proceeding confirming service on 3 November 2020 of the proceedings together with a cover letter enclosing a copy of the email from the Registry, advising that the first call of the matter was on 10 November 2020.
3 Being 23 February 2021.
[19] There was no appearance for MSM at the first call on 10 November 2020, nor has any notice of opposition or appearance been filed.
[20] On 11 November 2020, Mr Bargrove served a statutory demand on MSM, demanding payment of $15,044.38 being interest payable under the Agreement for late settlement.
[21] MSM has applied to set aside the statutory demand (“Statutory Demand Proceedings”) on the basis that it validly cancelled the Agreement in accordance with cl 21 and that Mr Bargrove had not elected which of the Lots the Agreement was to relate to, as required in the Agreement.
[22] Mr Bargrove has filed a notice of opposition in that proceeding and supporting affidavit dated 4 December 2020, in which he deposes that he elected Lot 5 on 8 December 2017, attaching the correspondence and bank record to confirm this. I record that Mr Bargrove made an oral application for leave to rely on the affidavit filed in the Statutory Demand proceeding in this proceeding. Although prior notice of intention to rely on this affidavit was not given by Mr Bargrove, as required by rule 7.32, I granted the leave sought in accordance with r 7.41. The reasons for doing so were that I would have reached the same decision on this application whether leave was granted or not and these caveat proceedings do not finally determine the parties’ rights so MSM is not likely to be unduly prejudiced by the granting of leave.
[23] Mr Bargrove confirms in his second affidavit filed in this proceeding that he wants the Agreement to be performed as his deposit has not been returned and he has been told that MSM “could not return the money to [him] even if [he] wanted it”.4 I record Mr Williams was adjudicated bankrupt on 23 September 2020.
Legal principles
[24] Section 138 of the Land Transfer Act 2017 (“LTA”) provides that a person may lodge a caveat against dealings with an estate or interest in land (a caveat against dealings) including on the basis that the person:
4 Mr Bargrove’s second affidavit, dated 20 November 2020 at [14].
(a)claims an estate or interest in the land, whether capable of registration or not; or
(b)has a beneficial estate or interest in the land under an express, implied, resulting, or constructive trust.
[25] It is settled law that on entry into a binding agreement for the sale and purchase of land, a beneficial equitable estate passes to the purchaser.5
[26] Section 143 of the LTA provides for the lapse of caveats against dealings as follows:
143 Lapse of caveat against dealings
(1)The following persons may apply to the Registrar for the lapse of a caveat against dealings affecting an estate or interest in land:
(a)a person who wishes to register an instrument affecting the estate or interest protected by the caveat; or
(b)the registered owner or a person acting for or on behalf of the registered owner of the estate or interest affected by the caveat.
(2)The Registrar must give notice of an application under subsection (1) to the caveator.
(3)A caveat to which an application relates lapses unless,—
(a)within 10 working days after the date on which the Registrar gives notice of an application under subsection (1) to the caveator, the caveator gives notice to the Registrar that an application has been made to the court for an order that the caveat not lapse; and
(b)within 20 working days after the date on which the caveator gives a notice to the Registrar under paragraph (a) (the relevant period), an order of the kind referred to in subsection (4) is served on the Registrar.
(4)The orders are—
(a)an order that the caveat not lapse:
(b)an interim order that the caveat not lapse:
(c)an order adjourning the application.
(5)The caveat lapses if the court makes an order to that effect before the close of the relevant period.
(6)If the court makes an order under subsection (4)(b) or (c), the caveat will not lapse if, after the close of the relevant period,—
(a)the court makes a final order that the caveat not lapse; and
(b)the order is served on the Registrar.
5 See Lysaght v Edwards (1876) 2 Ch D 499.
(7)If the court makes an order under subsection (4)(b) or (c), the caveat will lapse if, after the close of the relevant period,—
(a)the court makes a final order that the caveat lapse; and
(b)the order is served on the Registrar.
(8)An application under subsection (1) for the lapse of a caveat may be withdrawn—
(a)with the leave of the court only, if the caveator has applied to the court for an order that the caveat not lapse:
(b)without the need for leave of the court if—
(i)the Registrar has not yet given notice to the caveator under subsection (2); or
(ii)the Registrar has given notice to the caveator under subsection (2), but the caveator has not yet applied to the court for an order that the caveat not lapse.
[27] In Philpott v Noble Investments Ltd,6 the Court of Appeal summarised the legal principles governing applications to sustain caveats as follows:7
(a)The onus is on the applicants to demonstrate that they hold an interest in the land that is sufficient to support the caveat, but they need not establish that definitively;
(b)It is enough if the applicants put forward a reasonably arguable case to support the interest they claim;
(c)The summary procedures involved in applications of this nature are not suited to the determination of disputed questions of fact. An order for the removal of a caveat will only be made if it is patently clear that the caveat cannot be maintained – either because there is no valid ground for lodging it in the first place, or because such a ground no longer exists; and
(d)When an applicant has discharged the burden upon it, the Court retains discretion to remove the caveat which it exercises on a cautious basis. Before it does so the Court must be satisfied that the caveator’s legitimate interests would not be prejudiced by removal.
(footnotes omitted)
Analysis and decision
[28] There is no question that Mr Bargrove, as purchaser under the sale and purchase agreement, received a beneficial interest in the property once the money was paid and Lot 5 was selected.
6 Philpott v Noble Investments Ltd [2015] NZCA 342.
7 At [26].
[29] The issue is whether MSM’s purported cancellation of the Agreement removed that equitable interest in the property.
[30] Counsel for Mr Bargrove submitted that it is relevant that MSM has not opposed the application to sustain the Caveat.
[31] MSM purported to cancel the Agreement in reliance on the sunset clause at cl 21 of the Agreement. That clause permitted either party to cancel the agreement if the settlement date, as defined in the agreement, was not triggered by 30 September 2017.
[32] The difficulty with cl 21 is that the Agreement was not signed apparently until 6 December 2017, over two months after the date in the sunset clause.
[33] Counsel for Mr Bargrove submitted that the sunset clause is unworkable as a result and that it cannot be consistent with the parties’ intention. It allowed either party to immediately cancel the Agreement. Against this, the second half of cl 21 is set out in handwriting. It appears, therefore, that the parties must have turned their minds to the clause at the time they were entering into the Agreement, or at least at the time of initial entry into it. Mr Bargrove, in his evidence, recalls some discussion about a sunset clause at an early stage and deposes that that discussion “did not really go anywhere”.
[34] Counsel for Mr Bargrove said conceivably, if MSM participated in the proceeding, it might suggest that 30 September 2017 was a typographical error, and that some other date should have been used instead. In Mr Donkin’s submission, that does not assist MSM. The purpose of a sunset clause is to allow the parties to walk away from an agreement provided that the settlement date as defined in the agreement has not been triggered. That is not the case here, in Mr Donkin’s submission: he says the settlement date was triggered after the search copy of the title was issued on 19 December 2019 with MSM contractually obliged to settle by 10 February 2020. Counsel for Mr Bargrove says MSM, therefore, could not rely on cl 21, because the event triggering settlement had already occurred.
[35] Mr Bargrove relies on cl 3.18 for the triggering of the settlement date, which, in respect of the new title yet to be issued, defines the time for settlement where:
(a)the transfer of the property is to be registered against a new title yet to be issued; and
(b)a searched copy of that title is not obtainable by the tenth working day prior to the settlement date;
(c)then, unless the purchaser elects that settlement shall take place on the agreed settlement date, the settlement date should be deferred to the tenth working day following the later of the date on which:
(i)the (vendor) has given the purchaser notice that a search copy is obtainable; or
(ii)the requisitions procedure under cl 5.0 is complete.
[36] Several difficulties arise. For a start there is no settlement date set out in the agreement. As a result, subparagraph (b) above is not workable because there is no settlement date from which to subtract 10 working days as required.
[37] The vendor in this case did not give the purchaser notice that a search copy was obtainable. In this case the purchaser’s solicitors, following inquiries, discovered that a search copy was obtainable. Counsel for Mr Bargrove argued that the date could not depend on the vendor giving notice, the key question being whether a search copy was obtainable. However, the clause provides that the settlement date shall be deferred to the later of either the date on which the vendor gives notice or the requisitions procedure under clause 5.0 are complete. The requisitions procedure is not yet complete. It appears, therefore, that the settlement date may not yet have arrived.
[38] For the purposes of this application, even if the settlement date has not yet occurred, there may still be a right to maintain the caveat. That right depends on whether the sunset clause provided MSM with the right to cancel in July 2020 even if the settlement date had not yet been triggered.
[39] Considering the way in which cl 21 is drafted, there may be an argument that either party may cancel if the settlement date has not been triggered by 30 September 2017, whether the settlement date has been triggered or not. This would mean in this case, where the sunset date preceded the date the agreement was entered into, that either party could cancel at any time. Mr Donkin says that this could not have been intended.
[40] MSM was given an opportunity to participate in these proceedings but has chosen not to. This means that the only evidence before me in relation to the sunset clause is that of Mr Bargrove who says there was some discussion but that it did not really “go anywhere”. It does seem unusual that the sunset clause would be dated prior to the date on which the final agreement was reached. It is clear from the copy of the Agreement in evidence that there were handwritten amendments made to the Agreement, with different coloured amendments and initials confirming them. It may be that the Agreement was first entered into before 30 September 2017, the sunset clause being in black handwriting, not the blue ink apparently used for the 6 December 2017 variation.
[41] Given the uncertainties surrounding the settlement date and the sunset clause, there is no question that the applicant can make out a reasonably arguable case to support sustaining the caveat. The Court of Appeal said in Philpott v Noble Investments Ltd, an order for the removal of a caveat will only be made if it is patently clear that the caveat cannot be maintained.8 In this case, although there are questions around the way in which the agreement is to work, there is no question that the applicant has an arguable claim.
[42] Mr Bargrove’s issuing of a statutory demand in respect of the interest owing for late settlement under the Agreement is consistent with his position that the Agreement has not been cancelled. If the caveat is removed, Mr Bargrove is without any protection against MSM trying to on-sell the property to another purchaser.
8 Above n 5, at [26].
Result
[43]The application by Mr Bargrove that Caveat 11796820.1 not lapse is granted.
[44] Costs were not addressed in submissions made on the plaintiff’s behalf. If costs are sought, a memorandum is to be filed within 10 working days.
Associate Judge Sussock
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