Berenice v 125 Gills Limited
[2013] NZHC 2779
•23 October 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-3134 [2013] NZHC 2779
UNDER Section 145A of the Land Transfer Act
1952
IN THE MATTER OF An application that caveat 9356806.1 not lapse
BETWEEN LIM SEOK EE BERENICE Applicant
AND125 GILLS LIMITED Respondent
Hearing: 4 October 2013
Counsel: D P Hoskin & S F Gazley for Applicant
J K Goodall for Respondent
Judgment: 23 October 2013
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 23 October 2013 at 11.30 a.m., pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date: ………………………….
Solicitors:
Steindle Williams Legal, Auckland
Beca & Co, Auckland
LIM SEOK EE BERENICE v 125 GILLS LTD [2013] NZHC 2779 [23 October 2013]
[1] The applicant, Lim Seok Ee Berenice, seeks an order pursuant to s 145A of the Land Transfer Act 1952 that a caveat claiming a beneficial interest in land not lapse. By way of alternative order, she seeks leave to lodge a second caveat based on the same interest, pursuant to s 148.
[2] The current caveat is No 9356806.1. The applicant lodged the caveat with the Registrar General of Land on 24 April 2013 against dealings affecting the land comprised in computer register identifier (certificate of title) 472556. The land is vacant development land located at 125 Gills Road, Albany Heights and is now owned by the respondent, 125 Gills Road Limited.
Background
[3] In early 2011 the applicant attended a conference in Singapore about property for sale as an investment in New Zealand. One of the properties was a development property at 125 Gills Road in Albany Heights. The applicant and her husband were provided with promotional material which indicated that a proposed unit development was to be constructed in two phases and that the company behind the development was a company called Hunter Gills Road Limited. Following the conference on the 9 January 2011 the applicant entered into an option agreement with that company, called the “Gills Road Village Option Agreement”. Pursuant to the agreement, the applicant acquired an option to purchase unit 67 in respect of
which she paid the “Option Price” required under the agreement of $65,000.1
[4] Relevantly clause 3 of the agreement provided that “the purchaser” had a specified period in which to exercise the option, failing which the agreement “shall be at an end” and the provisions of cl 4 of the agreement “relating to an Option Refund shall apply”. The specified period was the shorter of two periods: the period of 18 months commencing from the date of the agreement which was 9 January
2011, or a shorter period if stipulated by the vendor on 5 working days notice.
1 The applicant’s husband was also a party to the option agreement. As it is the applicant who has lodged the caveat application, for convenience I refer in this judgment only to the applicant. Her position is that she has lodged the caveat on behalf of both herself and her husband with his authority.
[5] Clause 3 also stipulated that should the purchaser exercise the option:
(a) The purchaser “shall execute” a sale agreement for the unit in the standard form then used by the vendor for sales of units in the development, at the “Purchase Price”, such price being the valuation price of $420,000 less the “Discount” of $57,000;
(b)The option price of $65,000 “shall be applied” as part payment of the purchase price, and
(c) The purchaser is to pay an “additional deposit” equal to 10% of the difference between the purchase price and the option price, such payment to be applied as part payment of the purchase price.
[6] Should the option not be exercised under the agreement, the purchaser’s entitlement is to a refund pursuant to cl 4.1, in which case the vendor “will refund” the option refund encompassing the option price of $65,000” plus “50 % of the Discount”.i Clause 4.2 stipulates when the refund is to be paid.
[7] On the 18 November 2011 Hunter Gills Road Limited required that within five working days the applicant exercise her option to purchase. The applicant did not exercise her option with the result that the agreement was at an end at the expiry of that period and she acquired her entitlement to the option refund under cl 4.
[8] On 27 March 2013 Hunter Gills Road Limited was placed into liquidation. The liquidators sold the development property to the respondent. On 21 December
2012, the respondent’s interest as proprietor was registered against the title to the property. On 24 April 2013, concerned that she may never receive her refund, the applicant lodged her caveat.
[9] In May 2013, the respondent took steps to trigger the operation of s 145A with a view to securing the removal of the caveat. As a consequence the District Land Registrar gave notice to the applicant that an application had been made to lapse the caveat and that the caveat would lapse unless the Registrar received notice
within 14 days of an application to the contrary and service within a further 28 days of an order of the High Court. When served with the notice the applicant sought an order to the contrary and for that purpose took the necessary steps under s 145A. The Court made an interim order on her application on 6 June 2013 directing that the caveat not lapse pending further order, and the order was duly served in time on the Registrar.
The Application
[10] Put briefly the applicant’s case is that she should be permitted to maintain her caveat as she has held, at all material times, an equitable interest in the land in the nature of a purchaser’s lien over the registered proprietor’s estate. She contends that the lien came into being when the option agreement terminated and that the lien secures part and possibly all of the components of the option refund. Additionally, she contends that the respondent had notice of this before it acquired ownership of the land and registered its interest and that accordingly has taken ownership, subject to her lien.
[11] The respondent opposes the application, albeit on limited grounds. As made plain by counsel for the respondent at the hearing, it accepts for the purpose of the application that a refundable option price will ordinarily give rise to a purchaser’s lien over the vendor’s land if the option comes to an end. Additionally, the respondent has, for the purposes of the application, withdrawn its ground of
opposition that relies on indefeasibility of title.2 The respondent’s remaining grounds
of opposition, as explained at the hearing, are threefold:
(a) The applicant has no arguable case that her rights to a refund under the agreement give rise to a purchaser’s lien as under cl 9.4 of the agreement she has waived any entitlement she might otherwise have had to such a lien.
(b)Even if arguably cl 9.4 does not constitute such a waiver, her caveat cannot stand because the caveat does not clearly set out the interest on
2 Berenice v 125 Gills Limited [2013] NZHC 2559 per Venning J.
which the applicant relies, as required by s 137 of the Land Transfer
Act.
(c) There is no jurisdiction to permit a second caveat under s 148 in respect of the claimed purchaser’s lien. Section 148 could only apply if the current caveat claimed an interest based on such a lien. It does
not.
Issues
[12] The interim order that the caveat not lapse made on 26 June 2013 still stands. Broadly stated, the primary issue is whether it should continue. That turns on the following issues raised by the parties:
(a) Assuming the applicant has an arguable entitlement to the purchaser’s lien as claimed, does the caveat contain a description of the nature of that interest that complies with s 137? Is the interest described with sufficient certainty?
(b)Is the claimed entitlement to the lien arguable? Or does the claimed entitlement fail by reason of a waiver under cl 9.4?
[13] I turn presently to these issues, but first set out the legal principles of relevance.
Relevant legal principles
[14] By s 141A a caveat operates, with certain statutory exceptions, as a prohibition on the Registrar registering any dealing that might have the effect of charging or transferring or otherwise affecting the claimed estate or interest of the caveator.
[15] An application under s 145A seeking that a caveat not lapse essentially seeks retention of the prohibition. The principles applicable in considering such an
application were summarised in Ball v Fawcett,3 and need not be repeated in detail. It is sufficient to note the following key principles referred to in that case:
(a) The courts have long held that the caveator must have a specific legal or equitable interest in the land caveated:4
(b)The onus is on the caveator to show that it has an arguable case for the claimed interest in land. Once the onus is satisfied the balance of convenience will, in the normal course and in the absence of any special consideration, be in favour of leaving the caveat in existence until the proceedings to enforce the interest claimed are tried.5
(c) An order for removal of a caveat will not be made unless it is particularly clear that the caveat cannot be maintained either because there is no valid ground for lodging it or because the valid ground for lodging it no longer exists.6
[16] The caveat must describe the interest claimed with sufficient certainty and explain how the caveator has derived the interest from the registered proprietor. Relevantly, s 137 states:
(1) Any person may lodge with the Registrar a caveat in the prescribed form against dealings in any land or estate or interest under this Act if the person
(a) claims to be entitled to, or to be beneficially interested, in any land or estate or interest by virtue of any unregistered agreement or other instrument or transmission, or of any trust expressed or implied, or otherwise: or
(b) ...
(2) A caveat under this section must contain the following information: (a) the name of the caveator: and
3 Ball v Fawcett [1997] 1 NZLR 743 (HC) at 746.
4 Holt v Anchorage Management Ltd [1987] 1 NZLR 108 (CA) at 114.
5 Castle Hill Run Ltd v NZI Finance [1985] 2 NZLR 104 (CA) at 106.6 Sims v Lowe [1988] 1 NZLR 656 (CA) at 659-660.
(b) the nature of the land or estate or interest claimed by the caveator, which must be stated with sufficient certainty; and
(c) how the land or estate or interest claimed is derived from the registered proprietor.
[Emphasis added]
[17] Section 148 states:
148 No second caveat may be entered
(1) If a caveat has been removed under section 143 or has lapsed, no second caveat may be lodged by or on behalf of the same person in respect of the same interest except by order of the High Court.
(2) For the purposes of verifying that a caveat does not contravene the prohibition in subsection (1), the Registrar is not obliged to inquire further than the current folium of the register or computer register for the land.
Does the caveat contain a description of the nature of the claimed interest so as to comply with s 137?
[18] The issue is whether the caveat describes the claimed interest, being a purchaser’s lien arising upon termination of the option agreement, with sufficient certainty.
[19] The interest as claimed in the caveat is set out as follows:
Estate or interest claimed
The above named caveator claims a beneficial interest in the land ... as cestui que trust of which the registered proprietor, 125 Gills Road Limited is trustee by virtue of an agreement dated 9 January 2011 between the caveator and the preceding registered proprietor, Hunter Gills Road Limited, on account of the registered proprietor having notice of the caveator’s beneficial interest before acquiring legal ownership of the land.
[20] Counsel for the applicant recognised that as a creature of statute, the caveat must state the interest claimed with sufficient certainty in order to comply with s 137. He concedes that the caveat does not expressly refer to a purchaser’s lien, but he argues that the interest that the caveat describes approximates that interest in that:
(a) A cestui que trust is a person who holds an equitable interest or rights in property, and a purchaser’s lien is such an interest being an interest over the vendor proprietor’s estate.
(b)As the lien came into being by the operation of cl 4 of the option agreement of 9 January 2011, albeit upon termination of the agreement, the caveat contains a sufficient statement as to the origin of that interest by stating that she holds the interest “by virtue of an agreement of 9 January 2011”.
[21] Counsel for the applicant submits that if too strict an approach is adopted in terms of the detail required in the description of the interest claimed in the caveat, the whole purpose of the caveat regime would be undermined. He relied on Zhong v Wang where the Court of Appeal said an interest described as one arising “cestui que trust of which the registered proprietor ... is trustee” was sufficiently certain. 7 He
relied too on the statement of Archer J in Re Peycher’s Caveat that: 8
Provided ... the nature of the interest claimed is described with reasonable certainty, I do not think the caveator is bound by the precise form of words used.
[22] The essential thrust of counsel’s argument is that it is clear enough to describe someone as a cestui qui trust in order to state that the person is the holder of a lien. I am unable to agree with that proposition as it does not distinguish between the interest that a purchaser holds under a live agreement to buy land and a lien that can only arise when such an agreement comes to an end. The two interests are not
the same.9 While a purchaser’s lien is a security over land and as such is sufficient
to support a caveat,10 a lien can only arise on termination of the contract and not before,11 arising to secure repayment of the deposit and other amounts paid.12 Prior
7 Zhong v Wang (2006) 5 NZ ConvC 194,308 (CA).
8 Re Pycher’s Caveat [1954] NZLR 285.
9 As stated in Midwarren Estates Pty Ltd v Retek and Stivic [1975] VR 575 at 576 “A claim to an equitable estate by way of lien is quite inconsistent with a claim to an equitable interest in fee
simple by the same person. They are entirely inconsistent with each other...”
10 Joy v Roskam HC Hamilton CIV-2003-419-331, 12 June 2003.
11 Shannon Lindsay Caveats Against Dealing in Australia and New Zealand (Federation Press, New
South Wales, 1995).
12 Ex parte Lord [1985] 2 Qd R 198. 201; also see Shannon Lindsay Caveats Against Dealing in
Australia and New Zealand (Federation Press, New South Wales, 1995).
to cancellation of a contract to buy the purchaser has the right to specific performance of the vendor’s obligation to transfer the land under the contract. Once the contract is cancelled a caveat based on that right cannot be sustained. It must be replaced, if at all, with a caveat based on the lien.13 A lien only arises on termination and not before.14
[23] I do not therefore accept that the interest described in broad terms as “a beneficial interest in land by virtue of an agreement” is sufficient to identify with any degree of certainty the nature of the interest actually claimed or to distinguish it from an entitlement to the fee simple estate. Contrary to counsel for the applicant’s submission, the inclusion of the reference to an agreement of 9 January 2011 in the caveat does not overcome the mis-description of the claimed interest. This is not therefore a case of some minor discrepancy in a description that is nevertheless sufficiently certain.
[24] The result is that I find that the interest claimed by the current caveat is not stated with sufficient certainty to comply with s 137(2)(b).
[25] It is convenient to turn next to the question whether I should give leave under s 148 for a second caveat to be lodged in respect of the ‘same interest’ assuming for the moment that I am satisfied that the applicant arguably does hold a purchaser’s lien.
[26] The respondent submits that the indeterminate interest described in the
current caveat and the claimed interest are not the ‘same interest’ for the purpose of s
148 and therefore that no order can be made. However I am satisfied that the term
‘same interest’ applies to the same interest in fact. Additionally I am satisfied that as a matter of fact the applicant’s intention remains unchanged and that at material times she has been endeavouring to protect the same interest. The current caveat was lodged after the option agreement ended. It cannot be inferred that it was intended to
protect any interest to an entitlement to a transfer of the fee simple. It can only have
13 DW McMorland Sale of Land (2nd ed, Cathcart Trust, Auckland, 2011) at 202.
14 That is so whether the lien arises by the operation of law or at the point of termination pursuant to an express term of the contract.
been intended to protect the lien claimed to have arisen at the point the agreement ended.
[27] Relevantly, even if I am wrong about s 148, the respondent accepts for present purposes that it had knowledge of the applicant’s claimed interest before it purchased the property, and counsel concedes there would be no reason barring her from lodging another caveat provided she has an arguable entitlement to a lien.
[28] I come then to the issue of whether the applicant does indeed have an
arguable entitlement to a purchaser’s lien.
Is the claimed entitlement to a lien arguable? Or does the claimed entitlement fail by reason of a waiver under cl 9.4?
[29] There is no dispute, for the purpose of the application at least, that when the option agreement came to an end the applicant became entitled to a refund of the two components of the option refund, being the $65,000 option price and half of the
$57,000 discount effectively credited to her.
[30] The dispute is as to her contention that a purchaser’s lien over the vendor’s estate came into being to secure the refund of the two components and principally as to the effect of cl 9.4 of the agreement on her entitlement to a lien over the first component of the option refund. There is a subsidiary dispute as to whether, if cl 9.4 extinguishes that entitlement, there is a remaining entitlement to a lien to secure the refund of the second component of the option refund.
[31] I turn first to effect of cl 9.4. It states:
Payment of the Option Price shall not create any security interest in the
Development or the land on which the Development is to be completed.
[32] It is common ground that, whatever the effect of cl 9.4 is, it relates only to the
$65,000 option price. It is also common ground that were it not included in the agreement there would be no dispute that the applicant would have discharged the onus on her to show that she has an arguable case for a caveatable interest based on a lien to secure the refund of the option price. Such a lien would have come into being
upon termination of the option agreement when the applicant did not to exercise her option in the time allowed.
[33] Counsel for the respondent argues that as a security interest can be modified or extinguished, by cl 9.4 the applicant has waived any right to a lien to secure return of the option price.
[34] Though I agree that cl 9.4 arguably has this effect there is another argument that a narrow construction should be taken. Such a construction limits its applicability to the effect of payment at the time of payment – in which case it is clear that payment of the $65,000 option price, made at the inception of the agreement, will not per se create a security interest. As it is termination of the agreement that triggers the coming into existence of a lien15 it is termination that perfects or creates the lien, and hence cl 9.4 does not give extinguish a security interest that arises at that point.
[35] There is a measure of support for this narrow construction in the agreement. Without wishing to be seen as deciding the point, cl 3.3 suggests that the parties intended cl 9.4 to have a narrow construction.16 Clause 3.3 of the agreement states:
If the Purchaser shall fail to exercise the option within the stipulated period then this Option Agreement shall be at an end and the provisions of clause 4 in relation to an Option Refund shall apply. [Emphasis added.]
This clause arguably has the effect that on termination of the agreement only cl 4 remains relevant and operative, and otherwise the agreement is ended. This would make cl 9.4 at an end and of no effect.
[36] Also supporting a narrow construction is the contra proferentem rule, which requires that any ambiguity in exclusion clauses be interpreted against the party who
inserted it and relies on it.17
15 Combe v Swaythling [1947] 1 Ch 625.
16 Clause 3.3 was not raised by either party. I considered inviting submissions on this argument, however on reflection, given the nature of the point, I have decided it was unnecessary to do so.
17 Vance v Huhtamaki New Zealand Ltd [2011] NZCA 602.
[37] For these brief reasons, I am satisfied that it is arguable that cl 9.4 only refers to the payment of the option price itself creating a security interest while the contract is live and at the time the payment is made, and not an interest created on termination.
[38] Given these findings, it is unnecessary to deal with the consequential question whether a purchaser’s lien could possibly arise in respect of the second component of the option refund (the 50% of the Discount).
[39] It is sufficient to say that at first glance and again without wishing to be seen to decide the point such an entitlement seems arguable on the basis that if a lien can arise in respect of monies paid and refundable there seems no reason in principle why a lien should not extend to monies that are, by the terms of the agreement, effectively credited to a purchaser and to be applied to the purchase price or refunded. McMorland in the Sale of Land states that:18
A purchaser who is entitled to recover a deposit or other sum, including the purchaser’s costs of investigating the title, from the vendor, whether through cancellation of the contract by the purchaser or through avoidance of the contract for failure of a contingent condition, has an equitable lien on the land for that amount.
[40] Furthermore in the case of Joy v Roskam Judge Faire states:19
That raises the possibility that the purchaser may become entitled to recover from the vendor the amount of the deposit paid and, perhaps, other sums.
[41] Such authorities suggest that a purchaser’s lien is not limited to defined categories of monetary entitlements of which a deposit is the key example, but that it may extend to entitlements to liquidated money sums specifically provided for in the contract as refundable upon cancellation.
Result
[42] For the above reasons I am satisfied that the applicant’s caveat cannot stand.
I make orders as follows:
18 McMorland, above n 13.
19 Joy v Roskam, above n 10 at [8].
(a) The current caveat will lapse at 5.00 p.m. Tuesday, 29 October 2013.
(b)To the extent that leave is required the applicant has leave under s 148 to lodge another caveat forthwith
[43] As each side has been partially successful I consider it appropriate to apply r
14.7 of the High Court Rules and I order that costs will lie where they fall.
H Sargisson
Associate Judge
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