Brown v KN Building Limited
[2015] NZHC 2290
•22 September 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2015-404-001992 [2015] NZHC 2290
BETWEEN GORDON NEIL BROWN
Applicant
AND
KN BUILDING LIMITED Respondent
Hearing: 21 September 2015 Appearances:
I M Hutcheson for the Applicant
M C Kilham for the RespondentJudgment:
22 September 2015
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
22.09.15 at 4:00pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
G N BROWN v KN BUILDING LIMITED [2015] NZHC 2290 [22 September 2015]
[1] The applicant (Mr Brown) applied on 26 August 2015 to sustain a caveat he had lodged over the property of the respondent at 159 Henderson Valley Road, Henderson (the property).
[2] KN Building Limited (KNB) opposes the application. It says Mr Brown does not have an arguable case for a caveatable interest in the land. KNB says Mr Brown was a building contractor, was not an intended purchaser and had no interest in the land at the time the work was done or when the caveat was lodged.
Background
[3] KNB purchased the property on 28 May 2013 intending to subdivide it and to construct social housing with the agreement of Housing New Zealand Limited (HNZ).
[4] KNB’s lawyer Mr Small acted for KNB on the purchase.
[5] One third of the property on which a house was situated was not needed for the development and Mr Small agreed to purchase that by a conditional agreement entered into on 18 June 2013. KNB says Mr Small indicated he wished to purchase the one-third share as a property investment.
[6] The parties’ agreement enabled Mr Small early possession of the one-third share from 22 June 2013 for the purpose of renovating the property. The agreement was conditional on KNB obtaining subdivision approval; that KNB would use its best endeavours to obtain subdivision approval but if the agreement was cancelled then the purchaser would be entitled to a refund of all monies paid. A purchaser was able to use the dwelling on the property as a residence prior to settlement but the purchaser was not to lodge a caveat against the property.
[7] Mr Small purchased the property for himself and/or his nominee. The agreement provided that if no certificate of title was obtained by 31 March 2014 then either party was entitled to cancel the agreement and then Mr Small would be
entitled to a refund of all monies paid including costs of renovation but that neither party would have a further claim against the other.
[8] The evidence is that by March 2014 it was clear that subdivision of the property was not likely to be achieved by 31 March 2014.
[9] KNB’s evidence is that Mr Small then attempted to negotiate a sale of the entire property to him, or a payout for renovation costs he had incurred in respect of the one-third share.
[10] KNB’s evidence is that those negotiations continued until June 2014 when
Mr Brown’s caveat was lodged.
[11] KNB asserts the renovation work was completed by 21 March 2014 at which time Barfoot & Thompson were instructed to tenant the property which they did.
[12] Evidence from Mr Small strongly indicates a significant sum was owed by him to Mr Brown for those renovation works. On 30 March 2014 Mr Small emailed KNB advising that Mr Brown had confirmed the cost of his building works amounted to $180,000 but that no breakdown of costs had been provided.
[13] KNB states that it learned in late June 2014 that Mr Small had lodged a caveat on behalf of Mr Brown on 9 June 2014 claiming Mr Brown had a beneficial interest in the property.
[14] On 29 July 2014 KNB by its solicitors wrote to Mr Small advising it had no contractual relationship with Mr Brown and requested the caveat be withdrawn. In response Mr Hutcheson, Mr Brown’s counsel wrote advising he understood Mr Brown to have been nominated under an earlier agreement for sale and purchase. Then on 7 August Mr Small sent KNB’s solicitors an email attaching a deed of nomination dated 6 August 2014.
[15] Later Mr Hutcheson sent a letter explaining that the caveat was not based on Mr Brown being the nominated purchaser under the agreement but was lodged on the basis of substantial building work having been carried out by Mr Brown.
[16] On 17 June 2015 Housing New Zealand cancelled its contract with KNB and in the result on 28 July 2015 KNB sent written notice of cancellation to Mr Small and Mr Brown asking for invoices and receipts to substantiate the renovation costs incurred.
[17] KNB accepts the purchaser is entitled to a refund of renovation costs if properly quantified and proven; but says neither Mr Small nor Mr Brown have provided any reliable documentation to support the $180,000 claimed.
Considerations
[18] KNB does not accept Mr Brown has a caveatable interest.
[19] KNB says it was unaware of Mr Brown’s involvement until 10 March 2014 when it asked Mr Small what amounts were owing for renovation costs. It was then that Mr Small responded that he had a meeting with Mr Brown who did the renovation work and who had given him a figure of $180,000 to complete it.
[20] On 20 March 2014 Mr Small emailed KNB and he asked KNB to pay the renovation cost into his trust account or in the alternative Mr Small offered to buy the property from KNB, less the renovation costs.
[21] KNB’s evidence is there were significant negotiations with Mr Small regarding the extent of renovation costs for which Mr Small was to be reimbursed. There was, KNB says, no mention of Mr Brown being a purchaser before 10 June
2014. On 13 June 2014 Mr Small sent to KNB a copy of an offer to purchase the property for $400,000 with Mr Brown named as purchaser. KNB rejected the offer. KNB says then unexpectedly it received notification dated 19 June 2014 that Mr Small had lodged a copy of the caveat on the property on behalf of Mr Brown claiming an interest under an implied trust. KNB says this was the first time they were notified that Mr Brown claimed an interest in the property.
[22] Mr Brown states by his affidavit dated 31 August 2015:
[4] Although the deed of nomination was only formally completed on 6
August 2014 it was well understood by all parties that I was to be the nominated purchaser pursuant to the agreement for sale and purchase.
[7] I liaised directly with the respondent, through its then property manager Mr Ian Mueli about all matters relating to the renovation.
[23] Mr Mueli who then was with KNB, deposes by affidavit dated 4 September
2015:
1. I was involved in the purchase of the property… by [KNB] in my
capacity as agent for the company.
2.In that capacity I was also involved in the conditional sale of a part of that property to the applicant.
[24] Mr Mueli’s connection to KNB ceased in about October 2013.
[25] In short it is Mr Brown’s position that KNB did or ought to have known from the beginning that he was the prospective purchaser of the property.
[26] For Mr Brown it is submitted there is evidence of Mr Brown’s connection to instructions having been given to Barfoot & Thompson to rent the property out from about March 2014 by which time the renovation works had been completed. In a property management authority written up in that regard the owners details are noted as KN Building Limited/G Brown care of the Small Law Firm Limited. Contact names were noted as Gordon Brown/Peter Small.
[27] KNB’s position is that until Mr Small in his capacity as Mr Brown’s lawyer registered a caveat over the property in June 2014 that nothing was known about Mr Brown’s claim of an interest in the property. As the chronology earlier described notes Mr Small had negotiated with KNB for some purchase solution of the property because Mr Brown was insisting on payment for renovation works done. There is no evidence of a claim by Mr Small at that time that Mr Brown had been or was to be nominated as a purchaser, much less that such outcome had been proposed from about the time Mr Small purchased the property for himself when he is recorded to have said he had an interest in property investment.
[28] Mr Meuli had deposed he was involved with the purchase of the property by KNB originally in his capacity as an agent for KNB. Then he says that in that capacity he was involved in the conditional sale of part of the property to Mr Brown. But he provides no evidence at all regarding “the conditional sale of part of that property to the applicant”.
[29] Mr Brown claims that he was the nominated purchaser of the land pursuant to the original agreement for sale to Mr Small. But there is no written evidence of this and the deed of nomination was only provided when KNB challenged claims of a caveatable interest and that was not until three months after Mr Brown’s caveat had been lodged.
[30] Mr Brown does not explain why it was as he claims well understood that he was to be nominated purchaser. Mr Meuli’s apparent endorsement of this claim is vague and uncertain. No detail is provided of his claim to have been “involved in the conditional sale of part of that property”. Mr Meuli had long ceased his connection to the building project before issues arose in connection with Mr Brown’s registration of a caveat against the property.
[31] It is far from clear that the engagement of Barfoot & Thompson to tenant the property from about that time the renovation works had been completed provides proof at all of any recognition of an interest of Mr Brown in the property. An email from Barfoot & Thompson seems to indicate that they understood Mr Brown to have been connected with KNB.
[32] Neither is Mr Brown’s position supported by affidavit evidence from Mr Small. He was Mr Brown’s solicitor. Mr Small had negotiated the purchase when it is said he had an interest in property investment. It is Mr Small who engaged Mr Brown to do renovation work. The evidence is that when by end of March 2014 it was clear that KNB would not have available the Auckland Council’s consent to its subdivision proposal that a purchase solution had to be explored because pressure was being placed by Mr Brown on Mr Small for payment of renovation costs. Mr Small would be unable to complete his purchase if the Auckland Council subdivision consent was not available.
[33] The Court accepts Ms Kilham’s assessment that Mr Small’s correspondence with KNB at this time intended to relegate Mr Brown’s position to one as a contractor demanding payment. Certainly there is no suggestion to support Mr Brown’s position as having an interest in the land as a nominated purchaser. The evidence is Mr Small at no time told KNB of the prospective interest of Mr Brown and it is clear when the caveat was lodged that Mr Small could not afford to pay the renovation costs.
[34] The caveat purports to protect an implied trust which is later explained by a letter from his barrister as meaning to protect the value of building work carried out on the property i.e. and not on the basis of Mr Brown having been an intended purchaser.
[35] No evidence is provided of meetings, discussion, correspondence or the kind between Mr Small and Mr Brown about Mr Brown assuming the role of a purchaser. Perhaps understandably in the circumstances no affidavit has been provided by Mr Small – the only party who could have nominated Mr Brown as purchaser; the person who never suggested to KNB that Mr Brown held an equitable interest at that time he told KNB he was being pressured for payment of renovation costs.
[36] The caveat was lodged by Mr Small on behalf of Mr Brown at that point in time when Mr Small had not been able to negotiate a settlement with KNB when it became clear Auckland Council’s subdivision consent would not be available within the timeframe that Mr Small’s purchase agreement had allowed for and because Mr Small was under pressure to pay Mr Brown’s building costs.
Conclusions
[37] Mr Brown must show he has a reasonably arguable basis for his claim of a caveatable interest and that such existed when his caveat was filed on 9 June 2014.
[38] The caveat challenge process is unsuitable for resolving important disputed questions of fact. Any caveat should remain intact unless clearly there is no basis for it to remain.
[39] In the circumstances of this case the more acceptable view by far is that the caveat was lodged because Mr Small could not afford to pay for Mr Brown’s renovation costs. Clearly Mr Brown completed those although a question remains regarding his having provided sufficient information to prove amounts claimed. Prior to those issues arising regarding payment of renovation costs there is almost no useful evidence to support claims that Mr Brown was a prospective purchaser of the property.
[40] Mr Brown’s claims have been advanced but only to secure the sum he claims is owing for building works provided. Therefore the property represents no greater interest to him than that. Mr Small’s purchase agreement has been cancelled. Mr Brown accepts cancellation. It is clear the position he now adopts is to seek security to ensure he is paid.
[41] Mr Brown’s entitlement to his caveat depends on him providing an arguable case in support of his claim of an interest. The Court does not accept there is such available to him. Mr Brown has not provided credible evidence to support his bare assertion that it was well understood by all parties he was to have been the nominated purchaser. The Court is not bound to accept Mr Brown’s statement uncritically in the circumstances.
[42] Also it is this Court’s view that even if it was conceded that Mr Brown had a caveatable interest the Court would have exercised its discretion to direct the removal of it on the grounds that there was no practical advantage in maintaining it. Mr Small’s contract with KNB requires KNB to meet the reasonable costs of renovation work. The Court agrees that insufficient evidence has been provided as proof of Mr Brown’s claims that he is owed $180,000. KNB accept the responsibility to pay costs. The Court accepts their request for further evidence has not been unreasonable. Mr Meuli ventured an opinion as to the value of those but the building works were completed long after Mr Meuli had departed. Evidence from another quantity surveyor is of limited value because the works in question were not viewed by that person. KNB’s present position is that it is willing to pay the costs property claimable.
Result
[43] Mr Brown’s application is dismissed.
[44] KNB has indicated it will apply for indemnity costs against Mr Brown and Mr Small. Any submissions of support of such an application are to be filed and served within 10 working days of this judgment and thereafter any submissions in
opposition are to be provided within a further 10 working days.
Associate Judge Christiansen
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