Cassiny Ltd v Hounslow Holdings Ltd

[2021] NZHC 3039

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-1992

[2021] NZHC 3039

UNDER

Land Transfer Act 2017

IN THE MATTER

of an application to sustain caveats on land

BETWEEN

CASSINY LIMITED

First Plaintiff/Applicant

CASSINY LANDS LIMITED
Second Plaintiff/Applicant

AND

HOUNSLOW HOLDINGS LIMITED

Defendant/Respondent

Hearing:

9 November 2021

Appearances:

K J Sheehan for Plaintiffs/Applicants

K G Davenport QC and A M Cameron for Defendants/Respondents

Judgment:

10 November 2021

JUDGMENT OF VENNING J

This judgment was delivered by me on 10 November 2021 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Kate Sheehan Lawyers, Auckland

Sellars & Co, Helensville

Counsel:            K G Davenport QC/A M Cameron, Auckland

CASSINY LTD v HOUNSLOW HOLDINGS LTD [2021] NZHC 3039 [10 November 2021]

[1]                 Cassiny Limited (Cassiny) and Cassiny Lands Limited (CLL) lodged caveats against land belonging to Hounslow Holdings Limited (Hounslow). Hounslow applied to lapse the caveats on 1 October 2021. Cassiny and CLL apply to the Court for orders that the caveats not lapse. The application is opposed by Hounslow.

[2]                 The caveats each claim an estate or interest in Hounslow’s land pursuant to an agreement for sale and purchase dated 3 December 2020 between Hounslow as vendor and, in one case, Cassiny as purchaser, and in the other, CLL as purchaser.

[3]                 The background to the issues between the parties is set out in a judgment of Woolford J in related proceedings in which Cassiny sought injunctive orders to prevent Hounslow from relying on a settlement notice it had issued.1

[4]                 On 3 December 2020 Cassiny entered into an agreement to purchase bare land at Helensville from Hounslow. Cassiny intended to subdivide the land into about 28 or 30 lots and on-sell them. Settlement date was six months from the date the agreement became unconditional.

[5]                 The agreement became unconditional on 25 February 2021. Settlement was therefore due on 25 August 2021. Cassiny did not settle. Hounslow issued a settlement notice on 3 September 2021 requiring settlement on or before 21 September 2021.

[6]                 CLL lodged its caveat on 25 August 2021. Then, on 20 September 2021 Cassiny lodged its caveat. Apparently CLL became involved as it was to be nominated by Cassiny as the purchaser. Ultimately however, that did not occur.

[7]                 On 20 September 2021 Cassiny filed proceedings against Hounslow and sought an injunction. It claimed the settlement notice was invalid. It also alleged there was an implied term that the agreement was conditional on resource consent from Auckland Council. Finally, Cassiny sought rectification of the agreements to reflect the implied term. Cassiny sought orders suspending the settlement notice and

1      Cassiny Ltd v Hounslow Holdings Ltd [2021] NZHC 2528.

deferring the settlement date until further order of the Court or agreement between the parties.

[8]                 Woolford J dismissed Cassiny’s application for injunction on 24 September 2021. The Judge noted Cassiny’s statement of claim raised three causes of action. First, it alleged invalidity of the settlement notice due to impossibility of performance. The Judge was not persuaded there was a serious question to be tried as to whether or not it was impossible to perform the agreement for sale and purchase. Cassiny had six months to make the necessary arrangements. He considered it was not impossible for Cassiny to settle the purchase. Cassiny just did not have the money to do so.

[9]                 Next, the Judge was not persuaded there was a serious question to be tried as to whether or not the agreement was impliedly conditional on resource consent being granted. Cassiny took the risk of not obtaining resource consent for the subdivision.

[10]             The final cause of action was the claim for rectification of the agreement to provide that settlement was conditional on Cassiny obtaining resource consent for the subdivision. It drew on the same evidence pleaded in the second cause of action, which the Judge did not accept. The Judge was satisfied there was no serious question to be tried in relation to that issue either. For those reasons the Judge rejected the application for interim orders.

[11]             After the judgment was delivered, Hounslow cancelled the agreement for sale and purchase on 24 September 2021.

[12]             Cassiny’s and CLL’s application to sustain the caveat is supported by the affidavit evidence of Mr Ebrahim, the director of the plaintiffs. It is also supported by an affidavit of Mr Webster, a conveyancing solicitor who now acts for Cassiny and CLL.

[13]             Cassiny and CLL have also commenced separate proceedings, CIV-2021-404- 1996 (the 1996 proceedings) against Hounslow, the real estate agent involved in the transaction and the solicitor who initially acted for them. In the 1996 proceedings they seek a declaration against Hounslow that it wrongfully terminated or cancelled the

agreement, again on the basis performance was impossible. They seek the return of the deposit of $300,000 plus interest, together with compensation and/or damages to be quantified prior to trial. Cassiny and CLL also plead in a second cause of action against Hounslow that the agreement was subject to an implied term they would be able to obtain the necessary resource consents and that the settlement date would be extended to allow for the resource consent to be obtained. Next they plead rectification to provide that the settlement was conditional on the plaintiff obtaining resource consent for subdivision. The relief claimed is again the return of the deposit plus interest, together with compensation and/or damages. All these claims have been considered and dismissed as not seriously arguable by Woolford J. They also plead mistake, breach of a duty of good faith, unjust enrichment, and breach of Fair Trading Act 1986. The relief sought under the latter causes of action is limited to damages.

[14]             I return to the issue before the Court on this application. The onus is on Cassiny and CLL to sustain the caveats they have lodged.2

[15]             It is not enough for Cassiny or CLL to show that the caveat would in some way be advantageous to them.3

[16]             There are a number of difficulties for Cassiny and CLL with their applications. The first and fundamental issue is that the caveats lodged against Hounslow’s property are lodged on the basis that they claim an interest as purchaser under an agreement for sale and purchase dated 3 December 2020.

[17]             Apart from the fact there can only be one purchaser, which they both claim to be, the agreement for sale and purchase has been cancelled. A purchaser under an agreement for sale and purchase of land has a caveatable interest in the land the subject of the agreement but the interest based on the agreement for sale and purchase does not survive cancellation of that agreement. A caveat will be removed or allowed to lapse where, even if there was a valid ground for lodging it in the first place, that ground no longer exists.4

2      Castle Hill Run Ltd v NZI Finance Ltd [1985] 2 NZLR 104, 106.

3      Guardian Trust and Executors Co of New Zealand Ltd v Hall [1938] NZLR 1020 at 1025.

4      Orams Marine (Auckland) Ltd v Ports of Auckland Ltd (1994) 6 TCLR 88 (CA).

[18]             Ms Sheehan suggested that an answer may be that CLL, as the entity that was to be nominated as purchaser, was different to Cassiny. Its caveat should be sustained. That proposition cannot be right. Any interest as purchaser that either Cassiny or CLL (as the proposed nominee to purchase the property) had is based on the agreement for sale and purchase which has been cancelled. Further, the nomination in favour of CLL was never perfected and the deed was never provided to the defendants, as Mr Webster accepted in an email of 20 October 2021 to the defendant’s solicitors.

[19]             Ms Sheehan then suggested that Cassiny may have an equitable claim against Hounslow on the basis that Hounslow will have the benefit of the work carried out by Cassiny in preparation for the subdivision. Again however, the immediate answer to that proposition is that it is not the basis upon which the caveats are sought to be sustained. That is a claim for unjust enrichment, not a claim under the agreement for sale and purchase. Also, as noted, in the 1996 proceedings the relief claimed under the unjust enrichment cause of action is limited to damages.

[20]             Ms Sheehan then submitted that Cassiny is able to sustain its caveat on the basis that it has a purchaser’s lien to support its claim for the return of the deposit of

$300,000.

[21]             A purchaser under an agreement for sale and purchase which has been terminated may, in certain cases, have a purchaser’s lien in relation to the deposit and other funds. Where a contract for sale of land is cancelled by the purchaser or is avoided by the failure of a contingent condition the purchaser may become entitled to recover from the vendor the amount of the deposit paid and perhaps other sums, such as the purchaser’s wasted costs of investigating title. Such circumstances may be sufficient to support an equitable lien on the land for such amounts which will support a caveat.5 However, in the present case Hounslow as vendor cancelled the agreement because of Cassiny’s failure to settle.

[22]             There is a suggestion, in some Australian authorities in particular, that the purchaser’s lien may extend to cases where the purchaser was itself in default of the

5      DW McMorland and others Hinde McMorland & Sim Land Law in New Zealand (online ed, LexisNexis) at 10.009(m).

agreement for sale and purchase.6 However the preponderance of authority is that the purchaser’s lien is applicable in cases where the purchaser has not been in default.

[23]             The basis for the purchaser’s lien was examined and explained in Combe v Swaythling (Lord) by Wynn-Parry J.7 Wynn-Parry J noted that the basis for the lien was to be found in the case of Whitbread & Co v Watt:8

If a purchaser advance all or any part of the money to the vendor, and the contract is broken off, an implied contract arises, by which the purchaser has a lien on the land; and if the purchaser properly declines to complete, he has a lien for the deposit and interest on unpaid purchase-money, and for interest on the payments, and also for the costs of a suit by himself or the vendor to compel performance of the contract, and this lien attaches on the deeds. If the purchase goes off through the fault of the purchaser, of course he has no lien for what he has paid.”

[24]And later Wynn-Parry J summarised the position himself:9

The basis of the undoubted right of a purchaser, who has paid a deposit to a vendor, to a lien for his deposit if the contract goes off otherwise than through the purchaser's default is, in my judgment, that the purchaser is to be regarded, in respect of that deposit, as a secured creditor.

[25]             That authority confirms that the better view is that a defaulting purchaser, such as Cassiny in the present case, has no right to a caveatable interest in the vendor’s land to support its claim for a return of the deposit.

[26]             However, it is unnecessary to resolve that rather interesting issue in the present case. When a purchaser’s lien is relied on to sustain the caveat rather than the agreement for sale and purchase itself, then, after cancellation of the agreement, the purchaser no longer has a caveatable interest based on the agreement and any such caveat must be withdrawn and replaced with a caveat based on the lien:10

[a]fter cancellation of the contract to buy, the purchaser no longer has a caveatable interest based on the contract; any such caveat must be withdrawn and replaced with a caveat based on the lien.

6      Re Kimberley NZI Finance Ltd v AR Barr Investments Pty Ltd [1989] ATPR 40-981; Frankcombe v Foster Investments Pty Ltd [1978] 2 NSWLR 41, at 57: See Hewett v Court [1983] HCA 7; (1983) 149 CLR 639, per Deane J, at 668.

7      Combe v Swaythling (Lord) [1947] Ch 625, ChD.

8      Combe v Swaythling (Lord), above n 7, at 627, citing Whitbread & Co v Watt [1901] 1 Ch 911 (emphasis added).

9      Combe v Swaythling (Lord), above n 7, at 628 (emphasis added).

10     DW McMorland Sale of Land (2nd ed, 2000) at 202.

[27]             The strict requirement for the caveat to refer to the correct basis for the interest is consistent with the provisions of s 138 of the Land Transfer Act 2017 and the Land Transfer Regulations 2018, cl 5 and sch 2 which require:11

Caveat against dealings document

A description of the nature of the estate or interest claimed by the caveator (which must be stated with sufficient certainty) … . Details of how the estate or interest claimed is derived from the registered owner.

[28]             The caveats lodged are solely based on the agreement for sale and purchase of 3 December. They cannot support a different basis of claim. For the above reasons, the caveats registered by Cassiny and CLL cannot be sustained.

[29]             There are further issues for Cassiny and CLL. Mr Ebrahim has made it clear that he has deliberately chosen not to appeal the decision of Woolford J. Mr Ebrahim says in his further affidavit in reply in this matter:

Although I did consider appealing the Judgment on behalf of [Cassiny], I did not see any point in wasting any more time, money, and legal fees in appealing that decision when it was not going to achieve anything in terms of an overall outcome or a result. Instead, I decided to focus on resolving the main issues which would achieve an outcome or result by commencing new proceedings making any claims that arise following cancellation of the Agreement for Sale and Purchase, challenging the validity of cancellation, seeking the return of the deposit in the sum of $300,000 and seek relief in terms of a claim in damages following cancellation plus indemnity costs. New Proceedings have since been filed and commenced in CIV-2021-404-1996. Also, to sustain the caveats.

[30]             As noted, those 1996 proceedings, at least in terms of the claim against Hounslow based on the implied term and rectification issues, raise the same issues that were determined against Cassiny by Woolford J in the interim injunction proceedings. Although it is unnecessary for this Court on this current application to determine the matter, it is likely that Cassiny’s claim would be met by an issue estoppel on that point. While it is rare for an issue estoppel to arise in relation to an interlocutory judgment, the ultimate question is not so much concerned with the character of the earlier decision, but rather whether in the circumstances it is reasonable to regard the earlier

11     Land Transfer Regulations 2018 (LI 2019/193) Schedule 2.

decision as a final determination of the particular issue, which one of the parties seeks to raise.12

[31]However, for the above reasons, namely that:

(a)the agreement for sale and purchase which both Cassiny and CLL rely on to support the caveats has been cancelled; and

(b)it was Hounslow rather than Cassiny that cancelled the contract for Cassiny’s failure to settle rather than vice versa; and

(c)the caveats are in the wrong form in that they fail to identify proper details of how the interest in land is claimed apart from under the agreement for sale and purchase,

Cassiny and CLL fail to satisfy this Court that the interim order they seek sustaining the caveats, (presumably until the determination of the issues in the 1996 proceedings), should be made.

Result

[32]The Court declines to make any such interim orders. The caveats are to lapse.

Costs

[33]             Hounslow is entitled to costs. I fix costs on a 2B basis for all steps taken in opposition to the application including the hearing.

Venning J

12     Joseph Lynch Land Co Ltd v Lynch [1995] 1 NZLR 37 (CA).