Chacko v Palaparambil
[2025] NZHC 1974
•18 July 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2025-404-0003
[2025] NZHC 1974
BETWEEN JOSEPH VALLAPPURACKAL CHACKO
Applicant
AND
JEEJO VELAYUDHAN PALAPARAMBIL
First Respondent
SUDHA JEEJO
Second Respondent
Hearing: 24 March 2025 Appearances:
A Nair for the Applicant
S Khan and M Orange for the Respondent
Judgment:
18 July 2025
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 18 July 2025 at 10 am pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Nair & Associates, Auckland
Fortune Manning Lawyers, Auckland
CHACKO v PALAPARAMBIL [2025] NZHC 1974 [18 July 2025]
Introduction
[1] The applicant, Mr Chacko, has applied to sustain the caveat he has lodged against a property in Retreat Drive, Mangere.
[2]Mr Chacko submits the caveat ought to be sustained on two grounds:
(a)an equitable interest arising from an alleged agreement with Mr Palaparambil, the first respondent, to repay a debt from the sale proceeds of Retreat Drive; and
(b)a beneficial interest in Retreat Drive as a beneficiary under a trust deed.
[3] The interest recorded on the caveat is only as a beneficiary under the trust deed. There is no reference to any equitable interest arising from an alleged agreement.
[4] The respondents accept that Mr Chacko has a beneficial interest in Retreat Drive under a trust deed and that this is a sufficient basis for the caveat to be sustained. However, the respondents submit that the Court ought to exercise its discretion to lapse the caveat because Mr Chacko’s legitimate interests would not be prejudiced by such lapse.
[5] It is clear that the Court has such a discretion and that the circumstances of the lodging of the caveat are unusual.
[6] First, Mr Chacko signed a sale and purchase agreement to purchase Retreat Drive in the name of a company for which he is the sole director and shareholder. He then lodged the caveat several weeks later, relying on the following interest:
…as beneficiary in an express declaration of trust dated 31 August 2021 with the registered proprietors Sudha Jeejo and Jeejo Velayudhan Palaparambil as trustees.
[7] The caveat prevented settlement of the sale of the property to the caveator’s own company.
[8] As a result of both the caveat and other issues arising, including entry into commercial leases by Mr Chacko allegedly without the consent of the trustees or other beneficiaries and the alleged dumping of soil on the property, the trustees cancelled the sale and purchase agreement.
[9] I set out the legal principles applying to the sustaining of caveats below before considering whether the caveat can be maintained on both bases claimed or just on the basis of the bare trust. This will assist in determining the legitimate interests that the caveat can protect before considering whether the discretion to lapse ought to be exercised on the basis that those legitimate interests will not be prejudiced.
Relevant legal principles
[10] Section 138 of the Land Transfer Act 2017 (LTA) provides that a person may lodge a caveat against dealings on the basis that the person:
(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.
[11] Section 143 of the LTA sets out the requirements for an application to sustain a caveat. The principles applying were summarised by the Court of Appeal in Green & McCahill Holdings Ltd v Ara Weiti Development Ltd:1
[80]The core principles covering applications to sustain caveats under s 143 of the LTA are those set out in this Court’s decision in Philpott v Noble Investments Ltd (drawing in turn on our earlier decision in Sims v Lowe): 2
(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;
1 Green & McCahill Holdings Ltd v Ara Weiti Development Ltd [2022] NZCA 218.
2 Philpott v Noble Investments Ltd [2015] NZCA 342 at [26]; Sims v Lowe [1988] 1 NZLR 656 (CA) at 659–660. Philpott was referred to with approval by the Supreme Court in Melco Property Holdings (NZ) 2012 Ltd v Hall [2022] NZSC 60, [2022] 1 NZLR 59 at [56].
(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)Where 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 interest would not be prejudiced by removal.
…
[83] Although summary process does not permit close engagement with contested facts, the court must still assess the arguability of the asserted case of a proprietary right realistically and interrogate the documentary record. As the Privy Council said in Eng Mee Yong v Letchumanan, a court is not required:3
… to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement in an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be.
First ground for sustaining caveat: Can Mr Chacko rely on an equitable lien arising from the alleged debt agreement?
[12]I set out the background briefly before considering this first ground.
Background
[13] The property in Retreat Drive against which the caveat has been lodged was purchased by the respondents on 24 September 2019 for $980,000.
[14] It is not in dispute that although the title to the property is in the names of the first and second respondents, it is held as part of a property investment syndicate involving the respondents, the applicant (Mr Chacko), and two others: Anand Kumar Talasu and Sreenivasa Rao Krishnameneni. Mr Palaparambil’s evidence is that the syndicate was established to develop the property and that costs and profits associated with the property were to be shared equally.
[15] A declaration of trust was executed on 31 August 2021 to record that the respondents held 75 per cent of Retreat Drive on trust for Mr Chacko, Mr Talasu and
3 Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 335–337.
Mr Krishnameneni in equal shares, that is 25 per cent each. The respondents therefore retain the remaining 25 per cent interest.
[16] Between July 2022 and May 2024, Mr Chacko and Mr Palaparambil engaged in several other joint property ventures without the involvement of Mr Talasu and Mr Krishnameneni.
[17] Mr Chacko’s evidence is that as a consequence of these ventures, Mr Palaparambil owes him money and that an agreement was reached that Mr Palaparambil would repay him with the proceeds from the sale of Retreat Drive. Mr Chacko relies on an email sent to Mr Palaparambil on 5 June 2024 stating:
Hi [Mr Palaparambil],
Please check below proposal. If agreed we will make legal agreement:
· Balance amount owed after sale of [street number] Bass Road will be taken from [Mr Palaparambil’s] share of profits from the sale of [street number] Retreat Drive.” Any balance owing will be reduced from [Mr Palaparambil] share in [street number] Bairds Road accordingly. If there is still a balance owing a second mortgage/caveat for that amount will be placed on [street number] Bass Road, Mt Wellington.
· Sign bare trust agreement for [street number] Bairds Road, Otara
[18]Mr Palaparambil replied the same day:
I'm happy to do that, but I think we will do after settlement of [street number] Bass Road so we can mention the correct sum.
[19] Mr Palaparambil begins his affidavit in response by deposing that Mr Chacko’s claims that Mr Palaparambil owes him money are completely unrelated to Retreat Drive, that he never agreed to repay any alleged debts, that he disputes that there are any debts owing and that Mr Chacko in fact owes the respondents substantial sums. Mr Palaparambil then goes into some detail about the dealings with Mr Chacko in relation to several properties other than Retreat Drive.
[20] Mr Palaparambil’s evidence is that by “the correct sum” in the email above he intended to convey to Mr Chacko that it was unclear what money was allegedly owing and that nothing further came from those discussions. He deposes that no legal
agreement was ever signed or bare trust agreement entered into for the Bairds Road property.
[21] In reply, Mr Chacko deposes that Mr Palaparambil’s statements about there being no agreement are not true and he annexes an email dated 19 September 2024 in which Mr Palaparambil allegedly acknowledges that he owes Mr Chacko money. That email attached a schedule of the amount Mr Chacko said was owing and requested full repayment by 30 September 2024. The email also demanded payment of Mr Chacko’s 25 per cent in the profit from the sale of Retreat Drive by the same date. The sale and purchase agreement in relation to Retreat Drive with Mr Chacko’s company had not yet been entered into so it is not clear on what basis this is demanded.
[22] In any event, Mr Palaparambil’s reply on 19 September 2024 asks Mr Chacko to “deduct interest of IRD from 168k and then send me confirmation numbers – so that I will arrange for the money thanks”.
[23]The schedule attached to Mr Chacko’s email does not include a figure of
$168,000 so it is not clear what Mr Palaparambil is referring to. This email chain in fact appears consistent with Mr Palaparambil’s evidence that he “kicked the issue of the alleged debt off until after Bass Road settled”.
[24] On 24 September 2024, the respondents then entered into the agreement to sell Retreat Drive to Mr Chacko’s company, Redoubt Property Maintenance and Services Limited (Redoubt) for $1,217,391.30 plus GST with settlement scheduled for 12 December 2024.
[25] Three weeks later, on 16 October 2024, Mr Chacko lodged his caveat setting out his interest as set out in full in the introduction but with no reference to the alleged debt or any agreement in relation to it.
[26] On 12 December 2024, the respondents’ solicitors wrote to the solicitors for Redoubt and cancelled the sale and purchase agreement including because of the entry into leases allegedly without the consent of the trustees preventing vacant possession and the alleged dumping of soil by Mr Chacko but in respect of which Redoubt had
given notice it intended to withhold $50,000 of the purchase price. The cancellation letter referred to the caveat lodged as follows:
18. We also refer to the caveat that Mr Chacko has recently lodged over the property. That caveat is preventing any sale of the property. It is of course, highly unusual that Mr Chacko has sought to frustrate the sale of Retreat Drive to Redoubt, his own company, while at the time instructing you to facilitate the settlement of the transaction.
19. Mr Chacko's caveat is entirely improper. The purpose of any caveat is to protect a genuine caveatable interest. The interest that Mr Chacko is said to be protecting is his equitable interest in a 25% share of the property. That, however, is clearly not the case given a sale would pose no threat to his interest.
20. The real purpose of the caveat is to protect entirely separate claimed debts that Mr Chacko alleges are owed to him by Mr Palaparambil. Those alleged debts have been set out in a summary judgment application that Mr Chacko has filed in Court and which will be vigorously defended. We have written to Mr Chacko's other solicitor who is dealing with those proceedings setting out our client's position. Needless to say, costs will be sought in relation to these proceedings.
21. We will shortly be filing an application to lapse the caveat that Mr Chacko lodged. We remind you of your duty as a solicitor not to lodge caveats for improper purposes. We urge you and Mr Chacko to let the caveat lapse. If an application is made to sustain it, costs will again be sought.
[27]Mr Chacko’s solicitors responded on 18 December 2024 saying:
4.I also make the point that your client is accruing further liability as a consequence of his failure to settle with my client:
a.the caveat on [street number] Retreat Drive (‘Property’) was lodged as a consequence of your client's agreement to settle his debt to Mr Chacko from the proceeds of the sale of the Property.
b.the sale of the Property (‘Sale’) did not take place as a consequence of the caveat over the Property
c.your client is trustee of the property, he is required to follow the instructions of the trust's beneficiaries
d.the beneficiaries instructed your client to complete the sale of the Property
e.your client is in breach of the trust deed.
5.A notice of failure to settle has been issued to my client's company as a consequence of your client's failure to complete the Sale with Redoubt Property Maintenance & Services Limited.
6.Your client is accountable to my client as a trustee in breach of trust and my client intends to issue proceedings to recover any losses that arise from the failure of your client to complete the Sale by the agreed settlement date.
Discussion
[28] The interest recorded in the caveat lodged does not refer to an equitable interest arising from an alleged agreement with Mr Palaparambil so the applicant cannot rely on this ground to sustain the caveat.4
[29] In any event, a caveatable interest requires a proprietary interest in the land. The debt agreement alleged by Mr Chacko is not sufficient to support a caveat as Mr Chacko’s proposal refers only to the alleged debt being repaid from Mr Palaparambil’s share of profits from the sale of the Property. A share in profits or proceeds from a sale of a property in the circumstances alleged is not sufficient to support a caveat.5
[30] The first ground for sustaining the caveat put forward by Mr Chacko must therefore fail as Mr Chacko does not have a caveatable interest on this basis even if he could establish that it is reasonably arguable an agreement was reached.
Second ground: beneficial interest under the Trust Deed
[31] The respondents accept that Mr Chacko holds a 25 per cent beneficial interest in Retreat Drive pursuant to the Trust Deed, as do Mr Talasu and Mr Krishnameneni, and that Mr Chacko’s interest is proprietary and in principle is capable of supporting a caveat under section 138(1)(b) of the LTA.
[32] There is no question that a beneficial interest in a property pursuant to an express trust is a sufficient basis to sustain a caveat and so Mr Chacko clearly has a caveatable interest on the basis of the second ground.6
4 DW McMorland and others Hinde McMorland and Sim Land Law in New Zealand (online ed, LexisNexis) at [10.013(a)].
5 At [10.010(o) and (p)].
6 At [10.009(b)].
Should the Court nonetheless exercise its discretion to discharge the caveat?
[33] As the Court of Appeal recorded in Green & McCahill Holdings Ltd v Ara Weiti Development Limited, when an applicant has discharged the burden to show a caveatable interest, as Mr Chacko has done here, the Court retains a discretion to remove the caveat.7 It does so however on a cautious basis with the Court of Appeal in Green & McCahill Holdings Ltd v Ara Weiti Development Limited holding that the Court must be satisfied that the caveator’s legitimate interests would not be prejudiced by removal.8
[34] In Pacific Homes Limited v Consolidated Joineries, the Court of Appeal discussed the exercise of the discretion as follows:9
An order will be made for removal only where the Court is completely satisfied that the legitimate interests of the caveator will not thereby be prejudiced. If, on the facts of a case, it can be seen that the caveator can have no reasonable expectation of obtaining benefit from continuance of the caveat in the form of recovery of money secured over the land or specific performance of an agreement or if a caveator’s interests can be reasonably accommodated in some other way, such as by substituting a fund of money under the control of the Court, then it may be appropriate for the caveat to be removed notwithstanding that the right to the claimed interest is undoubted.
[35] Hinde McMorland & Sim, Land Law in New Zealand records three points about this residual discretion:10
(a)In Stuart v Kaipara Consultants Ltd, the Court of Appeal emphasised that the discretion must be exercised on a cautious basis and the caveat should only be removed where the Court can be “completely satisfied” that the caveator's legitimate interest will not be prejudiced.11
(b)The onus lies on the party challenging the caveat to show why the residual discretion should be exercised.12
7 Green & McCahill Holdings Ltd v Ara Weiti Development Limited, above n 1, at [84].
8 At [80(d)].
9 Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.
10 Hinde McMorland & Sim, Land Law in New Zealand, above n 4, at [10.020(c)].
11 Stuart v Kaipara Consultants Ltd [2000] 3 NZLR 55 at (23).
12 Lombard Finance and Investments Ltd v Albert Street Limited HC Auckland CIV-2004-404-2120, 14 October 2004 at [60] in Wellesley Club Ltd v Wellesley Property Holdings Limited [2007] 8
(c)The residual discretion is expressed in terms of the caveator obtaining no “practical advantage” from continuation of the caveat and is exercised only where the court is completely satisfied that the “legitimate interest” of the caveator will not thereby be prejudiced.
[36] The authors of Hinde, McMorland and Simm comment that “practical advantage” does not include the bargaining advantage that the caveator would obtain from continuation of the caveat because if such bargaining advantage were taken into account, the caveator would always easily be able to show a practical advantage and the residual discretion would never be exercised.13
[37] In Topa Partners Ltd v JWL International Group Ltd,14 Associate Judge Paulsen discussed the exercise of the discretion and referred to GR8 Constructions Pty Ltd v O’Donnell, where Refshauge J in the Supreme Court in Canberra, cited Young J in Kingston Constructions Pty Ltd v Crispel Pty Limited, before commenting:
A caveat should not be used for … a “blackmailing device” described by his Honour as where “…a caveat can be legitimately lodged in respect of a relatively small claim and force the registered proprietor to pay out such a claim even though it is bitterly contested”.
[38] In Topa, the respondent submitted that the applicant was using the caveat as leverage to force the respondent to pay a sum of money. Associate Judge Paulsen was not satisfied however that the applicant's legitimate interest would be protected by the respondent’s proposal to pay a lesser sum and so considered it was not a proper case for the removal of the caveat in the exercise of the Court's discretion.
[39] The respondents say that Mr Chacko’s legitimate interests would not be prejudiced here because:
NZCPR 421 at [55], Thomas v FWT Holdings Ltd HC Wellington CIV-2009-485-120, 8 October 2009 at [14].
13 Hinde McMorland & Sim, Land Law in New Zealand, above n 4, at [10.020(c)].
14 Topa Partners Ltd v JWL International Group Ltd [2020] NZHC 182, (2020) 21 NZCPR 591 at [56], referring to Gr8 Constructions Pty Ltd v O’Donnell [2011] ACTSC 92 at [28] citing Kingstone Constructions Pty Ltd v Crispel Pty Ltd [1991] 5 BPR 11,987 at 11,991.
(a)A sale of Retreat Drive does not threaten Mr Chacko’s 25 per cent share of the property. Indeed, the only way Mr Chacko could realise his 25 per cent share is if the property is sold.
(b)A sale of the property would only convert his equitable interest under the Trust Deed from real property to cash.
(c)The property was to be sold to Mr Chacko’s own company. He instigated the deal that would have seen the property sold. It therefore must have served his interests.
(d)Mr Chacko’s affidavit and submissions fail to articulate any specific risk to his interest if the property is sold. He merely asserts an interest in the property, and contends that this alone justifies sustaining the caveat, irrespective of any prejudice.
[40] The respondents further refer to the assertion by Mr Chacko in his affidavit that the caveat was lodged to “protect the benefit I was to receive in the sale as beneficiary”. The respondents therefore say Mr Chacko expects a sale of the property so he can receive his 25 per cent benefit, but that can only occur if the caveat lapses so as not to block any sale. Furthermore, the respondents point to the fact that the caveat frustrates the 75 per cent interest in the property held by the respondents, Mr Talasu and Mr Krishnameneni, and that Mr Chacko as a 25 per cent beneficiary ought not to be able to hold the property hostage to the detriment of the other beneficiaries.
[41] In the respondents’ submission, the caveat is clearly being used as a means of leverage to resolve the unrelated disputed debt.
[42] The respondents do however propose that if the Court considers it “absolutely necessary”, the respondents would be prepared to give an undertaking that if Retreat Drive is sold, Mr Chacko’s 25 per cent share of the proceeds and any disputed portion of the first respondent’s 12.5 per cent share be held in a solicitor's trust account pending resolution of Mr Chacko’s claims. Counsel submits this protects Mr Chacko’s
beneficial interest under the Trust and any potential debt claim without the caveat's encumbrance.
[43] The respondents also seek to rely on the clean hands doctrine to submit that Mr Chacko is disentitled to relief and that his attempt to sustain the caveat is an abuse of process used to exert pressure on Mr Palaparambil with respect to the alleged debt. The respondents submit that Mr Chacko’s conduct undermines his claim to equitable protection because:
(a)Mr Chacko lodged the caveat to prevent the sale of Retreat Drive to his own company. This thwarted a $1,400,000 sale he had agreed to as Redoubt’s director.
(b)This self-inflicted obstruction prejudiced all syndicate members, including himself, and suggests an ulterior motive, namely leveraging the property to resolve the unrelated debt claims he has against Mr Palaparambil.
(c)Mr Chacko has fiduciary duties to his fellow syndicate members. The lodging of the caveat is contrary to the interests of the syndicate as a whole.
(d)Although the Court can only take these matters so far in a summary context like this, there is evidence that Mr Chacko has been receiving rent payable to the syndicate, and that he dumped construction spoil on the property without the consent of the other syndicate members.
[44] The respondents further submit that the essence of clean hands is that “[n]o Court of equity will aid a man to derive advantage from his own wrong”15 and that by lodging the caveat to manipulate an unrelated dispute and engaging in conduct that breaches his fiduciary duties, Mr Chacko forfeits any right to the Court’s equitable assistance.
15 Myers v Casey (1913) 17 CLR 90 (HCA) at 124.
[45] In my view these factors are relevant to deciding whether to exercise the discretion to lapse the caveat despite a caveatable interest being established, rather than for separate consideration in terms of the equitable doctrine of clean hands.
[46] I am satisfied in the circumstances of this case that it is appropriate to exercise my discretion to lapse the caveat as Mr Chacko’s legitimate interests can be protected by requiring his 25 percent share of the profits from the sale of Retreat Drive to be paid to him within 20 workings days of the settlement of the sale.
[47] There is no question that the caveat could legitimately be lodged to protect Mr Chacko's 25 per cent share in the property but it cannot then be used to force payment of the unrelated alleged debt. As held above, there is no right to sustain the caveat on the basis of the alleged agreement to repay debt owed by the respondents so the caveat cannot be used to force repayment as that is not a legitimate interest that the caveat is there to protect, only the protection of the 25 per cent share in the property is.
[48] Mr Chacko deposes in his affidavit that he lodged “the caveat on the basis of his equitable interest which arises from an agreement with the first respondent.” He refers to Mr Palaparambil promising to pay him from the proceeds of the sale of the property “as part of settling a debt he owes me”.
[49] Mr Chacko’s evidence and actions by his company, Redoubt, in entering into the sale and purchase agreement to buy Retreat Drive, as well as his solicitor’s correspondence following, make it clear that Mr Chacko is not wishing to protect his share of Retreat Drive by preventing sale because of some connection to Retreat Drive itself. He instead, is attempting to force payment of other amounts he alleges are owing.
[50] I do not require either the first or both respondents’ shares in those profits to be held on trust until resolution of the dispute between the parties over the alleged debts unrelated to Retreat Drive as any order for those proceeds to be held would essentially allow a caveator to obtain freezing orders in respect of unrelated debts by a sidewind. This is not appropriate. Any application for interim orders in respect of
the respondents’ 25 per cent share can be made in the context of the separate proceedings that Mr Chacko has brought seeking recovery of the debts he alleges are owing.
Conclusion
[51] The caveat lodged by Mr Chacko over the property in Retreat Drive, Mangere, with instrument number 13137217.1, is to lapse on condition that 25 percent of the profits of sale are to be paid to Mr Chacko within 20 working days of settlement of the sale of Retreat Drive with leave to return to Court if issues arise (preferably by joint memorandum with any differences set out).
Costs
[52] The respondents indicated that they would be seeking increased or indemnity costs. I ask the parties to confer and try to agree costs but indicate my preliminary view that costs on an increased basis may be payable given the circumstances in this case.
[53] If costs are not able to be agreed, memoranda may be filed of no more than three pages, excluding schedules, on behalf of the respondents by 15 August 2025 and by the applicant by 29 August 2025.
Associate Judge Sussock
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