CIT Holdings Limited (in liquidation) v Auckland West Legal Services Limited
[2018] NZHC 232
•23 February 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2017-404-3004
[2018] NZHC 232
UNDER section 143 of the Land Transfer Act 1952 BETWEEN
CIT HOLDINGS LIMITED (IN LIQUIDATION)
Applicant
AND
AUCKLAND WEST LEGAL SERVICES LIMITED, BAILEY TRUSTEE SERVICES LIMITED, THE GLOVER TRUST
LIMITED and GLOVER TRUST CORPORATION LIMITED
First RespondentsGREGORY MARTIN OLLIVER
Second Respondent
Hearing: 21 February 2018 Appearances:
M J Tingey for Applicant
R B Stewart QC for Respondents
Judgment:
23 February 2018
JUDGMENT OF PETERS J
This judgment was delivered by Justice Peters on 23 February 2018 at 11 am pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date: ...................................
Solicitors: Bell Gully, Auckland
Kevin McDonald & Associates, Takapuna
Counsel: M J Tingey, Auckland
R B Stewart QC, Auckland
CIT HOLDINGS LTD (IN LIQUIDATION) v AUCKLAND WEST LEGAL SERVICES LTD, [2018] NZHC
232 [23 February 2018]
[1] This judgment determines an application by CIT Holdings Limited (in liquidation) (“CIT”) for orders that:1
(a)caveat 10987480.1 (“caveat”) lapse and be removed from the land described in certificates of title NA1855/91, 31658, NA44A/276, NA22B/1248, NA34D/425, NA798/58, 163298 and NA2038/73, all North Auckland Registry (together “caveated properties”); and
(b)the second respondent (“Mr Olliver”) and any members of his family residing at the property described in NA49C/1486, being 22 Waimarie Street, St Heliers, Auckland (“no. 22”), vacate and give up possession to CIT.
[2] CIT is the registered proprietor of all the land referred to in [1] above (“land”). It has agreed to sell that land to Oceania Village Company Limited (“Oceania”). CIT wishes to settle that sale forthwith but it is unable to do so in the absence of removal of the caveat and possession of no. 22.
[3]I propose to grant the orders sought on the terms below.
Background
[4] CIT has been in liquidation since March 2016 when, on the application of the Inland Revenue Department (“IRD”), the High Court ordered that it be wound up. The Court appointed Ms Vivian Fatupaito and Mr Andrew Hawkes as liquidators.
[5] The land is CIT’s principal, if not only, asset. The titles to the land are contiguous and by my calculation comprise 9,704 m2, including no. 22 at 2,999 m2.
[6] CIT acquired the land in 2009, pursuant to a joint venture between, and on trust for, Glover Trust and Waimarie Trust (now the Glover No 2 Trust). These trusts were settled for the interests of Mr Olliver and Ms Sarah Sparks respectively. Mr Olliver
1 Originating Application to Remove Caveat 10987480.1 and for Recovery of Possession of Land dated 18 December 2017.
and Ms Sparks were married at the time and no. 22 was their family home. They have been in dispute since their marriage ended in 2012.
[7]The first three named first respondents (“caveators”):
(a)lodged the caveat on 13 December 2017. The caveat is lodged against the land in [1](a) but not [1](b);
(b)are each corporate trustees of Glover Trust, that is of Mr Olliver’s trust. There is a dispute as to whether Mr Olliver is a beneficiary of Glover Trust, but at the very least his children are beneficiaries;
(c)are the joint owners of the share(s) issued in CIT.
[8] Mr Olliver is the sole director of CIT, and a director of The Glover Trust Limited, one of the caveators. Mr Olliver and members of his family have occupied no. 22 since the liquidators were appointed, and without paying rent or outgoings.
[9] Glover Trust Corporation Limited, an entity associated with Ms Sparks, was named as a first respondent in error and I strike it out accordingly.2 Ms Sparks supports the removal of the caveat and the sale of the land to Oceania. She considers that in the best interests of CIT’s creditors and beneficiaries.
Sale
[10] Since their appointment, the liquidators have been seeking to sell the land so that they can pay CIT’s creditors. CIT’s creditors include:
(a)Bank of New Zealand (“BNZ”) which is secured by a general security agreement and a first mortgage of all the land. At the time of the hearing, the sum due to the BNZ was more than $14,500,000. Interest on the debt accrues at approximately $100,000 per month and is compounding;3
2 High Court Rules 2016, r 4.56(1)(a).
3 Affidavit of V J Fatupaito sworn 7 February 2018 at [17].
(b)the IRD and Glover No 2 Limited (“Glover No 2”) which are preferential creditors within the meaning of Schedule 7 to the Companies Act 1993. The IRD is owed approximately $750,000. Glover No 2’s preferential debt is $4,030, and arises from costs it has met;
(c)unsecured creditors, or those who contend they are creditors, being architects, builders, a law firm, Auckland Council, Glover No 2, and The Bankhouse Trust Limited and BBG Holdings Limited (“Bankhouse” and “BBG”), both associated with Mr Olliver.
[11] There are also unpaid rates of more than $100,000 and the costs of the liquidation, including legal costs, which in round terms are $450,000.
[12] As at today’s date, more than $22.5 million would be required to pay all of the sums claimed or owed. There is, however, dispute as to the sums, if any, due to Glover No 2 and possibly to Bankhouse and BBG.4
Present position
[13] In November 2017, following a sales campaign conducted by Bayleys, CIT agreed to sell all the land to Oceania. Oceania is a subsidiary of an NZX listed company, Oceania Healthcare Limited.
[14] Although Mr Olliver has always sought to retain the land within his interests, his endeavours to do so have not succeeded.
[15] In late March 2017, Bankhouse purported to appoint receivers to CIT. The circumstances in which Bankhouse did so, and the subsequent negotiations that took place between the liquidators, the receivers and Mr Olliver, are described in Jagose J’s judgment in Harris v Bank of New Zealand.5
4 As to which see Glover No. 2 Ltd v CIT Holding Ltd [2014] NZHC 2786.
5 Harris v Bank of New Zealand [2017] NZHC 2374 and subject to appeal.
[16] In August 2017, the liquidators withdrew their opposition to a conditional agreement that the receivers had entered into with Mr Olliver’s vehicle, GMO Trust Limited. That agreement did not become unconditional and lapsed when the liquidators declined to extend it.
[17] Following this, the liquidators and BNZ discussed which of them would undertake a sales process in respect of the land. Although the BNZ were considering a mortgagee sale, it was agreed that a better price was likely to be achieved if the liquidators sold, rather than the bank as mortgagee.6 Hence the Bayleys’ campaign.
[18] Mr Olliver continued to make offers to purchase thereafter, which the liquidators declined. These offers were for less than the GMO agreement referred to in [16] above, no deposit was proffered and the liquidators had no confidence in Mr Olliver’s ability to finance a purchase.
Tender process
[19] A number of tenders were received following the sales campaign.7 The liquidators accepted Oceania’s offer on 10 November 2017, as it was the “most attractive in both settlement timing and pricing”.8 Oceania’s offer exceeded that made by GMO Trust Limited, and by a substantial margin if CIT is obliged to account to the IRD for GST on the sale.
[20] The agreement for sale and purchase with Oceania (“agreement”) is for all the land described in [1] above. It is conditional on the removal of all caveats and encumbrances etc. It also requires the vendor to give vacant possession of the land, including no. 22.
[21] The sale to Oceania was to settle on 22 December 2017. The caveat was lodged on 13 December 2017, without notice – prior or subsequent. The liquidators learned of the caveat in the course of preparing for settlement, which then had to be postponed. Nor were the liquidators able to give vacant possession.
6 Affidavit of V J Fatupaito sworn 18 December 2017 at [11]–[15].
7 At [38].
8 At [39].
[22] Delay in settlement increases the sum payable to the BNZ and so reduces the sum available to other creditors, or to the beneficiaries if there is a surplus. Also, Oceania may give written notice to cancel the agreement if the caveat is not removed by 23 March 2018. Otherwise, settlement is to take place five working days after removal of all caveats, encumbrances etc.
Discussion regarding caveat
[23] The application for an order removing the caveat is made pursuant to s 143 Land Transfer Act 1952 (“LTA”), which provides:
143 Procedure for removal of caveat
(1)Any such applicant or registered proprietor, or any other person having any registered estate or interest in the estate or interest protected by the caveat, may, if he thinks fit, apply to the High Court for an order that the caveat be removed.
(2)The court, upon proof that notice of the application has been served on the caveator or the person on whose behalf the caveat has been lodged, may make such order in the premises, either ex parte or otherwise, as to the court seems meet.
[24] The first issue on an application under s 143 LTA is whether the caveator is able to establish a reasonably arguable case for the interest in land that is claimed in the caveat.9
[25]In this case the interest claimed is:10
... a beneficial interest in the land contained in the [caveated properties] as beneficiary of a trust created by agreement dated March 2009 pursuant to which [CIT] acquired the [caveated properties] ... as trustee on behalf of the caveator.
[26] Given the matters referred to in [6] and [7](b) above, the starting point must be that the caveators do have a reasonably arguable case to the interest claimed. However, Mr Tingey submits that any beneficial or caveatable interest that the caveators may have in the land is or will be extinguished if the debts in respect of which the trustee (CIT) may indemnify itself exceed the value of trust assets.
9 Sims v Lowe [1988] 1 NZLR 656.
10 Caveat 10987480.1.
Mr Tingey submits that those debts will exceed the sale proceeds of the land, and that any pre-existing beneficial interest of the caveators is or will be extinguished accordingly.
[27] Mr Stewart QC (who was only instructed on 20 February 2018) rejected that submission as a matter of principle but, in any event, submitted that there is no certainty that CIT’s debts will exceed the sale proceeds. That is because of the dispute referred to in [12] above. CIT might well be in possession of a surplus if those disputes are resolved in CIT’s favour.
[28] The extent to which CIT is indebted to Glover No 2 and others is not a matter that I can determine at present. Given that, I shall assume for the purposes of this decision that the caveators have established the required reasonably arguable case.
Discretion
[29] There is no dispute the Court retains a residual discretion to make an order removing a caveat, even if a reasonably arguable case is made out. This discretion will be exercised cautiously.11
[30]I propose to make an order for removal for these reasons.
[31] First, interest is accruing on the debt to the BNZ in the amount to which I have referred. In round terms, a further $200,000 in interest has been incurred, and therefore lost to other parties, since the failure to settle on 22 December 2017. Removal of the caveat will enable settlement and avoid further loss.
[32] Secondly, if the caveat is not removed, Oceania will be able to cancel the agreement from 23 March 2018. There is no present prospect, let alone assurance, of any other sale on the same or better terms.
[33] Thirdly, the liquidators propose to apply the proceeds of sale to pay the costs of sale and outstanding rates, the sums due to the BNZ and preferential creditors (in
11 Pacific Homes Ltd (in receivership) v Consolidated Joineries Ltd [1996] 2 NZLR 652, (1996) 3 NZ ConvC 192,459 at 656.
the sense of Schedule 7), and the liquidators’ costs including legal fees. The liquidators undertake that they will then retain the surplus on interest bearing deposit pending further order of the Court.12 This will enable any dispute about who is and who is not a creditor and in what sum, to be resolved.
[34] Fourthly, none of the matters to which Mr Olliver has referred in his evidence warrant a continuation of the caveat.13 Mr Olliver could have, but did not, submit a tender, whether for one or more titles, or indeed all of the land. The evidence before me establishes that he was sent the tender documents.
[35] Mr Olliver also says that a better price would have been achieved overall, had the liquidators sold individual parcels of land. Mr Olliver also states that a sale of the caveated properties would have generated a sum sufficient to repay all debt, leaving no. 22 in CIT’s ownership. There is no expert evidence supporting any of these contentions.
[36] Ultimately, a liquidator is required to make the best decision they can in the circumstances that present themselves and Ms Fatupaito’s evidence confirms that is what the liquidators did. Oceania’s offer was accepted because it was better than any other offer received following a four-week sales campaign undertaken by appropriately qualified agents.
[37] In these circumstances, I am satisfied that I should make an order removing the caveat from the certificates of title referred to in [1](a) above.
[38] Mr Tingey raised two further points. The first is that CIT reserves its rights to seek compensation from the caveators pursuant to s 145 LTA. Secondly, s 148 LTA prohibits the lodging of a second caveat by or on behalf of the same person in respect of the same interest. Mr Tingey proposed that I should make a declaration prohibiting a second caveat. I decline to do so. The legal advisers involved, and the Registrar- General of Land, will be familiar with the prohibition contained in s 148 LTA.
12 At 656.
13 Affidavit of G M Olliver affirmed 31 January 2017.
Vacant possession
[39] Mr Olliver, and possibly one or more of his children, occupy no. 22. This occupation has existed since the liquidators were appointed and quite possibly before that.
[40] CIT’s case on this is straightforward. It is that Mr Olliver has no legal right to occupy no. 22. He does not have a lease or tenancy agreement or licence. In those circumstances, and Mr Stewart could not disagree, Mr Tingey submits that Mr Olliver is an unlawful occupier within the meaning of High Court Rules 2016, r 13.1 and that the applicant is entitled to an order for recovery of land under Part 13. Mr Tingey also submits, correctly, that the liquidators have given Mr Olliver ample opportunity – in fact months – to vacate in a timely way, and he has not done so.
[41] On the evidence before me, I am satisfied that Mr Olliver is in possession without CIT’s consent, and without a lease, tenancy agreement or licence to occupy.
[42] The liquidators’ evidence is that initially Mr Olliver led them to understand that he had an informal tenancy agreement from CIT but he was not able to produce evidence of the same.
[43] By letter dated 18 September 2017, the liquidators notified Mr Olliver that any tenancy he held would terminate in 90 days (18 December 2017), being the requisite period under the Residential Tenancies Act 1986.
[44] By email dated 22 September 2017, Mr Olliver notified the liquidators that Bankhouse was mortgagee in possession of no. 22 and that he was not required to vacate.
[45] Having made enquiries of the BNZ, Ms Fatupaito concluded that Bankhouse was not mortgagee in possession. Also, on 29 September 2017, the High Court made an order that avoided Bankhouse’s charge.14 Ms Fatupaito advised Mr Olliver of these matters the same day.
14 Harris v Bank of New Zealand, above n 5.
[46] The liquidators then sought an order for possession from the Tenancy Tribunal. However, at a hearing before the Tribunal on 15 December 2017, Mr Olliver’s then solicitor, Mr Peter Spring, advised that there was no tenancy agreement and that Mr Olliver and his family had occupation rights as beneficiaries of a trust. On 18 December 2017, the Tribunal advised the parties that it had no jurisdiction in the absence of a tenancy agreement.
[47]The relevant evidence now before me from Mr Olliver is as follows:15
34. When our right of occupation of [no. 22] was challenged by the Liquidators I erroneously advised the Liquidators that a lease was in place as recorded in paragraph 47 of Ms Fatupaito’s affidavit. However, our family lawyer, Don Thomas clarified the issue and provided the Liquidators with the resolutions of the trustees of the Waimarie Trust granting the right of occupation of the family home to the beneficiaries of the trust. ...
[48]The only conceivably relevant resolution in evidence states:
This resolution made this 9th day of March 2009 by way of entry in the minute book of the Waimarie Trust whereby it is resolved:-
…
3.The trustees are authorised to enter into the joint venture on the basis that it will preserve for the trust and its beneficiaries the residential property situated at 22 Waimarie Street St Heliers occupied by certain of the beneficiaries as their home.
[49] This resolution (if passed) is an authority given to the trustees of the Waimarie Trust. It is not binding on CIT, and it does not confer or evidence a right of occupation or possession on Mr Olliver.
[50] Given that, I am satisfied that Mr Olliver and any member of his family must vacate and give possession of no. 22.
[51] In his affidavit Mr Olliver refers to personal matters which make it undesirable for him to relocate, particularly on short notice. Those matters are unfortunate but the short notice is of Mr Olliver’s making. The liquidators require possession urgently.
15 Affidavit of G M Olliver, above n 13, at [34].
Orders
[52] On the undertaking recorded in [33] above, I order that caveat 10987480.1 be removed from the land referred to in [1](a) above. That removal is to be effected at 12 pm, or as soon thereafter as possible, on 2 March 2018.
[53] I also order Mr Olliver and any member of his family residing at 22 Waimarie Street, St Heliers, Auckland, to vacate and give up possession of the property forthwith and, in any event, by 12 pm, 2 March 2018.
Costs
[54]The applicant is entitled to costs on a 2B basis and disbursements.
Peters J
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