Cressida Capital One Ltd v Mapp

[2013] NZHC 1666

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2013-485-1407 [2013] NZHC 1666

IN THE MATTER

of Section 143 of the Land Transfer Act

1952

BETWEEN

CRESSIDA CAPITAL ONE LIMITED Plaintiff

AND

VANESSA LOUISE MAPP First Defendant

MILES BUCKINGHAM Second Defendant

Hearing:	3 July 2013
Appearances:	J. Toebes - Counsel for Plaintiff No appearance for the first and second defendants
Judgment:	3 July 2013

ORAL JUDGMENT OF JUSTICE D.I. GENDALL

CRESSIDA CAPITAL ONE LIMITED v MAPP [2013] NZHC 1666 [3 July 2013]

Introduction

[1]      The plaintiff applies for an order for removal of caveat 9432051.1 lodged by the first defendant against certificates of title 49A/272 and 57A/439 (Wellington Land Registry).

[2]      No Notice of Opposition to this application has been filed for or on behalf of either the first defendant or the second defendant nor has there been any appearance before me at the hearing of this matter today on behalf of either defendant.

[3]      As to that aspect it appears from the Court file that on 20 June 2013 the defendants provided a memorandum to this Court to state that they were instructing counsel on their behalf in this matter and that it would take 2 days to prepare for a hearing of the plaintiff’s application but a date after 24 June 2013 was suitable.

[4]      As I understand the position, the defendants were served with the application and all supporting papers, were informed of the hearing date for this matter today, 3

July 2013 and have not responded in any way.  As I have mentioned above there is no appearance for either defendant today.

Background Facts

[5]      The plaintiff is the registered first mortgagee of the residential property comprised in certificates of title 49A/272 and 57A/439 (the property) over which the caveat in question has been registered.  The plaintiff’s mortgage 8996461.5 was registered on 7 March 2012 and secures in favour of the plaintiff all the indebtedness of  the  registered  proprietor  mortgagor  of  the  property,  Twig  Luxury  Trustee Company Limited (the mortgagor).  This indebtedness, as I understand the position, is presently in excess of $950,000.00.

[6]      The mortgagor company, Twig Luxury Trustee Company Limited, has as its sole director the second defendant, Mr Buckingham and, as I understand it, the first defendant Ms Mapp and her interests are shareholders in this company.

[7]      Significant   defaults   have   occurred   under   the   mortgage   between   the mortgagor and the plaintiff.  The plaintiff became mortgagee in possession of the property, as I understand it on 11 April 2013.  This was pursuant to an application to the Court for an order for vacant possession under s 137 Land Transfer Act, and the making of that order when redemption of the mortgage was not completed by 2.00 pm on Wednesday, 12 June 2013 as required.

[8]      On 15 June 2013 the plaintiff as mortgagee exercised its power of sale under the mortgage by entering into an unconditional contract for the sale of the property. Settlement under this sale agreement was scheduled for Tuesday, 18 June 2013.

[9]      Some 2 days later on 17 June 2013 the first defendant lodged the caveat in question against the titles to the property.  As I understand it, a copy of the caveat is presently unable to be searched but the caveat it seems claims a caveatable interest in the property by the first defendant as a beneficiary under a constructive trust of which the mortgagor is said to be the trustee.

[10]     The  plaintiff’s  position  here  essentially is  that  whatever  interest  may  be claimed under the caveat, the plaintiff has not consented to this nor is it binding on the plaintiff as mortgagee.  The plaintiff’s interest as first mortgagee of the property is indefeasible (Frazer v Walker [1967] NZLR 1069) and it has an accrued power of sale of the property, on default under this mortgage which has occurred. This is also indefeasible – Congregational Christian Church of Samoa Henderson Trust Board v Broadlands Finance Limited [1984] 2 NZLR 704.

[11]     Settlement  under  the  plaintiff’s  mortgagee  sale  and  purchase  agreement which was scheduled for 18 June 2013 is now overdue but this is prevented by the presence of the first defendant’s caveat.  That caveat needless to say is required to be removed from the titles to the property to enable settlement of the mortgagee sale to occur.

[12]     It is the plaintiff ’s position here essentially as I understand it that the lodging of the caveat is nothing but a mischievous attempt to undermine the settlement of the proper  mortgagee  sale  undertaken  by  the  plaintiff  and  follows  a  long  line  of

unsuccessful attempts to thwart a sale including breaching of Court orders on the part of the defendants and various endeavours they have carried out to prevent that proper sale process taking place.

Parties’ Submissions and My Decision

[13]     The general approach to applications such as the present was settled in Sims v

Lowe [1988] 1 NZLR 656 at 660 (CA):

The caveator seeks to clog or fetter the proprietary interest of another. As a matter of principle it seems right that he must justify the continued existence of his caveat. He will do that if he can show he has a reasonably arguable case for the interest he claims.

[14]     The first defendant here essentially seeks to sustain the caveat and thus has the burden of establishing a “reasonably arguable case” that she has a caveatable interest in the property in question: Castle Hill Run Ltd v NZI Finance Ltd [1985] 2

NZLR 104 at 106 (CA). An order for removal of a caveat will not be made unless it is patently clear that the caveat cannot be maintained, either because there was no valid ground for lodging it, or no such ground now exists: Sims v Lowe at 659-660. The Court therefore should not finally determine the rights of the parties unless the facts are not in dispute and the law has been fully argued: New Zealand Limousin Cattle Breeders Society Inc v Robertson [1984] 1 NZLR 41 (CA).

[15]     In the present case the plaintiff goes on to argue that even if a caveatable interest might be established, the caveat should not be upheld here in the exercise of the Court's residual discretion. On this aspect, the authorities are clear that the Court does have a residual discretion to remove a caveat where there is no practical advantage in its continuance, even if it protects an otherwise caveatable interest.

[16]     This  principle  has  been  stated  in  the  following  terms  in  Pacific  Homes Limited (in receivership) v Consolidated Joineries Limited [1996] 2 NZLR 652 (CA) at 656:

In such circumstances the Court retains the discretion to make an order removing the caveat, though it will be exercised cautiously. 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 the 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 the recovery of monies secured over the land or specific performance of an agreement or if the 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.

[17]     And, in the Court of Appeal in Stewart v Kaipara Consultants Limited [2000]

3 NZLR 55 Blanchard J at para [27] noted:

The grant of a specific remedy to a person claiming an interest in land lies in the discretion of the Court. It is a discretion to be exercised in accordance with settled principles. But where the particular piece of land does not have attributes giving it a personal value to the claimant, unable easily to be measured and substituted in economic terms, then the Court in balancing the interest of the defendant and other affected parties (especially those who have entered into independent commitments which will be affected by the delay in establishing the claim) will properly lean in favour of freeing the title from the claim if a fund can be created which suffices to protect the claimant's legitimate interest.

[18]     To  reiterate,  in  circumstances  where  this  residual  discretion  is  to  be exercised, a caveat will only be removed if the Court is satisfied that any legitimate interests of the caveator will not thereby be prejudiced. And, the Courts have found too that this discretion is one to be exercised cautiously.1

[19]    Generally, it is clear a caveat will be removed where the caveator has 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  relating  to  the  land,  or  if  the  caveator's  interests  can  be  reasonably

accommodated in some other way.2

[20]     In the present case, as I have noted above, although the caveat in question is unable to be searched at this time it does seem the caveatable interest claimed by the first defendant is a right to the property as a beneficiary under a constructive trust of which the mortgagor is trustee.  There is however no evidence of any kind before the Court to justify this claim on the part of the first defendant.  Nor as I have mentioned has there been any formal Notice of Opposition filed by the defendants with respect

to the present application, nor any appearance by or on their behalf today.

1 Stewart v Kaipara Consultants Ltd [2000] 3 NZLR 55

2 Pacific Homes Ltd v Consolidated Joineries Ltd [1996] 2 NZLR 652 at 7.

[21]     Notwithstanding this, it must be accepted here that in the past this Court has confirmed that a caveatable interest over a property may arise in situations where the registered proprietor holds the property under a constructive trust in favour of a third party caveator.

[22]     As noted above, the first defendant here it is presumed seeks an order from the Court sustaining her caveat and thus she has a burden of establishing a “reasonably arguable case” that the caveatable interest claimed does exist.

[23]     But,  to  this  end  there  is  really  nothing  before  the  Court  to  justify  the caveatable  interest  claimed.    No  details  of  the  claimed  constructive  trust  are provided.   It is hard therefore to escape the conclusion that this claim is a mere device concocted to delay or upset the plaintiff’s genuine mortgagee sale of the property. This alone will be sufficient to allow removal of the caveat here.

[24]     But for completeness I will go on now in this judgment to consider whether, even if the continued existence of the caveat was justified, whether the caveat should be upheld in this case involves the exercise of the Court’s residual discretion.

[25]     Assuming for a moment therefore that the first defendant has shown that she has a reasonably arguable case for her caveatable interest and the caveat to remain (and I have essentially found otherwise), I turn now to consider whether notwithstanding this, the Court under the circumstances here should exercise its residual discretion to have the caveat removed.

[26]     In my view this aspect of the case is quickly determined.  I find here that the plaintiff’s  case  is  effectively  unanswerable.    As  to  this  I  apply  the  following principles which were applied by His Honour Associate Judge Faire in Rabobank

New Zealand Limited v Lambert [2012] NZHC 908 as follows:

A registered  mortgagee’s  title  (which  the  plaintiff  has  here)  is paramount; that includes the mortgagee’s right to exercise its power of sale:   Congregational Christian Church of Samoa Henderson Trust Board v Broadlands Finance Ltd [1984] 2 NZLR 704.

Section 105 Land Transfer Act 1952 provides:

105       Transfer by Mortgagee

Upon the registration of any transfer executed by a mortgagee for the purpose of [exercising a power of sale over any land], the estate or interest of the mortgagor therein expressed to be transferred shall pass to and vest in the purchaser, freed and discharged from all liability on account of the mortgage, or of any estate or interest except an estate or interest created by any instrument which has priority over the mortgage or which by reason of the consent of the mortgagee is binding on him.

Irefer also to the judgment of Master Venning in Canterbury Finance Ltd v Sagar Trust Ltd (1997) 3 NZ ConvC 192,571 (HC).  That was a case also where a registered proprietor endeavoured to enter into a sale agreement with a third party before its mortgagee had conducted a proper mortgagee sale.  The land was sold at the mortgagee sale to Canterbury Finance Ltd which then brought the High Court proceeding. The Court found the original sale agreement might support a caveat but ordered the caveat to be removed.  That was because, as the headnote

records,:3

If a mortgagee does not consent to a sale the mortgagee is not bound. Sagar’s interest in the land being subject to the mortgagee’s power of sale was extinguished by the sale to the mortgagee:  National Mutual Finance (1988) Ltd v Berryman.

[27]     Here,  there  is  nothing  before  the  Court  to  suggest  that  the  plaintiff  as mortgagee in any way consented to the Trust claimed by the first defendant or any sale agreement which the first defendant may have purported to construct.

[28]     The interest supposedly claimed in this case by the first defendant in her caveat (as beneficiary under the constructive Trust) as I have said was clearly not consented to by the plaintiff as mortgagee, it has no priority and it is entitled to no protection in respect of the registration of any transfer executed by the mortgagee for the purpose of the exercise of the mortgagee’s power of sale over the property.  As I understand it, that mortgagee sale and transfer is precisely what the plaintiff wishes to carry out here.   And following this sale as I understand, there will still be a

shortfall owing under the plaintiff’s mortgage.

3 At [4] of Headnote referring to National Mutual Finance 1988 Ltd v Berryman (HC Wellington M

451/91, 2 October 1991); Jenssen v Jenssen, Charles Ashton Ltd (CA 246/90, 13 December 1990)
and Mewhinney v Permanent Building Society of Otago [1882] 1 NZLR 270).

[29]     For all these reasons any attempt by the first defendant to protect her caveat here must fail.

[30]     I conclude therefore that, even if the first defendant was able to show that she had a caveatable interest over the property (and I have found otherwise) the present case is an appropriate one for the Court to exercise its residual discretion and require the caveat to lapse.  This is to allow the plaintiff’s mortgagee sale in pursuance of its unquestioned rights under the first mortgage over the property to be completed.

[31]     If it should transpire that the first or second defendants, the mortgagor or any other party might then decide they have a claim against the plaintiff for its actions under its mortgage then those claims could be advanced and if successful be the subject of an appropriate damages award.  In my view here damages if any would provide an adequate remedy for the defendants if indeed any such remedy might lie against the plaintiff.

Conclusion

[32]     The plaintiff’s application before me therefore succeeds in its entirety. [33]  Orders are now made as follows:

(a)      That JT Law is authorised to withdraw the Caveat lodged with LINZ under registration number 9432051.1 Wellington Registry (the caveat) by the first defendant against the lands in certificates of title WN49A/272 and WN57A/439 Wellington Registry, being together the properties known as 16 Hammerton Road, Lower Hutt, (Balgownie House) and the adjoining section (the Properties) from registration against those titles; but

(b)If the Caveat shall be registered against these titles then JT Law shall be authorised to sign, certify and absolutely release a withdrawal of the caveat in the Land On Line workspace to achieve registration of

withdrawal of the caveat in the same e-dealing as the transfer in exercise of the power of sale of the Properties authorised by Cressida Capital One Limited (the mortgagee) in favour of the purchaser from that mortgagee.

[34]    The plaintiff has succeeded in its present application and in my view it is entitled to an award of costs against the defendants.

[35]     Mr Toebes for the plaintiff has requested that I might nevertheless reserve costs today to allow him time to provide a suitable Memorandum to this Court with respect to that issue of costs.

[36]     Costs are therefore reserved.

[37]     In the event the parties are unable to agree between them on the issue of costs, the following directions are now made:

(a)     The plaintiff is to file and serve its Memorandum on this issue of costs within 15 working days of today.

(b)The defendants are then to have a further 15 working days from that date to file and serve any Memorandum on costs in response they may wish.

(c)     The plaintiff is then to have a further period of 5 working days to file and serve any brief response Memorandum on the costs question.

(d)Those Memoranda are then to be referred to me and I will decide the question of costs on this application based on the Memoranda and the

material then before the Court.

Solicitors:           JT Law, Wellington

‘Justice D.I. Gendall’