Erlon Limited v Agrotrust Limited - [2022] NZHC 1995

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2021-470-117

[2022] NZHC 1995

UNDER Section 143 of the Land Transfer Act 2017

BETWEEN

ERLON LIMITED

Applicant

AND

AGROTRUST LIMITED

Respondent

Hearing: 19 May 2022

Appearances:

J Delaney for the Applicant

J Hakaria for the Respondent

Judgment:

12 August 2022

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 12 August 2022 at 4pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors/Counsel: KM Law, Tauranga
Sharp Tudhope, Tauranga J Delaney, Tauranga

ERLON LTD v AGROTRUST LTD [2022] NZHC 1995 [12 August 2022]

Introduction

[1] Erlon Limited has applied for an order that a caveat over two properties in Pakaraka in the Far North not lapse. The properties are owned by the respondent, Agrotrust Limited, and have been converted from farmland into a kiwifruit orchard.

[2]Erlon’s interest in the properties is described on the caveat as:

an equitable interest pursuant to a constructive trust ... by reason of the Joint Venture Agreement dated 6 November 2021 between the Caveator and the registered proprietor of the Properties, and by reason of both direct and indirect financial contributions to the Properties.

[3] In an application that a caveat not lapse, the overriding issue for determination is whether it is reasonably arguable that the interest in the property claimed in the caveat exists and is an interest in land. Erlon submits that it is reasonably arguable that an institutional constructive trust arises and is a sufficient interest in land to sustain the caveat.

[4] It is settled law that an institutional constructive trust is a sufficient interest in land to sustain a caveat and that the four elements for such a trust are as set out in Lankow v Rose, namely that:1
(a)the applicant has made contributions, direct or indirect, to the property in question;

(b)the applicant had an expectation of an interest in the property;

(c)that expectation was a reasonable one; and

(d)the respondent should reasonably expect to yield the interest to the applicant.

[5] Agrotrust submits there cannot be an institutional constructive trust in Erlon’s favour because:

1 Lankow v Rose [1995] 1 NZLR 277 (CA) at 294 per Tipping J, as recently confirmed in Siddiqui v Siddiqui [2022] NZCA 324 at [26].

(a)Erlon could not have had an expectation of an interest in the properties;

(b)Erlon used Agrotrust’s money to fund development of the properties and did not contribute to the development itself;

(c)Erlon derived a profit from the development of the properties;

(d)even if Erlon did make contributions to the properties:

(i)they did not manifestly exceed the benefit it obtained by way of payment for its contributions; and

(ii)the works were performed in its capacity as a contractor/service provider, which do not give rise to an equitable interest that is capable of supporting a caveat.

Issues

[6] The issues are therefore whether Erlon has established that it is reasonably arguable that:

(a)Erlon has made…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2022] NZHC 1995
Decision Date: 12 August 2022

CaseChat Overview and Summary

Erlon Limited has applied for an order that a caveat over two properties in Pakaraka in the Far North not lapse. The properties are owned by Agrotrust Limited, and have been converted from farmland into a kiwifruit orchard. Erlon’s interest in the properties is described on the caveat as being an equitable interest pursuant to a constructive trust by reason of a joint venture agreement dated 6 November 2021 between the Caveator and the registered proprietor of the Properties, and by reason of both direct and indirect financial contributions to the Properties. The court must determine whether it is reasonably arguable that the interest in the property claimed in the caveat exists and is an interest in land. The issues are whether Erlon has established that it is reasonably arguable that: (a) Erlon has made contributions, direct or indirect to the properties against which the caveat is registered; (b) Erlon had an expectation of an interest in the properties; (c) Erlon’s expectation was reasonable; and (d) Agrotrust should reasonably expect to yield an interest in the properties to Erlon. The court found that it is reasonably arguable that Erlon has made contributions, direct or indirect to the property in question. It is reasonably arguable that Erlon had an expectation of an interest in the property. It is reasonably arguable that Erlon’s expectation was reasonable. It is reasonably arguable that Agrotrust should reasonably expect to yield an interest in the properties to Erlon. Therefore, the court granted Erlon’s application that the caveat not lapse.

Orders