GRP Holdings Limited v VP Nominees Limited
[2022] NZHC 3262
•6 December 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-1403
[2022] NZHC 3262
IN THE MATTER of an application to sustain Caveat 11816775.1 against Record of Title NZ12C/168 BETWEEN
GRP HOLDINGS LIMITED
Applicant
AND
VP NOMINEES LIMITED
Respondent
CIV-2020-404-1994 IN THE MATTER
of an application to sustain Caveat 11816775.1 against Record of Title NZ12C/168
BETWEEN
GRP MANAGEMENT LIMITED
Applicant
AND
VP NOMINEES LIMITED
Respondent
Hearing: 1 August 2022 Counsel:
G Blanchard KC and GSA Morrison for GRP Holdings Limited and GRP Management Limited
R Hollyman KC for VP Nominees Limited
Judgment:
6 December 2022
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 6 December 2022 at 4pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
GRP HOLDINGS LTD v VP NOMINEES LTD [2022] NZHC 3262 [6 December 2022]
Introduction
[1] VP Nominees Limited has applied for an order adding a condition requiring GRP Holdings Limited to provide a satisfactory undertaking as to damages to continue lodgement of its caveat against VP Nominees’ land in Sinton Road, Hobsonville.
[2] VP Nominees originally brought its application against GRP Management Limited as well but accepted in submissions that this part of the application could not be pursued as GRP Management was not a present caveator.
[3] VP Nominees submits the above order ought to be made against GRP Holdings as there has been a material change in circumstances since the Court made the order sustaining GRP Holdings’ caveat in March 2021; namely that a final determination of GRP Holdings’ interest in the property before 1 April 2022 has not been possible, contrary to what was expressly contemplated by the Court when it made the order sustaining the caveat (Caveat Judgment).1
[4]GRP Holdings opposes the application including on the basis that:
(a)Although there may be jurisdiction to make an order that a caveat not lapse conditional on the provision of an undertaking, it is too late to do so now that a final order has been made sustaining the caveat.
(b)It would be an abuse of process to allow such an application now when an application could have been made at the time of the original hearing.
(c)In any event, it is not appropriate to add such a condition, as VP Nominees’ position is of its own making as it entered into the sale and purchase agreement with the third party knowing of the caveat and that GRP was going to bring proceedings for specific performance.
Issues
[5]Three issues arise:
1 GRP Holdings Ltd v VP Nominees Ltd [2021] NZHC 545 [Caveat Judgment] at [220].
(a)Is there jurisdiction to vary the caveat order and add a condition requiring an undertaking now?
(b)Would it be an abuse of process to allow such an application?
(c)In any event, would it be appropriate to add a condition requiring an undertaking for damages in the circumstances?
[6] I begin by setting out the factual background and then discuss the first two issues and the questions arising together. I move on to the third issue without resolving those questions as, in my view, there remains considerable uncertainty as to the correct position and the third issue is effectively dispositive of this application if answered in the negative.
Background
[7] On 10 October 2018, VP Nominees entered into an agreement to sell 14 Sinton Road, Hobsonville (Property) to GRP Management Limited (GRP Management) for
$8.75 million (later nominated to GRP Holdings) (together, GRP). The Property consists of 2.37 hectares of development land. The settlement with GRP did not proceed as intended on 31 March 2020. GRP submits this was because of the Covid- 19 Level 4 lockdown and in particular because GRP wished to inspect the property before settlement in accordance with an oral agreement for pre-settlement inspection.
[8] Following the issue of a purported settlement notice in April 2020, GRP sought confirmation from VP Nominees that it was not aware of any methamphetamine contamination at the property.
[9] On 8 May 2020 VP Nominees responded in relation to the methamphetamine issue, recording that the current property manager was not aware of any contamination during his management. However VP Nominees’ response confirmed the former property manager had advised that methamphetamine contamination had been discovered in 2016 but the property had been professionally decontaminated and they were not aware of any further issue.
[10] Further correspondence ensued between the parties in relation to both inspection and the methamphetamine issue.
[11] On 14 May 2020, VP Nominees then gave notice purporting to cancel the agreement, recording that the deposit was forfeited, and that VP Nominees reserved the right to sue for damages.
[12] On 15 May 2020, GRP wrote to VP Nominees disputing its purported cancellation of the agreement with detailed reasons, including that VP Nominees was in breach of the agreement.
[13] On 18 May 2020, VP Nominees wrote to GRP asking it to withdraw its caveat on the basis that the agreement had been cancelled.
[14] GRP replied on 25 May 2020 recording that (as previously advised) VP Nominees’ purported cancellation of the agreement was invalid and unlawful, that GRP would be commencing legal proceedings shortly and that it would apply to sustain the caveat if VP Nominees applied to LINZ for the caveat to lapse.
[15] On 23 June 2020, VP Nominees entered into an agreement to sell the Property to Cabra Developments Limited (Cabra) for $9.1 million subject to a 20 working day due diligence condition. In addition, the further terms of sale provided that the deposit of 10 per cent of the purchase price would be paid into VP Nominees’ solicitors’ trust account and “shall be held undisbursed until such time as the caveat 11281036.1 had lapsed, been withdrawn or has been removed by court order, to the intent that the deposit cannot be disbursed until such time as there is no caveat registered on the title by any previous purchaser.”
[16]On 6 July 2020, VP Nominees applied to LINZ to lapse the caveat.
[17] On 21 July 2020, the Cabra Agreement went unconditional with settlement scheduled to take place on 1 April 2022.
[18] On 24 July 2020, GRP Management filed and served an application in the High Court to sustain its caveat. However, the caveat had already lapsed, GRP says due to a timing and service technicality caused by LINZ. In the Caveat Judgment, I held that leave would have been granted for GRP Management to lodge a second caveat, had that been required. Instead, on 30 July 2020, GRP Holdings as nominee registered a caveat with LINZ.
[19] Although not before the Court for the caveat application, on 31 July 2020 solicitors for GRP wrote to solicitors for Cabra advising that GRP’s position is that VP Nominees was in breach of the agreement when it purported to cancel and so was not willing, ready and able to settle. The letter continued:
As far as GRP Holdings is concerned, the Agreement remains on foot. Substantive proceedings will be filed shortly against VP Nominees seeking specific performance and/or damages.
[20] On 13 August 2020, VP Nominees applied to lapse the caveat lodged by GRP Holdings.
[21] On 26 August 2020 GRP Holdings applied to the High Court to sustain its caveat.
[22] On 14 September 2020, GRP Management and GRP Holdings commenced proceedings against VP Nominees seeking specific performance of the agreement (Substantive Proceeding).2 The validity of the purported cancellation by VP Nominees is a key issue for determination in that proceeding.
[23] GRP Holdings’ application to sustain its caveat was granted on 23 March 2021 in the Caveat Judgment. No condition requiring proceedings to be filed was necessary, as the Substantive Proceeding had already been filed. Nor was any condition requiring an undertaking either applied for or granted.
2 File reference CIV-2020-404-001675.
[24] The hearing of the Substantive Proceeding was originally set down on a priority basis for five days commencing on 15 November 2021. However, on 4 November 2021, that fixture was vacated and a ten day trial allocated, commencing on 19 June 2023.
[25] VP Nominees submits that the fixture was vacated due in part to Covid. However it appears from Wylie J’s minute that the main reason for the vacation of the original date was the number of witnesses to be called, with 17 witnesses of fact and eight expert witnesses plus two further witnesses possibly by subpoena. There are almost equal numbers of witnesses for each party. VP Nominees pushed for the hearing to go ahead although accepted that the five days allocated would only be sufficient for the evidence and not closing submissions. In his Honour’s Minute, Wylie J described VP Nominees’ estimate as “woefully inadequate” and indicated his firm view that it was undesirable both from the Court’s and the parties’ perspective for the matter to be part-heard.
Jurisdiction and procedure: Is there jurisdiction to vary the caveat order and add a requirement to provide an undertaking, and would allowing the application now be an abuse of process?
[26] VP Nominees submits that there is no question that the Court has the power to require the provision of an undertaking as to damages to sustain a caveat.
[27] Applications for orders sustaining caveats are made under the originating application procedure provided in pt 19 of the High Court Rules. Rule 19.10(1) provides that a number of rules including r 7.45 apply “with all necessary modifications to proceedings commenced by originating application.”
[28] Rule 7.45 provides that an order may be made “subject to any just terms and conditions, including, without limitation, any condition that—(a) a party give an undertaking”.
[29] VP Nominees submits that in adopting r 7.45, pt 19 expressly contemplates, among other possible conditions, the provision of an undertaking by a caveator.
[30] Although not referred to expressly by VP Nominees, r 19.10(3) provides that “[d]espite [r 19.10(1)], rule 7.45, in its application to a proceeding commenced by originating application, is subject to the Act under which the originating application is made.”
[31] VP Nominees relies on the decision in BP Oil New Zealand Ltd v Van Beers Motors,3 where Barker J canvassed at length the authorities on whether a court could impose a condition requiring an undertaking as to damages on an order to sustain a caveat. Barker J concluded in relation to the earlier High Court Rules that the court did have power to order an undertaking. Barker J was referred to the earlier version of r 19.10(3), R458F(2), but concluded:4
Clearly if the terms of an Act prevented the conditions to an order, then R 263 would not apply but s 145 is silent as to whether conditions may be imposed or not.
[32] The previous rule was not limited at the time of BP Oil to the application of the equivalent of r 7.45 but, rather, extended more generally to the terms or conditions (including undertakings) on which an order on an interlocutory application could be made.
[33] The conclusion in BP Oil was expressly approved by the Court of Appeal in Raiser Developments Ltd v Trefoil Properties Ltd,5 although the question of whether a condition requiring an undertaking could be imposed was not in issue in that case.
[34] In Raiser leave had been reserved in the original orders sustaining the caveat to have the caveat application listed for further consideration if, as a result of a change of circumstances, further orders should be made. After the judgment sustaining the caveat, the registered proprietor (together with the other defendant) successfully sought orders for security for costs in the substantive proceeding. The caveator failed to post security within the time fixed. The registered proprietor therefore applied for the caveat application to be relisted for argument pursuant to the leave reserved as
3 BP Oil New Zealand Ltd v Van Beers Motors [1992] 1 NZLR 211 (HC).
4 At 217.
5 Raiser Developments Ltd v Trefoil Properties Ltd [2008] NZCA 73, (2008) 9 NZCPR 161 at [41]– [43].
referred to above, seeking orders for its removal. In the High Court, Associate Judge Faire granted the application on the basis that there had been a change in circumstances which was relevant to the balance of convenience. The change in circumstances included the caveator’s failure to comply with timetabling directions and to post security as ordered. In removing the caveat, the Associate Judge referred to the fact that the failure to pay security meant the plaintiff’s right to a decree of specific performance was also in jeopardy because, as purchaser, it would have to pay the purchase price if specific performance was ordered.6
[35] The Court of Appeal dismissed the appeal, holding the leave reserved for the application to be revisited was sufficient for the Judge to determine whether the caveat ought to be removed. The Court held further that:7
The amount required to settle the transaction in the form alleged by Raiser is so significantly higher than the relatively modest amount required to comply with the order for security for costs that non-payment of that security alone would have justified the Judge’s decision to remove the caveat. The additional defaults in complying with timetabling orders put a prompt trial at risk and provided further grounds for the Associate Judge’s decision to revisit maintenance of the caveat.
[36] Therefore, not only was the Court not directly considering whether a condition requiring an undertaking could be imposed, the factual situation is distinguishable from the situation here.
[37] GRP refers to a recent decision of the Supreme Court, Cowan v Cowan, where the Court expressly left open the question of whether undertakings could be imposed as a condition of sustaining a caveat.8 In Cowan v Cowan there had been two earlier Court of Appeal decisions, the first of which granted leave to file a second caveat on condition that the caveators file an undertaking as to damages.9 Following the lodging of the second caveat and the filing of the required undertaking as to damages, the registered proprietor applied for its removal. At the hearing of the removal application in the High Court, Associate Judge Lester held that an undertaking as to damages
6 Raiser Developments Ltd v Trefoil Properties Ltd HC Auckland CIV-2005-404-5883, 11 July 2007 at [12(h)].
7 Raiser Developments Ltd v Trefoil Properties Ltd, above n 5 at [56].
8 Cowan v Cowan [2022] NZSC 43.
9 At [10].
should be “accompanied … by evidence that the undertaking is of value,”10 and that only an undertaking in form but not substance had been provided.11 Following that finding, his Honour concluded that the caveat should be removed, although he made orders that the net proceeds of sale were to be held in a solicitor’s trust account until further court order or the written agreement of the parties.
[38] The caveators appealed against this judgment but their appeal was dismissed. This second Court of Appeal judgment was then appealed to the Supreme Court.
[39] The Supreme Court commented that the dispute “touches on important issues as to the principles that apply to undertakings as to damages.”12 The Court records however that the appeal was only from the second Court of Appeal judgment and not the first, where the condition requiring an undertaking was imposed. The Supreme Court records that the caveators confirmed to the Court at the hearing that they did not wish to apply for leave to appeal out of time against the first Court of Appeal decision. The Supreme Court therefore held that this meant the Court would need to “deal with the appeal on the basis that the first Court of Appeal decision is correct and that the undertaking as to damages was properly required.” Some paragraphs later, after reiterating that the Court must deal with the appeal on the basis that the first Court of Appeal decision was correct, the Supreme Court commented:13
There are a number of cases which deal with the perhaps slightly different, although closely related, question of whether such an undertaking can be required as a condition of sustaining such a caveat. Questions which are relevant to this issue include whether an order sustaining a caveat is interlocutory within the meaning of r 1.3(1) of the High Court Rules 2016 (thereby engaging r 7.45, which provides (inter alia) that an interlocutory order may be conditional on an undertaking) and also whether requiring an undertaking unacceptably cuts across the operation and policy of s 148.
[40] The Supreme Court again later in the judgment questioned the correct position, this time stating:14
There may have been scope for debate about whether (a) an undertaking should have been required, (b) if required, whether it should have been capped and (c) if so, at what amount. But that debate should have occurred during the
10 Cowan v Cowan [2021] NZHC 1291 at [24] (footnote omitted).
11 At [30].
12 Cowan v Cowan, above n 8, at [13].
13 At [23].
14 At [62].
first Court of Appeal hearing or in the context of an appeal against that decision.
[41] The Supreme Court went on to conclude that the undertaking was plainly intended to be sufficiently substantial to provide material protection for the registered proprietor and that it clearly was not. Against that background the Court said that to allow the appeal against the second Court of Appeal judgment they would, in effect, be setting aside the condition imposed in the first Court of Appeal judgment despite the first appeal judgment not being the subject of the appeal.15
[42] In this case there are added questions. The first being whether, even if a condition requiring an undertaking can be imposed, such an application can be made more than a year after the original orders sustaining the caveat were made or whether it would be an abuse of process. And second, whether the application ought to be a new originating application to remove the caveat or an interlocutory application in the original caveat proceeding, the approach taken by VP Nominees in this case.
[43] Given the uncertainty and the issues in relation to the correct procedural approach, I move onto the third issue: if there is jurisdiction, should a condition requiring an undertaking be imposed in the circumstances? If it would not, then this issue determines the application in any event.
If there is jurisdiction, would it be appropriate to order an undertaking for damages in the circumstances?
VP Nominees’ Submissions
[44] VP Nominees submits that GRP Holdings should be required to provide an undertaking for the following reasons:
(a)The evidence that VP Nominees may suffer a significant loss is plain. If Cabra cancels its agreement, based on the September 2021 valuation, the loss would be at least $900,000 (but likely more).
15 At [63].
(b)Even putting that to one side, the Court should assume that the registered owner is likely to suffer loss if a caveat is sustained, a point made by the learned authors of Hinde, McMorland and Sim:16
The Court should assume that the registered owner is likely to suffer some loss if the caveat is sustained, rather than place an onus on the registered owner to put forward evidence that loss is likely. In the absence of evidence that no loss is likely, or of other special circumstances, the Court should require an undertaking.
If GRP is ultimately unsuccessful, it would be unjust for VP Nominees to be left with no remedy for the losses it may suffer.
(c)At the time the Court made its orders in March 2021 it was expressly apprehended that the Substantive Proceedings could, and would, be resolved before VP Nominees faced any exposure to loss solely through the presence of the caveat. That has not been possible.
(d)There will be considerable further delay in reaching a final determination of GRP’s claims.
(e)GRP has declined to engage in arbitration. Although it cannot be compelled to engage in an alternative judicative process, it should not be entitled to refuse a process for determination of its claims without bearing the consequence of that decision in the event it causes loss.
(f)It is entirely open to GRP to elect to sue only for damages. It is only GRP’s insistence upon receiving this particular piece of development land that gives rise to the potential for substantial loss. While it may be entitled to so insist, it ought not to be allowed to do so without regard for the potential consequences.
(g)GRP Holdings has failed to put any appropriate evidence before the Court as to its financial position. Moreover, and adding to the change in circumstances, it appears that GRP Holdings has disposed of its only
16 Hinde McMorland & Sim Land Law in New Zealand (LexisNexis, online ed) at [10.020(f)] and [10.022(j)].
landholding to another entity, GRP Properties Limited, in March this year.
(h)The parties’ respective positions in the Substantive Proceeding might both be described as “arguable” and so are a neutral factor.
(i)The protection afforded by s 148 of the Land Transfer Act 2017 is inadequate. This is because s 148 addresses only the situation where a caveat is lodged “without reasonable cause”. The applicant submits that provision’s applicability is doubtful where, as here, the High Court has already held that the caveator has a reasonably arguable claim to an interest.
[45] In addition, VP Nominees submits that, although it might have sought the provision of an undertaking or the Court might have imposed such a condition when the application to sustain the caveat was heard:
(a)It was then anticipated that a hearing of GRP’s claims could occur expeditiously, so as to avoid the situation that has developed. VP Nominees submits that a trial in June 2023 is contrary to VP Nominees’ expectation, and the expectation of the Court in making its orders, so that VP Nominees has significant additional exposure.
(b)There is no prejudice or difficulty in addressing the need for an undertaking as a separate and discrete issue. VP Nominees is not challenging or seeking to relitigate the order sustaining the caveat; it seeks only that such order should be varied so as to include an orthodox condition in the interests of justice (to reflect the imposition of the caveat on VP Nominees’ rights to deal with its land).
GRP’s Submissions
[46] GRP says in response that GRP cannot be responsible for protecting VP Nominees against any losses it suffers in respect of the Cabra agreement. In GRP’s submission, VP Nominees has exposed itself to the risk of any such losses with its eyes wide open, where:
(a)As held in the Caveat Judgment, from at least 11 May 2020 it would have been clear to VP Nominees that:
(i)GRP had claims for compensation (for breach of cls 5.2(2) and 8 of the sale and purchase agreement, and misrepresentation and/or misleading or deceptive conduct) in relation to the methamphetamine contamination at the Property; and
(ii)the parties’ mutual obligations under cl 8.4 were engaged, requiring them to resolve the dispute over the interim amount to be deducted to allow settlement to proceed.
(b)From 15 May 2020, the day after it purported to cancel the agreement, VP Nominees was on notice of GRP’s position that the agreement remained operative. That was repeated in correspondence on 25 May 2020, including that GRP would:
(i)shortly be commencing proceedings in respect of VP Nominees’ invalid cancellation of the agreement; and
(ii)would apply to sustain the caveat to protect its interest in the Property if VP Nominees applied to LINZ for it to lapse.
(c)Yet on 23 June 2020, VP Nominees entered the Cabra agreement, despite having full knowledge of:
(i)GRP’s position that the agreement remained on foot and associated claims, in respect of which GRP intended to commence proceedings and sustain its caveat if required; and
(ii)GRP Management’s caveat registered against the title of the Property to protect its interest as purchaser under the agreement.
(d)On or around 6 July 2020, VP Nominees applied to LINZ to lapse GRP Management’s caveat. On 21 July 2020 before the period for GRP Management to apply to sustain its caveat had expired,
VP Nominees went unconditional under the Cabra agreement, with settlement set for 1 April 2022.
[47] In short, GRP submits that VP Nominees has known at all material times that the caveat protected GRP’s interest in the Property as purchaser under the agreement, and that it would impact on VP Nominees’ ability to sell the Property to a third party. Yet VP Nominees went ahead and purported to sell the Property to Cabra anyway, and then went unconditional under the Cabra agreement. GRP submits that VP Nominees could and should have made the Cabra agreement conditional upon removal of GRP’s caveat or full and final resolution of the dispute with GRP. In those circumstances, GRP submits that VP Nominees is the author of its own misfortune and cannot reasonably expect GRP to provide an undertaking to secure its claim for damages.
[48] GRP further submits that there is no evidence before the Court to support what VP Nominees describes as an “ever-present” risk that Cabra cancels the Cabra agreement and sues VP Nominees for damages. Rather, GRP submits the evidence points to the fact that Cabra has waived significant rights under the Cabra agreement to ensure settlement can proceed. This includes the fact that the deposit is held in the VP Nominees’ trust account and, further, that VP Nominees was able to secure an agreement with Cabra that if, and only if, VP Nominees proceeds to settle with it, Cabra will not seek late settlement interest. Cabra has, however, reserved its right to cancel the agreement and/or seek damages.
[49] GRP submits that nor is there likely to be any claim for loss. GRP says that now that Cabra has agreed to waive its right to late settlement interest, the only remaining loss could be by reference to the value of 14 Sinton Road. GRP says that if, as VP Nominees submits, the value of the Property has increased, a cancellation by Cabra would not cause VP Nominees any loss – VP Nominees would retain the Property, and any damages would be offset by the capital gains it received. VP Nominees also continues to hold the $1.5 million deposit paid by GRP, exceeding the amount it is entitled to retain under the agreement of 10 per cent of the purchase price, giving it additional protection against any losses.
[50] In the alternative, GRP submits the Court should not exercise its discretion because an undertaking as to damages is unnecessary here and such an undertaking would not materially add to VP Nominees’ ordinary rights to claim or recover damages.17
[51] GRP submits that the remaining grounds relied on by VP Nominees to support the Court exercising its jurisdiction to order an undertaking are irrelevant. Namely:
(a)There is no legal obligation on GRP to privately arbitrate the dispute. VP Nominees cannot rely on GRP’s legitimate decision to pursue court proceedings, subject to ordinary court timetabling and scheduling, as being prejudicial in any way or otherwise requiring an undertaking.
(b)Nor is there any obligation on GRP to volunteer an undertaking as to damages to protect VP Nominees against any potentially inconvenient court scheduling or timetabling, whether due to GRP’s legitimate choice not to arbitrate or otherwise.
Discussion
[52] Even if there is jurisdiction, having considered the submissions of the parties, I do not consider that it is appropriate for a condition requiring an undertaking as to damages to be ordered now.
[53] I do not accept that there has been a material change in circumstances justifying the imposition of such a condition at this stage. There was no assurance from the outset that the question of whether there has been a valid cancellation would be finally determined by 1 April 2022. Even if the trial of the Substantive Proceeding had gone ahead in November 2021, as originally scheduled, there was always a prospect that the decision would be appealed and so no final determination would have been made.
[54] In the Caveat Judgment, I recorded that the settlement date for the new sale and purchase agreement entered into by VP Nominees was 1 April 2022 and that “the question of whether VP Nominees validly cancelled the agreement needs to be finally
17 Citing Thomas v Thomas HC Christchurch CIV-2011-409-2514, 24 April 2012 at [16].
determined before then”.18 That comment was overly optimistic in hindsight but in any event cannot be the basis for a claim that there has been a material change in circumstances. It was not expressed as a condition of the caveat being sustained nor was leave reserved for the parties to return to court if that time frame could not be met.
[55] As VP Nominees accepts in its submissions (as set out above) it “might have sought the provision of an undertaking or the Court might have imposed such a condition when the application to sustain the caveat was heard.” However, no application for a condition requiring an undertaking was made at the original hearing and nor for leave to be reserved to return to Court if the Substantive Proceeding could not be finally determined before 1 April 2022.
[56] It is a feature of this case that the judges deciding whether to vacate the November fixture and the application for priority in reallocating a date both commented that notwithstanding GRP’s claims, VP Nominees resold the property to a third party.19
[57] Counsel for VP Nominees submits that it has not disentitled itself by entering into the Cabra Agreement because of the long settlement date agreed to, submitting that VP Nominees expected to have the issue resolved. Whilst I make no final finding, on the evidence before me in this application that appears to be a risk that VP Nominees took. If VP Nominees’ expectations turn out to have been wrong that does not justify requiring an undertaking by GRP now.
[58] In asserting that the loss would be at least $900,000, VP Nominees assumes that Cabra will be able to recover that loss. However, Cabra was on notice of the dispute with GRP when it entered into the sale and purchase agreement with VP Nominees as the agreement expressly refers to the caveat. And the further term included in the Cabra agreement in relation to the holding of the deposit in VP Nominees’ solicitors’ trust account until the caveat lapses (clause 20), depends not
18 Caveat Judgment, above n 1, at [220].
19 See GRP Management Ltd v VP Nominees Limited HC Auckland CIV-2020-404-001675, 4 November 2021 (Minute of Wylie J) at [1]; and GRP Management Ltd v VP Nominees Limited CIV-2020-404-001675, 28 March 2022 (Minute of Moore J) at [3].
only on Caveat 11281036.1 lapsing but any caveat registered by any previous purchaser.
[59] On 31 July 2020, ten days after the agreement went unconditional, GRP’s solicitors wrote directly to Cabra’s solicitors advising of its claim and that GRP would be seeking specific performance. Despite this, Cabra later agreed to continue with the agreement and to waive late settlement interest, although I accept Cabra has reserved its rights or remedies if settlement eventually occurs.
[60] This is not a situation where any loss suffered by VP Nominees necessarily ought to be borne by GRP. Cabra’s solicitors’ letter dated 23 March 2022 refers to Cabra being “always given the impression that the first agreement had been lawfully cancelled and that appears to be in at least some doubt.” It does not follow that GRP ought to be liable for damages awarded to Cabra in respect of such alleged representations. Any undertaking would, therefore, have to make it clear that it is not presumed that, should the caveator’s claim ultimately fail, the caveator will be liable for all damages by reason of having lodged a caveat. A similar point was made by Fogarty J in Grace Pacific Ltd v Troon.20
[61] The only loss referred to by VP Nominees appears to be loss as a result of a claim for damages by Cabra, with Ms Ming Ma’s evidence for VP Nominees stating that “VP Nominees may be exposed to a significant claim for damages”. Possible loss by VP Nominees itself, by reference to the value of 14 Sinton Road if GRP’s claim for specific performance fails and Cabra does not settle, does not appear to be relied on. Nor is there evidence of any such loss before the Court. A valuation of the property completed for the Substantive Proceeding was provided in evidence, with a value of
$7,425,000 as at 10 October 2018 and $10,000,000 as at 27 September 2021. The agreement entered into with Cabra is for $9,100,000. If GRP does not succeed in its claim for specific performance, and Cabra cancels in the meantime, the above evidence does not suggest that VP Nominees will be likely to suffer loss if it has to find a new purchaser.
20 Grace Pacific Ltd v Troon Invercargill HC CIV 2004-425-289, 18 June 2004 at [32].
[62] Furthermore, VP Nominees retains the deposit paid by GRP of $1,500,000. VP Nominees asserted when it purported to cancel the agreement on 14 May 2020 that the deposit was forfeited.21 There is an argument that VP Nominees is entitled to retain only 10 percent, $875,000, of the purchase price. It is far from clear therefore that VP Nominees will suffer loss even if GRP does not succeed.
[63] In addition, if the undertaking is confined to those damages which VP Nominees could establish it was legally entitled to, as I consider would be appropriate, the provision of the undertaking will not add materially to VP Nominee’s rights in any event. VP Nominees will still have the right to bring a claim for damages whether an undertaking is ordered to be provided or not.
[64] Nor do I accept VP Nominees’ submission that there would be no prejudice to GRP in requiring such an undertaking now. In addition to the costs of responding to this application, if an undertaking had been applied for originally, GRP may have altered the steps it chose to take to enforce its rights.
[65] Furthermore, VP Nominees is seeking a direction that GRP Holdings must also file and serve an affidavit verifying its financial position so as to confirm its ability to pay any damages in terms of the undertaking. Such an affidavit, in addition to providing substance to the undertaking, may provide a real advantage to VP Nominees (and conversely a disadvantage to GRP Holdings) in terms of negotiating any settlement.
[66] Finally, I record that I do not consider that the changes in ownership of the neighbouring property originally owned by GRP Holdings Limited and now owned by GRP Properties Limited, as evidenced by a late affidavit filed in support of VP Nominees’ application, affects the outcome of this application. Ms Liu has explained in her affidavit in reply that the transfer is unrelated to these proceedings, arising as a result of plan changes and the need to refinance. Despite only being referred to in an affidavit filed for VP Nominees two weeks before the hearing, the change in ownership occurred well before VP Nominees’ application for a condition requiring an undertaking yet was not referred to in that application.
21 Caveat Judgment, above n 1, at [126].
Result
[67] VP Nominees’ application for an order requiring GRP Holdings to provide a satisfactory undertaking as to damages to continue lodgement of its caveat against VP Nominees’ land at 14 Sinton Road, Huapai is declined.
Costs
[68] As GRP has succeeded, my preliminary view is that it is entitled to costs. I note that the application was brought against both GRP Holdings and GRP Management despite GRP Management not having a caveat over the property. GRP submits that this ought to have consequences for costs.
[69] I expect the parties to be able to agree costs. If that is not possible, memoranda may be filed of no more than five pages excluding schedules, on behalf of GRP within 35 working days of this judgment and on behalf of VP Nominees a further 10 working days later. I record that I have allowed longer than usual to allow time for counsel to confer given the Christmas break.
Associate Judge Sussock
Solicitors:
Tompkins Wake, Auckland
Forest Harrison Lawyers, Auckland
G Blanchard KC, Shortland Chambers, Auckland R Hollyman KC, Shortland Chambers, Auckland
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