Hounslow Holdings Limited v Cassiny Lands Limited

[2021] NZHC 3304

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-002287

[2021] NZHC 3304

UNDER

the Land Transfer Act 2017

IN THE MATTER

of an application to remove a caveat under s 146 of the Act and for other orders

BETWEEN

HOUNSLOW HOLDINGS LIMITED

Applicant

AND

CASSINY LANDS LIMITED

First Respondent

CASSINY LIMITED

Second Respondent

Hearing:	3 December 2021
Appearances:	K G Davenport QC and A M Cameron for Applicant K J Sheehan for Respondents
Judgment:	3 December 2021

JUDGMENT OF VENNING J

APPLICATION TO REMOVE CAVEATS

This judgment was delivered by me on 3 December 2021 at 3.00 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Kate Sheehan Lawyers, Auckland

Sellars & Co, Auckland

Counsel:            K G Davenport QC/A M Cameron, Auckland

HOUNSLOW HOLDINGS LTD v CASSINY LANDS LTD [2021] NZHC 3304 [3 December 2021]

Introduction

[1]    Hounslow Holdings Limited (Hounslow) seeks an order removing a caveat registered against a title to its land by the first respondent, Cassiny Lands Limited (CLL) together with further and related orders.

[2]    There is a considerable background, both factual and procedural to the dispute between Hounslow, CLL and Cassiny Limited (Cassiny). I take the factual background largely from the decision of Woolford J in related proceedings in which Cassiny sought injunctive orders to prevent Hounslow from relying on a settlement notice it had issued.1

Background

[3]    On 3 December 2020 Cassiny entered into an agreement to purchase bare land at Helensville from Hounslow (the ASP). Cassiny intended to subdivide the land into about 28 or 30 lots and on-sell them. Settlement date was six months from the date the agreement became unconditional.

[4]    The agreement became unconditional on 25 February 2021. Settlement was therefore due on 25 August 2021. Cassiny did not settle. Hounslow issued a settlement notice on 3 September 2021 requiring settlement on or before 21 September 2021.

[5]    CLL lodged its caveat on 25 August 2021. Then, on 20 September 2021 Cassiny lodged its caveat. Apparently CLL became involved as it was to be nominated by Cassiny as the purchaser.

[6]    On 20 September 2021 Cassiny filed proceedings against Hounslow and sought an injunction. It claimed the settlement notice was invalid. It also alleged there was an implied term that the agreement was conditional on resource consent from Auckland Council. Finally, Cassiny sought rectification of the agreements to reflect the implied term. Cassiny sought orders suspending the settlement notice and

1      Cassiny Ltd v Hounslow Holdings Ltd [2021] NZHC 2528.

deferring the settlement date until further order of the Court or agreement between the parties.

[7]    Woolford J dismissed Cassiny’s application for injunction on 24 September 2021. The Judge noted Cassiny’s statement of claim raised three causes of action. First, it alleged invalidity of the settlement notice due to impossibility of performance. The Judge was not persuaded there was a serious question to be tried as to whether or not it was impossible to perform the ASP. Cassiny had six months to make the necessary arrangements. He considered it was not impossible for Cassiny to settle the purchase. Cassiny just did not have the money to do so.

[8]    Next, the Judge was not persuaded there was a serious question to be tried as to whether or not the agreement was impliedly conditional on resource consent being granted. Cassiny took the risk of not obtaining resource consent for the subdivision.

[9]    The final cause of action was the claim for rectification of the agreement to provide that settlement was conditional on Cassiny obtaining resource consent for the subdivision. It drew on the same evidence pleaded in the second cause of action, which the Judge did not accept. The Judge was satisfied there was no serious question to be tried in relation to that issue either. For those reasons the Judge rejected the application for interim orders.

Subsequent steps

[10]   After the judgment was delivered, Hounslow cancelled the ASP on 24 September 2021.

[11]   On 19 October 2021 Cassiny and CLL filed a claim against Hounslow, the real estate agent and their former solicitors.2 In those proceedings they alleged the same causes of action against Hounslow that had been rejected by Woolford J and also pleaded mistake, breach of a duty of good faith and unjust enrichment.

2      Cassiny Ltd v Hounslow Holdings Ltd HC Auckland CIV-2021-404-1996 (the 1996 proceedings).

[12]   Following the cancellation of the ASP Hounslow applied to lapse the caveats. That application was heard on 9 November and judgment delivered on 10 November 2021 (the first caveat judgment).3 In that judgment the Court directed the caveats lodged by Cassiny and CLL were to lapse. The caveats subsequently lapsed on 17 November 2021.

[13]   On 15 November 2021 Cassiny and CLL filed an application for stay and leave to appeal. On 17 November 2021 the Court declined the application for stay. In its reasons judgment delivered on 18 November (the stay judgment) the Court directed that if CCL still considered it had a proper basis to lodge a second caveat it should make a formal separate and focused application in relation to that supported by evidence which addressed the requirements for the grant of leave.4

[14]   In the meantime, however, and without advising Hounslow or the Court, CLL had registered a second caveat at 2.20 pm on 10 November 2021, shortly before the Court’s first caveat judgment issued. Then, on 22 November 2021, two working days after the stay judgment, CLL purported to lodge a further third caveat.

[15]   On 29 November 2021 Hounslow’s solicitors received notice that CLL had lodged the second caveat on 10 November 2021. Hounslow immediately filed an urgent application seeking to remove that second caveat and for related orders restraining CLL or Cassiny or any person associated with them from lodging further caveats and restraining the Registrar-General from registering any further caveats including that purportedly lodged on 22 November 2021, which had not at that stage been registered.

[16]   Hounslow also sought an order recalling the judgment of 17 November 2021 in relation to costs in order to seek indemnity costs.

[17]   On receipt of the application the Court made directions abridging the time for CLL and Cassiny to respond. The Court also made an order restraining the Registrar-

3      Cassiny Ltd v Hounslow Holdings Ltd [2021] NZHC 3039 at [35].

4      Cassiny Ltd v Hounslow Holdings Ltd [2021] NZHC 3116.

General from registering any further caveats lodged against the title, including the third caveat purportedly lodged on 22 November 2021.

The current application

[18]   Hounslow’s urgent application is supported by an affidavit by Mr Richard Kidd, the director of Hounslow. Mr Kidd confirmed that with the injunction and caveat issues seemingly behind them, and having filed a statement of defence in relation to the substantive proceedings for damages brought by Cassiny and CLL, Hounslow turned its attention to remarketing the property for sale and began a tender process.

[19]   The delay caused by Cassiny and CLL’s failure to settle on due date and their subsequent actions in relation to the caveats have caused prejudice to Hounslow.

[20]   Hounslow initially marketed the property in late November/early December 2020 before entering the ASP with Cassiny. It expected settlement and payment by 25 August 2021. It was only shortly before the due settlement date that Cassiny advised it could not settle as it needed a resource consent to obtain finance.

[21]   Hounslow’s shareholders have had to refinance loans which they had expected to be able to repay from the sale and had to raise finance which otherwise would not have been required. Mr Kidd and his wife have refinanced a significant loan expecting that it would need to be short-term only.

[22]   Hounslow has re-engaged real estate agents to run a process akin to a tender. Initially the response to the tender was due 1 December 2021. However, given that on 29 November they learned that the title had once again been caveated by CLL, Hounslow has extended the time for the tender process. Every day that passes further frustrates Hounslow’s ability to deal with its property.

[23]   In response to the application Cassiny and CLL’s director, Mr Ebrahim has filed an affidavit as has its conveyancing solicitor, Mr Webster. Mr Webster’s affidavit inappropriately makes submissions as to the law. That is for counsel, not a witness.

[24]   In his affidavit Mr Ebrahim says that he believes now that CLL paid or used its funds to pay the deposit. He says he intends to amend the statement of claim in the 1996 proceeding and is considering whether to now apply for leave to appeal Woolford J’s judgment out of time in light of that information. Mr Ebrahim suggests that in his view Mr Kidd and Hounslow should have acted more “reasonably” and given serious consideration to his request for an extension of time. Mr Ebrahim’s views overlook the contractual obligations that Cassiny entered and accepted as purchaser under the terms of the ASP.

[25]   Mr Ebrahim also confirmed that CLL had paid a further sum of $9,500 on 9 November 2021 to the Auckland Council to renew the resource consent application in respect of Hounslow’s land.

[26]   Mr Ebrahim makes something of the fact that Hounslow and Mr Kidd must have been aware that Cassiny and/or CLL intended to subdivide the land. That may be so but the ASP was not conditional upon that. There was no requirement for the settlement date to be tied to any resource consent application by Cassiny or CLL. Cassiny and CLL took the risk in relation to obtaining the consent in time to obtain finance if that was required.

[27]   As noted, Mr Webster has also sworn a further affidavit in support of the opposition. Mr Webster provides further details of the actions of Cassiny and CLL in relation to the proposed development of the land and on-sales. He then makes a submission that as the funds used to pay the deposit under the ASP originated from the respective purchasers of the sections who had sales agreements with CLL, they were therefore the property of CLL. It appears at the time the deposit was paid Cassiny and CLL’s solicitors had not created a separate trust account for CLL. He then opines: “it likely did not matter that a separate trust account ledger for CLL … was not created”. He further suggests that “an alternative way of looking at this transaction is that CLL paid the money to Cassiny in consideration of the nomination of the agreement”. He then sets out submissions as to the law of assignment. Mr Webster then confirms that since the agreement was cancelled he has had to cancel the sales for the on-sold sections.

The various interests claimed

[28]   The original caveats lodged by Cassiny and CLL and which were lapsed by the first caveat judgment claimed an interest in Hounslow’s land based on their interest as purchaser under the ASP.

[29]   The interest claimed by CLL under the second caveat lodged by it on 10 November 2021 is as:

[a]  beneficial interest in the land … as cestui que trust of which the registered proprietor [Hounslow] is trustee by virtue of an institutional constructive trust created inter alia by contributions and unjust enrichment.

[30]   The interest claimed by CLL under the third caveat lodged by it (but subject to the injunction order) is:

[CLL] as nominee advised to the registered proprietor on 15 February 2021 of an agreement for sale and purchase dated 3 December 2020 between the registered proprietor Hounslow and Cassiny Ltd (as nominator) paid a deposit of $300,000 … on 15 February 2021, and claims a lien on the deposit held by the registered proprietor, Hounslow as trustee of a [cestui] que trust.

Principles

[31]The principles in relation to applications to lapse a caveat are settled:5

·The onus is on the caveator, in this case CLL, to demonstrate that it holds an interest in the land sufficient to support the caveat.

·CLL must put before the Court a reasonably arguable case to support that interest.

·An order for removal will only be made if it is clear there is no valid ground for lodging it in the first place or alternatively such ground as then existed has ceased to exist.

5      Botany Land Development Ltd v Auckland Council [2014] NZCA 61.

·There is a residual discretion once a reasonably arguable case has been established as to whether to make an order removing a caveat. This will be exercised cautiously.

·Any application to lapse or remove the caveat and any challenge to it does not preclude other remedies.

The second caveat based on an “institutional constructive trust”

[32]   It appears that CLL claims the interest in the second caveat lodged by it based on its contributions to Hounslow’s land. It also says that Hounslow will be unjustly enriched by its actions which supports its claim to an interest in the land.

[33]   As a starting point I note that the interest claimed by CLL is an institutional constructive trust. Strictly speaking, a claim based on unjust enrichment is a trigger for the imposition of a remedial constructive trust rather than an institutional constructive trust.6

[34]   CLL maintains its claim is different to Cassiny’s given its position as the nominated purchaser under the ASP. However, that argument proceeds on a fundamental misapprehension. The only evidence of a nomination which, on its face, may arguably comply with the requirements of the Property Law Act 2007 is the deed of nomination now produced for the first time as an exhibit to Mr Webster’s affidavit confirming the nomination was executed in writing (as required) on 21 September 2021.

[35]   I accept that the executed deed of nomination dated 21 September would arguably comply with the requirements under ss 24, 25 and 50 of the Property Law Act 2007 so that CLL was, as from that date, the nominated purchaser of the property from Hounslow under the ASP.

6      Fortex Group Ltd v MacIntosh [1998] 3 NZLR 171 (CA).

[36]   However, by that date Cassiny was in default of its obligation to settle the ASP and Hounslow had issued the settlement notice. Cassiny, rather than CLL, took injunctive proceedings on 20 September in response to the settlement notices.

[37]   CLL as the nominated purchaser as from 21 September could be in no better position than Cassiny. At the time that deed of nomination was completed Cassiny was in default and subject to the settlement notices.

[38]   The judgment of Woolford J rejected Cassiny’s challenges to the validity of those settlement notices. The cancellation of the contract, once the settlement notices expired, was a valid cancellation. If CLL’s argument was correct that the settlement notices could not affect it then a purchaser in default and subject to a settlement notice could avoid the consequences by simply nominating an alternative “friendly” purchaser on the day the settlement notices were due to expire and then require the vendor to issue fresh settlement notices to that nominated purchaser and the process could be repeated and so on. That is obviously not the law.

[39]   Further, and as an additional feature in this case, both Cassiny and CLL are controlled by Mr Ebrahim as director. The knowledge of one entity can be imputed to the other.

[40]   The short point is that as matters stand the agreement for sale and purchase has been validly cancelled by Hounslow.

[41]   I also agree with Ms Davenport’s submission for Hounslow that the suggestion CLL has made contributions to Hounslow’s land which could support the interest claimed is not seriously arguable.

[42]   I observe the basis for CLL’s case appears to be evolving with time. The claim filed in the separate proceedings by Cassiny and CLL presently makes no claims for such an institutional constructive trust.

[43]   Putting the payment of the deposit to one side for the moment, (which could never be a contribution to Hounslow’s land) the alleged contribution to Hounslow’s

land is said to be the preparation of an application for resource consent which Cassiny (or CLL) made for its own purposes to subdivide the land into approximately 30 lots. That application for resource consent was only lodged one day prior to the date for settlement of the now cancelled agreement for sale and purchase. Relevantly it was subsequently rejected by the Auckland Council as incomplete under s 88 of the Resource Management Act 1991 (RMA) on 14 September 2021, some 10 days before Woolford J dismissed Cassiny’s injunction application.

[44]   The ASP was silent as to the resource consent issue. That was an issue for Cassiny which it failed to address in a timely manner. As the Judge observed, the reason Cassiny could not settle was that it did not have the funds.

[45]   Neither CLL nor Cassiny have contributed anything to the value of Hounslow’s land as would be required to support a constructive trust claim.

[46]   Rather extraordinarily, despite the fact that the ASP had been cancelled, CLL lodged a resource consent application in relation to Hounslow’s land on 9 November 2021, the day of the hearing of the first caveat judgment. CLL did that, despite at the time having no interest in the land as the agreement for sale and purchase had been cancelled. It did so without any authority from Hounslow and with no standing to do so.

[47]   The fact that CLL voluntarily, after the contract has been cancelled has relodged the consent is neither here nor there. It did so in the knowledge that at that time the contract had been cancelled.

[48]   To support the caveat CLL and Mr Webster seek to suggest that a passage from the judgment of 10 November 2021 directing the caveats should lapse suggests that a caveat based on a claim to a constructive trust was the more correct approach. With respect that rather overstates the effect of what the Court said. What the Court did say was:7

[19]     Ms Sheehan then suggested that Cassiny may have an equitable claim against Hounslow on the basis that Hounslow will have the benefit of the work

7      Cassiny Ltd v Hounslow Holdings Ltd, above n 3.

carried out by Cassiny in preparation for the subdivision. Again however, the immediate answer to that proposition is that it is not the basis upon which the caveats are sought to be sustained. That is a claim for unjust enrichment, not a claim under the agreement for sale and purchase. Also, as noted, in the 1996 proceedings the relief claimed under the unjust enrichment cause of action is limited to damages.

[49]   It cannot seriously be argued in accordance with established construction trust principles8 that Hounslow can be expected to yield or share an interest in its land as a result of the money expended and/or effort Cassiny and/or CCL may have spent on attempting to obtain resource consent over the land for their purposes, when the ASP was never subject to such a consent. As Woolford J held, it was not a term of the contract that the ASP was conditional on the purchaser obtaining a resource consent and there was no serious question to be tried whether such a condition would be implied.

[50]   As to the suggestion that there is an interest in the land on the basis of unjust enrichment, the separate proceedings filed by Cassiny and CLL allege unjust enrichment based on a claim for the return of the deposit and the “benefit or the value of the resource consent”. To the extent that the claim is based on forfeiture of the deposit that is a function of the agreement for sale and purchase. It is the subject of the purported third caveat. It cannot also support the constructive trust agreement.

[51]   To suggest that Hounslow has in some way benefited from the money that Cassiny and or CLL spent in seeking to obtain a resource consent which may or may not issue and may or may not be of value to Hounslow is misconceived. Cassiny or CLL expended that money for its own purposes. Any benefit to the land and attached resource consent is incidental. Further, as at the date the contract was cancelled, the resource consent application had been rejected by the Council. The money was wasted and of no value.

[52]   Cassiny lodged the subsequent application in the knowledge it may never have title to the land sufficient to realise any profit from it. To the extent the application may ultimately be successful and of benefit to the land as Ms Davenport submits, that will be as a consequence of the provisions of the RMA, not CLL’s actions. Further,

8      Lankow v Rose [1995] 1 NZLR 277.

Hounslow’s approval as owners to any resource consent would be required, and Hounslow does not want to bind itself to any such consent. It will not agree to accept it or implement it.

[53]   Next, even if the interest claimed in the second and third caveats lodged by CLL could be said to be conceivably separate, CLL has abused the process by lodging a second caveat at a time when the first caveat was still registered against the title and subject to proceedings before this Court, again quite apart from the fact the Court was not advised that was the position when the stay application was pursued. It is an abuse to file a second caveat when there is an existing caveat in an attempt to avoid the consequences of an adverse decision.

[54]   There is a pattern of behaviour by Cassiny and CLL and its director here. Woolford J was apparently not advised of the nomination in favour of CLL. This Court was not advised of the lodging of the second caveat on 10 November before the stay application hearing. The attempt to lodge yet another caveat on 22 November is a further example of the abuse of process.

The third caveat

[55]   The third purported caveat is lodged to support the deposit. CLL now claims that it paid the deposit. However, on the evidence CLL’s nomination was not effective until, at the earliest 21 September. If the deposit was paid by it in February 2021, it was as a volunteer. The trust account record confirms that Cassiny paid the deposit to the agent, whatever the source of the funds may have been. If CLL has a claim in relation to the deposit it should look to Cassiny rather than Hounslow. The fact a volunteer may fund payment of a deposit does not entitle the volunteer to an interest in the land.

Discretion

[56]   For the above reasons, the Court does not accept that there is an arguable interest in the land to support the caveats. Even if there could be, the Court would, in the circumstances, and having regard to the abusive actions of CLL decline to sustain

the interests claimed, particularly given the availability of an undertaking regarding the deposit.

[57]   At best, CLL (or Cassiny) may have a claim for a refund of the deposit. Even that claim has substantial difficulties given Cassiny’s default. However, throughout these proceedings Mr Kidd and counsel have said that Hounslow would be able to repay the deposit if ultimately Cassiny and CLL succeed on that claim. Ms Davenport confirmed that Hounslow could give an undertaking to that effect.

[58]   An undertaking by Hounslow that it will retain the deposit, being $300,000 plus interest on that deposit at market rates pending resolution of Cassiny and CLL’s separate proceedings or further order of the Court would address any proper concern Cassiny or CLL may have. There is no reason for Hounslow to be further constrained in dealing with its property.

Result

[59]   There will be orders removing the caveat described in the application and registered against the title described as Lot 3, DP 52300 together with an order restraining the respondents CLL and Cassiny (or any person or entity associated with them, including their agents and assignees) from lodging further caveats against the title.

[60]   The interim order restraining the Registrar-General from registering the further caveat, including that purportedly lodged by the first respondent on 22 November 2021 remains in force. The caveat is not to be registered.

[61]   In making those orders I take into account that the Court has directed that Hounslow is to give an undertaking relating to the deposit. While not express in earlier order, it was a matter raised during the course of the earlier proceedings and the order simply makes express what was previously understood to be the practical position. That is not to say that Cassiny or CLL has had any success on this application or that its claim for the deposit has any merit.

[62]   The above orders are to lie in Court until a memorandum is filed on behalf of Hounslow confirming the following undertaking:

Undertaking

I, Richard Kidd, undertake that Hounslow Holdings Limited will hold the sum of $300,000 together with interest calculated at 12 per cent per annum from 24 September 2021 from the proceeds of any sale of the land described as Lot 3, DP 52300 pending determination of the proceedings in CIV-2021-404-1996 or earlier order of the Court.

Costs

[63]   In the stay judgment the Court made an order for costs on a 2B basis. Ms Davenport seeks to recall the judgment to enable Hounslow to pursue an argument for indemnity costs rather than scale costs.

[64]   Generally speaking, once delivered a judgment must stand for better or worse, subject to appeal. A judgment will only be recalled under r 11.9 in limited circumstances: Horowhenua County v Nash (No 2).9 The special circumstances are not met in this case, particularly on the issue of costs which are discretionary.

[65]   However, in relation to the current application, which was required to be brought on urgently, and having regard to the actions of Cassiny and CLL the Court is satisfied that on this application indemnity costs are appropriate. Rule 14.6(4)(a) (by analogy) and r 14.6(4)(f) apply.

[66]   In acting in the way it has Cassiny and CLL have effectively ignored the finality of Woolford J’s judgment (when choosing not to appeal) previous orders of this Court and have acted improperly and unnecessarily by lodging caveats which have required a response by Hounslow at short notice because of the ongoing prejudice to Hounslow as a consequence.

9      Horowhenua County v Nash (No 2) [1968] NZLR 632.

[67]   There will be an order that Cassiny and CLL are jointly and liable to pay Hounslow’s costs on this urgent application on an indemnity basis.

Venning J