Hua Xiang Homes Limited v DDL Homes Ormiston Limited
[2022] NZHC 313
•28 February 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-169
[2022] NZHC 313
UNDER Section 146 of the Land Transfer Act IN THE MATTER OF
an originating application for an order permitting the registration of second caveats against dealings
BETWEEN
HUA XIANG HOMES LIMITED
First Applicant
AND
VAL RESIDENTIAL LIMITED
Second Applicant
Cont:/
Hearing: On the papers Counsel:
N R Frith for Applicants
Judgment:
28 February 2022
REASONS JUDGMENT OF PAUL DAVISON J
This judgment was delivered by me on 28 February 2022 at 3.30pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Minter Ellison Rudd Watts, Auckland
HUA XIANG HOMES LTD & ORS v DDL HOMES ORMISTON LTD [2022] NZHC 313 [28 February 2022]
AND Cont:/
MING WEI NZ LIMITED
Third Applicant
AND PROFESSIONAL BRICKLAYING LIMITED
Fourth Applicant
AND LS HOMES LIMITED
Fifth Applicant
AND JIN HOUSE NZ LIMITED
Sixth Applicant
AND F974 BUILDING LIMITED
Seventh Applicant
AND DDL HOMES ORMISTON LIMITED
Respondent
Introduction
[1] Following the lapsing of their first caveats, the seven applicants apply without notice for orders pursuant to s 146 of the Land Transfer Act 2017 permitting them to lodge second caveats against dealings over the property situated at 397 Ormiston Road, East Tamaki, Auckland (the property).1
[2] On 24 February 2022, and having regard to the urgency of the matter, I delivered a results judgment granting their application and made orders that they be permitted to file second caveats against dealings.2 In this judgment I set out my reasons.
Background
[3] On various dates between November 2020 and February 2021, each of the seven applicants entered into individual agreements with DDL Homes Ormiston Limited (the respondent) for the sale and purchase of lots in the respondent’s proposed residential subdivision of the property at 397 Ormiston Road, to be known as Ormiston Grove (the agreements). Particulars of the seven agreements are set out in the schedule attached to this judgment.
[4] The freehold lots in the subdivision which were the subject of the individual agreements were to be created by the respondent subdividing the Ormiston Road property. The agreements provided for the purchasers to pay a deposit of 10 per cent of the purchase price on entering into the agreement, and included a term pursuant to which the respondent as vendor, agreed to promptly complete a fee simple subdivision substantially in accordance with a scheme plan annexed to the agreement, and procure the issue of a separate title for the lot to be purchased.
[5]Clause 21 of the agreements provides:
21No Caveat
21.1The Purchaser acknowledges that the Vendor is completing a subdivision to create a title to the Lot and shall not lodge a caveat
1 Lot 2 DP 54823 as described in Record of Title NA6A/1020.
2 Hua Xiang Homes Ltd v DDL Homes Ormiston Ltd [2022] NZHC 276 [Results judgment].
which will in any way prevent registration of the subdivision and if they do so in breach of this provision, the Purchaser irrevocably appoints the Vendor as the Purchaser’s attorney to execute a withdrawal of caveat.
[6]Clause 33 of the agreements provides for a “sunset date”:
33Sunset Date
33.1Subject to subclause (b) below, if the record of title to the Lot has not issued by 30 June 2021 (Sunset Date), the Purchaser may cancel this Agreement by notice in writing to the Vendor within 10 working days of the Sunset Date, time being of the essence, and the deposit and any other moneys paid by the Purchaser under this Agreement shall be returned to the Purchaser. If the Purchaser does not provide written notice of cancellation to the Vendor within 10 working days of the Sunset Date, the Purchaser is deemed to have waived the right of cancellation set out in this clause.
33.2The Vendor may, by written notice to the Purchaser, extend the Sunset Date in subclause (a) for a period of up to six months provided that the Vendor is making reasonable progress in obtaining a record of title to the Lot.
33.3The Purchaser’s rights in subclause (a) are in addition to and not in derogation from its rights pursuant to section 225(2) of the Resource Management Act 1991.
[7] On 23 June 2021 the respondent advised the applicants that it had made good progress with the civil works at the property but had encountered a delay in the installation of the services, and gave written notice to the applicants pursuant to cl 33.2 that it was extending the sunset date to 30 December 2021. In the correspondence sent by the respondent’s solicitors (Steindle Williams), to the applicants’ solicitors they advised that the respondent was confident the titles for the lots would be issued well prior to the December 2021 date.
[8] On 28 October 2021 Steindle Williams wrote to each of the applicant’s solicitors advising that progress with the subdivision development had been delayed as a result of the COVID-19 pandemic which had affected the availability of contractors and had resulted in multiple changes being required to be made to the planned work schedule. The respondent’s solicitors advised that the Auckland Council’s processing time had been slow and had also contributed to the delay. They said that the cost of hiring equipment and purchasing materials for civil works and labour costs had also increased at “an unprecedented pace”, and the cost of borrowing
finance for the project had significantly increased as a result of the delays encountered. The respondent’s solicitors said:
6.Thus, there are two related issues: rapidly rising costs and ongoing delays. Both issues are outside the vendor’s control. Both result in the development being stalled and title not being available by the sunset date. We have therefore advised our client that a right to cancel under section 225(1) and (2) of the Resource Management Act 1991 would arise. We note that the purchaser would also have a contractual right to cancel under the terms of the sale and purchase agreement.
7.Rather, our client suggests 2 options to deal with these issues proactively and as early as possible:
a.Mutually agree cancellation of sales and refund deposits (Option 1) or
b.Increase sale price to make completion of the development achievable (Option 2)
[9] In relation to the second option the respondent proposed amending the price for the lots based on $2,608.70 plus GST per square metre. In respect of the agreements where the purchase price was $626,087.00 plus GST (if any), the proposed amendment would increase the purchase price to $1,064,347.83 plus GST. The letter requested the applicants to advise which of the two options they wished to adopt no later than 4.00 pm on 4 November 2021. The respondent’s proposal was conditional on it procuring increases in the purchase prices for all other existing purchasers within five working days of the date of execution of a deed of variation recording the increased purchase prices.
[10] The applicants’ separate solicitors all responded to the Steindle Williams’ letter of 28 October 2021, advising that the applicants declined to adopt either option, and advised that the applicants required the respondent to complete the transaction in accordance with the terms of their clients’ purchase agreements. Following further correspondence between the solicitors, on 2 December 2021 Steindle Williams wrote to each of the applicant’s solicitors requesting the applicants to advise by 6 December 2021 whether or not they would accept the proposal for variation of the purchase agreement at the increased price. The respondent’s solicitors advised that in the event that their offer was not accepted the respondent would make a final decision as to cancellation of the purchase agreements and if it cancelled them it would refund the deposits paid by the applicants.
[11] In early December 2021 all seven applicants changed solicitors and collectively engaged Minter Ellison Rudd Watts (MERW) to act for them in relation to the respondent’s proposal to increase the purchase price for the lots and the threat to cancel their agreements. On 6 December 2021 MERW wrote to Steindle Williams advising that it had been engaged by the first applicant and was awaiting receipt of confirmation of instructions to act on behalf of the other six applicants. In their letter MERW said that the respondent was not entitled to cancel the first applicant’s purchase agreement on the basis that had been previously advanced, and they reserved their client’s rights as regards the matter.
[12] On 7 December 2021 Steindle Williams wrote to each of the applicant’s solicitors to advise that as their client purchaser had not elected to either cancel the agreement or agree to the proposed variation of the agreement, the respondent had cancelled the agreement pursuant to s 225(1) of the Resource Management Act 1991.
[13] The following day on 8 December 2021 Steindle Williams returned the applicants’ deposits by funds transfers made to the several solicitors named as acting for them on their agreements. In accordance with the applicants’ instructions to their solicitors, the deposit moneys were held by the solicitors in their trust accounts under the joint names of the relevant applicant and respondent.
[14] Having by then been engaged to act for all seven applicants, on 8 December 2021 MERW wrote to Steindle Williams advising:
2.We refer to your emails to each Purchaser/Purchaser’s agent dated 7 December 2021 in which the Vendor purported to cancel the [sale and purchase agreements]. The Vendor was not entitled to cancel the [sale and purchase agreements] and the purported cancellation therefore amounted to a repudiation of the [sale and purchase agreements] (Repudiation).
3.By this letter the Purchasers give notice that they reject the Repudiation and affirm the [sale and purchase agreements]. Consequently, the [sale and purchase agreements] remain on foot and the Vendor remains obliged to perform them. The Purchasers reserve all their rights in relation to the [sale and purchase agreements], including taking any steps that might be required to protect their interests.
[15] Also on 8 December 2021, on behalf of the seven applicants MERW lodged caveats over the title to the property to protect their interests as purchasers.3 On 14 and 20 December 2021 MERW received written confirmations of registration of the caveats from Toitū Te Whenua Land Information New Zealand (LINZ).
[16] On 3 February 2022 MERW received seven notices from LINZ dated 1 February 2022 advising that the respondent had applied under s 143(1)(b) of the Land Transfer Act for lapse of the applicants’ caveats. The notices were delivered to MERW’s Wellington office reception by courier. The seven notices advised that the caveats would lapse unless an application to sustain the caveats was made to the relevant court and notice of the application was given to the Registrar-General of Land within 10 working days after the notice was given. The letter stated:
We count 10 working days starting on the day after the courier’s tracking service shows delivery to the address for service given in the caveat or notice of claim.
[17] The seven LINZ “Section 143(2) Notice of Lapse of Caveat” letters were in each case addressed to MERW at the firm’s post office box in Wellington. On 3 February 2022 a courier company engaged by MERW had cleared its Post Office Box and delivered the LINZ notices to MERW’s office.
[18] Referring to the evidence in an affidavit by Ms Holly Hill, a solicitor and partner of MERW, counsel for the applicants says that MERW calculated the time for filing of applications for orders that the caveats not lapse would expire on 18 February 2022 and accordingly on that date applications were filed on behalf of each of the seven applicants for orders that their caveats not lapse and LINZ was notified of the applications.
[19] On 21 February 2022, LINZ forwarded an email to MERW noting that on 18 February it had received copies of the applications made to the Court to sustain the caveats, and advised MERW that the lapse notices had been delivered to the firm’s post office box on 2 February 2022 and notices of applications for orders that the
3 First applicant (caveats 12327475.1); second applicant (caveat 12328655.1); third applicant (caveat 12328655.2); fourth applicant (caveat 12328655.3); fifth applicant (caveat 12328655.4); sixth applicant (caveat 12328655.5); and seventh applicant (caveat 12328655.6).
caveats not lapse were required to be made and notified to LINZ by 17 February 2022. LINZ advised that pursuant to s 143 of the Land Transfer Act, the seven caveats had in each case lapsed.
Submissions for the applicants
[20] In his written submissions Mr Frith for the applicants submits that the evidence contained in the affidavits filed by or on behalf of each of the seven applicants makes it clear that they have a reasonably arguable equitable interest in the lots of the property which they agreed to purchase. He submits that prior to the respondent purporting to cancel the purchase agreements, it had failed to show that it had taken all reasonable steps to complete the subdivision within a reasonable period of time, or that a reasonable period of time had elapsed having regard to the context and circumstances that had prevailed. He submits that the respondent was not entitled to cancel the agreements, and therefore the purported cancellation of the agreements notified in the Steindle Williams letters of 7 December 2021 were repudiations of the agreements. He submits that as the applicants elected to affirm the agreements and notified the respondent in the MERW letter of 8 December 2021, the agreements and the applicants’ equitable interests in the property continue to exist.
[21] Mr Frith further submits that there is a reasonable explanation for the applicants’ failure to file their applications for orders that their caveats not lapse within the required time by reason of the applicants’ solicitors’ miscalculation of the date. As a result the applicants filed their applications for orders that their caveats not lapse on 18 February 2022 and notified LINZ. However, as LINZ had not received notice of any applications for orders that the caveats not lapse by 17 February 2022, pursuant to s 143(3) of the Land Transfer Act, the caveats lapsed. Counsel submits that having regard to that explanation and those events, the consequences of the miscalculation of the time period for filing the applications should not be visited on the applicants.
[22] Finally Mr Frith submits that allowing the applicants to lodge second caveats would not cause prejudice to the respondent. He notes that as at the date of the current application filed on 22 February 2022 the applicants’ caveats remain registered on the title of the property together with another caveat lodged by a third party which would
in any event prevent the transfer of the property to another purchaser. He submits that the orders sought to permit the lodging of second caveats are intended to restore the position that the applicants would have been in had their 18 February 2022 application been made within time. He says that if the orders sought are granted, and assuming the respondent wishes to apply for orders that the second caveats lapse, the applicants will co-operate with the respondent’s solicitors to ensure that the applications are heard without delay.
[23] As regards the application being brought on a without notice basis, Mr Frith says that determination of the application is a matter of urgency and proceeding on notice would cause undue delay and prejudice to the applicants. As the caveats have lapsed the applicants’ equitable interests in the property are vulnerable to third party purchasers for value without notice. He submits that requiring the applicants to proceed on notice will extend the period of their vulnerability and expose them to the risk of the respondent taking irremediable steps to undermine or defeat their equitable interests in the property. However, if leave is granted permitting the applicants to lodge second caveats, the respondent will retain the right to apply to the Court for the lapse of the caveats, and the parties will be in the same positions as they were in and would have been in had the applications by the applicants been made within the 10 working day period. Counsel submits that such an outcome is consistent with the overall interests of justice.
Discussion
[24] I am satisfied that it is appropriate for the applications to proceed on a without notice basis. The applicants filed applications for orders that their caveats not lapse on 18 February 2022 and notified LINZ the same day which was one day after the time for filing and notifying LINZ expired. After LINZ advised the applicants on 21 February 2022 that the caveats had lapsed pursuant to s 143 of the Land Transfer Act, the applicants promptly applied on 22 February for orders pursuant to s 146 permitting the filing of second caveats. There is no significant prejudice to the respondent who will still be able to apply to test the validity of the caveats and whether the applicants each have an equitable and caveatable interest in the property.
[25]Section 146 of the Land Transfer Act provides:
146 Second caveat against dealings may not be lodged
Unless the court orders otherwise, a caveat against dealings must not be lodged by or on behalf of the same person to protect the same estate or interest as a caveat against dealings that has been removed under section 142 or lapsed under section 141(2)(a) or 143.
[26] In Lowther v Kim Randerson J considered the court’s approach to an application for leave to lodge a second caveat affecting the same land or interest pursuant to s 148 of the Land Transfer Act 1952, which was the predecessor of s 146.4 Section 148 provided:
148 No second caveat may be entered
When any caveat in either of the forms hereinbefore provided has lapsed, it shall not be lawful for the Registrar to receive any second caveat affecting the same land, estate, or interest by the same person, or in the same right and for the same cause, except by order of the High Court.
[27]Randerson J said:
[18] The Court of Appeal has held that an order under s 148 will not lightly be made. It is an indulgence and the applicant’s claim is “scrutinised carefully”: [Cotton v Keogh [1996] 3 NZLR 1 (CA) at 8]. In [Muellner v Montagnat (1986) 2 NZCPR 520 (HC) at 523–524], Thorp J reviewed previous authorities. He determined that the Court is given an unfettered discretion under s 148 but the Court will generally have regard to:
(a)the strength of the case made by the applicant to support the claimed interest in the land;
(b)any explanation for failure to exercise the caveator’s rights under s 145; and
(c)whether unavoidable prejudice would be suffered by those who have acted in reliance on the register and in the belief that the caveator was not pursuing the claim.
[19] Thorp J, rightly in my view, did not accept the submission made to him that an order under s 148 should only be made in exceptional cases. In considering the strength of the applicant’s claim to an interest in the land, it is appropriate to adopt the standard of a reasonably arguable case as identified in [Sims v Lowe [1988] 1 NZLR 656 (CA) at 659–660], but with the reminder that careful scrutiny is required where leave to lodge a second caveat is sought.
4 Lowther v Kim [2003] 1 NZLR 327 (HC) at [18]–[19]. See also Gourdie v Davies [2021] NZHC 1312, (2021) 22 NZCPR 385 at [6].
[28] I am satisfied that the applicants have shown that they have a reasonably arguable case in support of their claim to have an equitable interest in the property. They have each produced and exhibited copies of their agreements for sale and purchase and have described the events leading to the respondent’s purported cancellation of the agreements. There is clearly a reasonable basis for the applicants to dispute whether the respondent was entitled to cancel the agreements on the basis relied on. As purchasers pursuant to their respective purchase agreements, the applicants have a well-founded and reasonably arguable case to support their claim to have equitable interests in the respondent’s property being subdivided.
[29] I am also satisfied that the applicants have provided a sufficient explanation for their failure to apply in time for orders that their caveats not lapse. It is clear that they intended to apply in time and in each case they swore or affirmed detailed affidavits dated 17 February 2022 in support of their applications, and I have granted leave to them to rely on those affidavits in support of their current application. The miscalculation of the time limit for filing the application and providing notice to LINZ was an error that arose from a misunderstanding as to the date upon which the LINZ notice was received by MERW, and the one day late filing of the original application and the subsequent filing of the present applications on 22 February 2022 is a sufficient explanation for the failure to meet the time limit.
[30] I am also satisfied that there can be no significant prejudice to the respondent by the applicants being permitted to lodge second caveats to protect their equitable interests as purchasers under the agreements. Had their original applications been made within the required time, the respondent would have had an opportunity to apply to the Court pursuant to s 143(1)(b) of the Land Transfer Act for orders that the caveats lapse and to test whether the applicants could sustain their claim to have a caveatable interest in the property. Granting their applications to permit them to file second caveats is in effect maintaining what would have been the status quo had they not missed the deadline for filing their applications stipulated in s 143(3).
[31] For these reasons I am satisfied that it is in the interests of justice and consistent with the purpose of s 146 that all seven of the applicants are granted leave to file a second caveat in relation to their claimed equitable interests as purchasers under and
by virtue of their respective agreements for sale and purchase of lots in the respondent’s Ormiston Grove subdivision.
Result
[32] The application made by the first to seventh applicants dated 22 February 2022 is granted and I confirm and repeat the orders made in my results judgment in terms of paragraph [1(a)] and [1(b)(i)–(vii)] of that application.
Paul Davison J
The Schedule
[1] Hua Xiang Homes (first applicant). Agreement for Sale and Purchase dated 9 November 2020. Lot 13. Price $626,087.
[2] Val Residential Limited (second applicant). Agreement for Sale and Purchase dated 6 November 2020. Lot 8. Price $626087.
[3] Ming Wei NZ Limited (third applicant). Agreement for Sale and Purchase dated 6 November 2020. Lot 6. Price $626,087.
[4] Professional Bricklaying Limited (fourth applicant). Agreement for Sale and Purchase dated 9 November 2020. Lot 11. Price $626,087.
[5] LS Homes Limited (fifth applicant). Agreement for Sale and Purchase dated 6 November 2020. Lot 7. Price $626,087.
[6] Jin House NZ Limited (sixth applicant). Agreement for Sale and Purchase dated 10 February 2021. Lot 16. Price $626,087
[7] F974 Building Limited (seventh applicant). Agreement for Sale and Purchase dated 9 November 2020. Lot 9. Price $647,826.
3