LSK Builders 2011 Limited v Chamberlain - [2021] NZHC 2018

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE

CIV-2021-442-9

[2021] NZHC 2018

UNDER section 143 of the Land Transfer Act 2017

IN THE MATTER

of an application to sustain a caveat

BETWEEN

LSK BUILDERS 2011 LIMITED

Applicant

AND

MARK ELWYN CHAMBERLAIN and SUZANNE CATHERINE CHAMBERLAIN

Respondents

Hearing: 15 July 2021

Appearances:

G Pearson and M E Byczkow for applicant LS B Acland for respondents

Judgment:

5 August 2021

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1] This is an application pursuant to sub-pt 7 of pt 3 of the Land Transfer Act 2017 for an order that a caveat not lapse. The applicant is LSK Builders 2011 Ltd (LSK). The respondents are Mark and Suzanne Chamberlain.

[2] LSK is a building company. In July 2017 Mr and Mrs Chamberlain engaged LSK to build a home for them in Nelson. The build did not go smoothly. Virtually from the outset differences arose. The build has been completed, but the parties remain locked in a dispute. LSK is claiming that it is owed approximately $200,000. Mr and Mrs Chamberlain do not accept that they owe this.

LSK BUILDERS 2011 LIMITED v CHAMBERLAIN [2021] NZHC 2018 [5 August 2021]

[3] The contract contained a comprehensive dispute resolution provision in cl 7.5. This provided for an escalating process involving negotiation, mediation and arbitration (and catered also for the process contained in the Construction Contracts Act 2002).

[4] Notwithstanding this provision, the parties’ dispute is being litigated in the District Court. I am informed that this reflects an election by Mr and Mrs Chamberlain pursuant to s 11 of the Arbitration Act 1996. The proceeding was commenced by LSK in September 2019. It is still at the interlocutory stages, and nowhere near being set down for trial.

[5] The key clause in the contract for present purposes is cl 5.4 which is headed “Payment”. It provides for progress payments and payment following practical completion in fairly orthodox terms. It goes on to provide protections for the contractor in the event of a dispute about costs in the form of entitlements to lodge a caveat against, and register a mortgage over, the title to the property.

[6]Clauses 5.4.5 and 5.4.6 read:

5.4.5The Owner hereby irrevocably agrees and acknowledges that to secure payment of the monies due and owing to the Builder under this Contract, they shall grant a registered mortgage over the Site, the real property description of which is contained in the First Schedule hereof, in favour of the Builder. The form of the mortgage shall be the current Auckland District Law Society All Obligations Mortgage Memorandum (or in the event the Auckland District Law Society ceases to exist the form used by the lawyers for the Builder from time to time).

5.4.6For the purposes of clause 5.4.5, if the Owner refuses or fails for whatever reason to execute the necessary documentation to effect the mortgage security in favour of the Builder, the Owner hereby irrevocably appoints the…

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: [2021] NZHC 2018
Decision Date: 5 August 2021

CaseChat Overview and Summary

The High Court of New Zealand was tasked with determining whether LSK Builders 2011 Limited could sustain a caveat lodged against the property of Mark and Suzanne Chamberlain. LSK, a building company, had engaged with the Chamberlains to construct a home, but the project was fraught with disputes. LSK claimed an outstanding debt of approximately $200,000, which the Chamberlains denied. The contractual dispute resolution process was underway in the District Court, but LSK had also lodged a caveat to secure its position. The Chamberlains sought to have the caveat removed.

The primary legal issue was whether LSK could sustain the caveat under section 138 of the Land Transfer Act 2017, given that it had registered a charge over the property to secure its claim. The court considered whether LSK had a proprietary interest in the land that warranted maintaining the caveat beyond the registered charge. LSK argued that the caveat served a distinct purpose from the mortgage, while the Chamberlains contended that the caveat had become redundant once the mortgage was registered.

The court held that LSK's caveat was no longer justified because it had registered a charge over the property. The caveat was intended to protect LSK's contractual right to secure its claim by registering a charge, but once the charge was registered, the caveat's protective function was redundant. The court found that LSK's interest in the land was limited to the debt due under the contract, which was already secured by the registered charge. Therefore, the basis for the caveat no longer existed, and the application to sustain the caveat was dismissed.

The court did not award costs at the interlocutory stage but reserved the issue, inviting the parties to reach an agreement. If the parties could not agree, the matter would be resolved through further submissions.

Orders