Lynch v FCL Cl Limited
[2024] NZHC 1437
•31 May 2024
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE
CIV-2023-425-108
[2024] NZHC 1437
UNDER the Land Transfer Act 2017 IN THE MATTER
of an application for an order under s 143 of the Land Transfer Act 2017 that a caveat not lapse
BETWEEN
MONIQUE HUNE LYNCH and LUKE ALEXANDER SANSOM
Applicants
AND
FCL CL LIMITED as trustee of the FCL CL TRUST
Respondent
... contd over
Hearing: 21 May 2024 Counsel:
D G Chesterman for Applicants S A Grant for Respondent
Judgment:
31 May 2024
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 31 May 2024 at 3.30 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date:
LYNCH v FCL CL LIMITED [2024] NZHC 1437 [31 May 2024]
CIV-2023-425-114 UNDER
the Land Transfer Act 2017
IN THE MATTER
of an application for an order under s 143 of the Land Transfer Act 2017 that a caveat not lapse
BETWEEN
MARTA YATES
Applicant
AND
FCL CL LIMITED as trustee of the FCL CL TRUST
Respondent
[2] The applicants (the purchasers) entered into agreements to acquire residential units in a complex being constructed by the respondent (FCL) in Queenstown.1 FCL exhausted its funding facility, which it says was due to delays and cost increases resulting from the COVID-19 pandemic. FCL purported to cancel its agreements with the purchasers, relying on a force majeure clause. The purchasers lodged caveats over the head title of the development to protect their interests under the agreements. FCL regarded this as a further basis upon which to cancel the agreements and again purported to do so. It then applied to the Registrar-General of Land to lapse the caveats and the purchasers applied to this Court for an order under s 143 of the Land Transfer Act 2017 that the caveats not lapse.
[3] In a judgment of 9 April 2024, I granted the purchasers’ applications.2 The orders were conditional upon the purchasers commencing proceedings to sustain the interests claimed in their caveats within 10 working days, which they have done. As the purchasers were the successful parties, I awarded them 2B scale costs plus reasonable disbursements as fixed by the Registrar.
[4] FCL applies to recall the judgment so that the costs order can be reconsidered. FCL has also filed an appeal from the judgment on other aspects of the decision.
[5] The grounds upon which FCL relies to have the judgment recalled are as follows:
(a)I did not address an argument that the agreements expressly provided that costs relating to lodging a caveat in contravention of a no-caveat clause would be borne by the purchasers;
(b)costs ought not to have been awarded against FCL, or alternatively should have been reduced, because:
1 I will refer to the applicants in the substantive proceeding (but the respondents to this application) as “the purchasers” and the respondent in the substantive proceeding (and applicant to this application) as “FCL”.
2 Lynch v FCL CL Ltd [2024] NZHC 700.
(i)the purchasers refused to provide an undertaking to promptly commence and continue substantive proceedings;
(ii)the purchasers did not provide an undertaking to cooperate with the removal of the caveat to allow for the issue of new titles until after the hearing; and
(c)costs should be reserved until the purchasers’ substantive proceedings are finally determined.
[6] In addition to the above, FCL takes issue with the quantum of costs claimed by the purchasers.
The law
[7] The court has a wide discretion to recall a judgment before it is sealed. Rule 11.9 High Court Rules 2016 provides:
A Judge may recall a judgment given orally or in writing at any time before a formal record of it is drawn up and sealed.
[8] The discretion is used infrequently and with caution. The leading case is Horowhenua County v Nash (No 2) where Wild CJ identified three categories of case in which an unperfected judgment may be recalled as follows:3
Generally speaking, a judgment once delivered must stand for better or worse subject, of course, to appeal. Were it otherwise there would be great inconvenience and uncertainty. There are, I think, three categories of cases in which a judgment not perfected may be recalled - first, where since the hearing there has been an amendment to a relevant statute or regulation or a new judicial decision of relevance and high authority; secondly, where counsel have failed to direct the Court’s attention to a legislative provision or authoritative decision of plain relevance; and thirdly, where for some other very special reason justice requires that the judgment be recalled.
[9] In Munro v Gladvale Farms Ltd, Heath J noted that the court should be circumspect in exercising its recall jurisdiction which may be used inappropriately by disaffected litigants who are not prepared to accept the consequences of a judgment
3 Horowhenua County v Nash (No 2) [1968] NZLR 632 (SC) at 633.
entered against them.4 Heath J recognised the benefits of the recall jurisdiction where a Judge has overlooked a material factor in reaching a particular decision and said:
[14] In my view, a recall application must raise a material issue on which it would be unjust for the parties to be put to the cost and trouble of appeal, when the issue is one more appropriately addressed by the first-instance Judge. Such a situation will arise in cases in which a Judge acknowledges that he or she overlooked a material factor in reaching a particular decision. Recall, in that situation, avoids the risk that an appeal might be allowed and remitted to the trial Judge for reconsideration of the point in issue, at unnecessary further cost to the parties. Such circumstances, in my judgment, constitute a “very special reason” for exercising the recall jurisdiction, to adopt the language employed by Wild CJ in Horowhenua County.
(footnotes omitted)
[10] FCL principally argues that this case falls into the third category recognised in Horowhenua County v Nash. In Brake v Boote, Holland J found that the third category included a failure by the judge to apply his mind to a claim for interest when entering judgment.5 In Faloon v Commissioner of Inland Revenue, Asher J had this to say about the third category:6
[13] While the third category is not defined with particularity in the judgments, it is quite clear that the discretion to recall must be exercised with circumspection, and it must not in any way be seen as a substitute for appeal. In particular there are some things that it can be said the power to recall does not extend to. It does not extend to a challenge of any substantive findings of fact and law in the judgment. It does not extend to a party recasting arguments previously given, and re-presenting them in a new form. It does not extend to putting forward further arguments, that could have been raised at the earlier hearing but were not.
[11] Relevantly, it has also been held that in giving its reasons for judgment the court is not required to discuss every aspect of argument advanced by the parties. In Unison Networks Ltd v Commerce Commission the Court of Appeal made this point as follows:7
[34] We conclude by observing that the Court’s reasons and the issues it chooses to address are within the discretion of the Court. It will often be unnecessary to deal with all of the submissions presented because of the way
4 Munro v Gladvale Farms Ltd [2017] NZHC 2692 at [13]. See also Ngahuia Reihana Whanau Trust v Flight CA23/03, 26 July 2004.
5 Brake v Boote (1991) 4 PRNZ 86 (HC).
6 Faloon v Commissioner of Inland Revenue (2006) 22 NZTC 19,832 (HC). See also Erwood v Maxted [2010] NZCA 93, (2010) 20 PRNZ 466.
7 Unison Networks Ltd v Commerce Commission [2007] NZCA 49, with reference to R v Nakhla (No 2) [1974] 1 NZLR 453 at 456 (CA).
in which a case is finally resolved. The Court plainly is able to address submissions in the manner it chooses. While a decision may be recalled where a material issue properly put before the Court is not addressed, excluding a slip or minor error, the cases in which justice will require a recall on this basis are likely to be rare.
[12]I now turn to consider each ground advanced by FCL under the headings below.
Failure to consider an argument
[13] The no-caveat clause in the agreements between the purchasers and FCL was in these terms:
The Purchaser will not lodge a caveat against the Vendor’s Land unless a separate record of title for the Unit has been issued and the Vendor is in default of any of its obligations under this agreement. In the event the Purchaser lodges a caveat contrary to the restrictions in this clause (which restrictions are essential to the Vendor) the Vendor will be entitled to require the Purchaser to remove the caveat. The cost of such removal, including any costs or expenses incurred by the Vendor in relation to such removal will be borne by the Purchaser. In the event the Purchaser fails to remove the caveat within three (3) working days of the Vendor’s request, the Vendor may immediately and without further notice do either or both of the following:
(a)Take all necessary steps at the Vendor[s] cost to obtain immediate removal of the caveat. The Purchaser agrees that production of a copy of this agreement to LINZ together with a written statement from the Vendor that the Purchaser has failed to comply with a notice issued by the Vendor in terms of this clause will be sufficient authority to permit LINZ to remove the caveat from the Vendor’s title;
(b) Cancel this agreement and forfeit the Deposit. (emphasis added)
[14] FCL’s notices of opposition to the purchasers’ applications to sustain the caveats stated as follows:
The Applicant has no entitlement to costs, and the costs of this Application should instead be paid on an indemnity basis by the Applicant to the Respondent under [the no-caveat clause].
[15] Ms Grant’s written submissions for FCL at the hearing dealt with the issue of costs in one short paragraph as follows:
53.Contrary to the Applicants’ assertions, the costs to remove the caveat are payable by the Applicants. They were given fair warning to remove it, and could have taken other steps to protect their interests. They have known about the cancellation since 8 September 2023.
(footnote omitted)
[16] In support of the recall application Ms Grant argues that FCL’s position, which she says is set out in its notice of opposition, is that all costs relating to lodging a caveat in contravention of the no-caveat clause are to be borne by the purchasers regardless of the outcome of the purchasers’ applications. She relies on the words highlighted in bold in the no-caveat clause (at [13] above) pursuant to which, she says, the purchasers contractually agreed to pay costs and expenses of FCL in relation to removal of their caveats, including the legal costs of FCL in opposing the purchasers’ applications to sustain the caveats.
[17] Ms Grant contends the wording of the clause is wide, and the steps taken by FCL to oppose the purchasers’ applications were both within the parties’ contemplation and objectively necessary steps towards the removal of the caveats. She also submits the Court should not condone breaches of contract and award the purchasers costs.
[18] Ms Grant further submits that as there was no reference in the judgment to the no-caveat clause as it relates to costs it appears FCL’s entitlement to indemnity costs may have been overlooked. She submits this is a special reason for the judgment to be recalled so the issue of costs can be considered afresh. She acknowledges that FCL’s position was not raised in oral submissions at the hearing and could have been put more directly in the written submissions.
[19] To the extent FCL contends that I did not consider the argument that FCL was entitled to indemnity costs regardless of the result of the caveat proceeding, it is correct. However, I do not consider the argument was fairly put in issue in the notice of opposition or in FCL’s written submissions and nor, as I think is accepted, was it raised in oral submissions. I agree with Mr Chesterman’s submission that the proposition that an unsuccessful party is entitled to indemnity costs irrespective of the merits of its position to be such an unusual one that it should have been raised directly.
[20] In any event, I consider FCL’s argument that it could be entitled to indemnity costs to be without merit as a matter of construction of the no-caveat clause. Had I considered the argument now advanced I would have had no hesitation in rejecting it.
[21] In my view, the no-caveat clause says nothing about the incidence of costs in proceedings to sustain a caveat. The sentence in the clause that FCL relies upon refers to costs incurred in responding to a request by FCL to remove a caveat, which costs of removal are to be borne by the purchasers. However, that did not occur. The clause then goes on to deal with the situation where the purchaser does not remove the caveat, in which case FCL may take all necessary steps to obtain the removal of the caveat “at the Vendor[s] cost” or cancel the agreement and forfeit the purchaser’s deposit. The clause does not contemplate proceedings to sustain the caveat nor entitle FCL to indemnity costs in such proceedings. Further, and looking at the matter in a slightly different way, the costs that FCL says it is entitled to are not costs incurred in “removal of the caveat[s]” because the caveats were sustained.
Costs awarded should be reduced
[22] FCL argues the purchasers’ costs should be reduced because they failed to provide timely undertakings to commence and continue substantive proceedings and to cooperate with the removal of the caveat to grant the issue of new titles. These were matters that were not raised at the hearing in the context of costs. As the authorities referred to earlier in the judgment make clear, a recall application is not an opportunity for an unsuccessful party to put forward arguments that it could have raised, but failed to do so, at the earlier hearing.
[23] I also do not accept the premise upon which FCL’s submission is made, which is that had the purchasers provided suitable undertakings the caveat proceedings may have been avoided. There is no evidence to suggest that is the case and it is inconsistent with the manner in which FCL acted in purporting to cancel the agreements twice and then challenging the caveats without suggesting the caveats remain upon the giving of undertakings.
[24] Further, there was no obligation upon the purchasers to offer undertakings, and in not doing so they did not act unreasonably. Their counsel proposed well before the
hearing that the caveat applications and applications by the purchasers for summary judgment to enforce the agreements be heard together. It was the Court that expressed doubt that this was appropriate, so it did not occur. Further, when the issue of undertakings was first raised at the hearing the purchasers’ solicitors promptly provided undertakings to allow for the issue of titles.
Costs should be reserved
[25] The next matter raised by FCL is that costs should be reserved. Again, this was not raised at the hearing but is a new argument. I also do not accept there was any basis to reserve costs.
[26] The starting point is that, except in exceptional circumstances, costs are payable to the party that succeeds in respect to a proceeding and should be determined at the time the proceeding is determined.8
[27] Ms Grant refers to Campbell on Caveats where the learned author notes that the court’s usual approach to costs can present a quandary for a registered owner where a caveat has been lodged to protect a claim that needs to be determined in a substantive proceeding.9 The author suggests that in certain circumstances a registered owner may be regarded as the successful party for costs purposes notwithstanding that a caveat is sustained, as follows:10
... Where it appears to the registered owner that the caveator will likely be able to show an arguable case, it is advisable for the registered owner to invite the caveator to commence a substantive proceeding within a stated time, failing which the registered owner will challenge the caveat with the intent that any order sustaining the caveat be on the condition that the caveator commence a substantive proceeding. In this way, even if the caveat is sustained, the registered owner should be considered the successful party, and thereby entitled to costs, if such a condition is obtained.
(footnote omitted)
[28] However, FCL did not adopt the approach suggested above and invite the purchasers to commence substantive proceedings on the basis of which an order to
8 High Court Rules 2016, r 14.2(a).
9 Neil Campbell Campbell on Caveats (3rd ed, LexisNexis, Wellington, 2019) at 10.020A.
10 At 10.020A.
sustain the caveat could be made. It did not do so even when it was aware the purchasers wished to apply for summary judgment to enforce the agreements protected by the caveats.
[29] Ms Grant also submits that academic commentary suggests that costs are normally reserved on applications to sustain caveats and will ultimately follow the substantive proceeding. Ms Grant was able to refer to one text that suggests that is the case, but the authority relied upon by the authors does not support the proposition advanced.11
[30] The position is that on an application to sustain a caveat costs will usually be awarded to the successful party in the ordinary way, although as in all issues of costs the court retains a discretion to order otherwise.12 There are circumstances where costs may be reserved. For instance, in Green & McCahill Holdings Ltd v Ara Weiti Development Ltd the Court of Appeal said:13
[87] Fourthly, although the normal course is that costs in an originating application to sustain a caveat are resolved according to success or failure in that proceeding, costs remain discretionary. Where the caveat is sustained only on condition that the claimed proprietary right must be the subject of resolution by substantive proceedings, the s 143 court may instead order costs be reserved to be resolved when the substantive proceeding itself is determined. Whether that course should be taken may also depend on whether the s 143 claim to right is demonstrably strong (in which case it may be more appropriate to order costs on the application) or weak (in which case costs might better be determined in the round). ...
…
[133] Bearing in mind the discussion of principle at [87] above, we see this as one of those doubtless rare cases where merits are sufficiently balanced for costs to neither be awarded now nor lie where they fall, but rather be reserved for determination once the substantive outcome is known.
(footnotes omitted)
[31]The principle in Green & McCahill Holdings Ltd v Ara Weiti Development Ltd
does not apply here. This is not one of those rare cases where costs should be reserved
11 John Burrows (ed) Land Law (online ed, Thomson Reuters) at [CV4.07(4)], citing Tauranga Builders Ltd v Steeghs HC Tauranga M74/98, 21 September 2000.
12 Neil Campbell Campbell on Caveats, above n 9, at 10.020A.
13 Green & McCahill Holdings Ltd v Ara Weiti Development Ltd [2022] NZCA 218. See also Zhao v Zheng [2023] NZHC 983 at [60]–[62].
because the merits were not finely balanced. The purchasers’ case to sustain the caveats was very strong.
A further ground for refusing recall
[32] There is a further reason why I consider the application for recall should not be granted. FCL has filed an appeal from the judgment and could have raised its challenge to the costs award on appeal. This is not a case where the parties were going to be saved the cost and trouble of an appeal by having this issue addressed by me as the first instance Judge.
Quantum of cost
[33] FCL challenges the quantum of costs claimed by the purchasers. I directed the Registrar to fix costs and it is up to the Registrar to determine those matters. While I understand the parties have provided submissions to the Registrar, I will also provide the Registrar with the submissions provided on this application which canvas the arguments raised by FCL and the purchasers’ responses.
Result
[34]The application for recall of the judgment is declined.
[35] The purchasers have been successful and are entitled to costs on a 2B basis plus reasonable disbursements to be fixed by the Registrar.
O G Paulsen Associate Judge
Solicitors:
Mactodd Lawyers, Queenstown AWS Legal, Queenstown
Foley Hughes, Auckland
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