Mira Sahib Company Limited v Saundercock

[2012] NZHC 2322

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2012-485-1256 [2012] NZHC 2322

BETWEEN  MIRA SAHIB COMPANY LIMITED Applicant

ANDPAUL LINDSAY SAUNDERCOCK Respondent

Hearing:         29 August 2012

Appearances: Mr G Manktelow for Applicant

Mr J Langford for Respondent

Judgment:      11 September 2012

JUDGMENT OF ASSOCIATE JUDGE DOOGUE

This judgment was delivered by me on

11.09.12 at 4 pm, pursuant to

Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Counsel:

Guy & Toby Manktelow, P O Box 31-265, Lower Hutt – [email protected]

Langford Law, PO Box 344, Wellington – [email protected]

MIRA SAHIB COMPANY LIMITED V SAUNDERCOCK HC WN CIV-2012-485-1256 [11 September 2012]

[1]      The property which is the subject of this proceeding was originally owned by Kerry Saundercock, (“KS”) the son of the respondent.  On 14 July 2006, he entered into an agreement for sale and purchase to sell the property to Build It Up Limited (“BIUL”) for a price of $55,000 of which $10,000 was to be paid by deposit.  The balance was to be paid or satisfied on settlement date.  Settlement date was to be on acceptance “for the purpose of undertaking all works required to complete subdivision”.  Quite what that provision meant is not clear.  It seems though that the transaction envisaged that BIUL would be responsible for sub-dividing the property and that it would settle the agreement to purchase on completion of the subdivision works.  BIUL would have paid cash of $55,000 and would have had to fund the cost of the subdivision works.

[2]      On 16 March 2007, the respondent acquired the property from KS.

[3]      On  14  August  2007,  the  applicant  alleges  that  BIUL  entered  into  an agreement with the applicant company.  In the terms of that agreement the applicant was to carry out works at a number of places including the property at Newlands Road.  Upon completion of the various works and on issuance of titles occurring at

166 Newland Road, it was agreed that the applicant was to acquire Lots 1 and 2 of the subdivision at 166 Newland Road from BIUL.  Presumably BIUL would retain the third block, there being three resulting lots of the subdivision.  The agreement stated that the terms and conditions of the transfer of the land were to be those recorded in the Real Estate Institute agreement for sale and purchase 8th Edition 2006

with  all  necessary  modifications.[1]    The  respondent  does  not  dispute  that  this

[1] Clause 4.1(b) of the Agreement

agreement for sale and purchase was entered into.

[4]      The applicant says that sub-trades including drain layers invoiced work to a value of in  excess  of $59,000  for carrying out  services  as  part  of the  services required to complete the subdivision.   At least one of the invoices produced was directed to the applicant company as the intending payer.

[5]      Mr M Y Sahib ,the principal of the applicant company, says that:

5.        Although  the  title  to  the  property  was  transferred  by  Kerry

Saundercock to Paul Saundercock (and his partner) on 16 March

2007, it was at all times agreed by the parties concerned, including Paul  Saundercock that  the  property would  remain  subject to  the agreement that is exhibit “A” to my first affirmation in these proceedings.

[6]      The agreement apparently spoken of in the above passage was the agreement from Kerry Saundercock to BIUL.

[7]      Mr Sahib further says that that the respondent was fully aware of the works being done on the property and indeed pressed for fulfilment of contractual obligations of BIUL Limited and the applicant.  Mr Sahib says that at all times the respondent was fully aware of what was occurring and that he met him at least two times on site and spoke to him by telephone on a number of occasions where they would discuss works and progress on the site.

[8]      The applicant lodged a caveat expressed in the following terms:

Estate or interest claimed Pursuant to an agreement for sale and purchase dated 14 August 2007 between the caveator and (BIUL) whereby (BIUL) agreed agreed that they would transfer the land described above and being the land to be transferred to (BIUL) under an Agreement for Sale and Purchase dated 14 July 2006 between (KS) and (BIUL) such property having been transferred to (the respondent) ... subject to and with knowledge of the said agreement for sale and purchase with such property now being in the name of the registered proprietor...

[9]      The position of the applicant is that the work required for the subdivision has been largely completed and that obtaining sub-divisional consent would be a relatively easy matter.

[10]     The enquiry that I am required to make is whether it is reasonably arguable that  the  applicant  obtained  an  equitable  interest  in  the  land  as  a  result  of  the agreement that it entered into.[2]

[2] McDonald v Isaac Construction Co Ltd [1995] 3 NZLR 612 at 619.

[11]     The following are the issues which are considered in the remaining sections of this judgment:

a)       whether  the  respondent  has  become  a  party  to  the  agreement originally entered into between KS and BIUL and is therefore liable to perform the terms of that agreement;

b)whether  the  applicant  is  able  to  enforce  the  terms  of  the  head agreement by virtue of being the sub-purchaser under the sub- agreement;

c)       whether  the  caveat  which  has  been  lodged  properly identifies  the interest which it has sought to protect;

d)whether the terms of the caveat include possible rights pursuant to an institutional   constructive  trust   in   favour   of   the  applicant   thus providing an equitable interest over the property owned by the respondent; and

e)       whether it is necessary for the applicant to obtain consent under s 148 of the Land Transfer Act to bring a second caveat.

[12]     Before I go on to consider the issues it is necessary to make brief mention of the principles applicable to applications to sustain caveats.

[13]     I  understand  that  the  equitable  interest  in  land  for  which  the  applicant contends arises from an entitlement as a purchaser under a contract with BIUL as vendor.  BIUL is the purchaser under a head contract for the acquisition of the land. One complicating feature is that BIUL contracted not with the present registered proprietor of the property but with his son, KS.   One of the matters which the applicant  will  need  to  establish  is  that  the  respondent  was  a party to  the head contract.   Mr Langford realistically accepted that it was at least arguable that the respondent replaced his son in the contract with BIUL by a process of novation.  I consider that that is in fact correct.

[14]     I also agree with the submission of Mr Manktelow that it is arguable that a sub purchaser is able to establish an equitable interest in land.[3]   It may be that if the head vendee will not perform its obligations under the head contract, the sub- purchaser is able to stand in his shoes if he is willing to perform the obligations of the head vendee to the head vendor.[4]

[3] Ibid, at 617.

[4] Ibid.

[15]     I am therefore of the view that issues one and two should be answered in the affirmative.

[16]     Mr Langford submitted that the applicant is not able to establish that it has an enforceable contract because the titles that were contemplated as part of the subdivision  which  the  parties  were  going  to  enter  into,  have  yet  to  be  issued. Further, he said that given BIUL is in liquidation and that the respondent is unlikely to want to take steps to complete the subdivision, the contract which the applicant depends upon is not enforceable.

[17]     I do not accept that submission.  Enforcement of the contract envisages that the head vendor can be compelled to complete all of the subsidiary steps required as a condition for delivering to the other parties to the contract the consideration that was bargained for.  To put it another way, it is at least arguable that the applicant has the right to obtain orders requiring the respondent to complete the subdivision and to obtain any consents that are required for that purpose.  Of course, the party seeking to enforce the contract must be willing and able to perform his/her obligations under the same contract.   Specifically, the applicant would have to complete all of the works  that  it  was  engaged  to  carry out.    It  would  not  be able to  refrain  from performing the contract, thereby causing an inability on the part of the respondent to obtain consents, and thereafter obtain from the Court an order directing the respondent to get those consents.

[18]     Some mention was made of the issue of delay.   However, given that the respondent/KS accepted the benefit of services which the applicant either directly

supplied itself or paid for (such as the costs for the drainage work which was carried

out in 2010 by a subcontractor), then it is unlikely that the Court would be prevented from ordering specific performance only for the reason that the original head agreement was entered into as long ago as 2006.

[19]     It is correct that the respondent has made adverse comments about the quality of the work that was actually undertaken on the property.  In the very slight reference that is made to these issues in the evidence, it is clear that the applicant does not accept criticism of the quality of the work.   Defects in the work may provide a ground for cancelling the head purchase agreement but whether or not such an outcome would be contemplated by the Court cannot be predicted with any level of certainty at this stage.  The Court should not conclude in the circumstances of the caveat application that there is a sufficiently strong prospect of the respondent’s complaints being upheld, namely that the applicant will be unable to enforce the head contract.

[20]     The next issue concerns the form of the caveat.   The first objection which Mr Langford raised was that the agreement which the applicant entered into with BIUL could not aptly be described as “an agreement for sale and purchase of land”. That submission was directed towards shortcomings which Mr Langford said could be identified in the description of the interest which had been inserted into the caveat.

[21]     It is correct that the registered proprietor of land ought not to be vexed with incomprehensible claims for caveat interests.   Whether a given caveat can be described in those terms depends upon a number of things, including the circumstances of the case.   When that approach is applied to the present case, it would become tolerably clear to the proprietor just what interest was being asserted in the land. While there is no doubt that the drafting of the caveat might have been more felicitous, the actual form of the caveat is sufficient to describe the interest that is claimed.

[22]     Where I do agree with the criticism that Mr Langford made, is where he drew attention to the fact that there is no reference in the terms of the caveat to the constructive trust which is now put forward by the applicant.  Had that been the only

ground upon which the applicant intended to establish the existence of an equitable interest in the property, it is likely the Court’s view would have been that there was too great a divergence between the interest sought to be enforced and the terms of the caveat so that the application to sustain would have failed on that ground.

[23]     The next point concerns whether the applicant requires leave under s 148 of the LTA.  Section 148 relevantly states:

148     No second caveat may be entered

(1)       If  a  caveat  has  been  removed  under  section  143  or  has lapsed, no second caveat may be lodged by or on behalf of the same person in respect of the same interest except by order of the High Court.

(2)       For  the  purposes  of  verifying  that  a  caveat  does  not contravene the prohibition in subsection (1), the Registrar is not obliged to inquire further than the current folium of the register or computer register for the land.

[24]     Mr Langford pointed out that BIUL had previously lodged a caveat to protect its interests under the agreement with KS/the respondent but that that caveat had lapsed.  He therefore submitted that leave would be required under s 148.  I do not agree.  While it is correct the interest which the applicant seeks to protect derives from the same contract from which BIUL claimed that its rights arose, that is insufficient for the provisions of s 148 to be activated.  The applicant and BIUL are separate entities and therefore the caveat which is the subject of these proceedings is not relevantly lodged by “the same person” who lodged the earlier caveat.

Conclusion

[25]     In accordance with the statement of principle which I set out earlier in this judgment, I am not prepared to conclude that it is inarguable that the applicant has an interest of the type which it sought to protect when it lodged a caveat against the land.  Whether or not the applicant is able to succeed can only be decided after the full hearing.  Such a hearing is likely to raise legal issues of moderate complexity.  It will also be necessary to enquire into matters such as whether in the factual context of this application it is going to be possible for the subdivision to proceed to completion and for separate titles to be issued as the parties contemplated when they

entered into the head agreement.   Further, the issue of whether the applicant is in breach of its agreement with BIUL, and whether, if so, that has any relevance to any attempt to enforce the head agreement may also need to be considered.

[26]     Not surprisingly, the Court should only make an order which will result in removal of the caveat if it is satisfied that there is no real or substantial basis upon which the applicant could argue for the interests that are claimed at a substantive hearing.   While the respondent has pointed out a number of potential stumbling blocks on the part of the applicant, it has not satisfied me that this is an appropriate case for the removal of the caveat.  I am in broad agreement that an order of the kind sought in paragraph 1(i) of the originating application dated 20 June 2012 ought to be named.   I consider, however, that conditions ought to be attached to the order. The order is made on the basis that it is to enure until further order of the Court and is conditional upon the applicant commencing proceedings to enforce such rights as it considers it has within four weeks of the date of this judgment.   It is further conditional upon the applicant prosecuting those proceedings with reasonable expedition.  It is the intent of the Court order that should the applicant fail to comply with the conditions, the respondent can request to have the matter brought back before the Court so that the order may be discharged.

[27]     The applicant as the successful party is entitled to costs on a 2B basis.  As well, the applicant is to have disbursements as fixed by the Registrar.

J.P. Doogue

Associate Judge