Northwest Developments Ltd v Zhang
[2017] NZHC 1891
•11 August 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2017-404-000936 [2017] NZHC 1891
BETWEEN NORTHWEST DEVELOPMENTS LTD
Plaintiff
AND
CHENG ZHANG, JIN KUK JUNG AND PILL SOON SO
Defendants
Hearing: 3 August 2017 Appearances:
M J Fisher and K J Ng for Plaintiff
R M Dillon, T A Hwang and W Buckham for DefendantsJudgment:
11 August 2017
JUDGMENT OF JAGOSE J
This judgment was delivered by me on 11 August 2017 at 11.30 am
Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Counsel/Solicitors:
M J Fisher, Barrister, Auckland
Queen City Law, Auckland
Northwest Developments Ltd v Zhang & Ors [2017] NZHC 1891 [11 August 2017]
Introduction
[1] For decision are two interlocutory applications. The plaintiff (“Northwest”) seeks for an interim injunction to prevent settlement of Jung’s sale of its land (except on conditions). The defendants (“Jung”) apply for the removal of Northwest’s caveat over Jung’s land.1
[2] To summarise, Northwest and Jung are respectively incoming and outgoing proprietors of two separate landholdings. Their land is part of a wider residential development, pursuit of which is recorded in a series of agreements between then current landowners. They agreed to facilitate provision of the development’s common shared infrastructure (including by easements over each other’s land), to pay their proportionate share of the cost of such infrastructure, and to require successors in title to be bound by the same terms.
[3] Neither Northwest (as successor in title to the vendor of its land) nor the successor in title to Jung (as vendor of its land) is recorded as party to such documents. When it appeared Jung was to sell its land to a third party without obtaining its execution of such documents, Northwest – which carried the bulk of the actual development works – lodged a caveat against Jung’s land to protect its easement rights, and sought interim relief to prevent Jung’s impending sale except in compliance with the agreements. Jung applied to remove the caveat, and opposes the interim relief.
Facts
[4] Northwest and Jung are each registered proprietors of neighbouring properties respectively at 81 and 77 Nobilo Road, Kumeu. These properties are part of a larger aggregation of properties known as the Huapai Triangle in Auckland’s
Rodney District.
1 Rule 19.2 of the High Court Rules requires applications under s 143 of the Land Transfer Act
1952 for removal of caveats to be made by originating application. Brewer J directed by minute of 15 June 2017: The interlocutory application under s 143 of the Land Transfer Act 1952 filed by the defendants is deemed to be an originating application filed under Part 19 of the High Court Rules.
[5] The Huapai Triangle is intended to comprise a Special Housing Area (“SHA”) under the Housing Accords and Special Housing Areas Act 2013. Huapai Triangle landowners at the time entered into the Huapai Triangle Agreement dated
25 November 2013 (the “HTA”). Under the HTA, the landowners would collaboratively seek a private plan change to the Auckland Unitary Plan to accommodate the SHA development.
[6] On 6 May 2015, Northwest agreed to purchase 81 Nobilo Road from its registered proprietors (“Morton”). Pending settlement, Morton would continue to progress the private plan change as agent for Northwest. Settlement took place on 6
October 2016.
[7] In anticipation of (and conditionally on) the private plan change becoming operative, affected landowners, including Morton and Jung, entered into the Huapai Triangle 5 Landowners Infrastructure Agreement dated 23 June 2015 (the “5 Owners Agreement”). Under the 5 Owners Agreement:
(a) the landowners would work cooperatively to design and construct shared infrastructure (roading, water, sewerage, etc) for the development;
(b)easements over each other’s land were granted for access to provide and maintain the infrastructure (but on terms waiving any right to lodge, and prohibiting lodgement of, protective caveats);
(c) costs incurred in provision of the infrastructure were to be reimbursed proportionately between the landowners at a later date (but in any event on or before settlement of any transfer of their particular land);
(d)the rights and obligations of each party were to be assigned to successors in title to run with their respective lands, by novation of the Agreement or a new agreement in the same terms; and
(e) each party was obliged to sign all necessary deeds and documents and
do everything reasonably required to carry out the Agreement’s terms.
[8] There is also a Huapai Triangle 6 Landowners Infrastructure Agreement of indeterminate later date (the “6 Owners Agreement”) between affected landowners, similarly to cooperate and meet the cost of infrastructure for the development, and to run with the lands.
[9] On 6 May 2016, Jung agreed to sell 77 Nobilo Road to Sanlii Homes Limited (“Sanlii”), to settle on 8 May 2017. The Agreement for Sale and Purchase was unconditional, and contained no provision for Sanlii to succeed to Jung’s rights and obligations under the 5 Owners Agreement.
[10] A Deed of Authority dated October 2016 entitled Sanlii to act on Jung’s behalf as if it were owner of 77 Nobilo Road, but subject to an indemnity in Jung’s favour “for any liability for costs that Jung might incur as owner of the Property and which are incurred as a result of [Sanlii’s] actions”. At least in that capacity, Sanlii participated in ongoing arrangements for provision of the development’s infrastructure under the 5 Owners Agreement. Northwest incurred those infrastructure costs, and invoiced Sanlii for the proportionate share to be borne by the registered proprietor of 77 Nobilo Road. Northwest later readdressed those unpaid invoices to Jung.
[11] Sanlii did not formally become party to the 5 Owners Agreement (by novation, or otherwise), or to any new agreement in the same terms. But Sanlii did sign the 6 Owners Agreement – either under the Deed of Authority for Jung, or as successor in title to Jung (for which the 6 Owners Agreement made express provision). (Morton also signed the 6 Owners Agreement, presumably as agent for Northwest.)
[12] A proffered Deed of Novation, substituting Northwest as party to the 5
Owners Agreement in place of Morton, was signed by Morton and Northwest and the other continuing landowners except Jung. The Deed records Sanlii as a party to it and asserts in its recitals Sanlii entered into the 5 Owners Agreement on the basis of
its unconditional agreement to purchase Jung’s land. But Sanlii did not sign the Deed. And Jung denies liability to pay any proportion of infrastructure costs incurred (possibly, since sale to Sanlii) by Northwest.
[13] On 8 May 2017, Northwest lodged a caveat against dealings with Jung’s land. Jung’s sale to Sanlii thus has not settled. On 11 May 2017, Northwest issued the present proceeding. Sanlii issued a separate specific performance claim against Jung, which is not for determination (although it filed some evidence, but took no other part, and abides the Court’s decision) in this proceeding.2
The law
[14] The parties’ respective applications are to be determined in accordance with familiar principles. Northwest’s interim injunction application is to be determined on the basis of whether Northwest has a serious question for trial, and whether the balance of convenience and overall interests of justice favour granting the injunction.3
[15] The onus in Jung’s caveat removal application lies on the caveator (Northwest) to show it has a reasonably arguable basis for the interest claimed,4 subject to the Court’s discretion as to whether the balance of convenience favours leaving the caveat in place.5
Serious question for trial
[16] The first question is whether Northwest has a serious question to be determined at trial on its own application.
2 Mr Buckham appeared for Sanlii at the commencement of the hearing, for mention of Sanlii’s own proceeding against Jung (CIV 2017-404-0980). Before I granted him leave to withdraw, he confirmed the affidavit of Collette Fenton sworn 12 June 2017 was incorrectly intituled in the present proceeding, and should have been intituled in Sanlii’s proceeding.
3 American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL); Klissers Farmhouse Bakeries Ltd
[1985] 2 NZLR 129 (CA).
4 Castle Hill Run Ltd v NZI Finance Ltd [1985] 2 NZLR 104 (CA), (1986) 1 NZBLC 102,307 at
307.
5 McMahon v McMahon [1997] NZFLR 145 (CA) at 149, 152; Pacific Homes Ltd (in rec) v
Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA), (1996) 2 NZConvC 192,459 at 465-66.
[17] Northwest asserts Jung’s anticipated conduct in settling the sale of its land to Sanlii – without either making its contribution to payable infrastructure costs, and/or securing Sanlii’s commitment to the obligations contained in the 5 Owners Agreement – to be in breach of the 5 Owners Agreement. Northwest claims
$500,054.50 as due and payable by Jung at about the time of issue of the proceeding. That sum was updated to $730,051.07 at about the time of hearing, and continues to accrue as works progress.
[18] Northwest says it is entitled to enforce the 5 Owners Agreement against Jung, either as assignee of the benefit of the Agreement (its promise to perform Morton’s obligations under the Agreement being enforceable by Jung under s 4 of the Contracts (Privity) Act 1982),6 or as a party to the novated Agreement which is how Jung effectively has treated Northwest. Similarly, Northwest submits that gives it standing to lodge its caveat against Jung’s land.
[19] Pending determination of Northwest’s claim, Northwest seeks a injunction:
… restraining [Jung] from settling the sale of [its land], unless and until… (a) [Jung has] caused the purchaser to enter into the agreement contemplated by clause 58 of the [5 Owners Agreement]; (b) [Jung has] delivered to [Northwest] a duly executed copy of the said agreement; [and] (c) [Jung has] paid to [Northwest] the amounts payable by Jung under the 5 Owners Agreement….
Alternatively to such payment, Northwest seeks an order “in terms of rule 7.55(3) of the High Court Rules preserving the funds pending determination of the proceedings”.
[20] In opposition, Jung says it has no obligation to pay any sum to Northwest, and is not party to any agreement with Northwest regarding infrastructure costs. Further, Jung says Northwest has no interest in Jung’s land and is, by its execution of the Deed of Novation and its subsequent dealings with Sanlii, estopped from preventing Sanlii’s ownership of Jung’s land, or has waived any rights against Jung.
Jung also complains the 5 Owners Agreement prohibits lodging of caveats between
6 Relying on Savvy Vineyards 3552 Ltd v Kakara Estate Ltd [2014] NZSC 121, [2015] 1 NZLR
281 at [87] citing Justine Kirby “Assignments and Transfers of Contractual Duties: Integrating
Theory and Practice” (2000) 31 VUWLR 317 at 337–339.
the Agreement’s parties, and requires resort to a stepped dispute resolution process
leading to arbitration, with which Northwest has not complied.
[21] For Jung, Mr Dillon said Northwest’s claim was premature. No amounts were yet payable under the 5 Owners Agreement, because its reimbursement obligations under clauses 34 and 35 did not arise at the earliest until “one year after the date the Plan Change becomes operative”. The ‘Plan Change’ refers to the Huapai Triangle landowners private plan change referred to at paragraph [5] above, which was approved (and the consequent consent granted) by Auckland Council on 10
November 2015. Mr Dillon argued ‘operative’ was a term of resource management art, and referred to the date on which the private plan change became operative as part of the Auckland Unitary Plan, which was not until 15 November 2016, meaning the earliest any amount could become payable under the 5 Owners Agreement was
15 November 2017.
[22] Further, Mr Dillon said the 6 Owners Agreement was the “new agreement” required by clause 58 of the 5 Owners Agreement; that it was not “on the same terms” as the 5 Owners Agreement merely illustrated the project had moved on from what the 5 Owners Agreement addressed.
[23] Mr Dillon drew attention to clauses 10 and 12 of the 5 Owners Agreement. The former requires landowners’ decisions on design and construction of Shared Infrastructure to be unanimous; the latter permits, in circumstances of non- unanimity, two or more other landowners to continue with the design and construction of the Shared Infrastructure with all other relevant provisions of the agreement continuing to apply. He described clause 12 as an “option” for Jung to withdraw from participation in the development, and therefore not to incur any liability for subsequent infrastructure costs (while still being subject to the 5 Owners Agreement). I understood his point to be, from the time of Sanlii’s participation, Jung should be taken to have withdrawn.
[24] Mr Dillon argued the 5 Owners Agreement’s clause 58 was to be regarded as separately addressing landowners’ rights and remedies by assignment, and their obligations by novation or new agreement. He emphasised s 50 of the Property Law
Act 2007 (“PLA”) only permitted assignment of rights and remedies, not obligations. The PLA’s ss 24 and 25 made Northwest’s claimed ‘assignment’ “unenforceable”, to the extent it was of any interest in Jung’s land, which Jung had not conferred in writing on Northwest. And Jung had not been asked to enter into any new agreement or to novate the 5 Owners Agreement to Northwest.
[25] Mr Dillon submitted the real cause of the dispute was Sanlii, which (as “equitable owner” of Jung’s land) had caused Northwest to incur costs to Sanlii’s prospective benefit but intended for Jung’s expense. And Northwest was the author of its own misfortune: by caveating Jung’s land, Northwest had prevented settlement of the very transaction that would have provided – in the form of the 6 Owners Agreement – all the security Northwest sought.
[26] Mr Fisher for Northwest resisted these arguments. He noted they were not foreshadowed in pleadings, evidence, or written submissions. Northwest had filed a further affidavit on the eve of the hearing to address Jung’s indication the previous day it intended to refer the Court to a public notice of the date on which the Auckland Unitary Plan became operative in part. Further affidavit evidence would have established the 6 Owners Agreement was additional to, not in substitution for, the 5 Owners Agreement. The 6 Owners Agreement dealt with infrastructure in a different part of the Huapai Triangle to that the subject of the 5 Owners Agreement. (This is illustrated by the additional landowner party to the 6 Owners Agreement, whose land is to the west of the land subject to the 5 Owners Agreement.) Sanlii (more properly characterised as “constructive trustee” of Jung's land) was necessarily acting as agent for Jung (expressly in relation to both the 5 and 6 Owner Agreements), whom it had indemnified under the Deed of Authority.
[27] In my view, there is a serious question to be tried as to the state and meaning of the Agreements controlling relationships between Northwest and Jung in relation to their Huapai Triangle landholdings. There are serious questions for determination at least about whether:
(a) Northwest is entitled to claim benefits from, or enforce obligations against, Jung under the 5 Owners Agreement;
(b)“operative” in the 5 Owners Agreement’s clauses 34 and 35 has the technical resource management meaning of that word in terms of the coming into force of the relevant parts of the Auckland Unitary Plan (which the Huapai Triangle landowners’ private plan change is to vary);
(c) Jung has complied with the 5 Owners Agreement in terms of the sale of its land to Sanlii, including whether that compliance is met by the 6
Owners Agreement.
[28] It is not possible finally to determine the contractual position on the face of the documents, which at no point have both Northwest and Jung party to the same agreement, or from the untested affidavit evidence, some of which is not made in or translated from the deponents’ usual language.7 But the evidence overall anticipates a multipartite collaboration of relevant landowners, to continue the development’s shared infrastructure through successors in title, with which Jung’s conduct is
inconsistent.
Ground for caveat is reasonably arguable
[29] The second threshold question is whether Northwest can discharge its onus as challenged caveator.
[30] With regard to Jung’s application for removal of Northwest’s caveat, Northwest’s position outlined at paragraph [18] above is reasonably arguable. Equitable title can pass under a conditional contract, subject to the terms of the contract itself but “recognising that the purchaser must have acquired rights which
should be protected in an appropriate manner”.8
Balance of convenience
[31] The balance of convenience favours granting the injunction, because otherwise all relevant landowners would not be party to the 5 Owners Agreement,
7 Some of the affidavits reverse the expected position by endorsing text clearly authored by legal professionals as having been “orally translated” into the deponents’ usual language.
8 Bevin v Smith [1994] 3 NZLR 648 (CA), (1994) 6 TCLR 311 at 329.
putting the Huapai Triangle SHA development itself at prospective risk (if the 6
Owners Agreement is not its sufficient substitute). I include in that the risk to interests of the other current and prospective landowners not party to this proceeding, as well as the more distanced interests of those for whose benefit the development is being made.
[32] That factor also means the balance of convenience favours leaving the caveat in place, as giving notice to the world.
[33] I am not much taken with Jung’s complaint Northwest is in breach of the
5 Owners’ Agreement’s ‘no caveat’ provision, when Jung both denies Northwest has standing to claim under that Agreement, and is itself in apparent non-compliance with the Agreement. It may be – on final analysis, if Jung is found by its conduct to have repudiated the 5 Owners Agreement – Northwest would be excused from the contractual obligation not to caveat.9
[34] Neither is Northwest’s non-resort to the agreement’s alternative dispute provision disqualifying. The provision itself excludes applications for urgent interlocutory relief. Mr Dillon sought to argue Northwest’s application was not urgent, because the issues had arisen over an extended period of time. But, given everything fell for performance at the time of Jung’s settlement to Sanlii, Northwest’s application in the wake of its caveat seems to qualify. And Jung has not applied for a stay under Rule 8(1) of the Schedule 1 to the Arbitration Act 1996, but rather has submitted its first statement on the substance of the dispute, meaning its
entitlement to insist exclusively on the alternative dispute process has expired.10
[35] Meanwhile, as between Northwest and Jung, Northwest risks being out of (some, but a significant sum, of) its money incurred in infrastructure development for the benefit of all landowners, while any expense incurred by Jung in that capacity as a consequence of Sanlii’s actions is indemnified by Sanlii, and further secured by
Northwest’s undertaking as to damages in this proceeding. In terms of the balance of
9 Cash Handling Systems Ltd v Augustus Terrace Developments Ltd (1996) 3 NZ ConvC 192,398 at 412.
10 Property People Ltd v Housing New Zealand Ltd (1999) 14 PRNZ 66 (HC).
convenience, refusing interim relief would be harder on Northwest if ultimately successful than would granting interim relief now be on Jung if it prevailed at trial.
Overall justice
[36] Overall justice also commends grant of the injunction: Jung inarguably is party to the 5 Owners Agreement, and obliged thereunder to cause its successor in title to be bound “on the same terms”, which Jung literally has not done. Whether the contractual phrase is to be construed as having some ambulatory quality – met by the
6 Owners Agreement, as Mr Dillon contends – is a matter for determination at trial. Even stepping back from the detail of the dispute, Jung’s apparent non-compliance seems central to the risk Northwest seeks by its interlocutory application to avoid.
Result
[37] On interim relief:
(a) I am not prepared to prohibit settlement unless Jung delivers a copy of the ‘same terms’ agreement to Northwest. That would be an advance on the 5 Owners Agreement. But the provision of such an agreement to Northwest may be necessary if Northwest is to withdraw the caveat to permit settlement;
(b)I am not prepared to prohibit settlement unless sums alleged to be payable under the 5 Owners Agreement are paid to Northwest. There appears to be a dispute as to whether Jung or Sanlii is liable for that money, and then under the 5 or 6 Owners Agreement. Further, Jung’s liability (even if established) is not a ‘fund’ in terms of rule 7.55(3) of the High Court Rules for the purposes of payment into court.11 And Jung has the benefit of Sanlii’s indemnity under the Deed of Authority;
(c) I am prepared to prohibit settlement unless sums alleged to be payable under the 5 Owners Agreement are paid into an escrow account on
11 Rapid Metal Developments (NZ) Ltd v Rusher (1987) 2 PRNZ 85
terms including no disposition without this Court’s further order. Counsel should agree on acceptable terms specifying the particular account proposed for the Court’s formal order. I note clause 38(a) of the 5 Owners Agreement specifies terms for payment of disputed cost contributions to a stakeholder, which may be adaptable for present purposes. (I am not suggesting clause 38(a) otherwise has application: I understood the evidence to be – in terms of the 5 Owners Agreement’s clause 36(b), and subject to Jung’s contention Northwest has no standing under that agreement to render invoices to Jung – Jung is deemed to have accepted the validity of the amounts Northwest requires to be paid.)
[38] I order:
(a) pending further order of this Court, the defendants are restrained from settling the sale of any part of Lot 8, Deposited Plan 116044, being all that parcel of land comprised and described in Identifier NZ66A/205, to a successor in title, unless and until the defendants have:
(i) assigned or transferred their rights and obligations under the
Huapai Triangle 5 Landowners Infrastructure Agreement dated
23 June 2015 (the “Agreement”) to that successor in title;
(ii)caused the successor in title to enter into a new agreement with the other parties to the Agreement on the same terms as the Agreement, or a deed of novation of the Agreement so that the successor in title is bound on the same terms as the defendants are bound by the Agreement; and
(iii)paid any cost contributions payable under clauses 34 and/or 35 of the Agreement into an escrow account on terms including no disposition without this Court’s further order and otherwise as are submitted to the Court for approval on sealing;
(b)the defendants’ application for an order that Caveat No 10783033.1 (North Auckland Registry) affecting title NZ66A/205 be removed is refused; and
(c) subject to any other relevant considerations, 2B costs on the interlocutory applications, with an allowance for second counsel, are payable by the defendants to the plaintiff.
Next steps
[39] I am uncertain about arrangements for this proceeding’s future case management. I note Woolford J – by minute of 18 May 2017, in making timetable orders for the hearing of the interlocutory applications in this proceeding (but also making timetable orders for Sanlii’s proceeding against Jung (CIV 2017-404-980) – directed the Registry to allocate a case management conference on the first available date after the expiry of 20 working days from the date of the minute. At paragraph [4] of that minute, Woolford J noted this proceeding was to be case managed together with CIV 2017-404-980. If a case management conference is not already allocated for a date after the date of issue of this judgment, the Registry should now allocate such a case management conference for both proceedings together.
Costs
[40] Last, if costs cannot be agreed between counsel, they will be determined on the papers. Short memoranda of no more than five pages – annexing a single-page table setting out the contended allowable steps, time allocation, and daily recovery rate – are to be filed and served by Northwest within 10 working days of receipt of this judgment; and by Jung within 5 working days of receipt of Northwest’s memorandum.
Jagose J
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