Park Lane Estates Limited v Kim
[2014] NZHC 782
•15 April 2014
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2014-409-000066 [2014] NZHC 782
IN THE MATTER of Caveat No 9595321.1 (Canterbury
Registry)
BETWEEN
PARK LANE ESTATES LIMITED Applicant
AND
SUNG-HYUN KIM and TAE-HAN KIM and GAE JA LEE and SANG MI HONG Respondents
Hearing: 2 April 2014
Additional evidence: 7 April 2014 and 11 April 2014
Additional submissions: 11 April 2014Appearances:
D M Lester for Applicant
T A Hwang for RespondentsJudgment:
15 April 2014
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to caveat lapsing
PARK LANE ESTATES LIMITED v SUNG-HYUN KIM and TAE-HAN KIM and GAE JA LEE and SANG MI HONG [2014] NZHC 782 [15 April 2014]
Introduction
[1] The applicant (Park Lane) caveated two properties (the Owners’ properties):
(a) A property (Lot 6) owned by the first and second named respondents;
and
(b) A property (Lot 7) owned by the third and fourth named respondents. I will refer to the respondents as “the Owners”.
Park Lane’s caveat
[2] In its caveat, Park Lane set out the relevant Identifiers of Lots 6 and 7. Under
the heading “Estate or Interest claimed” it then asserted:
An agreement to mortgage the land dated 19 March 2012 between Park Lane Estates Limited as Mortgagee and the registered proprietors … as Mortgagors.
Background to the caveat
[3] Lots 6 and 7 were part of a group of neighbouring lots at Rolleston which were the subject of planned subdivisions. Park Lane also owned two properties (Lots 9 and 10) and was involved in the subdivision.
[4] In 2011, the various properties in the area were rezoned to “Living Z” through the local authority’s plan change process. A company, Tay No.1 Limited, (Tay) negotiated with a number of owners’ contracts whereby all those owners would engage Tay to achieve various matters relating to subdivision.
[5] On 19 March 2012 Tay entered into a contract with the Owners for the management of subdivision steps on their behalf (the contract). The contract recognised that the cost of the construction of a main trunk sewer would be initially met by the owners of other properties in the area of the project, with the Owners to then meet their pro rata share of those costs. I will return at [10] – [18] to more detailed provisions of the contract.
[6] Robin Schulz provided the evidence on behalf of Park Lane. He deposed that Park Lane incurred all the expenditure anticipated under the contract. He refers to steps taken in completing of obligations under the contract. He says that work was undertaken for the benefit of the Owners of Lots 6 and 7 with their full knowledge of the work. He exhibits an invoice for rezoning work, rendered pursuant to clause 2.5 of the contract. That invoice was met by the Owners in June 2012. He exhibits a further invoice for $43,222.31, rendered to the Owners by Park Lane on 12 July
2012. The Owners have not met this invoice.
[7] Mr Schulz deposes that Park Lane lodged a caveat in December 2013 when he became aware that the Owners were intending to sell the Owners’ properties, a step to which Park Lane has no objection provided the sale does not prejudice Park Lane’s security.
The Owners purport to cancel the contract
[8] On 20 February 2014 the Owners gave Park Lane a notice in which they purported to cancel the contract because three conditions were never satisfied.
Application that caveat not lapse – the principles
[9] I adopt the following principles in relation to this application:
(a) The burden of establishing that the applicant has a reasonably arguable case for the interest claimed is upon the caveator;
(b)The caveator must show an entitlement to, or beneficial interest in, the estate referred to in the caveat by virtue of an unregistered agreement or an instrument or transmission, or of any trust expressed or implied: s 137 Land Transfer Act 1952;
(c) The summary procedure involved in an application of this nature is wholly unsuitable for the determination of disputed questions of fact – an order for removal of the caveat will not be made unless it is clear that the caveat cannot be maintained either because there was no valid
ground for lodging it or that such valid ground as then existed no longer does so;
(d)When the burden upon the applicant has been discharged, there remains a discretion as to whether to remove the caveat, which will be exercised cautiously;
(e) The Court has jurisdiction to impose conditions when making orders.
The contract’s more detailed provisions
[10] The contract was headed “Heads of Agreement – Park Lane (Lots 6 & 7)” but it is common ground that the document is contractual. The contract is in typed form but certain clauses have amendments in handwriting. References in this contract to the “Owners” are to both sets of Owners (of Lots 6 and 7).
[11] Section 1 contains what is headed as “Warranty by the Manager”. It
provides:
1.1The Manager warrants that the properties listed in the Schedule A (attached) have entered into an agreement with the terms of the agreements with other land Owners being the same as the terms contained in this agreement. If there is any deviation, in a material way, from the terms of this agreement, the Manager further warrants to inform the Owner about the variation.
1.2The minimum number of parties joining the Park Lane Project must be at all times
six (6).To avoid confusion, the minimum number of joining parties only include fee paying Owners.
Condition to sign this agreement (7 Owners to Join Lot 10, 9, 8, 2, 3 and 6.7)
[The italicised words were hand-written into the contract]
[12] Section 2 dealt with rights of way and subdivisional covenants. It was pursuant to Clause 2.5, for expenses in that regard, that the first invoice was rendered and paid.
[13] Clause 2.6 provided for a further payment by the Owners “as outlined in documents (attached) as Schedule B”. Schedule B to the contract was a document
headed “Budget re Park Lane Resource Consent” which was itemised and totalled at
$127,500 plus GST for the full project. Schedule B then showed four different scenarios. The scenario involving seven participating Owners showed the budgeted cost per lot at $18,200.
[14] Alongside clause 2.7, (in which reference was made to the Manager being permitted to instruct Cordner Hill Law in relation to clause 2 matters) the Owners added to the contract:
Required to agree. If the cost of process, over the Budget Information
(Schedule B).
[15] Section 3 contains terms as to the construction of a main trunk sewer. It provides:
3.1The Owner agrees to facilitate the construction of a main trunk sewer as identified in the plan contained in
Schedule Dand provide if necessary, all consents, easements, or restrictions necessary to protect the sewer in favour of the Selwyn District Council.
Sewers Plan including to cover Lot 6, 7.
[The italicised words were handwritten into the contract]
3.2The cost initially for the construction of the sewer will be met by the Owners of properties A & H in Schedule A, subject to each other Owner contained in Schedule A, (except “Property I”) meeting and paying their pro rata share of the cost of the main trunk sewer (in the proportion of number of lots resultant from each individual Owner’s title compared to the total number of lots of all Owners) at such time as that Owner obtains a Section 224C Certificate from the Selwyn District Council for the first stage of any development in terms of PC7 and the resultant Resource Consent of their land.
To avoid confusion, the calculation of the costs is as follows:
total amount of costs incurred;total number of resulting lots to be served by the asset upon completion;
the total number of lots the Owner can service from the asset.
3.3The Owner agrees that the costs referred to in Clauses (3.1) and (3.2), is an interest in the land sufficient to be protected by mortgage, or caveat, in favour of the parties making the original payments, i.e. the Owners of the land marked A & B in Schedule A. The Owner shall sign any document necessary to achieve that security.
…
[16] Through a confirmation of the provisions of Schedule A and the evidence, the following are identified as the relevant owners:
Property A – NZ Rolleston Investments Ltd
Property B – Beulah Ltd
Properties G & H – Park Lane
[17] Clause 6 deals with disputes. Clause 6.1 imposed a duty of good faith upon the parties:
6.1The parties agree that they will act in good faith in all matters relating to this agreement, with the understanding that the Plan Change and the early sub-division and infrastructure stages will benefit all Owners.
[18] Remaining provisions of clause 6 required, in the event that any dispute arose, that the parties attempt resolution first by negotiation, then by mediation and then by arbitration.
Park Lane’s case
[19] Park Lane says that the interest it claims is reasonably arguable because: (a) Park Lane’s entitlement to a beneficial interest
(i)By clause 3.3 the owners expressly agree to grant “an interest in the land sufficient to be protected by mortgage, or caveat”;
(ii)The entitlement or interest identified in clause 3.3 was conferred as part of the Owners’ contractual promise upon Park Lane as the other owner making the original payments (under clause 3.2), which promise was intended to be enforceable at the suit of the party making the original payments (in terms of s 4 Contracts (Privity) Act 1982);
(b) Sufficient description of interest in the caveat
(i)The nature of the interest claimed by Park Lane was stated with sufficient certainty by Park Lane in its caveat, in compliance with s 137(2) Land Transfer Act 1952.
The Owners’ case
[20] The Owners say that the Court should not sustain Park Lane’s caveat
because:
(a) The interest claimed in the caveat does not exist
(i)Contrary to the assertion in the caveat, there has never been an agreement between Park Lane and the Owners.
(ii)Contrary to the assertion in the caveat, there was no agreement to mortgage.
(b) The caveat does not disclose how the claimed interest is derived.
(i)If clause 3.3 is construed or rectified so as to confer an interest upon Park Lane, such interest is derived other than in the way asserted in the caveat.
(c) No entitlement to an interest – if it is accepted that the interest claimed does exist
(i)The entities in whose favour the Owners agreed to give an interest under clause 3.3 were “the Owners of the land marked A & B in Schedule A”, being NZ Rolleston Investments Ltd and Beulah Limited and not Park Lane. Park Lane was not a party to the contract;
(ii)The titles to the lands referred to in Schedule A to the contract (as referred to in clauses 3.2 and 3.3) have been cancelled and no longer exist – any interest created under clause 3.3 ceased to operate when the titles were cancelled;
(iii)Given the express wording of clause 3.3 Park Lane, in order to rely upon any right intended to be conferred by clause 3.3, would first have to have made application for an order for rectification of clause 3.3.
(d) Cancellation of the contract
(i) The Owners were entitled to cancel the contract on 20
February 2014 when giving such notice to Park Lane because three conditions of the contract were never satisfied;
1. First, the handwritten condition attaching to clause 1.2 (as to seven joined owners) was not satisfied;
2. Secondly, the agreement of the Owners to costs in excess of those budgeted in Schedule B of the contract was not obtained, pursuant to the handwritten amendment attached to clause 2.7 of the contract;
3. Thirdly, the owners were not satisfied with the costs identified by Park Lane pursuant to clauses 2.5 and 2.6, and therefore the handwritten amendment to clause 2.8 (reading “condition to satisfy the cost to pay”) was not met.
Argument as to derivation of interest based on oral assignment not pursued
[21] Park Lane, by the caveat, had asserted an interest in the form of “An agreement to mortgage the land dated 19 March 2012 between Park Lane Estates Ltd as Mortgagee and the [Owners] as Mortgagors”.
[22] In its Originating Application for an order sustaining the caveat, Park Lane referred to the relevant documentation in this way, as its grounds of application:
The agreement to Mortgage Land of 19 March 2012 is in writing and is between Tay No. 1 Limited and the respondents.
Tay No. 1 Ltd has assigned its interests under the Agreement to Mortgage
Land to the caveator and applicant.
[23] In his supporting affidavit, Mr Schulz deposed that Park Lane had incurred all the expenditure and that Tay:
For all intents and purposes dropped out of the picture and assigned its interest under the agreement to the Applicant. The assignment was oral, given the close association between Tay and Park Lane.
[24] The reference to a “oral assignment” constituted a bare assertion. No proper particulars were provided. No documents which may have in some way evidenced the occurrence of an assignment were produced.
[25] Affidavits in opposition to this application were given by Sung-Hyun Kim and Sung Han Kim (the latter holding power of attorney for three of the Owners). Both depose that they had never received notice of Assignment of the contract (which they recognise would not have happened because Mr Schulz deposes to the assignment having been made orally).
[26] In the event, Mr Lester did not pursue the “oral assignment” argument. In his written submissions he had characterised the “oral assignment” argument as a “red herring” because the effect of clause 3.3 of the contract was to vest the relevant interest in Park Lane.
[27] I therefore do not have to reach a material conclusion on the “oral assignment” argument. Had I been required to, I would have found against Park Lane on the basis that Park Lane had not provided any proper foundation of evidence to support an argument that there had been an oral assignment. There is also force in Ms Hwang’s argument (for the Owners) that Park Lane would have been precluded from relying on any oral assignment by reason of ss 24 – 25 Property Law Act 2007.
Did the caveat sufficiently describe how the interest was derived?
[28] The Owners assert that the caveat did not disclose sufficiently either how the interest claimed was derived from the Owners. Ms Hwang submitted that the caveat must therefore lapse on either of these two grounds or the nature of the interest even if on no other.
[29] Section 137(2) Land Transfer Act provides:
(2) A caveat under this section must contain the following information: (a) …
(b) the nature of the land or estate or interest claimed by the caveator, which must be stated with sufficient certainty; and
(c) how the land or estate or interest claimed is derived from the registered proprietor; and
…
[30] I will deal first with the s 137(2)(c) requirement in relation to the statement of derivation of the interest. In Cube Building Solutions Ltd v Kingloch Holdings Ltd, I was called upon to consider the adequacy of the described derivation of a caveat.1 In that case, I reviewed a number of authorities in a passage which I now adopt. I began the review with reference to the decision of Ellen France J in Norrie v Registrar-General of Land2 and I then considered a number of authorities:3
[28] In Norrie Mr Mark Norrie caveated the title held by three registered proprietors being I Norrie, C Norrie and M & H Trustee Services Limited. The interest claimed in the caveat was “as beneficiary of the Norrie Family Trust”. The plaintiff in the proceeding said that the caveat complied with both s 137(2)(b) or (c).
[29] Reference was made to the policy of the statute as articulated by Vautier J in New Zealand Mortgage Guarantee Limited v Pye. Without quoting the full passage it is relevant to note His Honour’s observation cited by France J at [14] as follows:
... the inconvenience and injustice which is likely to arise from the upholding of caveats of this kind expressed in loose and general or inaccurate words is very obvious when one
1 Cube Building Solutions Ltd v Kingloch Holdings Ltd HC Christchurch CIV-2009-409-935, 15
October 2010.
2 Norrie v Registrar-General of Land (2005) 6 NZCPR 94 (HC).
3 Cube Building Solutions, above n 1, at [28]-[35].
considers the scheme of the provisions as a whole. It is not simply a matter, as counsel for the applicants’ argument would imply, of acquainting the registered proprietor with the general nature of the claim made against his land ...
[30] Counsel for the plaintiff in Norrie then submitted that a much more detailed form of caveat set out at [19] of Her Honour's judgment was required.
[31] Against that background Her Honour discussed the detail required to satisfy the “sufficient certainty” test. Her Honour noted with apparent approval the trend away from a stricter approach represented in New Zealand in cases such as New Zealand Mortgage Guarantee Limited v Pye and Holt v Anchorage Management Limited to what might be considered the more liberal approach. The authors Hinde McMorland & Sim have tracked the case law in relation to the same developments at para 10.013(a), through Buddle v Russell and ultimately to the Court of Appeal decision in Zhong v Wang.
[32] In Norrie Ellen France J applied the law to the facts on that case from [38]–[41]:
[38] What will be “sufficient certainty” (“adequate” to the purpose – Oxford English Dictionary (2nd ed. 1989)) will vary according to the circumstances. Clearly, also, the Registrar on receipt of a caveat is not exercising an adjudicative function. The plaintiff did not dispute that. And, in Holt v Anchorage Management at p 115, McMullin J refers to the Registrar’s “administrative” act in accepting a caveat for lodgement.
[39] On the other hand, equally clearly, the Registrar must be satisfied that the requirements as to form are met. One purpose of requiring adherence to the form is to provide a threshold of some sort albeit there are avenues of redress for the registered proprietor (making an application for removal of a caveat under s 143 and the ability under s 146 to seek damages from the caveator).
[40] On balance, I do not consider it was necessary here to make reference to the fact the interest claimed was as a discretionary beneficiary. Although it is the “bare minimum”, the description here equates with that in In Re Peychers’ Caveat in terms of the description of the nature of the interest (see, Equity and Trusts in New Zealand (2003) (A Butler (editor): ch 3.1.4(5), p 53) and with the form in the Land Titles precedents booklet.
[41] The authors of Land Law in New Zealand suggest at para
10.013(a) that where a registered proprietor claims a caveator has not complied with s 137(2)(b), “frequently the real complaint” is non-compliance with s 137(2)(c) and I consider that is the case here. It was necessary to explain how the interest derived from the registered proprietor. In some cases this factor may be obvious from the title but that was not so here. “M & H Trustee Services” are not so clearly linked to the “Norrie Family Trust”.
[33] As is indicated in the final paragraphs, Her Honour concluded that the requirements as to stating the derivation of the interest under s 137(2)(c) were not sufficiently met. The caveat had not expressed sufficiently the relationship between the third registered proprietor “M & H Trustee Services” and the “Norrie Family Trust”.
[34] Her Honour recognised, as had the authors of Hinde McMorland & Sim, that such a complaint often goes to the derivation requirement under s
137(2)(c) rather than the identity of the interest under s 137(2)(b).
[35] In Zhong v Wang, the Court of Appeal allowed an appeal against orders removing caveats. The title in that case was in the name of Jia Yi Wang and Jue Jin. The caveat is set out at [21] of the judgment and reads:
[Cheng Rong Zhong] claims a beneficial interest in the land contained in the above Certificate of Title as cestui que trust of which the registered proprietor, Jia Yi Wang, is trustee.
The Court found that the language used in relation to a beneficial interest was sufficient. The Court of Appeal approved the line of cases around Buddle v Russell. Wild and Heath JJ noted Norrie as preferring the Buddle v Russell line of cases. In particular, the Court considered a caveat which identified that the form of trust alleged, without expressly referring to it as a resulting or constructive trust, to be sufficient. Turning to the requirements of s 137(2)(c) Wild and Heath JJ said this:
[55] Applying the same test, did the caveats comply with s
137(2)(c)? In our view, they did. There was a clear link between the named trustee (Mr Wang) and the registered proprietors, of which he
was one. The caveats made it clear that the interest was derived from
Mr Wang’s involvement with Mr Zhong. The nature of the involvement would have been self-evident to Mr Wang.
[56] No suggestion was made to us that the caveat ought to be removed because Ms Jin was a co-owner of the property.
[57] It is unnecessary to require a caveator to explain the precise basis from which the interest qua beneficiary arises. Section
137(2)(c) applies to all types of interests that give rise to a caveatable interest. The derivation of those claimed interests may need greater explanation in some cases than in others. In this case a
linkage between the claimed interest and Mr Wang suffices.
[58] The purpose of the caveat procedure is to enable those with proper claims to proprietary interests to protect themselves against loss by forbidding dealing with the land pending resolution of substantive claims. The underlying purpose of the caveat regime could be undermined if too strict an approach were taken to the detail required to describe the interest claimed and its derivation from the registered proprietor.
In short, Zhong v Wang saw a link between the alleged trust and the proprietors (or in that case, one of the proprietors) on the register as clear.
(Citations omitted).
[31] In Cube Building Solutions, the caveator had claimed an estate or interest in titles:4
As Mortgagee pursuant to a Contract containing an agreement to mortgage dated 19th March 2008 between the registered Proprietor as Mortgagor and the Caveator as Mortgagee.
[32] In fact, the parties to the mortgage agreement had been the shareholders of the registered proprietor and not the registered proprietor itself. In Cube Building Solutions Limited I therefore concluded that the caveat as drafted did not state the means by which Kingloch’s interest was derived from the base contract.5
[33] In the present case, the parties to the agreement dated 19 March 2012 were Tay and the Owners. At no point was there an agreement (in the sense of a contract) dated 19 March 2012 between Park Lane and the Owners, whether as to a mortgage or otherwise. Accordingly, the caveat which Park Lane seeks to sustain does not truly state the means by which Park Lane’s interest was derived from the base contract. Equally, Park Lane no longer seeks to support its caveat by reason of the derived interest (an agreement to mortgage assigned by Tay to Park Lane) as identified in Park Lane’s application in this proceeding. The means of derivation by which Park Lane now seeks to support its caveat is the different route through adopting the Contracts (Privity) Act, as identified at [19](a)(ii) above.
[34] Park Lane’s caveat therefore does not meet the requirements of s 137(2) Land
Transfer Act in relation to the statement of derivation of interest.
[35] In reaching the above conclusion (in favour of the Owners), it has been unnecessary to directly address two decisions relied upon by Ms Hwang. They are decisions which do not turn on the caveator’s failure to identify the derivation of its interest under s 137(2)(c) Land Transfer Act. Rather, they turn on a failure under s
137(2)(b) to state the interest claimed with sufficient certainty.
[36] In Joy v Roskam,6 the subject caveat was ordered to be removed. Instead of asserting an interest by way of an equitable lien on the land for recovery of a purchaser’s deposit, the caveator had asserted an interest as purchase by virtue of an agreement for sale and purchase. The agreement for sale and purchase had been cancelled. The interest asserted in the caveat was incorrect. Joy v Roskam was applied in Best of Luck Ltd v Ratapu.7
[37] Ms Hwang had in her written submissions primarily referred to Joy v Roskam and to Best of Luck Ltd in order to meet the Park Lane’s “oral assignment” argument, which became unnecessary when Mr Lester did not pursue that argument.
[38] With the arguments that remained, Ms Hwang relied upon Joy v Roskam and Best of Luck Ltd in the context of the Owners’ proposition that the contract had been cancelled. Both those decisions, at their underlying level, recognise the basic proposition that in relation to any contract (in those cases agreements for sale and purchase), it is no longer open to a party to assert an interest if the interest has come to an end through termination of the contract. I will return briefly at [52] – [56] below to the Owners’ assertion that the contract in this case was cancelled.
Park Lane’s remaining arguments
[39] Given the failure of Park Lane in its caveat to comply with the requirements of s 137(2)(c) Land Transfer Act 1952, it is strictly unnecessary that I reach a determination in relation to Park Lane’s remaining propositions. I therefore indicate tentative conclusions by reason of the relevance they may have to any application by Park Lane for an order pursuant to s 148 Land Transfer Act permitting Park Lane to lodge a second caveat.
The estate or interest claimed by Park Lane?
[40] In the caveat lapsing context, it is for Park Lane to establish an arguable case.
By clause 3.3 the Owners (and Tay) clearly were intending to create an interest which could be protected by caveat, as that is precisely the interest identified. The parties further recognised that the interest was “sufficient to be protected by mortgage” but in this caveat lapsing context it is sufficient to focus on the right to lodge a caveat. Mr Lester referred to the commentary by the authors of Hinde
McMorland & Sim Land Law in New Zealand8 at 10.009(y) and the cases there
gathered9 to illustrate what they identify as the first possibility in relation to a right granted by contract:
… it may be that the clause granting the right to caveat necessarily implies that the registered proprietor intended to confer a caveatable interest on the other person.
[41] The decision in Yuan v TE Construction Ltd 10 demonstrates the arguability of Mr Lester’s reliance on clause 3.3. TE Construction was contractually entitled to a share of the profits of a development venture. A clause in the contract authorised TE Construction to caveat the title of the subject property. Master Lang observed that if the charge had not been given, it would have been open to the owner to dispose of the land without complying with its obligations under the agreement. An equitable charge was arguable.
[42] That risk, recognised by Master Lang in Yuan v TE Construction Ltd, is precisely the risk which Park Lane seeks to avoid through the subject caveat. It is therefore at least arguable that the nature of interest identified in clause 3.3 is capable of supporting a caveat.
[43] The next ground of opposition raised by the Owners is that the interest was not granted to Park Lane. In particular, Ms Hwang notes that the properties identified in clause 3.3 (the land marked A & B) are owned not by Park Lane but by NZ Rolleston Investments Ltd and Beulah Ltd. Ms Hwang submits that so long as any mistake in the wording of clause 3.3 remains unrectified, Park Lane does not
have a caveatable interest.
8 Hinde McMorland & Sim Land Law in New Zealand (online looseleaf ed, LexisNexis).
9 At fn 136-137. See also T Bennion and others New Zealand Land Law (2nd ed, Thomson
Reuters, New Zealand, 2009) at 4.3.11(2).
10 Yuan v TE Construction Ltd HC Auckland CIV-2003-404-003019, 12 August 2003.
[44] Mr Lester submits that Park Lane does not need to resort to rectification. He submits that as a matter of interpretation it is well arguable that something went wrong with the drafting of clause 3.3 and that the common intention of the contracting parties was that Park Lane would have the benefit of the clause 3.3 interest provided it met the construction costs of the sewer. Mr Lester submitted that the correct approach to typographical errors or misstatements is reflected in the reasons of the Court of Appeal, given by William Young P, in IBA Ltd v Stanley’s
Nightclub Ltd in which the President observed:11
[27] It is not the law that every typographical error or misstatement or other infelicity in a document can only be remedied by rectification proceedings. It is open to the Courts to look at the surrounding matrix of facts including associated contractual documentation.
[45] Mr Lester might equally have referred to the observations of the Supreme Court in Vector Gas Ltd v Bay of Plenty Energy Ltd.12 Even without going into surrounding circumstances, it is arguable in this case, given the structure of the contract, that Park Lane, if it incurred the costs of constructing the sewer, was at least one of the parties contractually entitled to the interests identified in clause 3.3. There is on the face of clause 3.2 and 3.3 a mismatch in the identification of the
properties whose owners would be meeting the initial costs of construction. The initial emphasis in clause 3.3 is not upon the importance of the ownership of particular properties but on the importance of who makes the original payments. In any event Park Lane was at all relevant times the registered proprietor and owner of the property identified as “H” in Schedule A and was expressly referred to in clause
3.2 as one of the owners to initially meet the cost of construction of the server.
[46] On this basis, it is arguable that as a matter of construction, and without resort to any remedy of rectification, it was Park Lane which was to have the benefit of the interest identified in clause 3.3.
[47] An alternative interpretation issue raised by Ms Hwang does not alter that conclusion. Ms Hwang submitted that the subsequent cancellation of the Identifiers
(Titles) referred to in Schedule A of the contract meant that Park Lane (even if once
11 IBA Ltd v Stanley’s Nightclub Ltd CA265/05, 29 November 2006.
12 Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444.
included within the interested parties identified in clause 3.3) was no longer so because it no longer the registered proprietor in relation to that Title or Identifier. Ms Hwang’s submission ignores the fact that the express focus of clauses 3.2 and 3.3 is on the Owners of the land and not on the Identifiers or Titles involved. The Identifiers can be seen as purely further description. Equally, there is nothing in the contract to suggest that an interest once acquired would come to an end if subsequently the Identifier to the property was changed or even if Park Lane sold its property. The interest was in favour of the owner, not the property itself.
[48] On any view, it is arguable that any interest obtained by Park Lane survived any alteration in relation to the former Identifier of its land.
[49] Ms Hwang did not address submissions to Mr Lester’s Contracts (Privity) Act argument. Mr Lester had invoked in particular s 4 Contracts (Privity) Act which provides:
4 Deeds or contracts for the benefit of third parties
Where a promise contained in a deed or contract confers, or purports to confer, a benefit on a person, designated by name, description, or reference to a class, who is not a party to the deed or contract (whether or not the person is in existence at the time when the deed or contract is made), the promisor shall be under an obligation, enforceable at the suit of that person, to perform that promise:
Provided that this section shall not apply to a promise which, on the proper construction of the deed or contract, is not intended to create, in respect of the benefit, an obligation enforceable at the suit of that person.
[50] Ms Hwang’s implicit concession appears appropriate. It is arguable that Park Lane was a person on whom a benefit contained in the contract was conferred (assuming the reference to the land marked “A” and “B” in clause 3.3 is ultimately construed as being a reference to “A” and “H”). First, Park Lane has then been designated by description or reference precisely because it was the owner of property “H”. Secondly, it is identified by description or reference as the owner who initially met the cost for the construction of the sewer. It is then at least arguable that as the party in whose favour the interest was created was intended to be entitled to enforce the obligation because the “caveat” referred to clause 3.3 is precisely a means of protection or enforcement on the part of a person holding an interest. That
conclusion is reinforced by the final requirement in clause 3.3, whereby the Owners
were required to sign any document necessary “to achieve that security”.
[51] Finally, Ms Hwang (in her argument that drew in part on the discussion as to cancelled contracts in Joy v Roskam and Best of Luck Ltd) relied on the Owners’ February 2014 notice of cancellation of the contract. The Owners had purported to cancel the contract by reason of what was said to be three unsatisfied conditions, as summarised at [20](d)(i) above.
[52] It is unnecessary, by reason of the conclusions reached earlier, that I reach a conclusion in relation to this cancellation argument. As the Owners may wish to preserve this argument for a later hearing, I refrain from exploring it in detail or stating a firm conclusion in relation to it.
[53] In this caveat-lapsing context, Ms Hwang would have had to satisfy me that it was not arguable that the contract remained on foot after February 2014. Mr Lester marshalled a number of arguments as to the ineffectiveness of the notice of cancellation.
[54] First, there was the clause 1.213 condition as to the seven owners (of Lots 2,
3, 6, 7, 8, 9 and 10) signing the agreement. The Owners on 20 February 2014 had purported to cancel the contract partly because that condition was not satisfied. In their affidavits in opposition the Owners had stated that they had never been advised that seven other owners had signed the agreement.
[55] Mr Schulz filed a reply affidavit in which he deposed:
Seven owners have signed an agreement as detailed in clause 1.1 of the
Heads of Agreement.
[56] With the agreement of counsel I directed at the conclusion of the hearing that
Mr Schulz provide a further affidavit identifying the “seven other owners” who had
signed the agreement.
13 Above at [11].
[57] Mr Schulz filed his supplementary affidavit and exhibited the contracts between Park Lane and the owners who had joined. In that affidavit, he explained that the Taylors (owners of the lot referred to as Lot 8 in the handwritten condition to clause 1.2) had not completed an agreement, although “they support the process”.
[58] On the face of the additional information which is now to hand through Mr Schulz’s additional affidavit, the Owners have an argument to the effect that the condition in clause 1.2 was not satisfied, inasmuch as the owners of Lot 8 did not join in signing an agreement in materially identical terms.
[59] I had reserved leave to Ms Hwang to file submissions in relation to any issues raised as to the parties who joined the contract, and she did so. Although I had not reserved leave to the owners to file additional evidence, Ms Hwang unsurprisingly (given the content of Mr Schulz’s additional evidence) sought to file a further affidavit of Sung-Hyun Kim. Mr Kim referred to the importance to the Owners of having the other identified lot owners sign the contract, both in terms of underwriting cost and in terms of access over such lots (including Lot 8). Mr Kim referred also to correspondence in both 2011 and 2012 in which Mr Schulz appeared to indicate that the Lot 8 owners had joined.
[60] It appears that the contract between Park Lane and the Owners (the respondents in this case) has been performed to a substantial degree. But on the evidence filed in this proceeding there are now serious questions as to whether the condition in clause 1.2 was ever complied with. To the extent that Park Lane might wish to suggest that February 2014 was too late a time for the Owners to give notice of cancellation, Park Lane appears to face real questions as to whether its representations and conduct in the meantime have prevented the Owners from knowing that the owners of Lot 8 had not joined and that clause 1.2 of the contract had therefore not been satisfied.
[61] Therefore, in relation to this first ground of cancellation given by the Owners, namely that the condition in clause 1.2 was not satisfied, there appears to be substance in the Owners’ contention.
[62] In relation to clause 1.2 and the other conditions, involving alleged breaches of Section 2 of the contract, Mr Lester emphasised the underlying good faith obligation provided by clause 6.1 and the Owners’ apparent failure to pursue the remaining mandatory disputes resolution provisions of clause 6. There appears to be a tenable argument, more appropriately explored in a trial context if necessary, that in relation to this contract which has been significantly performed by Tay and contributed to by Park Lane, it was not open to the Owners to cancel the contract on the asserted grounds when the Owners themselves have not followed the disputes resolution procedures.
The appropriate outcome
[63] The Owners are entitled to an order dismissing the application brought by Park Lane to sustain the subject caveat and to an order discharging the interim order sustaining the caveat.
[64] Park Lane has not in its notice of application or its submissions pursued alternative relief. In particular, I note that it has not requested an order under s 148(1) Land Transfer Act 1952 permitting it to lodge a second caveat.
[65] Although in Cube Building Solutions Ltd the Court found that the subject caveat was not justified, the Court made an order that Cube might lodge a second caveat with Cube identifying the derivation of its interest accurately. That was a course open to the Court in Cube Building Solutions Ltd because the possibility of s
148 relief was raised during the course of the hearing. Such did not occur in this case.
[66] The conclusions which I have reached above may point to a similar conclusion if Park Lane requests an order under s 148 Land Transfer Act. But the evidential complication which has emerged, as a result of Mr Schulz’s additional evidence in relation to joining owners, may complicate and undermine such a conclusion.
[67] As a request for such an order has not been made and the Owners have therefore not had an opportunity to respond either by way of evidence or
submissions, it would be inappropriate for the Court to make an order under s 148
Land Transfer Act as a part of this proceeding.
Costs
[68] Both counsel accepted that the appropriate order would be that costs follow the event on a 2B basis. Ms Hwang is based in Auckland so it is appropriate that her disbursements include reasonable costs of travel and accommodation.
Order
[69] I order:
(a) The order of this Court dated 24 February 2014, whereby caveat
9595321.1 (Canterbury Registry) was not to lapse until further order of the Court, is rescinded;
(b) Caveat 9595321.1 (Canterbury Registry) shall lapse;
(c) The applicant is to pay to the respondent the costs of this proceeding on a 2B basis, together with disbursements to be fixed by the Registrar. The disbursements of the respondents include the reasonable accommodation and travel costs of the respondents’ counsel in relation to the hearing.
Associate Judge Osborne
Solicitors:
Cordner Hill Law, Christchurch.
D M Lester, Barrister, Christchurch
Queen City Law, Auckland
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