Peaktop Developments (Auckland) Limited v Du
[2024] NZHC 3164
•30 October 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-285
[2024] NZHC 3164
UNDER Part 19 of the High Court Rules IN THE MATTER OF
An application for orders pursuant to section 143 of the Land Transfer Act 2017 in respect of caveat 10710081.1
BETWEEN
PEAKTOP DEVELOPMENTS (AUCKLAND) LIMITED
Applicant
AND
ZIYUN DU and Z Y DU TRUSTEE LIMITED
First Respondents
ZHIXIANG LI and HAOQUAN LU
Second Respondents
Hearing: 21 October 2024 Counsel:
R J Thompson for the Applicant
J Wickes for the First and Second Respondents
Judgment:
30 October 2024
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 30 October 2024 at 12 Midday.
Pursuant to Rule 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
Solicitors/Counsel:
Mark Lee Lawyers, Auckland Park Chambers, Auckland Loo & Koo, Auckland
PEAKTOP DEVELOPMENTS (AUCKLAND) LTD v DU TRUSTEE LTD [2024] NZHC 3164
[30 October 2024]
Introduction
[1] In 2015, eight owners of separate properties in West Auckland entered into an unincorporated joint venture pursuant to a written agreement (the agreement). The purpose of the joint venture was to obtain a resource consent for rezoning of the land of the eight owners.
[2] The applicant, Peaktop Developments (Auckland) Ltd (Peaktop), and the first and second respondents (the respondents) are three of the participating owners.
[3] The agreement included rights of first refusal conferred on the owners should any one of them wish to sell. The agreement provided for those rights for a period of five years commencing on the issue of a resource consent for the rezoning.
[4] The application for a resource consent for rezoning did not proceed. In 2017, Auckland Council designated a special housing area (SHA) which included the eight properties. It was no longer necessary for the eight owners to obtain a resource consent for rezoning.
[5] On 21 February 2017, a caveat was registered against the titles to each of the eight properties subject to the joint venture. The caveat states that the caveator is “Fred Taylor Group Joint Venture”, notwithstanding that the joint venture was not a legal entity.
[6] In 2024, the respondents commenced the lapsing procedure under the Land Transfer Act 2017. Peaktop now applies for an order sustaining the caveat against the respondents’ properties.
[7]The application can be resolved by considering the following issues:
(a)Is the agreement extant?
(b)If so, does the agreement confer on Peaktop an equitable interest capable of supporting a caveat?
Sustaining caveats — the legal principles
[8] The legal principles applicable to applications to sustain caveats were confirmed by the Court of Appeal in Philpott v Noble Investments Ltd:1
[26] The applicable legal principles which governed the application to sustain the caveats, and which now govern this appeal, are as follows:
(a)The onus is on the applicants to demonstrate that they hold an interest in the land that is sufficient to support the caveat, but they need not establish that definitively;
(b)It is enough if the applicants put forward a reasonably arguable case to support the interest they claim;
(c)The summary procedures involved in applications of this nature are not suited to the determination of disputed questions of fact. An order for the removal of a caveat will only be made if it is patently clear that the caveat cannot be maintained — either because there is no valid ground for lodging it in the first place, or because such a ground no longer exists; and
(d)When an applicant has discharged the burden upon it, the Court retains discretion to remove the caveat which it exercises on a cautious basis. Before it does so the Court must be satisfied that the caveator’s legitimate interest would not be prejudiced by removal.
Is the agreement extant?
[9]The agreement includes the following terms:
(a)Recital A records that the purpose of the joint venture was “preparing a plan to support an application to have the Land rezoned as set out in the plan attached”.
(b)Clause 7.1 records that the joint venture was established:
… to obtain the rezoning of the land owned by the Original Parties. They further acknowledge it is fair and reasonable for each FTG JV member to commit to support the rezoning process through to its conclusion. Accordingly, each FTG JV member acknowledges and agrees they will not withdraw their consent and support for the FTG JV until such land has been rezoned …
1 Philpott v Noble Investments Ltd [2015] NZCA 342.
(c)Clauses 12.1, 12.2 and 12.3 of the agreement provide:
12.1This agreement will be terminated upon the issue of a Resource Consent in relation to the application to re-zone the Land as set out in Schedule 2 and all matters relating to such rezoning have been completed including, for the avoidance of doubt, the payment of all monies owing by each party.
12.2Any termination of this agreement will be without prejudice to the rights of any party arising prior to termination.
12.3Nothing in this clause 12 affects the operation of any clauses in this agreement which are expressed or implied to have effect after its termination.
(d)Clause 13.1 of the agreement provides:
13.1 If on the 6th anniversary of this agreement the rezoning contemplated for the FTG JV has not yet been completed any party may by 10 working days’ notice in writing to all other parties for the time being cease to be a involved with the FTG JV.
[10] Peaktop argues that clause 12.1 is not satisfied because a resource consent did not issue. The respondents have not exercised their right to withdraw from the agreement under clause 13.1. Therefore, the agreement must be extant.
[11] The common purpose of the joint venture was to obtain a resource consent for rezoning of the subject land. It is common ground that the joint venture did not pursue an application for a resource consent after the subject land was designated as a SHA in 2017. There was no longer any need to do so.
[12] Another of the joint venturers, Liming Li, gave affidavit evidence confirming that the joint venturers have not met since 31 July 2018, and that no further steps were taken by the joint venturers to progress rezoning after the designation of the SHA. The caveat has already been removed or lapsed in respect of three other properties.
[13] In 2019, another of the joint venturers sold their property. There is limited affidavit evidence as to what happened at that time. The affidavit evidence is that there was “a netting off process between the parties”. No further explanation is given. The evidence falls well short of establishing that the parties considered that they continued
to be bound by the agreement. The “netting off” may have been a transaction ancillary to the termination of the agreement.
[14] The parties to most contracts have a common object, and this common object will be well understood by them. If the common object has become unattainable, then the contract will be frustrated.2
[15] Whether or not a contract was frustrated depends on the construction of the contract in its context, requiring a multi-factorial approach.3 The factors to take into account include: the terms of the contract; its matrix or context; the parties’ knowledge, expectations, assumptions and contemplations, in particular as to risk; the nature of the supervening event; the parties’ reasonable and objectively ascertainable calculations as to the possibilities of future performance in the new circumstances; and the demands of justice.4
[16] Performance must be “radically different” such that there is “a break in identity between the contract as provided for and contemplated and its performance in the new circumstances”.5
[17] I find that the agreement was discharged by frustration when Council designated the SHA in 2017. The common object became unattainable. Therefore, the agreement is not capable of conferring on Peaktop an equitable interest.
If the agreement is extant, does it confer on Peaktop an equitable interest capable of supporting a caveat?
[18] In case my finding that the agreement is discharged is wrong, I will also consider whether the agreement confers on Peaktop an equitable interest capable of supporting a caveat.
2 Planet Kids Ltd v Auckland Council [2013] NZSC 147, [2014] 1 NZLR 149 at [83].
3 At [8] per Elias CJ.
4 At [8]–[9] per Elias CJ and [60]–[62] per Glazebrook J.
5 At [9] per Elias CJ, citing Edwinton Commercial Corp v Tsavliris Russ (Worldwide Salvage and Towage) Ltd (The Sea Angel) [2007] EWCA Civ 547, [2007] 2 Lloyd’s Rep 517 at [111].
[19] The right of first refusal is set out in clause 7.2 of the agreement. It is unnecessary to repeat it. The right applies during the “Sale Period”, which is defined to mean:
… the period between the date of issue of resource consent for re-zoning and the expiry date of five (5) years following the date of issue of resource consent for rezoning.
[20]Clause 7.7 of the agreement provides:
7.7 The parties acknowledge and agree the rights contained herein represent caveatable interest and the FTG JV shall be entitled to lodge a caveat against all members land described in the schedule hereto preventing any dealing in the land except an instrument which relates to the rezoning of the land pursuant to the FTG JV purpose and pursuant to the Resource Management Act 1991
[21] Peaktop argues that the effect of clause 7.7 is that the equitable interest arose as soon as the agreement was signed.
[22] The respondents argue that if the agreement remained binding after the designation of the SHA in 2017, then the “Sale Period” must be interpreted as commencing on the date of the designation of the SHA, which is the act by Council that effectively gave consent for rezoning. I accept that submission.
[23] During the hearing, Mr Thompson, counsel for Peaktop, accepted this interpretation of the “Sale Period.” In doing so, he must be taken to have accepted that the “Sale Period”, and any equitable interest arising from the first right of refusal, must have expired by the end of 2022 at the latest.
[24] Mr Thompson submitted that although the equitable interest created by the first right of refusal may have ended at that time, the right to caveat remained based solely on clause 7.7 of the agreement. This is consistent with his submission that the equitable interest arose as soon as the agreement was signed.
[25] I reject that submission. Clause 7.7 confirms that the caveatable interest relates to the rights contained in the agreement, which must be a reference to the right of first refusal in clause 7.2, which ended in 2022.
[26] There is no other basis under the agreement for Peaktop to have an equitable interest in the respondents’ land. This was not a joint venture to develop land; it was a joint venture to obtain a resource consent. Clause 12.5 of the agreement provided that if there were to be any further development steps, then the parties would enter into a new agreement.
[27] A contractual clause granting the right to caveat in a contract which does not otherwise confer a caveatable interest of any sort cannot sustain a caveat.6 Clause 7.7 alone was incapable of conferring on Peaktop an equitable interest in the respondents’ land.
[28] It is not reasonably arguable that Peaktop has an equitable interest in the respondents’ land capable of supporting the caveat.
Orders
[29] The applicant’s application to sustain caveat 1071008.1 against Record of Title Identifier 208050 and Record of Title Identifier 208054 is declined.
[30] The applicant shall pay the respondents, collectively, costs on a 2B basis together with disbursements as fixed by the Court.
Associate Judge Brittain
6 DW McMorland and others Hinde McMorland and Sim Land Law in New Zealand (online ed, LexisNexis) at [10.009].
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