Plateau Farms Limited (in receivership and liquidation) v Lambert

[2012] NZHC 109

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

CIV-2012-419-93 [2012] NZHC 109

UNDER  the Land Transfer Act 1952

IN THE MATTER OF     an application to remove Caveats numbered

8908551.1, 8889289.1, 8889251.1,
8885248.1, 8880725.1, 8908568.1,
8873956.1, 8939286.1, 8955202.1,
8928984.1, 8940118.1, 8889263.1,

8951343.1, 8920891.1 and 8955214.1 pursuant to s 143 of the Land Transfer Act

1952

BETWEEN  PLATEAU FARMS LIMITED (IN RECEIVERSHIP AND LIQUIDATION) First Applicant

ANDHILLSIDE LIMITED (IN RECEIVERSHIP AND LIQUIDATION) Second Applicant

ANDTAHARUA LIMITED (IN RECEIVERSHIP AND LIQUIDATION) Third Applicant

ANDFERRY VIEW FARMS LIMITED (IN RECEIVERSHIP AND LIQUIDATION) Fourth Applicant

ANDELIZABETH MARY LAMBERT Respondent

Hearing:         9 February 2012

(Heard at HAMILTON)

Counsel:         M Sandelin for applicants

E Lambert in person

Judgment:      9 February 2012

PLATEAU FARMS LIMITED (IN RECEIVERSHIP AND LIQUIDATION) V ELIZABETH MARY LAMBERT HC ROT CIV-2012-419-93 [9 February 2012]

(ORAL) JUDGMENT OF LANG J [on application for removal of caveats]

[1]      The  applicants  in  this  proceeding  are  all  companies  associated  with  the Crafar family.   They are the owners of several farms spread throughout the North Island.   The applicants were placed in receivership by their banker, Westpac New Zealand Limited (“Westpac”) pursuant to a composite general security that Westpac holds dated 24 July 2008.

[2]      Following their appointment the receivers entered into an agreement to sell the farms owned by the applicants to a Chinese company.   That agreement was conditional in a number of respects but most, if not all, of the conditions have now been satisfied.  As a result, the receivers wish to be able to complete the sale as soon as they receive advice of the outcome of a challenge to this Court regarding the sale by New Zealand business interests.  That decision is expected any day now.

[3]      At  present,  the  receivers  are  prevented  from  completing  the  sale  of  the properties by the fact that Ms Lambert has lodged caveats against the titles to each of the properties.  In the caveats she describes her interest in the properties as that of purchaser under various agreements for sale and purchase dated 27 August 2011. The salient features of the agreements are that she has agreed to purchase each of the properties for the sum of $1.  Each property following purchase will then be leased to the Crafar family.  I take it she intends, following settlement, to allow the Crafars to return to the farms and continue farming them.

[4]      In order to establish an interest in the land capable of supporting the caveat in the present context, Ms Lambert must show that she arguably has a legal or equitable interest in the land that takes priority over other competing interests.  In this case, Westpac obtained registered mortgages over each of the property.   Most of these were registered on or about 1 August 2001.  The remainder were registered in 2008. The receivers have sold the farms pursuant to the powers of sale contained in the mortgage.

[5]      The receivers entered into the agreement with the Chinese company on 19

November 2010.  This means that the mortgages and that agreement are both prior in time to the agreements that Ms Lambert entered into with the company.   As a consequence, the powers given to Westpac under the mortgage take priority over any interest held by Ms Lambert under the agreements that she entered into with the Crafars.  In addition, the equitable interest held by the purchaser under the agreement that it has entered into with the receivers also takes priority over any equitable interest that Ms Lambert might hold in the land.

[6]      During the hearing today, Ms Lambert has addressed extensive submissions to me regarding the power of the directors of the companies to continue to exercise their powers to deal with the assets of the company.  The directors of a company in receivership undoubtedly have the power to continue to conduct the affairs of the company to the extent that that may be necessary to redeem a security.  This means that the Crafars have the continued power to take such steps as may be necessary to repay Westpac in full.

[7]      The problem in the present case is that Ms Lambert’s agreements go nowhere near satisfying the amount owing to Westpac.   A net return of approximately $16 does not go anywhere near satisfying the companies’ current indebtedness to Westpac,  which  is  put  at  approximately  $236  million.    For  that  reason,  the authorities relating to the exercise of the directors continued powers to redeem a security have no application.

[8]      Secondly, the directors of the Crafar companies undertook in the mortgages not to sell the mortgaged properties without Westpac’s consent.   The evidence establishes that neither the receivers nor Westpac has ever consented to any of the sales to Ms Lambert.  Indeed, it is difficult to see why they would have any interest in those sales given the extremely low return that they would produce.

[9]      I am therefore satisfied that Ms Lambert has failed to establish that she has a caveatable interest in the land that takes priority over the equitable interests held by the purchasers under the agreement for sale and purchase that they have entered into with the receivers.  Subject to the outcome of the litigation in Wellington, that sale

must now be permitted to proceed unimpeded by the caveats that Ms Lambert has registered.

Result

[10]     I therefore make an order under s 143 of the Land Transfer Act 1952 that each of the caveats is to be removed with immediate effect.

Costs

[11]     The applicants seek indemnity costs.  They point out that my determination effectively echoes comments made by Allan J when he considered another set of proceedings that Ms Lambert filed in the Rotorua Registry of this Court based on the same agreements for sale and purchase.[1]     I take the view that Allan J gave clear guidance to Ms Lambert regarding the merits of the basis of her claim in respect of the caveats today.[2]   She does not read the same meaning into Allan J’s comments as I do, but in my view they are clear.  Ms Lambert ought to have appreciated that any further  attempt  to  enforce  legal  rights  against  the  receivers  based  on  these agreements for sale and purchase was likely to be met with a claim for increased or indemnity costs.

[1] Lambert v Plateau Farms Ltd (In Receivership) HC Rotorua CIV-2011-463-528, 12 September 2011.

[2] At [9] to [14].

[12]     The receiver’s actual costs in relation to the present application amount to just  over $18,000.    Scale costs,  such as  those  that  Allan J  ordered  on  the last occasion, would amount to approximately $5,000.   I consider that justice will be done in the present case if Ms Lambert is required to meet an award of costs and disbursements in the global sum of $12,000, and I make an order accordingly.

[13]     I record also that I have spoken today with Ms Lambert about the futility of proceeding in the future with further attempts to enforce any legal rights that she

may claim to have accrued under the agreements for sale and purchase.  If further

litigation  ensues  based  on  those  agreements,  it  is  highly  likely  that  awards  of

indemnity costs will be made.

Lang J

Solicitors:

Minter Ellison Rudd Watts, Auckland
Copy to:

E M Lambert, Huntly