Plateau Farms Limited (in receivership and liquidation) v Lambert
[2012] NZHC 1478
•27 June 2012
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV-2012-419-363 [2012] NZHC 1478
BETWEEN PLATEAU FARMS LIMITED (IN RECEIVERSHIP AND LIQUIDATION) First Plaintiff
ANDHILLSIDE LIMITED (IN RECEIVERSHIP AND LIQUIDATION) Second Plaintiff
ANDTAHARUA LIMITED (IN RECEIVERSHIP AND LIQUIDATION) Third Plaintiff
ANDFERRYVIEW FARMS LIMITED (IN RECEIVERSHIP AND LIQUIDATION) Fourth Plaintiff
ANDELIZABETH MARY LAMBERT Defendant
CIV-2012-419-760
BETWEEN HILLSIDE LIMITED (IN RECEIVERSHIP AND LIQUIDATION) Applicant
ANDELIZABETH MARY LAMBERT Respondent
Hearing: 25 June 2012
Counsel: RB Stewart QC and I Rosic for Plaintiffs in CIV-2012-419-363 and
Applicant in CIV-2012-419-770
Defendant/Respondent in person with E Moana-Emery as MacKenzie friend in both proceedings
Judgment: 27 June 2012
PLATEAU FARMS LIMITED (IN RECEIVERSHIP AND LIQUIDATION) V ELIZABETH MARY LAMBERT HC HAM CIV-2012-419-363 [27 June 2012]
JUDGMENT OF RODNEY HANSEN J
This judgment was delivered by me on 27 June 2012 at 3.00 p.m., pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date: ………………………….
Solicitors:
M Sandelin/I Rosic, Minter Ellison Rudd Watts, Auckland: [email protected]
EM Lambert, Huntly: [email protected]
Copy to:
RB Stewart QC, Auckland: [email protected]
Introduction
[1] The four plaintiff companies (the Crafar companies) are the registered proprietors of 16 dairy farms located in the central North Island. The companies have been in receivership since 5 October 2009. The receivers have been attempting to sell the farms. On 19 November 2010, the Crafar companies entered into a conditional sale and purchase agreement to sell all farms to Pengxin Group International Limited (Pengxin). The Pengxin agreement was subject to consent by
the Overseas Investment Office which was granted on 20 April 2012.1
[2] On or about 27 August 2011, the defendant, Ms Lambert, and two members of the Crafar family (two of the three directors of the Crafar companies) entered into agreements for the sale of the Crafar farms for $1 each (the $1 agreements). Ms Lambert admits that she entered into the agreements in an attempt to “stymie” the sale to Pengxin and to give the Crafars time to redeem the mortgages. In reliance on the agreements, Ms Lambert has taken steps to assert ownership, including the registration of caveats over some of the titles and an attempt to register transfers of some of the properties.
[3] Ms Lambert’s actions have prompted the receivers to issue this proceeding in which permanent injunctions are sought to restrain Ms Lambert from acting inconsistently with the plaintiffs’ ownership of the farms. The receivers have also applied for an arrest order as a result of Ms Lambert’s alleged breach of undertakings given when an interim injunction was sought by the plaintiffs. There is also before the Court an originating application to remove caveats registered over titles to two of the farms.
The proceedings
[4] The plaintiffs have pleaded six causes of action but at the hearing Mr Stewart
QC elected to rely only on the first, which is the claim for a declaration that the $1
agreements are invalid. It is therefore unnecessary to consider in detail actions taken by Ms Lambert in reliance on the agreements which prompted allegations that she engaged in misleading and deceptive conduct, contrary to the Fair Trading Act 1986; maliciously published false statements to third parties causing damage to the Crafar companies; interfered in contractual arrangements between the Crafar companies and share milkers contracted to them; lodged caveats in breach of s 146 of the Land Transfer Act 1952; and trespassed on land owned by the Crafar companies.
[5] Ms Lambert has counterclaimed for losses she claims to have suffered as a result of the actions of the receivers. However, as she was adjudicated bankrupt on
28 May 2012, it will be for the Official Assignee to decide whether to seek leave to continue the counterclaim.2 Ms Lambert has also applied to strike out the receivers’ first cause of action.
The $1 agreements
[6] The terms of each of the $1 agreements are the same. They utilise the standard form approved by the Real Estate Institute of New Zealand Inc and the Auckland District Law Society (Eighth Edition 2006) but exclude the General Terms of Sale in the standard form. In each case the purchase price is $1. The possession date is the date of the agreement, 27 August 2011. It is stated that Allan Crafar, one of the signatories on behalf of the vendor, is a tenant. As a further term of sale, the agreement provides that “The Vendor retains title”.
[7] It is strongly arguable that the agreements are void for uncertainty. It is not easy to discern what the purchaser is intended to acquire when she receives neither title nor possession to the property. However, the plaintiffs base their claim that the
$1 agreements are invalid and of no effect on the more straightforward proposition that the directors of the Crafar companies had no authority to sell the properties to the purchaser.
[8] The plaintiffs’ argument that the directors of the Crafar companies did not have authority to enter into the $1 agreements relies, in the first instance, on the terms of the security documents pursuant to which the receivers were appointed.
[9] The Crafar farms are subject to first registered mortgages in favour of Westpac New Zealand Limited (Westpac) and to a composite General Security Deed (GSD) also in favour of Westpac. Both instruments limit the ability of the Crafar companies and their directors to sell or transfer the farms.
[10] The Westpac mortgages provide that the plaintiffs must obtain Westpac’s consent to sell or otherwise dispose of the Crafar farms or any interest in them3 and that no party other than the plaintiffs can have any interest in the Crafar farms, except those to which Westpac consents in writing.4 The GSD includes an undertaking by the plaintiffs to Westpac that they would not “dispose or permit the disposal of any part of the Secured Property” except for an ability to dispose of inventory in the ordinary course of the plaintiffs’ business.5 The definition of Secured Property encompasses all assets of the plaintiffs’.6
[11] Once the receivers were appointed, the directors’ power to deal with the secured assets of the Crafar companies was suspended. The directors retained all of the powers given to them under the constitution of the companies but not those which had been delegated to the receiver pursuant to the security agreements.7 The terms of the mortgages and the GSD provided that the receivers had the power to
take possession of, manage and sell the farms.8
3 Clause 3(j) of the mortgage.
4 Clause 3(a) of the mortgage.
5 Clause 13(g) of the GSD.
6 Clause 1.1 of the GSD.
7 Blanchard and Gedye Private Receivers of Companies in New Zealand (2nd ed, Lexis Nexis, Wellington, 2008) at [10.02].
8 Clauses 4.3 and 4.4 of the mortgage, cl 16(c) and (e) of the GSD.
[12] In arguing that the directors had authority to enter into the agreements, Ms Lambert relied on arguments that she had unsuccessfully advanced in proceedings she brought seeking orders restraining the respondents from disturbing the peace and quiet possession of workers in residence on the Crafar farms at Reperoa9 and proceedings brought by the plaintiffs to remove the caveats she had
registered.10 In the first proceeding Allan J found that Ms Lambert had not
demonstrated that there was a serious question to be tried.11 In granting the application to remove the caveats, Lang J found that Ms Lambert had failed to establish that she had a caveatable interest in the land.12
[13] I will set out the basic propositions that underpinned Ms Lambert’s argument
precisely as they appeared in her brief of evidence:
5.This case is complicated by the fact that three different forms of property are involved and that fact has not been recognised. The first type of property is real estate, the second the registered title to the real estate and the third the mortgage which is a ‘chose in action’ which sits on the title to the real estate.
6.The three forms of property in this case also have different proprietors, the first being ‘owned’ by me as owner of the fee simple the second by the Crafar Companies as was agreed at the time the sale and purchase agreements were signed and the third the mortgage owned by Westpac.
Ms Lambert went on to contend that, under the Torrens system, a mortgage is a charge on the title, not an interest in the land. Based on these propositions, Ms Lambert argued that the directors of the Crafar companies were at liberty to transfer to her the fee simple in the land.
Decision
[14] I mean no disrespect to Ms Lambert when I say that the distinctions which she seeks to draw are novel and, as far as I am aware, unknown to the law of real
9 Lambert v Plateau Farms Ltd (in rec) HC Rotorua CIV-2011-463-528, 12 September 2011.
10 Plateau Farms Ltd (In Rec & Liq) v Lambert [2012] NZHC 109.
11 Lambert v Plateau Farms Ltd (In Rec).
12 Plateau Farms Ltd (In Rec & Liq) v Lambert.
property of New Zealand. She is simply wrong to say that a mortgage is not an interest in land.13 Ms Lambert’s arguments provide no basis for eroding the receivers’ right to exercise the power of sale, subject only to the continuing right of directors to sell company assets in order to exercise the company’s right of redemption.14 Although Ms Lambert appeared to suggest otherwise, that residual power could not possibly apply in this case. The $1 agreements would have gone nowhere to satisfying the plaintiffs’ current indebtedness to Westpac of approximately $236m.
[15] There is no doubt that the Crafar directors had no power to enter into the $1 agreements. They are of no legal effect. Even if it were otherwise, as submitted by Mr Stewart, any interest Ms Lambert may have acquired would be subject to Pengxin’s prior equitable interest.15
Remedy
[16] The plaintiffs are entitled to the declaration they seek and a permanent injunction. They are also entitled to orders removing the remaining caveats. In light of assurances given by Ms Lambert in evidence that she would accept the decision of this Court, subject only to rights of appeal, and to take legal advice before otherwise acting, the plaintiffs do not at this stage pursue the application for an arrest order.
[17] The defendant’s strike out application necessarily fails. The counterclaim
cannot be pursued unless the Official Assignee takes the necessary steps.
Result
[18] I make a declaration that the sale and purchase agreements, dated 27 August
2011 between the directors of the plaintiffs and the defendant, are invalid and of no effect.
13 Land Transfer Act 1952, s 2.
14 Brooklands Motor Co (in rec) v Bridge Wholesale Acceptance Corporation (Australia) Ltd
(1994) 7 NZCLC 260,449.
15 Perkins v Purea (2009) NZCA 541; (2010) 10 NZCPR 851 at [73].
[19] I make orders that the defendant, whether by her servants, agents or otherwise howsoever, is permanently restrained from:
(a) Lodging or attempting to lodge any caveats against the titles to the
Crafar Farms;
(b)Instructing, directing or causing any other person or entity to lodge or attempt to lodge any caveats against the titles to the Crafar Farms;
(c) Entering upon any of the Crafar Farms;
(d) Instructing, directing, authorising or causing any other persons to
enter upon the Crafar Farms on the defendant’s behalf or otherwise;
(e) Taking any steps to interfere with, impede or delay the sale of the Crafar Farms to Pengxin International Group Limited or any other purchaser;
(f) Seeking to deal with any of the assets owned by the plaintiffs including but not limited to:
(i) The Crafar Farms;
(ii) Chattels owned by or in the possession of the
plaintiffs/plaintiffs’ receivers;
(iii) Cows;
(iv) Milk proceeds; and
(v) Implements and machinery wherever situated;
(g) Seeking to effect a transfer of the titles to any of the Crafar Farms.
[20] I make an order, pursuant to s 143 of the Land Transfer Act 1952, removing the following caveats:
(a) Caveat number 8955217.1 registered by the respondent on 4 January
2012 against the title to the properties described in Certificates of Title TNC1/384, TN238/26, TNG2/1138 and TNC1/383 (Taranaki Registry); and
(b) Caveat number 9032765.1 registered by the respondent on 4 April
2012 against the title to the properties described in Certificates of Title
SA48B/773 and SA48B/774.
[21] The plaintiffs’ application for an order for arrest is adjourned to the Chambers List on 29 August 2012. They may file a memorandum withdrawing the application up to three days before the hearing.
[22] The counterclaim is also adjourned to 29 August 2012 for mention. [23] There is no order as to costs.
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