Rabarts v Reid
[2025] NZHC 667
•26 March 2025
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2024-470-190
[2025] NZHC 667
UNDER Section 143 of the Land Transfer Act 2017 IN THE MATTER OF
An application to sustain caveat
BETWEEN
CRAIG COLIN RABARTS
Applicant
AND
CARLENE JOANNE REID
Respondent
Hearing: 25 March 2025 Appearances:
J Donald / J De Vries for the Applicant T Mounsey for the Respondent
Judgment:
26 March 2025
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 26 March 2025 at 4 pm.
Pursuant to Rule 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
Solicitors:
Braun Bond and Lomas, Hamilton MMC Law, Taupo
RABARTS v REID [2025] NZHC 667 [26 March 2025]
Introduction
[1] The respondent, Carlene Joanne Reid (Ms Reid), owns a lifestyle block on Parton Road, Papamoa (the property). From approximately June 2022 until July 2024, Ms Reid was in a de facto relationship with the applicant, Craig Colin Rabarts (Mr Rabarts). During the relationship, Ms Reid and Mr Rabarts resided in an apartment on the property.
[2] Mr Rabarts claims that he has an equitable interest in the property based on contributions that he made to the cost of constructing a new dwelling on the property (the dwelling), maintenance of the apartment and other existing infrastructure on the property, and other contributions to the relationship.
[3] Mr Rabarts has lodged a caveat against the title to the property. Ms Reid commenced the lapsing procedure under the Land Transfer Act 2017. Mr Rabarts applies for an order sustaining his caveat.
[4] Ms Reid admits that Mr Rabarts has an equitable interest in the property, although there is a dispute as to the extent of that interest. Ms Reid wishes to refinance the property so that she can complete construction of the dwelling and then sell the property. She acknowledges that Mr Rabarts will be entitled to a share of the proceeds of sale.
[5]Ms Reid argues that:
(a)the caveat should be removed to enable her to refinance, with a second caveat then registered after a new mortgage; and
(b)the second caveat then be removed on the sale of the property on the basis that she undertakes to hold the net proceeds of sale on trust until her dispute with Mr Rabarts has been resolved.
[6] The sole issue for determination is whether the Court should exercise its residual discretion to remove Mr Rabarts’ caveat, and if so, on what terms.
Legal principles — the residual discretion
[7] The Court has a residual discretion to remove a caveat or to allow a caveat to lapse if the Court is completely satisfied that the legitimate interests of the caveator will not be prejudiced.1
[8] It may be appropriate for a caveat to be removed if the caveator’s interests can be reasonably accommodated in some other way, notwithstanding that the right to the claimed interest is undoubted.2 The onus is on the party challenging the caveat. The discretion is to be exercised on a cautious basis.3
[9] The Court may allow a second caveat to protect the same interest if the first caveat is removed.4
Analysis
The extent of Mr Rabarts’ contributions
Mr Rabarts says that he has made financial contributions which total
$305,205.18, comprised of:
(a)contributions to the cost of constructing the dwelling — $132,785.53;
(b)contributions to maintenance of the apartment and other existing infrastructure — $40,269.91;
(c)contributions to Ms Reid’s equine activities — $60,264.64; and
(d)other cash contributions — $71,885.10.
1 Pacific Homes Ltd (in receivership) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.
2 At 656.
3 Stewart v Kaipara Consultants Ltd [2000] 3 NZLR 55 (CA) at 60.
4 Land Transfer Act 2017, s 146; and Green & McCahill Holdings Ltd v Ara Weiti Development Ltd
[2022] NZCA 218, (2022) 23 NZCPR 259.
[11] Ms Reid accepts that Mr Rabarts made financial contributions to the cost of constructing the dwelling of $125,544.77, and contributions to maintenance of the apartment and other infrastructure of $26,515, which together total $152,059.77.
The status quo
[12] Ms Reid continues to reside on the property. Construction of the dwelling has not been completed. Ms Reid has entered into a fixed price construction contract to complete the outstanding work on the dwelling for a price of $198,000 including GST. Ms Reid has received an invoice from the builder for $59,400 for the first payment due under the construction contract, which is overdue.
[13] Ms Reid says that she has a mortgage debt of approximately $600,000 owed to ANZ Bank, the registered first mortgagee. Ms Reid says that she has unsuccessfully approached ANZ to obtain additional finance to meet her obligations under the construction contract.
[14] Ms Reid finds herself in the invidious position of having to refinance all of her existing debt with a second-tier lender to secure the additional finance that she needs to complete construction of the dwelling.
[15] Ms Reid has obtained an offer of finance from a new lender, dated 25 October 2024. The offer records that the lender is prepared to advance $937,000 to Ms Reid for a term of 12 months on an interest only basis, secured by a first mortgage of the property, for the stated purpose of:
(a)repaying approximately $600,000 to ANZ;
(b)approximately $94,000 for provision for interest on the new advance;
(c)approximately $200,000 for constructing the dwelling; and
(d)$43,000 for fees associated with the new loan.
[16] Ms Reid has produced a market appraisal of the property from a firm of real estate agents, Property Brokers. The appraised value of the property in its current condition is $2.3 million to $2.4 million. The appraised value of the property with the dwelling completed is $2.5 million to $2.6 million. Mr Rabarts assesses the current value to be $2.2 million.
Ms Reid’s position
[17] The offer of finance confirms that the proposed lender requires a first-ranking mortgage as security. Therefore, Ms Reid is unable to accept the offer of finance and draw down on that finance unless Mr Rabart’s caveat is removed.
[18] Ms Reid says that she cannot afford to service, on a long-term basis, the indebtedness that will result if she is able to refinance. She will be compelled to sell the property to reduce her indebtedness and to settle with Mr Rabarts.
[19] Ms Reid says that, when she sells the property, she expects to receive net sale proceeds of approximately $1,563,000, assuming a sale price of approximately
$2.5 million and secured debt of $937,000. Ms Reid offers to pay the net sale proceeds into trust pending resolution of her dispute with Mr Rabarts.
Mr Rabarts’ position
[20] Mr Rabarts is not prepared to release his caveat on the terms proposed by Ms Reid. He says that it is pointless for Ms Reid to complete construction of the dwelling because she will spend $200,000 to increase the value of the property by
$200,000. The implication is that Mr Rabarts considers that Ms Reid should sell the property in its current state.
[21] Mr Rabarts is concerned to ensure that the equity in the property is not eroded so as to prejudice his share of the equity.
Discussion
[22] Mr Rabarts’ position overlooks that Ms Reid is already bound by the construction contract. If Ms Reid does not complete the contract, then she will be exposed to a claim on the overdue invoice and a claim for damages.
[23] There is merit in Ms Reid’s position that the dwelling should be completed before the property is put on the market. A completed property will be a better sale proposition.
[24] Mr Rabarts’ interest in the property can be adequately protected in the following way:
(a)if his existing caveat is removed to allow Ms Reid to refinance, and then a new caveat is registered immediately after the new first mortgage is registered;
(b)the amount secured by the new first mortgage is limited;
(c)Mr Rabarts removes the new caveat on a sale of the property on the open market; and
(d)on settlement of a sale on the open market, the net sale proceeds are held on trust pending resolution of the dispute between Mr Rabarts and Ms Reid.
[25] This is an appropriate case for the Court to exercise its discretion to remove the caveat on terms.
Orders
[26] Caveat 12761649.1 registered against Record of Title Identifier 475594 (the title) shall be removed immediately before the registration of a first mortgage (the new mortgage) granted to:
(a)Capital Securities Ltd or its nominee, to secure an advance made to the respondent pursuant to an offer of finance from Capital Securities Ltd to the respondent dated 25 October 2024 produced as exhibit “F” to the affidavit of the respondent dated 29 November 2024; or
(b)Capital Securities Ltd or its nominee, or any other lender, on terms approved:
(i)in writing by the applicant; or
(ii)by the Court.
[27] The applicant shall be entitled to register a caveat (the new caveat) against the title immediately following registration of the new mortgage, claiming the same equitable interest that is claimed in caveat 12761649.1.
[28] The new caveat shall be removed immediately before the registration of a transfer of the title from the respondent as vendor to a third party as purchaser under an arms-length agreement for the sale and purchase of the property comprised in the title (the property) on the open market.
[29]The respondent shall:
(a)progress construction of the dwelling on the property with diligence;
(b)place the property for sale on the open market on completion of construction at a time recommended by the listing real estate agent;
(c)take all reasonable steps to pursue a sale at market value; and
(d)keep the applicant appraised of progress in complying with these orders.
[30] Upon settlement of a sale of the property, the respondent shall pay the net proceeds of sale, after deduction of the direct costs of sale and repayment of the new
mortgage, into a solicitor’s trust account to be held in the names of the applicant, Craig Colin Rabarts, and the respondent, Carlene Joanne Reid (the fund).
[31] The fund shall only be released on the written agreement of the parties or further order of the Court.
[32] The applicant shall file a proceeding in a court within 30 working days of the date of this judgment to establish the extent of the beneficial interest of the applicant in the property and pursue the proceeding with diligence.
[33] Leave is reserved to the parties to apply for a variation of these orders, or for further directions to implement these orders. Application can be made by memorandum.
[34]Costs are reserved.
Associate Judge Brittain
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