RPD Produce Holdings Limited v ASB Bank Limited

[2013] NZHC 3426

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-000156 [2013] NZHC 3426

UNDER  Section 145A of the Land Transfer Act

1952

IN THE MATTER             of an application to sustain a caveat

BETWEEN  RPD PRODUCE HOLDINGS LIMITED Applicant

ANDASB BANK LIMITED First Respondent

MARTIN ERIC MILLER Second Respondent

LINDA LEE SHAW Third Respondent

Hearing:                   17 December 2013

Appearances:           C Pideon QC for Applicant

M Powell for First Respondent

Judgment:                17 December 2013

ORALJUDGMENT OF VENNING J Re Costs

Solicitors:           Bell Gully, Auckland

Copy to:            C Pidgeon QC, Auckland

RPD PRODUCE HOLDINGS LTD v ASB BANK LTD [2013] NZHC 3426 [17 December 2013]

[1]      The applicant RPD Produce Holdings Limited (RPD) applied for an order sustaining a caveat it had registered against property in the name of the second and third respondents.  The first respondent Bank, ASB, had provided funding which was secured by a mortgage to enable the second and third respondents to purchase the particular property.  RPD’s claim to an interest in the property was in summary based on  its  case  that  the  second  and  third  respondents  had  misappropriated  funds belonging to it and applied those funds towards the purchase of a property.

[2]     On that basis in relation to RPD’s claims against the second and third respondents the position is relatively clear.  However, the difficulty for RPD is that the caveat it lodged was lodged some years after the mortgage was registered against the title in favour of ASB.  On receipt of the application to sustain the caveat ASB instructed  its  solicitors,  who  wrote  to  RPD’s  solicitors,  setting  out  the  Bank’s position in full.   That letter is a letter of 1 October 2013.   The letter recorded, amongst  other  things,  that  at  the  time  of  registering  its  mortgage ASB  had  no knowledge of the interest in the Property claimed by RPD.  They noted there was no suggestion in the application that ASB had acted as anything other than a bona fide third   party   without   knowledge.      The   clear   and   established   principles   of indefeasibility applied.

[3]      The  ASB  solicitors  required  confirmation  that  RPD  would  arrange  to discharge  the  caveat  and  discontinue  the  application  to  sustain  the  caveat. Importantly, it noted that:

If your client does not agree to discharge the Caveat, we are instructed to oppose your application and to seek solicitor/client costs against RPD.

[4]      I do note that the letter went on further and ASB offered that it would not oppose any application by RPD to the Court for orders that ASB effectively hold any net proceeds following the sale of the property otherwise payable to the second and third respondents pending resolution of the proceeding between RPD and those respondents.

[5]      Unfortunately,  despite  what  was  set  out  in  that  letter  RPD  and  its  then solicitors and advisers failed to take up that offer and instead pursued the application. As a consequence the Bank was put to the expense of filing an opposition and a full affidavit from Vaishali Sheth in response.

[6]      An interim order was made sustaining the caveat but I do not consider that suggests that in any way there was merit in the application.  It simply reflects that interim orders are made by the Court to preserve positions pending full argument. The file was then transferred from the Blenheim Registry to the Auckland High Court for hearing.

[7]      For the reasons that Mr Pidgeon has explained, (and I emphasise Mr Pidgeon has only recently been instructed and was not responsible for the earlier conduct of the file) the applicant RPD failed to serve a copy of the interim order on the District Land Registrar with the result that the caveat has in fact lapsed.

[8]      Against that background ASB now seeks indemnity costs in accordance with the notice given.  Mr Pidgeon’s instructions are to formally oppose that application and he has set out what can be said on behalf of the applicant RPD.

[9]      The short point is that unfortunately whatever the merits of RPD’s position against the second and third respondents might be as against the Bank the caveat could never have been sustained against the Bank’s interest given the clear and settled law in relation to indefeasibility.

[10]     This is a case where the provisions of Part 14 of the Rules apply.  RPD was put on notice of the Bank’s position.   In light of the Bank’s advice, which simply relied on settled law, RPD should have acknowledged the position and accepted the offer made by the Bank.  In failing to do so it has put the Bank to expense which the Bank should not have had to incur.

[11]     In the circumstances I make an order for the costs of all steps taken by the

Bank in this proceeding subsequent to its letter of 1 October 2013 on a reasonable

solicitor/client basis in ASB’s favour against RPD in the sum of $9,293 together with

disbursements of $1,781.58.

Venning J