Shaw v Dixon Homes Limited

[2022] NZHC 1271

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2022-419-000031

[2022] NZHC 1271

UNDER

Part 9 of the High Court Rules 2016 and Land Transfer Act 2017, s 143

IN THE MATTER OF

An application to sustain Caveat Instrument 10850077.1 lodged against Record of Title 846822

BETWEEN

MARGARET EVELYN SHAW and MURRAY NELSON SHAW

Applicants

AND

DIXON HOMES LIMITED

Respondent

Hearing:	12 May 2022
Appearances:	B A Vautier and J C Dawson for Applicants M D Talbot for Defendant
Judgment:	1 June 2022

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by Associate Judge Andrew on 1 June 2022 at 4.00 pm

pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar Date……………………………….

SHAW v DIXON HOMES LTD [2022] NZHC 1271 [1 June 2022]

Introduction

[1]    These are caveat proceedings relating to a subdivision on Dixon Road, Hamilton.1 Both parties own land on Dixon Road. The respondent, Dixon Homes Ltd,2 is a property development company and the owner of the property at issue. The Shaws are adjacent landowners, and their land is not part of the DHL subdivision. It remains relatively undeveloped.

[2]    The rights of the parties, including the right of the Shaws to a beneficial interest in the property, are governed by a deed of settlement entered into between them in 2017.3 That deed provided for a land swap and an order for specific performance in relation to a 2013 agreement for sale and purchase transferring some of the Shaw’s land to DHL.

[3]    It is not in dispute that under the 2017 deed, the Shaws had an express right to caveat the Property. However, DHL says that the Shaws have repudiated the 2017 deed, resulting in DHL exercising a valid right of cancellation. DHL says that the Shaw’s beneficial interest in the land has ceased and the caveat cannot be maintained.

[4]    The critical issue I must determine is whether the Shaws have established a reasonably arguable basis for concluding that their rights under the 2017 deed remain on foot; have the Shaws established that there was arguably no valid cancellation by DHL?

Factual background

[5]    In 2010, the land on Dixon Road was zoned a mixture of rural and future urban, with no existing infrastructure for residential development.

[6]    Since 2010, DHL has undertaken subdivision and development of its land on Dixon Road, creating and completing approximately 115 residential dwellings by

1      Application by the Shaws under s 143 of the Land Transfer Act 2017 that the caveat lodged over part of DHL’s land not lapse.

2      DHL.

3      The 2017 deed.

2020. DHL says that the only part of its project left for completion is the property affected by these proceedings.

[7]    In 2013, the Shaws owned all the land comprising Certificate of Title SA66C/540, being approximately 10.6987 hectares and legally described as Lot 2 DPS 83799. DHL owned the adjoining land to the north-east, legally described as Lot 5 DPS 9958.

[8]    On 28 August 2013, the parties entered into an agreement for sale and purchase of land belonging to the Shaws. The essence of the 2013 agreement was that the Shaws were to transfer some of their land to DHL in return for access to significant infrastructure, including services and roading, constructed by DHL as part of its significant subdivision project on the neighbouring land.

[9]    On 24 October 2013, subdivision consent was obtained by DHL from Hamilton City Council to undertake a 73-lot subdivision of its land and part of the Shaw’s land.

[10]   A dispute then arose in relation to the 2013 agreement and DHL issued proceedings for specific performance against the Shaws.4

[11]In July 2017, the parties settled the litigation and entered into the 2017 deed.

[12]The background to the deed of settlement states:

C.Dixon Homes has alleged that it has performed all of its obligations under the Agreement and has issued proceedings in the High Court under CIV-2016-416-139 against the Shaws for specific performance (Proceedings).

D.The Shaws deny that Dixon Homes has completed all of its obligations under the Agreement and, in particular, has failed to install reticulated gas and has failed to complete Road B.

E.Without admission of liability, the parties have agreed to settle all claims arising directly or indirectly out of the Proceedings as well as any matters between them on the terms set out below.

F.The Shaws have agreed for the transfer of land owned by them subject to the Agreement to be specifically performed by way of an order

4      Dixon Homes Ltd v Shaw HC Hamilton CIV-2016-419-139.

made by the Court by consent, with the parties being released from any other obligations under the Agreement.

G.This will result in land being transferred from the Shaws to Dixon Homes.

H.Following the transfer, the parties will undertake a further transfer of land to one another so as to result in Dixon Homes being transferred the area marked as 1 (Area 1), and the Shaws being transferred the area marked 2 on the plan (Area 2).

[13]The land swap is provided for in cl 2 which reads:

2.Following the transfer of the land from the Shaws to Dixon Homes, the parties agree that the following steps will take place:

a.Dixon Homes will apply as soon as practicable for a subdivision resource consent enabling:

i.Area 1 to be transferred to Dixon Homes and amalgamated with Dixon Homes’ land namely Lot 62 on the plan; and

ii.Area 2 to be transferred to the Shaws and amalgamated with adjoining land owned by the Shaws.

b.The costs of preparing and making the application, including any Council costs, referred to in paragraph 2a above will be paid by the parties in equal shares.

[14]   Clause 3 provided the Shaws with a right to place a caveat over the area described as Area 2, being the caveated property at issue in these proceedings.5 Under the settlement deed it is to be transferred to the Shaws in exchange for the transfer from the Shaws to DHL of Area 1.

[15]   Under cl 3 the Shaws also agreed to provide a partial release of the caveat to Dixon Homes for the portion of the title associated with Area 2 that is not to be transferred to the Shaws.

[16]Clause 5 of the deed of settlement reads:

5.Dixon Homes will instruct Rad Surveying Ltd to lodge for consent with Council to subdivide the land to achieve the following:

5      Area 2 is part of Lot 2 DP519914 contained in Record of Title 846822.

a.Consent for the road marked X on the plan (the Shaws will bear these costs); and

b.Consent for the road marked X1 on the plan (Dixon Homes will bear these costs).

[17]   On 24 July 2017, the Shaws lodged caveat number 10850077.1 over the title that includes Area 2.

[18]   In accordance with cl 1 of the settlement deed, 9895 square metres of land owned by the Shaws was transferred to DHL on 20 July 2017.6 The Shaws retained a balance of 9.7120 hectares (Record of Title 726332, Lot 515 DP 495213).

[19]   On 26 January 2018, DHL’s solicitors emailed the Shaw’s solicitors requesting that the caveat be withdrawn over the land to be vested and/or the land that was not the subject of the swap, and attaching an authority and instruction form for signing by no later than 5 February 2018.

[20]   On 14 February 2018, DHL applied for a partial lapse of the caveat under s 145 of the Land Transfer Act 2017. That application did not proceed.

[21]   On 28 February 2018, the Shaws signed and returned the authority and instruction form.

[22]   On 14 June 2018, the solicitor for DHL advised the solicitors for the Shaws that Rad Surveying had been engaged in respect of the “consents required”.

[23]   On 29 June 2018, the Shaws submitted an application for a 36-lot subdivision of part of its land located within Lot 515 DP 495213 and part of DHL’s land (Lot 2 DP 519914). This proposal was essentially a subdivision of the applicant’s property. That application was put on hold on 4  October 2019, and subsequently withdrawn on      9 March 2020.

6      DHL has since subdivided and sold six residential properties on that land.

[24] On 18 October 2018, DHL made an application for a six-lot subdivision for the area identified as Lot 205. That is Area 1. It was lodged by Mr Troy Radovancich of Rad Surveying Ltd.

[25]   Mr Da Costa, the sole director of DHL, says that on 19 November 2018,     Mr Radovancich advised him that the Hamilton City Council would not issue the DHL consent until the Shaw’s consent was issued.

[26]   In February 2019, there was correspondence exchanged between the parties’ solicitors in relation to a “proposed solution” to try and resolve outstanding matters between them.

[27]   Mr  Da  Costa  further  says  that  on  29  August  2019,  DHL  terminated  Mr Radovancich’s (Rad Surveying) services and appointed Blue Wallace Surveyors to complete its consent.

[28]   In March 2020, an updated scheme plan prepared by Blue Wallace was sent to Mr Radovancich, who passed it on to the Shaws. The scheme plan included road B (Lot 105), consisting of 488 square metres, with the notation “road to vest in HCC”.

[29]   On 2 July 2021, Mr Shaw wrote to Mr da Costa informing him that the Shaws had created “a committee to take control of their own affairs, releasing all our former legal representatives …”. Mr Shaw invited Mr da Costa to meet with them in order to “move forward”.

[30]   On 29 September 2021, the Shaws wrote to Mr Neverman, solicitor for DHL, expressing concern about an illegal pipeline that DHL had allegedly installed to run into a pond on the Shaw’s property. The letter is signed by Mr Shaw alongside the notation “[sovereign]: Murray Nelson Shaw (De Jure) (CD)”.

[31]   On 4 February 2022, DHL’s solicitor sent a letter to the Shaws giving notice of cancellation by DHL of the 2017 deed. Relevant parts of the letter read:

2.We are instructed to cancel the abovenamed agreement in reliance on, inter alia, the following grounds:

(a)Clause 2 – In respect of clause 2(a), you have failed to facilitate and/or enable the resource consent filed to be granted because of a refusal to respond to Council requests which are required by Council to grant the consent (which DHL have taken all reasonable steps to obtain).

(b)In respect of clause 5, and despite you expressly requesting Rad Surveying Ltd to be instructed pursuant to clause 5, you have caused Rad Surveying Ltd to declare it has a conflict of interest, such that it is now refusing to perform its role in respect of clause 5.

(c)In respect of clause 2(a)(i) and (ii), you have repudiated the contract by treating the land inconsistently with an intent to perform clauses 2(a)(i) and (ii) by, inter alia:

(i)altering the topography of Areas 1 and 2;

(ii)commencing a market gardening operation on Area 1;

(iii)constructing ponds on the proposed road X.

[32]On the same day, trespass notices were issued by DHL against the Shaws.

[33]   The Shaws responded to the letter of cancellation and trespass notices later in February 2022. The letter is signed under the heading “De Jure Sovereign Territorial Authorities ki Nukuhau”.

[34]   On 8 February 2022, DHL applied to lapse the caveat that prompted the present application, namely an application by the Shaws under s 143 of the Land Transfer Act 2017 that the caveat not lapse.

[35]   In May 2022, the Shaws filed substantive proceedings in the Hamilton High Court, seeking specific performance of the 2017 deed.

[36]   As at 2022, the vesting of Road B in the Hamilton City Council has been completed in part. However, the final 27 metre length of Road B is not vested and remains in DHL’s ownership.7

7      I note that the Shaws referred to this as the “spite strip” based on their allegation that DHL has deliberately not vested the road. I cannot of course determine that allegation.

Relevant legal principles

[37]   In Philpott v Noble Investments Ltd, the Court of Appeal set out the basic legal principles for applications to sustain caveats:8

(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;9 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.10

[38]   Philpott v Noble Investments Ltd dealt with the predecessor legislation, namely the Land Transfer Act 1952. However, it is not disputed that the principles laid down by the Court of Appeal apply equally to applications, such as this one, under s 143 of the Land Transfer Act 2017.11

Analysis and decision

Issue – Valid cancellation?

[39]   DHL contends that it is entitled to cancel the 2017 deed, based on a series of acts of repudiation by the Shaws of the deed. It is not in dispute that if the deed was validly cancelled, the Shaws no longer have a caveatable interest in Area 2 and the caveat should lapse.

[40]Section 36 of the Contract and Commercial Law Act 2017 reads:

8      Philpott v Noble Investments Ltd [2015] NZCA 342 at [26].

9      Sims v Lowe [1988] 1 NZLR 656 (CA) at 660; Zwarst v Saxton [2012] NZHC 448 at [12].

10     Stewart v Kaipara Consultants Limited [2000] 3 NZLR 55 (CA) at [23].

11 See Cowan v Cowan [2022] NZSC 43 at [21], where the Supreme Court held that despite there being some differences in structure and language between the provisions of the 2017 Act and the 1952 Act, those differences do not preclude the use of older case law to interpret the 2017 Act.

Party may cancel contract if another party repudiates it

(1)        A party to a contract may cancel the contract if, by words or conduct, another party (B) repudiates the contract by making it clear that B does not intend to –

(a)perform B’s obligations under the contract; or

(b)complete the performance of B’s obligations under the contract.

(2)This section is subject to the rest of this subpart.

[41]   Whether a breach of contract amounts to a repudiation is “a serious matter not to be lightly found or inferred”.12 Burrows Finn & Todd on the Law of Contract in New Zealand relevantly states:13

What has to be established is that the defaulting party has made clear the intention no longer to perform his or her side of the bargain. Proof of such an intention requires an investigation inter alia of the nature of the conduct, the attendant circumstances and the motives which prompted the conduct. In the words of Lord Selborne:14

You must look at the actual circumstances of the case in order to see whether the one party to the contract is relieved from its future performance by the conduct of the other; you must examine what that conduct is so as to see whether it amounts to a renunciation, to an absolute refusal to perform the contract.

[42] DHL submits that it has used its best endeavours to meet its obligations under the 2017 deed and to procure the performance by both parties of the land swap. However, they say that the Shaws have failed to comply with reasonable requests to sign appropriate documentation drafted by DHL and failed and/or refused to advance a consent application, largely in respect of a property they owned and unrelated to the settlement, but which included components of the 2017 deed obligations. DHL also says that the Shaws have treated both Area 1 and Area 2 inconsistently with an intention that those areas of land were to be swapped, treating both as their own. Finally, DHL alleges, as a further act of repudiation, that the Shaw’s dismissal of their entire legal and technical teams make it impossible for the 2017 deed to be performed.

12     Ross Smyth & Co Ltd v Bailey Son & Co [1940] 3 All ER 60 at 71 per Lord Wright.

13     Stephen Todd, Matthew Barber and Jeremy Finn Burrows, Finn & Todd on Law of Contract in New Zealand (6th ed, Lexis Nexis, New Zealand, 2017) at 694.

14     Mersey Steel and Iron Co v Naylor Benzon & Co (1884) 9 App Cas 434 (HL) at 438–439.

[43]   The context for assessing these contentions is all important. The 2017 deed is partly performed, the Shaws having transferred some land to DHL, and the Shaws have taken action in reliance on that part-performance. The Shaws say that they have transferred, without any consideration, some land to DHL, part of which is yet to be returned to them (i.e. Area 2) but from which DHL has profited. There is undoubtedly some merit to that contention.

[44]   It is also important to note that many of the critical factual matters are in dispute. That includes the critical role of Mr Troy Radovancich of Rad Surveying Ltd and in relation to the question of whether DHL has ever made application for subdivision consent, as required by cl 2(a) of the 2017 deed.

[45]   The Shaws say that DHL, far from performing its obligations under the 2017 deed, has failed to make application for subdivision consent, as required by cl 2(a) and that this is the principal reason the 2017 deed remains unperformed. The Shaws have filed evidence from an independent expert, Mr James Hook, an urban planner, whose report demonstrates that at no time has DHL made an application for subdivision consent, as expressly required.

[46]Mr John Neverman, solicitor for DHL, states in his affidavit as follows:

… While it was the responsibility of the respondent [DHL] to advance these applications [to advance the land swap] the respondent cannot make application in respect of land in which it does not have a legal or equitable interest. Therefore, Mr Radovancich of Rad Surveying determined how the application/s would be advanced, and despite 2(a) advised two applications would be advanced as follows.

[47]   The Shaws have understandably taken issue with Mr Neverman’s contention. I agree, that expressed in the bald terms that it is, Mr Neverman’s statement is wrong in law.15 The position is more accurately recorded in DHL’s written submission where DHL notes that the reality is that a party cannot give effect to an application for consent in respect of land of which it is neither the legal nor equitable owner without the cooperation of the owner. There is, however, no legal prohibition as Mr Neverman has suggested.

15     See s 122 of the Resource Management Act 1991 and Aoraki Water Trust v Meridian Energy Ltd

[2005] 2 NZLR 268 at [26].

[48] In any event, the question of whether DHL breached its obligations under cl 2(a), being a fundamental obligation of the 2017 deed, is a trial issue. It is clearly arguable, on the basis of the careful and comprehensive evidence of Mr Hook, that there has been a breach by DHL. Mr Hook, whose evidence is not contradicted by an independent expert from DHL, states that the only relevant application made by DHL is the 6-lot application submitted in 2018, which relates to Area 1 only. That application does not seek consent for Areas 1 and 2 (or road X1, X2 and X) and in Mr Hook’s view, therefore, could not have facilitated the land swap as required.

[49]   Furthermore, the role of Mr Troy Radovancich, critical to resolution of the issue of whether there has been a breach of cl 2.1, is not a matter I can determine at this interim stage. There is no direct evidence from Mr Radovancich before me and the steps that he took, on behalf of whom, and the reasons why the subdivision application has not advanced, need to be tested through cross-examination at trial. As noted above, repudiation is a serious matter not to be lightly found or inferred.16 The Court is required to investigate the nature of the conduct, the attendant circumstances and the motives which prompted the conduct.17 Each of the acts of repudiation here are contested by the Shaws and none of the explanations put forward for their conduct are so untenable or implausible that I could safely conclude at this stage that there was an unarguable case of a valid cancellation. On the contrary, I find that the Shaws have established that there is a reasonably arguable case that the cancellation by DHL was not valid and that the 2017 deed remains in force.

[50]   It is arguable that the alleged initial failure by the Shaws to sign the necessary authority and instruction forms is no longer relevant. Ultimately, the Shaws did sign those documents and the land to which they relate was transferred as the parties had agreed. It is also arguable that what DHL characterises as the “de jure” correspondence from the Shaws expresses no more than frustration and exasperation at the delays with implementing the 2017 deed and cannot properly be characterised as a clear and absolute refusal to perform the contract. The motives of the Shaws will need to be tested at trial through cross-examination.

16     Ross Smyth & Co Ltd v Bailey Son & Co, above n 12.

17     Stephen Todd, Matthew Barber and Jeremy Finn Burrows, Finn & Todd on Law of Contract in New Zealand, above n 13.

[51]   On the evidence before me, it is difficult to see why the Shaws would seek to prevent the 2017 deed from being performed. There is obvious benefit to them from the arrangements entered into and to wholly withdraw from those arrangements at this stage after some initial part-performance, would clearly be disadvantageous to them, as they have submitted. It may well be that they are also exasperated at the failure, as they see it, of DHL to vest the entirety of road B in the Council. That will also be a trial issue, but on the evidence before me there does not seem to be any good reason why road B has not to date been fully vested.

[52]   I also reject the submission of DHL that I could confidently conclude at this stage that the overall conduct of the Shaws would debar them from access to the equitable remedy of specific performance. They have engaged new legal representation, filed proceedings for specific performance and have thus far, arguably taken steps necessary to achieve part-compliance with some of the obligations under the 2017 deed. It would be wholly inappropriate for me to determine at this summary stage that the Shaws have no prospect of succeeding with their substantive claim. On the material before me, there is a strong case for contending that the obvious solution is for the 2017 deed to be fully implemented and the protracted period of dispute between the parties brought to an end.

[53]   For all these reasons, I conclude that the Shaws have established an ongoing beneficial interest in the Property and on that basis the caveat should be maintained. The 2017 deed arguably remains in force and under that contract, the Shaws have a clear right to maintain the caveat over the property until the 2017 deed has been performed.

Exercise of discretion

[54]   I find that there is no basis for me to exercise my discretion and conclude that the caveat should be discharged. While delay may be a relevant factor in the Court’s exercise of discretion,18 DHL cannot clearly and unequivocally establish that any delay has been solely caused by the Shaws. Furthermore, DHL has not put forward any clear evidence of prejudice or a basis for concluding that there is an urgent need

18     Varney v Anderson [1988] 1 NZLR 478 (CA) at 479.

for the caveat to be discharged. This is a different case from Glanville v Medical Holdings Ltd,19 a case relied upon by DHL. The question of timing for any necessary subdivision consents is a matter best addressed at trial.

Result

[55]   I grant the Shaw’s application under s 143 of the Land Transfer Act 2017 and order that caveat 10850077.1, lodged against Record of Title 846822, not lapse, pending the determination of the substantive proceedings. The order is conditional on the Shaws continuing to take all reasonable steps to prosecute their substantive claims.

[56]   As to costs, I am of the preliminary view that having succeeded, the Shaws are entitled to costs and on a 2B basis plus disbursements. If the parties cannot agree on costs, then submissions (no more than three pages) are to be filed and served within 14 days.

Associate Judge P J Andrew

19     Glanville v Medical Holdings Ltd HC Auckland M 46-IM03, 25 February 2003.