Wood v Wainui Holdings Ltd
[2023] NZHC 1251
•26 May 2023
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2022-419-220
[2023] NZHC 1251
UNDER the Land Transfer Act 2017 IN THE MATTER OF
an application for an order that caveat not lapse
BETWEEN
BEVAN GRAHAM WOOD
Plaintiff
AND
WAINUI HOLDINGS LTD
Defendant
Hearing: 17 May 2023 Appearances:
KA Lomas for the Applicant MK Brady for the Respondent
Judgment:
26 May 2023
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 26 May 2023 at 2 pm.
Pursuant to Rule 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
Solicitors:
Solicitors/Counsel:
Braun Bond & Lomas, Hamilton Tompkins Wake, Hamilton
WOOD v WAINUI HOLDINGS LTD [2023] NZHC 1251 [26 May 2023]
Introduction
[1] The respondent, Wainui Holdings Limited (Wainui) is the developer of a unit title development at 12 Wainui Road, Raglan, comprising eleven residential apartments. The applicant, Bevan Wood, signed an agreement for sale and purchase dated 14 April 2021 to purchase one of the apartments from Wainui (the contract). At the time of the contract, the apartments had not been constructed and the unit titles had not been issued.
[2] Construction of the apartments was completed by 27 August 2021, when the code compliance certificate was issued. To date, Wainui has been unable to obtain a separate unit title for the apartment sold to Mr Wood.
[3] The eleven apartments share private vehicle access to a public road. When the development was conceived, the operative District Plan of the Waikato District Council (Council) included a rule that restricted such shared private vehicle access to a maximum of eight allotments (the planning rule).
[4] Wainui anticipated that the planning rule would be removed when the Council’s new proposed District Plan became operative. In the interim, Wainui applied for, and obtained, a resource consent to create a subdivision of eight principal units under the Unit Titles Act 2010 (UTA), and for building consent to construct eleven apartments. The contract states that the resource consent was issued on 4 July 2018.
[5] Wainui’s intention at the time of the contract was to obtain an amended subdivision consent once the planning rule was eliminated, to permit the creation of a total of eleven unit titles, one for each apartment.
[6] The unit title plan was deposited on 7 October 2021, creating eight unit titles as permitted by the planning rule which remained in force, namely PU1, PU2, PU3, PU4, PU5, PU9, PU10 and PU11. PU5 contains four apartments, including the apartment purchased by Mr Wood.
[7] Wainui’s further subdivision of PU5 into four principal units awaits elimination of the planning rule, and appears to require a subsidiary unit title development under s 20 of the UTA.
[8] On 30 May 2022, Wainui cancelled the contract, relying on an asserted right to cancel in circumstances where either Wainui was prevented from completing the subdivision, or Wainui held the opinion that it was impractical or undesirable to complete the subdivision, due to factors beyond Wainui’s reasonable control.
[9] Mr Wood does not accept that Wainui had the right to cancel the contract on 30 May 2022, and he has lodged a caveat against the title to PU5, despite the contract containing a clause prohibiting this act. Mr Wood also argues that Wainui is estopped from cancelling the contract, based on matters said to have been verbally agreed with Wainui’s director, Stephen Godley, on 29 October 2021. Mr Wood now applies for an order sustaining his caveat.
[10] The fundamental issue in this case is whether it is reasonably arguable that Mr Wood has an equitable interest in PU5, capable of being protected by a caveat?
Sustaining caveats — the legal principles
[11] The legal principles applicable to applications to sustain caveats were confirmed by the Court of Appeal in Philpott v Noble Investments Ltd:1
[26] The applicable legal principles which governed the application to sustain the caveats, and which now govern this appeal, are as follows:
(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
1 Philpott v Noble Investments Ltd [2015] NZCA 342 (footnotes omitted).
maintained — either because there is no valid ground for lodging it in the first place, or because such a ground no longer exists; 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.
[12] In the case of unconditional contracts, the purchaser obtains an equitable interest in the land upon execution of the contract.2
[13] A conditional contract for the purchase of land may give rise to an equitable interest capable of supporting a caveat.3 The equitable interest will cease if a conditional contract is avoided for failure of a condition, or otherwise validly cancelled.4
[14] If a vendor is obliged to carry out certain steps to bring about fulfilment of a condition, equity will require a vendor to comply with that obligation, including making reasonable efforts to obtain necessary approvals.5
[15] The existence of a no-caveat clause is a factor taken into account when the Court exercises its discretion to sustain or remove a caveat.6
[16] The threshold for exercising the discretion to remove a caveat filed in breach of a no-caveat clause is not high, although there is a need for caution. There must be a good reason to sustain a caveat filed in breach of a no-caveat clause. Repudiation by the registered proprietor may be relevant.7
2 Mortre Holdings Ltd v ANCL Investments Ltd [2016] NZCA 494, (2016) 18 NZCPR 268, at [9].
3 Bevin v Smith [1994] 3 NZLR 648 (CA), at 664–665.
4 Mortre, above n 2 at [10].
5 At [14].
6 Landco Albany Ltd v Fu Hao Construction Ltd [2006] 2 NZLR 174 (CA), at [52].
7 Mortre, above n 2, at [26] and [28].
The relevant terms of the contract
[17] Clause 1 of the further terms of sale states that the resource consent dated 4 July 2018 was attached to the contract as schedule 1. The copy of the contract produced in evidence does not include the resource consent.
[18] The property to be sold was described as “Unit 7” and “…shown as PU on the attached scheme plan”. The PU reference was left blank. PU7 depicted on the scheme plan attached to the contract does not accord with unit 7 depicted on the site development plan approved for building consent. The parties agree that the apartment sold to Mr Wood was unit 7 depicted on the site development plan approved for building consent, which accords with PU 6 shown on the scheme plan attached to the contract.
[19] The certificate of title for PU5 includes four apartments, being units 5, 6, 7 and 8 depicted on the site development plan approved for building consent. This includes the apartment sold to Mr Wood, unit 7.
[20] Wainui’s obligation to complete a further subdivision is found in cl 23.2(2) of the contract:
…the vendor will at its cost in all things…
Arrange for the Unit Plan to be deposited with LINZ and a separate stratum estate in freehold record of title for the Property to be issued pursuant to the provisions of the Act.
[21] The contract was not expressed to be conditional on Wainui obtaining a further resource consent to subdivide four principal units from PU5.
[22]The further terms of sale included cl 21.2:
In addition to any other right it may have, in the event that war, civil disorder, monetary, market or economic developments, acts of Government or other factors beyond the reasonable control of the vendor whether similar or not (“specified events”) prevent the vendor from commencing, contunuing, or completing the subdivision of the land (in whole or in part), or in the opinion of the vendor, make it impractical or undesirable for the vendor to commence, continue or complete the subdivision of the land or the Development, the vendor may by notice in writing to the purchaser advise the specified event
and cancel this agreement and the deposit will be returned in full to the purchaser.
[23]Clause 26.1 provided:
The vendor is not obliged to obtain deposit of the subdivision plan by any fixed date, nor will the purchaser be entitled to make any claim against the vendor for any delays which may occur in the deposit of the unit plan, construction of the units and the issue of title for the Property.
[24] On 27 April 2021, the contract was varied to provide Mr Wood with a right to cancel unless two matters had occurred by 30 August 2021, referred to as the sunset date:
(a)the issue of a code compliance certificate for the building work involved in the construction of the apartments; and
(b)the issue of a title for unit 7.
There was no corresponding right of cancellation afforded to Wainui.
[25] On 30 August 2022, the sunset date for issue of the title was extended to 30 September 2022.
Wainui’s argument
[26] Wainui argues that it was entitled to cancel on 30 May 2022 because it was prevented from completing the subdivision due to the planning rule continuing in force, and the timing of the proposed District Plan becoming operative was a factor beyond the reasonable control of Wainui. Wainui submits that it is unclear when, or if, the proposed District Plan will become operative.
[27] Alternatively, Wainui argues that it was entitled to cancel based on its opinion that the same circumstances made it impracticable or undesirable to complete the subdivision.
Discussion
[28] Clause 21.2 of the contract affords some protection to Wainui in circumstances where completion of the subdivision is frustrated or problematic. The extent of Wainui’s right to cancel depends on the interpretation of cl 21.2, which contains two alternative grounds for cancellation that are relevant in this case:
(a)where a factor beyond the reasonable control of Wainui prevents Wainui from completing the subdivision; and
(b)where, in the opinion of Wainui, a factor beyond the reasonable control of Wainui makes it impracticable of undesirable for Wainui to complete the subdivision.
[29] I accept that the planning rule remaining in force is a factor beyond Wainui’s control. This leaves two issues to consider. As at the date of cancellation on 30 May 2022:
(a)was Wainui prevented from completing the subdivision?
(b)did Wainui hold the requisite opinion?
Was Wainui prevented from completing the subdivision?
[30] The evidence before the Court regarding the progress of the proposed District Plan is sparse. The proposed District Plan was notified in 2018. Both Wainui’s director, Mr Godley, and Mr Wood gave hearsay affidavit evidence regarding what may happen with the proposed District Plan.
[31] Mr Wood deposed that he has been advised by the head planner at the Council that the planning rule will cease to apply once the proposed District Plan becomes operative.
[32] Mr Godley deposed that it was Wainui’s understanding at the time of formation of the contract that the planning rule would be removed on notification of the Council’s
“decisions” on the proposed District Plan. Mr Godley says that notification of the Council’s decisions on the proposed District Plan was substantially delayed until January 2022.
[33] Mr Godley says that there is an “appeals process” still to be completed, and it is uncertain as to when the proposed District Plan will become operative and whether the planning rule will be removed. Mr Godley produced an email from a Council officer which states that the proposed District Plan will become operative once the appeals are resolved.
[34] However, there is no clear evidence of what the “decisions” by the Council were; how those decisions relate to the planning process generally; what is involved in the appeals; whether the decisions or the appeals might impact upon removal of the planning rule; or when the proposed District Plan is likely to become operative. There is no adequate explanation of the planning process.
[35] What is clear is that there is presently no evidence before the Court that the anticipated removal of the planning rule by the District Plan process was in jeopardy at the time of cancellation, or now.
[36] Mr Wood and Mr Godley had a phone conversation in October 2021. While the parties have different recollections as to precisely what was said or agreed, Mr Godley accepts that he told Mr Wood that Wainui was not then looking to end the contract, and that Wainui was waiting for the proposed District Plan to be “released”.
[37] On 18 February 2022, Wainui asked Mr Wood to sign a “Written Approval of Affected Persons” form in support of Wainui’s application for a resource consent to subdivide PU5 into four principal units. Wainui was proceeding with the contract on 18 February 2022, and there is no explanation from Mr Godley as to what changed between 18 February 2022 and 30 May 2022.
[38] Construction of the eleven apartments is complete. Seven principal unit titles have been issued in respect of seven of the apartments. Four apartments remain in one
principal unit, PU5, however there is no evidence or averment on behalf of Wainui that Wainui has abandoned completion of the subdivision.
[39] The only inference that can be drawn from the evidence before the Court is that Wainui is waiting for the proposed District Plan to become operative. Completion of the subdivision has been delayed.
[40] Clause 26 of the contract acknowledges that Wainui was not obliged to obtain deposit of the subdivision plan by any fixed date. The parties clearly contemplated that there might be a delay in obtaining title, notwithstanding that the contract was varied to give Mr Wood a right to cancel if title had not been issued by the sunset date. Mr Wood has chosen not to exercise that right.
[41] It is reasonably arguable that the delay in the proposed District Plan becoming operative is not a factor that prevents Wainui from completing the subdivision.
Did Wainui hold the requisite opinion?
[42] The substance of the requisite opinion is that it is impractical or undesirable to complete the subdivision given the continuing operation of the planning rule. The issue is whether the opinion is qualified by an implied requirement that the opinion must be reasonably held?
[43] Counsel for Wainui referred to the Court of Appeal’s decision in Landco Albany Ltd v Fu Hao Construction Ltd,8 another subdivision case. The relevant clause provided that if it was necessary for the vendor to obtain any consent, and the vendor was “unable or unwilling” to obtain the consent, then the vendor had the right to cancel regardless of any attempt by the vendor to obtain the consent.
[44] The Court of Appeal held that when the parties used the expression “unable or unwilling”, they must be taken to have invoked the jurisprudence relating to that expression as used in the requisitions clause in the Auckland District Law Society/Real
8 Landco, above n 6.
Estate Institute of New Zealand standard form agreement for sale and purchase.9 The use of the expression in the standard form relates to a purchaser’s objections or requisitions in respect of a title issued after a contract is formed.10
[45] In doing so, the Court of Appeal applied legal principles applicable in one situation, where a vendor is facing an objection or requisition to a title, to a different but analogous situation, where a vendor has a contractual obligation to obtain a consent and a contractual right to cancel if the vendor is unable or unwilling to obtain that consent.
[46]The Court of Appeal stated the legal principles to be:11
[36] Among the principles which appear from the authorities are the following:
(a)The vendor may not escape by acting in bad faith.
(b)The vendor must not have been reckless in entering into the contract, for example if it is shown that the vendor had no reasonable expectation of being able to deliver the title described in the contract.
(c)The vendor is not permitted to take advantage of the clause if the vendor has done less than an ordinarily prudent person is bound to do when dealing with another
(d)The vendor must not act arbitrarily, capriciously or unreasonably.
(e)The right to cancel may not be used to escape from a contract in a preemptory manner, for that would be making a nullity of the transaction.
(f)In deciding whether the vendor is acting reasonably regard may be had, among other factors, to the expense involved in complying with the requisition seen in the context of the case. A vendor cannot be forced to comply with a requisition if it would involve unreasonable labour or expense, although what constitutes unreasonable labour or expense varies with the value of the property and other circumstances.
(g)The onus of proof that the vendor is not acting properly in these circumstances lies on the purchaser and the vendor is not obliged to give the reason for wishing to cancel
9 At [35].
10 In the present case, the requisitions cls are 6.2(2) and 6.2(3) of the contract.
11 Landco, above n 6.
[47] In the present case, cl 21.2 of the contract does not include the expression “unable or unwilling”. However, the key theme of the Court of Appeal’s judgment in Landco is equally apposite: the vendor must not act unreasonably.
[48] It is seriously arguable that any opinion held by Wainui regarding whether it is impractical or undesirable to complete the subdivision in this case must be reasonably held. That requires an objective consideration of the circumstances at the time of cancellation.
[49] It is reasonably arguable that if, at the time of cancellation, Wainui held the opinion that it was impractical or undesirable for Wainui to complete the subdivision because of the delay in the proposed District Plan becoming operative, then in the circumstances of this case that opinion was not reasonably held.
Conclusion on equitable interest
[50] I find that it is reasonably arguable that Wainui did not have the right to cancel on 30 May 2022, on either of the grounds advanced by Wainui, and that Mr Wood has an equitable interest in PU5.
Estoppel
[51] Given my finding on cancellation, it is not necessary to consider Mr Wood’s estoppel argument.
The no-caveat clause
[52] Having found that it is reasonably arguable that Mr Wood has an equitable interest in PU5, I must now consider whether I should exercise my discretion to sustain the caveat despite the no-caveat clause.
[53] No-caveat clauses are sometimes justified on the basis that caveats during the development process can impose a practical impediment to completion of the
development process, for example by stopping a registered proprietor from arranging funding by preventing the registration of mortgages, or from registering instruments to complete the subdivision.
[54] In the present case, Wainui has already been able to obtain titles for seven principal units. Wainui either has, or presumably can, complete sales of those seven principal units.
[55] There is no evidence of any adverse effect on Wainui’s ability to continue with the development or to otherwise deal with PU5 if the caveat is sustained. Mr Wood can be expected to cooperate in lifting his caveat to enable any subdivision of PU5 to be completed, so that his purchase of unit 7 can be settled.
Concluding comments
[56] Counsel for Wainui submitted that the contract should not be construed to require Wainui to wait indefinitely for the planning rule to cease to be operative. I agree that it is possible that at some point in time circumstances may change so that the continuing operation of the planning rule may amount to a factor that either prevents Wainui from completing the subdivision, or renders reasonable Wainui’s opinion that it is impractical or undesirable to complete the subdivision. On the evidence before the Court, it is strongly arguable that this point has not yet been reached.
[57] If the caveat is sustained, Wainui seeks a direction that Mr Wood be compelled to file a substantive claim seeking specific performance of the contract. That is a reasonable request. The other alternative to immediate litigation, given that Mr Wood has affirmed the contract, is that Wainui withdraw its purported cancellation on 30 May 2022 and also affirm the contract, but without prejudice to any rights of cancellation that may arise after Wainui’s affirmation. I will sustain the caveat on terms that provide for both possibilities.
Result
[58]I make the following orders:
(a)The interim order made by Lang J on 18 August 2022, that caveat 12479523.1 not lapse pending further order of the Court, is extended pending further order of the Court.
(b)Order (a) is conditional on the applicant filing a substantive proceeding, within 20 working days of this judgment, to enforce the agreement for sale and purchase dated 14 April 2021 between the respondent as vendor and the applicant as purchaser, and the applicant taking reasonable steps to prosecute that proceeding. This condition shall cease to apply if the respondent elects to affirm the contract;
(c)The respondent has leave to apply on notice for revocation of order (a):
(i)if there is a material change in circumstances in respect of the proposed District Plan of the Waikato District Council; or
(ii)if the respondent elects to affirm the contract, and the respondent seeks to rely on a right of cancellation that arises after the affirmation.
(d)The applicant is entitled to costs on a 2B basis and disbursements as fixed by the Registrar.
Associate Judge Brittain
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