200 Victoria Street Ltd v Henderson HC Auckland CIV 2010-404-3894 [2010] NZHC 1301 (30 June 2010)

Last Updated: 13 August 2010

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV-2010-404-003894}

IN THE MATTER OF Section 143 of the Land Transfer Act

BETWEEN 200 VICTORIA STREET LTD First Applicant

AND VICTORIA PARK LTD Second Applicant

AND CENTRO APARTMENTS LTD Third Applicant

AND KITCHENER RENTALS LTD Fourth Applicant

AND DAVID STEWART HENDERSON AND ANTHONY CLIVE SANDLANT AS TRUSTEES OF THE HAURAKI TRUST Fifth Applicant

AND ROCHELLE DOROTHY HENDERSON First Respondent

AND GOODALL TRUSTEE SERVICES LTD AND ROCHELLE DOROTHY HENDERSON AS TRUSTEES OF THE NO. 9 TRUST

Second Respondent

Hearing: 30 June 2010

Appearances: D Grove for Applicants

A Maycock for First Respondent and the second-named Second

Respondents

Judgment: 30 June 2010

ORAL JUDGMENT OF ASSOCIATE JUDGE BELL [Application to remove caveats under s 143 of the Land Transfer Act]

Solicitors:

Ellis Law, PO Box 4516, Auckland

McMahon Butterworth Thompson, PO Box 106073, Auckland

Daniel Grove, PO Box 130, Auckland

200 VICTORIA STREET LTD AND ORS V R D HENDERSON AND ANOR HC AK CIV-2010-404-003894

30 June 2010

[1] All the applicants are associated with David Henderson. For clarification, I identify him as the Auckland David Henderson, not to be confused with the Christchurch David Henderson. The first respondent is his former wife. They separated sometime ago. The second respondent is a trust associated with Mrs Henderson. Mrs Henderson has lodged caveats against the titles to properties which are associated with Mr Henderson.

[2] Mr Henderson, like many developers, has struck hard times following the financial decline in 2007 and the drying up of the secondary finance market. He has been forced by financial circumstances to put all properties in which he has an interest on the market for sale. He has now negotiated the sales of the properties owned by the applicants. These sales are to third parties and I accept his evidence that there will be no connection between him and the purchasers of the properties other than the fact that a company, Orewa East Ltd, will be providing consultancy services. The income generated for his consultancy services will go to Orewa East Ltd, which will go to the benefit of his creditors under a proposal he has made under Part 5 of the Insolvency Act 2006. Except in that respect, he has no connection with the purchaser or with what will happen to his properties after the sales go through.

[3] The properties are all heavily mortgaged. In his affidavit, he says that the secured creditors are the Westpac New Zealand Ltd, owed $29,570,612.40; No. 120

Limited, which used to be called Babcock & Brown, which is owed $47,504,749.20; CK Investment Fund Ltd, which is owed $1,387,376.77; Golden Fund Ltd,

$2,703,427.12. That is a total of $81,155,165.49. Those figures were given in his proposal which he made earlier this year. He says that further interest and costs will have accrued on these sums in the meantime.

[4] Mr Henderson has attached to his affidavit copies of agreements for sale and purchase for the properties owned by the applicants. There are six agreements in all. The purchasers are variously Le Compte Ltd, Victoria Quarter No. 1 Ltd, Victoria Quarter No. 2 Ltd and Victoria Quarter No. 3 Ltd. The total to be realised under these sales is $37,000,000. The sales are due for settlement on 12 July 2010. The mortgages which secure the indebtedness to the creditors were all registered on the titles before the caveators lodged their caveats.

[5] For this case, the applicants do not dispute that the caveators do have caveatable interests and the matter really comes down to this question: whether, even though the caveators have caveatable interests, there is no useful benefit in maintaining the caveats and they ought to be removed in any event. The applicants’ case relies on the decision of the Court of Appeal in Pacific Homes Ltd (In Receivership) v Consolidated Joineries Ltd [1996] 2 NZLR 652. In that case, the Court recognised that, even if a caveator established a caveatable interest, which would ordinarily be upheld, if it could be shown that there was no practical benefit in maintaining a caveat, an order would be made for its removal.

[6] In that decision, Blanchard J, giving the judgment for the Court, said (at 656):

In such circumstances the Court retains a discretion to make an order removing the caveat, though it will be exercised cautiously. An order will be made for removal only where the Court is completely satisfied that the legitimate interests of the caveator will not thereby be prejudiced. If, on the facts of a case, it can be seen that the caveator can have no reasonable expectation of obtaining benefit from continuance of the caveat in the form of the recovery of money secured over the land or specific performance of an agreement or if the caveator’s interest can be reasonably accommodated in some other way, such as by substituting a fund of money under the control of the Court, then it may be appropriate for the caveat to be removed notwithstanding that the right to the claimed interest is undoubted.

[7] Mr Grove has also cited other cases that have applied this: Elliott v Cho HC Auckland, 29 April 2009, Associate Judge Abbott CIV 2009-404-2313; Westpac Banking Corporation v Ikafoli 4 March 2004, HC Auckland, Master Lang, CIV

2004-404-972 and Public Trust v Toussaint 20 July 2004, HC Wellington, Associate

Judge Gendall, CIV 2004-485-859.

[8] In this case, I accept that, following the sale of these properties, there will be no equity left to satisfy the current secured creditors, let alone anyone with any subsequent unregistered interest. I also accept from the evidence that these secured creditors will not be satisfied in full out of other assets held or associated with Mr Henderson. Accordingly, the unfortunate state of affairs in this case is that the caveators fall behind the secured creditors. The secured creditors themselves are going to take a loss and there is going to be nothing left available for the caveators.

In that situation, I can see no practical benefit for the caveators in maintaining their caveats and the caveats need to be removed.

[9] The next matter that arises is what orders should be made consequent upon my finding that the caveats should be removed under s 143 of the Land Transfer Act. The normal order that is made in these cases before the advent of e-dealing was that the caveat would be removed on presentation to the District Land Registrar of a transfer for registration of the registered proprietor’s interests in the subject title to the identified purchaser.

[10] Mr Grove advises that, as a result of inquiries he made since the matter was called yesterday, caveats can be removed with the co-operation of the caveator. In that event, the caveator would give an authority and instruction authorising the removal of the caveat under the e-dealing regime. I understand, however, that in this case there will not be any co-operation forthcoming from the caveators. In that event the matter will have to proceed on the basis that the parties will have to revert to the old paper transactions which I understand are still available in special cases. I understand that Land Information New Zealand Ltd will allow a paper transaction if there is a written explanation for the necessity of doing the transaction by paper. In this case, given the lack of co-operation from the caveators, that would seem to be the appropriate course.

[11] I note that Land Information New Zealand Ltd adds special charges for dealing with a paper transaction. It is obviously not appropriate that the registered proprietors should have to carry those costs and so the added costs of the conveyancing for the removal of the caveats will have to be borne by the caveators.

[12] Accordingly, there is an order for removal of all the caveats named in the application, such removal to take effect on registration of transfers of the interests of the registered proprietors in the subject titles to the purchasers, those purchasers being identified in the affidavit of Mr Henderson sworn in support of the application.

[13] There will be an order for costs in favour of the applicants on a 2B basis with this as well. I also order that the caveators are to pay the registered proprietors the

additional costs that they will incur as a result of the necessity of having to do the conveyancing by way of a paper transaction instead of under the e-dealing regime.

_{The applicants will also have disbursements as approved by the Registrar.}

R M Bell

Associate Judge