Amos v Star Catchers Limited [2012] NZHC 1140 (25 May 2012)

Last Updated: 26 August 2012

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2011-485-2568 [2012] NZHC 1140

BETWEEN ANTHONY MARK AMOS Applicant

AND STAR CATCHERS LIMITED Respondent

Hearing: 27 April 2012

(Heard at Wellington)

Counsel: JW Howell - Counsel for Applicant

PSJ Withnall - Counsel for Respondent

Judgment: 25 May 2012

_{JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL}

This judgment of Associate Judge Gendall was delivered by the Registrar on 25 May

2012 at 4.00 pm under r 11.5 of the High Court Rules.

Solicitors: Thomas Dewar, Solicitors, PO Box 31-240, Lower Hutt

_{Devine Law Limited, Solicitors, PO Box 5970, Wellington}

AM AMOS V STAR CATCHERS LIMITED HC WN CIV-2011-485-2568 [25 May 2012]

Introduction

[1] On 4 July 2011 the applicant registered caveat No. 8807541.1 against the title to a large residential subdivision property at Lot 28 Antrim Crescent, Wainuiomata (the property) owned by the respondent. In November 2011, the respondent applied to the Registrar General of Land to lapse the caveat under s 145A of the Land Transfer Act 1952. In the application before me, the applicant now seeks an order that the caveat not lapse.

[2] This matter came on for hearing before me on 27 April 2012. After hearing counsel for both parties, I decided to reserve my decision for two weeks under all the circumstances prevailing here, to encourage the parties to negotiate matters in an endeavour to reach some appropriate settlement. In doing so, I suggested two possible options for settlement: first, by the applicant buying back the property in question at the original agreed sale price less an amount being two-elevenths of that price, or secondly, by the property being sold to a third party and the parties dividing the proceeds of sale according to a Property Sharing Agreement they earlier entered into, details of which I outline below. Neither of these options it seems were acceptable to the parties. No agreement was reached during the fortnight following the hearing. The application therefore falls to be determined by this Court and I now give my decision.

Background

[3] The applicant, Anthony Mark Amos was a principal shareholder in and director of a company, Sunnyview Wainui Limited, which initially owned the property as part of a larger block of land held for the purposes of a residential subdivision venture. Sunnyview Wainui Limited encountered financial difficulties and was forced to reduce some of its debt to its bank by selling some of its land interests. On or about 21 October 2009 Sunnyview Wainui Limited as vendor entered into an agreement to sell the property to a named purchaser, Robert Ian Price (Mr Price) or his nominee, at a price of $210,000.00 (the sale agreement). Subsequently, Mr Price nominated the respondent Star Catchers Limited (a company in which he held a 50% shareholding and was a director) into the sale agreement as

purchaser. Then, on or about 10 August 2010, the respondent completed settlement of the purchase by paying the balance of the $210,000.00 purchase price to the vendor and title to the property was transferred into the name of the respondent.

[4] Around this time, the applicant and Mr Price on behalf of the respondent also agreed that the applicant would receive two sections from the total property purchased after it was subdivided. These two sections were stated as forming part of Lot 28 of Stage 2 of the proposed subdivision plan: specifically “Lot 21” from Stage

3B and a one-third share of Lot 31, which would become “Lot 17” when Stage 3C of the proposed subdivision was complete. The parties envisaged that the applicant Mr Amos would also carry out significant work on (and the respondent contends project manage) subdivision of the purchased land. The respondent maintains that the two sections in question were promised as payment for the subdivision work. The applicant disputes this and argues that the promise to receive these two lots was independent of any agreement to project manage the subdivision.

[5] To record the agreements noted at [4] above, the applicant and the respondent entered into a Property Sharing Agreement dated 19 August 2010 (the Property Sharing Agreement), which recorded that:

(a) the property had been purchased by and was to be registered in the name of the respondent, Star Catchers Limited, but the applicant was the beneficial owner of certain land within the property (namely Lot “21” and Lot “17” being a one-third share of Lot 31 as noted at [4] above);

(b) the respondent would not sell, transfer, mortgage, charge, lease or

grant a licence to occupy the property without the applicant’s consent;

(c) until the applicant’s interest in the property was transferred to him, he was to be beneficially entitled to a two-eleventh share of the total value of the property;

(d) the applicant was entitled to protect his interest by registering a caveat against dealings on the title;

(e) the applicant agreed “... to provide advice and assistance to enable

Star Catcher to develop the property.”

[6] Work on the subdivision of the property progressed. At some point, however, the respondent decided that the subdivision was not commercially viable (a view confirmed by a valuation report by a registered valuer, Colin Jenkins, attached to Mr Price’s 15 February 2012 affidavit filed in support of the respondent’s opposition to the present application). Work then stopped and the respondent decided that the entire property should be sold. Up to this point, Mr Price estimates that the applicant Mr Amos may have spent 40-60 hours working on the subdivision. The applicant disputes this and estimates the time he spent as 200 hours.

[7] In the meantime, the applicant lodged the caveat in question against the title to the entire property to protect his equitable interest in the two sections noted at [4] above which comprised part of that property. As the subdivision was not going ahead, and the property it said needed to be sold, the respondent applied to lapse the caveat and the present application has resulted.

Legal Principles

[8] Turning now to the application before me, it seeks an order that caveat

8807541.1 not lapse under s 145A of the Land Transfer Act 1952. It is well accepted, however, that the same principles apply to applications under that section as to applications made pursuant to ss 143 and 145.

[9] The general approach to these applications was settled in Sims v Lowe [1988]

1 NZLR 656 at 660 (CA):

The caveator seeks to clog or fetter the proprietary interest of another. As a matter of principle it seems right that he must justify the continued existence of his caveat. He will do that if he can show he has a reasonably arguable case for the interest he claims.

[10] The applicant here seeking to sustain the caveat thus has the burden of establishing a “reasonably arguable case” that he has a caveatable interest in the property in question: Castle Hill Run Ltd v NZI Finance Ltd [1985] 2 NZLR 104 at

106 (CA). An order for removal of a caveat will not be made unless it is patently clear that the caveat cannot be maintained, either because there was no valid ground for lodging it, or no such ground now exists: Sims v Lowe at 659-660. The Court therefore should not finally determine the rights of the parties unless the facts are not in dispute and the law has been fully argued: New Zealand Limousin Cattle Breeders Society Inc v Robertson [1984] 1 NZLR 41 (CA).

[11] In the present case, before me the respondent conceded that the applicant had a recognisable interest in two of the final eleven lots to be created once the property was to be subdivided, and that this interest was protectable by caveat. Indeed, the Property Sharing Agreement on its face says as much and even refers specifically to the applicant’s right to protect this interest by registering a caveat against dealings on the title.

[12] Notwithstanding this concession on its part, the respondent goes on to argue here that the caveat should not be upheld in the exercise of the Court’s residual discretion. On this aspect, the authorities are clear that the Court does have a residual discretion to remove a caveat where there is no practical advantage in its continuance, even if (as here) it protects an otherwise caveatable interest.

[13] This principle has been stated in the following terms in Pacific Homes Limited

(in receivership) v Consolidated Joineries Limited [1996] 2 NZLR 652 (CA) at 656:

In such circumstances the Court retains the 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 the 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 monies secured over the land or specific performance of an agreement or if the caveator’s interests 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.

[14] And, in the Court of Appeal judgment of Blanchard J in Stewart v Kaipara

Consultants Limited, [2000] 3 NZLR 55 at para [27] it was noted:

The grant of a specific remedy to a person claiming an interest in land lies in t he discretion of the Court. It is a discretion to be exercised n accordance with settled principles. But where the particular piece of land does not have attributes giving it a personal value to the claimant, unable easily to be measured and substituted in economic terms, then the Court in balancing the interest of the defendant and other affected parties (especially those who have entered into independent commitments which will be affected by the delay in establishing the claim) will properly lean in favour of freeing the title from the claim if a fund can be created which suffices to protect the claimant’s legitimate interest.

[15] To reiterate, in circumstances where this residual discretion is to be exercised, a caveat will only be removed if the Court is satisfied that the legitimate interests of the caveator would not thereby be prejudiced. And, this discretion is to be cautiously exercised.[1] Generally, a caveat will be removed where the caveator has 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 relating to the land, or if the caveator’s interests can be reasonably accommodated in some other way.[2]

Does the Applicant here have a Reasonable Expectation of Specific Performance?

[16] As noted above, removal of a caveat in these circumstances is likely where the caveator has no reasonable expectation of obtaining an order for specific performance of a contract relating to the land in question. In Landcorp Albany Ltd v Fu Hao Construction Ltd [2005] NZCA 293; (2005) 6 NZCPR 813 - a Court of Appeal decision which bears some factual similarities to the present case, it was held that the caveator’s

prospect of obtaining an order for specific performance was unrealistic,[3] and thus the

Court declined to make an order that the caveat should not lapse. Specific performance in that case would have required the appellant to sell the land as a completed subdivision of 53 lots. This was deemed to be unrealistic as the local authority in question had indicated that it would not approve the subdivision, and thus no Court would realistically order the appellant to complete the subdivision in

_{an action for specific performance.}[4]

[17] In the present case, the respondent notes that the applicant only has an interest in respect of a small portion of the property which is subject to the caveat. Additionally, it contends that the interest is contingent on the respondent as project manager carrying out the anticipated subdivision and until that occurs, the interest is simply an expectancy. The respondent asserts that, similar to the situation that prevailed in Landcorp Albany Limited v Fu Hao Construction Limited, the prospects of specific performance here are limited, as the respondent is not legally obliged to carry out the subdivision under the Property Sharing Agreement. There is no obligation on the respondent to turn what is a contingent or expectant interest into an actual interest in the land.

[18] Moreover, the respondent argues that even if it was legally obliged under the Property Sharing Agreement to carry out the subdivision, specific performance is unlikely to be ordered because the subdivision venture is not commercially feasible. It says this is demonstrated by the uncontradicted report of the registered valuer, Colin Jenkins exhibited to Mr Price’s 15 February 2012 affidavit. That valuer’s report estimates 3 of the sections in the ultimate planned subdivision to be worth

$85,000.00 each and 8 of the sections to be worth $50,000.00 each, once that subdivision is complete. After GST, selling costs, and profit and risk allowance are deducted, the valuer estimates the value of the subdivision at $412,000. But he estimates the actual costs of completing the subdivision to be $512,000.00, thus meaning that the venture if it proceeded would be likely to incur a loss of

$109,000.00. As I see it, this is relevant here because:

(a) Equitable remedies rarely demand that someone carry on a business, especially where that is a loss making business;[5]

(b) A Court would not order specific performance of an obligation that is

beyond the performing party’s power.

[19] In this case the respondent alleges that going ahead with the subdivision would force it to continue with a loss making venture, even leaving on one side its

_{further claim that its obligations in respect of local authority and Land Information}

New Zealand other requirements would also be too onerous. In response, the applicant purports to himself take issue with the valuation evidence (but provides no independent expert evidence of this). He asserts that recent sales in the Wainuiomata area of comparable sections amount to $100,000 in many cases. But there is no evidence before the Court of any kind to support these assertions.

[20] While the only valuation report which is before the Court suggests the proposed subdivision would be a loss making venture, I do not see that subdivision as impossible or practically unfeasible, in the same way as the subdivision in Landcorp was seen. At this stage, there do not seem to be any resource consent or legal impediments that would render performance impossible. The respondent has decided, on the basis of its commercial judgment and valuation advice, that there is less profit to be made in subdividing than they initially envisaged, and wants out of the venture. Although performance would be possible, in my view, it is important to note at this point that the applicant also cannot reasonably expect a Court, particularly where doubts exist as to what may have been agreed, to order performance of a loss money-making venture.

[21] The main issue the applicant faces in obtaining specific performance of the Property Sharing Agreement here is not that performance would be impossible, as in Landcorp, but that performance would not require the subdivision to be followed through to completion. The Property Sharing Agreement records the parties’ rights in respect of the whole property. It states that the applicant will become “the beneficial owner” of two lots if and when subdivision occurs, but until those lots are transferred to him, he is beneficially entitled to a two-eleventh share of the total value of the entire property. Therefore, all specific performance might require of the respondent, at this stage, is recognition of the applicant’s share in the value of the land as a whole. Issues too might well arise on any specific performance action as to whether in any event the applicant might himself be in breach of the Property Sharing Agreement in the sense of performance of his suggested role as “project manager” of the development.

Can the Applicant’s Interest be Accommodated in some other way?

[22] The discretion to remove a caveat is exercised more readily where the caveat protects a purely commercial rather than a sentimental interest,[6] as this kind of interest can usually be accommodated in some other way. However, a caveat should not lightly be removed if there is something about the caveator’s interest in the particular property which cannot be satisfied in monetary terms if the property were to be sold. The applicant in the present case appears to claim that he intends to reserve the two lots in which he has a beneficial interest for his family, to be held on trust by the Amos Family Trust. He suggests that he does have an attachment to the

particular piece of land the subject of the caveat, and thus he contends it protects more than a mere commercial interest in making a profit from the subdivision.[7] A solution to this could have been the one that I suggested after the hearing of this application, that Mr Amos buy the land back at a discounted price, but this it seems was rejected.

[23] The respondent contends that the applicant’s interest here can be reasonably accommodated by damages, as the applicant’s actual stated interest, prior to subdivision, amounts to a two-eleventh share in the total value of the property. Again, it is useful to note that this interest is reflected by clause 2.1 of the Property Sharing Agreement, which states specifically that “until Tony’s interest in the Property is transferred to him or his nominee, Tony will be beneficially entitled to a two-eleventh share of the total value of the Property.” And, the respondent here has offered on sale of the whole property to hold this portion of the sale price on trust for the applicant. It says that any interest in the property can be reasonably accommodated in the way that it has volunteered.

[24] In this situation I am satisfied that the applicant’s interest in the land can be satisfied by a two-eleventh portion of the sale price. The applicant and his company entered into the sale agreement and the Property Sharing Agreement with Mr Price and the respondent as part of a commercial venture to allow debt of Sunnyview

_{Wainui Limited to be settled, to assist in developing the property into smaller}

sections and to make a profit. I am not satisfied that anything more than a commercial interest is at stake here, in which case a monetary remedy is entirely inadequate. As the subdivision is unlikely to take place with Lots 17 and 21 transferred to the applicant, his interests in my view can be satisfied by a two- eleventh share in the final sale price of the entire property.

Conclusion

[25] The applicant as I see it has not made out a legitimate expectation of retaining a benefit from the caveat, in the form of specific performance of the Property Sharing Agreement. The interest he has in the property in my view can be accommodated without the maintenance of the caveat, through either damages or apportionment of the sale price to record his two-eleventh share. The applicant will not lose what is primarily a commercial benefit if the caveat lapses when ultimately the property is sold by the respondent.

[26] With this in mind, in the present case in my view, the appropriate course is for the discretion of the Court to be exercised to order removal of the caveat. In saying this, however, as I see the position, it is appropriate for the Court in exercising its residual discretion, to make that order subject to certain conditions – see Hinde McMorland & Sim Land Law in New Zealand, para 10.020(g) and BP Oil New Zealand Limited v Van Beers Motors Limited [1992] 1 NZLR 211.

[27] For the reasons I have outlined above, I am satisfied that this is a case where, even though the applicant caveator has established an arguable case, the Court’s residual discretion should be exercised in favour of the respondent to remove the caveat at the time of ultimate sale of the property, upon the basis that the respondent pays to the applicant then an amount which, from a commercial viewpoint, the caveat effectively secures.

Orders

[28] That said, the following orders are now made:

(a) Caveat 8807541.1 registered against certificate of title WN 516957 shall be removed upon presentation to the Registrar General of Land at Wellington for registration of a transfer of the property from the respondent as vendor to a third party as purchaser under an arms- length Agreement for the open market Sale and Purchase of the property.

(b) Any interim order of this Court preserving the said Caveat

WN8807541.1 is revoked (subject to the order made in (a) above).

(c) The respondent within thirty working days of the date of this judgment is to place the entire property for sale on the open market and to take all reasonable steps to pursue a sale at a fair market price.

(d) Upon settlement of the sale of the property the respondent is to pay a two-elevenths share of the true net sale proceeds into this Court to be then paid to the applicant representing his interest and share in the property sale proceeds.

(e) Leave is reserved to either the applicant or respondent at any time to apply further on 48 hours notice for directions to implement the form of these orders, or if any further steps are required from the Court for further assistance, or to perfect this judgment.

(f) Costs are reserved. If costs are in issue between the parties, then the respondent is to file its memorandum as to costs within 20 working days of the date of this judgment, the applicant is to have a further 20 working days from that date to provide his memorandum as to costs, and in the absence of either party wishing to be heard on the matter, I will decide the question of costs based upon the material filed.

‘Associate Judge D.I. Gendall’

---

[1] _{Stewart v Kaipara Consultants Ltd [2000] 3 NZLR 55.}
[2] _{Pacific Homes Ltd v Consolidated Joineries Ltd [1996] 2 NZLR 652 at 7.}
[3] _{At [40].}
[4] At [41].

[5] Co-operative Insurance Society v Argyll Stores (Holdings) Ltd [1997] UKHL 17; [1998] AC 1.
[6] _{Landcorp Albany Limited v Fu Hao Construction Limited (2005) 5 NZCPR 813 (CA) at [43].}
[7] At [43].