Cressida Capital One Limited v McDonnell [2014] NZHC 529 (20 March 2014)

Last Updated: 26 March 2014

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2013-485-5876 [2014] NZHC 529

BETWEEN CRESSIDA CAPITAL ONE LIMITED Plaintiff

AND BRENDAN JOHN RANDALL McDONNELL

Defendant

Hearing: 20 March 2014

Counsel: J Toebes for the Plaintiff

No appearance for the Defendant

Judgment: 20 March 2014

_{JUDGMENT OF MALLON J}

Introduction

[1] The plaintiff (Cressida) seeks damages and costs against the defendant (Mr McDonnell) for losses in respect of a caveat lodged by Mr McDonnell. Today’s hearing proceeded by way of formal proof. Mr McDonnell has not filed a defence. Cressida’s counsel has contacted Mr McDonnell in writing and by letter to provide him with the opportunity to respond to the claim. No response has been forthcoming and Mr McDonnell has not appeared at today’s hearing.

Background

[2] Mr McDonnell is a solicitor. He lodged the caveat on behalf of Vanessa Mapp. It was lodged on the title for a property known as Balgownie House. The registered proprietor of that property was Twig Luxury Trustee Company Limited. Ms Mapp was the sole director and shareholder of that company at the relevant time. The property was being sold by mortgagee sale. Cressida entered into an

_{unconditional sale agreement on 15 June 2013. The caveat was lodged on 16 June}

CRESSIDA CAPITAL ONE LIMITED v McDONNELL [2014] NZHC 529 [20 March 2014]

2013. It was removed by a consent court order on 3 July 2013. Settlement of the sale was then able to proceed. Cressida did not recover the full amount owing by the mortgagor.

[3] There is some considerable background to these events. Ms Mapp resisted was resisting the mortgagee sale and was obstructive of it. In early April 2013

Cressida was marketing the sale of the property. Due to concerns about Ms Mapp’s actions, on 19 April 2013 the Court made interim orders to the effect that Ms Mapp was to allow access to the property by the real estate agents and prospective purchasers, and that she was not to obstruct the mortgagee sale process. Due to further actions taken by Ms Mapp, further Court orders were made on 16 May 2013 to ensure access to the property by the real estate agents and prospective purchasers. Following yet further issues with Ms Mapp’s conduct, on 12 June 2013 final consent orders were made for vacant possession. These events were the subject of local media coverage on the Stuff website and the Dominion Post newspaper.

[4] On 15 June 2013 the property was sold. Settlement was scheduled for 18

June 2013. On 17 June 2013 Mr McDonnell lodged a caveat against the title on behalf of Ms Mapp. The interest claimed was as follows:

... by virtue of constructive trust arising from the receipt by the original proprietor of funds from the caveator which were applied by the registered proprietor on the purchase of the land ...

[5] Cressida’s solicitors immediately made contact with Mr McDonnell. They sought details of the claimed interest and removal of the caveat. No details were provided and voluntary removal was not undertaken. Cressida then applied, on 18

June 2013, for an order for removal. That order was made on 3 July 2013. Within an hour and a half of that order being made Ms Mapp sought to file another caveat. On 27 August 2013 indemnity costs were ordered against Ms Mapp. These costs have not been met.

[6] The present claim against Mr McDonnell was filed on 17 September 2013. As mentioned above, Mr McDonnell has taken no steps to oppose the claim.

The law

[7] Section 146 of the Land Transfer Act 1952 provides that “[a]ny person lodging any caveat without reasonable cause is liable to make to any person who may have sustained damage thereby such compensation as may be just.” This provision can apply to a solicitor who lodges a caveat on behalf of their client.¹

There is reasonable cause to lodge the caveat if a solicitor has an honest belief on reasonable grounds that the caveator has shown an interest.² What is reasonable depends on the information available to the solicitor: what they knew and ought to have known.³

This claim

[8] Objectively there was no basis for the caveat. It was removed by a consent court order. The interest claimed in the caveat was identical to a claim lodged by another party some 15 months beforehand. That raises a question as to whether the interest claim was copied from that earlier caveat. There is no evidence that Ms Mapp had the interest she claimed. Details of the interest claim were not provided when sought by Cressida’s solicitors. There were three prior registered mortgages. There was media publicity regarding Ms Mapp’s resistance to the mortgagee sale.

[9] There is no evidence from Mr McDonnell as to his instructions, knowledge and inquiries. There is therefore no evidence of why he might have had an honest belief on reasonable grounds that Ms Mapp had shown a caveatable interest despite the absence of a relevant interest and the above circumstances. In the absence of any opposition from Mr McDonnell, and the opportunity to file a defence or otherwise indicate his opposition, I must proceed on the basis that he does not deny the claim that has been made. That is, that he accepts that he did not have reasonable cause to lodge the caveat and he has nothing to say about that. Cressida is therefore entitled to such compensation as may be just.

[10] Cressida has filed affidavit evidence setting out its loss. Its loss is comprised of legal costs incurred to have the caveat removed ($14,107.20) and rates and

¹ _{Gordon v Treadwell Stacey Smith [1996] 3 NZLR 281 (CA) at 288.}

² _{Couchman v Taylor (1996) 3 NZ ConvC 192,341 (CA) at 6.}

³ Gordon v Treadwell Stacey Smith, above n 1, at 288.

insurance costs for the period that the settlement was delayed because of the caveat ($699.31).⁴ The total loss claimed is therefore $14,806.51. In addition Cressida claims costs and disbursements. Although the claim was filed in the High Court (for reasons which were understandable), it was a claim in respect of which the District Court had jurisdiction. In those circumstances, as counsel for Cressida accepts, it is just that the costs be the standard District Court rate, rather than High Court

Category 2B costs. Cressida has incurred disbursements of $3,103.50. They have been properly incurred.

Result

[11] Accordingly Cressida is granted judgment against Mr McDonnell in the sum of $14,806.51 together with costs at the standard District Court rate and disbursements of $3,103.50.

_{Mallon J}

⁴ Other claimed losses were not pursued.