Emmott v Michael Wilson & Partners Limited [2016] NZHC 3155 (20 December 2016)

Last Updated: 23 February 2017

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2016-485-973 [2016] NZHC 3155

BETWEEN	JOHN FORSTER EMMOTT Applicant
AND	MICHAEL WILSON & PARTNERS LIMITED Respondent

Hearings:	13 December 2016 and (by telephone) 19 December 2016
Appearances:	A J Knowsley and D Hunt for the applicant K P Sullivan for the respondent
Judgment:	20 December 2016

_{JUDGMENT OF ASSOCIATE JUDGE SMITH}

[1] The applicant applies for an order under s 145A of the Land Transfer Act

1952 (the Act) for an order that a caveat lodged by him against the title to certain land in Roseneath, Wellington, not lapse. The respondents filed a notice of opposition, and the application was called before me on 13 December 2016. At that hearing Mr Sullivan submitted that the applicant had no possible basis to support his claim that he had a caveatable interest, and that the Court should dismiss the application immediately. After hearing from counsel, I directed that the parties file memoranda on the narrow caveatable interest point to which I refer below. I adjourned the application for counsel to make oral submissions (limited to that point) at a further hearing to be conducted by telephone on 19 December 2016.

[2] In my minute of the hearing on 13 December 2016 I noted that if on hearing further from counsel it appeared that the applicant’s caveatable interest point might be arguable, it would probably be appropriate for the Court to then make an interim sustaining order, to allow the issues to be argued more fully in the new year. If on

_{the other hand it appeared clear that a party in the applicant’s position could have not}

EMMOTT v MICHAEL WILSON & PARTNERS LIMITED [2016] NZHC 3155 [20 December 2016]

caveatable interest of the kind contended for, the appropriate order might be to dismiss the application.

[3] Having received counsel’s memoranda and heard further oral submissions, I

now give judgment on the application.

Background

[4] For many years the respondent, the applicant, and Mr Thomas Ian Sinclair have been involved in litigation in a number of jurisdictions around the world. The respondents holds judgments against Mr Sinclair in the Bahamian Court of Appeal, the Bahamian Supreme Court, and in the Judicial Committee of the Privy Council. Those judgments are predominantly for costs awards. The respondent also hold judgments against Mr Sinclair for costs in the New Zealand High Court and Court of Appeal.

[5] The respondent’s judgments against Mr Sinclair are now (or will soon be) able to be enforced in New Zealand, following a judgment of the Court of Appeal delivered earlier this year¹ and a more recent judgment of Mallon J in this court

delivered on 14 December 2016.²

[6] On 6 October 2015 the respondent registered a charging order (“the charging order”) against a property owned by Mr Sinclair in Carlton Court Road, Roseneath, Wellington (Lot 2, Deposited Plan 52146, title identifier WN22B/114 — “the property”). The property contains a substantial dwelling which is also used for a bed and breakfast business.

[7] Mr Sinclair continues to refuse to pay the judgments the respondent has obtained against him.

[8] While the respondent holds the judgments against Mr Sinclair to which I

have referred, the applicant has a substantial (United Kingdom) judgment against the respondent. On 26 June 2015, judgment for the applicant was entered in the High

¹ _{Michael Wilson and Partners Ltd v Sinclair [2016] NZCA 376.}

² Michael Wilson and Partners Ltd v Sinclair [2016] NZHC 3050.

Court of Justice against the respondent, for the sums of £3,209,213 and US$841,213, both sums carrying interest from 1 January 2014. On 14 October 2016 this court ordered that the applicant’s judgment be registered in this country under the Reciprocal Enforcement of Judgments of Act 1934, and that any application to set aside that registration be made within thirty working days from service of the notice of registration. By further order of the court made on 28 November 2016, the period within which the respondent could apply to set aside the registration of the judgment was extended until 22 December 2016.

[9] The applicant lodged his caveat on the title to the property (caveat No.

10542308.1 – “the caveat”), on 24 August 2016. The caveat is unusual, in that it does not claim any interest in the property itself: the interest claimed is an interest in the charging order.

[10] The respondent takes the view that the applicant is no more than an unsecured creditor of the respondent under the United Kingdom judgment: it says that the judgment is not yet registered in New Zealand and may never be registered here, and that the applicant can have no arguable caveatable interest in either the property or charging order. The respondent applied to the Registrar-General of Land to lapse the caveat, and the applicant then filed the present application.

The wording of the caveat

[11] The estate or interest claimed by the applicant in the caveat is as follows:

Estate or Interest claimed

The Caveator claims an estate or interest in the interest in land created by [the charging order] and in the benefit to the proceeds protected for or available to [the respondent as holder of the charging order] pursuant to any sale order issued consequent upon [the charging order] such interest of the Caveator having been created by virtue of an Award against [the respondent] in favour of the Caveator for the sums of English Pounds 3,209,213.00 and US$841,213.00 such Award being enforceable as a Judgment by Order of the High Court of Justice in England and able to be recognised in New Zealand under the Judicature Act 1908 and such interest of the Caveator comprising an enforceable right for the Caveator to be indemnified from any proceeds available pursuant to [the charging order] being no less than an equitable lien over the interest comprised in [the charging order].

The application for an order that the caveat not lapse

[12] The applicant’s application filed in this court does not strictly reflect the estate or interest claimed by the applicant in the caveat. First, the application asks for an order that the caveat “on Lot 2 Deposited Plan 52146 ... not lapse”. Secondly, the application was said to be made on the basis that the applicant has a caveatable interest “in the land which is the subject of the caveat” (ie not in the respondent’s charging order), and that the applicant has a reasonably arguable case for the interest he claims “in the land”.

[13] The respondent says that the application is defective, in that the applicant does not have, and does not claim, any interest in the property itself.

[14] At the hearing on 13 December 2016 Mr Knowsley applied to amend the application. The amendment sought was to the grounds stated in the application, to read as follows:

3(a) the applicant has a caveatable interest in the interest which is the subject of the caveat.

3(b) the applicant is able to show that he has a reasonably arguable case for the interest he claims in the interest.

[15] Those amendments were opposed by Mr Sullivan. I adjourned the application for the amendment to be dealt with at the further hearing scheduled for

19 December 2016.

The respondent’s opposition

[16] The respondent contends that the applicant does not have an estate or interest in the property which could give rise to a caveatable interest, and nor can he show that he has a reasonably arguable case for the interest he claims.

[17] With its notice of opposition, the respondent filed an affidavit by Mr Burmester, a solicitor employed by the respondent’s solicitors. Mr Burmester pointed out that the caveat was lodged prior to steps being taken to register the applicant’s judgment against the respondent in New Zealand.

[18] Mr Burmester produced a copy of a letter dated 8 September 2016 from his firm to the solicitors for the applicant, and a letter dated 10 November 2016 from the respondent’s counsel to the applicant’s solicitor and counsel. The letter dated

8 September 2016 asserted that, while the applicant may currently hold a judgment against the respondent arising from an arbitration award in London, that judgment and related award were not recognised in New Zealand. The letter went on to advise that the respondent’s solicitors had instruction to file a further appeal and application to void and set aside the arbitral award before the Courts of England and Wales, in light of new evidence that was said to have come to light as a result of further forensic work. The letter referred to “significant judgments” in the respondent’s favour in the Supreme Court of New South Wales, the High Court of Australia, the Court of Appeal of the Supreme Court of New South Wales, the Federal Circuit Court, the Federal Court of Australia, the Queen’s Bench Division of the High Court of Justice in the United Kingdom, the Croyden County Court in the United Kingdom, and the Court of Appeal of England and Wales. Substantial sums were alleged to be due by the applicant on various judgment debts.

[19] The letter of 8 September 2016 went on to allege that the applicant has no proprietary claim or beneficial interest in the respondent’s assets, or in the property. The respondent’s solicitors said that the applicant had no caveatable interest, but merely personal and unsecured rights against the debtor. And any proceedings to recognise and enforce the applicant’s judgment against the respondent in New Zealand would be vigorously defended.

[20] The respondent’s solicitors also wrote to the applicant’s solicitors in the United Kingdom. This letter was dated 7 September 2016. It set out in rather more detail the various disputes and judgments in the other jurisdictions, and contended that the applicant was bound by the findings in the Australian judgments under the doctrine of res judicata. The letter advised that the respondent had instructed its New Zealand solicitors to strenuously oppose any application for reciprocal enforcement of the English judgment in New Zealand.

[21] In his letter of 10 November 2016, Mr Sullivan confirmed that he had been retained as counsel for the respondent, and that he had instruction to apply to set

aside the recognition and registration of the applicant’s United Kingdom judgment in New Zealand. He enquired if the caveat would be voluntarily discharged, given the respondent’s position that there was no caveatable interest.

Counsel’s submissions

[22] Section 137 of the Act materially provides:

Caveat against dealings with land under Act

(1) Any person may lodge with the Registrar a caveat in the prescribed form against dealings in any land or estate or interest under this Act if the person—

(a) claims to be entitled to, or to be beneficially interested in, the land or estate or interest by virtue of any unregistered agreement or other instrument or transmission, or of any trust expressed or implied, or otherwise; or

...

(2) A caveat under this section must contain the following information: (a) the name of the caveator; and

(b) the nature of the land or estate or interest claimed by the caveator, which must be stated with sufficient certainty; and

(c) how the land or estate or interest claimed is derived from the registered proprietor; and

...

[23] Mr Knowsley relies on the “or otherwise” part of s 137(1)(a). He submits that the charging order is an “interest” in the property, and that the applicant is beneficially interested in the charging order by virtue of an equitable lien. The alleged equitable lien is said to be brought into the ambit of s 137(1)(a) by the words “or otherwise” appearing near the end of the subsection.

[24] Mr Knowsley submits that the equitable lien arises from the applicant’s registered judgment, and it gives to the applicant as lienee rights in the nature of a charge over the respondent’s interest in the charging order. The charge is said to

_{arise by implication of equity, to secure the discharge of an actual or potential debt.}³

³ Relying on Laws of New Zealand: Lien (online looseleaf ed, Lexis Nexis) at [19].

[25] Mr Knowsley submits that an equitable lien is not dependent on possession by the lienee, and may arise as a result of the relationship between the parties. The equity is said to arise where it would be unconscionable for the party holding the relevant property to dispose of or otherwise deal with it without protecting the claimant’s rights.⁴

[26] Mr Knowsley relies particularly on the relationship between the parties. The applicant is a judgment creditor of the respondent by virtue of his registered judgment, but he is presently unable to enforce that judgment, as the time for the respondent to apply to set it aside has not yet expired.

[27] Mr Knowsley submits that if the caveat were to lapse and the respondent were able to enforce its charging order against the property, the applicant would suffer significant prejudice. He would be unable to enforce his interest in any proceeds of a sale order executed by the respondent against the property, and the proceeds of any such sale could disappear out of the jurisdiction if the respondent were able to obtain those proceeds. He submits that the respondent has deliberately delayed its application to set aside the registered judgment, in the hope that the applicant’s caveat would have lapsed before 22 December 2016. He contends that the respondent should not be permitted to benefit from that conduct, which “justifies equity’s intervention”. In his submission it would be unconscionable to permit the respondent to enforce its charging order, and “the caveat is necessary, by way of the equitable lien, to prevent such conduct by the respondent”.

[28] For the respondent, Mr Sullivan acknowledges that a charging order does create a charge over land, and therefore the holder of a charging order does have a sufficient right to apply under s 143 of the Act to remove a caveat.⁵ However Mr Sullivan has not been able to find any case in which a caveat was lodged against a charging order. He submits that there is considerable doubt as to whether any such

_{caveat could be sustained.}

⁴ _{Citing Lord Napier and Ettrick v Hunter [1993] AC 713 at 738.}

⁵ Citing Gill Construction Ltd v Morgan HC Wellington CIV-2009-406-100, 1 May 2009.

[29] Mr Sullivan emphasises that a person seeking to establish the right to lodge and maintain a caveat must have an interest in the land or interest; any lesser right, such as a contractual or personal right, will not suffice. He refers to the following statement in the judgment of Somers J in Holt v Anchorage Management Ltd:⁶

What is essential is that the caveator must make a claim to title to, or a beneficial interest in, land, estate or interest under the Act.

[30] Mr Sullivan submits that the applicant in this case is an unsecured creditor, with only personal rights against the respondent. In those circumstances he says there is no right to lodge a caveat.⁷

[31] Mr Sullivan submits that the applicant’s position is no different from any other judgment creditor who does not have an enforcement order granted over a particular asset or property, and there is nothing in the evidence or in Mr Knowsley’s submissions which would justify the claim to an equitable lien over the respondent’s interest in the property. He notes that the purpose of the caveat procedure is to enable those with proper claims to proprietary interests to protect themselves against

loss, by forbidding dealing with the land pending resolution of substantive claims.⁸

He refers to the commentary in Laws of New Zealand on the circumstances in which an equitable lien may arise – the learned authors say that there must be an identifiable interest before such a lien can arise, and the court has a discretion about whether one should be imposed.⁹

[32] Mr Sullivan also refers to the text Civil Remedies in New Zealand, where the learned authors state:¹⁰

An equitable lien is an equitable right conferred by law upon the plaintiff to have resort to a specified asset to secure the discharge of a liability owed by the owner of the asset to the plaintiff.

⁶ _{Citing Holt v Anchorage Management Ltd [1987] NZCA 5; [1987] 1 NZLR 108 at 117 (CA) per Somers J.}

⁷ Citing Hinde, McMorland and Sim Land Law (looseleaf ed. Lexis Nexis)at [10.010(a)] and Tom

Bennian and others New Zealand Land Law (2nd ed, Brookers, Wellington, 2009), at [4.3.09]: “An unsecured creditor does not have a caveatable interest in the debtor’s land. A caveator must have a beneficial interest in the land.”

⁸ _{Citing Zhong v Wang [2006] NZCA 242; [2006] 7 NZCPR 488 at [58].}

⁹ _{Relying on Laws of New Zealand: Lien (online ed.) at [19].}

¹⁰ Civil Remedies in New Zealand (2nd ed, Brookers, Wellington, 2010) at [10.4].

[33] The authors of Civil Remedies in New Zealand consider the circumstances in which an equitable lien can arise. With respect to a purely personal obligation, there are a limited and specific number of examples provided, being a solicitor’s lien, obligations in a contract or in a quasi-contractual relationship, or in equity where there is a breach of a trust or fiduciary obligation. Mr Sullivan submits that none of these examples apply to a judgment creditor being worried that a judgment debtor may take legal steps to recover property from a person who owes the judgment debtor money.

[34] Mr Sullivan submits that there is no evidence of unconscionability arising from the respondent taking its own enforcement steps against Mr Sinclair. He submits that the appropriate order is for the caveat to lapse, leaving the applicant to go through the process of recognition and enforcement of the judgment he has obtained in the United Kingdom. He asks for an award of increased costs over the category 2, Band B, costs which would otherwise be appropriate.

Discussion and conclusions

[35] Dealing first with the applicant’s application to amend his application, I allow the amendments which Mr Knowsley seeks. In my view the tight timeframes within which applicants for orders under s 145A are required to act, and the “summary” nature of the procedure, do not preclude the making of reasonable amendments, particularly where the amendments do not affect the order being sought and they will cause no prejudice to the respondent. The applicant has complied with the time limit for applying to the court to have his caveat sustained, and the amendments sought are only to ensure that the grounds relied upon reflect the estate or interest claimed as stated in the caveat itself. In my view there is no prejudice to the respondent in allowing the amendments, which simply reflect the argument the respondent must have expected it would have to meet. The amendments sought by the applicant are accordingly allowed.

[36] The respondent then submits that, even if the amendments are allowed, the application remains defective because the order sought refers to a caveat lodged on the land, rather than to a caveat lodged against the charging order. I do not think

there is anything in this. The part of the application where this issue arises is the part which is concerned with identifying the particular caveat in respect of which the applicant seeks a sustaining order, and the caveat in question is identified unmistakeably in the application by its registered number.

[37] There was no debate over the principles applicable to applications to sustain caveats. Those principles were helpfully summarised by Associate Judge Bell in Official Assignee v Menzies and others:¹¹

[4] In an application to sustain a caveat, the onus is on the caveator to show that he has a caveatable interest. An application to sustain a caveat is a summary procedure which is quite unsuitable for determining disputed questions of fact. Accordingly, there will be a decision not to sustain a caveat only if it is patently clear that the caveat cannot be maintained either because there was no valid ground for lodging the caveat in the first place, or that a valid ground no longer exists, or that no useful purpose will be served by maintaining the caveat. The patent clarity will not exist where the caveator has a reasonably arguable case in support of the interest claimed. The interest claimed by the caveator must be a proprietary interest in land. It may an equitable interest.

[38] For the purposes of this application Mr Sullivan accepts that a charging order over land may qualify as an “interest” in that land for the purposes of s 137(1)(a) of the Act.¹² The question, then, is whether it is patently clear that the applicant has no reasonably arguable case that he has an equitable lien over the respondent’s interest in the charging order. I accept for the purposes of this judgment that if the circumstances are such that an equitable lien in the applicant’s favour should attach to the respondent’s interest in the charging order, the words “or otherwise” in s 137(1)(a) of the Act are wide enough to bring the applicant’s claimed interest within the subsection.¹³

[39] The issue, then, is whether there is evidence of circumstances which arguably

might justify the court imposing an equitable lien on the respondent’s interest in the

_{charging order.}

¹¹ _{Official Assignee v Menzies HC Auckland CIV-2010-404-005457, 14 February 2011.}

¹² _{Referring to Gill Construction Co Ltd v Morgan, above n 5.}

¹³ See Official Assignee v Menzies, above n 11 at [28]. See also the judgment of Richmond J in Re an Application by Haupiri Courts Ltd (No. 2) [1969] NZLR 353 at 356. In the latter case, Richmond J accepted for the purposes of s 137(1)(a) the position that the words “or otherwise” are wide enough to cover any set of circumstances which in fact gave rise to an interest in land distinct from an existing interest as registered proprietor.

[40] The authors of the Laws of New Zealand describe a non-possessory, or equitable, lien as a charge over property arising by implication of equity to secure the discharge of an actual or potential debt. Such a lien may be enforced by sale under a court order, or by order for payment out of the fund subject to the lien.¹⁴ The equitable lien may arise as a result of the relationship between the parties, from their conduct, or by operation of law between the parties in a contractual relationship.

[41] Due to the diversity of situations in which such liens may arise, the authors of Laws of New Zealand say that “it seems to be impossible to state a general principle, beyond acknowledging [the equitable lien] as part of a scheme of equitable adjustment of mutual rights and obligation”. However they suggest that there must be an identifiable interest before such a lien can arise, and the court has a discretion

about whether one should be imposed.¹⁵

[42] In Hewett v Court, Gibbs CJ noted that the equity is said to arise where it is unconscionable for the party holding property to dispose of or otherwise deal with it without protecting the claimant’s rights.¹⁶ And in Lord Napier and Ettrick v Hunter, the House of Lords upheld an insurer’s claim to an equitable lien over recoveries made by the insured from a third party, in circumstances where the insurer had paid out the insured under the policy. Their Lordships considered that the insured person would be guilty of unconscionable conduct if he did not procure and direct that the sum due to the insurers by way of subrogation be paid out of the damages recovered. In order to protect the rights of the insurer under the doctrine of subrogation, the

damages recovered by the insured from the wrongdoer in respect of the insured loss were held to be subject to an enforceable equitable proprietary lien or charge in favour of the insurer.

[43] The authors of Civil Remedies in New Zealand note that an equitable lien does not confer on the plaintiff any ownership rights in the asset. The plaintiff’s right is said to be inchoate until default by the defendant of the obligations secured

_{by the lien, and is merely a right to have the asset sold, through the medium of the}

14. Citing, among other cases, Waitomo Wools (NZ) Ltd v Nelsons (NZ) Ltd [1974] 1 NZLR 484 (CA) at 490, and Lord Napier and Ettrick v Hunter [1993] AC 713, [1993] 1 A11 ER 385.

court, to satisfy the defendant’s obligation to the plaintiff. However, despite the absence of any ownership rights, the equitable lien is properly regarded as proprietary. The right that the equitable lien confers is in respect of an identifiable asset, and is said to survive the intervening insolvency of the owner of the property.¹⁷

[44] The authors of Civil Remedies in New Zealand also note that an equitable lien arises as a matter of law in respect of those claims “which equity considers the other party is in conscience bound to perform in order to do justice between the parties”. The learned authors go on to refer to the judgment of Deane J in Hewett v Court, saying that “it is difficult, if not impossible, to formulate any satisfactory statement of the necessary or sufficient circumstances for the implication of an equitable lien

which is applicable to any relationship at all”.¹⁸ Deane J also noted in Hewett v

Court that the “established examples of equitable lien are between people in a contractual or quasi-contractual relationship”.¹⁹

[45] In his oral submissions Mr Knowsley pointed out that the examples of equitable liens referred to in the text books and authorities do not purport to provide an exhaustive list of situations where the court will provide a remedy by imposing an equitable lien on a particular fund or asset. He says that the combination of circumstances in this case is such that it is at least arguable that the applicant has an equitable lien. That combination of circumstances is said to consist in the fact that the applicant has registered his United Kingdom judgment in New Zealand (albeit subject to the possibility that the registration may be set aside), the applicant’s inability to take any steps to enforce that judgment in New Zealand pending the expiry of the period within which the respondent may apply to set the registration aside, and the possibility that if the caveat is not sustained the respondent may frustrate the applicant’s attempts to enforce a United Kingdom judgment in New Zealand by selling the property and removing the proceeds of sale from

_{New Zealand.}

17. Civil Remedies in New Zealand, above n 10, at 10.4, referring to the decision of the High Court of Australia in Hewett v Court, above n15.

[46] In response, Mr Sullivan says that it is likely to be well into 2017 before his client can bring about a sale of the property, and that the applicant is in any event wrongly using the caveat procedures instead of making any application to the court which might be available to him, which properly reflects the fact that he is at this stage only an unsecured creditor.

[47] Mr Sullivan’s principal point is that no link has been shown between the applicant’s judgment and the interest in the charging order which is now claimed. If the purpose of an equitable lien is to create a proprietary interest in some defined property, nothing has been put forward by the applicant which would justify such a propriety interest. And if Mr Sinclair were to pay the respondent the amount of the respondent’s judgment now, there would be no sale and consequently no proceeds of sale. In those circumstances, an equitable lien over the charging order would appear to be worthless.

[48] I think there is some force in Mr Sullivan’s submissions on the absence of any evidence of a “link” between the applicant’s judgment and the claimed equitable lien. I observe also that the purpose of the caveat procedure as set out in s 137 of the Act is to prevent dealings in the relevant interest against which the caveat is registered. In this case, there appears to be no suggestion of the respondent assigning or otherwise “dealing” with the charging order (assuming, without deciding, that that is possible), at least in the ordinary sense of the word “dealing”.

[49] In the course of the oral submissions I asked Mr Knowsley how his client’s position would differ from any other unsecured creditor of the respondent. Would all the respondent’s creditors be entitled to assert the existence of an equitable lien over the charging order? As I understood his response, the applicant’s position is that other hypothetical creditors who had judgments against the respondent, which they were trying to enforce, would be entitled to equitable liens, and would be entitled to register caveats against the charging order. However Mr Knowsley submits that the applicant’s position in this case is particularly unusual and (I take him to mean stronger than other unsecured creditors) in that the applicant is in the “interim period” between initial registration of his United Kingdom judgment and the time when he is permitted to enforce that judgment, and does not have available to him

the recovery avenues which would be available to other unsecured creditors who may have obtained judgments.

[50] I do not think the cases referred to by Mr Knowsley assist the applicant on the central question of whether it is reasonably arguable that the applicant holds an equitable lien over the charging order. The decision of Associate Judge Bell in Official Assignee v Menizes and others simply illustrates the well understood rule that a trustee who has incurred a liability while acting properly on the trust’s behalf is entitled not only to indemnity out of the trust’s assets in respect of that liability, but also to an equitable charge over the trust assets securing the amount of the liability. There is nothing of that sort here. No trust relationship is alleged; the applicant relies only on the existence of his registered judgment, the fact that he is presently unable to enforce the judgment, and a concern that his attempts to enforce his judgment in New Zealand will or may be frustrated if the respondent is able to obtain an order for sale of the property, and removes the sale proceeds, before the applicant is able to complete the registration of his judgment and move to enforce it. The Haupiri Courts case does not assist either. It was concerned with the situation of a registered proprietor registering a caveat over his own land, in an attempt to prevent the mortgagee proceeding with a mortgagee sale. The registered proprietor contended that the mortgagee had failed to comply with certain requirements of the Property Law Act 1952, and as a consequence the right to exercise the power of sale had not arisen. The sole issue was whether the proprietor was a person entitled to lodge a caveat.

[51] Richmond J concluded that a registered proprietor cannot lodge a caveat against dealings merely because he is the registered proprietor: he must go further and establish some set of circumstances over and above his status as registered proprietor, which, affirmatively gives rise to a distinct interest in the land. If the registered proprietor had been able to establish such a distinct interest, the judge accepted that the interest could have come within the “or otherwise” wording in s 137(1)(a) of the Act. To that extent the case is relevant, but it is very different on the facts from the present case and in my view offers no support for the imposition of an equitable lien on the charging order.

[52] Nor does Lord Napier and Ettrick assist. This case was also decided in a context far removed from the facts of this case, namely the right of an insurer who had paid out its insured on a claim under the policy, to an equitable lien over the moneys recovered by the insured from the third party wrongdoer. Lord Browne- Wilkinson explained the way in which the equitable lien arose in that case in the

following terms:²⁰

... an insurer who has paid over the insurance moneys does have a proprietary interest in moneys subsequently recovered by an assured from a third party wrongdoer. Although many of the authorities refer to that right as arising under a trust, in my judgment the imposition of a trust is neither necessary nor desirable: to impose fiduciary liabilities on the assured is commercially undesirable and unnecessary to protect the insurer’s interests. In my judgment, the correct analysis is as follows. The contract of insurance contains an implied term that the assured will pay to the insurer out of the moneys received in reduction of the loss the amount to which the insurer is entitled by way of subrogation. That contractual obligation is specifically enforceable in equity against the defined fund (ie the damages) in just the same way as are other contracts to assign or charge specific property, eg equitable assignments and equitable charges. Since equity regards as done that which ought to be done under a contract, this specifically enforceable right gives rise to an immediate proprietary interest in the moneys recovered from the third party.

[53] In this case, there is no pleaded relationship between the parties other than judgment and creditor — no contract, and still less any implied contractual term which is specifically enforceable in equity against some defined fund. In my view the facts of the case are far removed from those of the present case.

[54] Mr Knowsley submits that the categories of equitable lien cannot be regarded as closed, and I think that must be right. But even allowing that, I think the applicant had to point to at least something beyond the fact of its registered judgment and its current inability to enforce that judgment, to justify the claim to an equitable lien. There was no agreement here that the applicant’s judgment would be met from a particular fund or source, and nothing which would justify the application of the maximum “equity treats as done that which ought to have been done”.

[55] But more fundamentally, there is nothing which would appear to distinguish

the applicant’s position from any other unsecured creditor of the respondent. The

fact that the applicant holds a judgment and wishes to enforce it cannot provide an answer — an unsecured creditor does not acquire secured status, or a beneficial interest in the debtor’s property, simply because it has obtained a judgment. And if one of the characteristics of an equitable lien is that it survives the debtor’s insolvency,²¹ the applicant, to succeed with his claim, would have had to point to some circumstances which had somehow operated to convert his unsecured status to that of the holder of a proprietary (equitable) interest in a specific asset of the respondent. In my view there is no evidence of any such circumstances.

[56] Nor can a concern about what the respondent might do with the proceeds of sale of the property improve the applicant’s position. To justify the lodging of the caveat the equitable lien had to exist at the time of registration, and its existence could not have depended on what the respondent might or might not do in the future if it succeeded in registering its judgment and then initiated enforcement proceedings for the sale of the property. The applicant’s argument appears to assume the very thing he is required to prove, namely that the respondent is required to act in a particular way with regard to the proceeds of sale of the property because of a beneficial interest the applicant already has in those proceeds.

[57] For all of those reasons I am not persuaded on the evidence produced that the applicant has any arguable claim to a beneficial interest in the respondent’s estate or interest in the charging order. The application for an order that the caveat not lapse will accordingly be refused.

Result

[58] I make the following orders:

(a) The application for an order that the caveat not lapse is refused.

(b) The respondent is entitled to costs. My preliminary view is that this is not a case for awarding an uplift on a standard “2B” costs award, with disbursements as fixed by the Registrar. However I did not hear fully

from counsel on the issue, and if the parties are unable to agree on costs they may file memoranda. Any memorandum from the respondent is to be filed by 31 January 2017, and any reply memorandum by the applicant by 14 February 2017.

(c) In case there is a need for the applicant to take urgent steps to preserve his position, I direct that this judgment is to lie in court and remain unsealed until 5pm on Wednesday 21 December 2016.

Associate Judge Smith

Solicitors:

Rainey Collins, Wellington for the applicant

WCM Legal, Wellington for the respondent