Hawken Lane Development LP v Property Sales Direct Limited [2021] NZHC 1410 (15 June 2021)

Last Updated: 26 August 2021

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-0830 [2021] NZHC 1410

BETWEEN	HAWKEN LANE DEVELOPMENT LP Applicant
AND	PROPERTY SALES DIRECT LIMITED Respondent

Hearing:	8 June 2021
Counsel:	S Maloney for applicant R B Stewart QC for respondent
Judgment:	8 June 2021
Reasons:	15 June 2021

REASONS JUDGMENT OF KATZ J

Solicitors: Heritage Law, Auckland

Davies Law, Auckland

Counsel: R B Stewart QC, Barrister, Auckland

HAWKEN LANE DEVELOPMENT LP v PROPERTY SALES DIRECT LIMITED [2021] NZHC 1410 [8 June 2021]

Introduction

• [1] On 8 June 2021, I heard an application by Hawken Lane Development LP (“Hawken Lane”) to remove a caveat that Property Sales Direct Ltd (“PSDL”) had lodged over a property owned by Hawken Lane.

• [2] At the conclusion of the hearing I granted the application, with written reasons to follow. I also gave directions in relation to costs. My reasons for ordering removal of the caveat are set out below.

Background

• [3] Hawken Lane is a property developer. It is currently undertaking a subdivision in Silverdale. PSDL entered into six agreements with Hawken Lane for the sale and purchase of lots in the Silverdale development, and paid deposits to Hawken Lane for those lots.

• [4] One of the lots, Lot 22, subsequently became part of Lot 92. PSDL alleges that Hawken Lane’s failure to provide title to Lot 22 gave PSDL a right to cancel all six agreements, which it purported to do on 4 October 2018. Hawken Lane, on the other hand, claims that it cancelled the agreements on 20 March 2019, following PSDL’s failure to settle. There is a separate proceeding between the parties relating to PSDL’s claim for repayment of the deposits it has paid.¹

• [5] On 30 March 2021, PSDL lodged a caveat over Lot 92, asserting an interest in the land under the agreement for sale and purchase for Lot 22 (“the Agreement”). Hawken Lane then applied under s 142 of the Land Transfer Act 2017 to have the caveat removed. Hawken Lane has agreed that the deposit for Lot 22 (now part of Lot 92) will be held by its solicitors pending resolution of PSDL’s claim for a refund of the deposit.

¹ Hawken Lane applied for leave for the pleadings and affidavits from that proceeding and another related proceeding to be admissible in this proceeding. PSDL initially opposed that application, but itself sought to rely on two affidavits from an earlier proceeding. At the hearing, PSDL confirmed that it consented to the pleadings and affidavits from the related proceedings being admissible in this proceeding, and I directed accordingly.

• [6] PSDL opposes Hawken Lane’s application to remove the caveat. In its amended notice of opposition, however, it does not rely on the Agreement (as it does in the caveat document) but instead asserts a caveatable interest by virtue of an equitable and/or purchaser’s lien over the deposit it paid for Lot 22.

The issues

• [7] The issues requiring determination are:

(a) Whether PSDL has a reasonably arguable case for the interest claimed in the caveat (an interest as a purchaser pursuant to the Agreement) in circumstances where the Agreement has been cancelled.

(b) Whether PSDL has a reasonably arguable case for the interest claimed in its amended notice of opposition (a lien over land securing repayment of the deposit for Lot 22).

(c) If PSDL does have a reasonable arguable case for the interest claimed in its amended notice of opposition, is this sufficient to sustain the current caveat?

Principles on applications to remove caveats against dealings

• [8] The basic principles applying to applications to remove caveats against dealings are well settled:

(a) The onus is on the caveator to show a reasonably arguable case for the interest claimed.² If the caveator does not establish a reasonably arguable case, the caveat must be removed.³

(b) A caveat must state with sufficient certainty what estate or interest the caveator claims.⁴

² Sims v Lowe [1988] NZCA 253; [1988] 1 NZLR 656 (CA) at 660.

³ Bank of New Zealand v McLachlan HC Christchurch CIV 2009-409-2545, 7 December 2009.

⁴ Land Transfer Act 2017, s 138; and Land Transfer Regulations 2018, sch 2.

(c) Where the caveator claims a particular estate or interest but, on a challenge to the validity of the caveat, the caveator is found to have a different estate or interest, the caveat will be defective.⁵ In such circumstances the caveat will be removed, notwithstanding that the caveator may show a reasonably arguable case to a different interest in the land.⁶

(d) The Court will not determine factual disputes on an application to remove a caveat. However, the Court may decide that one party’s interpretation of the law or the facts is untenable.⁷

(e) Even if a caveator establishes a caveatable interest, the Court retains a residual discretion to remove the caveat. For example, where there can be no practical benefit flowing to the caveator.⁸ The residual discretion must be exercised cautiously, only where the Court can be “completely satisfied” that the caveator’s legitimate interests will not be prejudiced.⁹

Does PSDL have a reasonably arguable case to the interest stated in the caveat?

• [9] The interest asserted in the caveat is expressed in the following terms:

Estate or Interest claimed

Pursuant to an Agreement for Sale and Purchase dated the 6^th July 2016 in respect of part of the land contained in the above Record of Title, being Lot 22 in stage 3 of the subdivision and shown on the scheme plan marked “A” attached... the Agreement being made between the registered proprietor, Hawken Lane Development LP as vendor and the abovenamed caveator as purchaser. The registered proprietor delivered title for Lots 15, 16, 19, 20,

21, 39, 42, 43 and 47 but failed to deliver Lot 22, which is now contained in the above Record of Title and referred to as Lot 92 on the scheme plan marked “B’’. The area highlighted and shaded with diagonal lines depicts Lot 92.

⁵ Francis v Taradale West End Ltd (1998) 3 NZ ConvC 192,762 at 192,766. See also Joy v Roskam HC Hamilton CIV 2003-419-331, 12 June 2003; and Athena Professional Trustees Ltd v Foundation Custodians Ltd (2009) 11 NZCPR 23. In Francis v Taradale West End Ltd, Master Faire considered that a caveat lodged prior to the cancellation of an agreement for sale and purchase no longer accurately stated the interest claimed.

⁶ Joy v Roskam HC Hamilton CIV-2003-419-331, 12 June 2003; Athena Professional Trustees Ltd v Foundation Custodians Ltd [2009] NZHC 1372; (2009) 11 NZCPR 239; and Francis v Taradale West End Ltd (1998) 3 NZ ConvC 192,762.

⁷ Lindsay v Noble Investments Ltd [2015] NZCA 588.

⁸ Pacific Homes Limited (in rec) v Consolidated Joineries Ltd [1996] NZCA 264; [1996] 2 NZLR 652 (CA) at 656.

⁹ Stewart v Kaipara Consultants Ltd [2000] NZCA 92; [2000] 3 NZLR 55 (CA) at [23].

• [10] PSDL accordingly asserts an interest in Lot 22 (part of the land contained in the relevant Record of Title) as purchaser, pursuant to the Agreement. The difficulty for PSDL, however, is that it is common ground that the Agreement has been cancelled.

• [11] It is settled law that an equitable interest in land as a purchaser does not survive cancellation of the agreement for sale and purchase.¹⁰ In Joy v Roskam, Master Faire summarised the relevant principles as follows:¹¹

• [9] The particular problem in this case, however, is that the caveat is not drawn claiming a lien against the land. Rather it alleges that an interest is claimed as purchaser under the sale and purchase contract. In my view, DW McMorland Sale of Land (2ed, 2000) 202 is correct when he says:

“after cancellation of the contract to buy, the purchaser no longer has a caveatable interest based on the contract; any such caveat must be withdrawn and replaced with a caveat based on the lien.”

• [10] ... The caveat here no longer refers to an interest which still exists.

• [12] His Honour concluded that:

[21] The result is that the caveat lodged by the defendants must be removed because the foundation for it, namely the allegation of an interest created by a sale and purchase contract clearly no longer exists because, even adopting the defendants' position, that contract has either been cancelled or, to use the defendants' words, extinguished.

(Emphasis original)

• [13] I accordingly accept Mr Maloney’s submission that there is no reasonably arguable case to the interest stated in the caveat. An equitable interest in land as a purchaser does not survive cancellation of the agreement for sale and purchase.

Does PSDL have a reasonably arguable case for the interest stated in the amended notice of opposition?

• [14] PSDL presumably recognised that it would be difficult, if not impossible, to maintain a caveat based on the cancelled Agreement. Hence, in its amended notice of

¹⁰ Moeke v South Waikato District Council [2019] NZHC 2282; (2019) 20 NZCPR 385 (HC); Joy v Roskam HC Hamilton CIV-2003-419-331, 12 June 2003; Featherstone Park Developments Ltd (in receivership) v Hu HC Auckland CIV-2011-404-1041, 20 June 2011; Berenice v 125 Gills Ltd [2013] NZHC 2779; and Francis v Taradale West End Ltd (1998) 3 NZ ConvC 192,762.

¹¹ Joy v Roskam HC Hamilton CIV-2003-419-331, 12 June 2003.

opposition, it no longer asserted an interest in the land based on the Agreement, but instead asserted an interest based on an equitable lien, securing repayment of its deposit.

• [15] It is well established that an equitable and/or purchaser’s lien can arise after the cancellation of a contract and can give rise to a caveatable interest. Such an interest can only arise after cancellation of the agreement for sale and purchase.¹² An equitable lien is imposed, however, only where necessary to protect the lien holder’s interests. There is a presumption against a claimant obtaining separate liens (and thus double security) for the same debt.¹³ Accordingly, a purchaser’s lien securing return of the deposit will not attach to the vendor’s land where the deposit is held by a stakeholder pending resolution of the purchaser’s claim.¹⁴ Otherwise, the purchaser would have “double security”.

• [16] Here, the deposit for Lot 22 is being held by PSDL’s solicitors (Heritage Law) pending resolution of the separate substantive proceeding between Hawken Lane and PSDL. Hawken Lane accordingly submitted that any lien held by PSDL securing return of the deposit for Lot 22 can only attach to the funds held by Heritage Law. A separate lien over Hawken Lane’s land would grant PSDL “double security” in relation to the same alleged debt.

• [17] PSDL submitted, on the other hand, that Heritage Law are not holding the deposit as stakeholder, because both parties must consent to the appointment of a stakeholder. PSDL claims that it has not consented to Heritage Law holding the deposit in a stakeholder capacity.

• [18] PDSL’s assertion does not withstand scrutiny. The Agreement itself appoints Hawken Lane’s solicitors as stakeholder for the deposit. Further, in email correspondence between the parties’ solicitors, PSDL’s solicitors expressly refer to the deposit being held by Heritage Law as stakeholder, pending resolution of the

¹² D W McMorland Sale of Land (3^rd ed, Cathcart Trust, Auckland, 2011) at 273; and Joy v Roskam

HC Hamilton CIV-2003-419-331, 12 June 2003.

¹³ Maurice Casey Laws of New Zealand Lien (online ed) at [19]-[20].

¹⁴ D W McMorland Sale of Land (3^rd ed, Cathcart Trust, Auckland, 2011) at 273; Combe v Swaythling (1947) Ch 625; and Ligiru Pty Ltd v DGA Investments Pty Ltd (1986) 4 BPR 9170.

substantive proceeding. Heritage Law confirms, in response, that it will continue to hold the deposit on that basis.

• [19] PSDL does not therefore have an equitable/purchaser’s lien over the relevant land arising out of its payment of the deposit.

If PSDL does have a reasonably arguable case for the interest claimed in its amended notice of opposition, is this sufficient to sustain the current caveat?

• [20] Even if, contrary to my findings, PSDL did have a reasonably arguable case for the interest claimed in its amended notice of opposition (an equitable lien over the land arising out of its deposit payment) that would not entitle it to maintain its current caveat. That is because the current caveat asserts an interest based on the Agreement.

• [21] As Master Faire explained in Joy v Roskam, after cancellation of an agreement for sale and purchase, the purchaser no longer has a caveatable interest based on the contract; any such caveat must be withdrawn and replaced with a caveat based on the lien. Here, however, there is no basis for the caveat to be replaced with a caveat based on a purchaser’s lien, as PSDL’s deposit for Lot 22 is being held by Heritage Law as stakeholder. PSDL therefore already has security for repayment of its deposit, should it succeed in the substantive proceeding.

Conclusion

• [22] These are the reasons for my decision of 8 June 2021 ordering removal of PSDL’s caveat.

Katz J