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North Shore Aero Club Inc v Black River Trustees Limited [2020] NZHC 3070 (20 November 2020)
Last Updated: 30 November 2020
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
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UNDER
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the Land Transfer Act 2017
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IN THE MATTER
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of an application under section 143
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BETWEEN
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NORTH SHORE AERO CLUB INC
Applicant
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AND
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BLACK RIVER TRUSTEES LIMITED
Respondent
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Hearing:
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19 October 2020 (by AVL)
Further submissions by memoranda on 20, 22 October and 10 November
2020
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Appearances:
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W E Andrews for Applicant J G Donkin for Respondent
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Judgment:
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20 November 2020
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JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 20
November 2020 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
NORTH SHORE AERO CLUB INC v BLACK RIVER TRUSTEES LTD [2020] NZHC
3070 [20 November 2020]
The application
- [1] The
North Shore Aero Club Inc (the Aero Club) applies for an order that a caveat
lodged by it against land registered in the name
of Black River Trustees Ltd
(Black River) not lapse under s 143 Land Transfer Act 2017 (the
Act).
- [2] The Aero
Club asserts it has a caveatable interest in the land by virtue of an agreement
of 4 December 2017 between it and Sunrise
9 Trustees Ltd (Sunrise). In the
agreement Sunrise granted the Aero Club an equitable interest in the land, which
it then owned,
to secure amounts owed to the Aero Club in settlement of disputes
between it and Sunrise.
- [3] It is not
disputed the settlement agreement conferred upon the Aero Club an interest in
the land that would support a caveat.
However, the Aero Club did not lodge a
caveat and the land was sold by Sunrise to Black River.
- [4] Black River
says it has taken an indefeasible title. The Aero Club asserts that Black River
cannot rely on its registered title
because it acquired the property through
fraud. The issue is whether the Aero Club has a prima facie case that its
equitable interest
survives because Black River acquired the land by
fraud.
Background
- [5] At
all relevant times the sole shareholder and director of Sunrise was John
Hamilton.
- [6] Mr Hamilton
is also the director of Black River. Black River is the trustee of the Riverview
Trust which Mr Hamilton described
as his trust used for the personal affairs of
him and his wife.
- [7] The genesis
of this proceeding is a residential development adjoining the Aero Club’s
aerodrome. This was subject to a development
agreement initially entered into
between the Aero Club, Pauanui Developments Ltd and Redvale Lime Company Ltd. In
around July 2013,
Sunrise became the registered owner of the land.
The
development agreement was assigned to Sunrise and it proceeded to undertake the
development in accordance with the development agreement.
- [8] Disputes
arose between Sunrise and the Aero Club which were resolved and the terms of
settlement recorded in Deeds of Settlement.
The first Deed of Settlement was
dated 25 March 2015 but is not directly relevant to the issues that arise. On
4 December 2017,
the parties entered into another Deed of Settlement (the
settlement agreement).
- [9] The relevant
provisions of the settlement agreement are clauses 1, 2 and 6 which provide as
follows:
- On
the issuance of a certificate for Stage 3A by the Auckland Council pursuant to
section 224(c) of the Resource Management Act 1991
(s224 Certificate), Sunrise
will, within 5 working days, pay to the Club,
$50,000 (including GST
if any).
- Within
5 working days of the issue of titles for the 4 Lots in Stage 3A, Sunrise will
pay to the Club a further $50,000 (including
GST if any).
...
6. Sunrise hereby agrees that the Club has an equitable
beneficial interest in Lot 85 DP 489589, Lot 86 DP 480346 and Lot 9 DP 324993
and any Lots created by virtue of this residential Development from those Lots
to secure the payments referred to in clauses 1 and
2 above. Sunrise agrees that
the Club can register a caveat over that land if Sunrise defaults on either
payment in clause 1 or clause
2 of this Deed.
- [10] The land
that is the subject of this application is now known as Lot 1 DP 530003
Identifier 862694 (Lot 1). It was one of the
four lots formed as part of stage
3A of the development. Title to Lot 1 issued on 2 April 2019 and the registered
interests brought
down onto the title included a first registered mortgage to
Spinnaker Capital Ltd (Spinnaker) and a second registered mortgage to
Black
River.
- [11] Spinnaker’s
mortgage secured advances to Sunrise to undertake the development. Black River
provided security and was a
guarantor of Sunrise’s borrowings from
Spinnaker. Both mortgages and their registrations pre-date the settlement
agreement.
- [12] The sums
payable by Sunrise to the Aero Club under the settlement agreement fell due for
payment in or around March/April 2019.
Mr Hamilton says Sunrise could not pay
and was heavily indebted to Spinnaker. Due to a change in the Overseas
Investment Act 2005
requirements a number of potential purchasers were prevented
or deterred from purchasing the sections and the market for vacant sections
had
fallen.
- [13] There is in
evidence correspondence between the parties’ lawyers concerning payment to
the Aero Club. The Aero Club was
aware Sunrise intended to sell the sections
over which it had been granted an equitable charge and pay it from the sale
proceeds.
Despite that knowledge and Sunrise’s default under the
settlement agreement, the Aero Club did not lodge caveats.
- [14] On 1 July
2019, the Aero Club’s lawyers, Vodanovich Law, emailed Sunrise’s
lawyers, Haigh Lyon, demanding payment
by 3 July 2019 and threatening the issue
of a statutory demand if payment was not made.
- [15] On 3 July
2019, Haigh Lyon responded that none of the four lots had been sold and they
would need to be sold before the debt
could be paid. It was proposed that
Sunrise grant the Aero Club an unregistered mortgage over one of the
lots.
- [16] On 26
August 2019, Vodanovich Law emailed Haigh Lyon again. The Aero Club required
payment by 4.00 pm 30 August 2019 or a statutory
demand would
issue.
- [17] On 26
August 2019, Haigh Lyon advised that Sunrise had two conditional agreements for
sale in place. They said “Our client
has advised that he will be in a
position to settle the funds upon settlement. We will advise once the conditions
have been satisfied.”
I infer the “he” referred to is Mr
Hamilton.
- [18] Mr Hamilton
says that despite his initial confidence the sales did not proceed. It was only
as a result of inquiry made by me
of counsel that I have been advised of the
following sales:
(a) Lot 3 – settled 5 November 2019 for $600,000;
(b) Lot 4 – settled 28 November 2019 for $650,000; and
(c) Lot 2 – settled on 20 December 2019 for $590,000.
- [19] Mr Donkin
advises in a memorandum filed with the Court that the proceeds of sale of these
lots was paid to Spinnaker to reduce
Sunrise’s mortgage debt. While the
Aero Club accepts those sales proceeded Ms Andrews advises it was not informed
nor provided
with details of the sales.
- [20] The next
correspondence between the parties’ lawyers that is in evidence is a
letter from Haigh Lyon to Vodanovich Law
dated 20 May 2020. There must have been
further correspondence not in evidence as Haigh Lyon refers to “our last
email correspondence
dated 22 January 2020 advising that the agreement for [the
sale of] Lot 1 Aeropark Drive was at an end”. The letter advised
Lot 1
had been sold for
$724,372.90 and the entire proceeds used to pay Spinnaker. A repayment statement
from Spinnaker accompanied the letter. Haigh Lyon
advised that Sunrise did not
have funds to pay the Aero Club as was originally anticipated. I set out the
letter as follows:
Sunrise 9 Trustees Limited | North Shore Aero
Club Incorporated
- We
refer to our last email correspondence dated 22 January 2020 advising that the
agreement for Lot 1 Aeropark Drive was at an end
(the Prior
Agreement).
- We
advise that our client recently entered into an unconditional agreement for Lot
1 Aero Park Drive on 12 May 2020 (the Agreement) with settlement required
two days later on 14 May 2020.
- The
purchase price of the Agreement was $724,372.90 (including GST). Please note
that the purchase price was significantly higher
than the purchase price of
$560,000 (including GST) that was previously offered and accepted under the
Prior Agreement.
- Our
client was required to pay the first mortgagee the entire proceeds in order to
discharge the mortgage as per the attached repayment statement.
Accordingly, our client does not currently have the funds to make the required
payments to North Shore Aero Club
Incorporated as was originally
anticipated.
- We
further understand that our client has a GST payment to be made to the Inland
Revenue Department.
- Please
contact the writer if you wish to discuss this further.
- [21] The
reference in the letter to an agreement for the sale of Lot 1 dated 12 May 2020
is an error. The agreement was in fact dated
12 April 2020.
- [22] Mr Hamilton
says when the prospective sale of Lot 1 fell over he considered the section was
unlikely to sell to an independent
party. He says the loans advanced by
Spinnaker were in default and Lot 1 had already been extensively marketed by
Mackys Real Estate
Ltd and advertised on Trademe, the Real Estate New Zealand
website and in the New Zealand Herald newspaper. He says he arranged for
the
purchase of Lot 1 by Black River so that at least the priority registered
mortgage to Spinnaker could be discharged.
- [23] Upon the
transfer of Lot 1 to Black River, Spinnaker’s mortgage was discharged but
Black River’s second registered
mortgage was not. In explanation for this,
Mr Hamilton says that from memory the mortgage was not discharged because it was
unnecessary
in order to effect the transfer to Black
River.
- [24] Black River
has filed an affidavit of Michael O’Connell, a registered valuer, who
provided an assessment of the market
value of Lot 1 as at 12 April 2020
of
$550,000 including GST. The Aero Club has not filed any valuation evidence. Mr
O’Connell’s valuation is broadly consistent
with Haigh Lyon’s
letter of 20 May 2020 which refers to a sale price of $560,000 that had
previously been accepted for the
section.
- [25] On 22 July
2020, the Aero Club lodged its caveat. The Aero Club also took action to
liquidate Sunrise. Rather than have liquidation
ordered by the Court, Sunrise
was put into liquidation by its shareholders on 8 September 2020. There appears
to be no prospect that
the Aero Club will be paid in the
liquidation.
The caveat and legal principles
- [26] The
relevant principles are set out in Philpott v Noble Investments Ltd,
where the Court of Appeal noted the following:1
- [26] The
applicable legal principles which governed the application to sustain the
caveats, and which now govern this appeal, are
as follows:
- Philpott
v Noble Investments Ltd [2015] NZCA 342 (footnotes omitted). See to similar
effect Botany Land Development Ltd v Auckland Council [2014] NZCA 61,
(2014) 14 NZCPR 813 at [24].
(a) The onus is on the applicants to
demonstrate that they hold an interest in the land that is sufficient to support
the caveat,
but they need not establish that definitively;
(b) It is enough if the applicants put forward a reasonably
arguable case to support the interest they claim;
(c) The summary procedures involved in applications of this
nature are not suited to the determination of disputed questions of fact.
An
order for the removal of a caveat will only be made if it is patently clear that
the caveat cannot be maintained — either
because there is no valid ground
for lodging it in the first place, or because such a ground no longer exists;
and
(d) When an applicant has discharged the burden upon it, the
Court retains discretion to remove the caveat which it exercises on a
cautious
basis. Before it does so the Court must be satisfied that the caveator’s
legitimate interest would not be prejudiced
by removal.
- [27] However, in
a case where the applicant alleges fraud the Court of Appeal has also said in
Schmidt v Pepper New Zealand (Custodians) Ltd:
2
[15] Allegations of fraud or dishonesty are very serious. They
must be pleaded with care and particularity. As the authors of Bullen
&
Leake & Jacobs Precedents of Pleadings emphasise, counsel must not
draft any originating process or pleading containing an allegation of fraud
unless they have reasonably
credible material which, as it stands, establishes a
prima facie case of fraud — that is, material of such a character which
would lead to the conclusion that serious allegations could properly be based
upon it. Fraud cannot be left to be inferred from the
facts — fraudulent
conduct must be distinctly alleged and as distinctly proved. General
allegations, however strong the words
may be appear to be, are insufficient to
amount to a proper allegation of fraud.
- [28] In Kiwi
Trustee Ltd v Lin, following Schmidt, Associate Judge Bell held that
although in caveat applications the caveator generally has an onus of showing a
reasonably arguable
case for the interest claimed, where there are allegations
of fraud or reprehensible conduct it is necessary to show a prima facie
case of
fraud.3 That is the approach I take in this
case.
2 Schmidt v Pepper New Zealand (Custodians) Ltd
[2012] NZCA 565 (footnotes omitted).
- Kiwi
Trustee Ltd v Lin [2016] NZHC 595 at [8] - [9] and Schmidt v Pepper New
Zealand (Custodians) Ltd, above n 2.
Land Transfer Act fraud
- [29] Black
River says its title to Lot 1 was taken free of the Aero Club’s equitable
interest. Section 51 of the Act provides
that on registration under the Act of a
person as an owner of an estate or interest in land, the person obtains a title
to the estate
or interest that cannot be set aside. This is subject to
exceptions, one of which is where the registered owner has acquired his
or her
title or interest by fraud.
- [30] Section
52(1)(a) of the Act provides:
52 Exceptions and limitations
(1) The title of the registered owner to an estate or interest in land is
subject to the following exceptions and limitations:
(a) in a case where the title of the estate or interest of the registered
owner is acquired through fraud on the part of the registered
owner or the
registered owner’s agent:
...
- [31] The
definition of fraud is contained in s 6 of the Act and relevantly
provides:
6 Meaning of fraud
(1) For the purpose of this Act, other than subpart 3 of Part 2, fraud
means forgery or other dishonest conduct by the registered owner or the
registered owner’s agent in acquiring a registered estate
or interest in
land.
(2) For the purposes of subsection (1), the fraud must be against
---
...
(b) the owner of an unregistered interest, if the registered owner or
registered owner’s agent, ---
(i) in acquiring the estate or interest had actual knowledge of, or was
wilfully blind to, the existence of the unregistered interest;
and
(ii) intended at the time of registration of the estate or interest that the
registration would defeat the unregistered interest.
...
(4) The equitable doctrine of constructive notice does not apply for the
purposes of deciding whether conduct is fraudulent.
- [32] Fraud under
the Act is broader than the concepts of deceit and misrepresentation but
narrower than constructive or equitable
fraud.4 Fraud involves
dishonesty which must be brought home to the person whose title is challenged or
to his or her agent. Whether the conduct
amounts to fraud is a question of fact
to be resolved from the particular circumstances.5 Its essence is
intentional dishonesty.
- [33] In
Waimiha Sawmilling Co Ltd (In Liq) v Waione Timber Co Ltd Lord Buckmaster
said:6
If the designed object of a transfer [is] to cheat a man of a
known existing right, that is fraudulent, and so also fraud may be established
by a deliberate and dishonest trick causing an interest not to be registered and
thus fraudulently keeping the register clear. It
is not, however, necessary or
wise to give abstract illustrations of what may constitute fraud in hypothetical
conditions, for each
case must depend upon its own circumstances. The act must
be dishonest, and dishonesty must not be assumed solely by reason of knowledge
of an unregistered interest.
- [34] Dishonesty
will not be assumed solely by reason of knowledge of an unregistered instrument.
Where the alleged fraud is against
the owner of an unregistered interest s 6(2)
of the Act requires it must be established that the registered owner or the
registered
owner’s agent:
(a) in acquiring the estate or interest had actual knowledge of,
or was wilfully blind to, the existence of the unregistered interest;
and
(b) intended at the time of registration of the estate or
interest that the registration would defeat the unregistered interest.
- [35] In
Lombard Finance & Investments Ltd v Albert Street Ltd, Keane J noted
that where the boundary lies between honestly taking a registered interest,
knowing of an inconsistent unregistered
interest, and dishonestly taking a
registered interest to the prejudice of an unregistered interest can often be
“a matter
of degree, even slight
degree”.7
4 Sutton v O’Kane [1973] 2 NZLR 304 (CA)
at 321.
5 At 303.
6 Waimiha Sawmilling Co Ltd (In Liq) v Waione Timber Co Ltd
[1926] AC 101 (PC) at 106–107.
- Lombard
Finance & Investments Ltd v Albert Street Ltd HC Auckland
CIV-2004-404-2120, 14 October 2004 at [27].
The parties’ submissions
The Aero Club
- [36] Relying on
the Court of Appeal’s decision in Waimiha Sawmilling, Ms
Andrews argues that notice of an adverse interest and the existence of an
intention not to recognise that interest are concepts
that are inexorably linked
and that taking a registered estate or interest in land with actual knowledge of
an adverse interest will
generally amount to
fraud.8
- [37] Here, Ms
Andrews submits, a combination of factors is sufficient to infer that Black
River is guilty of fraud. Dishonesty on
its part, she says, can be inferred
from:
(a) the fact Sunrise and Black River were related parties;
(b) the speed with which the sale was executed and settled;
(c) Black River’s knowledge, through Mr Hamilton, of the
terms of the settlement agreement and that registration of a transfer
of Lot 1
to Black River would defeat the Aero Club’s interest;
(d) Black River’s intention not to recognise the Aero
Club’s interest after registration.
- [38] In the
course of argument further factors were relied upon which
were:
(a) that up until Haigh Lyon’s letter of 20 May 2020 was
received there had been regular and transparent communications between
Sunrise
and the Aero Club through their respective solicitors regarding the proposed
sale of Lot 1 to satisfy the debt;
(b) the sale price was the exact amount required to satisfy
Spinnaker’s first mortgage debt;
8 Waimiha Sawmilling Co Ltd (In Liq) v Waione
Timber Co Ltd [1923] NZGazLawRp 32; [1923] NZLR 1137 at 1174.
(c) how Spinnaker’ debt was made up is not explained;
(d) that Black River’s second registered mortgage was not
discharged upon the sale of Lot 1 and remains registered on the title;
and
(e) Mr Hamilton’s motivation was seeded in bitterness
expressed towards the Aero Club in his affidavit.
- [39] Ms Andrews
argues the evidence of Mr O’Connell of Lot 1’s market value is
irrelevant as Black River “was the
market” for Lot 1. The section
was worth more to Black River, she submits, because Mr Hamilton had a personal
interest to repay
Spinnaker and transfer ownership to Black River. Mr Hamilton,
she contends, simply chose to ensure Spinnaker was paid and not the
Aero
Club.
Black River
- [40] Black River
submits there is no arguable case of fraud and no basis to maintain the caveat.
Even if the Court considered fraud
was reasonably arguable, it should exercise
its residual discretion to nonetheless remove the caveat which serves no useful
purpose.
- [41] Black River
contends the Aero Club offers no direct evidence of fraud and an inference from
the circumstances that Black River
must be guilty of fraud is not
sufficient.
- [42] In any
event, Black River argues, there was no fraud because it never intended to
defeat the Aero Club’s equitable interest.
As security for payment of the
debt owing to Sunrise, Lot 1 was worthless because it ranked behind a
substantial registered mortgage
to Spinnaker and there was no equity left in the
property after Spinnaker was paid. In those circumstances the Aero Club’s
interest in Lot 1 had already been defeated.
- [43] Black River
also argues the Court should remove the caveat in the exercise of its residual
discretion. There is, it says, no
practical advantage in maintaining the caveat.
The Aero Club does not have any realistic prospect of recovering the
debt,
given the liquidation of Sunrise and in the absence of a substantive claim
against Black River. The only reason for sustaining the
caveat could be to cause
inconvenience to Black River. If the caveat is sustained it will prevent Black
River from freely dealing
with the property but does nothing to protect or
improve the Aero Club’s ability to seek repayment of the debt.
Discussion
- [44] For
the reasons that follow the Aero Club has failed to show a prima facie case that
Black River acted dishonestly intending
that its registration would defeat the
Aero Club’s unregistered interest.
- [45] I accept
that Black River, through its director Mr Hamilton, had actual knowledge of the
existence of the Aero Club’s equitable
interest in Lot 1. Black River does
not argue otherwise.
- [46] All of the
following is not in dispute. Sunrise’s business was the development and
sale of sections for residential use.
Under the settlement agreement, the
interest conferred upon the Aero Club in the sections forming Stage 3A was an
equitable charge
to secure payment of the debt owed by Sunrise. The Aero Club
was entitled to lodge caveats against the sections if Sunrise defaulted
in the
payment of the debt. The Aero Club’s equitable interest in the sections
was subordinate to, amongst other things, the
registered first mortgage of
Spinnaker. When Sunrise defaulted in payment of the debt the Aero Club did not
lodge caveats to protect
its interest. It failed to do so when it knew Sunrise
was selling the sections. It did not lodge caveats as it expected to be paid
from the sale proceeds of the sections. All four sections were subsequently sold
by Sunrise. It is only the sale of Lot 1 the Aero
Club seeks to impugn on the
grounds of fraud.
- [47] It must
follow that the Aero Club can have no complaint that Sunrise sold
Lot
1. It knew the section was being sold. The Aero Club neither objected to the
sale nor took steps to protect its interest by lodging
a caveat. Its complaint
as to what has occurred can only be that Black River acquired Lot 1 on a basis
or on terms that
defeated an entitlement it would otherwise have enjoyed to payment from the
proceeds of sale. I can see no basis for such a view.
- [48] Lot 1 had
been marketed for sale and, initially, an agreement for sale was entered into at
a price significantly less than what
it was ultimately sold for to Black River.
When that agreement failed, Sunrise accepted that it was unlikely to be able to
sell the
property to a third party and resolved to sell the section to Black
River, so that at least the first mortgage to Spinnaker could
be discharged.
Both Spinnaker and Black River had a legitimate interest in ensuring Spinnaker
was paid. Black River paid Sunrise
$724,372.90 for Lot 1, being an amount
sufficient to pay Spinnaker. The correlation between the sale price and what was
owed to Spinnaker
is not surprising in those circumstances and if, as Black
River contends, the sale price was significantly above market value, it
cannot
possibly be evidence of fraud.
- [49] Had Lot 1
been sold to another purchaser without notice of the Aero Club’s interest
the result of the sale would have been
the same as far as the Aero Club is
concerned. The purchaser would almost certainly have paid less than Black River
for the section
and as the Aero Club had not lodged a caveat, the sale would
have been completed and there would have been insufficient proceeds
available to
satisfy the debt after Spinnaker was paid. The position of the Aero Club would
not have been improved had it lodged
a caveat. Black River would almost
certainly have been entitled to an order removing its caveat under the
Court’s residual
discretion in circumstances where Spinnaker’s
superior ranking interest accounted for the whole of the value of the
land.9
- [50] Nothing
leads me to doubt Mr O’Connell’s assessment that Lot 1’s
market value was $550,000. Ms Andrews argues
that Mr O’Connell’s
evidence is irrelevant as Black River was the market for Lot 1. I do not
understand this submission.
Black River was not the only prospective purchaser
of Lot 1. The property had been marketed to the public and an agreement for its
sale entered into, albeit that sale did not proceed. The evidence satisfies me
no other purchaser was likely to pay more for
9 Pacific Homes Ltd v Consolidated Joineries Ltd
[1996] NZCA 264; [1996] 2 NZLR 652 at 656 (CA).
it than Black River paid. On the evidence, the sale of Lot 1 to Black River was
at well above market value.
- [51] The Aero
Club argues that Black River did not need to acquire Lot 1 and could simply have
discharged the mortgage. On this view,
Black River should have sacrificed its
interests for those of the Aero Club. That is entirely unrealistic in a
commercial sense.
It also overlooks the possibility of Black River being
subrogated to Spinnaker’s security or taking an assignment of it upon
discharging Sunrise’s indebtedness. In such a case the Aero Club’s
position would not have been improved.
- [52] Ms Andrews
asks me to infer dishonesty on the part of Black River from the speed with which
the sale of Lot 1 was executed and
settled and the lack of transparency
concerning the proposed sale of Lot 1. Her argument concerning the speed of the
sale was based
on an incorrect understanding as to the date of the agreement for
sale. As to the alleged lack of transparency, the communications
between the
solicitors for Sunrise and the Aero Club appear to have been sporadic to an
extent that the Aero Club now says it was
not provided with any detail of the
sale of the first three sections sold.
- [53] The Aero
Club says it has not been given details of the loan arrangements between Sunrise
and Spinnaker particularly how the
sum said to have been owing to Spinnaker was
made up. There is no evidence that the Aero Club has requested this information.
Importantly,
there is no allegation, or basis to believe, that the proceeds of
sale of Lot 1 were not paid to Spinnaker in satisfaction of sums
secured by its
mortgage. Mr Hamilton has deposed that the amount paid by Black River was paid
in full to discharge the mortgage.
Mr Punshon, on behalf of the Aero Club,
accepts the loan by Spinnaker to Sunrise had priority over the Aero Club’s
debt.
- [54] Mr
Hamilton’s explanation for why Black River’s second mortgage was not
discharged appears odd but the Aero Club
has not advanced any argument that
suggests this was part of a fraudulent scheme on the part of Black River.
Furthermore, if Black
River considered there was some advantage to it in
retaining its registered mortgage, there is nothing to suggest that was
detrimental
to the Aero Club.
- [55] I also
reject the submission that Mr Hamilton was motivated by bitterness as it is
simply not made out on the evidence.
- [56] There was a
clear commercial justification for the sale by Sunrise to Black River. Both
Sunrise and Black River had a liability
to Spinnaker. The sale of Lot 1 to Black
River was made at above market value to ensure Spinnaker was paid in full. The
Aero Club
knew Sunrise was selling the section. The terms of sale to Black River
did not prejudice the Aero Club. It would have done no better
if the section had
been sold to an independent party. There is no evidence of conduct from which it
can be inferred Black River acted
dishonestly intending to cheat the Aero Club
out of its equitable interest in Lot 1. The Aero Club has failed to establish a
prima
facie case (or even an arguable case) that Black River’s registered
title can be impeached for fraud.
- [57] I am
advised by counsel that following the hearing Black River entered into an
agreement for the sale of Lot 1 for $610,000.
The agreement is not in evidence
and it has not been necessary to rely on it in reaching my
decision.
- [58] It is not
necessary either for me to consider Black River’s alternative submission
that the application should be dismissed
in the exercise of the Court’s
discretion.
Result
- [59] The
Aero Club’s application is dismissed. I make an order for the removal of
the Aero Club’s caveat which shall take
effect 14 days from the date of
issue of this judgment.
- [60] I do not
know of any reason why costs should not follow the event on the usual basis but
counsel did not make submissions on
costs. If it is necessary for the Court to
make a determination on costs any party seeking costs shall file submissions
within 14
days with seven days for any reply.
O G Paulsen Associate Judge
Solicitors:
Vodanovich Law Limited, Auckland for Applicant
Counsel: W E Andrews,Blackstone Chambers, Auckland email: wendy@wendyandrews.co.nz N T C Batts,
Haigh Lyon, Auckland for Respondent
Counsel: J G Donkin, Quay Chambers, Auckland email: james@quaychambers.co.nz
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URL: http://www.nzlii.org/nz/cases/NZHC/2020/3070.html