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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


IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-001494
[2020] NZHC 3070
UNDER
the Land Transfer Act 2017
IN THE MATTER
of an application under section 143
BETWEEN
NORTH SHORE AERO CLUB INC
Applicant
AND
BLACK RIVER TRUSTEES LIMITED
Respondent
Hearing:
19 October 2020 (by AVL)
Further submissions by memoranda on 20, 22 October and 10 November 2020
Appearances:
W E Andrews for Applicant J G Donkin for Respondent
Judgment:
20 November 2020


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

Background

development agreement was assigned to Sunrise and it proceeded to undertake the development in accordance with the development agreement.
  1. 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).

  1. 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.

(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.

$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

  1. 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).
  1. 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.
  1. 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.
  1. 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.
  1. We further understand that our client has a GST payment to be made to the Inland Revenue Department.
  1. Please contact the writer if you wish to discuss this further.
$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.

The caveat and legal principles



  1. 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.

[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.







2 Schmidt v Pepper New Zealand (Custodians) Ltd [2012] NZCA 565 (footnotes omitted).

  1. 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

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:

...

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.

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.

(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.

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.

  1. 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

(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.

(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.

Black River

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

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.



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.

Result




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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