AMT LIFESTYLE HOMES LIMITED v FERNANDES & ANOR [2018] NZHC 520

AMT LIFESTYLE HOMES LIMITED v FERNANDES & ANOR [2018] NZHC 520 [23 March 2018]IN THE HIGH COURT OF NEW ZEALANDTAURANGA REGISTRYI TE KOTI MATUA O AOTEAROATAURANGA MOANA ROHECIV-2017-470-165[2018] NZHC 520BETWEEN AMT LIFESTYLE HOMES LIMITEDApplicantAND CLIVE MARIO FERNANDES andELIZABETH SCOTT JOHNSRespondentsHearing: 21 March 2018Appearances: D Fraundorfer / T Carlisle for ApplicantT C Waikato for RespondentsJudgment: 23 March 2018JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSENThis judgment was delivered by me on23.03.18 at 3.30 p.m., pursuant toRule 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate [1] The applicant (AMT) applies for an order to sustain its caveat registered overland owned by the respondents.[2] On 10 February 2016 the parties entered into a building contract to build adwelling on the property at Tauranga. The parties' agreement contained termsincluding:(a) The building contract price was $336,496 (including GST);(b) Clause 2.2 of the contract provided:This Agreement is conditional upon the Council issuing a buildingconsent, in respect of the works quoted and agreed upon that formsthe value of this contract, within 30 working days from the date thisAgreement is signed by both parties. This Agreement is to be read inconjunction with the strict terms and conditions detailed in the plansand specifications and/or other terms satisfactory and agreed to byboth the Employer and the Builder and confirmed in writing.(c) Clause 23.1 gave AMT the right to mortgage the property in the eventthe respondents failed to pay amounts owing under the BuildingContract by the due date:Where [the respondents] have failed to make payment of any portionof the contract price [the respondents] will forthwith upon demandgive and execute in favour of [AMT] a registerable Memorandum ofMortgage over the land to secure the amount owing from time to timefrom [the respondents] to the [AMT] under this agreement .[3] No building consent issued within 18 months and on 21 August 2017 therespondents gave notice of cancellation of the contract pursuant to Clause 2.2. At thattime they sought the return of the $26,919 deposit they had paid. At this time AMThad not issued any invoices.[4] AMT then issued invoices to the respondents through its solicitors. The totalamount claimed exceeded the value of the deposit held. AMT's position was that thecontract had not and could not be cancelled.[5] The respondents disputed the invoice and AMT then lodged a caveat againstthe title of the land relying upon clause 23.1 of the contract.[6] On 27 October 2017 the respondents applied to the Registrar-General of Landfor the caveat to lapse pursuant to s 145 of the Land Transfer Act 1952. On 30 October2017 the Registrar-General gave AMT notice of the application to lapse the caveat.[7] When filing its application to sustain its caveat AMT sought and obtained aninterim order that the caveat not lapse until further order of the Court.Opposition to application[8] The respondents position is that the contract either lapsed for non-fulfilment ofclause 2.2 (because the building consent was not obtained within 30 days of the dateof the agreement), or was validly cancelled by the respondents by their notice givenon 21 August 2017 for failure to satisfy clause 2.2.[9] The respondents say that issues concerning whether or not the applicant'sinvoices are payable are separate to the question of whether there is a caveatableinterest. The respondents say all of the services provided by the applicant were outsidethe scope of the contract and there was no oral or written variation of clause 2.2.[10] It appears the respondents do not deny that some work had been carried out forwhich AMT would be entitled to be paid, but that no invoices had issued and littlereporting information had been provided.Evidence[11] Following the notice of cancellation, correspondence ensued between thesolicitors. The respondents say that they could have done nothing more to get thebuilding consent to issue more quickly. They had purchased the property it havingbeen recommended to them as suitable for building their proposed home by "My NewHome", a company which the respondents say was in a close business relationshipwith AMT. They say they had given approval to AMT for the engagement of anarborist in November 2016 so that issues concerning tree roots which had been raisedby the Council could be dealt with but still no progress was made towards obtainingthe resource consent or the building consent in relation to that "tree root" issue.[12] The respondents say that according to Council records there had been nocommunication from AMT to Council since 10 January 2017 when AMT hadrequested a one-month extension to the building consent application. Therefore therespondents' claim AMT cannot take the position that they are entitled to claim thatthere has been an agreed variation to the building contract. Their position is that thebuilding contract which included the agreement to mortgage [to cover payments due]was validly cancelled in August 2017.[13] Mr Thomas the managing director of AMT has sworn an affidavit in reply. MrThomas refers to AMT having prepared a claim for filing in the District Court. He issurprised therefore that the respondents choose to litigate the matter through the caveatproceeding process.[14] He says no invoices had issued because that only occurred at the completionof each stage of a build and given AMT was responsible for contracting to other partiessuch as the arborists, it was not feasible to issue an invoice until AMT had receivedthe final invoice and disbursements from all other contractors.[15] Mr Thomas denies that there was little reporting information. To his affidavithe attached copies of eight email chains dated 30 August 2016 to 19 July 2017.[16] Regarding claims of delays by AMT with the Tauranga District Council MrThomas says any lack of progress was due to delays caused by the Council in obtainingthe required information. He attached six email chains in that regard dated from 12August 2016 to 2 November 2017.[17] It is AMT's position that due to the nature of their work and the dependence onother contractors and the Council, much of the delay was out of AMT's control.[18] AMT experienced difficulties he says due to unforeseen problems with treesand root systems on the property; that the respondents raised no objection to this andonly sought to cancel a contract one and a half years later. Also he says that pursuantto condition 10.1(b) of the contract the respondents failed to provide all relevant andnecessary information to AMT, and in particular the land covenant information thatwas provided to another company My New Home Limited by email dated 14December 2015, which was not provided to AMT until 7 September 2017 by My NewHome.The law[19] The Court's focus is upon ss 143, 145 and 145A of the Land Transfer Act 1952.By those provisions an onus lies on a caveator, AMT to show there is a reasonablyarguable case for the interest claimed.[20] The summary procedure for removal of a caveat is unsuitable for thedetermination of disputed questions of fact.1[21] Even if an arguable case for an interest is established, the Court retains adiscretion to make an order removing the caveat although that will be exercisedcautiously.2Considerations[22] The dispute between the parties developed when the respondents purported tocancel the contract. In response to that AMT issued invoices for payment. Issues ariseregarding whether AMT is able to complete the contract or instead whether therespondents have validly cancelled it.[23] The contract terms provided for a mortgage to be registered over therespondents' property if the respondents failed to make payment of any portion of thecontract "to secure the amount owing from time to time "[24] AMT's position is that its ability to mortgage the property if invoices wereunpaid gave rise to a caveatable interest and that the registration of that interest shouldremain in place.1 Sims v Lowe [1988] 1 NZLR 656.2 Pacific Homes Ltd (in rec) v Consolidated Joineries Limited [1996] 2 NZLR 652.[25] Usually a Court will not make any order for removal of the caveat unless it ispatently clear the caveat cannot be maintained either because there is no valid groundfor lodging it, or that what such valid ground as that existed no longer does so.[26] The respondents rely on clause 2.2 of their contract which required AMT toobtain a building consent within 30 days. That was not done.[27] AMT's position is that despite that clause the parties continued to perform thecontract throughout 2016 and well into mid to late 2017.[28] AMT has now filed a proceeding in the District Court to recover what it saysremains owing to it. That proceeding claims the parties either agreed to an extensionof the consent clause or that there is an estoppel arising out of AMT continuing toperform the contract after March 2016 and into 2017.[29] It is apparent by that proceeding that AMT now relies on an alleged oralvariation to the original agreement, which by its terms would have been required tohave been in writing and agreed to by both parties. AMT's position is that there aresignificant facts in dispute such that this Court should not consider an analysis ofcontractual terms except upon evidential enquiry, and therefore it remains arguablewhether or not the building contract lapsed due to a failure to satisfy condition 2.2.Summary[30] Of importance for present purposes is whether the claim of an caveatableinterest should be sustained.[31] The Court's firm view is that it should not. Those invoices delivered includeAMT's charges on invoices for "sales commission" ($9,067) and "copyrite" ($2,500).[32] Those appear not to have been for building works at all within the scope of thebuilding contract or its specifications.[33] Significant questions arise regarding claims of a debt owing, or whether thereremained an enforceable contract.[34] Contractual delays relate to issues in obtaining a building consent for reasonsoutside of the respondents' control. Again it is not necessary for present purposes togo into background of these reasons but queries must rise in relation to an invoicecharge for "sales commission".[35] AMT's right of recovery is not just dependent upon its building contract for itwould be entitled to bring a "quantum meruit" claim. Indeed the amount of the claimsuggests it might be disposable by disputes tribunal process. Regardless the matter isbefore the District Court where, as the focus should be, it is about the merit of claimsof a debt owing in respect of works undertaken and provided.[36] In the Court's view and even if it was accepted AMT has established anarguable case for the interest claimed, this is a proper case for the removal of thecaveat.Result[37] The application to sustain the caveat under s 145A of the Land Transfer Act1952 is dismissed.[38] Costs are reserved for payment in the outcome of the District Court proceeding.Those are to be fixed on a 2B basis.Associate Judge Christiansen