PROPERTY SALES DIRECT LTD v HAWKEN LANE DEVELOPMENT LP [2022] NZHC 1735

PROPERTY SALES DIRECT LTD v HAWKEN LANE DEVELOPMENT LP [2022] NZHC 1735 [20 July2022]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-1435[2022] NZHC 1735UNDER The Companies Act 1993 and the LimitedPartnerships Act 2008BETWEEN PROPERTY SALES DIRECT LTDPlaintiffAND HAWKEN LANE DEVELOPMENT LPDefendantHearing: 4-8 April 2022Appearances: H G Holmes for the PlaintiffE St John and S P Maloney for the DefendantFurthersubmissionscompleted :4 May 2022Judgment: 20 July 2022JUDGMENT OF POWELL JThis judgment was delivered by me on 20 July 2022 at 2 pm pursuant toR 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Solicitors/Counsel:Keegan Alexander, P O Box 999, Shortland Street, AucklandHeritage Law, P O Bo 96135, Auckland(E St John, Barrister, Auckland P O Box 105 270, Auckland City, Auckland)[1] The present proceedings follow the cancellation of six agreements for sale andpurchase by the plaintiff, Property Sales Direct Ltd ("PSDL") on 4 October 2018.[2] The six agreements for sale and purchase corresponded to six lots, identifiedas Lots 16, 19, 20, 21, 22 and 47, which formed part of a development in Silverdaleundertaken by the defendant, Hawken Lane Development LP ("Hawken").[3] PSDL seeks recovery of the deposits for the six properties in question, in thetotal sum of $522,129.98. These deposits were retained by Hawken after theagreements were cancelled. In turn, Hawken has sought damages by way ofcounterclaim in the sum of $461,440.46, being the penalty interest payable on five ofthe agreements prior to cancellation, and a further $122,500 net for losses incurred byHawken as a consequence of a caveat placed by PSDL on Hawken's residual title inMay 2021.[4] At the time the hearing commenced PSDL asserted it was entitled to cancel theagreements because:(a) Hawken had breached an essential term, namely it had failed to notifyPSDL of a change to the scheme plan of the development whichresulted in changes to Lot 22, one of the six properties in issue;1(b) The changes to Lot 22 identified in the new scheme plan resulted in asubstantial reduction in value to each of the six lots including Lot 22;2(c) The loss in value of Lot 22 and the subsequent inability to resell Lot 22meant that PSDL could not settle the purchase of any of the properties;3(d) Any failure to settle by PSDL was otherwise caused by the defendant'smisleading or deceptive conduct in terms of the Fair Trading Act 1986.41 Second amended statement of claim – first cause of action.2 Second amended statement of claim – second cause of action.3 Second amended statement of claim – third cause of action.4 Second amended statement of claim – fourth cause of action(e) PSDL was entitled to restitution/relief from forfeiture of the deposits inrespect of Lots 16, 19, 20, 21 and 47 because the total deposits for thoselots exceeded 10 per cent of the purchase price.5[5] As the hearing unfolded however PSDL steadily abandoned its claims to thepoint that by the time the evidence was concluded the only cause of action remainingfrom the second amended statement of claim was the claim for restitution/relief fromforfeiture of the deposits. In addition, PSDL had added a specific claim for the returnof the deposit for Lot 22 on the grounds that pursuant to Clause 18.2 of the agreements,Lot 22 was conditional upon title issuing prior to 30 June 2018, and PSDL was entitledto a return of the deposit by operation of Clause 19.6. As no title had been issued bythat date, the agreement for Lot 22 was therefore at an end at the point PSDL purportedto cancel on 4 October 2018.6[6] In addition to reducing the scope of its claims, PSDL also now no longeropposed the first counterclaim in respect of the penalty interest on Lots 16, 19, 20, 21and 47 and accepted that the sum of $461,440.46 is outstanding on the agreements forsale and purchase on each of those five lots from the date that they were due to settleto the date each was ultimately cancelled by Hawken. PSDL likewise did notchallenge the extent of the loss claimed by Hawken as a consequence of the caveatplaced on the residual title by PSDL, although it put Hawken to proof at the hearing.PSDL did however continue to maintain its position that while there were no groundsto support the lodging of the caveat, PSDL is not liable for any proven loss becausePSDL's manager, Trent Cary, had a "subjective belief on reasonable grounds" thatPSDL was entitled to lodge the caveat, namely legal advice provided by a barristerprior to the caveat being lodged.[7] Given the significant changes in PSDL's position throughout the course of thetrial only the following issues remain to be determined in the judgment:5 Second amended statement of claim – fifth cause of action.6 The specific allegation in respect of Lot 22 had been the primary allegation in respect of theoriginal statement of claim and amended statement of claim but for reasons which have not beenexplained the allegation was removed when the second amended statement of claim was filed. Itshould be noted that paragraph 14(c) of the third amended statement of claim which reintroducedthis claim related to Clause 18.1 instead of 18.2 in the Further Terms of Sale.(a) Is PSDL entitled to restitution/relief from forfeiture of the deposits paidin respect of Lots 16, 19, 20, 21 and 47?(b) Is PSDL entitled to return of the deposit for Lot 22 because theagreement for sale and purchase had been terminated as a result of titlenot having been issued by 29 June 2018?(c) Did Trent Cary on behalf of PSDL have a subjective belief onreasonable grounds that PSDL was entitled to lodge a caveat over theresidual land owned by Hawken? and(d) If the answer to (c) is no, did Hawken suffer loss in the sum of $122,500(including GST) as a result of the PSDL caveat?Factual background[8] In November 2015 Hawken purchased 11.3864 hectares of land at 3 and 4 JackHawken Lane, Silverdale and began developing the property into an 89 lotsubdivision.[9] In May 2016 Mr Cary approached Hawken with a view to acquiring a largenumber of the available sites.[10] After initially indicating an interest in some 52 lots (including the six now inissue) PSDL ultimately entered into 31 agreements for sale and purchase in respect of31 lots. A further two lots were acquired by Welly Build Ltd, a related company toPSDL.[11] The agreement reached between PSDL and Hawken was in the form of a singleomnibus agreement consisting of a front page for each one of the 33 lots (includingthe two to be purchased by Welly Build Ltd). To these 33 first pages were annexed:(a) General terms of sale (taken from the Agreement for Sale and Purchaseof Real Estate, Ninth Edition, 2012 (3));(b) Supplementary General Terms of Sale and Further Terms of Sale, bothreflecting Hawken's standard terms;(c) Further terms of sale – 2nd Part, which incorporated a number of clausesrequired by PSDL, along with one further clause requested by Hawken;and(d) Four schedules.7[12] Although ostensibly a single document, clause 35.1 (located in the FurtherTerms of Sale – 2nd Part) made it clear that all of the terms of sale appliedindependently to every agreement for the purchase of each lot. Clause 35.2 confirmed:For the avoidance of doubt [Hawken and PSDL] or Welly Build Limited(where applicable) altogether enter into thirty three (33) individual agreementsto the purchase of the above Lots and each agreement operates separately andindependently for purchase of each Lot adopting the same terms as set outunder clause 35.1.[13] Likewise, in relation to the nature of the lots themselves, the Scheme Planannexed as Schedule 3 showed the location of the lots subject to the agreement, all ofwhich were identified as being within Stage 3 of the Development. However, clause21.1 relevantly provided:Scheme PlanThe Purchaser acknowledges that the typology and design of the Lots, roads,reserves and other aspects of the Development shown on the Scheme Plan oravailable at the date of this Agreement are indicative only and the Vendorreserves the right to alter or vary the final design, specifications andconfiguration of the Scheme Plan and the Development, and the Purchasershall not be entitled to make any objection, requisition, or claim forcompensation in respect of any such alternation or variation, provided thatthere is no material variation to the dimensions of the Lot(s).[14] Following the signing of the agreement both PSDL and Welly Builds Ltd weregiven a period to conduct due diligence on each lot. This ended up being a protractedprocess with PSDL and Welly Build Ltd seeking, and being granted, two extensionsto the period for conducting due diligence prior to PSDL confirming it would proceed7 Comprising a list of chattels, GST information, the Scheme Plan and Land Covenants respectively.with the purchase of 11 lots, being lots 15, 16, 19, 20, 21, 22, 39, 41, 42, 43 and 47.The remainder of the agreements (including the two Welly Build Ltd agreements) weresubsequently cancelled by Hawken following the failure to confirm due diligence byPSDL.8[15] A 10 per cent deposit became payable once PSDL confirmed due diligence onthe 11 lots and these deposits were paid on 18 August 2016.[16] According to the agreements, settlement in respect of each lot would then takeplace on the tenth working day after the Certificate of Title was issued for thatindividual lot unless PSDL nominated "builders terms" whereupon the settlementwould take place nine months after the issue of the Certificate of Title.9 Wherebuilders terms were elected the purchase price was increased10 and a further 10 percent deposit would also become payable upon the issue of the Certificate of Title,thereby bringing the deposit up to 20 per cent of the final purchase price.[17] Not long after the satisfaction of the due diligence clauses and the payments ofthe deposits, Hawken began work on an amendment to the scheme plan for thesubdivision. This ultimately resulted in Lot 22 being moved from the third stage ofthe subdivision (with the other lots) to become Lot 92 of the fourth stage, while the lotwas also increased in size to include an area of riparian planting.[18] The first title to settle was Lot 15. The Certificate of Title issued on 11 October2017. Although PSDL did not settle on the due date (25 October 2017) it was able tosettle on 15 November 2017 and Hawken did not charge penalty interest on the delay.[19] Titles for the remaining lots (excluding Lot 22) were issued on 4 December2017. At that point it became clear that PSDL would not be able to immediately settleall of the properties for which title had become available. Following a meeting8 PSDL had sought a further extension of the due diligence period for all 22 of the remaining lots.Hawken declined the extension with regard to 20 of the lots and subsequently cancelled theseagreements on 26 August 2016. The due diligence period for the remaining two lots was extendeduntil 2 September 2016 but when PSDL sought to vary the agreement on these two lots Hawkencancelled those agreements as well.9 Clauses 30 and 31.10 Clauses 30.2 – 30.4.between Mr Cary and Mr Cai (the sole director of Hawken) Mr Cary wrote thefollowing email on 18 December 2017:As per our discussion on Saturday we propose the following.1. We will agree to settle lots 42 and 43 this week and use best endeavoursto try and do this by tomorrow. So including lot 15 that has alreadysettled and lot 22 which we intend to settle on issue of title that will be atotal of 4 without requiring builders terms.2. We will agree to 9mths builders terms at the higher price as per theamount specified on the original agreement on the following lots 41, 39,16, 19, 20, 21, 47 which will be total of 7.3. We will agree to pay a further 7% as a second deposit on lots 41, 39, 16,19, 20, 21, 47 this week and use best endeavours to try and do this bytomorrow which will then make the total paid up deposit 17% at thatpoint.4. We will agree to pay a further 3% as a third deposit in 3mths from thedate of the second deposit being paid on lots 41, 39, 16, 19, 20, 21, 47which will then make the total paid deposit 20% at that point.5. So in [summary] only 1 section short of settling our circa 50% target andjust a small 3 MTh delay to make up the 3 % balance of the total deposit.6. Thank you for working with us on this occasion we really appreciate it.Please confirm.[20] Hawken agreed to the terms proposed by PSDL and lots 42 and 43 did indeedsettle on 19 December 2017. The additional 7 percent deposits on Lots 16, 19, 20, 21,39, 41 and 47 were paid on 21 December 2017, but the remaining additional 3 per centproposed by PSDL and agreed to by Hawken which was due initially on 22 March2018 but extended at PSDL's request to 19 April 2018, was never paid.[21] On 3 September 2018 Mr Cary met with Mr Cai and advised that PSDL wouldbe unable to settle Lots 16, 19, 20, 21, 39, 41 and 47 and sought a deferment of thesettlement dates. The position of PSDL was subsequently confirmed in an email on4 September 2018 that confirmed an agreed approach in respect of those lots, and alsoconfirmed that the purchase of Lot 22, while "still some time away", would alsoproceed.[22] A proposal by Hawken to extend the time of settlement was not accepted andsettlement notices were issued. Lots 39 and 41 were eventually settled late,11 whilePSDL purported to cancel the agreements on the remaining lots:(a) On 4 October 2018 in respect of Lots 19, 20, 21 and 22; and(b) On 9 October 2018 for Lots 16 and 47 (together with a further noticeof cancellation in respect of Lots 19, 20, 21 and 22).[23] PSDL's solicitors went on to demand the return of the deposits paid for lots 16,19, 20, 21, 22 and 47 on 23 October 2018.[24] Hawken did not accept the purported cancellation by PSDL. Instead, it wasnot until 14 March 2019 that Hawken purported to cancel Lot 22, while cancellationof the agreements in respect of Lots 16, 19, 20, 21 and 47 was effected by resalebetween October 2019 and June 2020.[25] Hawken's cancellation of Lot 22 was precipitated by liquidation proceedingsbrought by PSDL against Hawken in February 2019. While, ultimately, thoseproceedings were withdrawn by PSDL upon payment of $13,000 costs to Hawken, anagreement was also reached whereby Hawken's solicitors, Heritage Law, would holdthe deposit for Lot 22 on the basis that PSDL issued the present proceedings. Inaccordance with that agreement, the present proceedings were commenced on12 July 2019.[26] Notwithstanding the agreement for Hawken's solicitors to hold the Lot 22deposit pending the outcome of this litigation and the purported cancellation of theLot 22 agreement by both parties, on 30 March 2021 PSDL lodged a caveat over theresidual land owned by Hawken, which included the area encompassed by the originalLot 22. PSDL's caveat purported to be lodged "pursuant to an agreement for sale andpurchase dated the 6th July 2016 in respect of part of the land contained in the aboverecord of title being lot 22 in Stage 3 of the subdivision the registered proprietor failed to deliver lot 22 ". The caveat was not discovered by Hawken until11 On 9 October 2018, with PSDL paying penalty interest on the late settlement.29 April 2021 and, after PSDL declined to remove the caveat, on 6 May 2021 Hawkenfiled an application to have the caveat removed. Justice Katz removed the caveat on8 June 2021 and on 15 June delivered reasons confirming that PSDL did not havereasonable grounds for a caveatable interest.12Issue one – restitution/relief against forfeiture in respect of the deposits for lots16, 19, 20, 21 and 47[27] On behalf of PSDL, Mr Holmes submitted PSDL was entitled to return of thedeposits paid on lots 16, 19, 20, 21 and 47 either relying upon:(a) The authoritative judgment of Lord Browne-Wilkinson in WorkersTrust & Merchant Bank v Dojap Investments Ltd [1993] 2 All ER 370and Lords Neuberger and Sumption and Lord Hodge in CavendishSquare Holding BV v Makdessi; ParkingEye Ltd v Beavis [2015]UKSC 67 to the effect that the vendor must justify an unusually highdeposit lest it be struck down as a penalty; or(b) The Court's equitable jurisdiction to grant relief against forfeiture.[28] On the first limb of his argument, it was Mr Holmes' submission that anydeposit in excess of 10 per cent was, by definition, a penalty and was thereforerefundable in full unless a vendor could demonstrate that a higher than usual depositwas justified by the particular circumstances of the contract in question. InMr Holmes' submission in the Workers Trust case the Privy Council not onlyconcluded that the imposition of a 25 per cent deposit was a "plain penalty",13 but alsodetermined that not just the penalty component but the entire amount was obliged tobe repaid by the vendor. On this latter point the Court found:The Court of Appeal took a middle course by ordering the repayment of 15%out of the 25% deposit, leaving the bank with its normal 10% deposit which itwas entitled to forfeit. Their Lordships are unable to agree that this is thecorrect order. The bank has contracted for a deposit consisting of one globularsum, being 25% of the purchase price. If a deposit of 25% constitutes anunreasonable sum and is not therefore a true deposit, it must be repaid as awhole. The bank has never stipulated for a reasonable deposit of 10 per cent:therefore it has no right to such a limited payment. If it cannot establish thatthe whole sum was truly a deposit, it has not contracted for a true deposit atall.12 Hawken Lane Development LP v Property Sales Direct Ltd [2021] NZHC 1410.13 Workers Trust & Merchant Bank v Dojap Investments Ltd [1993] 2 All ER 370 at 376.[29] In Mr Holmes submission this approach remains the position in both Englandand New Zealand. Specifically Mr Holmes contended the approach was essentiallyconfirmed in Cavendish Square Holding BV v Makdessi,14 and in particular by LordHodge who after reviewing the law noted the approach taken in Workers Trust15stated:16I conclude therefore that in both English law and Scots law (a) a deposit whichis not reasonable as earnest money may be challenged as a penalty and (b)where the stipulated deposit exceeds the percentage set by long establishedpractice the vendor must show special circumstances to justify that deposit ifit is not to be treated as an unenforceable penalty.[30] With regard to New Zealand Mr Holmes noted Workers Trust was referred toby the New Zealand Court of Appeal in Garratt v Ikeda17 which in Mr Holmes'submission confirmed that only a deposit not exceeding 10 per cent would be forfeitto a vendor if a purchase was not completed.[31] In the alternative Mr Holmes submitted that "the 20 per cent deposits required[in this case] were unreasonable as earnest money in so far as they were extravagantas "security" for performance of the agreement". As a result, it was Mr Holmes'submission:The forfeiture clause (clause 19.6) imposes, in view of the size of the deposit,a detriment on PSDL out of all proportion to Hawken's legitimate interest inthe performance of the contract and is therefore penal (See Cavendish at para238 per Lord Hodge) and the Court should order repayment of the deposits onthe basis that Hawken may not rely on it (penalty clauses being a well-established – and recently affirmed – exception to the concept of contractualfreedom).[32] Mr Holmes therefore submitted this Court should grant relief against theforfeiture of the deposits on the basis that as Hawken made a profit on resale to requireforfeiture of the deposits would substantially over compensate it.1814 Cavendish Square Holding BV v Makdessi; ParkingEye Ltd v Beavis [2015] UKSC 67, [2016] AC1172.15 At [235].16 At [238].17 Garrett v Ikaeda [2002] 1 NZLR 577 at [39].18 It should be noted that Mr Holmes later appeared to accept there was no evidence of any profithaving been made by Hawken on resale: the figures upon which the submission was basedincluded improvements rather than the vacant lots which were the subject of the agreement inissue in these proceedings.Discussion – Issue one[33] With respect to Mr Holmes, I do not consider the law supports his position thatany deposit in excess of 10 per cent must inevitably be repaid as a penalty and Ilikewise conclude that in this case there is no basis for ordering any relief againstforfeiture with regard to the deposits paid by PSDL in respect of Lots 16, 19, 20, 21and 47.[34] On the first issue, having reviewed the authorities provided by counsel, itappears that Workers Trust is very much an outlier in treating a deposit as a penalty tobe forfeited in total if it exceeds 10 percent of the purchase price. In particular suchan approach was not evidenced from Stockloser v Johnson19 in which Lord Denningdiscussed the relationship between relief against forfeiture and penalties in the contextof deposits. On the contrary, while it was accepted an excessive deposit could beclassified as a penalty,20 no mandatory threshold was identified. As Lord Denningexplained:21There is I think, a plain distinction between penalty cases, strictly so called,and cases like the present. It is this. When one party seeks to exact a penaltyfrom the other, he is seeking to exact payment of an extravagant sum either byaction at law or by appropriating to himself moneys belonging to the otherparty, as in Hills' case (8).In the present case, however, the defendant is not seeking to exact a penalty.He only wants to keep money which already belongs to him. The money washanded to him in part payment of the purchase price and, as soon as it waspaid, it belonged to him absolutely. He did not obtain it by extortion oroppression or anything of that sort, and there is an express clause – a forfeitureclause, if you please – permitting him to keep it. It is not the case of a sellerseeking to enforce a penalty, but a buyer seeking restitution of money paid. Ifthe buyer, the plaintiff, is to recover it, he must, I think, have recourse tosomewhat different principles from those applicable to penalties, strictly socalled. On the other hand, counsel for the defendant urged us to hold that theplaintiff could only recover the money if he was able and willing.[Where] there is a forfeiture clause or the money is expressly paid as a deposit(which is equivalent to a forfeiture clause), then the buyer who is in defaultcannot recover the money at law at all. He may, however, have a remedy in19 Stockloser v Johnson [1954] 1 All ER 630.20 At 639C.21 At 637A, B and H.equity, for, despite the express stipulation in the contract, equity can relievethe buyer from forfeiture of the money and order the seller to repay it on suchterms as the court thinks fit. That is, I think, shown clearly by the decision ofthe Privy Council in Steedman v Drinkle (5).[35] Similar approaches based on this analysis were followed in Else (1982) Ltd vParkland Holdings,22 in England, and in Garratt v Ikeda in New Zealand. Although,as Mr Holmes had noted, the New Zealand Court of Appeal in Garrett referred toWorkers Trust it did so in the context of understanding "the nature and historicalantecedents of a deposit",23 but did not mention the approach taken in Workers Trustto require the return of the entire deposit if it exceeded 10 per cent, let alone to confirmthat Workers Trust accurately reflected the law in New Zealand. On the contrary iteffectively confirmed that where a deposit does not exceed 10 per cent it does not giverise to any basis for relief against forfeiture.[36] Likewise, and as Mr St John submitted on behalf of Hawken, it is alsoimpossible to read into Cavendish any general acceptance of the position taken inWorkers Trust. While Lord Hodge's statement cited at [29] above would indicate somesupport for such an approach, albeit in significantly less mandatory terms, it was notnecessary to determine the issue in that case as Neuburger and Sumption LJJ explainedin their joint judgment:24What is less clear is whether a provision is capable of being both a penaltyclause and a forfeiture clause. It is inappropriate to consider that issue in anydetail in this judgment, as we have heard very little argument on forfeitures –unsurprisingly because in neither appeal has it been alleged that any provisionin issue is a forfeiture from which relief could be granted. But it is right tomention the possibility that, in some circumstances, a provision could, at leastpotentially, be a penalty clause as well as a forfeiture clause. We see the forceof the arguments to that effect advanced by Lord Mance and Lord Hodge intheir judgments.[37] In any event I am satisfied that when considered in context the depositsprovided for in this case were neither a penalty nor of such a nature that PSDL shouldbe entitled to relief against forfeiture.22 Else (1982) Ltd v Parkland Holdings [1994] 1 BCLC 130.23 Garratt v Ikeda, above n 17, at [39].24 Cavendish Square Holding BV v Makdessi; ParkingEye Ltd v Beavis, above n 14, at [18].[38] First, and contrary to Mr Holmes submissions, the agreements at issue did notspecify a 20 per cent deposit. Clause 32.1 of the agreements specified the deposit foreach lot was in fact 10 per cent of the purchase price, and this was in fact what waspaid on 18 August 2016 in respect of Lots 16, 19, 20, 21 and 47. This was the onlydeposit payable under any of these agreements in the event PSDL settled within10 working days of the relevant Certificate of Title being issued as provided for inclause 30. This deposit was entirely unexceptional and none of the cases cited byMr Holmes provide any basis for categorising the same as a penalty or otherwiseproviding any basis for giving relief against forfeiture.[39] The balance of the deposits now in issue only became payable if PSDL electedbuilder's terms pursuant to clause 31. As noted, electing builder's terms not onlyincreased the purchase price25 and delayed settlement by nine months, but also resultedin a further deposit of 10 per cent becoming payable (clause 32.2). Somewhatstrangely given the contractual terms, PSDL had purported to elect builder's terms forlots 16, 19, 20 and 21 at the time due diligence was completed and prior to paymentof the initial deposit, and as a result paid a 10 per cent deposit on the higher price atthe outset.[40] It is clear that at the time the Certificates of Title were issued for Lots 16,19,20, 21, 39, 41, 42, 43 and 47, PSDL was only able to settle two of the five lots due forsettlement,26 and therefore sought builder's terms for lots 39, 41 and 47 in addition tothe builder's terms already agreed with Hawken in respect of lots 16, 19, 20 and 21.The request was made notwithstanding that pursuant to clause 31.1 of each agreementPSDL had committed to settling a minimum of 50 per cent of the lots it purchasedwithout builder's terms. The effect of the PSDL proposal was that 63 per cent of thelots would now be subject to builder's terms and that PSDL would only be able to payan additional 7 per cent across all seven of the lots to secure the delay in settlementuntil September 2018, instead of the additional 10 per cent provided for in clause 32.2.25 Upon election of builder's terms lots 16,19, 20 and 21 increased from $520,434.78 plus GST (ifany) to $547,826.09 which the purchase price for Lot 47 increased from $545,217.39 to$573,913.04.26 Being lots 42 and 43, and being unable to settle lots 39, 41 and 47.[41] The latter point is significant as not only did this mean that the settlementsanticipated upon the issue of titles in December 2017 were delayed, but the electionof builder's terms also entitled PSDL to enter onto the particular lot "to commenceconstruction of a dwelling on the lot prior to settlement".27[42] Given these various factors: the evident precarious financial position of PSDLas purchaser, PSDL's request to increase the number of builder's terms above 50 percent and the ability of PSDL to enter onto the lots under builder's terms prior tosettlement, there can be no doubt that the additional 10 per cent deposit agreed, ofwhich only 7 per cent was paid by PSDL, was eminently justified as a genuine "earnestof payment" in terms of the various authorities cited before me.[43] I therefore have no hesitation in concluding that the deposits paid by PSDLcannot be categorised as a penalty and nor that there is otherwise any basis to grantPSDL relief from forfeiture of the deposits. PSDL's remaining cause of actionaccordingly fails.Issue two – is PSDL entitled to the return of the deposit for Lot 22?[44] There is no dispute that all of the agreements were conditional upon the issueof the relevant certificate of title in respect of each individual lot. Specifically, clause18.2 provided:28This Agreement is conditional upon [Hawken] giving written notice to[PSDL] of the issue of title no later than 5 pm on [30 June 2018] providedhowever if [Hawken] is making reasonable progress in obtaining the issue ofthe Certificate of Title, [Hawken] may by notice to [PSDL] extend the date forsatisfaction of this condition to 5 pm on [30 December 2018].[45] There is equally no dispute that the effect of clause 18.2 was that individualagreements were voidable rather than void in the event that title was not issued withinthe timeframes provided. That is, for the agreement to be terminated as a result of titlenot being issued, one or other of the parties was required to give notice of termination.This was spelled out in clause 9.8 of the General Terms of Sale, which provided:27 Clause 26.1. This was subject to further conditions in 26.3 – 5.28 The dates in square brackets are the result of clause 34.2 of the Agreement which extended thetime for obtaining Certificates of Title by a further six months compared to Hawken's standardconditions of contract.If this agreement is expressed to be subject either to the above or to any othercondition(s), then in relation to each such condition the following shall applyunless otherwise expressly provided:(1) The condition shall be a condition subsequent.(2) The party or parties for whose benefit the condition has been includedshall do all things which may reasonably be necessary to enable the conditionto be fulfilled by the date for fulfilment.(3) Time for fulfilment of any condition and any extended time for fulfilmentto a fixed date shall be of the essence.(4) The condition shall be deemed to be not fulfilled until notice of fulfilmenthas been served by one party or the other party.(5) If the condition is not fulfilled by the date for fulfilment, either party mayat any time before the condition is fulfilled or waived avoid this agreement bygiving notice to the other. Upon avoidance of this agreement, the purchasershall be entitled to the immediate return of the deposit and any other moneyspaid by the purchaser under this agreement and neither party shall have anyright or claim against the other arising from this agreement or its termination.(6) At any time before this agreement is avoided, the purchaser may waiveany finance condition and either party may waive any other condition whichis for the sole benefit of that party. Any waiver shall be by notice.[46] In the event that an agreement was terminated in reliance on clause 18.2, clause19.6 would then apply. This clause provided:If this Agreement is avoided or cancelled for reasons other than the default ofthe Purchaser, the Purchaser shall be entitled to the return of the deposit.[47] With regard to Lot 22, both parties agree that Hawken did not at any point givenotice to extend the date for satisfaction of the condition, and that no title has everbeen issued for Lot 22/92.[48] In Mr Holmes' submission, at the time PSDL purported to cancel theagreements for Lots 19, 20, 21 and 22 on 4 October 2018, while it now accepts it hadan insufficient basis to cancel for the reasons given in the letter of that date, nor in thesubsequent letter of 9 November 2018, it was nevertheless entitled to terminate inreliance on clause 18.2.[49] As Mr Holmes submitted:PSDL remained entitled to bring the agreement to an end (by operation ofclause 18.2 and [9.8]). By Davies Law's letter of 4 October 2018, it did so. Itmade it clear that the unavailability of Lot 22 was the problem. Admittedly,the notice did rely on grounds that were not available to the plaintiff. But thatdoes not affect the notice's validity. All the agreement requires was that noticebe given in writing and record that the agreement was at an end.[50] Mr Holmes relied upon Thompson v Vincent29 as authority by analogy, thatwhere a party who is entitled to cancel an agreement purports to do so with inadequatereasons, it will not prevent the cancelling party from relying on valid reasons at trial.In Mr Holmes' submission:It is submitted that the same must surely be said of circumstances such as thepresent where a party is entitled to avoid an agreement by notice for failure ofa condition, and that notice does not explicitly state the correct basis forcancellation. Indeed, no particular form of notice is required by the agreement– theoretically, a notice saying, "the agreement is hereby avoided" wouldsuffice on the plain terms of the agreement to bring the agreement to an end.It is therefore of no moment that Davies Law referred to different grounds(firstly, clause 21.3 of the agreement and ultimately the Credit Contracts andConsumer Finance Act) when providing notice of the avoidance of theagreement.Discussion – Issue 2[51] In commencing my analysis, I accept Mr Holmes' submissions that the factthat PSDL attempted to cancel the agreement in respect of Lot 22 on invalid groundsdoes not prevent it from relying on valid grounds for termination, should those bedetermined to exist.30[52] It is likewise clear that in the absence of notice prior to 29 June 2018, thatclause 18.2 was never extended to 30 December 2018. As a result, PSDL, likeHawken, had a right to terminate the agreement in respect of Lot 22 from 30 June2018.29 Thompson v Vincent [2001] 3 NZLR 355 (CA).30 See Kumar v Station Properties Ltd [2015] NZSC 34, [2016] 1 NZLR 99 at [65], where theSupreme Court stated that "At common law, it was accepted that where a party cancelled a contractfor an insufficient reason, the cancellation might nevertheless be justified if there was a sufficientreason at the time of cancellation even though the party cancelling was not aware of it". TheSupreme Court declared the reasoning in Thompson v Vincent to be correct at [66].[53] However, as Mr St John submitted, relying upon the decision of the Court ofAppeal in Jansen v Whangamata Homes Limited,31 if a party that is entitled toterminate a contract in the context of a sunset clause elects to continue with thecontract, it cannot later resile from that position and terminate through reliance on thesunset clause.32[54] In this case such an election could not happen prior to the expiry of the sunsetclause on 29 June 2018, nor after the purported cancellation of the Lot 22 agreementby PSDL on 4 October 2018.[55] During this period there was little communication between the parties, until on3 and 4 September there was an exchange of emails between the respectiveconveyancing solicitors of Hawken and PSDL with regard to the settlement of Lots16, 19, 20, 21, 39 and 41 (including a proposal to delay some of those settlements),with no mention at all of Lot 22 in any of those emails. Following this exchange,settlement statements for those lots were forwarded by Hawken on 5 September 2018,followed by settlement notices on 21 September 2018, which PSDL did not respondto, and which likewise contained no reference to Lot 22.[56] The only mention of Lot 22 during the relevant period was in an email fromMr Cary to his conveyancing solicitor, Kevin Lo of Mana Law, on 4 September 2018.This email was copied by Mr Cary to both Mr Cai and his solicitor, Anita Yang of YuLawyers (shortly thereafter renamed Heritage Law ("Heritage Law")), and recorded:Hi KevinI met with Sky yesterday at 4.15pm at his offices to advise him of our currentposition and discussed a deal and a seasonable way forward given the currentfinancial climate. We agreed that I was going away and to do some numbersand talk to our funders and come back to him later today with some answersand he was also going to do the same.The general feel was that Sky is happy to work with us in order to settle atleast 3x sections in the short term lots 39, 41, and 47 over the next say one totwo weeks and also agree on a restructured deal in relation to the remainingx4 un-settled sections Lots 16, 19, 20, 21 in order to achieve a good outcomefor all parties which means maybe a very small deposit applied out of funds31 Jansen v Whangamata Homes Limited [2006] 2 NZLR 300 (CA).32 At [20] – [33].already paid say 5% to be applied to these 4x lots and some further terms say3 to 6 MThs yet to be confirmed and agreed.In addition to that Lot 22 title which was part of the original bundle isstill some time away but I have advised Sky that we will settle that lot assoon as the title is available which will then be a total 7 sections settledout of the 11 however its looking like Lots 16, 19, 20, 21 will end up settlingbefore lot 22 does.Sky is very good to deal with and understands that we are both wanting tomaintain a long term working relationship.I will get back to Sky later today and I will keep you updated after we havefurther discussions.RegardsTrentOn behalf of the director[Emphasis added].[57] Applying the reasoning of the Court of Appeal in Jansen, it is difficult to seethis email as being anything less than an explicit election to continue with the Lot 22contract from which PSDL could not subsequently resile. Although clause 18.2 wasnot specifically mentioned in the email, there is no doubt that Mr Cary was aware thatthe issue of title in respect of Lot 22 had been delayed, and that settlement of Lot 22would take place after the settlement of the other lots at some time in the future.[58] It follows that by 4 October 2018, PSDL could not have relied upon the sunsetclause as set out in clause 18.2 as a basis for termination of the Lot 22 agreement, evenif it had been referred to, and it is not now able to be relied upon as a basis for thereturn of the Lot 22 deposit. Instead, the Lot 22 agreement remained in force untilterminated by Hawken when, in March 2019, it finally accepted PSDL's repudiation.33[59] I therefore conclude that with regard to issue two, PSDL is not entitled to thereturn of the deposit in respect of Lot 22.33 See [24] above.Issue three – did PSDL have a subjective belief on reasonable grounds it wasentitled to lodge a caveat over the residual land owned by Hawken?[60] The third issue relates to the caveat lodged by PSDL over Hawken's residualland in March 2021, after the present proceedings were commenced.[61] There is no dispute that there was no reasonably arguable basis for the caveat.This was the finding of Katz J when the removal of the caveat was ordered on 8 June2021,34 with her overall conclusions summarised in the subsequent costs judgment:35I found that PSDL had no reasonably arguable case to the interest stated in thecaveat, given that the agreement for sale and purchase had been cancelled.Nor could PSDL sustain the caveat on the basis of an equitable lien securingthe return of its deposit, because the deposit was held by Hawken Lane'ssolicitors as a stakeholder pending resolution of the substantive proceeding.Further, it was not the interest relied on in the caveat.[62] Given those conclusions Hawken's second counterclaim was made pursuant tos 148(1) of the Land Transfer Act 2017 which provides:A person, including the agent of a person, who lodges a caveat against dealingswithout reasonable cause is liable to pay compensation to a person who suffersloss or damage as a result.[63] Opposing the counterclaim Mr Holmes submitted "it is a defence to a claimunder s 148 (which this is) that a caveator lodged the caveat with the subjective belief,on reasonable grounds, that such an interest did exist". In support of this propositionMr Holmes relied upon the following statement in Hinde McMorland & Sim LandLaw in New Zealand:36A person who, in good faith, instructs a solicitor and makes full disclosure tothe solicitor of all the relevant facts and is advised that there is an arguablecase for the existence of a caveatable interest will normally be held to havereasonable grounds for an honest belief that he or she has such an interest.This is so even if the legal advice turns out to be wrong, and probably alsoeven if the advice is negligent. If, therefore, a caveat is lodged in reliance onthe advice received the caveator will not incur liability under s 148.34 Hawken Land Development LP v Property Sales Direct Ltd [2021] NZHC 1410.35 Hawken Land Development LP v Property Sales Direct Ltd [2021] NZHC 2021 at [3].36 DW McMorland and others Hinde McMorland & Sim Land Law in New Zealand (looseleaf ed,LexisNexis) at [10.022(f)].[64] Mr Holmes acknowledged that PSDL's solicitors Davies Law advised Mr Carynot to lodge the caveat, and he disputed whether Mr Cary was aware that the depositfor Lot 22 was being held by Hawken's solicitors with the agreement of PSDL.Mr Holmes nonetheless submitted it was reasonable for Mr Cary to rely upon the"emphatic" advice of a barrister, Desmond Wood, whom he described as "anexperienced property law barrister". As a result, it was Mr Holmes' submission thatMr Cary "plainly believed PSDL had a caveatable interest" at the time the caveat waslodged.Discussion – Issue Three[65] With the greatest respect to Mr Holmes the available evidence simply does notsupport a conclusion that PSDL could have had a subjective belief, let alone one basedon reasonable grounds, that it had a caveatable interest in the land in question.[66] First, there can no doubt that Mr Cary himself was aware that both PSDL andHawken had purported to cancel the agreement in respect of Lot 22. As noted, PSDLhad purported to do it through a letter sent by Davies Law on 4 October 2018, andHawken in a letter from their solicitors to Davies Law on 20 March 2019. At thatpoint neither party contended that the agreement for Lot 22 remained in force and inthose circumstances it is simply not credible to suggest Mr Cary considered PSDL tostill have an interest in Lot 22, particularly given his own evidence he was anexperienced property developer and middle man, buying and selling propertiesbetween developers and other developers and builders.[67] Similarly, while in March 2021, as a result of an interlocutory judgment byPeters J in the course of these proceedings,37 PSDL clearly had at least someexpectation of obtaining the return of the deposit for Lot 22,38 I cannot accept thatMr Cary was at any point unaware that the deposit for Lot 22 was being held byHawken's solicitors with the agreement of both parties. As noted above, this had comeabout following the issue by PSDL of ill-conceived and inappropriate liquidationproceedings against Hawken in February 2019 which were eventually withdrawn by37 Property Sales Direct Ltd v Hawken Lane Development LP [2020] NZHC 1743.38 At [23].PSDL in June 2019 upon payment of $13,000 in costs. In the same letter as it hadpurported to cancel the agreement in respect of Lot 22, Hawken's solicitors, HeritageLaw, gave an undertaking to hold the deposit for Lot 22 pending the determination ofthe liquidation proceedings. As Heritage Law noted in a subsequent letter dated 5 July2019, the initial undertaking expired on 4 June 2019 when the liquidation proceedingswere discontinued by PSDL. Heritage Law therefore confirmed that it intended torelease the deposit to Hawken unless by 12 July 2019 substantive proceedings for therecovery of the Lot 22 deposit were issued by PSDL. In response, on 12 July 2019PSDL's solicitors Davies Law wrote confirming proceedings had been issued for thereturn of the deposits including that pertaining to Lot 22 and requested Heritage Lawto "confirm that you will continue to hold the deposit for Lot 22 as stakeholder pendingagreement of the parties or order of the Court", which confirmation was subsequentlygiven.[68] Not only was there no credible evidence that this correspondence was notcopied to Mr Cary, the initial statement of claim filed by PSDL in these proceedingson 12 July 2019 (and substantially replicated in the amended statement of claim dated24 September 2020 and extant at the date the caveat was lodged) confirmed PSDL'sunderstanding of what had occurred:In breach of the Agreement the defendant has failed to deliver title to Lot 22by the 29th June 2018 or the 30th December 2018 being the later date had itdelivered notice (which it did not) to the Purchaser to extend the date havingmade reasonable progress towards obtaining title.On or about the 4th of October 2018 the plaintiff through its solicitor gavenotice to the defendant, by notice in writing to the Stakeholder, that due to theunavailability of title for Lot 22 it had caused the plaintiff to be unable to settleLots 19, 20 and 21. This was due to the unavailability of the Title for Lot 22substantially reducing the value of all four lots. A request for the immediaterefund of the deposits was made.On or about the 9th October 2018 and 23rd October 2018 the plaintiff throughits solicitor gave further notice to the defendant by notice in writing ofcancelling the contracts in respect of Lots 16 and 47.The deposits paid to the Stakeholder in respect of the cancelled lots are asfollows:(a) Lot 16 $ 93,130.44(b) Lot 19 $ 93,130.44(c) Lot 20 $ 93,130.44(d) Lot 21 $ 93,130.44(e) Lot 22 $ 52,043.00(f) Lot 47 $ 97,565.22Total $522,129.98[69] If that was not enough, the mutual cancellation of the Lot 22 agreement inparticular was further noted by Peters J in her Honour's judgment with regard toHawken's application for security for costs in the proceedings.39[70] This then was the position on 2 March 2021 when Mr Cary first raised thepossibility with Davies Law of PSDL lodging a caveat in respect of the residual landof which Lot 22 formed a part. The immediate reaction from Charlotte McAllister, alaw clerk at Davies Law in an email sent on the same day was:As per your phone instructions I have since performed a search on the residualland for Lot 92 and discovered that the title has not issued and that HawkenLand Development LP still owns the residual land. I have also reviewed theagreement and attach the page of the agreement that states that a caveat cannotbe lodged until Record of Title has issued for the lot at clause 24.1.We strongly advise against lodging a caveat on the residual land. If you wereto lodge a caveat against the residual land Hawken Lane Development LPcould sue you and claim costs.[71] Ms McAllister did not elaborate on the reason PSDL should not lodge a caveat.In evidence Mr Cary suggested that he thought she was referring to the no caveatclause contained in the agreements but there is nothing in Ms McAllister's email tosuggest her advice was limited to that clause alone. In any event Mr Cary did not seekclarification of the reasons nor did he request any form of formal opinion.[72] Instead, undeterred, Mr Cary copied his response to Mr Wood and advisedMs McAllister:Explain this to Des [Wood] and ask him what he thinks. If we put it on theresidual land now we can simply move it to Lot 92 when title issues similar tothe [redacted in original] situation.39 At [11] – [14].[73] As instructed Ms McAllister attempted to contact Mr Wood but it was not until8 March 2021 that it appears any substantive progress was made. Following thatdiscussion and further discussions with Mr Cary, Ms McAllister made contact withBruce Stewart QC, who was then counsel for PSDL in these substantive proceedingsand advised "Trent [Cary] is concerned that if [redacted in original] is successful inthe proceedings, the defendant company will not be in a position to return the depositsor damages" and asked him to discuss the issues about lodging a caveat with Mr Cary.[74] The next day Mr Stewart wrote to Mr Wood in the following terms:I understand that Trent Cary has approached you with an instruction to lodgea Caveat over certain lots in a subdivision.Trent has a concern that the developer may well take steps to sell certain lotswith a view to defeating Trent's claim which is currently being prepared forhearing in the High Court. The developer has already taken steps to sell asection without any right to do so. I will forward to you a copy of Peter J'sjudgment which concluded that the developer had no right to sell Lot 22 andconcluded that the developer was obliged to restore Lot 22 to the purchaserwhich the developer had agreed to sell to Trent Cary.I am happy for you to lodge a caveat to prevent the developer from selling lotswhich are under contract to Trent's company.I am very happy to meet with you and Trent to discuss the matter.[75] The letter was copied to Ms McAllister with Mr Stewart explaining it was "aletter which [Mr Cary] instructed me to write to Des Wood".[76] As will be apparent, Mr Stewart's letter was fundamentally wrong on a numberof different levels and instead appeared to completely mis-state the basis of the presentproceedings. Not only did the letter mis-state the effect of the judgment of Peters Jbut as Mr Stewart was aware, given the pleadings in this proceeding, PSDL hadpurported to cancel all of the agreements including those in relation to Lot 22 andnothing in those proceedings had ever sought to "restore Lot 22" to PSDL and/or MrCary. Mr Stewart's suggestion therefore that he was "happy for [Mr Wood] to lodgecaveat to prevent the developer from selling lots which are under contract to [MrCary's] company" was therefore utterly without foundation or otherwise explicable,not to mention entirely inconsistent with PSDL's own proceedings. It is not surprisingtherefore that PSDL and Mr Cary did not seek to rely on Mr Stewart's letter to support"a subjective belief on reasonable grounds" PSDL was entitled to lodge the caveat.[77] Ms McAllister duly forwarded Mr Stewart's letter to Mr Wood and arranged tocall Mr Wood on 10 March 2021. In preparation and at Mr Cary's requestMs McAllister forwarded Mr Wood the two scheme plans for the Hawken LaneDevelopment which showed that Lot 22 had both increased in size and changed frombeing part of the third stage of the development to the fourth stage.[78] Immediately after talking to Mr Wood and at his request, Ms McAllisterforwarded him copies of the statement of claim, notice of proceeding and statement ofdefence in these proceedings, together with PSDL's initial disclosure and the recordof title for the residual land Lot 22 and a timeline Ms McAllister had prepared. Havingadvised Mr Cary that she had done so Mr Cary responded immediately and instructed:I really only wanted to give [Mr Wood] the two scheme [plans] at this stageand have an initial high level discussion before he wastes a lot of time readingall of that material and bills us for it.Just ask him to hold off reading all the material until we have our initial takereferencing the two scheme plan only.[79] As a result, Ms McAllister emailed Mr Wood and advised:Our client has instructed me to refer you at this stage only to the two schemeplans rather than the additional information provided to you earlier today.Please advise your availability to set up a phone conference.[80] A further telephone discussion did take place between Mr Cary, Ms McAllisterand Mr Wood following which Ms McAllister provided Mr Wood with a copy of thejudgment of Peters J.[81] No further correspondence occurred until a week later when Ms McAllisterforwarded a draft caveat to Mr Wood. Over the next two weeks drafts were exchangedfollowing which Mr Wood emailed Mr Cary as follow:I have been sorting out with Charlotte McAllister a suitable form of caveat tolodge over the Silverdale property to protect your company against theimproper disposal or attempt at disposal of Lot 22/ now 92 in the subdivision.A respectable form of caveat has now been completed. Charlotte has done avery good job with this and I am satisfied that it is sufficient to protect thecontractual interest of your company in this property. It now requires yourattendance at Davies Law to sign an authority for the caveat to be lodged.Could you contact Charlotte as soon as you are able to make a time to see herto get this done.There will be no direct reference to the non-caveat clause in this document.That will be for another time depending on the response of the vendor to thislodgement.[82] Mr Wood's email makes it clear that he did not have the faintest idea what thesesubstantive proceedings were about and, presumably taking his cue from Mr Stewart'sletter and his discussions with Mr Cary, was under the completely mistaken impressionthat PSDL was still seeking an interest in Lot 22 itself. It is telling that Mr Wood wasnever asked for a formal opinion about whether PSDL had a caveatable interest in theresidual land. Instead, it is clear that at the specific request of Mr Cary, Mr Wood hadbeen kept in the dark and remained spectacularly ignorant of PSDL's actual positionwith regard to the land in question, namely that all of the agreements including thatrelating to Lot 22 had been cancelled and at most PSDL sought only the return of thedeposits and damages for loss of profits.[83] Davies Law proceeded to lodge the caveat on PSDL's behalf on 30 March 2021with the final version of the caveat recording PSDL's claimed interest in the followingterms:Pursuant to an Agreement for Sale and Purchase dated the 6th July 2016 inrespect of part of the land contained in the above Record of Title, being Lot22 in stage 3 of the subdivision and shown on the scheme plan marked "A"attached. The area highlighted and shaded with diagonal lines depicts Lot 22,Record of Title 801138 formerly comprising of Lot 3-4 DP 326198 and theland now contained in titles for Lot 15 in DP 507209 and Lots 16, 19, 20, 21,39, 41, 42, 43 and 47 in DP 513928; the Agreement being made between theregistered proprietor, Hawken Lane Development LP as vendor and theabovenamed caveator as purchaser. The registered proprietor delivered titlefor Lots 15,16, 19, 20, 21, 39, 42, 43 and 47 but failed to deliver Lot 22, whichis now contained in the above Record of Title and referred to as Lot 92 on thescheme plan marked "B". The area highlighted and shaded with diagonal linesdepicts Lot 92.[84] Not only had Mr Cary deliberately requested Mr Wood not to look at theinformation provided by Ms McAllister, he must have been aware that Mr Wood hadsimply not realised the proceedings issued by PSDL did not in any way claim anyongoing interest in any of the properties, including Lot 22, but rather, by that pointPSDL's interests were limited to the return of the deposits and any lost profits onresale.[85] Although the critical point is at the time the caveat is lodged, I note forcompleteness the position had not substantively changed when Mr Wood wascontacted by Davies Law on 30 April 2021 after Hawken found out about the caveatand Heritage Law requested its immediate removal. Although Mr Wood advisedMr Cary by email PSDL had a "pretty good chance at succeeding if there is achallenge" he once again did not at any point identify any basis for PSDL to assert acaveatable interest in the land notwithstanding Ms McAllister had by that point madeit clear to him:(a) that all of the agreements including that relating to Lot 22 had beencancelled by PSDL, and that in response Hawken had also cancelledthe agreement relating to Lot 22; and(b) Heritage Law had given an undertaking to hold the deposit in respectof Lot 22.[86] Given those circumstances outlined above I conclude there cannot be and wasnot any remotely reasonable basis for any subjective belief on the part of Mr Cary thatPSDL had any form of caveatable interest in Lot 22, let alone any other part of theresidual land owned by Hawken. Instead, as Mr St John submitted, the position ofMr Cary is at best analogised to that of the client described by the Court of Appeal inGordon v Treadwell Stacey Smith:40What is reasonable will depend upon the information available to the personwhose conduct is challenged under s 146. The position is best demonstratedby an illustration. Suppose a client seeks advice from a solicitor about whetheran interest exists in land sufficient to support a caveat but deliberately orinadvertently conceals from the solicitor a crucial fact (eg that the clientpreviously had an interest but has already assigned it absolutely to someoneelse). If the solicitor then advises that an interest may exist and that a caveatshould be lodged and proceeds to undertake that task, the solicitor will notshare the client's liability under s 146. The client had no reasonable cause;the solicitor, on the information available, did.40 Gordon v Treadwell Stacey Smith [1996] 3 NZLR 281 (CA) at 288.[87] It is also noted with regard to any belief held by PSDL that Mr Cary did nothimself lodge the caveat and is not a director of PSDL. Murray Price was and remainsthe sole director of PSDL and it was Mr Price who ultimately lodged the caveat. Noevidence whatsoever has been placed before the Court as to what Mr Price's subjectivebeliefs were at the time the caveat was lodged, but at the very least there is nothing tosuggest they differed from the position taken by PSDL in the present proceedings thatit had purported to cancel all of the remaining agreements including the agreement inrespect of Lot 22.[88] Finally, I observe that given Mr Cary was aware of the cancellation of theLot 22 agreement and that the deposit was being held by Heritage Law, in the absenceof Mr Cary identifying any legitimate purpose for the lodging of the caveat in hisevidence, I accept Mr St John's submission it follows that the only available inferencewas that the caveat was filed for an improper purpose, namely to put pressure onHawken to release the deposit for Lot 22.[89] Taking these matters together I am satisfied beyond any dispute the caveat waslodged without reasonable cause, and that PSDL, whether through Mr Cary orMr Price, did not have a subjective belief on reasonable grounds that it was entitled tolodge the caveat.Issue four – is PSDL liable for the loss claimed by Hawken as a result of thecaveat?[90] Having determined that PSDL is liable to pay compensation for loss ordamages suffered by Hawken as a result of the lodging of the caveat, the final issue isto determine the amount of such loss.[91] Hawken contends that the caveat prevented it from completing re-financinguntil the caveat was lifted. A cashflow shortfall and threats by two of its contractorsto cease work resulted in it having to agree to pay an extra $172,500, including GST,that would not have been necessary but for the caveat. Deducting $50,000 paid byDavies Law for its contribution to the losses suffered by Hawken, this leaves a balanceof $122,500 claimed by Hawken.[92] PSDL has ultimately raised no substantive issue with Hawken's claim forlosses suffered as a result of the caveat. In the course of cross-examination Mr Holmesattempted to question the purposes of the loan and whether the agreements that werereached with the contractors by Hawken occurred within the period or were otherwisegenuine. By the time closing submissions were presented however, no specific issuewas relied upon by PSDL, PSDL simply putting Hawken to proof for the amountsclaimed.Discussion – Issue four[93] Having reviewed the evidence, I am satisfied the amount claimed by Hawkenis properly payable by PSDL.[94] It is clear that Hawken was well advanced with arrangements for refinancingat the time it discovered PSDL's caveat on 29 April 2021. As Heritage Law made clearin correspondence that day and subsequently:Please be advised that our client has a refinance scheduled for tomorrow. Wetherefore demand on behalf of our client that you immediately withdraw thecaveat. Unless confirmation of withdrawal is received from you by the closeof business today 29 April 2021, we have instruction to apply to the HighCourt to remove the caveat without any further notice. In that event, costs willbe sought against you and your client jointly and severally on a solicitor-clientbasis pursuant to s 148 of the Land Transfer Act 2017. We trust this will notbe necessary.[95] As PSDL refused to remove the caveat, the first tranche of the refinancing wasnot able to be drawn down until after Katz J ordered removal of the caveat on 8 June2021.[96] In the meantime, the evidence of Mr Cai on behalf of Hawken was thatcashflow issues which would not have arisen had the refinancing gone ahead asenvisaged meant that Hawken was forced to enter into two variations of contract withcontractors, Z2Y Construction Ltd and MZ Construction Ltd, dated 4 May 2021 and14 May 2021 respectively. The first of these variations, that with Z2Y Construction,relevantly explained:A. The Principal [Hawken] and the Contractor are respectively the principaland contractor under the Contract.B. The Principal is experiencing cashflow issues and it has requested theContractor to defer its payment obligations under the Contract and torefrain from suspending or issuing any notice of intention to suspendworks under the Contract until after 31 August 2021.C. The Contractor has agreed to defer the Principal's payment obligationsunder the Contract and to continue carrying out construction works underthe Contract on the terms and conditions of this Variation.[97] In exchange for not issuing a notice of intention to suspend and agreeing notto suspend the contract until after 31 August 2021 Hawken agreed to pay Z2YConstruction a further $50,000 plus GST on or before 31 August 2021. On 10 August2021, a payment of $57,500 was advanced by Hawken.[98] The agreement with MZ Construction was couched in similar terms, with theamount to be paid however $100,000 plus GST. Again, on 10 August 2021, Hawkenpaid MZ Construction Limited $115,000 to fulfil their obligations under the variationof contract.[99] The undisputed evidence of Mr Cai was that it was only when the caveat wasremoved and the first tranche of the refinancing drawn down that Hawken was able toaddress its cashflow issues, including meeting the additional sums now payable to bothZ2Y Construction and MZ Construction. Although, and as Mr Holmes had pointedout in cross-examination, the first tranche of the funding was specifically to reimbursethe sole remaining partner of Hawken for its buy out of the other partner, as Mr Caiexplained in evidence all this meant is that the remaining partner then had thenecessary funds to continue paying Hawken's contractors in order to complete thedevelopment. Likewise, copies of the email demands from Z2Y Construction andMZ Construction, apparently dated June 2021, do not detract from the clear evidenceof the further sums having been incurred as a result of the delay in drawing down therefinancing caused by the caveat.[100] Overall, I am satisfied that the sum of $122,500 (inclusive of GST), being thebalance of the $172,500 claimed, was indeed losses directly incurred by Hawken as aresult of the caveat placed on the title of the residual land by PSDL.Decision[101] The claims brought by PSDL against Hawken are dismissed.[102] Judgment for Hawken against PSDL on the counterclaims in the sum of$1,106,070.44 made up as follows:(a) Deposits on Lots 17, 19, 20, 21, 22 and 47 in the sum of $522,129.98;(b) Penalty interest on Lots 17, 19, 20, 21 and 47 in the sum of$461,440.46; and(c) Losses consequent to the PSDL caveat in the sum of $122,500(inclusive of GST).[103] Hawken is entitled to interest on the judgment pursuant to s 10 of the Intereston Money Claims Act 2016.[104] Hawken is entitled to costs on the judgment. If these cannot be agreed withintwo months of the date of this judgment I will determine the issue following the filingof memoranda._____________________________Powell J