SUNRISE 9 TRUSTEES LIMITED v NORTH SHORE AERO CLUB INC. [2017] NZHC 1794

SUNRISE 9 TRUSTEES LIMITED v NORTH SHORE AERO CLUB INC. [2017] NZHC 1794 [16 August 2017]IN THE HIGH COURT OF NEW ZEALANDAUCKAND REGISTRYCIV-2017-404-977[2017] NZHC 1794BETWEEN SUNRISE 9 TRUSTEES LIMITEDApplicantAND NORTH SHORE AERO CLUB INC.RespondentHearing: 8 August 2017Appearances: K M Quinn for the ApplicantA G W Webb for the RespondentJudgment: 16 August 2017JUDGMENT OF ASSOCIATE JUDGE R M BELLThis judgment was delivered by me on 16 August 2017 at 3:30pmpursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors:Leigh Judd Law, Auckland, for the ApplicantGreenwood Roche, Auckland, for the RespondentCopy for:Kelly M Quinn, Auckland, for the ApplicantAlan G W Webb, Auckland, for the Respondent[1] Sunrise 9 Trustees Ltd applies under s 143 of the Land Transfer Act 1952 for an order removing caveat 10594258.1 lodged against the title to one of its properties at Wilks Road, Dairy Flat. North Shore Aero Club Inc is the caveator. The interest claimed against the caveat is:Pursuant to a constructive trust between the above registered proprietor as trustee and North Shore Aero Club Incorporated and North Shore Aero Park Ltd as beneficiary.[2] Sunrise's caveated property in Wilks Road is Lot 85 described in identifier70549.1 It is 16.38 hectares in area and adjoins the North Shore air field operated by the aero club. Sunrise is developing the land beside the air field, including Lot 85, for residential development. Relations between Sunrise and the club have not alwaysbeen smooth. The club's co-operation on a number of matters is required for Sunrise to carry out its development but there have been disagreements.[3] The club's case is that its right to caveat Sunrise's property arises out of a deed of settlement of 25 March 2015 which it says allows it to caveat Sunrise's titleif certain payments have not been made. Sunrise says that the club does not have a caveatable interest in the land, and that the caveat is defective in form. It denies that it owes any money to the club because of an equitable set-off. The club breached the deed of settlement and is liable to it for damages that exceed the amount of any debt to the club.General principles on caveat applications[4] In Holt v Anchorage Management Ltd, McMullin J stated the purpose of a caveat against dealings under the Land Transfer Act 1952:2Once lodged, a caveat is notice to all who search the title to the land against which it is registered and to the registered proprietor of the land (to whom notice of its receipt is given pursuant to s 142) that the caveator claims the estate or interest the subject of the caveat. It is both a warning to the persons mentioned that the caveator asserts rights against the land and a protection of those rights. (Section 143(1) uses the phrase "protected by the caveat".) Once the caveat is lodged the Registrar is prohibited from making any entry1 I have shortened the legal description.2 Holt v Anchorage Management Ltd [1987] 1 NZLR 108 (CA) at 113.on the register which has the effect of charging or transferring or otherwise affecting the estate or interest protected by the caveat (s 141).[5] In caveat applications under ss 143, 145 and 145A of the Land Transfer Act, the caveator generally has the onus of showing a reasonably arguable case for the interest claimed. The interest must come within s 137(1) of the Act:137 Caveat against dealings with land under Act(1) Any person may lodge with the Registrar a caveat in the prescribed form against dealings in any land or estate or interest under this Act if the person—(a) claims to be entitled to, or to be beneficially interested in, the land or estate or interest by virtue of any unregistered agreement or other instrument or transmission, or of any trust expressed or implied, or otherwise; or(b) is transferring the land or estate or interest to any other person to be held in trust.A personal or contractual right is not enough. The caveator must show an entitlement to a beneficial interest in the land under the caveat.3 It is not necessary for the caveator to have a registrable interest in the land. A purely equitable interest may be protected.4 The caveat must also comply with the formal requirements of s 137(2):(2) A caveat under this section must contain the following information:(a) the name of the caveator; and(b) the nature of the land or estate or interest claimed by the caveator, which must be stated with sufficient certainty; and(c) how the land or estate or interest claimed is derived from the registered proprietor; and(d) whether or not it is intended to forbid the making of all entries that would be prevented by section 141 or a specified sub-set of them; and(e) the land subject to the claim, which must be stated with sufficient certainty; and3 Guardian Trust and Executors Company of New Zealand, Limited v Hall (No 2) [1938] NZLR 1020 (CA) at 1025, Philpott v NZI Bank Ltd (1989) 1 NZ ConvC 190,246.4 See the discussion in Hinde McMorland and Sim Land Law in New Zealand (online looseleaf ed, Lexis Nexis) at [10.006].(f) an address for service for the caveator.[6] Caveat applications are summary and are therefore not suitable for deciding disputed questions of fact. On the other hand, the court is not required to accept uncritically as raising a dispute of fact which calls for further investigation, every statement in an affidavit, however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent or inherently improbable it may be. For a caveat to be removed, it must be patently clear that the caveat cannot stand either because there was no ground for lodging it at the outset or because any such ground no longer exists.[7] In addition, the court has a residual discretion not to uphold a caveat but that is exercised cautiously, as when the caveat could serve no useful purpose or alternative safeguards are available. In Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd, the Court of Appeal said:5We are of the view that in the dictum in Sims v Lowe Somers and Gallen JJ were concerned with the situation which was then before the Court and were not putting their minds to a situation in which there is no practical advantage in maintaining a caveat lodged by someone who could properly claim a caveatable interest. In such circumstances the Court retains a discretion to make an order removing the caveat, though it will be exercised cautiously. An order will be made for removal only where the Court is completely satisfied that the legitimate interests of the caveator will not thereby be prejudiced. If, on the facts of a case, it can be seen that the caveator can have no reasonable expectation of obtaining benefit from continuance of the caveat in the form of the recovery of money secured over the land or specific performance of an agreement or if the caveator's interests can be reasonably accommodated in some other way, such as by substituting a fund of money under the control of the Court, then it may be appropriate for the caveat to be removed notwithstanding that the right to the claimed interest is undoubted.[8] To establish a reasonably arguable case there must be evidence tending to prove the facts relied on. Assertion, whether in pleadings or affidavit, is not enough. The evidence need not be as extensive as that given in a hearing on the substantive merits. It may be circumstantial. But if there is no evidence to prove the facts contended for, the caveator will not have made out a reasonably arguable case for those facts.5 Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.Background[9] The North Shore Aero Club, an incorporated society, has owned and operated the air field for many years. In the 1990s plans were made for land beside the airfield to be developed as a residential air park. The Rodney District Council's districtplan under the Resource Management Act 1991 was changed to provide for this. Those behind the project at the outset were Pauanui Developments Ltd and Redvale Lime Company Ltd. There have been a number of agreements between the club and the developers, providing for the development of the adjoining land for residential use in stages to agreed designs, and allowing for access from the proposed air park to the air field. One of these agreements is the North Shore Air Park Development Agreement of 24 April 2004 between the club and the developers. Sunrise 9 Trustees Ltd has taken over the development from Pauanui Developments Ltd and RedvaleLime Company Ltd. The club accepts Sunrise's position that it is subject to theburdens and entitled to the benefits of the North Shore Airpark Development Agreement.[10] The development by Sunrise is in three stages. It started with Stage 2, then Stage 1, with Stage 3 the last. In early 2015, when it was to settle the sales of 29 lots in Stage 2, there was a dispute. The club alleged that Sunrise had changed design drawings without its consent, when that was required. The club began a judicial review proceeding alleging that the issue of titles for Stage 2 was unlawful for failure to comply with a rule in the Rodney District Plan which required the developer to provide the Auckland Council as consent authority with evidence of an agreement with the club that the lots in a subdivision had guaranteed access to the air field for the planned taxiways. The Council, the Registrar-General of Land and Sunrise were parties. The club sought an interim injunction. This led to a mediation between the club and Sunrise and that, in turn, resulted in the club and Sunrise making the deed of settlement of 25 March 2015.6[11] In summary the deed of settlement provided how the parties were to deal with proposed changes to design drawings. Sunrise was to notify the club of any proposed6 North Shore Aeropark Ltd, a land-holding entity for the air park, is also a party to the deed but it has not taken any part in this application.changes, the club was to respond in ten working days, Sunrise within a further five working days. The parties agreed to act with urgency. The club was not to withhold its consent to changes unreasonably. In addition, amongst other things, within 10 working days of the agreement (8 April 2015) the club had to give Sunrise an easement or a similar conveyancing mechanism, which would allow owners of lotswithin Sunrise's development to have aircraft access to the air field. The club undertook not to oppose Sunrise's resource consent application for furtherdevelopment on the land for Stage 3 of the development. That was Lot 85, which has been caveated. The club agreed to discontinue the judicial review proceeding, each party paying their own costs.[12] The deed included:Incentives for Title Issuance21 In consideration for the support and co-operation set out in preceding clauses of this Deed of Settlement, Sunrise shall make the following payments in the following circumstances:(a) Sunrise shall pay to the Club $100,000 inclusive of GST upon issuance of titles for 11 subdivision lots including within Stage 1, being Deposited Plan 324993 and as shown as the parcel of land marked in yellow on Annexure E to this agreement.(b) Sunrise shall pay the Club $100,000 inclusive of GST upon the settlement of all 11 lots referred to at 21(a) above.(c) Sunrise shall pay $100,000 to the Club, inclusive of GST within four months of the issuance of titles for all 11 subdivision lots included within Stage 1, being Deposited Plan 324993 and as shown as the parcel of land marked in yellow in Annexure E to this agreement.22 Sunrise accepts that the Club will have a caveatable interest in lot 87 Deposited Plan 480326 shown at annexure D. The club undertakes that it will only be entitled to register a caveat should Sunrise fail to make any payment under paragraph 21(a) to (c) above.[13] Sunrise has paid the club the first two payments under cl 21 (a) and (b). It paid $100,000 on 29 January 2016 when titles for Stage 1 issued. It paid another $100,000 in February 2016 when the sales of the 11 lots under 21(a) settled. Thefinal $100,000 was due on 21 May 2016 but Sunrise did not pay. The club lodged the caveat in October 2016.[14] Sunrise has refused to pay the final $100,000 because it says that the club breached the settlement agreement by its delays in dealing with the easement and with changes to design drawings. Sunrise's director, Mr Hamilton, says that theclub did not provide a document for the proposed easement in time as required under the deed. Instead, Sunrise prepared the document itself and submitted it to the club for comment and consent. He complains of delays by the club in responding to requests for changes to design drawings and at pointless and trivial objections being raised. On 17 November 2015 the Auckland Council issued a certificate under s 224(c) of the Resource Management Act for Stage 1.7 Titles issued on 21 January 2016. Mr Hamilton says that the time between the s 224(c) certificate and the issue of titles was attributable to delays by the club in dealing with the easement documents. The extra time for titles to issue delayed settlement of sales. Sunrise incurred additional interest charges of $198,708, which it would not have incurred if the club had dealt with the matter in a timely way as required under the settlement deed. The club denies any breach of the deed of settlement.[15] Sunrise has made out an arguable case for breach of contract and did not submit that it had proved its case to any higher standard. While it contested liability and gave evidence to suggest that it had dealt with matters in good time, the club did not submit that Sunrise did not have an arguable case.Does the Aero Club have a caveatable interest?[16] Sunrise says that the deed of settlement does not give the club a caveatable interest in lot 85. While cl 22 of the deed may have contractual effect, Mr Quinn compared cl 22 to an arbitration agreement which gave a right of appeal to the court on questions of fact, citing Carr v Gallaway Cook Allan as an example.8 The reference to the club having a caveatable interest achieved nothing, because the club7 The certificate records the council's approval of the survey plan, that consent conditions havebeen complied with and that measures are in place for ensuring compliance with on-going conditions. The certificate is generally the last approval required of a consent authority before a survey plan can be deposited for new titles to issue.8 Carr v Gallaway Cook Allan [2014] NZSC 75, [2014] 1 NZLR 792.has no interest in lot 85 that meets the requirements for a caveatable interest under s 137(1)(a) of the Land Transfer Act.[17] As to contracts that expressly give a right to caveat, Hinde McMorland & Sim, Land Law in New Zealand says:9Right to lodge a caveat granted by contractA registered proprietor of land sometimes grants the right to lodge a caveat over that land to another person with whom the registered proprietor is contracting. Where the effect of the contract, quite apart from the clause granting the right to caveat, is to confer a caveatable interest on the other person, the clause is otiose. Where the contract does not, apart from the clause, confer a caveatable interest, it is not clear whether the clause is effective to vest a right to lodge a caveat in the other person. Two possibilities should be distinguished.First, it may be that the clause granting the right to caveat necessarily implies that the registered proprietor intended to confer a caveatable interest on the other person. Such an implication should arise only where the nature of the interest that the registered proprietor intended to confer is clear from the contract. Where such an implication does arise, the other person will have a caveatable interest that can be protected in the ordinary way by a caveat.Secondly, the clause granting the right to caveat may occur in a contract in which no caveatable interest of any sort is conferred by the registered proprietor. In such a case the other person has no caveatable interest, and therefore has no right to lodge a caveat under s 137 of the Land Transfer Act 1952. Nonetheless, where that person does lodge a caveat, it is submitted that the clause granting the right to caveat will have some effect. An application by the registered proprietor under s143 of the Land Transfer Act 1952 for removal of the caveat would, it is submitted, be a breach of contract (it being implicit that the registered proprietor would not derogate from the grant of the right to caveat by applying for removal). The caveator would at least have a remedy in damages, and might be able to enjoin the registered proprietor from continuing with the application for removal. However, the clause granting the right to caveat will bind only the registered proprietor, so that third parties would be free to invoke the procedure under s 143 for removal of the caveat, or the procedure under s 145 for the lapse of the caveat.[18] The question here is whether the deed of settlement is in the first or the second class. If the first, an interest in the land can arise only by implication. There are no express words in the deed referring to a recognisable interest in land. There are two9 Hinde McMorland and Sim Land Law in New Zealand, above n 4, at [10.009(y)], cited with approval by Rodney Hansen J in Kilmartin v Monk (2005) NZConvC 194,122 (HC).New Zealand cases where clauses giving a right to caveat a property have been held to give a caveatable interest by implication.[19] In Yuan v T E Construction Ltd the clause said:10The owner authorises the manager to caveat the property and the manager shall provide a release of the caveat upon the performance of the terms andconditions of the agreement to the manager's satisfaction.That was held to give an equitable charge over the property, securing performance of a contractual obligation to pay a share of the proceeds of sale of the property to the caveator.[20] In Kilmartin v Monk a deed of acknowledgment of debt said:113. The vendor shall be entitled to register and maintain a caveat against (address given) to secure his interest under this agreement until the debt is paid.4. The borrower shall upon request by the lender execute a second mortgage over (address) to secure the debt advanced by the lender. The lender shall hold the said mortgage unregistered and unless default has been made in payment of the debt on the due date.Rodney Hansen J held that cl 3 conferred a caveatable interest by implication.[21] These decisions drew on judgments from New South Wales: Kingstone Construction Pty Ltd v Crispel Pty Ltd12 and Troncone v Aliperti.13 Contracts under which debtors allow their creditors to caveat their properties appear to be more common in New South Wales. In some cases following Troncone v Aliperti the courts have readily found interests by implication. In Coleman v Bone, McLelland CJ in Eq said:14So far as the "caveat" is concerned, it has been held by the Court of Appeal (in Troncone v Aliperti ) that if in a contract between A and B, A grants Bauthority to lodge a caveat in respect of property of A, that grant carries with it by implication such estate or interest in the property as is necessary to10 Yuan v TE Construction Ltd HC Auckland CIV-2003-404-3019, 12 August 2003.11 Kilmartin v Monk, above n 9.12 Kingstone Construction Pty Ltd v Crispel Pty Ltd (1991) 5 BPR 97,424 (SC).13 Troncone v Aliperti [1994] NSW ConvR 55-703, (1994) 6 BPR 97,455 (CA).14 Coleman v Bone (1996) 9 BPR 16,235 at 16,239 (SC). Iaconis v Lazar [2007] NSWSC 1103, (2007) 13 BPR 24,937 at [23] is to similar effect.enable that authority to be exercised. Where the authority to lodge a caveat is given in connection with an obligation by A to pay money to B, and there is no sufficient indication to the contrary, the implication is that the estate or interest granted is an equitable charge to secure payment to B of thatmoney[22] There are, however, cases going the other way. In Taleb v National Australia Bank Limited, Bryson AJ said:15[61] The circumstances that there was a debt and that there is to be a caveat, together with the nature of the caveat, certainly direct attention to whether it was intended that the debt should be protected by a charge or some other interest. It is quite likely that there was some such intention in the mind of one party or of both, but if that intention is not found expressed or by implication in their document, there is no equitable interest. Authorisation to lodge a caveat does not create by necessary implication the conclusion that there must have been an intention to create an equitable interest, and that there must have been the further intention that that interest should be a charge over the property.[63] My experience with commercial documents has shown that the advantage sought by provisions such as these is not always the advantage of owning an equitable interest such as a charge; there are real advantages in having a caveat on the register and impeding the registered proprietor's dealings in that way, whether or not one ownsan interest in the land; once a caveat is lodged it is a complicatingfactor and an impediment for the registered proprietor's dealings,and getting rid of the caveat involves a certain amount of difficulty. The conclusion that contractual authorisation to lodge a caveat means what it says and no more is not irrational at all. Registered proprietors may agree to put up with an inconvenience as a term of their dealings, and in my experience from time to time they do.[23] Clearly each agreement turns on its own terms. The Australian decisions are hard to reconcile. In Taleb v National Australia Bank this clause was held not to create any caveatable interest in land:1.3 The Debtor will grant to the Creditor the right to register a Caveatover the Debtor's interest in property located at [address] ("the secured property").On the other hand, in Troncone v Aliperti the New South Wales Court of Appeal held that the following did confer a caveatable interest:15 Taleb v National Australia Bank Ltd [2011] NSWSC 156, (2011) 82 NSWLR 489 at [61] and [63].The Debtor authorises the Creditors to lodge a Caveat on any property owned by the Debtors (sic) to protect his interest.[24] In Troncone v Aliperti Mahoney JA said:16It is a fundamental principle of construction that "Whoever grants a thing isdeemed also to grant that without which the grant itself would be of noeffect". (Cuicunque aliquis quid concedit concedere videtur et id sine quo res ipsa esse non potuit): Broome's Legal Maxims 9th ed, p 307. A caveat cannot be entered against land unless the caveator has the relevantproprietary interest in the land Therefore, unless there be evident anintention to the contrary, the grant to the creditors of an authority to lodge a caveat on the relevant property carried with it by implication such an estate or interest in land as was necessary to enable the authority to be exercised. There was, in the present case, no intention to the contrary. Indeed, it might be thought to involve deception or worse if Mr Aliperti had intended to authorise the lodgement of a caveat but to withhold the creation of the interest in the land necessary for that to be done.[25] That applies to this case as well. In cl 22 Sunrise expressly accepted that the club will have a caveatable interest in lot 85. Sunrise cannot both accept that the club has a caveatable interest and also deny that there is a caveatable interest under the agreement. That is reinforced by the second sentence in cl 22. While the first sentence provides for a caveatable interest, there is a restraint on lodging a caveat until Sunrise defaults in making any payment. That recognises that the club has an interest in the property which may be protected by a caveat, even before the right to caveat arises.[26] While the agreement provides for a caveatable interest in the property, it does not specify the particular interest. The right to lodge a caveat under cl 22 is clearly intended to provide the club with security for payment. The right arises only if Sunrise defaults in payment under cl 21. There is no right to caveat for breach ofSunrise's other obligations under the agreement or to support any other interest ofthe club. Clauses 21 and 22 are to be read together and are in a distinct section of the deed. Given that the right to lodge a caveat arises upon default, as a matter of implication the club cannot keep the caveat on the title once any default has been remedied. To allow the caveat to stay on the title after any defaults are remedied goes beyond the purpose of giving a right to caveat only if Sunrise is in default.16 Priestley JA concurred. Meagher JA is considered to have gone further than Mahoney JA.Because the right to lodge a caveat is limited to any period of default by Sunrise, the right is security for payment by Sunrise under cl 21. That security is an equitable charge.[27] In Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd (in liq), Peter Gibson J said:17Such a charge is created by an appropriation of specific property to the discharge of some debt or other obligation without there being any change of ownership either at law or at equity, and it confers on the chargee rights to apply to the Court for an order for sale or for the appointment of a receiver, but no right to foreclosure (so as to make the property his own) or take possession.In Re Cosslett (Contractors) Ltd, Millett LJ, distinguishing between a mortgage and an equitable charge, said:18The difference between them is that a mortgage involves a transfer of legal or equitable interest to the creditor whereas an equitable charge does not.In Swiss Bank Corporation v Lloyds Bank Ltd, Buckley LJ in the Court of Appeal gave a fuller outline of an equitable charge to similar effect.19[28] Whereas in England a mortgage involves a transfer of ownership to the mortgagee with a right of redemption in favour of the mortgagor, in New Zealand a mortgage is not a transfer of the estate but takes effect as a charge.20 For land under the Land Transfer Act, the distinction between an equitable mortgage and an equitable charge is that an equitable mortgagee has the right to compel the mortgagor to execute a registrable mortgage in accordance with a contract, but under an equitable charge, the chargee cannot require registration of a legal interest. Even though an equitable charge is an interest in land, it does not give any right to registration of an interest under the Land Transfer Act. It is nevertheless a caveatable interest.2117 Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd (in liq) [1985] Ch 207 (Ch) at 227.18 Re Cosslett (Contractors) Ltd [1998] Ch 49 (CA) at 508.19 Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584 (CA, HL).20 Land Transfer Act 1952, s 100; Property Law Act 2007, s 79.21 Hinde McMorland and Sim Land Law in New Zealand, above n 9, at [10.009(o)].[29] The deed of settlement meets the requirements for an equitable charge. The writing requirement of s 25 of the Property Law Act 2007 is satisfied. The land which is to be collateral for the debt is adequately identified. The land, not the proceeds of sale, is to be the security. The charge does not give the club any right to possession of lot 85 or to sell the land without the assistance of the court. The charge can be enforced only by a judicial process such as court order for sale or for appointment of receivers.[30] The parties' clear intentions were to provide the club with an interest in lot85, the interest was to be protected by a caveat, the interest was to operate by way of security only and was to last until all the payments under cl 21 had been made. Given that, the interest under cl 22 is an equitable charge.Is this caveat valid?[31] While the club has a caveatable interest by way of an equitable charge, it has not claimed it in the caveat. It alleges a constructive trust. The caveat accordingly misidentifies the interest the club may claim under the caveat. I can see nothing in the circumstances of this case which could give rise to a claim to a constructive trust. A constructive trust is invariably imposed or recognised as a matter of justice by the law. While an agreement may be the source for a constructive trust, the trust is imposed independently of the intentions of the parties. The rights the club relies on come from the agreed terms of the deed of settlement. The club is asserting a contractually-based claim. But for the agreement there is nothing to require Sunrise to recognise any interests in lot 85 in favour of the club.[32] For the club, Mr Webb referred to the Court of Appeal's decision in Zhong v Wang as showing that a trustee-beneficiary relationship could co-exist with a creditor-debtor relationship.22 In that case it was arguable for the caveator that the registered proprietor was his agent and owed him fiduciary duties, breach of which would be remedied by a finding of a constructive trust against assets acquired by the agent in breach of duty.23 That case is far different from this one. There was never22 Zhong v Wang (2006) 7 NZCPR 488 (CA).23 Citing Attorney-General for Hong Kong v Reid [1994] 1 NZLR 123(PC) for authority.more than an arm's length relationship between Sunrise and the club under the deedof settlement or otherwise. There is nothing in the circumstances of this case to suggest that Sunrise breached any fiduciary duty to the club. Nothing else was suggested to provide any basis for a constructive trust.[33] The caveat is also defective for non-compliance with the requirements to state the nature of the interest claimed with sufficient certainty and to set out how the estate is derived from the registered proprietor. Zhong v Wang is regarded as binding authority for a flexible approach in dealing with the requirements of s137(2). In that case, the caveator claimed "a beneficial interest in the land cestui que trust in which the registered proprietor was the trustee". The Court of Appealsaid:[53] What is important is that the registered proprietor and the Court understand the nature of the interest claimed and the basis of their claim.[54] As a general rule (for s 137(2)(b) purposes) it is sufficient to identify the form of trust alleged. While it would have been preferable for MrZhong's caveats to refer expressly to a resulting or constructive trust, there can be no doubt that an interest of the type to which s 137(1)(a) refers was claimed. In our view, the caveats complied with s 137(2)(b).[55] Applying the same test, did the caveats comply with s 137(2)(c)? In our view, they did. There was a clear link between the named trustee (Mr Wang) and the registered proprietors, of which he was one. The caveatsmade it clear that the interest derived was from Mr Wang's involvement withMr Zhong. The nature of their involvement would have been self-evident to Mr Wang.[34] In this case, given the absence of any trustee-beneficiary relationship (express, implied, resulting or constructive) and the absence of any particulars at all, Sunrise would be at a loss to understand how a caveatable interest by way of a constructive trust could arise. The caveat did not give the registered proprietor sufficient information to assess whether the claim to an interest was viable. The claim of a constructive trust would suggest that some interest outside an agreement had arisen. The wording of the caveat does not direct the attention of the registered proprietor to the deed of settlement.[35] A caveat that does not correctly identify the interest claimed or give the matters required under s 137(2) will not be upheld.24 Accordingly, the club's caveatfails for non-compliance with the requirements of s 137(2)(b) and (c). The club cannot resist the removal of the current caveat.An order under s 148?[36] While failure to comply with the requirements of s 137(2) may be fatal to a caveat, and the court has no power to amend the caveat, a caveator with an otherwise proper case for a caveatable interest may be able to obtain relief under s 148 of the Land Transfer Act:148 No second caveat may be entered(1) If a caveat has been removed under section 143 or has lapsed, no second caveat may be lodged by or on behalf of the same person in respect of the same interest except by order of the High Court.(2) For the purposes of verifying that a caveat does not contravene the prohibition in subsection (1), the Registrar is not obliged to inquire further than the current folium of the register or computer register for the land.[37] In Lowther v Kim Randerson J said:25[18] The Court of Appeal has held that an order under s 148 will notlightly be made. It is an indulgence and the applicant's claim is "scrutinised carefully": Cotton v Keogh [1996] 3 NZLR 1 at p 8. InMueller v Montagnat (1986) 2 NZCPR 520, 523-524 Thorp J reviewed previous authorities. He determined that the Court is given an unfettered discretion under s 148 but the Court will generally have regard to:(a) The strength of the case made by the applicant to support the claimed interest in the land;(b) any explanation for failure to exercise the caveator's rightsunder s 145;(c) whether unavoidable prejudice would be suffered by those who have acted in reliance on the register and in the belief that the caveator was not pursuing the claim.24 Ball v Fawcett [1997] 1 NZLR 743 (HC).25 Lowther v Kim [2003] 1 NZLR 327 (HC) at [18]-[19].[19] Thorp J, rightly in my view, did not accept the submission made to him that an order under s 148 should only be made in exceptionalcases[38] In cases where the courts have recognised that although the caveator has a proper caveatable interest in the property the caveat fails for non-compliance with the form requirements, leave has readily been granted under s 148 as a remedy for what is no more than a drafting error.26 As to the relevant factors identified inMueller v Montagnat27 and Lowther v Kim, I find that the club has a sound case to support a claim for an equitable charge in lot 85. The failure in this case was a drafting one. While Sunrise would clearly prefer to have the title to lot 85 free of the caveat, it cannot complain of prejudice, given that it expressly agreed the club could caveat its title. There is no basis for anyone else to assert any prejudice. This is a straightforward case for allowing a further caveat to be lodged in place of the present one.The exercise of the power under s 143[39] While the current caveat is defective for non-compliance with s 137(2) of the Land Transfer Act, it may be replaced with a further caveat stating that the club has an equitable charge arising out of cl 22 of the deed of settlement. But there are other matters that require consideration.[40] In caveat applications, it is standard to require the caveator to take a proceeding for a decision on the merits of the interest claimed in the caveat. In this case, Sunrise contests that interest, because it says that it has a cross-demand against the club for a greater sum than that owing under the deed of settlement. As the party asserting the interest in the land, the club should start the proceeding and continue it with all due diligence in a court with appropriate jurisdiction. If the club's claim were purely in debt and Sunrise's counterclaim is for less than $350,000, theproceeding may be within the jurisdiction of the District Court under s 74 of the District Court Act 2016. But if the club seeks relief at equity for its equitable charge, seeking an order for the sale of the property or the appointment of a receiver,26 Examples are Ball v Fawcett, above n 24; Cube Building Solutions Ltd v Kingloch Holdings LtdHC Christchurch, CIV-2009-409-935, 15 October 2010.27 Mueller v Montagnat (1986) 2 NZCPR 520 (HC) at 523-524.the matter may have to be brought in this court as the value of the property is likely to exceed $350,000.28[41] Sunrise should also have the option of offering alternative security. That is within the residual discretion in Pacific Homes Ltd (in rec) v Consolidated Joineries. If Sunrise were to pay $100,000 into court or to an agreed stakeholder, pending a further decision of the court or agreement of the parties, that would be anadequate substitute for the club's caveat. I have accordingly tailored the removalorders for these matters.Some incidental matters[42] Sunrise did not submit that by reason of its cross-demand it had an equitable set-off so that the caveat should be removed. The decision of the Full Court of the Supreme Court of Western Australia in Porter v McDonald29 is authority against allowing caveats lodged to secure payment of funds being removed on the grounds of alleged set-off. That is consistent with the approach taken where a mortgagor tries to enjoin a mortgagee from exercising powers and the validity of the powers is not impeached. The standard approach is to require the mortgagor to pay the amount secured into court before the mortgagee will be restrained. The existence of a cross-demand or an equitable set-off does not change the position.30[43] If I had not found that the club had a caveatable interest in the property, I would need to consider whether Sunrise could apply for removal of the caveat in breach of contract. Sunrise accepts that it did agree to the caveat being lodged and that its application to have the caveat removed is in breach of contract. Its argument was that because there was no caveatable interest under the deed of settlement, the breach is harmless, and the club will suffer no loss through the caveat being removed. That argument misses the point that Sunrise agreed to an impediment being placed on its title and while the caveat is there it is an impediment on its own ability to deal in the property, including offering it as security to financiers. There is no reason why it should not be held to its bargain. In those circumstances I would28 District Court Act 2016, s 76 (2).29 Porter v McDonald [1984] WAR 271 (SC).30 Parry v Grace [1981] 2 NZLR 273 (HC).not have ordered removal of the caveat. In this regard I follow the views of NeilCampbell QC in "Contracting around the Caveat".31[44] As to costs, the club has prevailed in that its right to caveat the title has beenupheld. Sunrise's purpose was to obtain a ruling that the club had no right to caveat the title. It has not succeeded, even though it has shown that the present caveat is defective.Outcome[45] I make these orders:[a] Caveat 10594258.1 lodged against identifier 70549 will be removed, with effect from 28 August 2017.[b] Notwithstanding that removal, North Shore Aero Club Incorporated may lodge a second caveat, relying on its equitable charge under cl 22 of the deed of settlement of 25 March 2015.[c] It is a condition of the order that the Aero Club begin a proceeding in a court of competent jurisdiction against Sunrise seeking payment of $100,000 under cl 21 of the deed of settlement enforcement of its equitable charge. It must begin that proceeding by 15 September 2017 and must pursue it with due diligence.[d] The replacement caveat will be removed upon Sunrise 9 Trustees Ltd paying into court or to an agreed stakeholder the sum of $100,000 plus interest at 5 per cent from 21 May 2016 to the date of payment into court or to an agreed stakeholder to hold pending further order of the court or the agreement of the parties.31 Neil Campbell "Contracting Around the Caveat" in David Grinlinton (ed) Torrens in the 21st Century (LexisNexis, Wellington, 2003) at 215. See also the second class in the extract from Hinde McMorland and Sim Land Law in New Zealand, above n 4, at [10.009(y)] (quoted at [15] above).[e] Leave is reserved to apply further, in particular, if the club does not issue a proceeding against Sunrise 9 Trustees Ltd within time or it does not pursue the proceeding with due diligence.[f] Sunrise 9 Trustees Ltd will pay North Shore Aero Club Incorporated costs on the removal application. If the parties cannot agree costs, memoranda may be filed...Associate Judge R M Bell