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Boat Harbour Holdings Limited v/s Steve Mowat Building & Construction Limited

    CA No. 146 of 2011

    Decided On, 13 July 2012

    At, Court of Appeal of New Zealand


    For the Appellant: J Katz QC , A E Hansen, Advocate. For the Respondent: D R Tobin, Advocate.

Judgment Text

Ellen France, J.

A building project goes awry

[1] Dolphin Street Development Ltd (Dolphin) entered into a construction contract with the respondent, Steve Mowat Building & Construction Ltd (the builder), to develop student accommodation on a site owned by Dolphin, which comprised four separate titles.

[2] Dolphin borrowed money to finance the project. The financiers would not lend Dolphin the money it needed without an underwriting agreement. The appellant, Boat Harbour Holdings Ltd (Boat Harbour), underwrote the borrowings. As part of the underwriting arrangements, Boat Harbour entered into an agreement to purchase the site for approximately $4 million plus GST. Boat Harbour then registered a caveat on the titles giving notice of its equitable title under the agreement for sale and purchase.

[3] It soon became apparent there were problems with completion of the project. Ultimately the sale and purchase agreement proceeded as the financiers decided not to release Boat Harbour from the underwriting agreement. Meanwhile, the builder lodged a claim against Dolphin under the Construction Contracts Act 2002. That claim was successful. However, before a charging order was registered, Dolphin and Boat Harbour reduced the purchase price in their agreement for sale and purchase by about $250,000 and brought forward the settlement date. On 18 August 2010 Boat Harbour became the registered proprietor of the land. About a fortnight later Dolphin was placed into voluntary liquidation.

[4] Boat Harbour and the builder then entered into an agreement for the builder to finish the building project. The builder subsequently registered a caveat on the title claiming an interest in equitable fee simple by reason of a trust.

[5] This appeal relates to the builder’s application to the High Court under s 145 of the Land Transfer Act 1952 that its caveat not lapse. That application was heard by Fogarty J who determined that the caveat not lapse.[1] Boat Harbour, the defendant in the High Court, appeals against that decision. The appeal raises issues about the nature of the builder’s interest and whether a builder's claim under sub-pt 6 of pt 6 of the Property Law Act 2007, or under the Construction Contracts Act, was capable of supporting a caveat.

[6] We set out the factual narrative in more detail before discussing the High Court judgment.


[7] As we have foreshadowed, in October 2009 Dolphin purchased some land in Dunedin on which there were four existing homes. Dolphin’s plan was to develop the site and build student accommodation on it. After some initial discussions, Dolphin and the builder entered into a construction contract.

[8] To obtain financing for the project, Dolphin borrowed from Kiwibank and from a company named Viaduct Capital Ltd. The financiers required an underwriting agreement. Accordingly, on 14 October 2009 for a fee of $200,000, Boat Harbour entered into a written sale and purchase agreement to purchase the student housing complex on the later of: 25 June 2010, practical completion, issue of the titles, or local authority code compliance certificate. In the agreement, the purchase price was $4,066,666.70 plus GST. Boat Harbour could be discharged of this obligation by the financiers. The agreement for sale and purchase also dealt with the question of release of the deposit to Dolphin. The deposit in the contract was $450,000. That sum was paid into a solicitors’ trust account. If Boat Harbour was released from the agreement then that sum plus interest was to be paid back to Boat Harbour. If it was not released then the deposit was to be paid over to the vendor, Dolphin.

[9] Boat Harbour lodged a caveat over each title on the site on 27 October 2009.

[10] The construction contract did not go smoothly. In the early days of the project in December 2009 there were meetings between the builder, Dolphin, Boat Harbour and the financiers. The builder became increasingly concerned about delays in payments and delays in approval by the engineer of either variation claims or scope change claims.

[11] In June 2010, the financiers decided not to release Boat Harbour from the underwriting agreement. The underwriting agreement then proceeded. The deposit of $450,000 was paid over to Dolphin.

[12] On 22 June 2010, the builder lodged a claim against Dolphin under the Construction Contracts Act. Ultimately, on 13 August 2012 the adjudicator awarded approximately $200,000 to the builder and approved the issue of a charging order in respect of the site. The builder then applied in the District Court to register that award and sought a charging order. However, the enforcement process did not proceed beyond that point as that process was overtaken by events.

[13] In early August 2010, Dolphin and Boat Harbour varied and then settled their agreement for sale and purchase. The settlement date was brought forward to 18 August 2010 and the price reduced to $3,816,666.70 plus GST. Jonathon Spencer, a director of Boat Harbour, explained the change in timing of settlement on the basis it became apparent it was 'only a matter of time before Dolphin was put into liquidation or the [l]and was sold pursuant to a mortgagee sale'. Either possibility could have jeopardised the agreement to underwrite and, with it, Boat Harbour’s deposit. Mr Spencer said the price reduction factored in 'the cost to complete, consultants costs and the holding costs (... two of the buildings

could ... not [by then] be tenanted until the end of the year)'.[2] Boat Harbour became the registered proprietor of the land. On 3 September 2010, Dolphin was placed into voluntary liquidation.

[14] Boat Harbour then entered into an agreement with the builder to complete the project. As we have noted, the builder registered a caveat against the titles. That caveat was registered on 21 October 2010. The estate or interest claimed was recorded in the caveat as follows:

An equitable estate in the fee simple pursuant to a claim by the Caveator as beneficiary of a Constructive Trust imposed on the Registered Proprietor Boat Harbour ... as Trustee.

[15] The builder’s application for an order that the caveat not lapse was lodged on 24 November 2010.

The High Court judgment

[16] The Judge recorded that three arguments were advanced in support of maintaining the caveat. The first argument was that the underwriting agreement was for below market consideration. Secondly, it was submitted that the settlement on 18 August 2010 was a prejudicial disposition by Dolphin to Boat Harbour over the interests of the builder and others, such as the Inland Revenue Department. Finally, it was argued that acquisition of the land was unjust enrichment. The Judge took the view that the argument based on a prejudicial disposition was the strongest of these three arguments. He dealt only with that argument.

[17] Fogarty J noted that the argument based on a prejudicial disposition relied on ss 344 to 350 of the Property Law Act, sub-pt 6 of pt 6. Those sections provide for the setting aside of dispositions that prejudice creditors.

[18] The Judge did not accept the builder’s criticism of the original purchase price (approximately $4 million). He saw that price as consistent with the purpose of an underwriting agreement. It was a different story, however, in terms of the variation of price and the early disposition of the property. The relevant part of the reasoning is as follows:

[15] The liquidators of Dolphin have not provided any information for this hearing. Some inferences can be drawn from the way the agreement was varied. At the time the agreement was varied Boat Harbour was not obliged to settle. The building was not at the practical completion stage. A consultant Ortus had estimated the cost to complete at $80,000. The survey/title was not completed. The price was reduced by $250,000 of which $90,000 was for further building work. In addition to those costs Boat Harbour was to spend $40,000 to complete chattel purchases. Further, the sum of $50,000 was sought for the additional holding costs of Boat Harbour. I infer that this later sum was to compensate Boat Harbour for the greater interest cost of purchasing the property earlier.

[19] The Judge concluded:

[30] Drawing [the] threads together it appears to be a reasonable argument that this property was deliberately sold by a varied agreement, at a reduced consideration, without advertising, in order to secure advantages to the shareholders and other controllers of Dolphin at the expense of unsecured creditors including the builder ... having a prospect of obtaining some contribution to their debt. Had it been sold for a sum in excess of the debt to the secured creditors it would have produced a fund to make some payments to unsecured creditors, including the builder ... . There is a significant argument that the property was sold below market value on 18 August. I am satisfied that this may well be a case of a prejudicial disposition.

[20] Upon recognition of such a disposition, the Judge concluded it was likely that the varied agreement and the settlement would be set aside and the property vested in Dolphin in liquidation or Dolphin ordered to pay compensation under s 350 of the Property Law Act. The Judge considered that in this sense it was appropriate for the caveat to have described Boat Harbour as a constructive trustee.

[21] Fogarty J said the possibility that the transaction would be set aside and a remedy granted explained the definition in the caveat of the interest as 'beneficiary of a constructive trust' but not the reference to an equitable estate. However, the Judge considered that the just approach was to tolerate the inadequate drafting of the caveat but to control its future by exercising the discretionary power in s 143(2) of the Land Transfer Act. That section provides that the court may make such order 'as to the Court seems meet'. In this context, Fogarty J noted the concession by counsel for the builder that were the settlement price of $3.8 million the market value of the property on 18 August 2010, it would not be a prejudicial disposition. The Court had no expert opinion as to the value of the property on that date. Accordingly, the Judge proposed a regime under which the caveat remained in place while the parties obtained opinions as to the market value of the property on 18 August 2010. The builder was required to incur the costs in the first instance of obtaining an opinion from an independent expert valuer as to the market value of the property on that date.

[22] The Judge also added the liquidators of Dolphin as second plaintiffs to the proceedings.

[23] A valuation was undertaken on behalf of the builder as directed by Fogarty J on 7 April 2011. That valuation puts the market value of the property as at 18 August 2010 as $5 million. The property has been on the market since the commencement of the caveat proceeding. An offer to purchase the property for $3,700,000 plus GST has been received conditional on removal of the caveat. This is the only offer that has been made since an offer of just over $3.9 million plus GST was received in early 2011.

[24] The other development we should mention since the caveat removal proceeding is that the builder has filed a statement of claim against Boat Harbour. The builder avers that both the agreement for sale and purchase between Dolphin and Boat Harbour and the variation of the agreement are dispositions intended to prejudice the builder as a creditor of Dolphin. The relief sought is either an order for compensation under s 348 of the Property Law Act or orders that the land be vested in a trustee for the builder and any other creditors of Dolphin.

A caveatable interest?

[25] Under s 137(1) of the Land Transfer Act, a person may lodge a caveat against dealings if the person has a beneficial interest in the land. Section 137(1)(a) refers to 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; ...

[26] There is no dispute about the principles applicable under s 143 of the Land Transfer Act, which provides for the removal of a caveat. The key principles in terms of this case are first, that the onus under s 143 lies on the caveator to show it has a reasonably arguable case for the interest claimed.[3] Secondly, what the caveator must establish is an arguable case for claiming an interest of the kind in s 137.[4] Finally, even if the caveator establishes an arguable case for the interest in the land claimed, the Court retains a discretion to make an order removing the caveat although it will be exercised cautiously.[5] It is also recognised that the summary procedure for removal of a caveat is wholly unsuitable for the determination of disputed questions of fact.[6]

[27] The key issue is whether it is reasonably arguable that the builder has a caveatable interest. In considering that issue in this case we note first that the builder had notice of Boat Harbour’s interest because of the caveat lodged by Boat Harbour. For completeness, we note that as it transpires, the builder had not only deemed knowledge but actual knowledge of the caveat. That is apparent from the record. The record of the title searches shows the builder’s solicitors searched the titles at a time when the Boat Harbour caveat was registered.

[28] The case turns on whether there is some action by Dolphin or Boat Harbour that arguably gives the builder an interest in the land. There is no question of fraud as none is alleged. Instead, as the case has been argued, two possible routes to a caveatable interest are raised. The first option identified is on the basis of a putative claim under sub-pt 6, pt 6 of the Property Law Act. The second is by means of an institutional constructive trust.

[29] We deal with each in turn.

The effect of a claim under sub-pt 6

[30] Sub-part 6 of pt 6 of the Property Law Act deals with the setting aside of dispositions that prejudice creditors. This part of the Act expands on matters previously dealt with in s 60 of the Property Law Act 1952. Section 60 provided that alienations of property with an intent to defraud creditors were voidable at the instance of the person prejudiced by the alienation. Section 60, in turn, was derived from the Statute of Elizabeth.[7] We first set out the relevant provisions.

The statutory scheme

[31] The purpose of sub-pt 6 is set out in s 344. That section states:

The purpose of this subpart is to enable a court to order that property acquired or received under or through certain prejudicial dispositions made by a debtor (or its value) be restored for the benefit of creditors (but without the order having effect so as to increase the value of securities held by creditors over the debtor’s property).

[32] Section 345(1) spells out when a disposition prejudices a creditor. A disposition of property is not made with intent to prejudice a creditor if it is made with the intention only of preferring one creditor over another.[8] In terms of s 345(1)(c) a disposition of property by way of gift includes:

the disposition made at an undervalue with the intention of making a gift of the difference between the value of the consideration for the disposition and the value of the property comprised in the disposition.

Section 345(2) defines 'disposition' to include:

(a) a conveyance, transfer, assignment, settlement, ... or other alienation of property, whether at law or in equity:

[33] The sub-pt applies only to dispositions of property made after 31 December 2007 as this disposition was. Further, the sub-pt relevantly applies only to a debtor who was insolvent at the time, or became insolvent as a result of making a disposition.[9]

[34] The persons who can apply for an order to have a disposition of property set aside are set out in s 347. Section 347 states:

(1) Only the following may apply for an order under section 348:

(a) a creditor who claims to be prejudiced by a disposition of property to which this subpart applies (whether the disposition was made before or after the debtor became indebted to the creditor):

(b) the liquidator, if the debtor is a company in liquidation or an overseas company being liquidated under section 342 of the Companies Act 1993.

[35] The power to set aside is contained in s 348. First, the Court may make an order on an application and if satisfied that the applicant 'has been prejudiced by a disposition of property' to which the sub-pt applies.[10] Secondly, the order must do one, but not both, of the following:[11]

(a) vest the property that is the subject of the disposition in the person (for any applicable purpose) specified in section 350:

(b) require a person who acquired or received property through the disposition to pay, in respect of that property, reasonable compensation to the person (for any applicable purpose) specified in section 350.

[36] In terms of s 349, a court must not make an order under s 348 against a person who acquired property for valuable consideration and in good faith without knowledge of the fact that it had been the subject of a disposition to which the sub-pt applied.

[37] Section 350 then sets out to whom the property vested or compensation to be paid is payable. Section 350(1) and (2) read as follows:

(1) Property vested, or compensation to be paid, by or under an order under section 348, vests in, or is payable to, the following person:

(a) the Official Assignee, if the debtor is a bankrupt; or

(b) the debtor, if the debtor is a company in liquidation ...; or

(c) in every other case, the person directed by the court under subsection (2).

(2) A direction under this subsection must specify that the property vests in, or the compensation is payable to, the following person (for the following purpose, if any):

(a) a trustee for the debtor's creditors; or

(b) the debtor (for the purpose only of enabling the carrying out of any execution or similar process against the debtor or the administration of a future bankruptcy or liquidation of the debtor or arrangement with the debtor’s creditors).

[38] Section 350(4) states that this section overrides the Land Transfer Act 1952. This clears up a matter of debate as to the interrelationship between s 60 of the Property Law Act 1952 and the indefeasibility provisions of the Land Transfer Act.[12]


[39] We heard argument about the applicability of sub-pt 6. That argument was put in various ways. For example, the arguments canvassed whether the builder was able to make a claim under sub-pt 6, whether the Judge was right that Dolphin was insolvent at the relevant time and whether the evidence supported the Judge’s conclusion that this was a disposition to prejudice creditors. We record that the appellant disputes that an application could be made under sub-pt 6 and disputes that this was a disposition to prejudice creditors. However, our view is that even if a remedy was available under sub-pt 6, the potential availability of that remedy does not mean it is reasonably arguable that this creates a caveatable interest. Accordingly, we deal with the matter on the basis that we assume, without deciding, that it is reasonably arguable that the sale was at an undervalue or that the second transaction was an agreement to avoid or sufficient to be a prejudicial disposition.

[40] The builder’s argument is based on the proposition that sub-pt 6 creates a proprietary remedy. As we understand the argument, the builder says that as soon as a disposition is made that is intended to defeat creditors, those creditors have a proprietary interest. That is a statutory interest which exists independently of any equitable entitlement. It is also argued that sub-pt 6 supports an institutional constructive trust so that the registered proprietor becomes a constructive trustee holding the land for the benefit of the creditors until such time as the claim under sub-pt 6 is resolved. Hence, Mr Tobin for the builder submits the Judge was correct to describe Boat Harbour as a constructive trustee.

[41] We agree with the appellant that this argument necessitates reading up sub-pt 6. A better way of viewing these sections is that they give an inchoate claim to a creditor. That claim does not amount to an interest in land unless and until the court makes an order. Even then, as we shall discuss, the interest is one in favour of the debtor company, not the creditor.

[42] Section 344 provides that the sub-pt has an enabling purpose. Further, the court can order restoration of property or its value. Even if successful, a claim is not necessarily going to achieve a return of property to the builder. Finally, s 350 only comes into operation when a court makes an order under s 348 vesting property.

[43] Accordingly, we do not consider the enactment of sub-pt 6 has altered the effect of its predecessor, s 60, on this aspect. Section 60 described a disposition subject to the section as 'voidable'. For the purposes of the present discussion there has been no change, although the word voidable is no longer used. Certainly, there is no suggestion in the legislative history that it was intended to make a change of this nature.[13]

[44] The discussion of Tipping J in Regal Castings is helpful on this point. In Regal Castings the Supreme Court considered whether the debtor in that case had the necessary intent to defraud. The Court also examined whether an order under s 60 of the Property Law Act in respect of Land Transfer Act land transferred with an intent to defraud creditors was precluded by the principle of indefeasibility. The creditor in that case sought to invoke the in personam exception to indefeasibility. As Tipping J explained:[14]

[148] An in personam claim against a registered proprietor looks to the state of the registered proprietor’s conscience and denies him the right to rely on the fact he has an indefeasible title if he has so conducted himself that it would be unconscionable for him to rely on the register. Such a claim is concerned with the personal obligations of the registered proprietor rather than with the sanctity of their title. A successful in personam claim indirectly affects the registered proprietor’s title, such as when a decree of specific performance is made; but the claim is not a claim to the land as such. It is a claim that the registered proprietor perform the contract of sale.

[45] Tipping J considered that the case was an appropriate one for the use of a remedial constructive trust. His Honour referred to the discussion in Fortex Group Ltd (in Receivership and Liquidation) v MacIntosh where the difference between institutional and remedial constructive trusts was briefly considered.[15] Tipping J said:[16]

In short, an institutional constructive trust arises upon the happening of the events which bring it into being. A remedial constructive trust is created by order of the Court.

It is common ground that if there was a remedial constructive trust here, that would not give rise to a caveatable interest. That is because the interest would not have crystallised at the time the caveat was lodged.[17]

[46] Importantly, for the present case, Tipping J said there were difficulties in viewing the interests of the creditor, Regal Castings, as one of an institutional constructive trust. Tipping J explained:

[162] I consider this case is an appropriate one for the use of a remedial constructive trust. ... There are difficulties in viewing this case as one of institutional constructive trust. Logically the time at which such a trust might have arisen is immediately following the implementation of the transaction. But at that time the alienation was only voidable at best and the potential for its avoidance was contingent upon Regal or another creditor of Mr Lightbody having occasion to take the necessary steps. In a sense, therefore, any institutional constructive trust would itself have been at least initially of a contingent kind and to declare the existence of such a trust would be unconventional. Furthermore, any constructive trust would necessarily have been in favour of Mr Lightbody himself rather than in favour of a particular creditor or creditors generally. They would only benefit through the transmission of the trust to the Official Assignee on Mr Lightbody’s bankruptcy. This route strikes me as artificial and unnecessarily problematic when there is available the much more straightforward course of directly imposing a remedial constructive trust on the trustees of the family trust in favour of the Official Assignee.

[47] Mr Tobin emphasises the latter part of Tipping J’s comment and in particular the reference to the institutional constructive trust as the less straightforward route. We do not see that observation as detracting from the earlier comment that at the relevant time the alienation was 'only voidable at best'. In our view that remains the position on the language used in sub-pt 6. The builder’s interest in the land is, at best, a contingent one.

[48] Mr Tobin also says that sub-pt 6 contains the machinery provisions lacking in s 60. This means, it is submitted, that the problems identified by Tipping J as to who will act as trustee have been resolved. We do not consider that solves the problem for the respondent. The ability is to vest the property in those identified in s 350. That does not contemplate the land being vested in the respondent. If the property is vested in a trustee under s 350(2)(a) that is as a trustee 'for the debtor’s creditors'. Under s 350(2)(b) the property may be vested in the debtor only for the specified purpose, namely, to enable the carrying out of any execution or similar process against the debtor or the administration of a future bankruptcy or liquidation of the debtor or arrangement with the debtor’s creditors.

[49] The builder also says that there is an analogy with the concept of recission. Mr Tobin points to the discussion in the High Court in Trustees Executors Ltd v Eden Holdings (2010) Ltd.[18] In that case, Associate Judge Bell observed that in cases where equity allows recission, this Court has held that the recission is effective from the date it is communicated to the other side rather than from the date of any judgment in subsequent litigation.[19] We do not consider the analogy is apt. It does not deal with the statutory language.

[50] Finally, Mr Tobin says that the builder’s approach is the more efficacious one and supports the purpose as set out in s 344. If the builder does not have a caveatable interest, Mr Tobin points out that land could be sold out from under the creditor. However, that creditor is not without remedy. It may be, for example, that an interim order could be made to protect the position pending resolution of the claim. Alternatively, the construction contract could have included an agreement to mortgage clause or similar provision.

[51] The availability of a remedial constructive trust is a matter of debate[20]and the appellant questions its availability here. However, for present purposes, all we need to say here is that the best that the respondent can hope for is a remedial constructive trust.

[52] For these reasons, we do not consider that the potential for relief under sub-pt 6 gives rise to a caveatable interest.

Is there another basis for a caveatable interest?

[53] The respondent says that even if claims under sub-pt 6 do not give rise to a caveatable interest, there are particular circumstances in this case that support a caveatable interest. The circumstances relied on relate to the adjudication under the Construction Contracts Act. The respondent accepts that if the builder was no more than a creditor, there would be no caveatable interest.[21] However, the respondent says the effect of the adjudicator’s determination under the Construction Contracts Act means the builder was not just a creditor.

[54] Mr Tobin relies, first, on the fact the adjudicator approved the issuing of a charging order in favour of the builder. It is accepted on the basis of Firth Concrete Industries Ltd v Duncan that a charging order may in fact not have been registrable, even if the early settlement had not occurred.[22] However, Mr Tobin argues, the fact the charging order may not have been registrable does not prevent it from being a caveatable interest. The proposition is that any equitable interest in land will support a caveat.[23]

[55] The respondent relies in this respect on the effect of the underwriting agreement on creditors. The respondent also says that Boat Harbour’s actions increased the cost of the building project. That is because Boat Harbour changed the construction timetable to ensure two blocks were finished in advance of the others.

[56] The problem for the builder, in our view, is that none of this alters the fact the builder’s interest is that of an unsecured creditor. The reality is that the charging order was not registered and while the grounds of opposing registration are confined, registration is not automatic.[24]

[57] Mr Tobin relies on the ability to enforce an adjudication award under the Construction Contracts Act.[25] This is a reference to s 50 of the Construction Contracts Act which enables the adjudicator to determine that an associate owner of a construction site is jointly and severally liable with the developer for the debt. However, s 50(1) states that it applies if various conditions are met. Relevantly, s 50(1) provides that the section applies if:

(b) the claimant has sought, in the notice of adjudication,-

(i) a determination of the owner’s liability under section 30(a); and

(ii) approval for the issue of a charging order in respect of the construction site under section 30(b); and

(c) the adjudicator has determined that the respondent-

(i) is liable to pay (whether in whole or in part) the amount claimed in the adjudication; and

(ii) is an associate of the owner.

[58] Relevant to this case, person A is an associate of person B if person A is a nominee or trustee for person B.[26]

[59] Section 30, in turn, states that a claimant may, in the notice of adjudication, seek a determination under s 50 that an owner who is not a respondent is jointly and severally liable for payment and approval for the issue of a charging order for the construction site.

[60] None of this is applicable here, though, as no attempt was made to join Boat Harbour as beneficial owner of the property in the Construction Contracts Act dispute. The point that, in certain circumstances, charging orders can be registered against the property under s 50 remains a theoretical one.

[61] Mr Tobin did not press an argument that an institutional constructive trust may arise following the reasoning of Tipping J in Regal Castings relating to an in personam claim. We agree with the appellant that there are difficulties for the respondent in this respect. As Tipping J notes, the first thing that has to be shown is a cause of action entitling the applicant to the assistance of the Court, indefeasibility issues aside.[27] In the present case the only cause of action is that relating to the claim under sub-pt 6. For the reasons we have discussed the builder has no reasonably arguable interest in the land.

[62] For completeness, we note this is not a case where it is suggested a fiduciary duty may arise because money was paid over to be applied towards a specific purpose.[28] There is no claim for following or tracing assets.[29]

[63] Accordingly, while we are sympathetic to the situation in which the builder, as an unsecured creditor, finds itself we do not consider it is reasonably arguable that either ground advanced supports a caveatable interest.

[64] The builder says that if the appeal is successful, the matter should be remitted back to the High Court. Remittal back would enable the High Court to consider the other two grounds advanced in that Court which Fogarty J did not address. We see no need for that course. Fogarty J did not consider the other two grounds merited determination and nothing has been advanced to us to suggest otherwise.

[65] Because of the position we have reached, we do not need to deal with the other issues raised on the appeal relating to the exercise of the residual discretion and the fact no undertaking as to damages was required from the builder.


[66] For these reasons, the appeal is allowed. The caveat number 8620902.1 shall lapse. The builder was awarded costs in the High Court. That award is set aside. Costs in the High Court are to be reconsidered in light of this judgment. The appellant, having succeeded, is entitled to costs for a standard appeal on a band A basis plus usual disbursements. We make an order accordingly.

1. Steve Mowat Building & Construction Ltd v Boat Harbour Holdings Ltd HC Christchurch CIV 2010-409-2698, 17 February 2011.

2. In an email sent on 6 August 2010, Mr Spencer suggested this breakdown: $90,000 to complete chattel purchase and fit out; $80,000 to complete project works; $30,000 for survey/title/legal work; and $50,000 for contingencies.

3. Castle Hill Run Ltd v NZI Finance Ltd [1985] 2 NZLR 104 (CA) at 104–106.

4. Al

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len v Hogan Developments Ltd (2001) 4 NZConvC 193,420 (HC) at [12]. 5. Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656. 6. Sims v Lowe [1988] 1 NZLR 656 (CA) at 659–660. 7. 13 Eliz c 5 (1571); Regal Castings Ltd v Lightbody [2008] NZSC 87, [2009] 2 NZLR 433 at [4] per Elias CJ; per Blanchard J for Blanchard and Wilson JJ at [73]; see also Tipping J at [126] and McGrath J at [174]. 8. Property Law Act, s 345(1)(b). 9. Property Law Act, s 346(2)(a). 10. Property Law Act, s 348(1)(b). 11. Property Law Act, s 348(2). 12. See the discussion in Regal Castings, above n 7, per Elias CJ at [17]–[22], per Blanchard J (for Blanchard and Wilson JJ) at [71]–[78], per Tipping J at [154] and [156], and per McGrath J at [170] and [193]; and Paul Heath and Michael Whale (eds) Heath and Whale Insolvency Law in New Zealand (LexisNexis, Wellington, 2011) at [2051]. 13. The Law Commission described its proposals for what became sub-pt 6 as 'a reformulation and extension of s 60 ...'. Further, the Commission said: 'The new subpart will put into statutory form much of the common law gloss which the former statutory provision has attracted. It will also clarify procedures ...': Law Commission, A New Property Law Act (NZLC R29, 1974) at [305]; and see explanatory note to the Property Law Bill 2006 (89-1) as introduced, at 69. 14. Citations omitted. 15. Fortex Group Ltd (in Receivership and Liquidation) v MacIntosh [1998] 3 NZLR 171 (CA) at [172]–[173]; see also Commonwealth Reserves I v Chodar [2001] 2 NZLR 374 (HC) at [39]. 16. Regal Castings, above n 7, at fn 194. 17. The respondent refers in this context to Philipiah v Ministry of Health HC Auckland M1038-IM01, 5 February 2002 at [23(c)], applied in Metalplas Engineering Pty Ltd v Ellis HC Auckland M293-IM02, 21 August 2002 and Three Chicks Ltd v NZ Building and Projects Ltd [2011] NZHC 1074; (2011) 12 NZCPR 799 (HC). 18. Trustees Executors Ltd v Eden Holdings (2010) Ltd HC Wanganui CIV-2010-483-101, 12 August 2010 at [62]; overturned on appeal: Trustees Executors Ltd v Eden Holdings (2010) Ltd [2010] NZCA 626 although not affecting this point. 19. At [62], citing this Court’s decision in O’Connor v Hart [1983] NZLR 280 at 295. 20. For example, Jessica Palmer 'Attempting Clarification of Constructive Trusts' (2010) 24 NZULR 113 at 124 notes that the remedial constructive trust 'is a controversial concept in the common law world'. 21. Hinde, McMorland & Sim Land Law in New Zealand (LexisNexis, Wellington, 2004) at [10.010(a)] and Tom Bennion et al New Zealand Land Law (2nd ed, Brookers, Wellington, 2002) at [4.3(6)], citing Holt v Anchorage Management Ltd [1987] 1 NZLR 108 (CA) at 117. 22. Firth Concrete Industries Ltd v Duncan [1973] 1 NZLR 188 (SC). 23. Citing Wellesley Club Inc v Wellesley Property Holdings Ltd (2007) 8 NZCPR 421 (HC) at [37]; Waitikiri Links Ltd v Windsor Golf Club Inc (1998) 8 NZCPR 527 (CA); and Regal Castings, above n 7, per Tipping J at [151]. 24. Construction Contracts Act 2002, s 74. 25. A charging order issued in accordance with the Construction Contracts Act can be enforced as a charging order under the District Court Rules: Construction Contracts Act 2002, ss 77 and 78. 26. Construction Contracts Act 2002, s 7(1)(e). 27. Regal Castings, above n 7, at [157]. 28. For example, as in Zhong v Wang (2006) 5 NZ ConvC 194,208 (CA). 29. Hence, the principles discussed in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] UKHL 12; [1996] AC 669 (HL) do not apply.