Navilluso Holdings Ltd v Davidson Hc Nap

JurisdictionNew Zealand
CourtHigh Court
JudgeOsborne
Judgment Date23 October 2012
Neutral Citation[2012] NZHC 2766
Docket NumberCIV-2012-441-000550
Date23 October 2012

[2012] NZHC 2766

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2012-441-000550

BETWEEN
Navilluso Holdings Limited
Applicant
and
Anthony John Davidson John Laurence Armstrong Stuart Gordon Kinnear as trustees of the Caroline Trust No 2
Respondent

M E J Macfarlane for Applicant

M B Lawson for Respondents

Application that caveat not lapse — respondents were trustees of a trust that owned caveated property — associated company operated its business from the property — subsidiary of applicant entered into agreement with associated company to lease the property — under agreement, trustees agreed to register encumbrance against certificate of title but didn't, despite efforts of applicant — dispute procedures invoked — whether reasonably arguable case for interest claimed in caveat.

At issue was whether Navilluso had a reasonably arguable case for the interest claimed in the caveat.

Held: As a part of their contractual commitments, the parties clearly intended to have a binding commitment by the trustees (as encumbrancer) to Navilluso and its associated persons (as encumbrancees). In the months after the agreement was executed, the parties acted upon it and implemented its terms, save that the trustees did not execute and register an encumbrance instrument. This accordingly was a case where the Court was obliged to strive to uphold the agreement (Australian Securities and Investments Commission v Fortescue Metals Group Ltd).

The $460,000 figure which was transferred from the agreement into the draft encumbrance instrument was of no assistance to Navilluso in its defence of the caveat. The payments under the agreement of up to $460,000 were payments flowing from Tumu to the trustees, not by the trustees to Navilluso or Tumu. There was an objective standard of reasonableness which the Court had to take to fill what the trustees were required to identify as to the nature and amount of security in the encumbrance instrument. Naviluso and its associated persons as encumbrances would be taken to have not been concerned as to the precise (nominal) amount to be identified ( Jackson Mews Management Ltd v Menere). The obligation was on the trustees to complete the relevant part of the encumbrance instrument by inserting the words reflecting nominal consideration and this would give legal effect to the intention of the parties to be bound by the agreement. Navilluso's draft version of the easement instrument was irrelevant

An “entire agreement” clause such as in the agreement here, would not usually prevent the identification of terms arising from the construction of the agreement itself ( Hart v MacDonald), and did not purport to exclude terms implied from the agreement itself. There was a term to be arguably implied in this case precisely because it met the requirements for a term to be implied on the face of the contract itself. Navilluso had established a reasonably arguable case for the interest claimed in the caveat.

Order that caveat not lapse.

JUDGMENT OF ASSOCIATE JUDGE Osborne

[as to caveat lapsing]

Introduction
1

The applicant seeks an order that a caveat not lapse.

2

In its caveat, lodged on 11 February 2011, the applicant claimed an estate or interest:

Pursuant to an agreement signed by the Registered Proprietor … dated on or about 10 January 2011, the Registered Proprietor irrevocably and unconditionally covenanted to register an encumbrance in favour of the Caveator being Navilluso Holdings Limited over the Registered Proprietor's land contained in certificate of title 323998.

3

The key issue between the parties has been whether a contract between them gave rise to a registrable interest. The issue is legal, not factual. There is no

The facts
4

The respondents (“the trustees”) are trustees of a trust associated with the Kinnear family.

5

The trustees own a property in Hastings whose title has been caveated by the applicant, Navilluso.

6

The Kinnear interests control a company, Fernwood NZ Ltd, which operates its business on the property, making wooden bins and other products.

7

Navilluso controls another company, Tumu Timbers Ltd. Tumu, from premises in Hastings, manufactures bins particularly for the pip fruit industry.

8

The agreement referred to in the caveat is a written agreement dated 10 January 2011 which was entered into by:

  • • Tumu;

  • • Fernwood;

  • • The trustees; and

  • • Richard and Stuart Kinnear (members of the Kinnear family), as covenantors.

The terms of the agreement
9

Under the agreement, Tumu was the “Customer” ; Fernwood the “Supplier” ; and the trustees described as the “Trust”.

10

Clause 10 of the agreement provides:

Lease of capacity and covenants
10.1
    Lease of capacity: In consideration of the Trust procuring the Supplier to enter into this Agreement in order to provide the Customer with additional capacity for the operation of the Customer's business the Customer agrees to pay to the Trust a rental payment of $10,000.00 plus GST per month for the Initial Term. The first such payment will be made on the Commencement Date and all subsequent payments will be made on the monthly anniversary of the Commencement Date. For the avoidance of doubt it is acknowledged that the maximum amount payable by the Customer under this provision is $460,000.00 being $10,000.00 per month for the 46 months of the Initial term. 10.2 Trust covenants: The Trust irrevocably and unconditionally covenants to register against the certificate of title to the Site an encumbrance pursuant to which the registered proprietor of the Site from time to time agrees, in favour of Navilluso Holdings Limited and its Associated Persons, that the registered proprietor shall not permit any of the following activities to be conducted on or from the Site without the prior written approval of Navilluso Holdings Limited: (a) nailing for the assembly of pallets or Bins; and (b) the supply of components to other manufacturers who have a place of business within the boundaries of the Hawkes Bay. The parties acknowledge that the encumbrance is intended to bind the registered proprietor of the Site from time to time in perpetuity. 10.3 Supplier and Covenantor covenants: In consideration of the Customer agreeing to enter into this Agreement for their benefit (which is acknowledged) the Supplier and Covenantors jointly and severally covenant that they shall not at any time during the term of this Agreement and for a period of two years after expiry of this Agreement be directly or indirectly involved in the assembly of pallets or Bins or the supply of components or pallets or Bins to other manufacturers who have a place of business within the boundaries of the province of Hawkes Bay unless agreed in writing by Navilluso Holdings Limited. This restriction shall apply to any Associated Person of either of the Covenantors.
The facts — continued
11

From the day after execution of the contract (11 January 2011) Navilluso's solicitors sought to obtain the trustees' execution of an encumbrance instrument. The draft instrument was expressly stated to be pursuant to s 101 Land Transfer Act 1952 and adopted the form (2009/6232EF) approved by the Registrar-General of Land. The form which Navilluso wanted executed is that attached to this judgment as Appendix A.

12

In the meantime, issues also arose over manufacturing rights under the agreement.

13

In May 2012 Tumu and Navilluso invoked dispute procedures under the agreement. They referred the trustees' failure to register an encumbrance in favour of Navilluso to dispute resolution, leading ultimately to the appointment of an arbitrator.

14

At the time of this hearing it appears that the trustees may take some issue in relation to the arbitration process but the evidence before the Court indicates that the dispute over the non-registration of the encumbrance is now to be considered as the subject matter of an arbitral process.

Application that caveat not lapse — the principles
15

The principles which I adopt in relation to Navilluso's application are these:

  • (a) The burden of establishing that Navilluso has a reasonably arguable case for the interest claimed is upon Navilluso as caveator;

  • (b) Navilluso must show an entitlement to, or beneficial interest in, the estate referred to in the caveat by virtue of an unregistered agreement or an instrument or transmission or of any trust expressed or implied: s 137 Land Transfer Act 1952;

  • (c) The summary procedure involved in an application of this nature is wholly unsuitable for the determination of disputed questions of fact — an order for removal of the caveat will not be made unless it is clear that the caveat cannot be maintained either because there was no valid ground for lodging it or that such valid ground as then existed no longer does so;

  • (d) When the applicant's burden has been discharged, there remains a discretion as to whether to remove the caveat, which will be exercised cautiously;

  • (e) The Court has jurisdiction to impose conditions when making orders.

16

As these principles indicate, the caveat lapsing jurisdiction is not fertile territory for a respondent's attack on the current state of the law, based on arguments of principle or otherwise as to what the law should instead be. The caveator lodges its caveat in the light of the current state of law and is then entitled, assuming its basic facts are made out, to have its caveated interest recognised as at least arguable. The appropriate jurisdiction in which a respondent should argue for alteration or improvement of the existing legal principles is at a substantive hearing when the Court is equipped to deal with the level of sophistication, including analysis of any policy issues, that is required for a reformulation of legal principles.

The existing principles in relation to encumbrance instruments and covenants in gross
17

As used in land law, a...

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1 cases
  • Navilluso Holdings Limited v Davidson HC Nap
    • New Zealand
    • High Court
    • 23 October 2012
    ...HIGH COURT OF NEW ZEALAND NAPIER REGISTRY CIV-2012-441-000550 [2012] NZHC 2766 Hearing: BETWEEN NAVILLUSO HOLDINGS LIMITED Applicant AND ANTHONY JOHN DAVIDSON JOHN LAURENCE ARMSTRONG STUART GORDON KINNEAR AS TRUSTEES OF THE CAROLINE TRUST NO 2 Respondents 21 September 2012 (Heard at Napier)......

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