Three Chicks Ltd v Nz Buildmg and Projects Ltd Hc Ak

JurisdictionNew Zealand
CourtHigh Court
JudgeMatthews
Judgment Date30 Sep 2011
Neutral Citation[2011] NZHC 1074
Docket NumberCIV-2011-404-005417

[2011] NZHC 1074

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-005417

BETWEEN
Three Chicics Limited
Applicant
and
NZ Building and Projects Limited
Respondent
Appearances:

SA Grant and EA James for Applicant

G Bogiatto for Respondent

Counsel

Sandra Grant, PO Box 4338, Auckland. Email: sgrant@shortlandcha1nberssco.nz

E A James, PO Box 4338, Aucltland. Email: ejames@shortlandchambers.co.n

JUDGMENT OF ASSOCIATE JUDGE Matthews

1

The applicant is the registered proprietor of a prope1iy in Browns Bay, Auckland. On 14 June 2010 it entered a contract with a building company to erect on the property a residential dwelling. In November 2010 the building company assigned the contract to the respondent. The respondent continued with the building and by June 2011 construction was at an advanced stage, though there is a dispute between the parties about whether all work under the building contract has been completed, and whether some work has been satisfactorily undertaken. The respondent maintains that there is a sum of money still owing under the building contract; conversely the applicant maintains that it is owed monies by the respondent which exceed any residual sum owing under the contract, because it has expended monies repairing what it believes to be faulty workmanship and completing some works which were specified under the contract but remained incomplete by June. It was common ground that in June the respondent left the site and has not returned.

2

On 7 August 2011 the applicant entered an agreement to sell the prope1iy to a third party. On 26 August the respondent lodged a caveat against the title claiming an estate or interest in the land in the following terms:

A beneficial interest in the land arising from a constructive trust and/or resulting trust in which the registered proprietor Three Chicks Limited is the trustee and the caveator NZ Building and Projects Limited is the beneficiary.

3

This application for an order removing the caveat from the title was filed on 2 September 2011. It was heard on an urgent basis but after due time for the applicant and the respondent to file and serve affidavits pursuant to timetabling directions.

4

It is convenient to refer first to the argument presented by the respondent in suppo1i of its position that it has a caveatable interest in the land.

The respondents argument
5

Although the caveat itself states alternative reliance on a resulting trust, Mr Bogiatto rested his case entirely on there being a remedial constructive trust in favour of the respondent. By reference to Sims v Lowe, 1 Mr Bogiatto submitted that there exists an arguable basis for the imposition of a remedial constructive trust, and if that arguable case is found the caveat should remain, the test being that removal should not be ordered “unless it is patently clear that the caveat cannot be maintained”.

6

The basis upon which Mr Bogiatto argued that a remedial constructive trust had arisen may be summarised largely in his words thus:

  • (i) The applicant has received the benefit of the respondent's labour and materials supplied.

  • (ii) The applicant has sold the prope1iy and will be receiving payment.

  • (iii) The applicant is intending to retain the benefit of the labour and materials supplied to the respondent.

  • (iv) This results in an enrichment of the applicant in respect of the respondent's labours to the detriment of the respondent and in the absence of juristic reason for the enrichment.

  • (v) The circumstances therefore give rise to an unjust enrichment or unconscionability by the applicant to the detriment of the respondent.

  • (vi) It is submitted that these circumstances prick the conscience of the applicant such that the Comi may impose a remedial constructive trust in favour of the respondent against the applicant.

7

Mr Bogiatto drew my attention to Commonwealth Reserves I, LC v Chodar2 and Fortex Group Ltd (in receivership and liquidation) v Maclntosh. 3

The applicants case
8

The applicant's position is that the dispute between the paiiies is based upon a contract, and the provision of work and materials pursuant to that contract does not create a situation where equity will find a constructive trust in favour of the provider. Mrs Grant drew my attention to Re PT Steven Earthmoving Pty Ltds Caveat, 4 where Stable J said:

The central fact is whether the caveator, an earthmoving contractor, has by virtue of his contract and work done under it an estate or interest in the land on which he is working to enable him to put a caveat upon it, … such a contractor, who has been granted possession of the site to enable him to execute the works, has no estate or interest in the land …

9

Even though the contract in question in that case contained a clause expressly stating that possession of the site conferred on the contractor a right only to such degree of possession as should be reasonably necessary to execute the contract works, the Court did not place any reliance on this; the learned author of S Lindsay, Caveats against dealings in Australia and New Zealand (The Federation Press, 1995) at 120 expresses the view that such a clause does no more than state the position that would apply in any event in the absence of an express provision.

10

Counsel then drew my attention to Twenty-sixth Shackle Pty Ltd v Drever. 5 In that case Twenty-sixth Shackle Pty Limited carried out extensive work building three townhouses on a prope1iy, and was to receive title to two of the lots on the plan. It had the right to possession of the land under the contract. It lodged a caveat claiming an interest in the two lots it was to buy. Quite apart from having an interest as purchaser, Beach J expressed the view that the company had a caveatable interest as a consequence of having possession of the land and carrying out work on it. He said: 6

In the present case [the caveator] entered into possession of the land the subject of a caveat and thereafter expended a sum of approximately $750,000 on the construction of the three townhouses on the property. In that situation I consider it is strongly arguable that [the caveator] has had a

caveatable interest in the property from the time it took possession of the property, even though its contract to purchase two of the townhouses was conditional upon the approvals being given to the plan of subdivision.

And further: 7

Clearly [the caveator] has an interest in the land if for no other reason than it is in possession of townhouses two and three and has expended $750,000 in erecting the three townhouses on the land.

11

The learned author of Caveats against dealings in Australia and New Zealand noted that the Judge considered that the caveator's interest arose from the contract of sale rather than the joint venture, but expressed the view: 8

It is difficult to see why it cannot be argued that a similar interest should be inferred in favour of a builder who has made substantial improvements to land.

12

Mrs Grant distinguished this case on the basis that under the arrangement between the parties Twenty-six Shackle Pty Ltd was to obtain title to the land, with the purchase price being satisfied by the construction of the townhouses, and a large sum of money had been expended pursuant to that obligation, whereas in the present case there is no contract of sale to the caveator and no joint venture agreement, nor a charging clause in the contract between the applicant and the respondent. Thus she submitted that there is no basis upon which an equitable interest in the applicant's land had arisen. She submitted that all the respondent ever had was a licence to enter the land which was revocable at will and which had, in any event, terminated when the respondent left the site. 9

13

Mrs Grant advised that she had not been able to find any case law where a caveat had been upheld in favour of a contractor on land for services and materials supplied, as in the present case; neither did the respondent cite any suppmiing case to me, and my own research has not located any case where this has occurred.

14

There is authority in New South Wales that the existence of a debt owed to a builder is a personal contractual claim and does not create an estate or interest in land which would support a caveat; Frankcombe v Foster Investments Pty Ltd.10

15

Mrs Grant submitted that there are sound policy reasons for the Court to find that in the circumstances of this case there is not a constructive trust in favour of the respondent of an interest in the applicant's land. The reasons she cited are:

  • (a) An argument that a constructive trust arises in favour of a contractor who works on a prope1iy would apply equally to any contractor, for example plumbers, electricians, painters and landscapers, and thus be of wide-ranging effect.

  • (b) If the paiiies had intended the...

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