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Funder wins round one in battle with developer over caveat

19 May 2023

| Author: Andrea Hilton

Sections 138, 143 Land Transfer Act 2017, Schedule 2 Land Transfer Regulations 2018 – procedure – caveatable interest – lapse of caveat – caveatable interest – agreement to mortgage equitable mortgage -caveat to include description of interest – contract – consideration – cancellation

Pearlfisher Trustee Limited v Mega Capital Group Limited [2023] NZHC 994 [1 May 2023] (Associate Judge CB Taylor)

Note: Under s 143(3), a caveat lapses unless an order to sustain it is made within 20 working days of the caveator giving the Registrar of Land notice of its application that the caveat not lapse

Successful application by Pearlfisher to sustain its caveat over Mega’s land. Pearlfisher is a nonbank lender and Mega is a developer. Pearlfisher agreed to provide Mega with finance for its development. The documentation was prepared and signed by Pearlfisher. Despite attempting to renegotiate the fees, Mega signed and returned the documentation with the fee amounts unaltered. Mega also paid Pearlfisher the “work fee”.

The documentation consisted of an “indicative offer”, “formal offer” and “property finance facility agreement”. The property finance facility agreement contained an agreement to mortgage, the terms of which included payment of fees. Mega did not pay the “arrangement” and “establishment” fees after informing Pearlfisher it no longer required the finance.

Pearlfisher served Mega with a statutory demand when Mega failed to pay the outstanding fees and Mega applied to have it set aside. Pearlfisher also lodged a caveat against Mega’s land and Mega applied to have it lapse. Previously, the court had ordered by consent that the caveat not lapse until further order of the court because there was insufficient time to meet the 20-working-day deadline. Pearlfisher’s application determined that order.

The evidence was by affidavit.

Pearlfisher claimed it had an arguable case that it had a caveatable interest in Mega’s land because it had an agreement to a mortgage. Mega argued Pearlfisher did not have an arguable case because there was no agreement to mortgage but if there was such an agreement, the lack of consideration from Pearlfisher meant there was no contract. The fees were not owing under the contract, it was agreed separately that the fees were payable only on drawdown, the caveat was defective because it did not sufficiently identify the caveator’s interest and Pearlfisher’s application was an abuse of process because it was a party to other litigation on the same matter.

Applicable principles – an equitable interest in land supports a caveat – agreement to mortgage establishes caveatable interest – caveator to demonstrate caveatable interest – only reasonably arguable case necessary – application to sustain caveat not applicable to resolve disputed facts – removal ordered only if clear caveat not maintainable – caveat removable only if no valid ground or valid ground no longer exists – where affidavits conflict court normally favours caveator’s affidavit – court can still critically consider other evidence and deponents’ other statements – discretion to lapse exercised cautiously – removal must not prejudice caveator’s legitimate interests – established requirement to identify interest in caveat interpreted liberally – caveat regime to protect those with proper claim – caveat provides security – abuse of process accusation against party defending proceedings unsustainable -a commitment to act is consideration – cause necessary to unilaterally cancel contract


Held: that Pearlfisher had an arguable case because:

  • Pearlfisher had an agreement to mortgage;
  • Mega’s claim of a reduced fee was inconsistent with the documents;
  • the documents made Mega liable for fees;
  • consideration was Pearlfisher’s commitment to advance the funds;
  • the proceedings were issued by Mega, therefore no abuse of process; and
  • Pearlfisher’s interest was sufficiently identified so the caveat was not defective.


Pearlfisher trustee Ltd v mega Capital group Ltd


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