Equitable Liens Revisited

UPDATE

One of the cases, Podular (Francis v Gross) was appealed to the Court of Appeal ([2024] NZCZ 528). It came to a different view to that reached in the High Court. The Court of Appeal held that “the better view” was that there was no equitable lien over the partly-completed modules. The decision has some significant element of policy and judicial deference to Parliament.

By way of the Court’s own summary (at [11]) in rejecting the equitable lien:

• To hold otherwise would make an unjustified distinction between customers who had paid deposits but whose modules had not been commenced (no lien) and those who had partly completed pods (equitable lien).
• The implications of upholding an equitable lien were uncertain in scope: to what items should such a lien apply?
• The equitable lien was not supported by New Zealand case law and an Australian case relied on by the High Court to support the lien was not clearly on point.
• Parliament had provided layby sale protection up to $30,000 by considered legislation. By analogy, any extension of protection should also be by Parliament, not the Courts.
• Recognition of an equitable lien ran across existing statutory priority schemes, notably the Personal Property Securities Register and Schedule 7 of the Companies Act 1993. Any adjustment of priorities once again was for Parliament not the Courts.

The decision is something of a blow for those prejudiced by modular home failure in this particular case but understandable in the wider context of providing a principled approach to priorities.