Vol 22 (2025) - Issue 4

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Equitable Liens over Partly Completed Items: The Divergent Answers Offered by New Zealand and Australian Courts

Synopsis
New Zealand suffered a recent series of financial collapses of builders of modular homes, known as ‘tiny homes’. In 2023, two first instance decisions held that purchasers of tiny homes had an equitable lien over partly completed homes to the extent of the amount they had paid towards the purchase price. These decisions followed the High Court of Australia’s reasoning in Hewett v Court which also recognised an equitable lien in this context. In Francis (as liquidators of Podular Housing Systems Limited (in liq)) v Gross, New Zealand’s Court of Appeal overturned one of those first instance decisions by clarifying that purchasers do not benefit from an equitable lien over partly completed modular homes and they will be unsecured creditors in a liquidation unless they have contracted for a security interest.
In doing so, the New Zealand Court of Appeal rejected the High Court of Australia’s approach. The Court of Appeal concluded that there is no principled basis for recognising a lien in this context and took an orthodox approach, rejecting the logical complexities an equitable lien would introduce to New Zealand’s insolvency priority regime.