IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE	
CIV-2018-404-002463
[2019] NZHC 1862	

IN THE MATTER	of an application by Andrew Taylor for orders pursuant to s 145A Land Transfer Act 1952 in respect of caveat 11149439.1	
BETWEEN	ANDREW TAYLOR
Plaintiff	
AND	EVA NAERA
Defendant	

Hearing:	24 June 2019	
Appearances:	P Stevenson and S Carter for the Applicant Respondent in Person	
Judgment:	2 August 2019	

JUDGMENT OF ASSOCIATE JUDGE SARGISSON

This judgment was delivered by me on 2 August 2019 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

P Stevenson, Auckland
D M A Burgess, Auckland

TAYLOR v NAERA [2019] NZHC 1862 [2 August 2019]

[1]	At issue is a caveat (caveat number  11149439.1) lodged by the applicant,  Mr Andrew Taylor, over a property at 16 Ireland Street, Freemans Bay. The property is owned by the respondent, Mrs Eva Naera, who is Andrew’s sister.

[2]	Andrew applies for an order pursuant to s 145A of the Land Transfer Act 1952 that the caveat not lapse. His application is opposed by Eva.

[3]	There was a fixture allocated for earlier this year, but Eva failed to file submissions. The Court made an interim order that the caveat not lapse pending further order and allocated a further fixture for the application. The parties have had settlement discussions but to no avail.

[4]	The central questions are twofold:

(a)	The first is whether Andrew has an arguable caveatable interest in the property as beneficiary of an interest pursuant to a constructive trust. His claim is that he contributed indirectly to the property when it was owned by the parties’ mother and that he had a reasonable expectation of an interest in the property that equity must recognise.1 He contends that Eva was fixed with knowledge of the interest when she acquired her interest in the property from their mother and she must now yield to his interest.

(b)	The second question is whether, even if the interest Andrew claims is arguable, the Court should use its discretion to order the lapse of the caveat.2 Eva (who is self-represented) deposes that she put the property on the market in February 2018 and entered into a binding agreement for sale and purchase in April 2018 before the caveat was lodged. She has been unable to settle the purchase and wishes to do so. The purchaser has not taken steps to remove the caveat and is waiting for her to take the necessary steps. She lodged a notice with the District

1	Relying on principles established in Lankow v Rose [1995] 1 NZLR 277 (CA).
2	See Botany Land Development Ltd v Auckland Council [2014] NZCA 61; (2014) 14 NZCPR 813 at [24].

Land Registrar for removal of the caveat and Andrew has responded with his application for an order that the caveat not lapse.

[5]	For reasons that follow, I find that Andrew has made out a reasonably arguable case for the interest he claims. Counsel for Andrew accepts there is little point in holding up settlement of the sale of the property. She adds the proviso that if the caveat is to be removed there should be a payment into Court of a sum of $120,000 to be held as security pending resolution of the parties’ dispute over the claimed interest (or further order). Eva is reluctant to pay security, but advises she will do so if required, to enable settlement with her purchaser to proceed. She acknowledges that she will need to instruct a conveyancing solicitor and she is willing to give an undertaking regarding the provision of security from the proceeds of sale. She advises (and counsel for Andrew accepts) that she has no other means of providing security.

[6]	I propose to issue this judgment as an interim judgment and to list the matter for review and further orders on 8 August 2019 at 12.15 pm. Eva is to arrange for her (newly instructed) solicitor to appear, at which time I will make further orders. Counsel for Andrew should also appear.

Background

[7]	Eva and Andrew’s mother, Mrs Rihi Taylor, lived in Freemans Bay for many years before she died in 2004. Eva spent the last years of Mrs Taylor’s life living with her at 16 Ireland Street. Eva has lived there ever since. It is not disputed that in 1994 Mrs Taylor relinquished part of her interest in the property to Eva and took a life interest in substitution. Eva acquired an interest as the remainderman. The circumstances of that arrangement – and the basis for Andrew’s claimed interest – are best described by rolling back to the early 1960s when Mrs Taylor acquired her first property in Freemans Bay.

[8]	Mrs Taylor’s first property was at 15 Spring Street. She acquired it in 1961. Andrew helped her to put together the necessary money for the purchase by contributing £200, which was about seven per cent of the overall purchase price. His contribution was provided by the Blind Institute, which required confirmation that the

money would be used for its intended purpose. Mother and son entered into a deed which recorded:

… My son, Andrew Taylor, has provided  two  hundred  pounds [200 pounds] towards the purchase price of the property, and in the event of any disposition of the property I will account to him for his share in full.

[9]	The Auckland City Council wanted to acquire the property for pensioner housing, and Mrs Taylor transferred the property to the Council. In place of the property she moved to another property, at 19 Spring Street, apparently initially as a tenant. But she later became registered proprietor when the property was transferred to her on 14 October 1968.

[10]	Mrs Taylor left 19 Spring Street and was relocated by the Council to 16 Ireland Street (apparently acquired the by the Council in 1969) in 1976. 19 Spring Street was transferred back to Auckland City Council on 25 November of that year. Mrs Taylor lived at 16 Ireland Street as a tenant for a time until the Council agreed to sell the property to her. She took title on 13 May 1982. The title shows she had a mortgage from General Finance which was discharged in 1983.

[11]	In 1994 Eva agreed to pay $110,000 to her mother for the Ireland St property, which was to be met by way of forgiving the entire amount – except for a $10,500 contribution that the council had required Mrs Taylor to pay to secure the right to acquire the property – on a staged basis. Eva says in fact she had paid the $10,500. She signed a deed of acknowledgement of debt for the balance in 1994. By 2002  Mrs Taylor had signed all the necessary acknowledgments of forgiveness of debt and forgiven the whole of the balance.

[12]	Mrs Taylor died in 2004 and title to the property was transferred to Eva.

[13]	Andrew says that throughout the period from 1961 to 2004 it was understood between himself and Mrs Taylor that he would eventually be repaid for his contribution to 15 Spring Street and his indirect contribution from the proceeds that were subsequently applied to 19 Spring Street and 16 Ireland Street. He says Eva knew this because their mother discussed it with a range of people, and the solicitor

who acted throughout for Mrs Taylor and then for Eva was fully conversant with the position and would have shared the information. He says it was a solicitor from the same practice who prepared the 1961 deed. Eva denies all knowledge of the arrangement.

[14]	Andrew also says that he paid rates on one Mrs Taylor’s  properties  at  Spring Street. Along with the initial £200 contribution this contributed to his expectation that an interest would be paid back to him at the time of each disposition. He says although that did not happen it was the enduring understanding between himself and his mother.

[15]	Counsel argues that there is enough in the evidence to raise the real possibility that Eva is fixed with knowledge so as to entitle Andrew to relief by way of constructive trust, in respect of his contribution to the first Spring Street property. This would be in the form of an order that his contribution is traceable as an indirect contribution to the later properties, which was then acquired by Eva on trust for him when she acquired her interest in the Ireland Street property.

Caveats – legal principles

[16]	The pertinent legal principles are not in dispute.

[17]	The onus lies with the caveator, Andrew, to demonstrate he has a reasonably arguable case for the interest he claims.3

[18]	In this case, the interest relied upon by Andrew is his status as beneficiary of a constructive trust over the property. There is no dispute that a constructive trust interest, if proven, is caveatable.4

[19]	A caveat will only be removed if it is patently clear the caveat cannot be maintained because:5

3	Sims v Lowe [1988] 1 NZLR 656 (CA) at 660.
4	Land Transfer Act 1952, s 137(1).
5	Sims v Lowe, above n 3, at 659-660.

(a)	there was no valid ground for lodging it; or

(b)	such valid ground as then existed no longer does so.

[20]	Associate Judge Bell noted in Body Corporate 239331 v Escrow Holdings Forty-One Ltd that “caveat applications are summary and are therefore not suitable for deciding disputed questions of fact”.6 But he went on:7
… On the other hand, the court is not required to accept uncritically as raising a dispute of fact which calls for further investigation, every statement in an affidavit, however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements made by the same deponent or inherently improbable it may be.

…

To establish a reasonably arguable case there must be evidence tending to prove the facts relied on. Assertion, whether in pleadings or affidavit, is not enough. The evidence need not be as extensive as that given in a hearing on the substantive merits. It may be circumstantial. But if there is no evidence to prove the facts contended for, the caveator will not have made out a reasonably arguable case for those facts.

[21]	Even if Andrew establishes a reasonably arguable case, the Court retains a residual discretion, exercised on the balance of convenience, to nonetheless remove a caveat or allow it not lapse.8 This discretion is usually exercised in circumstances where the caveat could serve no useful purpose or alternative safeguards are available.

Constructive trust - legal principles

[22]	A constructive trust interest can support a caveat.9

[23]	The principles applicable to whether the circumstances of this case demand a constructive trust be imposed are laid out in Lankow v Rose and rearticulated more recently in Wakenshaw v Wakenshaw.10

6	Body Corporate 329331 v Escrow Holdings Forty-One Ltd [2017] NZHC 754 at [8].
7	At [8]–[9].
8	See Botany Land Development, above n 2, at [24].
9	See for example Marshall v Bournville [2013] NZCA 271, [2013] 3 NZLR 766.
10	Lankow v Rose, above n 1; Wakenshaw v Wakenshaw [2017] NZCA 252, [2018] NZAR 532.

[24]	Stated briefly, before this Court will impose a constructive trust, Andrew must show:11

(a)	he made a direct or indirect contribution to the property;

(b)	he had an expectation of an interest in the property;

(c)	that expectation was reasonable; and

(d)	his mother (during her life time) would reasonably have been expected to have yielded the interest.

[25]	The Court of Appeal in Wakenshaw v Wakenshaw recently clarified the legal position on contribution. A claimant seeking the protection of a constructive trust must establish their alleged contribution was:12

(a)	a ‘more than a minor’ contribution into the acquisition, preservation or enhancement of specified assets;

(b)	causally related to that acquisition, preservation or enhancement; and

(c)	manifestly in excess of any benefits derived from the arrangement.

Discussion

[26]	I address each issue in turn.

Did Andrew contribute to the property?

[27]	The first issue is whether Andrew adequately contributed directly to the first property, and indirectly to the subsequent properties, so as to take him beyond the legal position of a mere volunteer or a minor contributor.

11	Lankow v Rose, above n 1, at 294.
12	Wakenshaw v Wakenshaw, above n 10, at [25].

[28]	The deed suggests the contribution, though small by today’s standards, was not insignificant in 1961, and that it enabled Mrs Taylor to buy the first property. Given that the contribution would have retained its value commensurate with the value of the first property and the subsequent acquisitions were in the exact same locality it is a reasonable to infer (for the purpose of the application) that the indirect contribution to the later properties was, if not seven per cent of their value, nonetheless “more than minor”.

Was it reasonable for Andrew to expect he had an interest in the property?

[29]	Andrew says that when Mrs Taylor acquired 16 Ireland Street he expected that the £200 he originally contributed and rates which he had paid on one of her properties at Spring Street (with an expectation of an interest) would be paid back to him at the time of each disposition. He says although that did not happen it was the enduring understanding between himself and his mother.

[30]	The terms of the deed make it plainly arguable that Andrew had an expectation of an interest in the first property and that it was reasonable. Mrs Taylor was required under the deed to account for Andrew’s share when the first property was eventually disposed of. That share was used instead towards the replacement properties on the understanding she would eventually account to him. On those facts, it is arguable that he had an expectation he would be repaid from the proceeds of any sale or that his interest would be traceable through to the subsequent purchase of the Ireland Street property.

[31]	As such, it is at least arguable that Andrew had a reasonable expectation that his mother would yield the interest during her lifetime when she effectively disposed of the remainder to Eva.

[32]	It is also arguable that when Eva acquired her interest in the Ireland Street property she had knowledge of Andrew’s interest, and did not acquire her interest as a bona fide purchaser for value. Eva says she paid proper value for what she acquired. She denies she knew anything about her brother’s contribution. Whether or not she is right involves a factual dispute that cannot be resolved in the context of the present proceeding.

[33]	There is some support for Andrew’s position that Eva did have knowledge in the fact that she and Mrs Taylor shared a solicitor regarding the arrangements around Eva’s  acquisition  of  the   property.   The  same  practice  acted  in  fact  for Mrs Taylor on the 1961 deed and the subsequent acquisitions. Counsel for Andrew submits that the solicitor’s file appears to cast doubt on Mrs Taylor’s capacity to provide the relevant acknowledgments. It includes a 2001 file note recording that Mrs Taylor refused to sign the final reduction on the basis that the home was a family home. Counsel for Andrew submits that this supports his account, indicating an arguable ongoing course of conduct by Eva to defeat Andrew’s claim to an interest, and blunting the impact of a letter written by the same solicitor on 10 December 2002 in which he stated “No member of Mrs Taylor’s family nor any other person [than Eva Naera] has any claim at all on the property”.

[34]	Counsel further points to two wills made by Mrs Taylor. The early will is dated 15 December 1976; it acknowledges Andrew’s contributions and leaves everything to him. The second will is dated 23 June 1988. It appoints the Public Trustee as executor and transfers the remainder of the estate to Eva Taylor.

Assessment

[35]	I am satisfied that it is arguable that Mrs Taylor agreed to recognise Andrew’s initial £200 contribution to the acquisition of the first Spring Street property, and possibly also his subsequent contributions to rates, in the form of an interest in the proceeds of the sale of the property or the replacement properties in due course. I am also satisfied that, on the facts, Eva at least arguably knew about this interest. This is not just because Andrew claims that his mother told everyone, but because their solicitor knew about it, and seems to have acted for both Mrs Taylor and Eva.

[36]	For present purposes I must therefore take it that there is a genuine possibility that Eva acquired her interest in the property knowing that Andrew was entitled to expect an interest in respect of his contribution.

The sale to a third party – the discretion to lapse the caveat

[37]	Despite the fact that Andrew has established a reasonably arguable case for the interest claimed, the Court retains a residual discretion, to be exercised on the balance of convenience, to remove a caveat or allow it not lapse.13 This discretion is usually exercised in circumstances where the caveat could serve no useful purpose or alternative safeguards are available.

Assessment

[38]	Counsel for Andrew acknowledges that there is little point in the caveat standing in the way of settlement of the sale, provided a relatively modest sum is provided as security to safeguard Andrew’s claimed interest. Consequently, there is no question that the caveat should lapse. No reason is advanced to suggest Andrew’s interest should or indeed could stand in the way of settlement if the purchaser were to insist on it. The financial impact on Eva of further delay is potentially significant. The only real issue is how should security be provided or whether it should be required at all.

[39]	I am satisfied it is appropriate that security should be provided by way of an undertaking that Eva will pay $120,00 into Court from the net proceeds of sale, to be held in trust on an interest-bearing account, pending further order, to provide security in the event Andrew succeeds in proving the interest he claims. I make the orders set out below.

Orders

[40]	I order as follows:

(a)	I issue this judgment as an interim judgment.

13  See Wellesley Club Inc v Wellesley Property Holdings Ltd (2007) 8 NZCPR 421 (HC) at [23];  citing Pacific Homes Limited (in receivership) v Consolidated Joinery Limited [1996] 2 NZLR 652 (CA) at 656.

(b)	The caveat will stand on an interim basis (pending further order) to allow Eva to arrange for her (newly instructed) solicitor.

(c)	I list the matter for review on 8 August 2019 at 11.45 am. In the meantime, Eva has leave to file and serve a memorandum prior to      8 August 2019:

(i)	confirming the filing and service (by her solicitor) of an undertaking on her behalf that $120,000 of the net proceeds of sale will be held in trust and paid to the Registrar of the Court to be held on interest bearing deposit, pending the Court’s further order; and

(ii)	seeking an order that the caveat lapse.

[41]	I further order:

(a)	Andrew is to file and serve proceedings by 16 August 2019 to establish his claimed interest. An early case management conference is to be allocated at which time consideration can be given to the allocation of an urgent judicial settlement conference if necessary.

(b)	If Andrew fails to file his substantive proceedings by 16 August 2019, or to prosecute his proceeding diligently, Eva has leave to seek further orders to lapse the caveat or to release any sum paid as security by way of memorandum on two days’ notice.

(c)	I reserve costs pending the further orders that will be made.

Associate Judge Sargisson