Andrew v McGinty
[2024] NZHC 1834
•8 July 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-2039
[2024] NZHC 1834
UNDER Part 18 of the High Court Rules 2016 BETWEEN
JENNIFER ANNE ANDREW
Plaintiff
AND
MATTHEW PATRICK MCGINTY
First Defendant
RACHEL HOLLEY MCGINTY
Second DefendantREBECCA EMILY MCGINTY
Third Defendant
Hearing: 4–6 June 2024 Appearances:
T M Molloy for Plaintiff
S L McColgan for First and Second Defendants D J Rooke for Third Defendant
Judgment:
8 July 2024
JUDGMENT OF O’GORMAN J
This judgment was delivered by me on 8 July 2024 at 12 pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
…………………………………
Solicitors/Counsel:
T M Molloy, Barrister, Auckland Spencer Legal, Auckland
S L McColgan, Barrister, Auckland Gibbs Mills Livingstone, Auckland
ANDREW v MCGINTY [2024] NZHC 1834 [8 July 2024]
Overview
[1] This dispute arises, following the breakdown of the marriage between the first defendant, Mr Matthew McGinty, and the third defendant, Ms Rebecca McGinty (referred to below by her maiden name Ms Crowe). The claim is brought by Mr Matthew McGinty’s mother, Ms Jennifer Andrew. The dispute relates to an interest claimed by Ms Crowe in a property at 22 Mareth Street, Panmure, Auckland (the Property). Ms Crowe has lodged a notice of claim against the Property asserting an interest pursuant to s 42(2) of the Property (Relationships) Act 1976 (PRA). The plaintiff seeks an order removing that notice of claim from the title and a declaration that the Property is held on trust for Ms Andrew as sole beneficiary.
[2] Legal title to the Property is held by Mr Matthew McGinty and the second defendant, his sister, Ms Rachel McGinty (Ms McGinty) as tenants in common in half-shares. Both the first and second defendants support their mother’s position.
[3] The issue in dispute is whether the Property is held subject to trust obligations put in place when the Property was first acquired in 2001. The plaintiff contends that her two children each agreed to hold title to the Property on an express trust or, alternatively, the plaintiff owns the entire beneficial interest in the Property on a resulting trust, in circumstances where the purchase money for acquiring it came entirely from the plaintiff and her husband, Mr Patrick McGinty (now deceased). Under Mr Patrick McGinty’s will, his estate (and therefore any interest he had in the Property) passed to Ms Andrew.
[4] In contrast, Ms Crowe claims that Mr Matthew McGinty and Ms McGinty each hold their half-shares beneficially, because the Property was gifted to them (supported by a presumption of advancement). Ms Crowe takes a similar position with the plaintiff’s ongoing investment in the Property, contending that Ms Andrew also gifted more than $300,000 spent on renovations and capital improvements to the Property.
[5] For the below reasons, I am satisfied that the Property has all along been held by Mr Matthew McGinty and Ms McGinty as bare trustees, and the plaintiff is now the sole beneficial owner of the Property.
Factual background
[6] The plaintiff in this case, Ms Andrew, is a retired solicitor. She operated her own practice from home and was practising as a solicitor when the Property was acquired in 2001. She conducted the conveyance herself.
[7] Her husband, Mr Patrick McGinty, was a retired process worker/labourer. Following his retirement in 1999, he undertook a number of projects renovating investment properties. In 2001, he became aware of an estate sale of the Property, being sold by the Public Trust as executor. Mr Patrick McGinty discussed the investment opportunity with his wife and asked her to make a cash offer. The intention was for him to then work on the Property once it was acquired to make it liveable.
[8] On 20 April 2001, Ms Andrew faxed the offer to the Public Trust with a proposed purchase price of $130,000 and a settlement date of 1 May 2001. The Public Trust accepted the offer at that price, but it was agreed between the parties to change the settlement date to 8 May 2001. In order to carry out the conveyance, Ms Andrew opened a file called “P McGinty & J Andrew purchase 22 Mareth Street Panmure”. She kept documents relevant to the Property on that file which has since been discovered in the course of this proceeding.
[9] The assigned sale and purchase agreement records the purchaser as “Patrick Denis McGinty and Jennifer Anne Andrew or nominee” with their home address.
[10] Ms Andrew explained that she decided that she wanted the Property held on trust for reasons that were promoted and popular at the time in a book authored by Ross Holmes, barrister and solicitor. Ms Andrew discussed with her husband the possibility of their children holding the Property for them as bare trustees. Ms Andrew gave evidence that she spoke to both of her children before settlement of the purchase to ask them whether they would be happy to hold the Property as bare trustees for their parents. At that time, Mr Matthew McGinty flatted in a house in Bucklands Beach with friends, and Ms McGinty was a professional yachtswoman working overseas. Both asked what holding the Property as bare trustees would require on their part. Ms Andrew explained that they would not have any financial responsibilities because those responsibilities and liabilities would all be met by Ms Andrew and her husband.
They would simply hold title and would have to transfer the title to their parents if requested. Both agreed to hold the Property on that basis. The evidence of Ms Andrew on this point was supported by the witness evidence of both Mr Matthew McGinty and Ms McGinty. Although their recollections have understandably faded over the intervening 23 years, their memories on the key issues were clear and are consistent with contemporaneous and subsequent documentary evidence.
[11] Once Ms Andrew knew that her two children were prepared to take title on that basis, she arranged for the conveyance to be into their names when the Property settled on 8 May 2001. Ms Andrew sent the bank cheque to the Public Trust on the settlement date for $130,094.89. The funds for that bank cheque were provided entirely by Ms Andrew and her husband, with no other parties contributing to the purchase price. No finance was obtained and neither Mr Matthew McGinty nor Ms McGinty provided any funds for the purchase.
[12] In order to record the trust relationships, Ms Andrew asked each of her children to sign a document. Ms Andrew drafted the document that was signed by Mr Matthew McGinty on 9 May 2001. It states as follows:
I, Matthew Patrick McGinty, acknowledge that I hold my half-share of the property at 22 Mareth Street, Panmure as co-trustee with Rachel Holley McGinty, the holder of the other half-share for the benefit of Patrick Denis McGinty and Jennifer Anne Andrew.
[13] Ms McGinty was overseas at the time and did not sign her document until after settlement had been completed and the title transferred. Reflecting a telephone discussion with her mother about what the document should say, Ms McGinty prepared a handwritten document and signed it on 13 July 2001. She posted the original from overseas back to Ms Andrew in New Zealand. That document reads as follows:
I Rachel Holley McGinty acknowledge that I hold 22 Mareth Street, Panmure as trustee for Jenny Ann Andrew and Patrick Denis McGinty.
[14] On 23 May 2001, Ms Andrew issued an invoice for the professional fees acting on the purchase and conveyance of the Property. The invoice is addressed to J Andrew and P McGinty through “R & M McGinty as Trustees for J Andrew & P McGinty”.
The reference line also says, “Re R H McGinty & M P McGinty as nominees of P McGinty and J Andrew — Purchase 22 Mareth Street, Panmure from Public Trust”. The invoice includes GST and disbursements for “search” and “registration and agency”. This invoice was paid directly from Ms Andrew’s personal funds, so the only aspect processed through the trust account was the disbursement payment to the agency.
[15] In cross-examination, Ms Andrew was asked whether any other subsequent payments in respect of the Property were processed through her trust account. Ms Andrew confirmed subsequent payments were not — all material payments were made directly from the private bank accounts of Ms Andrew and her husband.
[16] At the time the Property was purchased, it was a two bedroom state house that was very run down and in need of repair. Mr Patrick McGinty commenced restoration work on the Property to make it fit for habitation. Mr Matthew McGinty had previously been flatting in Bucklands Beach, but his flat had disbanded. He lived with his parents in Point England until the Property was restored to a habitable standard. That work was completed by December 2001. At that point, Mr Matthew McGinty moved into the Property. He invited an old school friend, Mr Crispin, to move in as a flatmate with him, and they shared the costs.
[17] Between late 2001 and early 2005, Mr Matthew McGinty paid a weekly sum of $200 into Mr Patrick McGinty’s bank account, with the narration recording that it was “rent”. Bank statements also show “rent” payments made by Mr Crispin, and then by Mr Saunders (who replaced Mr Crispin as flatmate when he moved overseas).
[18] Throughout this period from acquisition in May 2001 through to 2005, Ms Andrew and Mr Patrick McGinty paid all rates, insurance and other expenses associated with the Property, including all maintenance and the costs of adding a garage and constructing fencing and retaining walls.
[19] Mr Matthew McGinty and Ms Crowe started dating around March 2002. They married on 22 January 2005. Shortly after the wedding, Ms Crowe moved into the Property with Mr Matthew McGinty. One room continued to be rented to Mr Saunders until he moved out in October 2005.
[20] At the time she moved into the Property, Ms Crowe was told that the Property was held on trust. After Ms Crowe moved in, Mr Matthew McGinty’s income from his employment and later from benefits were paid into Ms Crowe’s Kiwibank account. From the Kiwibank accounts, payments continued to be made to Mr Patrick McGinty with a narration of “rent”. Mr Matthew McGinty and Ms Crowe paid for their own electricity and water usage at the Property but, up until 2013, Ms Andrew continued to pay for all maintenance to the Property, including all general rates, water rates and insurance.
[21] Mr Patrick McGinty died on 20 September 2007. After his death, Ms Andrew continued to make improvements to the Property, including undertaking a significant renovation between 2012 and 2013 that cost her over $300,000. By this time, Mr Matthew McGinty and Ms Crowe had four children with a fifth child on the way. The design for these renovations was undertaken with extensive consultation with Mr Matthew McGinty and Ms Crowe, to ensure that additions would meet the needs of their expanding family. Ms Andrew dealt directly with Ben Price, who was the project manager. Ms Andrew paid all invoices directly. For a period of around four months while the building work was undertaken, Mr Matthew McGinty, Ms Crowe and their children moved in with Ms Andrew.
[22] Around this time, Mr Matthew McGinty and Ms Crowe discussed the possibility of buying the Property from Ms Andrew. On 29 March 2012, Ms Andrew emailed them recording their decision to continue paying rent, but with the addition of them taking over rates, insurance, and water rates in lieu of a rent rise. Ms Andrew said that after the house had been renovated, they could again discuss whether they wished to purchase the house with KiwiSaver funds and vendor finance from Ms Andrew (to be secured by a mortgage). That idea was never subsequently revisited.
[23] Mr Matthew McGinty, Ms Crowe and their children moved back into the Property around 24 December 2012, by which time the extension had been mostly completed and the house was a four bedroom, two bathroom house with an additional basement garage and office space. A code of compliance was issued by Auckland City Council for the renovations on 8 January 2014.
[24] Mr Matthew McGinty and Ms Crowe separated in March 2017, and Ms Crowe moved out of the Property at that time. Mr Matthew McGinty has remained in the Property. After their separation, Ms Crowe obtained legal advice and at that point discovered that title to the Property was in the name of Matthew and Rachel McGinty as tenants in common in half-shares. This led to Ms Crowe lodging a notice of claim against the Property, and the plaintiff commencing this proceeding to have that notice of claim removed.
Other work on the Property
[25] It is common ground that Mr Patrick McGinty carried out an extensive amount of renovation work on the Property between when it was acquired in 2001 and when he died on 20 September 2007. Mr Matthew McGinty assisted after-hours and on weekends with that work, both on this Property and also on other investment properties owned by Ms Andrew and Mr Patrick McGinty.
[26] There is some dispute between Mr Matthew McGinty and Ms Crowe about the nature and costs of work undertaken directly by them on the Property and the significance of this in terms of any alleged proprietary rights. Mr Matthew McGinty gave evidence that the works were relatively limited:
The only things [Ms Crowe] and I ever paid for were the lower driveway to the basement garage ($800–$900), the chicken coop, the lower fence and gate on the front left side. I also lined and painted the basement garage area with plywood for an office.
[27] Taking a far more expansive approach, Ms Crowe gave evidence that they treated the Property as their “own home” and that they had “all sorts of plans” that they discussed and carried out. Her evidence referred to the following:
We purchased and paid for materials and undertook the labour. They included constant and extensive landscaping and manual earthworks. We built a gate and retaining wall.
We constructed raised garden beds, a chicken coop, fencing and gate for the chicken area, and kept beehives.
We purchased and did extensive planting, including planting fruit trees and developing a vegetable garden.
I recall painting the previously built garage under [Mr Matthew McGinty’s] detailed instruction and supervision, as well as the office attached to the downstairs garage with multiple coats of paints.
…
I was involved personally and this included during my pregnancies particularly in extensive gardening, planting, and landscaping, assisting the construction of retaining walls and steps on the left side of the house with [Mr Matthew McGinty], with painting of the downstairs office and external garage, creation of the mowing strips with [Mr Matthew McGinty], assistance with the concreting, and construction of the chicken coop and raised garden beds with [Mr Matthew McGinty], painting of the hallway and bathroom and then regularly tree, and garden maintenance.
Also we paid for at least as I recall but have not kept records the cost of fencing; retaining wall material, paint; concreting Tree House materials and built it; the Heat pump; Wood supplies for the gate.
We made significant financial outlay even at times when our budget was small and savings for projects were necessary. I have not kept records of these.
[28] In respect of some of the above work, Ms Crowe appeared to acknowledge that Mr Patrick McGinty and Mr Matthew McGinty undertook the work together, including building the retaining wall and fences, and constructing the driveway.
Pleadings and issues
[29]The plaintiff has pleaded two alternative causes of action.
[30] Under the first cause of action, the plaintiff seeks a declaration that the first and second defendants hold their title to the Property on an express trust for Ms Andrew. Accordingly, they seek an order under s 142 of the Land Transfer Act 2017 removing the third defendant’s notice of claim. Given that the Legal Services Commissioner has recently registered a statutory land charge pursuant to s 36 of the Legal Services Act 2011, the Court cannot make an order under s 89 of the Land Transfer Act immediately vesting title to the Property in Ms Andrew’s sole name.
However, the plaintiff intends to seek removal of that charge by the Legal Services Commissioner. She would then be free to have title transferred into her sole name.
[31] The third defendant denies that there was ever any express trust created. Her position is that there was never any sufficiently certain intention. Instead, she says all interests in and title to the Property were transferred to the first and second defendants as legal and beneficial owners on settlement from 8 May 2001. In the absence of any enforceable express trust, this took effect as a gift because of the presumption of advancement. A gift is effective once completed. A completed gift cannot be revoked. Mr Rooke, counsel for Ms Crowe, also submitted that any subsequent acknowledgements of trust were ineffective to create a trust relationship with the plaintiff.
[32] If the first cause of action for an express trust is unsuccessful, the plaintiff pursues an alternative claim of a resulting trust. This is based on payment of the entire purchase price giving rise to a resulting trust, and the declarations of trust by the first and second defendants (among other things) rebutting any presumption of advancement. The plaintiff suggests that the proper approach is to start with a presumption of a resulting trust if parents pay the entirety of the purchase price, then consider whether that presumption is displaced by a contrary intention such as evidence of a gift or the counter-presumption of advancement.1
[33]The third defendant denies any resulting trust:
(a)the transfer was a gift, under the presumption of advancement; and
(b)due to the operation of the presumption of advancement, no resulting trust can arise (one or other presumption applies).
1 This was the approach adopted by the Court of Appeal in Reid v Castleton-Reid [2019] NZCA 372, [2019] NZAR 1655.
[34]Accordingly, the following interrelated issues fall for determination:
(a)Were the requisite certainties and the formality for an express trust of land satisfied when the Property was purchased? What is the effect of the declarations of trust signed post-settlement? Do they acknowledge the prior trust or create a subsequent trust relationship, or are they ineffective attempts to disclaim a completed gift?
(b)Alternatively, if there is no enforceable express trust, is the initial conveyance and each subsequent contribution deemed to be a gift because of the presumption of advancement, or does a resulting trust arise on the facts?
(c)What is the significance of:
(i)Ms Crowe’s knowledge (or otherwise) about the legal position?
(ii)The work of Mr Matthew McGinty and Ms Crowe on the Property while they lived there as a family?
(iii)The intention of Ms Crowe when continuing to make regular payments narrated as “rent” (a term she now disavows)?
Legal principles
Express trusts
[35] For a valid express trust to be created, there must be certainty of intention, subject matter, and objects. There must also be compliance with any statutory writing requirements in the case of land.2
[36] A trust may be created by any language that is clear enough to show an intention to create it. No special technical words or formal language is required. An
2 Andrew S Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at [4.2.1].
intention to create a trust can be expressed by words or inferred from conduct that indicates an intention to create a trust.3 In case of doubt, contemporaneous and subsequent acts of the settlor may be looked at.4 It is sufficient that the settlor intends to enter into the arrangements which have the effect of creating a trust.5 The test of whether a trust has been created has been stated as being “whether in the circumstances of the case, and on the true construction of what was said and written, a sufficient intention to create a true trust has been manifested”.6
[37] Section 49A, Property Law Act 1952 (the 1952 Act) was in force at the time the Property was transferred to the first and second defendants and specified the writing requirements for a trust of land:
49A Certain instruments to be in writing
…
(2)A declaration of trust respecting any land or any interest in land shall be manifested and proved by some writing signed by some person who is able to declare such trust or by his will.
[38] Unlike s 25 of the Property Law Act 2007, s 49A(2) did not require the trust to be created in writing but a declaration of trust has to be “manifested or proved” in written form and signed by a person able to make the declaration. A declaration can therefore be reduced to written form in several documents after the event and the person who signs one of the documents can either be the settlor or trustee.7
[39]The learned authors of Equity and Trusts in New Zealand record that:8
First, s 49A(2) Property Law Act 1952 did not require the trust to be created by writing, all that was required was that there be some writing that was evidence of the creation of the trust. Accordingly, if a trust was created
verbally but was later reduced to writing, the trust took effect from the date of
the oral declaration….Secondly, notwithstanding the clear language of s 49A(1) Property Law Act 1952, the required writing could be signed by the trustee rather than the settlor.
3 At [4.2.2].
4 Belton v Commissioner of Inland Revenue [1959] NZLR 1372 (SC) at 1374.
5 Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164 at [71].
6 Tito v Waddell (No 2) [1977] Ch 106 (Ch) at 211.
7 Smith v Ball [2020] NZHC 944 at [66], referencing Andrew S Butler “Creation of an Express Trust” in Equity and Trusts in New Zealand, above n 2, at 92–93.
8 Equity and Trusts in New Zealand, above n 2, at [4.4.3(2)] (footnotes omitted, emphasis in original and emphasis added in underline).
Resulting trusts, gifts, and the presumption of advancement
[40] The Court of Appeal considered resulting trusts, gifts, and the presumption of advancement in Reid v Castleton-Reid.9 In that case, Mr Reid transferred $1.7 million into a share trading account in the name of his son, Mr Castleton-Reid, but also giving Mr Reid management rights. A dispute later arose about whether this was a gift (as Mr Castleton-Reid contended), or whether Mr Castleton-Reid agreed to hold the money as nominee for Mr Reid.10
[41] The Court of Appeal allowed the appeal, finding (with some exceptions) that the money was held on trust for Mr Reid. The Court of Appeal’s approach to determining the interrelated issues was as follows:
(a)Given that Mr Reid was the source of the funds, the “starting point” was that a resulting trust would arise in Mr Reid’s favour.11
(b)The presumption of a resulting trust can be displaced by evidence of a contrary intention, such as evidence of a gift, or by the counter presumption of advancement.12
(c)A gift inter vivos requires an expression of intention by the donor to make the gift, the assent of the donee to the gift, and actual or constructive delivery.13
(d)The Court found the evidence did not establish any intention to make a gift. Rather, at its highest, Mr Reid referred to a future inheritance, which is not an inter vivos gift.14 Mr Reid’s ongoing control of the investment fund and his regular withdrawals for his own purposes were
9 Reid v Castleton-Reid, above n 1, at [85]. See also Le v Hemu Trade Company Ltd [2019] NZCA 476 at [43], n 29.
10 At [34].
11 At [37].
12 At [38].
13 At [44].
14 At [56].
inconsistent with a gift.15 There was no satisfactory explanation for why Mr Reid would gift all his assets to his son.16
(e)Mr Reid’s evidence did not support a finding of express trust.17
(f)Accordingly, subject to the presumption of advancement, a resulting trust in Mr Reid’s favour would arise in relation to the money, as it was his originally.18
(g)The presumption of advancement is just that — a presumption as to the most likely inference of fact in the absence of evidence to the contrary.19
(h)Given the facts of the case, the contrary evidence counted strongly against a presumption.20
(i)Mr Reid might well have intended that, on his death, Mr Castleton-Reid would inherit the proceeds of the trading account. However, with one exception21 and two complications,22 the money was Mr Reid’s and Mr Castleton-Reid held the moneys in the trading account on trust for his father.23
(j)The case was remitted to the High Court to determine the parties’ respective interests on that basis.24
15 At [60] and [66].
16 At [63].
17 At [77].
18 At [77].
19 At [86]. This conclusion followed a detailed discussion of the presumption in other jurisdictions being abolished or its effect diminished, including reference to Stack v Dowden [2007] 2 WLR 831 (HL).
20 At [86].
21 At [91], referring to the proceeds of the Auckland Airport and Air New Zealand shares.
22 At [92], referring to a payment of $800,000 to the daughter/sister and a withdrawal for Mr Castleton-Reid to buy an apartment.
23 At [90].
24 At [95].
[42] Another example of the application of the principles in the New Zealand context is Hall v Guardian, Trust & Executors Co of New Zealand Ltd.25 Mr Hall purchased properties in his son’s name during 1910 and 1911. The son lived in one rent-free. The father collected the rent for the others and accounted for the tax on the rental income. The Court of Appeal held that, at least until the son later signed a document which acknowledged he held the properties on trust for his father, the presumption of advancement applied, and the father had made a gift of the properties to the son.26 In making that assessment, it was particularly relevant that the son had paid no rent for living on one of the properties.27
[43]The son’s subsequent letter dated 26 August 1927 stated as follows:28
Referring to the undermentioned properties, the titles of which are in my name, I write to record the fact that although in my name the properties in fact belong to you, and that you have full power and authority to deal with any or all of the properties either by sale by public auction or otherwise, or by mortgage or lease, or in any other manner whatsoever, and I hereby undertake and agree that I will, when called upon so to do, execute such memorandum of transfer, or mortgage or lease, or agreement for sale and purchase, or other documents as may be necessary to give effect to any mortgage or other alienation which you may make.
[44] This could be interpreted in one of three potential ways: (1) as evidence that the lands always remained the property of the father (negating the presumption of advancement); (2) if the lands were the son’s, that he attempted to make an imperfect gift (an incomplete transfer) back to the father; or (3) that the document constituted a declaration of trust in the father’s favour.29 The majority of the Court of Appeal found that the third interpretation applied,30 and the properties were held under a trust constituted in 1927 in favour of the father as beneficiary.
25 At [40], referencing Hall v Guardian, Trust & Executors Co of New Zealand Ltd [1938] NZLR 922 (CA) at 948 lines 32-35 and 951 lines 40–43 per Kennedy J.
26 Hall v Guardian, Trust & Executors Co of New Zealand Ltd, above n 25, at 938 per Myers CJ and 965 lines 22–27 per Johnson J.
27 At 938 lines 5–9 per Myers CJ and 945 at lines 11–12 per Kennedy J.
28 At 924.
29 At 938 lines 18–26 per Myers CJ, 951 lines 5–15 per Kennedy J and 954 lines 38–32 per Johnson J.
30 At 939 lines 4–6 per Myers CJ and 952 lines 39-41 per Kennedy J. The dissent of Johnson J at 966 lines 22–23.
Trusts and relationship property law
[45] For determining the properties that are subject to division under the terms of the PRA, the starting point is to assess the “property” that each party owns. A beneficial interest under a fixed trust can be categorised as property owned by a spouse, civil union partner, or de facto partner for the purposes of the PRA. However, property that a spouse, civil union partner, or de facto partner holds as trustee falls outside the scope of the PRA because, although the person is the legal owner of the property, the requirement of beneficial ownership is lacking.31
Tenancies and family occupants
[46] The Residential Tenancies Act 1986 applies to “every tenancy for residential purposes”, except those expressly excluded.32 One of the exclusions is contained in s 5(1)(n) “where the premises, not being a boarding house, continue to be used, during the tenancy, principally as a place of residence by the landlord or the owner of the premises or by any member of the landlord’s or owner’s family”.
[47] Where the Residential Tenancies Act does not apply, the tenancy falls to be considered on the general law of landlord and tenant.33 This includes the general provisions applicable to leases in both the Property Law Act, the Land Transfer Act 1952 where relevant, and the residual common law.34
[48] In CIR v Cutbush, a residential tenancy falling within the exclusion under the then s 5(n)35 was held to be a statutory implied monthly tenancy under s 105 of the 1952 Act:36
31 Property (Relationships) Act 1976, ss 2 and 4B; and Johns v Johns (1979) 2 MPC 98 at 99, referenced in James Anson-Holland and others Law of Trusts (online ed, Lexis Nexis) at [TRUChap2.2].
32 Residential Tenancies Act 1986, s 4.
33 David Grinlinton Residential Tenancies: The Law and Practice (4th ed, LexisNexis, Wellington, 2012) at [2.8].
34 At [1.2].
35 Now Residential Tenancies Act, s 5(1)(n). Section 5(1)(n) was substituted for s 5(n) as from 1 October 2010, by s 6(3) Residential Tenancies Amendment Act 2010 (2010 No 95).
36 CIR v Cutbush [1994] NZFLR 598 (HC) at 602.
It was conceded, however, that she was in occupation as tenant and was paying rent. It appears that there was no written tenancy agreement nor any oral agreement concerning a term or a right of termination. Accordingly there was a statutory tenancy arising under s 105 of the Property Law Act 1952.
[49]Section 105 of the 1952 Act provided as follows:
No tenancy from year to year shall be created or implied by payment of rent; and if there is a tenancy it shall be deemed in the absence of proof to the contrary to be a tenancy determinable at the will of either of the parties by one month’s notice in writing.
[50]The current equivalent provision provides as follows:37
210 Implied term of lease if no other term agreed
(1) This section applies to a lease if—
(a)the lessee is in possession of the land, although the lessor and the lessee have not agreed, expressly or by implication, on the duration of the term of the lease; or
(b)the lessee remains in possession of the land with the lessor’s consent, although the term of the lease has expired and the lessor and the lessee have not agreed, expressly or by implication, that the lessee may continue in possession for some other period.
(2) A lease to which this section applies—
(a)is terminable at will; and
(b)may be terminated, at any time, by the lessor or the lessee giving not less than 20 working days’ written notice to the other party to the lease.
[51] A lease terminable at will under s 210 is called a “statutory tenancy”.38 It also falls within the definition of “short-term lease”.39 The consequence of a statutory tenancy is that the implied obligations of lessor and lessee under pt 2 of sch 3 of the Property Law Act apply.40 Under cl 4(1) of sch 3, the lessee is obliged to pay the rent when it falls due.
37 Property Law Act 2007, s 210.
38 Section 207.
39 Section 207.
40 Lowry Bay Section One Ltd v Pukeatua Kohanga Reo Charitable Trust [2012] NZHC 1498, (2012) 13 NZCPR 611 at [62].
Analysis
Express trust
[52] To decide whether an express trust was created, it is first necessary to assess whether there was sufficient certainty of intention, subject matter, and objects. I am satisfied that these requirements were established on the evidence. In particular:
(a)Ms Andrew and her husband intended to purchase the Property for their own beneficial interest, but to have the Property held on trust. Those intended trust obligations were discussed in advance with their children, who agreed to hold title on those terms and later recorded and acknowledged their bare trust obligations in writing.
(b)The subject matter of the trust was the Property.
(c)Certainty of objects requires that the identity of the beneficiaries of the trust must be certain. In this case, the evidence substantiates an intention for the Property to be held for the benefit of Ms Andrew and her husband, with the children holding legal title on a bare trust basis, without any beneficial interest of their own.
[53] The intention to create the trust was expressed by words (discussions between Ms Andrew and her children) before settlement, as well as substantiated by the contemporaneous documents and the subsequent conduct of those involved. Ms Crowe was not involved in the events during 2001 — she has no direct knowledge about those matters. To the extent that Ms Crowe was involved in subsequent events and discussions, Ms Crowe’s actual knowledge was entirely consistent with my finding of an intention to create an express trust.
[54] The conveyancing file was opened in the name of Ms Andrew and her husband, and the invoice issued on 23 May 2001 expressly refers to the trustee/beneficiary relationships. The two declarations/acknowledgements signed by the children also explicitly acknowledged trustee interests only, with the beneficial interests vested
entirely in Ms Andrew and her husband, Mr Patrick McGinty. Mr Patrick McGinty’s beneficial interest subsequently vested in Ms Andrew via his will.
[55] The declarations/acknowledgements by the two children satisfy the formality requirements under s 49A of the 1952 Act. As referred to above, a declaration may be reduced to written form after the event and it is sufficient for the written instrument to be signed by the trustee rather than the settlor.41
[56] I reject any allegation that Ms Andrew and Mr Patrick McGinty intended a gift of the Property, whether at the outset when the Property was acquired, or subsequently when they worked on and paid for substantial renovations to the Property. Neither Ms Andrew, nor either of the two children, thought that any gift was involved. Such a recent assertion by Ms Crowe artificially seeks to reclassify the acquisition of the Property as a gift, not based on any actual intention, but solely based on an argument that relies on a presumption of advancement and alleged inadequacies in formalising the intended trust arrangements.
[57] Those arguments fail because the law does not require any special technical words or formal language for the creation of an express trust, so long as the intention is sufficiently expressed by words or inferred from conduct. In assessing whether those requirements are satisfied, the Court does not start with any preconception that a gift should be imposed against the wishes and understanding of all the individuals directly involved. The presumption of advancement operates only as an inference of fact in the absence of evidence to the contrary. In this case, there is ample evidence to the contrary. Ms Andrew and her husband intended an express trust, and this was achieved because the requisite certainties were satisfied, and the declaration of trust was manifested and is proved in writing.
[58] The third defendant relied on a number of categories of evidence to say that there was insufficient certainty about an intended trust relationship, or that some documents and practices were inconsistent with express trust obligations. I address those as follows:
41 See [36] and [37] above.
(a)Ms Crowe and her lawyer contended that any assertion of a tenancy relationship and an obligation to pay rent cannot be substantiated because no formal tenancy agreement was signed, no bond was paid, and the parents never referred to themselves as “landlords”. Although the word “rent” was used between them (including in narrations for the regular payments by bank transfer), Ms Crowe says this should now be seen as an error. As referred to above, these submissions reflect a misunderstanding of the law. In circumstances where a family member is living in the property, the Residential Tenancies Act does not apply. Nevertheless, a “statutory tenancy” can be entered into with a family member, including an obligation to pay rent in agreed amounts.42 In this case, there was no error in describing the payments as “rent”, and the occupation of the Property occurred under a family tenancy. The evidence was unequivocal in recording the agreed rent amounts payable for their occupation of the Property, and the increase of those payments following the 2012 renovations on the terms recorded in the email dated 29 March 2012. No formal signed tenancy agreement or payment of bond was required because the Residential Tenancies Act did not apply.
(b)Much of the evidence from Ms Crowe and her sister was about the Property being treated as the “home” of Mr Matthew McGinty, Ms Crowe and their family. The plaintiff and the first and second defendants have never disputed this. It was an important motivation on the part of Ms Andrew and her husband (prior to his death), to provide a stable home environment for Mr Matthew McGinty and his family through the tenancy arrangements, in circumstances where they were not in a position to buy a property themselves and they had fluctuating income. Mr Matthew McGinty’s family benefited from this stability by living in the Property for a period of more than 12 years. This does not negate a tenancy, not does it result in any transfer of beneficial title. Any tenant in a stable arrangement should feel entirely justified in regarding that place as their home. Tenants are entitled to the
42 See [46]–[51].
reasonable use and enjoyment of the leased premises, which would generally include gardening and the harvesting of produce from that garden. Their work such as painting rooms, building a tree house, raising chickens, and keeping beehives on their property was done with the knowledge and support of Ms Andrew and (before he died) Mr Patrick McGinty as beneficial owners. A tenant can enjoy such home benefits, without adversely impacting on a landlord or owner’s title.
(c)Ms Crowe acknowledged that the regular payments made by them narrated as “rent” in the bank statements were below market value. For example, she included evidence from Tenancy Services that during the period from 1 August 2023 to 31 January 2024, a four bedroom home in Panmure could be expected to achieve rents of between $820–$908 weekly. Ms Crowe asserted that the payments they made were “payments of gratitude, in a rent-to-own agreement”. Contrary to that assertion, if there were a rent-to-own agreement, then the payment amount would normally exceed the market value of rent so that the excess contributes towards payment of the principal value of the title being acquired. In any event, a concept of “rent-to-own” is inconsistent with the beneficial title already being vested in Mr Matthew McGinty from May 2001. Overall, the objective contemporaneous evidence was overwhelming and consistent that the regular payments made by Mr Matthew McGinty and Ms Crowe were rent, correctly narrated as such in the bank statements, under what may properly be classified as a statutory tenancy, in amounts expressly agreed with Ms Andrew.
(d)Ms Crowe alleged that some insurance documentation was inconsistent with a tenancy. As with the special position of family members living in a property for the purposes of landlord and tenant law, I accept that there can be a range of ways that insurers record and invoice for a property held on trust, occupied by a family member. In this case, I do not accept that there is any evidence that the insurers were misled about the true facts. For example, a letter from AA Insurance to Ms Andrew
dated 22 September 2010 records that the nature of the loss was described as “broken glass tenant home”.43 On 16 August 2012, the plaintiff emailed AA Insurance (copying in the first, second and third defendants) confirming the position as to who was recorded on the title, the trust obligations owed to her, and who was living in the Property (under tenancy/rental arrangements). Ms Crowe denied ever reading that email, which at the time was copied to her two email addresses. Whether Ms Crowe read it or not, it clearly shows that Ms Andrew was honest and open with all parties about the true arrangements. Even if some of the insurance documentation from third parties did not expressly refer to the trust and tenancy relationship, that cannot override the legal effect of the express trust arrangements put in place by the trustees and beneficiaries in 2001.
(e)Similarly, Ms Crowe alleged that some uncertainty arises from correspondence and invoices being addressed to Mr Matthew McGinty and Ms Crowe, even if they were passed on to Ms Andrew for payment. Ms Crowe seeks to assert that this also shows that Mr Matthew McGinty, Ms Crowe and Ms Andrew were all involved in the 2012 renovation process, focused on achieving additions suitable for their family. I see no probative value from these matters that undermine the express trust (or alternative resulting trust) claim. The details underlying the legal and beneficial ownership of the Property are not necessarily of any relevance for third parties. Far from undermining the plaintiff’s claim, the extent to which these documents were addressed to Ms Andrew and/or forwarded to her for payment assists to substantiate her claim. The intention of the additions being suitable for the family are consistent with the family tenancy arrangements, and the long-term support of that nature that Ms Andrew was happy to provide for her son and his family.
43 Emphasis added.
(f)In terms of the other contributions that Ms Crowe relies on,44 I find that these are entirely consistent with a family tenancy enjoying long term practical stability, because of Ms Andrew’s care for her son and his family. As Ms Crowe herself acknowledges, the financial value of these contributions was relatively limited. Mr Matthew McGinty, Ms Crowe and their family enjoyed the benefits as tenants. In addition, Mr Matthew McGinty gave evidence that he helped his father after-hours on this and other properties, as part of his relationship with his father, without any expectation of specific reward. In the circumstances described in the evidence (including below-market rent payments), I find that this does not substantiate any reasonable belief that the Property was already beneficially owned by them, nor could it give rise to any reasonable expectation of a proprietary interest in the property.45
(g)Ms Crowe alleged that water rates would normally be paid by a tenant,46 so the fact Ms Andrew continued to meet those expenses in early years is inconsistent with a formal tenancy. While in hindsight Ms Andrew and Mr Patrick McGinty could have sought to transfer responsibility for payment of water rates earlier, I again find that this supports rather than undermines the plaintiff’s causes of action. It is consistent with Ms Andrew meeting expenses of and outgoings on the Property because it was hers beneficially. Responsibility for water rates was later transferred to the occupants, under the rental arrangements recorded in the 29 March 2012 email.
44 See [27] above.
45 For example, under the constructive trust requirements discussed in Lankow v Rose [1995] 1 NZLR 277 (CA) at 294; and Vervoort v Forrest [2016] NZCA 375, [2016] 3 NZLR 807 at [69]−[70]. These constructive trust arguments were not pleaded or argued by the third defendant
— such arguments would have been inconsistent with the gift assertion. They were nevertheless issues capable of being determined in this proceeding to determine the third defendant’s asserted proprietary interest in the Property, consistent with the principles in Henderson v Henderson (1843) 3 Hare 100 (Ch); and Neylon v Dickens [1987] 1 NZLR 402 (CA) at 409–410.
46 Residential Tenancies Act, s 39: if the water supplier charges for water provided to the premises on the basis of consumption.
(h)Ms Crowe and Mr Rooke asserted that Ms Andrew could not beneficially own the Property because she had never received any benefits from it (because the rent did not meet outgoings on the property), and the asset was “surplus” to Ms Andrew’s needs. Among other things, Ms Crowe referred to the fact that she grew vegetables in the garden and yet Ms Andrew never required these to be handed over to the “landlords”. Again, this fails to understand the usual entitlements of a tenant in occupation, and the investment value of capital appreciation (whether or not the rental payments were at market levels). In this case, the Property was bought in 2001 for a price of $130,000. Ms Crowe accepted in cross-examination that the Property now has a value of $1.6 million. In those circumstances, it cannot reasonably be alleged that the investment has had no value for the beneficial owner. Furthermore, an asset can depreciate and still be beneficially owned.
[59] I now separately consider the relevance of Ms Crowe’s knowledge of the true legal position, to assess whether this impacts on the ability of the plaintiff to enforce an express trust and/or resulting trust. I find it does not.
(a)Ms Crowe readily accepted that she was told on numerous occasions, from the very outset of her marriage, that the Property was held in trust. As the creation of the express trust occurred before she was involved, her knowledge (or otherwise, given that she did not see any trust documentation) is not directly relevant to the proper classification of the events that took place during 2001.
(b)Ms Crowe gave evidence that she first discovered that Mr Matthew McGinty’s name was on the title to the Property only after she had separated from him and took legal advice on relationship property matters.47 It is only in that context that she has sought to recategorise their regular “rent” payments as “gratitude” payments.
47 See [24] above.
(c)Ms Crowe advanced a number of different and inconsistent claims in respect of the Property.
(i)She said she anticipated that Mr Matthew McGinty would likely inherit the Property. However, there was no factual basis for any enforceable expectation of such an inheritance. In particular, Ms Crowe said in her witness statement that Ms Andrew never discussed the contents of her or Mr Patrick McGinty’s will with her. Similarly, there was no discussion of Mr Patrick McGinty’s estate or inheritance of property before or after his passing. If anything, the hope of a future inheritance appears to be something on which Ms Crowe speculated, with or without any discussion about those issues with Mr Matthew McGinty (which he denies). The problem for Ms Crowe is that a hope of receiving a future inheritance is inconsistent with an assertion that title already vested beneficially on 8 May 2001.
(ii)Ms Crowe acknowledged that there were high level discussions about the concept of Mr Matthew McGinty and Ms Crowe purchasing the Property. This is substantiated by the 29 March 2012 email. Again, any concept of Mr Matthew McGinty and Ms Crowe buying the Property in 2012 is inconsistent with an assertion that they were already beneficial owners.
(iii)Similarly, the assertion (without any supporting documentation) of a “rent-to-own” agreement is entirely inconsistent with beneficial ownership already being vested in Mr Matthew McGinty on or from 8 May 2001.
[60] Ms Crowe also made unsubstantiated allegations that Ms Andrew and Mr Patrick McGinty had provided financial assistance to Ms McGinty to purchase a property. Therefore, it was only fair that Mr Matthew McGinty would receive similar support. Based on the witness evidence, I find this never occurred and those allegations are untrue. Both Ms Andrew and Ms McGinty were emphatic that no such
financial assistance had ever been given, nor had they participated in any discussions with Ms Crowe that could be misconstrued in that way.
[61] Overall, I found Ms Andrew, Mr Matthew McGinty and Ms McGinty honest and credible in their evidence. They gave fair concessions when appropriate and their evidence was entirely consistent with the documentation over the relevant period from 2001 onwards. In contrast, Ms Crowe’s evidence was internally inconsistent, and based on a retrospective reconstruction of events in a way that simply cannot be reconciled with the contemporaneous documents and her admissions of fact (including her acknowledgement that she was told the Property was held on trust on many occasions).
[62] For the above reasons, I find that the first cause of action succeeds. There was an express trust in effect at the time the Property was acquired in 2001, and the beneficial interests have not changed since then. Even if there had been a defect in establishing the trust to take effect upon conveyance, the subsequent declarations of trust by the two children on 9 May 2001 and 13 July 2001 respectively would have been sufficient to constitute themselves as bare trustees holding the Property on trust for Ms Andrew and her husband as beneficiaries.48
Resulting trusts, gifts, and the presumption of advancement
[63] Given my finding of an express trust, it is not strictly necessary to address the second cause of action.
[64] Under that cause of action, following the approach in Reid v Castleton-Reid,49 the starting point would be a resulting trust in Ms Andrew’s favour, given that she and her husband were the source of the entirety of the funds used to purchase the Property.
[65] The next issue would be whether the presumption of a resulting trust can be displaced by evidence of a contrary intention, such as evidence of a gift or by the counter-presumption of an advancement. In this case, the evidence does not establish any intention whatsoever to make a gift. At its highest, Mr Matthew McGinty and
48 See [44] above; and Hall v Guardian, Trust & Executors Co of New Zealand Ltd, above n 25.
49 See [41] above.
Ms Crowe might have been hopeful of a future inheritance, which is not an inter vivos gift.
[66] The presumption of advancement is merely an inference of fact that might be available in the absence of any evidence to the contrary. In this case, the presumption is displaced by overwhelming evidence counting strongly against any presumption of advancement. Among other things, Mr Matthew McGinty, later with his family, occupied the Property on the basis that he would pay rent for that privilege (albeit at below-market levels). Ms Andrew continued to make decisions as beneficial owner of the Property, including meeting expenses and outgoings that arise whether or not the premises are occupied. She and her husband made extensive continued investment in the Property, including paying for comprehensive alterations to convert the two bedroom home into a four bedroom home at a cost in excess of $300,000. This was done on the express basis that Mr Matthew McGinty and Ms Crowe would pay an increased rent following those renovations, in the form of them taking over the payment of rates, insurance, and water rates in lieu of a rent rise. At the same time, they discussed the concept of Mr Matthew McGinty and Ms Crowe potentially purchasing the house assisted by vendor finance from Ms Andrew, but that idea was not pursued.
[67] In the circumstances, if the first cause of action had not succeeded, the second cause of action would have succeeded. I would have made a declaration of a resulting trust in favour of Ms Andrew.
Relief
[68] The third defendant’s notice of claim pursuant to s 42(2) of the PRA relies on the first defendant holding both beneficial and legal title to his half-share in the Property.50 Given my finding of an express trust, that requirement is not satisfied on the facts. Accordingly, the third defendant’s notice of claim has been wrongly registered.
50 See [45] above.
[69] Section 42(3) of the PRA provides that every notice of claim lodged under s 42(2) of the PRA shall have the effect as if it were a caveat lodged pursuant to s 138 of the Land Transfer Act and the provisions of that Act (except for s 141) shall apply with certain modifications. Section 142 of the Land Transfer Act is the section under which the Court may order removal of a caveat.
[70] In Young v Young,51 Mrs Young and her late husband purchased a house in Avondale, funding it from the sale of their previous property along with a bank loan secured by a mortgage. Given that both Mrs Young and her husband were beneficiaries, the bank required one of the registered proprietors to be working full-time. To satisfy this requirement, they asked their son to be registered on the title with them. When the husband passed away, Mrs Young and her son took a transmission by survivorship. Subsequently, the son met and married Ms Kim and lived at the property between 2007 and 2012, without making any rental or board payments but paying some of the outgoings. Following their divorce, Ms Kim claimed that her husband had a beneficial half-share in the property, which in turn was relationship property to be divided equally. Gordon J held that there was a resulting trust in favour of Mrs Young, and Mrs Young had retained the beneficial interest throughout.52 The Court expressly accepted that these arguments were not contrived to avoid legal liability in the relationship property proceeding.53 Accordingly, Mrs Young obtained an order that the notice of claim by Ms Kim be immediately removed (made under s 142 of the Land Transfer Act).
[71] The same position applies here. The first defendant has no beneficial interest in the property. Accordingly, it is appropriate for orders to be made under s 142 of the Land Transfer Act that the caveat (in this case Ms Crowe’s notice of claim) is removed.
[72] For the same reasons, it will also be necessary for the statutory land charge lodged pursuant to s 36 of the Legal Services Act to be removed. This is because Mr Matthew McGinty has no beneficial interest in the Property. As found in this judgment, from the time it was acquired in 2001, legal title was held for the beneficial
51 Young v Young [2020] NZHC 3054, (2020) 21 NZCPR 793.
52 At [40], [46] and [49].
53 At [45] and [50].
interest of Ms Andrew and her now deceased husband (with his interest now vested in Ms Andrew via his will). Their children have held legal title as bare trustees only. Far from being a recent construct to avoid legal liabilities, this trustee relationship has been documented and consistently recognised in writing since 2001. As the Legal Services Commissioner is not a party to this proceeding, I do not make orders removing that charge, but I expect that step will be taken upon considering the effect of this judgment.
Result and orders
[73] The legal interest of the first and second defendants in the Property is held subject to an express trust in favour of Ms Andrew.
[74] In consequence, I make an order under s 142 of the Land Transfer Act, that the notice of claim registered against the title to 22 Mareth Street, Panmure, Auckland (document 11919337.1) by Rebecca Emily McGinty is to be immediately removed.
Costs
[75] Costs are reserved. If the parties agree costs, a joint memorandum should be filed within 20 working days of the date of this judgment. If costs cannot be agreed, then counsel for the plaintiff and counsel for the first and second defendants are to file and serve their memoranda within five working days of the date for the joint memorandum. The third defendant may respond by filing and serving a memorandum within a further five working days. I will then determine costs on the papers.
O’Gorman J
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