Ashton v Clydesdale

[2019] NZHC 432

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE

CIV-2018-412-21

[2019] NZHC 432

UNDER

the Land Transfer Act 1952

IN THE MATTER

of an application for an order that caveat 11008234.1 not lapse

BETWEEN

ROBERT WALTER ASHTON by his

attorneys, LEANNE ELIZABETH AITKEN and RICK McQUEEN
Applicants

AND

STEPHEN JOHN CLYDESDALE and DENISE MARIE CLYDESDALE

Respondents

Hearing:

(Determined on the Papers)

Counsel:

M C Ryan for Applicants

L A Andersen for Respondents

Judgment:

13 March 2019

JUDGMENT OF ASSOCIATE JUDGE LESTER

(as to costs)

[1]    The applicants and respondents each make costs applications in relation to this application to sustain a caveat. The dispute between the parties was settled leaving costs to be resolved.

[2]    The caveat was lodged by the applicants on 22 January 2018 over a property registered in the respondents’ names. Also, on that date the applicants’ solicitors wrote to the respondents referring to the circumstances that meant the respondents held the property as trustees. The letter of 22 January 2018 referred to the respondents being

ASHTON & ORS v CLYDESDALE [2019] NZHC 432 [13 March 2019].

trustees for Stephen Clydesdale’s late mother, Winifred Ashton, and for her husband Robert Ashton (“Bob”), one of the applicants. Leanne Aitken and Rick McQueen are the trustees of Mrs Ashton’s estate and are Mr Ashton’s attorneys.

[3]    The respondents then moved to have the caveat removed. Ms Aitken in her affidavit, sworn 12 March 2018, refers to a letter dated 27 February 2018 from Land Information New Zealand advising that the respondents had applied to lapse caveat.

[4]    On 5 March 2018, the respondents’ solicitors wrote to the applicants’ solicitors as follows:

Our clients’ position is that there is no legal basis for the caveat to have been registered. No evidence has been produced which establishes a legal claim by your client for an implied Trust on the said property.

[5]    The reference to an “implied Trust” is to the interest as it is expressed in the caveat.

[6]    Given the application to lapse the caveat, and given the above passage from the respondents’ solicitor’s letter of 5 March 2018, the only available conclusion is that the respondents were denying at that time that the applicants had a caveatable interest based on the respondents holding the property on trust.

[7]    Ms Aitken then explains that she and Mr McQueen, very shortly after the     5 March 2018 letter, located a copy of a Deed of Trust dated 13 March 2013 under which the respondents agreed to hold the property subject to the caveat on trust for the late Mrs Ashton and for Mr Ashton. The document records a Bare Trust.

[8]    The challenge to the caveat by the respondents and their statement in the letter of 5 March 2018 stands in stark contrast to Mr Clydesdale’s affidavit of 6 April 2018 in which he says:

I  was  surprised  to  discover  the  Deed  recording  a  Bare  Trust  dated    13 March 2013 (“the Deed”) which is annexed to the affidavit of Leanne Elizabeth Aitken as my wife and I have no memory of signing the Deed. However, it does not change anything as we held 13 McDonald Street in Trust and have not ever claimed to be the beneficial owners.

We accept that that is our signature on the Deed and that we are obliged to hold the property in accordance with the Deed for the Plaintiff and my mother’s estates …

[9]    There is no  attempt  by  Mr Clydesdale  to  explain  his  solicitor’s  letter  of 5 March 2018 which must have been written on his instructions. Mr Clydesdale’s position, from the above extract from his affidavit, is that the respondents accepted they held the property on trust but they instructed their solicitors that there was no Trust and therefore no basis for the caveat, is left unexplained.

[10]   The applicants plainly had a caveatable interest and in my view the respondents were quite wrong to challenge the caveat given what Mr Clydesdale deposes was his position all along. I agree with the applicants that there is the appearance that the respondents hoped in plain terms that they could “get away with it” in relation to saying that the respondents owned the property outright, which is the consequence of denying the existence of a Trust as they did in their solicitor’s letter.

[11]   The  respondents’  challenge  to  the  caveat  cannot   be   reconciled   with Mr Clydesdale’s sworn position.

[12]   In any event, once the Deed of Trust was provided to the respondents on      7 March 2018, the challenge to the caveat should have been withdrawn. Again, the applicants had an unarguable caveatable interest.

[13]   There is a dispute in relation to the circumstances in which the respondents borrowed funds secured against the property.   The respondents say that the late   Mrs Ashton requested that they borrow funds against the property in order to make those funds available to Mr Clydesdale’s brother, Graeme. The applicants dispute that the advance was made with the late Mrs Ashton’s knowledge and consent.

[14]   Whatever the correct position is in relation to that advance, it did not deprive the applicants of their caveatable interest.

[15]   Against  this  background,  the  applicants  seek  costs  on  a  2B  basis  with  a 50 per cent uplift on the grounds that the application was necessary as a result of the

denial of Trust by the respondents, both expressed in their letter of 5 March 2018 and implicit in their application to have the caveat removed.

[16]   The applicants emphasise that even after the Deed of Trust was located and provided, there was no response from the respondents, leaving the applicants having to make an application to the Court on 12 March 2018 that the caveat not lapse. Even then in the notice of opposition, the first ground of opposition stated is “The Applicants do not have a caveatable interest in the property”.

[17]The respondents in their memorandum make an application for costs.

[18]The respondents’ memorandum says:

On 27 February 2018, the Respondents’ applied to have the caveat lapse. This was for the purposes of being able to sell the property and account for the outstanding debt before transferring the balance to the beneficiaries.

[19]   It is clear from the respondents’ costs memorandum that the primary issue appears to be that between Mr Clydesdale and his brother Graeme in respect of the debt said to be owed by Graeme and which was secured against the property.

[20]Mr Andersen, counsel for the respondents, says:

Costs reflect how the parties acted during litigation, rather than prior to it: see Paper Reclaim Ltd v Aotearoa International Limited¹ …. It is relevant to costs in this case that the Applicants were trustees and accepted the obligation to transfer the property to the Respondents in accordance with the Trust Deed (the relevant issue being that the debt secured over the property had to be repaid).

[21]   What the Court of Appeal in Paper Reclaim said is that in relation to preceding conduct: “If that conduct was wrongful, then the remedy is damages. Aotearoa did not plead any breach of contract …”.2

[22]   In Paper Reclaim, the proceeding was issued in 2001 with the consideration of conduct from 1999 and 2000 in relation to costs being held to have been in error. Here the conduct pre-proceeding lies in the weeks before the application. In Voyce

1      Paper Reclaim ltd v Aotearoa International Ltd [2006] 3 NZLR 188 (CA).

2 At [160].

v Lawrie,3 applying the leading authority Donald Campbell and Co Ltd v Pollak,4 Adams J refused a successful defendant costs. The defendant was held to have taken advantage of a technical statutory defence which had become available through the defendant’s agent’s pre-litigation representation that no action was required. Accordingly, where pre-commencement conduct has occasioned or precipitated litigation, there is authority that it may be taken into account to refuse or reduce costs and in my opinion should be available to increase costs.

[23]   Even if that is wrong, then in the course of this litigation the respondents denied the caveatable interest in their notice of opposition as I have already set out. I also note that in the course of the litigation, the respondents did not explain the pre-litigation denial of a Trust.

[24]   I do not accept Mr Andersen’s submission 1 (referring to Mr Clydesdale’s affidavit):

The Applicants commenced proceedings in circumstances where the legitimate interests of the Applicants were acknowledged and the Respondents were willing to transfer the property in payment of the outstanding mortgage…

[25]The relevant part of Mr Clydesdale’s affidavit states:

While we are happy to transfer the property to the beneficiaries, they need to first repay the mortgages and our trustee costs (including defending these proceedings) before the property can be transferred as we are entitled to an indemnity from the trust property for the costs we have incurred as trustees.

[26]   This does not record a pre-litigation position acknowledging the caveatable interest.

[27]   The suggestion that the respondents can be seen as the successful party in these proceedings is a submission I do not accept. Mr Andersen submits: “The Applicants claim [that the respondents] were in breach of trust was not substantiated…” I do not accept this when the notice of opposition denied a caveatable interest. Mr Andersen’s submission that the applicants claim that they were entitled to a specific performance

3      Voyce v Lawrie [1952] NZLR 984 (SC).

4      Donald Campbell and Co Ltd v Pollak [1927] AC 732 (HL).

of the transfer of the property was incorrect is not relevant to whether there was       a caveatable interest pursuant to the Deed of Trust.

[28]   Mr Andersen submits that the applicants misused the inability of the respondents to sell the property and that the applicants wrongly acted in reliance on the caveat.   That is a submission that is not sustainable.   The caveat was lodged    on 22 January 2018 and challenged the following month as noted in [3] above.

[29]   The criticism made of the applicants in of Mr Andersen’s submissions are beside the point in relation to whether the applicants had a caveatable interest.

[30]   The balance of Mr Andersen’s memorandum relates to disputed issues of claim and cross-claim concerning to the status of the debt owed by Mr Clydesdale’s brother, the validity of the applicants notice calling for transfer of the property, and finally there is the claim:

There is no proper basis for a claim for increased costs. The claims made by the Applicants were disputed, not tested in Court and contrary to the actions of the Applicants in accepting the validity of the Respondents’ position by when it agreed to repay all money owing (including a small amount owing by Graeme) before the property was transferred to them.

[31]   The fundamental claim by the applicants was that they had a caveatable interest in the property under the Deed of Trust. That was disputed by the respondents by challenging the caveat and then denying a caveatable interest in the notice of opposition. The respondents’ position in relation to the existence of a caveatable interest was unreasonable.

[32]   While the other issues had to be worked through, they were not issues that supported a challenge to the applicants’ caveatable interest.

[33]   There will be costs to the applicants on a 2B basis with a 50 per cent uplift as sought. The uplift is justified in particular on the grounds of the respondents maintaining there was no caveatable interest in the course of the proceedings, notwithstanding that they had been supplied with a copy of the Deed of Trust and through the respondents failing to explain their position before the proceedings that

there was no Trust, particularly given Mr Clydesdale’s affidavit that I have previously referred to.

Result

[34]The application for costs by the respondents is dismissed.

[35]The application for costs by the applicants is granted.

Associate Judge Lester

Solicitors:

Albert Alloo & Sons, Dunedin

Copy to counsel: L A Andersen, Barrister, Dunedin
Solomons, Dunedin