Auton v Auton

[2020] NZHC 940

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2020-409-000144

[2020] NZHC 940

BETWEEN

ANDREW MYERS AUTON

Applicant

AND

VALERIE BEATRICE AUTON

Respondent

Hearing:

4 May 2020

Appearances:

P N Allan for Applicant

H A Evans and S B Henry for Respondent

Judgment:

7 May 2020

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 7 May 2020 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

AUTON v AUTON [2020] NZHC 940 [7 May 2020]

The application

[1]    The applicant  applies to sustain a caveat he lodged against a property at     47 Aorangi Road, Christchurch (Aorangi Road). The respondent (Mrs Auton) is the registered proprietor of Aorangi Road and the applicant is her son. The applicant lodged the caveat on the basis that on around 1 August 2015 there was a concluded oral agreement between him and Mrs Auton to transfer the property to him for valuable consideration and there have been sufficient acts of part performance of the agreement. Alternatively, he asserts that Mrs Auton holds the property for him pursuant to a constructive trust.

[2]Mrs Auton opposes the application on the bases:

(a)there was no concluded agreement for the transfer of the property;

(b)there have been no acts of part performance; and

(c)the property is not held upon a constructive trust for the applicant.

[3]    The application was heard under urgency as Aorangi Road has been sold with settlement on 8 May 2020. Due to the COVID-19 pandemic restrictions, Mrs Auton’s affidavit was not sworn in accordance with r. 9.73 High Court Rules. I make an order that her affidavit of 16 April 2020 has been accepted for filing and may be used in this proceeding under r 9.73(4) High Court Rules,1 the requirements of r 9.73(5) having been satisfied.

Background

[4]    Mrs Auton was the sole shareholder and director of Check Point Trailers Ltd (Check Point). Check Point acquired Aorangi Road in February 2002. Aorangi Road contains both a house and a cottage. The cottage was built by Mrs Auton’s parents who lived there until they both passed away.

1      As amended by r. 17 High Court (COVID-19 Preparedness) Amendment Rules 2020.

[5]    In April 2007, Mrs Auton and her husband (the applicant’s father, who I will refer to as Mr Auton) purchased 14 Exeter Street, Merivale (Exeter Street) for

$550,000 and undertook renovations to it.

[6]    In around early 2009, the applicant returned to New Zealand from the United Kingdom, where he had been living, with his then partner. Mr and Mrs Auton sold Exeter Street to him. The sale price was $460,000. The applicant obtained a mortgage for $360,000 and the balance of $100,000 was left owing to Mr and Mrs Auton under a deed of acknowledgment of debt and agreement to mortgage of 9 May 2009 (the debt). The applicant became the registered owner of Exeter Street on 1 May 2009.

[7]    Exeter Street was badly damaged in the 4 September 2010 earthquake and the dwelling was rendered uninhabitable. Mrs Auton allowed the applicant and his partner to move to Aorangi Road. For a time, the Earthquake Commission paid rent to Check Point. When that entitlement was exhausted no rent was paid and the applicant has never personally paid rent or outgoings in respect of the property.

[8]    The applicant’s earthquake claim in respect of Exeter Street was settled. He received payments from the Earthquake Commission and Tower Insurance which exceeded the amount owing under his mortgage. He retained the balance without repaying Mr and Mrs Auton the debt and he has not paid the debt since.

[9]    On 24 June 2014, Mr and Mrs Auton registered a caveat over Exeter Street to protect repayment of the debt. Around this time, the applicant and Mr Auton agreed to develop Exeter Street by demolishing the existing dwelling, subdividing the property and building two townhouses. The applicant describes the arrangement in his first affidavit in the very briefest of terms as follows:

My father, who among other things is a property developer, approached me with a proposal to tear down the damaged house on Exeter Street and in its place build 2 new townhouses. He would undertake the work on my land and in return I would share in the profits to the point where I might be able to keep one of the townhouses or alternatively I would at least have sufficient money to buy a better house.

[10]   Mrs Auton acknowledges an arrangement between the applicant and Mr Auton to develop Exeter Street but describes it in more detailed terms. She says that the

applicant engaged Lichfield Placements Ltd (LPL), a company owned by a family trust and directed by Mr Auton, to finance and project-manage the development of Exeter Street. From the sale of units the applicant would receive $495,000 (representing the land value of Exeter Street). The other proceeds of sale were to be used to cover the construction and development costs. It was intended the applicant and his partner would raise a mortgage to purchase the rear unit once completed.

[11]    The applicant and his partner separated on 14 February 2015. Following separation, they both continued to live at Aorangi Road. The applicant occupied the house and his former partner and child the cottage.

[12]   It is common ground that from around 2015 there were discussions about the possibility of the applicant acquiring Aorangi Road. The applicant describes this in his first affidavit as follows:

As the project proceeded my father informed me that there would not be sufficient profits to be made to allow me to have one of the townhouses. It was suggested instead that I could own Aorangi Road outright instead (mortgage and debt free).

[13]   Mrs Auton says that the applicant’s break-up from his partner, his dependency on prescription drugs and his inability or unwillingness to work meant that he could not raise a mortgage to buy the rear unit at Exeter Street. She says after taking accounting advice there was a proposal for the sale of Aorangi Road to the applicant for $500,000. The full purchase price was to be left owing upon mortgage to be repaid from the sale proceeds of Exeter Street. Documents were prepared for the acquisition of Aorangi Road by the applicant, but he refused to sign them. The applicant says this was because his parents required him to acknowledge the debt when he was to receive Aorangi Road mortgage and debt free. When the applicant refused to sign the paperwork, Mrs Auton regarded the proposal was abandoned.

[14]   On 31 March 2016, Aorangi  Road  was  transferred  by  Check  Point  to  Mrs Auton and LPL registered a mortgage over Exeter Street to secure repayment of the development costs. To allow this, Mr and Mrs Auton withdrew and then re-lodged their caveat. Check Point was removed from the Register of Companies on 8 July 2016.

[15]   The development of Exeter Street continued, and the units sold in June 2017 and January 2018. The applicant authorised payment of the sale proceeds to LPL as mortgagee. Mrs Auton says that the profit from the development was just $5,000 before tax.

[16]   In March 2018, the applicant became violent towards his former partner and was charged with property and firearms offences. Mrs Auton served a trespass notice requiring the applicant to stay-off Aorangi Road. Mr Auton arranged for the applicant to live at Helanca Avenue, Woolston, which was a property owned by a family business.

[17]   Before sentencing on the criminal charges, the applicant was admitted to Hillmorton Hospital. He was not sentenced in the District Court until 26 April 2019 and received supervision. He appealed and on 4 December 2019 was discharged without conviction in the High Court. Clark J found that the seriousness of the applicant’s offending was mitigated by a recent diagnosis of Attention Deficit Hyperactivity Disorder and conviction on the offences was likely to create a barrier upon his ability to travel. In arriving at this conclusion, the Judge relied upon evidence from Mr Auton that the applicant needed to travel overseas to market the products of the family business.

[18]   In December 2019,  the  applicant  was  removed  from  Helanca  Avenue.  Mr Auton found alternative accommodation for him at Sullivan Avenue, Woolston. In recent times, the applicant has attempted to return to Aorangi Road. He has been removed by the Police and is presently facing charges for trespass.

[19]   Mrs Auton put Aorangi Road on the market. On learning of this, the applicant lodged his caveat on 26 February 2020. On 5 March 2020, Mrs Auton entered into an agreement to sell Aorangi Road with settlement scheduled for 8 May 2020. She applied to the Registrar-General of Land for the caveat to lapse and the applicant made this application to sustain the caveat.

[20]   Consistent with what Mrs Auton says was agreed between the applicant and Mr Auton for the development of Exeter Street, the sum of $338,578 is held by

Layburn Hodgins in trust for the applicant. This represents the unimproved land value of Exeter Street of $495,000 less the $100,000 debt owed to Mr and Mrs Auton and less a further $56,442 for living expenses paid on the applicant’s behalf at his request. The applicant’s position is that he does not want the money but wants Aorangi Road.

Legal principles - caveats

[21]   Before the Court can sustain the applicant’s caveat he must show a reasonably arguable case to the interest in Aorangi Road he has claimed. An order for removal of the caveat will not be made unless it is clear the caveat cannot be maintained either because there was no valid ground for lodging it or because the ground upon which it was lodged no longer applies.2 The Court also retains a discretion to remove a caveat if it is completely satisfied the removal will not prejudice the legitimate interests of the caveator.3

[22]   Applications of this kind are generally not suitable for finally resolving the rights of the parties or resolving disputed questions of fact or deciding disputed questions of law relating to the construction of contracts. Where there is a conflict between the affidavits the Court will generally prefer the evidence of the caveator.4 However, the Court is not bound to accept uncritically statements on an affidavit that are equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable. 5

The issues

[23]Section 24(1) of the Property Law Act 2007 (the Act) provides:

A contract for the disposition of land is not enforceable by action unless –

(a)the contract is in writing or its terms are recorded in writing; and

(b)the contract or written record is signed by the party against whom the contract is sought to be enforced.

2      Sims v Lowe [1988] 1 NZLR 656 (CA) at 659 – 660.

3      Philpott v Noble Investments Ltd [2015] NZCA 342 at [26].

4      Bethell v Rickard [2013] NZCA 68 at [22].

5      Barrett v IBC International Ltd [1995] 3 NZLR 170 at 175 citing Eng Mee-Yong v Letchumanan s/o Velayutham [1980] AC 331, 341.

[24]   Section 24 does not affect the operation of the law relating to part performance.6

[25]   It is established an oral agreement for the sale and purchase of land, which is unenforceable by reason of s 24, may support a caveat if the purchaser may be entitled to specific performance of the agreement by virtue of the equitable doctrine of part performance.7

[26]Against that background, the issues arising in this case are the following:

(a)whether on or about 1 August 2015 a concluded oral agreement was made between Mrs Auton and the applicant for the transfer of Aorangi Road to the applicant;

(b)if that is so, whether the applicant can overcome the absence of any writing by recourse to the doctrine of part performance; and

(c)if not, does Mrs Auton hold the property upon a constructive trust for the applicant.

Discussion

Was there a concluded agreement?

[27]   The applicant must show an arguable case that all the essential terms of an agreement to transfer Aorangi Road to him were agreed. 8 The question whether there was a concluded agreement is primarily one of fact. I am in no doubt there was no concluded agreement. The applicant’s arguments are too unsatisfactory and insubstantial to sustain the caveat.9

6      Property Law Act 2007, s 26.

7      Cribb v Austin Chalk Company Ltd HC Christchurch M150/02, 22 August 2002; Neil Campbell

Campbell on Caveats (3rd ed, LexisNexis, Wellington, 2019) at 23.

8      For the essential terms of a contract for the sale and purchase of land see Elizabeth Toomey New Zealand Land Law (3rd ed, Thomson Reuters, Wellington, 2017) at 1331-1337.

9      Barrett v IBC International Ltd, above n 5, at 177.

[28]   The applicant’s evidence is argumentative, contains hearsay and submission. He has produced only parts of correspondence without any explanation. His evidence is plainly incomplete. His description of the arrangements concerning the development of Exeter Street and his acquiring Aorangi Road is both skeletal and confused.

[29]   I have set out in [12] what the applicant says was agreed in relation to Aorangi Road. This does not come close to establishing a concluded agreement.  He refers to a “suggestion” that he could own Aorangi Road. The discussion he refers to was with his father, who had no interest in Aorangi Road. The applicant does not refer to any discussion of the consideration for the transfer of Aorangi Road or to when that would occur. It is only in his reply affidavit that he states as part of the agreement he was to transfer Exeter Street to LPL.

[30]   The applicant has annexed to his reply affidavit incomplete client engagement letters from Layburn Hodgins dated 22 July 2015 and 31 March 2016. The letter of 22 July 2015 confirms his instructions on four matters namely:

1)   You are selling your property at 14 Exeter Street to Lichfield Placements Limited.

2)   You are purchasing 47 Aorangi Road from Checkpoint Trailers Limited.

3)   Loan arrangements are to be made with Bank of New Zealand.

4)   The loan provided to you by Robert and Valerie will be restructured.

[31]The letter of 31 March 2016, however, records instructions only in respect of:

We have received your instructions to assist you with the purchase of 47 Aorangi Street, Christchurch from Valerie Auton.

[32]   These letters show the applicant was not to receive Aorangi Road mortgage and debt free. As at 22 July 2015, the applicant was to raise a mortgage to acquire Aorangi Road and the debt was to be restructured. The letters also show the parties’ intentions changed over time. The letter of 22 July 2015 contemplates a composite transaction involving Exeter Street, Aorangi Road and the restructuring of the debt. The letter of 31 March 2016 does not mention Exeter Street or the debt and refers only

to the purchase of Aorangi Road. The letter of 31 March 2016 is not consistent with the applicant’s case that a concluded agreement was made on or about 1 August 2015.

[33]   Mr Allan referred to the alleged agreement as a land swap agreement. He set out terms of this agreement for which there is no evidential foundation. These include that Aorangi Road would be transferred to the applicant when the Exeter Street units were sold (this contradicts the applicant’s evidence), that the applicant was to treat Aorangi Road as his own regardless of the legal ownership, that LPL could be required to pay a purchase price for Exeter Street and, that the parties would value “the respective transactions” to minimise their tax exposure. This highlights the lack of clarity about the terms of the alleged agreement.

[34]   The applicant acknowledges he refused to sign documents to acquire Aorangi Road because Mrs Auton required him to acknowledge the debt. It does not appear that the applicant thereafter asserted an entitlement to Aorangi Road until he lodged his caveat on 26 February 2020. That was almost two years after Mrs Auton required him to move from the property.

[35]   In an email to Mrs Auton of 26 July 2018, the applicant asked her to again consider allowing him to purchase the property. He wrote:

I would still like to consider buying aorangi road…

Once I’m on acc I should be able to afford a mortgage … Please consider this…

Again its an option thats more likely to keep me here, where if I get a discharge I’m going back to England.

[36]   The applicant says this email concerned formalizing the agreement to buy Aorangi Road. That is an untenable interpretation. It shows there was no concluded agreement. There was nothing for Mrs Auton to consider if there was a concluded agreement.

[37]   In an email of 5 September 2019, Mrs Auton sent the applicant a link to an advertisement for a property she considered he might inspect. Contrary to his evidence

that he owns Aorangi Road, the applicant responded stating “I will never ever own anything here again.”

[38]   I am satisfied the proposal the applicant would purchase Aorangi Road was abandoned and the development of Exeter Street continued broadly as Mr Auton and the applicant had agreed. The development work, the registration by LPL of a mortgage to secure development costs, the sale of the units and payment of sale proceeds to LPL were all consistent with that.

[39]   Mr Allan emphasised an email of 16 January 2019 from Mrs Auton’s email account to the applicant’s criminal lawyer referring to a verbal agreement to swap Exeter Street and Aorangi Road and a bank record of a payment of $250 by LPL to the applicant on 16 January 2020 noted as being rent on Aorangi Road. Mr and Mrs Auton have gone a very long way to support the applicant with his personal and mental health issues. The email was provided to assist the applicant at sentencing on the criminal charges. While one can justly be critical that its contents are misleading, it is no answer to the fundamental difficulty that the applicant has failed to establish an arguable case for the existence of a concluded agreement to acquire Aorangi Road. The bank record was a payment to assist the applicant with his living expenses. It was not rent, and LPL had no reason to pay the applicant rent.

Part performance

[40]   The leading cases in New Zealand on part performance are TA Dellaca Ltd v PDL Industries Ltd,10Mahoe Buildings Ltd v Fair Investments Ltd,11 and Fleming v Beevers.12 In Dellaca, Tipping J set out the essential elements of the doctrine which were slightly amended in Fleming v Beevers. I take the correct statement of those elements from the Court of Appeal’s judgment in Nguyen v SM & T Homes Ltd as follows:13

1.     Is there a sufficient oral agreement such as would have been enforceable but for the [Property Law Act]?

10     TA Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 at [99] – [109] (HC).

11     Mahoe Buildings Ltd v Fair Investments Ltd [1994] 1 NZLR 281 (CA).

12     Fleming v Beevers [1994] 1 NZLR 385.

13     Nguyen v SM & T Homes Ltd [2016] NZCA 581 at [32].

2.     Has there been part performance of that oral agreement by the doing of something that:

(a)clearly amounts to a step in the performance of a contractual obligation or the exercise of a contractual right under the oral contract; and

(b)when viewed independently of the oral contract was, on the probabilities, done on the footing that a contract relating to the land, consistent with that alleged, was in existence?

3.     Do the circumstances in which that part performance took place make it unconscionable (fraudulent in equity) for the defendant to rely on the [Property Law Act]?

[41]   The doctrine of part performance is available only where there is a concluded and otherwise enforceable contract. It will not apply if the act of part performance preceded that agreement, or where the parties are still negotiating, fail to agree on all essential terms or, the contract is void for some other reason. As I have found there was no concluded agreement between the applicant and Mrs Auton the doctrine does not assist the applicant.14 Had that not been the case I would have found that the applicant cannot rely on the doctrine of part performance.

[42]   Mr Allan submitted the act of part performance was payment of sale proceeds of Exeter Street to LPL. This was not a sufficient act of part performance because, under the second limb of the Dellaca test, it was not the performance of a contractual obligation or the exercise of a contractual right under the agreement the applicant alleges was made to transfer Aorangi Road to him mortgage and debt free. The disbursement of the sale proceeds was pursuant to the agreement reached between the applicant and Mr Auton for the development of Exeter Street.

[43]   The third limb of the Dellaca test is not satisfied either. Whilst it has been argued that the third limb is wrong in principle and superfluous,15 I consider it fulfils an important function.16 Here, the applicant knew Mrs Auton would not transfer Aorangi Road to him on the terms he says were agreed. He took no steps to enforce the agreement. The development of Exeter Street proceeded as the applicant and Mr

14     TA Dellaca Ltd v PDL Industries Ltd, above n 10, at 109.

15     Susy Frankel “The Uncertainty Doctrine of Part Performance” (2011) 42 VUWLR 37.

16     Brabazib Properties Ltd v Nixon (1999) ANZ Conv R 378; Nguyen v SM & T Homes Ltd, above n 13.

Auton had agreed. There is nothing to suggest Mrs Auton understood, or could have been expected to understand, the applicant authorised the disbursement of the sale proceeds to LPL pursuant to the alleged agreement. She did not benefit personally from the disbursement of the sale proceeds. It is not, in those circumstances, unconscionable that Mrs Auton rely on the statutory requirements in s 24 of the Act to defend an action on the agreement.

Constructive trust

[44]   The applicant claims that Aorangi Road is held on a constructive trust for him in reliance upon the principles in Lankow v Rose.17 Mr Allan did not pursue any argument that a constructive trust might arise on another basis.

[45]A claimant asserting an interest in property in reliance upon Lankow v Rose

must establish four features:

(a)that they made direct or indirect contributions to the property in question;

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

(c)that such expectation is a reasonable one; and

(d)that the owner of the property can reasonably expect to yield to the claimant an interest in the property.

[46]   Direct financial contributions as well as indirect contributions that assist in the acquisition, improvement or maintenance of property or its value will qualify. However, a claimant’s contributions must be more than minor, causally related to the acquisition, preservation or enhancement of property, and manifestly exceed any benefits that the claimant derives from the arrangement.18

17     Lankow v Rose [1995] 1 NZLR 277 (CA).

18     Wakenshaw v Wakenshaw [2017] NZCA 252, [2018] NZAR 532 at [25].

[47]   The applicant has no arguable case to an interest based on Lankow v Rose because he has made no contribution to the acquisition, maintenance or preservation of Aorangi Road. Mr Allan could not point to any qualifying contribution. Furthermore, I can see no circumstances from which an argument can be made that the applicant has a reasonable expectation to an  interest  in  the  property or  that Mrs Auton can be expected to yield any interest to him.

Result

[48]   The application is dismissed. I hereby order that Caveat 11696891.1 lodged by the applicant against 47 Aorangi Road shall lapse.

[49]   I reserve costs because the applicant has applied for legal aid. If the parties are unable to agree on costs I will receive submissions by memoranda within 21 days from the respondent and from the applicant seven days thereafter. Memoranda are to be no longer than five pages.

O G Paulsen Associate Judge

Solicitors:

Patient & Williams, Christchurch Young Hunter, Christchurch