Bell v Bell
[2022] NZHC 1388
•14 June 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-002415
[2022] NZHC 1388
UNDER Land Transfer Act 2017, s 143 IN THE MATTER OF
An application for an order that caveat not lapse
BETWEEN
WILLIAM JEFFREY BELL as the
administrator of the late JEFFREY
REGINALD BELL, HOLLIE MARIE BELL and MICHAEL PATRICK BELL
Applicants
AND
REGINALD PATRICK BELL and JOHN
MURU WALTERS as the trustees of the BELAYR FAMILY TRUST
Respondents
Hearing: 25 May 2022 Appearances:
N W Woods for Applicants
S L Cogan and M G Beresford for Respondents
Judgment:
14 June 2022
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by Associate Judge Andrew on 14 June 2022 at 2.00 pm
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar Date………………………….
BELL v BELL [2022] NZHC 1388 [14 June 2022]
Introduction
[1] These are caveat proceedings.1 The property at issue2 on Tara Road, Mangawhai, is owned by the respondent trustees, Reginald Bell and John Walters.3 Reginald is the grandfather of the applicants, William, Hollie and Michael Bell.
[2] Jeffrey Bell was the son of Reginald and the father of the applicants. He died intestate in 2021. As the next of kin, the applicants lodged a caveat on the title to the Property on 9 September 2021 contending that Jeffrey had an institutional constructive trust over the Property on the basis of contributions he made, both financial and non- financial, over a lengthy 20-year period. Reginald and Jeffrey lived on the Property. The applicants rely upon the principles in Lankow v Rose4 in support of their claim for a beneficial interest in the Property.
[3] The caveat was lodged prior to the grant of letters of administration. Those letters of administration were applied for by William after the date of lodging the caveat and granted to him on 4 February 2022.
[4] The trustees say that the caveat at issue suffers from a fatal flaw; no caveatable interest existed at the time the caveat was lodged, and it must accordingly be removed. The trustees rely upon the principle that the next of kin of a deceased who dies intestate has no caveatable interest in the property of the deceased until the estate has been fully administered.5
[5] The applicants dispute the challenge to their standing. They rely upon the retrospective application of s 24(2) of the Administration Act 1969. That section provides that the title of every administrator to any part of the deceased person’s estate relates back to and is deemed to have arisen immediately upon the death of the deceased person.
1 Land Transfer Act 2017, s 143.
2 The Property, being Lot 1 Deposited Plan 559883, Certificate of Title identifier 986983 (North Auckland).
3 The trustees.
4 Lankow v Rose [1995] 1 NZLR 277 (CA).
5 Re Savages Caveat [1956] NZLR 118 (SC); Wakenshaw v Wakenshaw [2017] NZCA 252.
[6]The critical issues I must determine are twofold:
(a)Do the applicants have standing?
(b)If so, have the applicants established a reasonably arguable claim for an institutional constructive trust?
Factual background
[7] Reginald had four children. In addition to Jeffrey, they are Christine, Paula and Jennifer. Jeffrey is the only one who has passed away.
[8] In the 1960s, Reginald and his wife bought a substantial section of land on Tara Road. In 2006, the Property was put into a trust known as the Belayr Trust. Jeffrey was one of the original trustees.
[9] The applicants rely on the following factual allegations in support of their claim. Some may well be contested:
(a)Jeffrey moved back onto the Property in 2003. He was enticed back from Australia by Reginald and persuaded to look after the Property, rather than to buy his own separate piece of land;
(b)In 2004/2005, the lower part of the Property was sold, with only a shed upon the remainder;
(c)In 2006, Jeffrey built a 6 x 9 metre shed together with a carport on the Property. He laid the foundations, carried out the base excavations and completed all connections and the accessway;
(d)At that time, Reginald was elderly and in need of care. Reginald was living in Whangarei at the time. Reginald then moved onto the Property and lived in the 6 x 9 metre shed;
(e)Jeffrey then built a 12 x 6 metre house in which he resided.
[10]Between 2006 and 2018, Jeffrey lived rent-free on the Property.
[11] On 11 February 2010, Reginald signed a memorandum of wishes. It appears to have been drafted by lawyers. Under the heading “first priority”, the memorandum records that “the first and absolute priority” for the trustees is to Reginald and to Jeffrey who resides on the Property. Reginald also stated that he wished that the Property would not be sold (expressed as a “second priority”). Furthermore, “all improvements” made to the land by Jeffrey “shall remain” for his benefit.
[12] On 4 September 2014, Reginald signed a “memorandum of guidance for trustees of the Belayr Family Trust”. The memorandum set out Reginald’s wishes concerning the administration and management of the Trust. Under the heading “first priority” the memorandum states that “the first and absolute priority for the trustees is to myself and my son Jeffrey Reginald Bell who resides on the Trust property”. Reginald again stated that he wished “all improvements made to the land by my son Jeff” to remain for his benefit. The memorandum expresses as a “second priority” Reginald’s desire to assist his children, Jeff, Christine, Paula and Jennifer.
[13]In July 2018, Jeffrey was removed as a trustee by Reginald, as the settlor.
[14] By letter dated 9 February 2018, John Walters, as solicitor for the Trust, wrote to Reginald, confirming his instructions that he wished to wind up the Trust. The first two paragraphs of the letter read:
I confirm that you wish to wind up your Trust. The Trust owns your nine acres at Tara Road. You are a trustee with your son Jeffrey and daughter Christine. You hold the property on trust for the beneficiaries who are Jeffrey and Christine plus your two daughters who live in Australia. The children do not get on together. You are concerned that after your passing they will be unable to amicably deal with the Trust assets (the property) and it will be a mess.
You accordingly want to wind up the Trust and transfer the land to you; subdivide it into four lots; three to be sold and the sale proceeds to go to your three daughters; and the other (and larger) lot to be transferred to your son. He lives on the property and has always been there to help you and work on it.
[15] Subdivisional works were subsequently carried out on the Property. The applicants say that the work was undertaken primarily by Jeffrey. Ultimately, the
Property was subdivided into three lots rather than four as had been originally proposed.
[16]Jeffrey died intestate on 27 August 2021.
[17] On 9 September 2021, the applicants lodged the caveat. They subsequently agreed to a partial withdrawal of the caveat to enable the sale of Lots 2 and 3. Those two lots have now been sold and the remaining Lot 1, still owned by the trustees, is the Property at issue.
[18]The interest claimed on the caveat is described as:
Beneficial interest in the land comprising the Affected Title held by the Registered Proprietor pursuant to a resulting and/or constructive trust between the Registered Proprietor as trustee and the late Jeffrey Reginald Bell as beneficiary, the Caveator being beneficiaries of the estate of the said Jeffrey Reginald Bell and/or the personal representatives of the late Jeffrey Reginald Bell.
[19] In November 2021, the trustees purchased a unit for Reginald in Whangarei. They resolved to distribute to Reginald $246,845, being the net proceeds of the sale of Lots 2 and 3 after the purchase of the Whangarei unit.
[20] In his will of 9 November 2021, Reginald has provided for the residue of his estate to be shared equally between his four children (in the case of Jeffrey, a quarter- share for Jeffrey’s children).
[21] On 4 February 2022, letters of administration were granted in Jeffrey’s estate to William.
Relevant legal principles
[22] In Philpott v Noble Investments Ltd, the Court of Appeal set out the basic legal principles for applications to sustain caveats:6
6 Philpott v Noble Investments Ltd [2015] NZCA 342 at [26]. See also Green & McCahill Holdings Ltd v Ara Weiti Developments Ltd [2022] NZCA 218 at [80]–[87].
(a) The onus is on the applicants to demonstrate that they hold an interest in the land that is sufficient to support the caveat, but they need not establish that definitively;
(b) It is enough if the applicants put forward a reasonably arguable case to support the interest they claim;
(c) The summary procedures involved in applications of this nature are not suited to the determination of disputed questions of fact. An order for the removal of a caveat will only be made if it is patently clear that the caveat cannot be maintained – either because there is no valid ground for lodging it in the first place, or because such a ground no longer exists;7 and
(d) When an applicant has discharged the burden upon it, the Court retains discretion to remove the caveat which it exercises on a cautious basis. Before it does so the Court must be satisfied that the caveator’s legitimate interest would not be prejudiced by removal.8
[23] Philpott v Noble Investments Ltd dealt with the predecessor legislation, namely the Land Transfer Act 1952. However, it is not disputed that the principles laid down by the Court of Appeal apply equally to applications, such as this one, under s 143 of the Land Transfer Act 2017.9
Analysis and decision
Issue (a) – Standing
[24] The Court of Appeal in Wakenshaw v Wakenshaw10 held that the next-of-kin of a deceased who dies intestate has no caveatable interest in the property of the deceased until the estate has been fully administered.11 In Wakenshaw, the caveator argued that a caveatable interest was an inheritable right which passed upon death. The Court of Appeal rejected that contention:
[32] Mr Chambers attempted to bridge the gap by arguing that Norman’s beneficial interest in the property passed to Jan on his death. Jan’s evidence is also framed in that way. In particular, she asserts a claim “by virtue of [her] survivorship” as Norman’s next of kin “pursuant to what [she] understands the laws of intestacy say”. However, any argument that Jan has somehow “inherited” Norman’s beneficial interest in the Property faces the insurmountable obstacle that Jan has never sought letters of administration in
7 Sims v Lowe [1988] 1 NZLR 656 (CA) at 660; Zwarst v Saxton [2012] NZHC 448 at [12].
8 Stewart v Kaipara Consultants Limited [2000] 3 NZLR 55 (CA) at [23].
9 See Cowan v Cowan [2022] NZSC 43 at [21], where the Supreme Court held that despite there being some differences in structure and language between the provisions of the 2017 Act and the 1952 Act, those differences do not preclude the use of older case law to interpret the 2017 Act.
10 Wakenshaw v Wakenshaw, above n 5.
11 See also in Re Savages Caveat, above n 5.
respect of Norman’s estate. Nor has any other person. The next of kin of a person who dies intestate has no caveatable interest in the deceased’s land until the estate has been fully administered.
[25] The trustees say that on the date the caveat was lodged, each of the applicants were merely beneficiaries to Jeffrey’s estate. No person had been granted letters of administration at that time and no application for letters of administration had in fact been made. They further say, in reliance on Kilmartin v Monk,12 that a caveatable interest must have existed at the time the caveat was lodged and must continue to exist at the time of the hearing.
[26] The trustees further say that it is not an answer that the next of kin are the “personal representatives” of the deceased. “Personal representative” is an umbrella term for executors of an estate (where the deceased had a will), or administrators (where the deceased died intestate). At the time the caveat was lodged, the applicants were neither. It is said that until such time as letters of administration were granted – which did not occur until 4 February 2022 – the applicants were simply members of a class of persons who had an interest in receiving a distribution from Jeffrey’s estate pursuant to a statutory trust.
[27] This issue of standing turns on the interpretation of s 24 of the Administration Act 1969. That section, relied upon by the applicants, reads:
Estate to vest in administrator
(1) Immediately upon the grant of administration of the estate of any deceased person, all the estate then unadministered of that person, whether held by him or her beneficially or held by him or her in trust, shall vest in the administrator to whom the administration is granted for all the estate therein of that person: provided that nothing in this section shall affect the earlier vesting in an executor by operation of law.
(2) The title of every administrator to any part of the estate of a deceased person, whether he or she has died before or after the commencement of this Act, shall relate back to and be deemed to have arisen immediately upon the death of the deceased person, as if there had been no interval of time between the death and the grant of administration.
(3) If there are concurrently more administrators than 1 of any part of the estate that part shall vest in them as joint tenants.
12 Kilmartin v Monk (2005) 6 NZCPR 405 (HC).
[28] Section 24 is to be interpreted in its relevant statutory context. It includes s 22, which provides that where a person dies intestate, until administration is granted, his or her estate vests in the Crown. Section 23 provides that where administration has been granted in respect of the estate of a deceased person, no person other than the administrator shall have the power to bring an action or otherwise act as the administrator.
[29] The trustees contend that s 24 does not have the retrospective effect for which the applicants contend. They submit that s 24 does not operate to retrospectively invalidate or unseat the earlier vesting of Jeffrey’s estate in the Crown. They say that that is the express intent of the proviso in s 24, namely “nothing” shall affect the earlier vesting in an executor by operation of law.
[30] I reject the contentions of the trustees. I find that it is reasonably arguable that s 24 operates retrospectively to cure any deficiency in the standing of the applicants to lodge the caveat. This case is arguably different from Wakenshaw v Wakenshaw in that, unlike the caveator [Jan] in that case, here letters of administration have now been granted to William, one of the applicants. In Wakenshaw, the caveator, Jan, had never sought letters of administration in respect of the estate. That was described by the Court of Appeal as “the insurmountable obstacle”.13
[31] In the High Court decision in Wakenshaw, Associate Judge Doogue expressly acknowledged that the grant of letters of administration might have cured the standing deficiency:14
[25] Even though I was not requested to do so, I gave consideration to adjourning this matter so that any necessary application for the grant of letters of administration could be made, thus supplying the deficiency identified above.
[32] In my view, it is arguable that the proviso in s 24 is intended to protect the Crown against any steps taken in the interim period and does not undermine the essential retrospective vesting of all beneficial and legal rights that s 24 is expressly
13 Wakenshaw v Wakenshaw, above n 5, at [32].
14 Wakenshaw v Wakenshaw [2016] NZHC 773 at [25]. See also [24], where Doogue AJ noted that Jan, the caveator, had not applied for letters of administration at the time of the hearing and therefore the estate was vested in the Crown.
concerned with. There is some support for that approach, albeit factually quite a different case, in Rika v Westpac Banking Corporation.15 That case concerned the execution of a mortgage. The basic facts of the case were that the deceased’s wife (plaintiff 1) and children (plaintiff 2) were entitled to a block of land under the rules of intestate as the deceased died without a current will. Plaintiff 1 executed a guarantee to the defendant bank securing a mortgage over the block of land in question. The plaintiff later argued that she had no power to execute the mortgage in favour of the defendant bank on the date that she did because letters of administration were not granted until a later date. However, the Court held that the subsequent grant of letters of administration retrospectively authorised the signing of the mortgage by virtue of s 24(2) of the Administration Act 1969. The Court held:16
It is sufficient to observe that at the time the mortgage was registered the person who had executed the same purporting to have authority to do so by reason of survivorship and letters of administration had in fact been granted letters of administration which related back to the time of execution, and was in fact the survivor of the previously registered joint tenants.
[33] It is reasonably arguable that the retrospective application of s 24, a statutory deeming in essence, does not offend against the principle that at the time the caveat is lodged, the caveatable interest must exist.17 While at the time when the applicants lodged the caveat, they may have relied on a “potential or future interest”, that deficiency was cured by the statutory deeming under s 24(2).
[34] I conclude therefore that it is reasonably arguable the applicants have standing. It is thus necessary to address the merits of the claim to a beneficial interest in the Property.
15 Rika v Westpac Banking Corporation HC Rotorua CP198/88, 21 March 1989.
16 Rika v Westpac Banking Corporation above n 15, at 14.
17 See Zambuto v Kensington Park Holdings Ltd (2011) NZCPR 395 (HC) at [19] and Murphys Park Development LP v Green City Developments Ltd [2020] NZHC 813 at [24].
Issue (b) – Is there a reasonably arguable claim for an institutional constructive trust?
[35] At their core, constructive trusts are concerned with unconscionability.18 A claimant must show that conscience requires the respondent to recognise their beneficial claim in the relevant property.19
[36] In Almond v Read,20 the Court of Appeal referred to the principles of Lankow v Rose,21 and the elements a claimant must prove to establish that equity should regard as unconscionable a defendant’s denial of a claimant’s interest. These are:
(a)Contributions, direct or indirect, to the property in question;
(b)The expectation of an interest therein;
(c)That such an expectation is a reasonable one; and
(d)Whether the defendant should reasonably expect to yield the claim and interest.
[37] In addressing each of these elements, it is important to note at the outset that a significant number of relevant facts are in dispute. It is not of course the role of the Court at this summary stage to resolve these factual matters; the test is one of a reasonably arguable case.
[38] The trustees challenge the veracity and admissibility of significant aspects of the applicants’ evidence. They say that the applicants’ evidence consists primarily of each of them recounting what Jeffrey told them Reginald had said to him. It is not disputed that none of the applicants were present when these conversations are said to have taken place. They further say that there is a significant risk that Jeffrey’s
18 See for example, Millett LJ’s articulation of a constructive trust in Paragon Finance PLC v DB Thakerar & Co (a firm) [1999] 1 All ER 400 (CA) at 409, “A constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his own beneficial interest in the property and deny the beneficial interest of another.”
19 Elders Pastoral Ltd v Bank of New Zealand [1989] 2 NZLR 180 (CA) at 193.
20 Almond v Read [2019] NZCA 26 at [68].
21 Lankow v Rose, above n 4.
recollection and/or interpretation of any statements made to him by Reginald were coloured by the influence of alcohol or drugs. They also say that in turn the applicants’ recollection and interpretation of critical issues is inevitably coloured and influenced by their natural affection and loyalty for their late father and their own self-interest in the outcome of the proceedings, particularly given Jeffrey’s otherwise modest estate.
[39] There may well be some merit to those contentions. However, these are trial issues. This is not a case where I could safely conclude at this stage that the applicants’ evidence is so implausible or inconsistent with undisputed documentation that it could be rejected as falling short of the threshold of a reasonably arguable claim.
[40] I find that the applicants have established a reasonably arguable claim to an institutional constructive trust. The evidence meets the threshold in relation to each of the elements referred to in Lankow v Rose. I address each of the elements in turn.
[41] There is clear evidence that Jeffrey made contributions, both direct and indirect, to the Property. He built the house on the Property, additional outbuildings, and carried out earthworks including retentions, retaining walls, turn-arounds and driveways. He also arguably provided assistance to his father, Reginald, for a period of at least 12 years, including care, comfort and companionship.
[42] It appears not to be in dispute that Jeffrey lived on the Property rent-free. That is, of course, not unusual in these kinds of cases. However, the question of whether Jeffrey’s contributions manifestly exceeded any benefits that he derived from the arrangements is a trial issue. I cannot conclude at this stage that Jeffrey’s contributions were manifestly outweighed by the substantial benefits he received.
[43] The respective memoranda of wishes and the letter from John Walters dated 9 February 2018 provide support for the applicants’ claim that there was a reasonable expectation that Jeffrey would have an interest in the Property. I acknowledge that there is no trustee resolution (and Jeffrey was a trustee for a significant period) and that the memoranda of wishes do not give rise to binding legal obligations. There may also be merit to the trustees’ contention that at best, these documents evidence an intention to grant Jeffrey a life interest or that the land was to be divided equally, with
Jeffrey getting the improvements. Again however, the weight, interpretation and significance of the memoranda and the letter of February 2018 are issues to be explored at trial.
[44] The trustees submit that there is no evidential foundation or logical explanation for the applicants’ case, which must be that Reginald, John Walters and Jeffrey came to the conclusion that the entire Property was Jeffrey’s and should be treated as though it was his. I reject that submission. There is, as I have noted, arguably some evidence, including documentary evidence, supporting the claims now being made. I also note that the applicants do not have to establish an expectation that the entire Property was to become Jeffrey’s; the test is whether there is a reasonably arguable expectation of an interest in the Property. The extent of any interest (if any) and whether that extends to the entire Property are all trial issues.
[45] I conclude that the applicants have established the necessary arguable element of unconscionability. They have established a reasonably arguable claim for a beneficial interest in the Property. On that basis, they are entitled to the order sought.
[46] There are no factors which would justify exercising my residual discretion to remove the caveat. Having said that, I note that these are internal family-related proceedings and the issues that would need to be tested at trial include some delicate and sensitive topics. The trial process is unlikely to be helpful in repairing any family disunity. The sensible approach is for all concerned to engage in mediation or some alternative dispute resolution process.
Result
[47]I grant the application that the caveat not lapse.
[48] I order that caveat 12238715.1 (lodged against Certificate of Title identifier 986983 (North Auckland)) not lapse pending further order of the Court. The order is conditional on the applicants filing and serving substantive proceedings claiming a beneficial interest in the Property within 20 working days and taking all reasonable steps to prosecute those proceedings.
[49] As to costs, I am of the preliminary view that the applicants, having succeeded, are entitled to costs on a 2B basis plus disbursements.
[50] If costs cannot be agreed, then memoranda (no more than three pages) are to be filed and served within 14 days.
Associate Judge P J Andrew
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