Benniman v Harmer

[2021] NZHC 2049

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-1391

BETWEEN

JASON BENNIMAN

Plaintiff

AND

JOHN ANTHOY HARMER and LINDA JANE HARMER

First Defendants

JANE BENNIMAN

Second Defendant

Hearing:	3 August 2021
Appearances:	Brian Stewart and Kelsey Sabine for the Plaintiff Tom Pasley for the Defendants
Judgment:	9 August 2021

JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on   9 August 2021  at 4:00pm

pursuant to Rule 11.5 of the High Court Rules

………………………….

Registrar/Deputy Registrar

Solicitors:

Simpson Western (B Stewart/K Sabine), Takapuna, for the Plaintiff Fee Langstone (T Pasley), Auckland, for the Defendants

BENNIMAN v HARMER and [2021] NZHC 2049 [9 August 2021]

[1]    In this family litigation, the defendants apply for security for costs against the plaintiff. Mr and Mrs Harmer, the first defendants, are the parents of Jane Benniman, the second defendant, who was married to Jason Benniman, the plaintiff. In the early years of Mr and Mrs Benniman’s relationship, Mr and Mrs Harmer gave them financial assistance to buy a family home in Auckland. The purchase was also financed with a bank mortgage. Four years later, the Bennimans transferred the property to Mr and Mrs Harmer. The Harmers took out a fresh bank mortgage in place of the Bennimans’ mortgage but did not pay the Bennimans anything for the transfer. The Bennimans continued to live in the house until they separated. Mr Benniman claims that Mr and Mrs Harmer own the property subject to an equitable interest in favour of the Bennimans.   The defendants say that his claim is opportunistic and has no merit.   Mr Benniman accepts that he will not be able to pay the defendants’ costs if his case fails.

[2]    I do not order security. Mr Benniman’s case is worth hearing, but any order for significant security would block his claim. That prevails over the defendants’ interest in being protected from a barren costs order.

[3]    The case turns on the exercise of the discretionary power to order security: “if the Judge thinks it is just in all the circumstances”.1 The discretion is exercised according to the principles summarised in A S McLachlan Ltd v MEL Network Ltd,2 and taking into account the factors set out by Kós J in Highgate on Broadway Ltd v

Devine.3 It is helpful to bear in mind William Young J’s statement in Reekie v Attorney-

General:4

[2]        … The jurisdiction to require security poses something of a conundrum for the courts. The poorer the plaintiff, the more exposed the defendant is as to costs and the greater the apparent justification for security. But, as well, the poorer the plaintiff, the less likely it is that security will be able to be provided and thus the greater the risk of a worthy claim being stifled.

[3]        … [J]udges are slow to make an order for security which will stifle a claim.

1      High Court Rules 2016, r 5.45(2).

2      A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [15]–[16].

3      Highgate on Broadway Ltd v Devine [2012] NZHC 2288, [2013] NZAR 1017.

4      Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737 at [2]–[3].

Generally the court needs to balance competing interests – a defendant’s interest in being protected from a barren costs order and a plaintiff’s right of access to the court.

[4]        In assessing whether it is just in all the circumstances of the case to order security, some assessment of the merits of the case is required. Such an assessment is a matter of impression. The parties do not and ought not to deploy all the evidence they will give at trial. Security for costs applications are summary in nature.

Background

[5]        The Harmers live in England but have visited New Zealand often. In 2010, Mr and Mrs Benniman were in a relationship. They married in August 2011. They have two children. Mr Benniman is an experienced triathlete and had worked in sports goods shops. With the Harmers’ encouragement and financial support, Mr Benniman set up his own sports goods business, Triathlete’s Corner Ltd. Mrs Benniman was an equal shareholder. The business failed. Mr Benniman later worked for Air New Zealand but was laid off during the COVID-19 pandemic. He now has a job managing a sports goods shop. Mrs Benniman on the other hand had steady employment in her work as a radiologist. They separated in May 2019. Their most significant asset was their family home at Glendowie, Auckland, but that had been transferred to Mr and Mrs Harmer in 2014.

[6]        In October 2010, Mr and Mrs Benniman, not yet married, entered into an agreement to buy the Glendowie property for $519,000 with a deposit of $100,000 and settlement at the end of January 2011. They did not have any funds for the purchase. They borrowed $290,000 from a trading bank, secured by a first mortgage. Mr and Mrs Harmer funded the rest of the purchase. They paid $104,050 towards the deposit and made a further payment before settlement, making a total of $233,500. Mr and Mrs Benniman took title on settlement. The documents registered against the title did not record Mr and Mrs Harmer as having any interest in the property at that time.

[7]        The parties disagree on the basis on which the Harmers helped the Bennimans buy the property. Mr Benniman says that it was a gift. He supports that by producing

a document given to the bank stating that the Harmers’ contribution was a gift. It had to be a gift because the bank would not advance the funds if the Bennimans also borrowed the deposit.

[8]        On the other hand, the Harmers say that they were to take an interest in the property. They rely on a document Mr Harmer sent his daughter in October 2010. It is not a formal legal agreement. The Harmers do not say that Mr and Mrs Benniman signed it, but they rely on it as reflecting their intentions at the time. They say that they would have an equity interest in the property, at least until they were repaid.

[9]        At the same time, the Bennimans set up Triathlete’s Corner Ltd. The business struggled. Mr Harmer advanced considerable funds for the business through his company, J A Harmer Ltd. He says he put in some $500,000, but the company’s financial statements record liabilities to his company of some $170,000.

[10]The Harmers contributed to the costs of improvements to the family home.

[11]      In 2014, Mr and Mrs Harmer visited Mr and Mrs Benniman. The Bennimans sold their family home to Mr and Mrs Harmer. Mr Harmer took the advice of a real estate agent as to a price, which was fixed at $822,000. He instructed lawyers, who acted for both the Harmers and the Bennimans. The Bennimans signed an acknowledgment, disclaiming the right to take other legal advice. The agreement, dated 9 June 2014, in the usual ADLS/REINZ form includes this further term of sale:

18.0Payment of purchase price

18.1The purchase price shall be paid or satisfied as follows:

(1)As to the sum of $411,000, the vendor acknowledges and confirms that the purchaser was already the equitable owner of an undivided one half share of the property prior to this agreement being entered into;

(2)As to such further sum as represents the current amount owing by the vendor to ANZ Bank New Zealand Ltd (“the Bank”), by the purchaser by taking over and assuming responsibility for the said current balance outstanding to the Bank; and

(3)As to the balance in cash on the settlement date which is the 16^th day of June 2014.

[12]      At the time of the agreement, the bank mortgage was $293,000. On settlement, the property was registered in the name of Mr and Mrs Harmer, without any payment to Mr and Mrs Benniman. The mortgage to the ANZ Bank was discharged and replaced by a new one with Mr and Mrs Harmer as mortgagors.   Notwithstanding   cl 18.1(3), Mr and Mrs Benniman agreed not to be paid anything for transferring their home to Mr and Mrs Harmer. That was recorded in their disclaimer of their right to take other legal advice.

[13]      The Bennimans carried on living in the property. They made fortnightly payments to Mr and Mrs Harmer. Mrs Benniman describes these payments as “rent”, but Mr Benniman says that the amounts were the same as what they were paying on the mortgage and outgoings before the property was transferred to the Harmers. He says that they still paid rates and other outgoings, whereas she says that her parents met those expenses.

[14]      Mrs Benniman says that the sale came about because they were in dire financial straits. The benefit of the sale was that her parents now took the risk on meeting the mortgage payments. If the Bennimans missed a payment, they would not risk losing the house because her parents would not do that to them.

[15]      The triathlete business closed in 2017. Mr and Mrs Benniman separated in May 2019.   Mrs Benniman has continued living in the home with  the children.     Mr Benniman was excluded from the home.

This proceeding

[16]      Mr Benniman began this proceeding in August 2020. His statement of claim has these causes of action against the Harmers: misrepresentation, estoppel, constructive trust, resulting trust and a claim under s 44 of the Property (Relationships) Act 1976. Following discussion Mr Stewart indicated that the pleadings may be amended.

[17]      Mrs Benniman has been joined as a defendant to the proceeding, because   Mr Benniman claims that the property is held for both himself and her. While she

does not accept that claim, she is a necessary party to the proceeding. She may, if she wishes, abide the outcome, but she has actively supported her parents.

[18]      The 2014 agreement said that Mr and Mrs Harmer already had a half share of the home. While Mr Benniman does not accept that the Harmers had any interest at all, Mr Stewart pointed out that when the purchase was completed in early 2011, the Harmers had contributed 45 per cent of the purchase price, whereas the Bennimans’ share (albeit financed by bank mortgage) was 55 per cent. If the Harmers had a 45 per cent interest in 2014, that would be worth about $369,900. Instead, they took title to the $822,000 property subject to a mortgage to the ANZ Bank of $293,000, giving them an interest in the property worth $529,000. On the defendants’ case, the Bennimans’ interest in the property was extinguished under the 2014 agreement. They got nothing for their equity in the property.

[19]      For the first cause of action, Mr Benniman says that in 2014 the Harmers represented that the property could be transferred to them for asset protection, whereas they in fact held it absolutely for themselves. The pleading is sparse on particulars, but Mr Benniman’s affidavit is more informative. There were discussions with an accountant who suggested protecting  the  home  by  moving  it  into  a  trust,  but  Mr Harmer was not keen on that idea. He did not believe in trusts. He thought they were more expensive than what they were worth. Mr Harmer suggested that the property be transferred into the Harmers’ name for safe-keeping. While Mr Benniman was not keen, Mrs Benniman reassured him that it was only to protect their home which would remain “ours”.

[20]      He relies on the same matters to plead equitable estoppel and says that the Bennimans acted in reliance on the Harmers’ representations to transfer the title into their names. The causes of action for constructive trust and resulting trust can be seen as variations on the same theme. Mr Stewart accepted that the claim under s 44 of the Property (Relationships) Act 1976 was unlikely to survive a review of the pleadings.

[21]      In discussion during  the  hearing,  I  wondered  whether  the  facts  which  Mr Benniman asserts also show an oral trust where the writing and signature

requirements under s 25 of the Property Law Act 2007 are not required, because it would be fraudulent to rely on the absence of formality.5

[22]      The Harmers say that they have a knock-out argument: this case is similar to Tinker v Tinker.6 Having divested themselves of the property to keep it out of reach of creditors, the Bennimans can hardly say that they kept an interest in the property.

[23]      That is a possible argument, but not necessarily decisive. In Tinker v Tinker a husband arranged to buy a house with his funds, with title to be taken in the name of his wife. There was accordingly a presumption of advancement. He could not rebut that presumption by saying that the only reason for putting it in her name was to keep the property out of reach of his creditors. But in this case, there is no presumption of advancement when a married couple transfer a property without consideration to the parents of one of them. On Mr Benniman’s case, the Harmers said that they would hold the property protectively for the Bennimans. That is plausible in the circumstances. If Mr Benniman can prove that the Harmers instigated the disposition and did so by saying that they would hold it protectively for the Bennimans, it may be difficult for the Harmers to say that the Bennimans do not have an interest in the family home.

[24]      My assessment is that while there are difficulties for Mr Benniman, his claim is not hopeless. There is enough in it to warrant it being heard in court.

The discretion

[25]      Mr Benniman’s circumstances are modest. He has a job as a manager of a shop. Earnings in retail are not high. He has a motor vehicle and bicycles, but no other assets of significance. It is unlikely that he will be able to find funds to put up significant security, say $20,000. The Harmers want him to put up more than three times that. Against that, the Harmers are relatively affluent. While they live in England, they have invested in other properties in Auckland. A barren costs order is

5      As in Rochefoucauld v Boustead [1897] 1 Ch 196 (CA), Bannister v Bannister [1948] 2 All ER 133 (CA)

6      Tinker v Tinker [1970] P 136 (CA).

not likely to impose as much hardship on them as depriving Mr Benniman of his opportunity to have his claim heard in court.

[26]      The present case can be compared with other family litigation, most of which takes place in the Family Court. Property cases in the Family Court often involve a claim by one without means against others with greater resources. But security for costs is not normally ordered. The Family Court Rules 2002 were amended in 2009 to give the Family Court the power to order security, but as best I am aware the power is not used often.7 The infrequent use of the power gives claimants a proper opportunity to have their case heard. There is no reason why this court should not take a similar approach when a security order would block a poor plaintiff with a case worth hearing from being heard.

[27]      It would be pointless to ask Mr Benniman to put up token security ($1,000 say), an amount that he may be able to pay but would fall well short of any costs he may be ordered to pay.

[28]Overall, the balance favours not ordering security.

Other matters

[29]      As part of his opposition, Mr Benniman claimed that the Harmers had caused his impecuniosity. That was not pursued in the hearing. I accept the Harmers’ submission that there are other causes of his circumstances: his business failed; then he had a job with Air New Zealand but was laid off during the COVID-19 pandemic; and he is not paid much in his retail job.

[30]      While Mrs Benniman also sought security for costs, I would not have made a separate order for her. She has, unsurprisingly, joined forces with her parents. If she had instructed other lawyers, the court would be unlikely to order separate costs in her favour, given that she and her parents can be represented together.8 I would not have

7      Family Court Rules 2002, r 207B, inserted by Family Courts Amendment Rules (No 2) 2009.

8      High Court Rules 2016, r 14.15.

ordered separate security for her or increased the amount of any security on her account.

[31]      The Harmers sought security on the basis of a four-day hearing. Mr Stewart suggested that the case may require no more than three days, especially as evidence will be given by affidavit and deponents will only need to be cross-examined. I leave counsel to review that.

Outcome

[32]I make these orders:

(a)I dismiss the application for security for costs.

(b)The defendants are to pay Mr Benniman costs on the security for costs application. If the parties cannot agree costs, memoranda may be filed and I will decide costs on the papers.

(c)Leave is reserved to apply for further directions.

…………………………………….

Associate Judge R M Bell