Blumenthal v Stewart
[2014] NZHC 1924
•15 August 2014
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
CIV-2014-454-90 [2014] NZHC 1924
IN THE MATTER of the J H MATHIESON TRUST BETWEEN
COLIN PAUL BLUMENTHAL Plaintiff
AND
BRUCE ANTHONY STEWART Defendant
Hearing: 1 August 2014 Counsel:
H A Cull QC for Plaintiff
J M Morrison for DefendantJudgment:
15 August 2014
JUDGMENT OF WILLIAMS J
I direct that the delivery time of this judgment is
11.00 am on the 15th day of August 2014.
Solicitors: McIntosh & Signal, Feilding, for plaintiff
Rainey Collins, Wellington, for defendant
BLUMENTHAL v STEWART [2014] NZHC 1924 [15 August 2014]
Introduction
[1] John Hawthorn Mathieson died on 1 February this year leaving an estate valued at just over $486,000 and a three acre semi-rural property in Manawatu vested in the J H Mathieson Trust (the Trust) of which the deceased was settlor, co- trustee and contingent beneficiary. The Trust property is now the subject of a sale and purchase agreement to a third party in the sum of $520,000. The net assets of the Trust are valued at something under $470,000, the difference being the result of a debt to the estate because the deceased had not forgiven the Trust all of the purchase price by the time of his death.
[2] The surviving trustee of the Trust is Bruce Stewart, Mr Mathieson’s former solicitor.
[3] The plaintiff, Paul Blumenthal, has brought proceedings against both the estate and the Trust. His mother lived in a de facto relationship with the deceased for some 22 years until her death and Mr Blumenthal says that as John Mathieson’s stepson, he is entitled to the three acre Trust property and a share in the estate.
[4] The primary beneficiary under Mr Mathieson’s 1981 will is the New Zealand Neurological Foundation. The Foundation is also a named beneficiary under the Trust Deed. Mr Blumenthal is not a named beneficiary under either instrument.
[5] The substantive proceeding is in two parts: causes of action under the Family Protection Act 1955 and Law Reform (Testamentary Promises) Act 1949 against the estate; and in constructive trust and unconscionable bargain against the Trust asset.
[6] In the meantime Mr Blumenthal has lodged a caveat against the title of the Trust property and now applies for an interim injunction to prevent completion of the property sale. Mr Stewart responded with an application under s 143 of the Land Transfer Act 1952 to remove the caveat. Mr Blumenthal filed a notice of opposition. The focus therefore in the applications before me is the Trust and its property.
[7] Mr Stewart has also applied for security for costs but the parties are now agreed that issue can be adjourned pending resolution of the applications for interim orders and in relation to the caveat. I set that matter to one side accordingly.
The Facts
[8] In the time that has been available to me and in light of the issues I am required to address, I set out the facts in brief outline only.
Relevant relationships
[9] Mr Blumenthal knew the deceased for around 33 years. They first met in
1978 as a result of a mutual interest in rally cars. Mr Blumenthal’s mother Dawn and the deceased entered into a de facto relationship in 1982 (she having separated from Mr Blumenthal’s father a year or two earlier). The couple were known to one another because the deceased was a tenant in a boarding house run by the Blumenthals during the course of their marriage. Dawn Blumenthal and the deceased remained together for 22 years until her death in January 2004.
[10] Mr Blumenthal described his relationship with the deceased as that of stepson. He said his children referred to the deceased as granddad. He said they celebrated Christmases and birthdays (including children’s birthdays) together and continued to do so until Mr Mathieson’s death. From time to time the deceased would refer to Mr Blumenthal as his son although when at work not so, because Mr Blumenthal was his stepfather’s employer. The deceased was Mr Blumenthal’s best man at his marriage to his second wife and was, Mr Blumenthal said, “an integral part of my family and my children and he regarded me as his son”. Mr Blumenthal continued:
[e]qually, I saw him as my stepfather, with whom I had a close and meaningful relationship. I would do anything for him, as he had provided such support for me, whenever I needed it.
[11] Mr Blumenthal gave a eulogy at Mr Mathieson’s funeral (as did his (Mr Blumenthal’s) daughter and son-in-law) and he was also a pallbearer. Mr Blumenthal made all the arrangements for the funeral.
[12] Barry Mabey filed an affidavit in support of Mr Blumenthal. Mr Mabey was a long-time friend of the deceased. Mr Mabey confirmed that the deceased had affection for Mr Blumenthal and considered himself a part of Mr Blumenthal’s family. He said:
From my close association with John [Mathieson], I had always drawn the conclusion that John would provide for Paul in his Will. I certainly believe that upon John’s death, that Paul would have been a beneficiary of John’s estate. I was very surprised to learn that Paul was not a beneficiary.
[13] For the Trust, Mr Stewart did not challenge any of this evidence. As the deceased’s professional legal adviser and without the personal associations likely to generate intimate knowledge of the family relationships, it is unlikely that he would have been in a position to challenge Mr Blumenthal’s evidence.
The property and the Trust
[14] The deceased settled the Trust in May 2002. The trustees were Mr Mathieson and Mr Stewart. The beneficiaries are declared by cl 4 of the Deed to be:
(a) John Mathieson;
(b) the New Zealand Neurological Foundation; (c) any other person in New Zealand;
(d) any charity in New Zealand nominated by deed by the settlor.
[15] No nomination appears to have been made under (d). Mr Blumenthal is not an express beneficiary but obviously does fit the general class description in (c) above.
[16] The Trust purchased the property in July 2005 following Dawn’s death. It comprises 1.2710 hectares and is situated on Setters Line, a semi-rural location just outside of Palmerston North. There is a four bedroom house on the property. It is, or has until recently been, rented. There is also a large workshop on the property with an accommodation annex. Mr Mathieson lived in the annex. Mr Blumenthal
used a portion of the shed as a base for his pest control business – storing, as far as I can determine, his equipment and product there. It will be remembered that the deceased was at one time employed by the business. Mr Blumenthal also grazed two cattle to keep the grass down in the two paddocks at the property. He said that the resulting meat was shared with the deceased regularly.
[17] As the sole surviving trustee and proprietor, Mr Stewart resolved to sell the property and distribute the proceeds in accordance with his discretion under the Trust Deed. It was put on the market in early April 2014. Mr Stewart said that at the time he had a conversation with Mr Blumenthal in which Mr Stewart offered to sell the property to him at the rateable value of $520,000. According to Mr Stewart the response given was that Mr Blumenthal was not interested and that he (Mr Blumenthal) would remove the items he had stored on the property to allow the sale to proceed.
[18] Mr Blumenthal’s perspective in these exchanges is somewhat different. He said that within a month of John’s death, Mr Stewart arranged with him (Mr Blumenthal) to inspect the property. Mr Blumenthal said he asked Mr Stewart for a right of first refusal but was advised that this was not possible. He also raised with Mr Stewart the possibility of contesting the will and stopping the sale of the property. Mr Blumenthal said that Mr Stewart’s reply was that he should seek independent legal advice.
[19] On 30 May Mr Blumenthal’s solicitors put Mr Stewart on notice as to the likelihood of a claim against each of the estate and the Trust. This letter was acknowledged on 3 June. On 3 July a fuller letter was sent by Mr Blumenthal’s solicitors advising that there would be four heads of claim (as I have already discussed above – two against each entity) and asking that the property be withdrawn from sale as Mr Blumenthal wished to retain the property in light of his “monetary and non-monetary contribution” to it.
[20] On 9 July Mr Stewart wrote seeking further particulars, noting that only “bare assertion” had been provided thus far. He suggested that it was “imprudent to withdraw the house from the sale process already commenced …”.
[21] On the same date Mr Blumenthal’s solicitors lodged the caveat. The agreement for sale and purchase was signed the next day on 10 July. At that point Mr Stewart would have been unaware of the caveat. On 11 July the District Land Registrar gave notice that the caveat had been registered.
[22] Substantive proceedings were filed on 18 July. Mr Morrison argued before me that the agreement for sale and purchase then became unconditional on 22 July. For myself I rather doubt that this was so because the purchaser’s solicitor noted in a letter of that date that settlement depended on the issue of the caveat being resolved to the purchaser’s satisfaction. In the end nothing turns on this point and it need not be resolved.
[23] On 23 July the defendant requested that Mr Blumenthal remove the caveat subject to the proceeds being held pending determination of his claims. The plaintiff rejected this option and the current applications and cross applications were filed.
Representations
[24] According to Mr Blumenthal, the deceased referred to the Trust property as “Paul’s inheritance”. Mr Blumenthal said he once complained to the deceased that his relationship property settlement with his former wife had used up the small inheritance he received from his late mother. Mr Blumenthal said the deceased replied: “Not to worry about it, it doesn’t matter, you will get it back when I’ve gone”.
[25] On another occasion the deceased was at the Peppertree Rest Home following his last hospitalisation. He said that the deceased’s “happy go lucky attitude” had been misinterpreted as flirting by one of the female rest home staff. The staff member described herself as “stalker” and the deceased as “flirter” in a Christmas card she gave to the deceased. Mr Blumenthal said that the deceased managed to avoid this person’s romantic designs, but in the context of that the deceased said to Mr Blumenthal: “You wouldn’t want someone else getting your inheritance would you?”
[26] Mr Blumenthal said that he had always believed that the Trust property was intended by the deceased to be his inheritance.
[27] Again, Mr Stewart was in no position to deny this evidence. He simply said that no comment or indication was ever made by the deceased to him along the lines deposed to by Mr Blumenthal during the deceased’s lifetime and he was never instructed to adjust either the will or the Trust Deed.
Contributions
[28] Mr Blumenthal said he made significant contributions to the property while the deceased was alive. He helped the deceased with heavy lifting about the property, grazed cattle on it to keep the pasture down, maintained stock fences, took care of the property if the deceased was away, maintained the water pump and generally kept the grounds tidy including mowing the lawns.
[29] He said he helped the deceased with his firewood requirements and during the final months of his life, Mr Blumenthal was “a hands on caregiver for John everyday …”. He said he visited the deceased every day in hospital and at home, and bought him food, toiletries and other essentials. He said he also bought the deceased a DVD player and rented DVDs for him.
[30] In the time leading up to his death, they had planned, Mr Blumenthal said, to address a drainage problem under the house by laying water pipes but the deceased passed away before it could be done.
[31] Mr Blumenthal said he was very attached to the property because it formed a significant part of his life and his association with the deceased. He said he had keys and free access to the property and regularly visited it. He said he sprayed blackberry and other weeds and the two had numerous discussions, he said, about Mr Blumenthal buying the place.
The attraction of the property
[32] The attraction of the property for Mr Blumenthal is set out in his third affidavit in these terms:
The property would provide an excellent base to enable me to continue to operate my business, as I have done previously with John. The property is centrally located. It is a lifestyle block and is away from the built-up urban area. It is safe for the business in respect of pest control chemical storage. It is within easy access to the area from which I operate my business.
It is a property where I have many memories of my friendship with John and spending time there with both John and my family.
The arguments
[33] The respective arguments advanced by counsel may be briefly outlined. Ms Cull QC for the plaintiff argued that there was a sufficiently arguable case to support both the caveat and an interim injunction. She pointed to the leading New Zealand decision on constructive trusts, Lankow v Rose.1 She argued that the test articulated by Tipping J, (which I set out at [41] below), was met. Further, the contributions that Mr Blumenthal made to the property founded an arguable claim in
unjust enrichment or unconscionability. Finally, it was argued that the balance of convenience lay with maintaining the caveat and granting an interim injunction. First, the plaintiff ’s attachment is to the land arising from his years of connection with it and the deceased, and is non-substitutable. Second, the defendant proceeded with the sale despite clear notice that proceedings would be brought against the Trust and estate. The defendant should not be allowed, it was argued, to hide behind the existence of a sale and purchase agreement entered into in the face of clear prior notice of the litigation. Other arguments were advanced, but this is the essence of the plaintiff’s case.
[34] For the defendant, Mr Morrison argued that the plaintiff had no reasonably arguable case. First, such contributions as were made to the property were amply repaid through free rent of the shed for storage and free grazing. Second, he had no knowledge of any representations made by the deceased to Mr Blumenthal and the Trust would not have been bound by them even if made. Third, the alleged
representations, if made, related to the deceased’s estate, not the Trust, and so could
not affect the sale of the property.
[35] In addition, Mr Morrison argued that his client has offered to complete the sale and retain the proceeds, pending final resolution of this proceeding. That is, it was argued, an adequate protection of the plaintiff ’s interests.
[36] During the course of argument, a fresh issue arose as to whether the deceased as one of two trustees could, by representation or by unilateral acceptance of contribution, bind his fellow trustee without notice. Ms Cull said he could. She pointed primarily to the Supreme Court decision in Regal Castings v Lightbody in which the Court unanimously accepted that the fraudulent intent of the Lightbodys could be attributed to their independent and innocent co-trustee.2
[37] Mr Morrison submitted that Regal Castings v Lightbody did not apply because it was a case about avoidance of creditors under s 60(3) of the Property Law Act 2007. The issues and facts were, he said, completely different. Mr Morrison pointed to the decision of Panckhurst J in Murrell v Hamilton in which the Court refused to grant relief to an otherwise deserving de facto partner because the property in question was owned by a trust and the independent trustee had no role in
“stimulate[ing] her expectations” of an interest in the property.3 In reply Ms Cull
pointed out that this decision should be treated with caution because it had been appealed. It transpires that the Court of Appeal issued its decision in the matter last week after the hearing in this case. I will come back to the appeal decision below.
My approach
[38] The plaintiff’s argument is in constructive trust in support of both the caveat and the interim injunction. Either way, an arguable case must be found. There is then a question as to the extent to which I have a broader discretion to decline to maintain the caveat if I find an arguable case at step 1. The discretion, if it exists, under the caveat application is certainly narrower than the broad balance of convenience considerations applicable to interim injunctions. I will focus therefore
on the plaintiff ’s caveat application since, in theory at least, the hurdles to be overcome in that context are lower than those in relation to interim injunctions, and in any event a decision to sustain the caveat would render unnecessary the interim injunction.
General principles applied under ss 143, 145 and 145A of the Land Transfer
Act 1952
[39] In the time available to me it is necessary only to refer to the list set out in Land Law reflecting summaries routinely included by Associate Judge Faire (as he then was) in his judgments in relation to caveat applications.4 The generally applicable principles are as follows:
1. The Court may make an order that a caveat be removed: Catchpole v
Burke [1974] 1 NZLR 620, at p 623.
2.If it is clear that there was no valid ground for lodging a caveat, or that the interest which in the first place justified the lodging of the caveat no longer exists, such a caveat should be removed: Sims v Lowe [1988] 1 NZLR 656, at p 659.
3.The onus under ss 143, 145 and 145A lies on the caveator to show that there is a reasonably arguable case for the interest claimed: Castle Hill Run Ltd v NZI Finance Ltd [1985] 2 NZLR 104.
4.The caveat, being a creature of statute, may be lodged only by a person upon whom a right to lodge it has been conferred by statute. It is not enough to show that the lodging and continued existence of the caveat would be in some way advantageous to the caveator: Guardian Trust and Executors Co of NZ Ltd v Hall [1938] NZLR 1020 (CA), at p 1025.
5.For the purpose of the application, the caveator must therefore show that he/she is entitled to, or beneficially interested in, the estate referred to in the caveat by virtue of an unregistered agreement or an instrument or transmission or of any trust (expressed or implied): s 137.
6.What the caveator must establish is an arguable case for claiming an interest of the kind in s 137.
7.Even if the caveator establishes an arguable case for the interest in the land claimed, the Court retains a discretion to make an order removing the caveat although it will be exercised cautiously: Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996]
2 NZLR 652; (1996) 3 NZ ConvC 192,459 (CA).
8.Delay is a relevant factor to be weighed in the exercise of the Court’s wide discretion. Delay is more important where there is specific prejudice. What is required is a consideration of all the circumstances: Varney v Anderson [1988] 1 NZLR 478, at p 480.
9.The summary procedure for removal of a caveat against dealings is wholly unsuitable for the determination of disputed questions of fact. Accordingly, the Court in Sims v Lowe [1988] 1 NZLR 656 said (at pp 659-660):
“that an order for the removal of such a caveat will not be made under s 143 unless it is patently clear that the caveat cannot be maintained either because there was no valid ground for lodging it or that such valid ground as then existed no longer does so.”
10.Once the caveator has established an arguable case for the interest claimed, the Court has an overall discretion as to whether the balance of convenience is for or against leaving the caveat in place: McMahon v McMahon [1997] NZFLR 145 (CA), at p 149.
[40] It will be seen that there is a slight dissonance between the way in which the Court’s residual discretion is expressed variously in principles 7, 8 and 10. I will come back to these matters.
Constructive trust
[41] The plaintiff relies on the test articulated by Tipping J in Lankow v Rose in which the Judge set out the matters to be proved by claimants at least in the context of de facto spouse constructive trusts:5
(a) Contributions, direct or indirect, to the property in question. (b) The expectation of an interest therein.
(c) That such expectation is a reasonable one.
(d)That the defendant should reasonably expect to yield the claimant and interest.
[42] His Honour continued:6
If the claimant can demonstrate each of these four points equity will regard as unconscionable the defendant’s denial of the claimant’s interest and will impose a constructive accordingly.
[43] The plaintiff here, pointed to contributions he made to the property by way of maintenance and upkeep to fencing, grass and the like. There was talk of more capital works such as under house drainage, but these were not commenced before Mr Mathieson’s death. Mr Blumenthal also gave support, assistance and comfort to the deceased before his death, especially toward the end of his life. There was shared meat, regular visits and inclusion in the life of Mr Blumenthal’s family. And there were daily visits and emotional support towards the end. These matters, and the fact that Mr Blumenthal took responsibility for the funeral, together demonstrate, I accept, that there was a close bond between the two. There is uncontroverted evidence of statements by the deceased that the property was “Paul’s inheritance”. There was also the rest home reference by the deceased to Mr Blumenthal that:
You wouldn’t want someone else getting your inheritance.
[44] To some extent at least, the evidence of Barry Mabey, the deceased’s friend, corroborated this story of expectation at some level.
[45] It is important however to keep in mind the distinction between the deceased’s estate and the Trust. “Inheritance” is a word apt to apply to estates not trusts. Such representations may create an arguable case in testamentary promise (I express no opinion on that) but they are beside the point in respect of the Trust property. Indeed even if the term “inheritance” should, in the circumstances, be construed more liberally than just a technical reference to the deceased’s estate, Mr Blumenthal still has a problem. In truth, the deceased could not, alone, make good on such a representation in relation to the Trust property. He could not unilaterally decide that the Trust property would go to Mr Blumenthal. He first needed the support of his co-trustee Mr Stewart. There is no evidence that the deceased had raised or discussed with Mr Stewart at any stage, the transfer of the property to Mr Blumenthal, and Mr Stewart certainly made no direct representations to Mr Blumenthal in relation to the transfer of the property to him.
[46] How then could Mr Blumenthal have formed a reasonable expectation of receiving this property on Mr Mathieson’s death, if only one of the trustees made the relevant representation, and the trustees were required to act unanimously? That brings me to the question of whether the representations allegedly made (and it is clearly arguable that they were made) should be treated as representations of both trustees. Ms Cull cited the Regal Castings v Lightbody decision to support her
argument that it did, but in my view that decision cannot apply.7 The relevant issue
there was whether the Lightbodys could claim the advantage of s 60(3) of the Property Law Act 1952 – the exception to voidability of transfers made for the purpose of avoiding creditors. The Court said the exception did not apply to the transfer from the Lightbodys to their trust. That was for two reasons. First, the Lightbodys’ trust was not a purchaser for value as required by the subsection. The second reason was that the Lightbodys’ motive of avoidance infected the whole trust, so could be attributed to the independent trustee even though he was unaware of the real purpose for the transfer.
[47] The first reason obviously has no application at all to these facts. But the second reason doesn’t apply either. Section 60(3) required the Lightbodys to positively prove good faith on the part of the trustees. It is unsurprising in that context that the bad faith of one, would be treated as the bad faith of all – although I would have thought bad faith of one would have been enough. In the case before me, there is no onus on the surviving trustee to prove anything. Regal Castings v Lightbody tells us nothing about whether a representation by one trustee in relation to the rights or interests of a third party should bind all trustees.
[48] Counsel also referred to Murrell v Hamilton, the constructive trust case in relation to a property owned by the de facto spouse defendant’s trust.8 The former couple had lived at the property for three years and Mrs Murrell had contributed to its refurbishment. Panckhurst J found that although the case for contribution was proved, both trustees had to generate any expectation on the part of the plaintiff as to
a share. It was not sufficient that just one of them had.9
7 Regal Castings v Lightbody, above n 2.
8 Murrell v Hamilton, above n 3.
9 He found that the plaintiff ’s contribution to the refurbishment of the property was valued at
15 per cent of the property’s overall value.
[49] On appeal, that decision was overturned. Wild J, writing for the Court of
Appeal, found (here I summarise):10
(a) There is no difficulty in principle with finding a constructive trust within an express trust.
(b)On the evidence the independent trustee had “abjured” responsibility for the refurbishment of the property, leaving all relevant decisions to the defendant de facto spouse.
(c) It followed that the trustees proceeded on the implied understanding that the defendant’s representations in relation to the plaintiff’s contributions to the refurbishment would bind the trust.
(d)It would be unconscionable in these circumstances to allow the trustees to deny relief to Ms Murrell for her contribution to the property.
[50] Implicit in that reasoning is the proposition that in order to meet the test in Lankow v Rose relevant representations will ordinarily be required from all trustees, although unanimity may be implied from the circumstances of the case. In Murrell v Hamilton, Wild J described the facts as “somewhat peculiar”.11 Trustees will have different roles and, where there is evidence that a trustee was authorised by other trustees to make representations having constructive trust consequences, then such representations will necessarily bind all trustees.
[51] In the present case however, there is no evidence to suggest that Mr Stewart “abjured” responsibility for distribution of the Trust asset to the deceased. The evidence is of course that Mr Stewart was an independent solicitor and professional trustee but there is no evidence to suggest that it was understood by both men that decisions in respect of distribution of the Trust’s asset were to be made by the deceased acting alone. The record is entirely silent on the point. It is to be
remembered that the onus is on the plaintiff here.
10 Murrell v Hamilton [2014] NZCA 377.
11 At [31].
[52] Setting that to one side, I have some issues with respect to the nature and extent of Mr Blumenthal’s contributions to the property. While his contributions were real enough and spread over a long period, I doubt that they are more than one would expect from a family member. Such contributions may be relevant to the Family Protection Act proceeding in which the relationship itself becomes of paramount importance, but my focus here is on contributions. Contributions may of course be direct or indirect. The evidence in this case is of indirect contributions by way of maintenance, repair, and upkeep of the property, and emotional support for the deceased. On the defendant’s side, Mr Stewart points to the fact that Mr Blumenthal had free grazing for his cattle and free storage for the equipment and product related to his business throughout the period of the Trust’s ownership of the property.
[53] As Hardie-Boyes J said in Lankow v Rose:12
The contribution must manifestly exceed the benefits.
[54] It is not at all clear to me that there is such manifest excedence of contributions over benefits on these facts. This situation is to be contrasted with the case of Stratulatos v Stratulatos in which the plaintiff (and her deceased husband) contributed to the property owned by the deceased’s mother by meeting mortgage payments and rates as well as funding an extensive renovation on the property.13 To like effect is Hamilton v Jurgens in which the plaintiff contributed for many years to the development of a profitable horticulture operation receiving only a limited income in return.14 The contribution in the case before me, even if it is accepted, is simply not on the scale or in the class of contributions accepted in the cases I have reviewed as producing constructive trust rights.
[55] For the foregoing reasons I find therefore that Mr Blumenthal has no arguable case to sustain his caveat.
12 Lankow v Rose, above n 1, at 282.
13 Stratulatos v Stratulatos [1988] 2 NZLR 424 (CA).
14 Hamilton v Jurgens [1996] NZFLR 350 (HC).
Discretion
[56] Even if that analysis is wrong, I would have exercised my discretion to order the removal of the caveat. There is, I accept, controversy around the extent of the Court’s discretion if the threshold of an arguable case is reached. The Court of Appeal decision in Orams Marine (Auckland) Ltd v Ports of Auckland Ltd is often cited in support of a restrictive view of that discretion: 15
Other cases in this Court Castlehill Run Ltd v VNZI Finance, Holt v Anchorage Management Ltd and Shell Oil New Zealand Ltd v Wordcom Investment Ltd confirmed that while consideration of the balance of convenience may be required in exceptional cases, once a reasonably arguable case has been established, justice will require the maintenance of the caveat.
[57] That said, there are a number of authorities suggesting that the discretion is somewhat broader.16 It is unnecessary for me to attempt to resolve this difference of opinion because the authorities are clear that, even if there is an arguable case for sustaining a caveat, it will not be sustained if there is no point in doing so. The leading decision in this regard is Pacific Homes Ltd (in receivership) v Consolidated Joineries Ltd.17 In that case Blanchard J said: 18
If, on the facts of a case, it can be seen that the caveator can have no reasonable expectation of obtaining benefit from the continuance of the caveat in the form of the recovery of money secured over the land or specific performance of an agreement or if the caveator’s interests can be reasonably accommodated in some other way, such as by substituting a fund of money under the control of the Court, then it may be appropriate for the caveat to be removed notwithstanding that the right to the claimed interest is undoubted.
(my emphasis)
[58] In that case, the argument was that secured creditors with priority over the caveator’s interest would inevitably exhaust the value of the caveated titles and, sustaining the caveat could serve no purpose. Blanchard J rejected that argument on
the facts, but, as the foregoing shows, he accepted the proposition in principle.
15 Orams Marine (Auckland) Ltd v Ports of Auckland Ltd (1994) 6 TCLR 88 (CA).
16 See for example McMahon v McMahon [1997] NZFLR 145 (CA) at 149; Hatswell Investments
Ltd v Flanaghan HC Wellington M111/96 and M111/96, 3 April 1996; Azalea Investments Ltd v
Crosshill Farm Ltd HC Dunedin M10/96, 14 April 1996.
17 Pacific Homes Ltd (in receivership) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA).
18 At 656.
[59] In this case, the defendant has agreed to set the proceeds of sale aside pending the outcome of the substantive proceedings. The plaintiff says that is insufficient because he wants the land. He says the land is highly suitable for a site for the continuation of his business and it has a certain emotional attachment.
[60] The difficulty for the plaintiff is that, even if an arguable case in contribution is made out, there is simply no evidential basis to conclude that his contributions to the land would justify his receiving the entire asset. The best he could expect is a portion of the value of the land. One way or another, the property would have to be sold.
[61] In my view therefore, the plaintiff’s interests are more than adequately protected by the means proposed by Mr Stewart. The fact that Mr Blumenthal finds the property highly suitable and convenient for the operation of his business cannot assist him. There will be any number of similar rural residential properties in the Manawatu area. Such emotional attachment as the plaintiff has to the land is limited in my view. The land was only recently purchased. Mr Blumenthal did not grow up there and has no particular long-term association with it. The evidence suggests that the primary attraction of the property is commercial, and that is substitutable.
Conclusion
[62] I propose to make a conditional order having the effect (ultimately) of removing the caveat and to dismiss the plaintiff’s application for interim relief. But I am prepared to do that only on condition that Mr Stewart places the proceeds of sale of the Trust property in an appropriate interest bearing account pending disposition of the plaintiff’s substantive proceeding. I require this in case, in the substantive proceedings, it is found that I am wrong with respect to the arguability of the plaintiff’s case.
[63] The caveat will lapse today without an order from me sustaining it. I have indicated that, in my view, the caveat should be removed. The plaintiff may wish to appeal, and it seems appropriate that I order that the caveat be sustained for a further seven days to protect the plaintiff’s appeal right.
[64] I therefore order (notwithstanding my conclusions) that the caveat be sustained until Friday, 22 August 2014 and that it will lapse at 5 pm on that day provided, within those seven days, Mr Stewart files an appropriate undertaking to hold the proceeds of sale, and unless there is a further order of this Court in the meantime to protect the plaintiff’s appeal right.
[65] The application for interim relief is dismissed. In light of the nature of these proceedings, costs are reserved until the substantive proceedings are dealt with.
“Williams J”
7