Crampton-Smith v Crampton-Smith HC Rotorua CIV 2006-463-840
[2010] NZHC 1582
•12 August 2010
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
CIV-2006-463-000840
BETWEEN CHRISTOPHER CRAMPTON-SMITH Plaintiff
ANDNOELINE GAIL CRAMPTON-SMITH Defendant
Hearing: 8-10 February 2010
Counsel: J D McBride for the plaintiff
M S McKechnie for the defendant
Judgment: 12 August 2010
JUDGMENT OF STEVENS J
This judgment was delivered by me on Thursday, 12 August 2010 at 3pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
J D McBride, Bell Gully, PO Box 4199, Shortland Street, Auckland 1140M S McKechnie, PO Box 1227, Rotorua 3040
CHRISTOPHER CRAMPTON-SMITH V NOELINE GAIL CRAMPTON-SMITH HC ROT CIV-2006-463-
000840 12 August 2010
Table of Contents
Para No
Introduction [1] Factual background [5] The pleadings [15] Plaintiff’s case at trial [26] Submissions for the defendant [29] Applicable legal principles [32] Discussion
Synthesising the competing claims [45]
Reconciling the two approaches [50]
Proof of intention [51]
Factual aspects
Background context [53]
Factual findings [58] Result [77] Costs [79]
Introduction
[1] This case involves the tragic falling out between a brother and sister. In earlier times, the brother was extremely close to his sister and her late husband. The brother comforted his sister after her husband’s death following an illness of three years and, among other forms of support, provided considerable financial assistance to her and one of her sons when they lived in Australia. The sister has since sold up in New Zealand and now lives in the United Kingdom with another son.
[2] Prior to the sister’s departure, she sold two properties which she had developed in Ngongotaha near Rotorua. The properties were situated on two subdivided lots on which the sister had constructed townhouses in 2004. The two properties were sold for a total of $511,000. The original section had been purchased as undeveloped land in the name of the sister in 1993 for $10,000 in the circumstances explained below.
[3] The brother, as plaintiff, has brought a claim against the sister, as defendant, seeking judgment for the whole sum of $511,000 plus interest and costs.[1] The sole cause of action is for breach of trust alleging that the defendant has failed and/or refused to account to the plaintiff for the sale proceeds of the two properties. The
defendant has denied any liability to the plaintiff contending that she was always the beneficial owner of the two properties.
[1] See prayer for relief in second amended statement of claim dated 6 August 2008.
[4] For the reasons set out below, the plaintiff has not succeeded in establishing his claim. It follows that there must be judgment for the defendant.
Factual background
[5] In September 1987, the plaintiff, who lived in Australia, visited the defendant and her husband in Rotorua. They had recently purchased a block of land at 13 Te Manga Place, Ngongotaha. The plaintiff says he spoke to the defendant about the possibility of buying land in the Rotorua area for himself, but did not pursue that possibility at the time. In April 1992, the plaintiff again visited the defendant and her family. He says that on this occasion he saw two properties, one at 3 Te Manga Place, the other next to the defendant’s land and situated at 11 Te Manga Place. Both properties were unfenced and undeveloped with no buildings on them. It seems that during this visit the plaintiff and his then partner opened a joint account with Postbank into which $100 was deposited on 27 April 1992. The defendant was given drawing authority on the account.
[6] In October 1992, there was a telephone discussion between the plaintiff and the defendant regarding the availability for sale of 3 Te Manga Place for a purchase price of $10,000. The plaintiff says that the property was purchased for him as an investment, although the purchase price was paid from funds provided by his partner, apparently from the estate of her late father. The funds were sent to New Zealand in December 1992 and the transaction was settled at that time. There is no dispute that the title to the property was registered in the name of the defendant.
[7] A year later in October 1993, there was a further telephone discussion between the plaintiff and the defendant during which the purchase of 11 Te Manga Place (the property) was discussed. On 11 October 1993, the sum of $12,467.01 was deposited into the Postbank account. The following day the defendant withdrew
$12,000 from the account. It seems that this amount was used for the purchase of the property, the title to which was again registered in the name of the defendant on
29 October 1993. The defendant contends that she is the beneficial, as well as the legal, owner of the property on the basis that the funds used for the purchase were a loan from the plaintiff.
[8] The defendant’s husband, a well known Rotorua lawyer named Michael Quirke, was diagnosed with cancer in 1994. The plaintiff visited the defendant and her husband several times during the course of the latter’s illness. There is no dispute that the property at 3 Te Manga Place was sold in March 1995. The plaintiff says that he was contacted by the defendant to advise him of the sale for the sum of
$10,000. He recalls that the defendant and her husband considered the property to have been a bad investment and saying that he was “lucky to get [his] money back”. Shortly thereafter, the sum of $10,000 from the sale was transferred into the Postbank account.
[9] Importantly, the plaintiff claims that during the telephone conversation relating to the sale of 3 Te Manga Place, he became aware for the first time that the titles to both properties had been registered in the name of the defendant. He also says that the sale of 3 Te Manga Place was carried out without his permission.
[10] The defendant’s husband died in October 1997. Thereafter, the plaintiff supported his sister by making regular visits to see her and her family in New Zealand. Around October 2000, the defendant and her son went to live in Australia where they lived until the end of 2002. During this time, it seems that the plaintiff further supported her in numerous ways, including financially.
[11] With respect to the property, the plaintiff claims that he contributed to outgoings, such as rates and other expenses, by reimbursing the defendant. In evidence, the plaintiff suggested that from time to time he had work carried out on the property for which he personally made payment. But he acknowledged that from
2000 or 2001 he ceased making any contributions towards the upkeep of the property and the payment of rates. No records were produced by the plaintiff to support any such payment to the defendant for rates or other expenses or to contractors or workers for maintenance on the property.
[12] Following the return of the defendant to New Zealand, she undertook at her cost the subdivision of the property into two lots on separate titles in mid-2003. There is no dispute that the defendant then developed the subdivided lots, again at her own expense, and had a townhouse built on each. In September 2004, the plaintiff’s daughter, Catherine, visited Ngongotaha. She observed that the townhouses had been constructed and that one of the townhouses was on the market for sale. She told the plaintiff about this and the plaintiff claims he telephoned the defendant to ask her why she had subdivided the property.
[13] Some 14 months later, on 23 December 2005, the plaintiff lodged caveats against the titles to the two lots. This action precipitated considerable disagreement between the parties and the commencement of a litigation saga extending down to the present time. There has been a complete breakdown in family relations and it now falls to the Court to determine the issues that divide brother and sister.
[14] A brief and uncontentious chronology of events after the lodgment of the caveats is as follows:
23 May 2006
Transfer of Lot 2 registered.
3 November 2006
Statement of claim filed.
18 May 2007
Sale of Lot 1.
19 June 2007
Plaintiff lodges further caveat in respect of
Lot 1.
11 July 2007
First amended statement of claim issued.
5 June 2008
Court-ordered removal of caveat on Lot 1.
19 June 2008
Transfer of Lot 1 registered.
6 August 2008
Second amended statement of claim filed.
The pleadings
[15] Because of the way in which the plaintiff cast his claim at trial, it is important to refer to the history of the pleadings. Under a heading “factual matrix” in the statement of claim, the plaintiff first alleged that during the first half of 1993 he expressed interest to the defendant in purchasing two blocks of land in Te Manga Place. One was the block at 11 Te Manga Place, while the second was that at 3 Te Manga Place.
[16] The pleading deals first with the property at 11 Te Manga Place alleging that such block was “purchased and transferred into the name of Noeline Crampton- Smith’s [sic] on 6 September 1993”. The pleading does not deal with the circumstances in which the second block at 3 Te Manga Place was acquired. But it does plead that in March 1995 the defendant returned to the plaintiff the sum of
$10,000 with the explanation that she had sold the block at 3 Te Manga Place which
“she believed to be a bad investment”. There then follows a pleading with respect to
11 Te Manga Place:
There remained therefore as the block described in paragraph 5.1 which the defendant held in trust for the plaintiff.
[17] After some less relevant allegations, the pleading continues:
15.It has always been the position of the Plaintiff that the subdivided sections described in paragraph 5 above were held in trust by the Defendant for the Plaintiff and were at all times the property of the Plaintiff.
16.It was the Plaintiff’s understanding that if the sections were kept and built upon then the reward to the Plaintiff would be the increased value of the land from purchase date in September 1993 to today.
17. The plaintiff values the blocks of land between $200,000 and
$300,000.
[18] There was a second cause of action alleging that between 2000 and 2001 the plaintiff had lent the defendant the sum of $15,000. Such a loan was said to be for travel and expenses. The plaintiff claimed the sum of $15,000 plus interest and costs.
[19] Some eight months later, the plaintiff filed a first amended statement of claim. In terms of the pleaded factual allegations, the first amended statement of claim was in precisely the same terms as the original statement of claim. Paragraphs
10, 15 and 16 remained in the pleading in identical wording. What changed was the prayer for relief. Now the plaintiff sought:
A declaratory order declaring him to be the beneficial owner of Lot 1
DP225127 described in Certificate of Title 101208 to the extent that he can prove that he should receive a percentage (up to 100%) of the value of the land.
[20] The plaintiff also sought an order for sale of Lot 1. The second cause of action also remained in this pleading.
[21] When the second amended statement of claim was filed in August 2008, it was in a significantly different form. Under a heading “claim against the defendant: breach of constructive trust”, the plaintiff introduced new factual allegations relating to visits by the plaintiff to Rotorua in 1987 and April 1992. He alleged that during the latter visit he inspected Rotorua properties and that “one of the properties inspected was a property at 11 Te Manga Place, Ngongotaha, Rotorua being the property described in CT SA35D/739” (the property). There then followed a completely new pleading:
8.On or about 25 April 1992, the plaintiff and the defendant orally agreed that the defendant would:
(a)sign any sale and purchase agreement for the Property in her name, as the plaintiff was returning to Australia and it would be easier to for her to sign on his behalf, and
(b) subsequently register the transfer of the Property in the plaintiff’s name.
[22] As to the events from August 1993, there were further new pleadings as follows:
10.In August 1993, the defendant advised the plaintiff that she had agreed terms for the purchase of the Property.
Particulars
• Telephone call between the plaintiff and the defendant.
11.On 6 September 1993, the defendant executed a memorandum of transfer in respect of the Property. The sale price was $10,000.
12.Contrary to the plaintiff’s instructions, the memorandum of transfer provided that the Property would be transferred to the defendant (rather than the plaintiff).
13.On or about 8 October 1993, the defendant advised the plaintiff that he had to pay $10,000 for the purchase of the Property, together with solicitors costs of $2,200.
Particulars
• Telephone call between the plaintiff and the defendant.
14.On 11 October 1993, the plaintiff transferred the sum of $12,467.01 into the Account.
15.On 12 October 1993, the defendant withdrew the sum of $12,200 from the Account to fund the purchase of the Property and to pay solicitor’s costs.
16. On 29 October 1993, the transfer of the Property was registered.
Contrary to the plaintiff’s instructions, the defendant named herself as the registered proprietor on the certificate of title.
17.The defendant thereafter held the Property on trust for the benefit of the defendant.
18.During the course of a telephone conversation on 15 March 1995 with the plaintiff:
(a)the defendant advised that the Property had been transferred into her name; and
(b) the plaintiff asked the defendant to immediately transfer the
Property into his name.
19.During the period March 1995 to May 1995, the plaintiff repeatedly requested that the defendant transfer the Property into his name.
20.The defendant failed and/or refused to transfer the Property into the plaintiff’s name.
[23] The relief sought by the plaintiff is significantly different. Under a heading “cause of action against the defendant – breach of trust”, the plaintiff pleaded that the defendant has failed in breach of trust and/or refused to account to the plaintiff for the sale proceeds arising from the sale of Lots 1 and 2. Under the prayer for relief, the plaintiff claimed from the defendant the sum of $511,000 plus interest and costs. Significantly, there has been a fundamental change in the nature of the claim so that the claimed trust relates not to an increase in the value of the land, but rather
to everything arising from the sale of the two lots. No account is taken of the cost of the subdivision, the construction of the buildings, borrowings, upkeep or other expenses. It is not in dispute that the plaintiff has not contributed to the property, now two developed sections, since 2001 at the latest.
[24] The plaintiff abandoned the allegations in paragraphs 5 of the previous statements of claim that Lot 1 was “purchased and transferred into the name of Noeline Crampton-Smith’s on 6 September 1993”. Also abandoned were the pleadings in paragraphs 10, 15 and 16 quoted in [16] and [17] above.
[25] Finally, the claim for the sum of $15,000 allegedly lent by the plaintiff to the defendant was abandoned. At trial, the plaintiff’s explanation for this was that rather than being his money, the $15,000 was in truth that of his wife Ms Culverston.
Plaintiff’s case at trial
[26] It was the plaintiff’s case at trial that the defendant was to purchase the property on behalf of the plaintiff. To this end, the plaintiff deposited funds into an account to which the defendant had drawing authority. It was intended that the property be registered from the outset in the name of the plaintiff. Instead, the defendant purchased the property with the plaintiff’s funds and registered it in her own name. The plaintiff claims he repeatedly requested that registration be transferred into his name. The defendant failed to comply with such requests.
[27] Counsel for the plaintiff submits that, as soon as the property was purchased using the plaintiff’s money and registered in the name of the defendant, a resulting trust arose in favour of the plaintiff. Counsel relies in essence upon the authority of Westdeutsche Landesbank Girozentrale v Islington London Borough Council in which Lord Browne-Wilkinson stated that:[2]
[2] Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 (HL) at 708 per Lord Browne-Wilkinson.
[W]here A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A (if he is the sole provider
of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions.
[28] Relying on this authority, the plaintiff contends that the defendant was and remained a trustee holding the property on trust for the plaintiff. The plaintiff retained beneficial ownership throughout. The subsequent improvements form part of the trust property for which the defendant must now account in full to the plaintiff.
Submissions for the defendant
[29] The defendant’s case was that the plaintiff advanced her the money by way of a loan. She applied this towards the purchase of the property. She was always to be the legal and beneficial owner of the property.
[30] Counsel for the defendant submits that the plaintiff’s account of a common intention that he was to be the beneficial owner is inherently implausible. There is no credible evidence to support it. It is inconsistent with the failure of the plaintiff to formalise or document the arrangement (either at its inception or over the ensuing years) and his failure to take professional advice or, indeed, raise the issues with anyone outside his family. The account of the defendant, by contrast, is said to be consistent with her paying the outgoings on the property and financing its later subdivision and the development of the townhouses.
[31] With respect to the plaintiff’s contention, counsel for the defendant submits that even if the Court were to accept it, the plaintiff cannot succeed. There is no beneficial vacuum in which the Court may presume an intention that the defendant hold the property on trust for the plaintiff. Rather, on the plaintiff’s account the common intention of the parties is clear. Beneficial ownership was always to reside in the plaintiff. On this approach, the parties contemplated an express trust whereby the defendant as trustee was to hold the property on trust for the plaintiff as beneficiary. But this is an express trust that did not comply with the requirement of s 49A of the Property Law Act 1952 that such instruments be in writing. It should fail on this basis.
Applicable legal principles
[32] A summary will suffice, with the caveat that a succinct summary is difficult in such an intractable area of the law. Trusts may be express, constructive or resulting. An express trust is one which is deliberately established and which the trustee deliberately accepts.[3] It arises from the express intention of the parties. In order for a settlor to create an express trust, the settlor must have used language from which the court finds, as a fact, an intention to create a trust of ascertainable property
in favour of ascertainable persons whose ability to enforce the trust underpins the binding obligation inherent in the trust concept.[4] Thus an express trust requires the coincidental satisfaction of three certainties: certainty of intention, certainty of subject-matter and certainty of object.[5] The absence of any one of the three certainties will cause an express trust to fail. As to the requisite intention, a declaration does not require a technical form of expression.[6] What is needed is the manifestation of an intention to declare what equity calls a trust.[7]
[3] Fortex Group Ltd (in rec and liq) v MacIntosh [1998] 3 NZLR 171 (CA) at 172.
[4] David Hayton, Paul Matthews and Charles Mitchell Underhill and Hayton: Law of Trusts and Trustees (17th ed, LexisNexis Butterworths, London, 2006) at [7.1](1)(a).
[5] Knight v Knight (1840) 3 Beav 148, 49 ER 58. See also Thexton v Thexton [2001] 1 NZLR 237 (HC) at [48].
[6] Thexton v Thexton at [52].
[7] See Thexton at [52] citing Paul v Constance [1977] 1 WLR 527 (CA).
[33] A constructive trust, by contrast, arises not from the express intentions of the parties but rather regardless of them by operation of law. For present purposes it is necessary only to address one species of constructive trust: the institutional constructive trust. An institutional constructive trust arises by operation of the principles of equity and the courts recognise its existence in simply a declaratory way.[8]
[8] Fortex Group Ltd (in rec and liq) v MacIntosh at 172.
[34] Institutional constructive trusts arise in various and often incongruent circumstances. The common factor is described in Equity and Trusts in New Zealand as follows:[9]
… the unconscionability of the defendant in denying the plaintiff an equitable interest in the relevant property because of a previous understanding, whether subjectively agreed upon between the parties or more commonly deemed by the law to have been appropriate in the circumstances. It is the element of consent or intention (or lack of either of these, as the case may be) that triggers the institutional constructive trust which arises to reverse the defendant’s unconscionability.
[9] Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Brookers, Wellington, 2009) at [15.5.2].
[35] Finally, while an express trust arises from the express intention of the parties and a constructive trust regardless of the intent of the parties, a resulting trust is said to give effect to the presumed intention of the parties. A resulting trust arises in two sets of circumstances:[10]
… (A) where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions. It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter- presumption of advancement or by direct evidence of A's intention to make an outright transfer …. (B) Where A transfers property to B on express trusts, but the trusts declared do not exhaust the whole beneficial interest ….
[10] Westdeutsche Landesbank Girozentrale v Islington London Borough Council at 708 per Lord Browne-Wilkinson.
[36] The plaintiff relies on the first type of resulting trust. Such voluntary conveyances and purchases of property in the name of another have also been called “apparent gifts”.[11] Equity does not presume that a gift is intended because equity will not assist a volunteer. Rather, equity presumes, in the absence of a contrary intention, that the party who paid for the property intended to retain beneficial ownership of it. A resulting trust arises.
[11] Equity and Trusts in New Zealand at [12.3] and see Dyer v Dyer (1788) 2 Cox Eq Cas 92, 30 ER 42.
[37] It is the absence of a contrary intention that prompts the courts to presume such an intention, to fill the beneficial vacuum. But the presumption may be displaced. In certain situations, a counter-presumption of advancement applies. Such a counter-presumption applies where the relationship between the parties is such that there is a natural obligation for one to provide for the other.[12] In such situations, it is presumed that the donor intended to make a gift. More generally, however, the presumption may be displaced by evidence showing a contrary
intention. It may, for example, be proved that a loan or a gift was intended. As Lord
Browne-Wilkinson emphasised, the first presumption may be “easily rebutted”.
[12] Equity and Trusts in New Zealand at [12.5.4].
[38] Thus the weight of the presumption differs according to the circumstances of the case. So too does the nature of the evidence of a contrary intention required to displace the presumption. As was observed by Mellish LJ in Fowkes v Pascoe:[13]
Now, the presumption must, beyond all question, be of very different weight in different cases. In some cases it would be very strong indeed. If, for instance, a man invested a sum of stock in the name of himself and his solicitor, the inference would be very strong indeed that it was intended solely for the purpose of a trust, and the Court would require very strong evidence on the part of the solicitor to prove that it was intended as a gift; and certainly his own evidence would not be sufficient. On the other hand, a man may make an investment of stock in the name of himself and some person, although not a child or wife, yet in such a position to him as to make it extremely probable that the investment was intended as a gift. In such a case, although the rule of law, if there was no evidence at all, would compel the Court to say that the presumption of trust must prevail, even if the Court might not believe that the fact was in accordance with the presumption, yet, if there is evidence to rebut the presumption, then, in my opinion, the Court must go into the actual facts.
[13] Fowkes v Pascoe (1875) LR 10 Ch App 343 (CA) at 352–353, quoted with approval in BatemanTV Ltd v Bateman [1971] NZLR 453 (CA) at 463–464.
[39] It is against this broad legal framework of the different forms of trust that the positions of the parties fall to be analysed in light of the facts established at the trial. Reference is made first to the statutory requirements applying to certain trusts in respect of land.
[40] Section 49A of the Property Law Act 1952 provided at all relevant times that:[14]
[14] The position is now governed by s 25 of the Property Law Act 2007.
49A Certain instruments to be in writing
…
(3) A disposition of an equitable interest or trust subsisting at the time of the disposition shall be in writing signed by the person disposing of the same or by his agent lawfully authorised in writing in that behalf, or by will.
[41] Analogous provisions apply in all Commonwealth jurisdictions. They trace their origins to s 7 of the Statute of Frauds of 1677 (Imp), the preamble to which provides that it was passed “[f]or prevention of many fraudulent practices, which are commonly endeavoured to be upheld by perjury and subornation of perjury.” Although the functions of such provisions are many, I refer only to two.[15] First, they prevent ill-considered declarations of trust where the settlor lacks finality of intention. Secondly, they perform a valuable evidentiary function. They provide a safeguard against fabricated allegations of declarations of trusts. They facilitate the
creation of evidence of a permanent and reliable form as to whether a trust was intended and, if so, the terms of that trust. This evidentiary function is apposite in the present case.
[15] These are drawn from the much fuller discussion of T G Youdan in “Formalities for trusts of land, and the doctrine in Rochefoucauld v Boustead” (1984) 43 Cambridge Law Journal 306 at 314 and following.
[42] Broadly speaking, if the requirements of s 49A are not met, an express trust in respect of land will fail. This, however, is subject to the longstanding principle applied in Rochefoucauld v Boustead[16] that equity will not allow a statute to be used as an instrument of fraud. This principle was more recently applied in Bannister v Bannister.[17] The English Court of Appeal held that fraud arose when the purchaser of two cottages relied on the absolute character of a conveyance to deny the vendor her right to rent-free occupation of one of the cottages pursuant to the terms of an oral agreement not included in the formal conveyance. The Court imposed a constructive trust and observed:[18]
[16] Rochefoucauld v Boustead (No 1) [1897] 1 Ch 196 (CA) at 206.
[17] Bannister v Bannister [1948] 2 All ER 133 (CA).
[18] At 136.
It is, we think, clearly a mistake to suppose that the equitable principle on which a constructive trust is raised against a person who insists on the absolute character of a conveyance to himself for the purpose of defeating a beneficial interest, which, according to the true bargain, was to belong to another, is confined to cases in which the conveyance itself was fraudulently obtained. The fraud which brings the principle into play arises as soon as the absolute character of the conveyance is set up for the purpose of defeating the beneficial interest, and that is the fraud to cover which the Statute of Frauds or the corresponding provisions of the Law of Property Act, 1925, cannot be called in aid in cases in which no written evidence of the real bargain is available. Nor is it, in our opinion, necessary that the bargain on which the absolute conveyance is made should include any express stipulation that the grantee is in so many words to hold as trustee. It
is enough that the bargain should have included a stipulation under which some sufficiently defined beneficial interest in the property was to be taken by another.
(Emphasis added.)
[43] Mahon J relied on the above in Avondale Printers v Haggie.[19] As to the circumstances in which a constructive trust may arise, the Judge stated:[20]
[19] Avondale Printers v Haggie [1979] 2 NZLR 124 (SC) at 161.
[20] At 163–164.
… the holder of the legal title to property will not in all cases be constituted a constructive trustee merely by reason of the fact that he has been shown to be in breach of an oral agreement affecting that property and made between himself and the plaintiff. The circumstances must show that reliance upon the legal title in that particular situation amounts to a fraud upon the plaintiff. Where the relationship between the parties, or the terms of the oral agreement, or the terms of a common intention not constituting a completed agreement, are such as to show that the owner of the legal title has not committed any fraud in the legal or equitable sense, then the plaintiff must be left to whatever contractual remedy he may have for breach of the oral agreement, if it is enforceable.
The ordinary rule is that reliance upon the Statute of Frauds in order to defeat a beneficial interest intended to be conveyed by oral agreement will constitute equitable fraud so as to fasten upon the legal owner the liability of a constructive trustee. But mere reliance upon the Statute of Frauds to defeat an oral agreement relating to land does not in itself give rise to a constructive trust. Prima facie the Statute of Frauds or its modern statutory equivalent must be given its legal effect. Fraud in equity will only arise where in all the circumstances it will be dishonest for the legal owner to rely upon the statute, and that result will most commonly occur when in the words of Lord Diplock in Gissing v Gissing [[1971] AC 886] "the legal owner has so conducted himself as to induce the other party to act to his own detriment in the reasonable belief that by so acting he was acquiring a beneficial interest in the land".
[44] Counsel for the plaintiff in his helpful additional closing submissions acknowledged that the distinction between institutional constructive trusts and resulting trusts is not always clear-cut. In the case of purchase of property by one person for another, it could be said that the nominal purchaser is acting as the fiduciary of the actual purchaser, giving rise to an institutional constructive trust. Counsel cited the decision of the House of Lords in Stack v Dowden.[21] But that was a rather different case to the present as it concerned an unmarried couple who had conveyed a house into joint names when they were living together. Their Lordships
[21] Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432.
discuss the principles applicable to determining the beneficial interests of the parties in the property in the particular context of that case.
Discussion
Synthesising the competing claims
[45] The plaintiff’s claim to beneficial ownership of the whole of the proceeds of the sale of the two townhouses built on the property is essentially based upon the existence of the parties’ common intention that beneficial ownership of the property would remain with the plaintiff. But the plaintiff has provided two competing versions of the factual matrix relevant to the ascertainment of such intention. The first is that the defendant was to hold legal title of the property until transfer of legal title to the plaintiff could be effected at a later date. The second is that the defendant was to purchase the property on the plaintiff’s behalf and register it forthwith in the name of the plaintiff. In the second scenario, the arrangement according to the plaintiff dated back to an occasion on or about 25 April 1992.
[46] The first approach can be analysed in terms of an express trust. That an express trust was contemplated is evident from the original statement of claim and the first amended statement of claim. Thus, where the parties manifest a common intention to declare that which equity calls a trust, there is an equitable obligation binding the defendant as trustee to deal with the property in which she was to hold legal title for the benefit of the plaintiff as beneficiary. In this context, an express trust arises from the express intentions of the parties. But as the declaration of trust is in respect of land there is a requirement to comply with s 49A(3) of the Property Law Act, that it shall be manifested and proved by some writing. The defendant therefore contends that the Court should not enforce the arrangement.
[47] However, that is not the end of the analysis. Equity will not allow a statute to be used as an instrument of fraud: see Rochefoucauld v Boustead. It would constitute fraud for the defendant to whom the property was conveyed as trustee, and who knew it was so conveyed, to deny the trust and claim the land herself. Notwithstanding the statutory provisions, the plaintiff may prove by parol evidence
that it was conveyed upon trust and that the defendant is denying the trust and relying on the form of the conveyance and the statute to keep the land herself. The modern approach in such an instance would be to impose an institutional constructive trust of the type referred to in Avondale Printers v Haggie. The creation or operation of a constructive trust is not affected by s 49A of the Property Law
Act.[22]
[22] Section 49A(4).
[48] At trial, counsel for the plaintiff proceeded on the second basis, relying upon the existence of a resulting trust. Counsel for the defendant still sought to characterise the facts as giving rise to an express trust. But the analytical options do not necessarily stop there. Another approach, however, is to analyse the facts recognizing that there is a relationship of agency at work. This would arise where
there was never any intention that the defendant would hold legal title to the land.[23]
Rather, the property was to be registered in the name of the plaintiff from the outset. There was never any anticipated separation of legal and equitable title so as to permit an analysis as an express trust.
[23] See Equity and Trusts in New Zealand at [12.3.3] which speaks of a resulting trust arising following a “voluntary” transfer into the name of another. See also GE Dal Pont and DRC Chalmers Equity and Trusts in Australia (4th ed, Lawbook Co, Sydney, 2007) at [26.55].
[49] An agency relationship may give rise to a fiduciary one. That would be because the defendant as agent misappropriated the property of the principal in applying the principal’s funds towards a purchase in respect of which she took legal title. The Court could then find a constructive trust over the property in favour of the plaintiff. This is consistent with the broader proposition that if an agent who agrees to acquire land on behalf of his principal acquires it in his own name or on his own
behalf, he becomes a trustee of it for his principal: Lees v Nuttall.[24] In these
circumstances, the conveyance of land to the agent cannot vest the beneficial interest in the agent. Rather, a trust arises as part of the fiduciary obligation as to self- dealing. Section 49A of the Property Law Act would not prevent the plaintiff from succeeding here either.
[24] Lees v Nuttall (1829) 1 Russ & M 53, 39 ER 21.
[50] While the plaintiff appeared to favour the first approach in his original statement of claim and the second approach at trial, the defendant submits the plaintiff’s position should be analysed solely in terms of the first approach (express trust) so that a finding of a trust is precluded by operation of s 49A. However, if one were to accept the premise that the critical issue is whether the parties’ common intention was that beneficial ownership remain with the plaintiff, the choice of approach is immaterial. In neither case is the Court prevented from imposing a constructive trust. The important factual issue for determination is the intention of the parties.
Proof of intention
[51] As was stated in the Westdeutsche Landesbank Girozentrale case, where A pays for the purchase of property which is vested in B alone there is a presumption that A did not intend to make a gift to B: the property is held on trust for A. A similar situation was discussed in Bateman TV Ltd v Bateman:[25]
The second class of cases is that in which A, using funds provided by B, purchases, in the absence of B, a property, putting it in his own name. Here, if the evidence is such that B, can be said to have advanced the moneys to A in the character of a purchaser, there will be a resulting trust; aliter, if the moneys appear to have been advanced by him to A in the character of a lender.
[25] Bateman TV Ltd v Bateman at 462.
[52] As discussed above, the strength of the presumption will vary according to the circumstances. In Equity and Trusts in New Zealand several factors are identified as being relevant in ascertaining the true intention of the transferor (additional to written and oral evidence of the circumstances surrounding the transfer and statements of the parties).[26] Relevant among them are whether anything has happened subsequent to the initial purchase relevant to the transferor’s intention, the control and use of the property, and how the parties discharged any outgoings on the property.
Background context
[26] At [15.5.2].
[53] The incontrovertible factual background is that the defendant and her late husband lived at 13 Te Manga Place. In December 1992, the nearby property at 3 Te Manga Place was purchased by the defendant for $10,000. The purchase price was provided by the then partner of the plaintiff, but the legal title to the property was registered in the name of the defendant. In this case I infer that the beneficial title to
3 Te Manga Place remained with the plaintiff. But in March 1995 there was a sale of
3 Te Manga Place and the sum of $10,000, being the proceeds of the sale, was returned to the plaintiff. I find that, upon the return of the purchase price, any obligations of the defendant to the plaintiff, legal or equitable, came to an end. Indeed, counsel for neither party argued to the contrary.
[54] At an earlier time, in April 1992, the plaintiff and his then partner opened a joint account with Postbank with an initial deposit of $100. The defendant was given drawing authority on the account. In October 1993, there was a discussion between the plaintiff and the defendant concerning the purchase of 11 Te Manga Place. On 11 October 1993, an amount of $12,467.01 was deposited into the Postbank account. On 12 October 1993, the sum of $12,000 was withdrawn from the account by the defendant. I infer that this amount was used by the defendant to pay the purchase price for 11 Te Manga Place, the legal title to which was registered in the name of the defendant.
[55] There is no written record, formal or informal, between the plaintiff and the defendant regarding the transaction to acquire 11 Te Manga Place. In particular, there are no documents of any kind recording the intention of the parties at the time of the purchase. The only evidence of an alleged common intention that the plaintiff was to hold the sole beneficial interest in the property at 11 Te Manga Place was the oral evidence of the plaintiff. His claim to the property was to the whole of the property, including all the proceeds from the sale of the two townhouses. The plaintiff did not assert a joint or partial interest.
[56] In respect of the outgoings for rates and other expenses, there is no dispute that the defendant paid the rates. The plaintiff claimed that he reimbursed the defendant for rates, but only until 2001 at the latest. No records were produced by the plaintiff to substantiate such reimbursement. The plaintiff was asked about the existence of such records and commented that “if need be I can have those in Court by tomorrow”. No such records were produced. Further factual aspects of the alleged reimbursement of rates and payment of expenses by the plaintiff will be discussed below.
[57] In relation to written records of the transaction, the plaintiff acknowledged that apart from “text messages” in relatively recent times there were none. In particular, at no time from October 1993 down to the lodging of the caveats in late December 2005 did the plaintiff express any concerns in writing. Even after the time in March 1995 when the plaintiff accepts he knew that 11 Te Manga Place was registered in the name of the defendant he did not write to her or her husband or his law firm. Not a single piece of paper exists in which the plaintiff raised any issue about the claimed beneficial interest or his purported concern that the defendant was failing or refusing to transfer the title to the property into his name.
Factual findings
[58] The above sets out the incontrovertible facts and features that can be established from existing documents, or lack of them. It is now necessary to deal with relevant factual findings, together with veracity and reliability issues. I record that the defendant did not give or call evidence in the defence of the claim. Rather, through her counsel, the defendant relied upon the inherent implausibility of the plaintiff’s version of the alleged transaction and a lack of credibility and reliability on the part of the plaintiff.
[59] The plaintiff’s claim relied upon inferences or a presumption to be applied to the background facts. In addition, counsel for the plaintiff submitted that the evidence given by the plaintiff ought to be accepted as supporting the presumption and, in particular, the existence of a common intention that the beneficial title to
11 Te Manga Place would remain with the plaintiff. Counsel for the plaintiff
submitted that the evidence was supported by three family members: his wife, sister and daughter. Reference was made to the evidence that the family believed the property belonged to the plaintiff and that the plaintiff had asked the defendant on a number of occasions to transfer the property into the name of the plaintiff and that the defendant promised on numerous occasions to do so. Counsel submitted that the absence of formal correspondence or the involvement of lawyers until December
2005 was understandable, particularly because of the serious illness of the defendant’s husband Mr Quirke, and his death in October 1997. Finally, counsel pointed to the defendant’s failure to give evidence as raising an inference that her evidence would have been unhelpful to her case: see Ithaca (Custodians) Ltd v Perry Corporation.[27]
[27] Ithaca (Custodians) Ltd v Perry Corporation [2004] 1 NZLR 731 (CA).
[60] Dealing first with the evidence of the plaintiff, I have reached the conclusion that he was not a credible or reliable witness. First, I do not accept the plaintiff’s version that the genesis of the arrangement between himself and his sister dates back to an oral agreement made on or about 25 April 1992. He claims that the agreement was that the defendant would sign any agreement for sale and purchase of property in her name because he was returning to Australia and it would be easier for her to sign on his behalf and subsequently register the transfer of the property into the plaintiff’s name. Yet the plaintiff acknowledged that Mr Quirke was “handling the transfer deeds with the owner” and he accepted that an agreement for sale and purchase could have been faxed to him in Australia, signed and faxed back. I do not accept the plaintiff’s evidence that at the time of the acquisition of 11 Te Manga Place he put all his trust in the defendant and Mr Quirke and “thought everything would be done according to [his] wishes”. Had the common intention been that the registered title would be in the plaintiff’s name when the conveyancing was carried out (as pleaded in paragraph 8 of the second amended statement of claim), then one might have expected the plaintiff to follow up with Mr Quirke to confirm that his “wishes” had been complied with.
[61] With respect to both the lead up to the purchase of 11 Te Manga Place and the transaction itself, I found the plaintiff’s evidence rather vague, lacking in clarity
and at times inconsistent. The plaintiff claimed in his evidence to have engaged in transactions of a similar nature on other occasions. Yet he also agreed that the transaction with his sister was a “private arrangement” and agreed that he had not told his solicitor in Australia about it. No detail was provided by the plaintiff as to the precise nature of such similar transactions.
[62] Another factor relevant to the plaintiff’s credibility is the claim that he made against the defendant in the original statement of claim for $15,000, being money that he himself allegedly lent to the defendant during the period 2000/2001. This claim was repeated in the first amended statement of claim but later abandoned when the plaintiff filed the second amended statement of claim in August 2008. At trial, the plaintiff was cross-examined about this loan that had been referred to in the earlier pleadings as follows: “During that time in terms of her travel and her expenses the Plaintiff lent the Defendant the sum of $15,000.00.” I found the plaintiff’s answers on this topic unconvincing, unhelpful and inconsistent. In particular, there were inconsistencies with the pleading, with his wife’s evidence and even between answers to different questions. In the end, he conceded that any monies that may have been made available to the defendant were not his, but rather those of his wife Ms Culverston whom he had only met in March 2001.
[63] So far as the payment of rates and other expenses are concerned, I find that the rates and any other necessary expenses were paid by the defendant. In so far as the plaintiff claimed to have reimbursed the defendant in cash and in other ways prior to 2001, I reject his evidence. There are no documents to support it. I found his evidence about having arranged for unnamed persons to do minor work on the property on his behalf to be unconvincing. Again, there was no documentary evidence to support it and I do not accept his answer that payment for such services was made for cash and beer.
[64] I agree with the submission of counsel for the defendant when he referred to the “inherent implausibility of the alleged arrangement”. I find that for more than 10 years, the plaintiff took no steps to have what he claimed to be the agreed common intention documented or formalised in any way. Further, it is surprising that he took no professional advice in the matter. He did not write to the defendant or to her
lawyer husband Mr Quirke. Importantly, he did not raise the issue with Mr Quirke. Although he had become ill from 1994, the plaintiff claimed that he was promised by Mr Quirke that the subject property would be registered in his name. But even after his death the plaintiff took no steps to raise the matter with the partners of Mr Quirke.
[65] The plaintiff in his evidence claimed that the relationship with his sister broke down around 2000–2001. If this is so, however, then one might have expected that he would take some steps to regularise the position at that point. Yet none were taken. There was no approach for advice and no formal or informal correspondence about the matter. I agree with the submission on behalf of the defendant that it is unlikely that the defendant would have undertaken the subdivision and development of the townhouses had she believed that the plaintiff had a beneficial interest in the property. It is also relevant that, even on the plaintiff’s version of events, he knew about the development of the property and the existence of the two townhouses in September 2004. However, he did not take any advice, took no legal steps and entered into no written correspondence with the defendant. It was not until 14 months later that the caveats against the two subdivided lots were lodged.
[66] So far as the evidence of the plaintiff’s wife, daughter and sister are concerned, I am satisfied that none of this evidence adds any weight to the plaintiff’s claim. Much of the evidence was of a hearsay nature and I find that it is unreliable because of the relationship of those witnesses to the plaintiff. I agree with the submission of counsel for the defendant that most of the evidence given by these witnesses involved the repetition of self-serving statements by the plaintiff on various occasions over the years.
[67] By way of conclusions on the facts, I am satisfied that the plaintiff has not established:
a) The existence of any agreement with the defendant dating from April
1992.
b)By other evidence that there was a common intention between the parties that he would hold the beneficial interest in 11 Te Manga Place.
c) That he contributed any outgoings by way of rates or other expenses towards the maintenance and upkeep of the property.
d)That he played any part in, or contributed to any cost of, the subdivision and development of the property.
e) Any factual basis that would warrant the Court imposing a constructive trust in respect of the whole of the proceeds from the sale of the two townhouses. In particular, the plaintiff has not established any factual basis upon which the Court should hold that it would be unconscionable for the defendant to retain the proceeds from the sale of the two townhouses.
[68] If the initial transaction were to be analysed as an express trust, then the defendant would have been able to rely upon the provisions of s 49A of the Property Law Act because there is no record in writing subsisting at the time of the disposition. But this would not have been the end of the analysis. It was open to the plaintiff to establish a common intention that the beneficial ownership of 11 Te Manga Place was to remain with the plaintiff, notwithstanding the fact that the registered title was in the name of the defendant. But the facts presented at trial simply do not support such a claim.
[69] If the transaction is approached in terms of a resulting trust, I conclude that any presumption of a trust in favour of the plaintiff has been rebutted in this case. I am satisfied that this is not a case where the presumption is a strong one. Neither is it a case where the initial presumption is overtaken by the counter presumption of, say, a presumption of advancement. Given the plaintiff has not established that there was a common intention that the beneficial interest in the property would remain with him, it is important to look at all of the circumstances to ascertain whether the
presumption in favour of a resulting trust should prevail. But I am satisfied that it should not.
[70] In drawing this conclusion, I have considered all of the circumstances surrounding the transfer, including what has happened subsequent to the purchase of the property in October 1993. I have also taken into account that the property at
11 Te Manga Place was directly adjacent to the defendant’s property. I infer that it would have been in her interest, and that of her late husband, to control it because of the likely impact on the value of their own property. Further, all the outgoings and expenses were paid by the defendant. The plaintiff has not established that he contributed to these in any way whatsoever. Finally, all of the subdivision and development costs incurred in the building of the two townhouses fell to the defendant. The plaintiff did not contribute to such costs in any way to these either.
[71] For similar reasons, I am satisfied that there was no relationship of agency which could give rise to a constructive trust. The plaintiff’s evidence simply fails to establish that the defendant bought the property as agent for the plaintiff and then, against his wishes, transferred it into her own name in breach of fiduciary duty.
[72] Accordingly, I am satisfied on balance that the more likely position is that the sum of $12,000 withdrawn by the defendant in October 1993 from the joint account of the plaintiff and his then partner was in the nature of a loan. I am fortified in this conclusion because the evidence established that, at various stages until the relationship between the parties broke down, the plaintiff supported his sister and on occasions advanced monies to her or caused others to lend monies to her. Any remedy which the plaintiff may now have must sound in recovery of that loan.
[73] Finally, if I am wrong in the conclusions which I have reached, it would be necessary to examine the remedy which the plaintiff has sought. I have already referred to the fact that in the first two statements of claim the plaintiff sought an increase in the value of the land. Inconsistently at trial, he sought the total proceeds of the sale of the two townhouses. This difference in claim illustrates one of the ways in which the plaintiff failed to demonstrate with clear evidence the nature of the transaction that he was alleging.
[74] In this context, I have rejected the plaintiff’s claims to have spent money in terms of rates and expenses on the property. Even on the plaintiff’s account, any reimbursement stopped around 2000–2001. There is no valuation of the land, as distinct from the improvements. Moreover, there is no valuation of the improvements. No estimate has been given as to the cost of maintaining or developing the property.
[75] One of the key elements in the grant of equitable relief is whether the defendant has profited from the transaction at the expense of the plaintiff. There is no evidence before the Court that the defendant has done so. To accede to the plaintiff’s claim would mean that in essence an investment of $10,000 was converted into a return of $511,000 in circumstances where there has been no other contribution by the plaintiff to the cost of maintaining, subdividing or developing the property. That would not be just.
[76] Accordingly, even if the factual findings in terms of liability had been different, the plaintiff would have faced significant difficulties in terms of obtaining any effective remedy, let alone the remedy sought in the second amended statement of claim.
Result
[77] The plaintiff has not succeeded in establishing his claim. There will be an order granting judgment for the defendant.
[78] For completeness, I note that the defendant’s counterclaim contained in the second statement of defence and counterclaim dated 20 August 2008 seeking the sum of $8,751 was abandoned at the trial. No evidence was led in relation to the counterclaim and the plaintiff would have been entitled to judgment.
Costs
[79] The defendant is entitled to costs. No doubt any such costs would be reduced by a small measure to take into account the late abandonment of the counterclaim. If the parties cannot agree on costs, it will be necessary for counsel to file memoranda. The defendant should file first by memorandum of no more than four pages within
30 days of the judgment. The plaintiff may reply with a memorandum of similar limit within a further 14 days.
[80] It is to be hoped that the parties can at least agree over costs. It is time to bring this sad family saga to an end.
Stevens J
0
2
1