Dillon v Dillon
[2024] NZHC 1109
•7 May 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-419-88
[2024] NZHC 1109
BETWEEN CHRISTOPHER DILLON
Plaintiff
AND
HAYDEN DILLON
First Defendant
LISA DILLON
Second Respondent
Hearing: 14 February 2024 Counsel:
P V Cornegé for the Applicant
W D Hofer for the First and Second Respondents
Judgment:
7 May 2024
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 7 May 2024 at 4 pm.
Pursuant to Rule 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
Solicitors/Counsel: Tompkins Wake, Hamilton
Riverbank Chambers, Hamilton
DILLON v DILLON [2024] NZHC 1109 [7 May 2024]
Introduction
[1] This proceeding has its genesis in a dispute between the plaintiff, Christopher Dillon, and his son and daughter-in-law, Hayden and Lisa Dillon. Christopher’s wife, Glen Dillon, is not a party, but she is mentioned in the background which I set out below.
[2] The first defendant, Tullycrine Ltd (Tullycrine), is a company that was incorporated and controlled by Hayden and Lisa. It was removed from the Register of Companies. On 29 November 2023, I ordered that Tullycrine be restored to the Register, so that Christopher’s claims against Tullycrine can proceed.
[3] The second defendant, Hopeton Trustee Co Ltd (Hopeton), was at material times a trustee of the Dillon Family Trust, a trust associated with Hayden and Lisa. Hopeton’s directors are Hayden and Lisa, although Lisa was the sole director during the relevant period.
[4] Christopher commenced this proceeding in 2022, bringing causes of action against Hayden, Lisa and Tullycrine (the first statement of claim). In a judgment dated 3 May 2023, I dismissed Hayden and Lisa’s application for an order striking out the claims against them, or alternatively for defendant’s summary judgment. I directed Christopher to file an amended statement of claim.
[5] Christopher has filed a second amended statement of claim dated 6 June 2023, adding Hopeton as a defendant (the second statement of claim). Hayden and Lisa are no longer parties. Hopeton now applies for defendant’s summary judgment in respect of the cause of action against Hopeton in the second statement of claim.
Background
[6]The relevant background is set out in my judgment dated 3 May 2023:
[3] In 2010, Tullycrine purchased a farm in the Waikato. The intention was that the farm would be utilised to provide accommodation for Hayden, Lisa and their children, together with Christopher and Glen, and to operate Tullycrine’s racehorse agistment business (the business). The extended Dillon family lived together on the farm from 2010 until 2018.
[4] On 20 December 2011, the family met with a lawyer at the offices of Tompkins Wake to attempt to agree various matters relating to the arrangements between them. The meeting resulted in a letter from Tompkins Wake to Hayden and Lisa dated 21 December 2011, and various handwritten notes which were included with that letter. Some of the handwritten notes were signed by the parties.
[5] From 2010 to 2018, Christopher contributed his services to the business. A residence was built on the farm for the purpose of accommodating the extended family. Christopher and Glen paid $17,000.00 for a development consent fee for construction of the residence. Christopher alleges other contributions to the development of the property. Christopher and Glen also assisted by looking after their grandchildren.
[6] By 2018, the relationship between Christopher and his son had irreparably broken down. Christopher and Glen left the farm in mid-2018 and the farm was subsequently sold.
[7] The legal nature of the arrangements between Christopher and the defendants is in dispute.
[8] After Christopher and Glen left the farm, Christopher commenced a claim in the Employment Relations Authority, seeking to recover wages for the period that he assisted in operating the business. The Authority determined that Christopher was not an employee of Tullycrine and his claims were dismissed.
[9] Christopher challenged that determination in the Employment Court. The Employment Court upheld the Authority’s determination that Christopher was not an employee of Tullycrine, adding that the Employment Court and the Authority had no jurisdiction to deal with other legal issues between Christopher and Tullycrine.
(footnotes omitted)
[7] On 9 August 2017, Tullycrine sold the property to Hopeton as trustee for the Dillon Family Trust. According to Hayden’s evidence, Hopeton sold the farm to an arms-length purchaser in June 2021. There is no evidence before the Court regarding: the substance of the transaction between Tullycrine and Hopeton; the sale price achieved on the on-sale to the arms-length purchaser in June 2021; or what became of the net sale proceeds.
The pleadings
[8] In the first statement of claim, Christopher included claims to recover compensation of $500 for each week that he contributed services to the business.
Christopher pleaded causes of action for breach of contract and promissory estoppel. Those claims are no longer pursued.
[9] In the second statement of claim, Christopher has refined his claim to one of breach of a constructive trust against Tullycrine and knowing receipt of trust property against Hopeton. Christopher’s claim against Tullycrine seeks only a declaration that the constructive trust existed. Christopher’s claim against Hopeton seeks equitable compensation.
[10] Christopher alleges that he made direct contributions to the property, together with work performed for the business and childcare in respect of Lisa and Hayden’s children. Christopher alleges that these various contributions were made in the expectation that he would receive an ownership interest in the property, and that this expectation was reasonable, giving rise to an institutional constructive trust against Tullycrine.
[11] Christopher further pleads that Hopeton had knowledge of Tullycrine’s breach of the constructive trust when Hopeton received the transfer of the property from Tullycrine, rendering Hopeton liable for knowing receipt of trust property.
[12]Hopeton now argues that it is entitled to summary judgment on two grounds:
(a)the claim against it cannot succeed on the evidence; and
(b)alternatively, the claim against it is out of time.
Summary judgment principles
[13] Rule 12.2(2) of the High Court Rules 2016 provides that the Court may enter judgment against a plaintiff if the defendant satisfies the Court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[14]The test for summary judgment is set out by the Court of Appeal in
Stephens v Barron:1
(a)The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually this will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claim.
(b)An application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment able to be properly arrived at only after a full hearing of the evidence.
(c)The Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment is not to be arrived at on a fine balance of the available evidence as would be appropriate at a trial.
(d)The residual discretion of the Court to refuse summary judgment would be properly invoked to avoid the oppression which would otherwise result if an application by a defendant for summary judgment would pre-empt a plaintiff exercising the right to amend the pleadings.
(e)Summary judgment should not be applied for unless the substantive merits of the case are clear and capable of summary disposal.
(footnotes omitted)
Has Hopeton established that the claim against it cannot succeed on the evidence?
[15] Before reviewing the evidence, I briefly set out the legal principles applicable to Christopher’s claims of an institutional constructive trust against Tullycrine and knowing receipt of trust property by Hopeton. I adopt my summary of the principles in my judgment dated 3 May 2023:2
[48] Constructive trusts arise by operation of a rule [of] equity, without reference to the actual or assumed intention of the parties. Generally, a constructive trust will arise where it would constitute a fraud for the party in question to deny the trust.
[49] Broadly, there are two types of constructive trust: institutional and remedial. The former is treated as a substantive institution, recognised by the
1 Stephens v Barron [2014] NZCA 82 at [9], citing Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).
2 Dillon v Dillon [2023] NZHC 949.
court in a declaratory way upon a claimant successfully establishing its existence by reference to a category of case law where constructive trusts are said to arise.
[50] Constructive trusts based on reasonable expectation comprise one such category. Reasonable expectation trusts most commonly arise in the context of a breakdown of a de-facto relationship not subject to the Property (Relationships) Act 1976, but have also been considered in the context of other family units, including as between child and parent. In either context, the claimant must satisfy each of the following factors listed by Tipping J in the leading case of Lankow v Rose:
(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; and
(d)that the defendant should reasonably expect to yield to the claimant an interest in the property.
[51] To justify equity’s intervention, the courts have emphasised that the claimant’s contributions must be more than minor, made towards the acquisition, preservation or enhancement of the defendant’s property, and should manifestly exceed any benefits derived from the defendant.
…
[57]There are three elements to establishing liability for knowing receipt:
(a)there is a transfer of property in breach of trust;
(b)the defendant beneficially receives that trust property; and
(c)the defendant has the required level of knowledge that the transfer was in breach of trust.
[58] New Zealand’s position on the level or type of knowledge required to establish liability for knowing receipt is unsettled. What can be said with certainty is that the guiding question is whether the recipient’s state of knowledge was such that it would be unconscionable for them to retain the benefit of the receipt. That reflects the accepted basis for knowing receipt: unconscionability.
(footnotes omitted)
[16] Hopeton accepted, for the purpose of its application for summary judgment, that it is arguable that Christopher made qualifying contributions while Tullycrine owned the property. However, Hopeton argues that there is no evidential basis for Christopher’s pleaded assertion that he had a reasonable expectation of acquiring an interest in the property from Tullycrine.
[17] For Hopeton, Ms Webster relied on what she characterised as Hayden’s consistent evidence, in the Employment Relations Authority (ERA) and the Employment Court (EC), that Christopher was not entitled to an interest in the property.
[18] Ms Webster placed weight on an email dated 13 February 2013 from Hayden to Christopher, which included the following statement:
What ever your personal situation which is a result of the decisions you have made. You should not assume any right to our capital because you work on the farm … Not forgetting the future liability we will inherit as you both age. I appreciate that you work hard on the farm in return for that.
[19] This email cannot deliver the fatal blow sought by Hopeton, for two reasons. First, this statement cannot affect any reasonable expectation held by Christopher before the statement was made. Some of Christopher’s contributions, including payment of $17,000 towards the cost of construction of a house on the property, were made before the email was sent. Secondly, Hayden’s comments are directed towards “work on the farm” and not direct financial contributions to developing the property.
[20] Ms Webster referred to the basis on which Christopher has previously advanced claims in the ERA, the EC and this Court for compensation of $500 per week for work performed for the business. It was submitted that abandoning these claims in substitution for a constructive trust claim on the same grounds lacked credibility.
[21] That submission may be relevant when Christopher’s credibility is assessed at trial, however this change in legal position falls short in establishing that Christopher’s claim against Hopeton cannot succeed. It overlooks Christopher’s alleged direct contributions to the property, which are distinct from work performed for the business.
[22] A trial is required to ascertain the extent of the contributions made by Christopher and the understandings and arrangements that existed between the parties at the time. Context is required to enable the Court to determine whether Christopher held an expectation of an interest in the property and, if so, whether such an expectation was reasonable.
[23] Alternatively, Ms Webster submitted that the claim against Hopeton should be dismissed on the basis that there is no evidence that Hopeton had the required level of knowledge for a claim of knowing receipt of trust property. I reject that submission. Hopeton’s director at the material time was Lisa. Her knowledge of any circumstances that would give rise to an institutional constructive trust against Tullycrine is imputed to Hopeton.
[24] The evidential arguments advanced on behalf of Hopeton are unsuitable for determination on an application for summary judgment, by a wide margin.
Is Christopher’s claim against Hopeton out of time?
[25] The Limitation Act 2010 (the Act) does not prescribe a limitation defence for every civil claim. The defences in the Act only apply to the specified claims for relief that are prescribed in the relevant parts of the Act. The Act applies to land, including land under the Land Transfer Act 2017.3
[26] Hopeton argues that the claim against Hopeton for knowing receipt of trust property is out of time, relying on ss 21, 24 and 49 of the Act, which relevantly provide:
21 Claim to recover land (based on adverse possession)
(1)It is a defence to a claim to recover land if the defendant proves that the date on which the claim is filed is at least—
(a)60 years after the date on which the claim accrued to the claimant or to some other person through whom the claimant claims, if the claimant is, or is a person claiming through, the Crown; and
(b)12 years after the date on which the claim accrued to the claimant or to some other person through whom the claimant claims, if the claimant is not, and is not a person claiming through, the Crown.
(2)No claim to recover land accrues under this Act unless and until the land is in the possession (in this section called adverse possession) of a person in whose favour the period in subsection (1)(a) or (b) can run.
3 Limitation Act 2010, s 19(1).
(3)For the purposes of this section, 1 or more joint tenants or tenants in common of any land can take adverse possession of the land as against the other tenant or tenants.
…
24 When claims accrue: land held on trust
(1)This Act applies to equitable interests in land, including interests in the proceeds of the sale of land held on trust for sale, in the same way as it applies to legal estates.
(2)Accordingly a claim to recover the land is, for the purposes only of this Act, deemed to accrue to a person entitled in possession to an equitable interest of that kind in the same way and circumstances and on the same date as it would accrue if the person’s interest were a legal estate in the land.
(3)If land is held by a trustee (including one who is also tenant for life) on trust, including a trust for sale, and the period in section 21(1)(a) or (b) for the trustee to make a claim to recover the land has expired, the estate of the trustee is extinguished only if, and when, the claim to recover the land of every person entitled to a beneficial interest in the land or in the proceeds of sale has accrued and may be the subject of a defence under section 21.
(4)If land held on trust for sale is in the possession of a person entitled to a beneficial interest in the land or in the proceeds of sale, not being a person solely and absolutely entitled to the land or the proceeds, no claim to recover the land is for the purposes of this Act deemed to accrue during that possession to a person in whom the land is vested as tenant for life, person having the powers of a tenant for life, or trustee, or to any person entitled to a beneficial interest in the land or the proceeds.
…
49 Trust property possessed or converted by trustee
(1)A claim’s longstop period or Part 3 period does not apply to the claim if it is one by a beneficiary of a trust to recover from the trustee either or both of the following:
(a)trust property, the proceeds of trust property, or both in the trustee’s possession:
(b)trust property, the proceeds of trust property, or both previously received by the trustee and converted to the trustee’s use.
(2)It is a defence to a claim whose Part 3 period is disapplied by subsection (1), and that does not have a late knowledge period, if the defendant proves that the date on which the claim is filed is at least 3 years after the date on which the claimant gained knowledge (or, if
earlier, the date on which the claimant ought reasonably to have gained knowledge) of the trustee’s breach of the trust.
(3)Sections 44 to 47 apply to the 3-year period prescribed for a claim by subsection (2) of this section as if that period were a Part 3 period.
[27]Section 4 of the Act defines “trust” to include a constructive trust.
[28]There are five premises to Hopeton’s argument that the claim is out of time:
(a)First, Christopher’s claim against Hopeton is for an equitable interest in the proceeds of sale of land held on trust for sale, and s 24 of the Act therefore applies a Part 3 period.
(b)Secondly, s 21 applies because Christopher’s claim is to recover land.
(c)Thirdly, the claim is brought by Christopher as a beneficiary of a trust to recover from the trustee, Hopeton, the proceeds of trust property. So, s 49(1) applies to displace the Part 3 period, and the only applicable limitation period is the three-year period in s 49(2).
(d)Fourthly, the elements of the cause of action of knowing receipt were completed on 9 August 2017, when Tullycrine sold the property to Hopeton as trustee for the Dillon Family Trust.
(e)Fifthly, in May 2018, evidence was filed in the EC referring to the sale of the property to Hopeton, giving Christopher knowledge of Hopeton’s knowing receipt of trust property. The three-year time limit began to run. The claim was filed on 6 June 2023, out of time.
[29] The application of the limitation periods prescribed in the Act to claims for constructive trusts can be controversial, and complicated by:
(a)the application of s 49(2) of the Act,4 and the distinction between those who acquire trust property as trustee or when they are already a
4 And its predecessor, s 21(1) of the Limitation Act 1950.
fiduciary or trustee in fact (which may include trustees of an institutional constructive trust) and those upon whom an obligation to account is imposed in equity as a response to wrongful conduct (which may include trustees of a remedial constructive trust);5 and
(b)the issue of whether s 21 of the Act, which prescribes limitation periods of 12 or 60 years to certain claims to recover land, applies to claims based on breach of trust.6
[30] In the present case, there is no need to grapple with these difficulties because Christopher’s claim against Hopeton is for equitable compensation based on knowing receipt of trust property. The claim is not for the recovery of land under s 21. There was no “land held on trust for sale”, so s 24(1) does not apply.
[31] If Christopher’s claim against Hopeton is upheld by the Court, then the claim will be predicated on a finding by the Court that an institutional constructive trust came into existence when Tullycrine was the registered owner.
[32] It is irrelevant whether Tullycrine now has a limitation defence. The issue is whether Hopeton has a limitation defence to a claim of knowing receipt of trust property on 9 August 2017.
[33] Under s 12 of the Act, a money claim includes a claim for monetary relief in equity. Therefore, s 11 of the Act applies and the primary limitation period is six years after the date of the act or omission on which the claim is based.
[34] The relevant act is the transfer of the property to Hopeton on 9 August 2017. The primary limitation period expired on 9 August 2023. The second amended statement of claim, which commenced Christopher’s claim against Hopeton for equitable compensation was filed on 6 June 2023, within the primary limitation period and within time.
5 See the discussion in Proprietors of Wakatū v Attorney-General [2017] NZSC 17, [2017] 1 NZLR 423 at [450]–[451]; and Scott v ANZ Bank New Zealand Ltd [2020] NZHC 906, [2020] 3 NZLR 145 at [172]–[178].
6 Compare Sain v Erceg [2021] NZHC 761 and JC Corry Limitation Act Handbook (LexisNexis, Wellington, 2011) at 76.
[35] Section 11(2)(b) is not satisfied and, therefore, s 11(1) of the Act applies. There is no need to consider any extension of the primary limitation period based on late knowledge, or under s 49 of the Act.
[36] In particular, s 49(1) of the Act is not applicable as there is no relevant longstop period or Part 3 period to disapply. Accordingly, the opening words of s 49(2) are not engaged because no longstop period or Part 3 period has been disapplied under s 49(1). The six-year primary limitation period has not been displaced.
[37] Therefore, I conclude that it is arguable that Christopher’s claim against Hopeton is not subject to a limitation defence.
Orders
[38]Hopeton’s application for summary judgment is dismissed.
[39] My preliminary view is that costs should follow the event on a 2B basis. If counsel are unable to agree costs, then I direct:
(a)the plaintiff shall file and serve a memorandum on costs, of no more than four pages, by 21 May 2024;
(b)the second defendant shall file and serve a memorandum on costs, of no more than four pages, by 28 May 2024; and
(c)I will then determine costs on the papers.
Associate Judge Brittain
0
3
1