Doughty v Doughty

[2013] NZHC 2871

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-2556 [2013] NZHC 2871

IN THE MATTER             of an application to extend a caveat no.

9339230.1 pursuant to section 145A of the
Land Transfer Act 1952

BETWEEN  CHRIS ANTHONY DOUGHTY Applicant

ANDCECELIA AMARY DOUGHTY, GRAEME DOUGHTY and ROKO MARIJAN JUJAJ URLICH as trustees of THE GRAEME AND CECELIA DOUGHTY TRUST

Respondents

Hearing:                   24 October 2013

Counsel:                  M Hislop for the Applicant

A Holgate for the Respondents

Judgment:                31 October 2013

JUDGMENT OF ASSOCIATE JUDGE SARGISSON

This judgment was delivered by me on 31 October 2013 at 4.00 p.m. pursuant to r 11.5 of the High Court Rules 1985.

Registrar/Deputy Registrar

Solicitors / Counsel:

Mr M Hislop, Barrister, Auckland

……………………………………

Ms S Edmondson (applicant’s instructing solicitor), Law Works, Solicitors, Auckland

Mr A Holgate, Barrister, Whangarei

Ms T-A Chapman (respondents’ instructing solicitor), The Conveyancing Shop Lawyers Ltd, Solicitors, Auckland

C A DOUGHTY v C A DOUGHTY, G DOUGHTY and R M J URLICH [2013] NZHC 2871 [31 October 2013]

[1]      The applicant, Chris Anthony Doughty, seeks an order pursuant to s 145A of the Land Transfer Act 1952 that a caveat not lapse.

[2]      The respondents, the father of the applicant and his wife (Graeme and Cecelia Doughty)  and  Roko  Urlich,  oppose  the  application.  They  are  the  registered proprietors of the land affected by the application and hold their interest in the land as trustees of a family trust whose beneficiaries are the two children of the applicant and his wife. On the land is situated a house where the applicant lives with his wife and the children.

[3]      The only issue for determination in the application is whether the applicant has demonstrated he has an arguable case for the interest that he has claimed in the caveat, in which case the caveat should stand to allow him a reasonable opportunity to prove the interest by way of a separate proceeding.

Background

[4]      The caveat is caveat no. 9339230.1.  The applicant lodged the caveat with the Registrar General of Land on 13 March 2013 against dealings affecting the land comprised in computer register identifier (certificate of title) NA1090/230, North Auckland Land Registration District.

[5]      The interest the applicant claims in the property as set out in the caveat is as follows:

... an interest in the land contained in the above Identifiers ... by virtue of a constructive   trust   between   the   registered   proprietors   Cecelia   Mary Doughty, Graeme Doughty and Roko Marijan Jujaj Urlich and the Caveator arising from contributions made by the Caveator to the [property] in the reasonable expectation based on promises made by one of the registered proprietors, Graeme Doughty, that the Caveator would receive an interest in the [property].  [Emphasis added]

[6]      The respondents do not accept that there is any such interest.  Therefore they took steps to trigger the operation of s 145A with a view to securing the removal of the caveat. As a consequence the District Land Registrar gave notice to the applicant that an application had been made to lapse the caveat and that the caveat would lapse unless the Registrar received notice within 14 days of an application to the contrary

and service within a further 28 days of an order of the High Court.  When served with the notice the applicant sought an order to the contrary and for that purpose took the necessary steps under s 145A.1   The Court made an interim order sustaining the caveat until further order of the Court, and that order was duly served in time on the Registrar.

The application

[7]      The caveat states that the interest claimed in the land is derived from the registered proprietors by reason of a constructive trust.   By contrast, the grounds relied on in the application to support the interest claimed in the caveat contain no claim to an identifiable interest in land or how any such interest might have been derived from the registered proprietors. The stated grounds are that:

(a)       The  applicant  was  “a  shareholder  of  a  company  in  which  the

[property] in question was company property”.

(b)      The removal of the caveat by the registered proprietor would remove

the applicant’s “shareholding interest in the property”.

(c)       The applicant resides in the property and the subsequent removal of

the caveat would be contrary to the applicant’s property interest.

[8]      In the minute that Associate Judge Christiansen issued on 30 May 2013 he noted that he had informed counsel of “perceived deficiencies within the papers” including that it appears that the claimed interest, if any, may be in respect of a shareholding in Doughty Investments Ltd which originally brought the property. He also noted that the caveat and the certificate of title and the nature of the interest claimed had not been put in evidence.

[9]      At the outset of the hearing I discussed these shortcomings with counsel. Counsel reached agreement on two matters – first, that copies of the caveat and the title to the land would be produced by consent to rectify the continuing omission,

and secondly, that new grounds would be substituted for those in the application.

1      Land Transfer Act 1952, s 145A.

The second change arises because of counsel for the applicant’s advice that the interest claimed in the caveat is not reflected in the grounds of the application. Counsel advised that the grounds relied on are in fact are two-fold:

(a)      A claim to a 40 per cent interest in the property “based on the original company structure of Doughty Investments Ltd” before that company was struck off the Companies Register and “on conversations between the parties”.

(b)A claim “based on a mutual agreement between the applicant and his father”, to the effect that the applicant would have a share in the property which would be held in the long-run for the benefit of his children.

[10]     Counsel for the applicant submitted that these new grounds are consistent with the interests identified in the applicant’s evidence.

[11]     I proceed on the basis of these agreements.

Applicable legal principles

[12]     There is no dispute that the following principles apply to the application.

[13]     The caveat must describe the interests claimed with sufficient certainty and to explain how the caveator has derived the interest from the registered proprietor.  An interest must be an interest in the land; it may arise by virtue of an expressed or implied trust.  Relevantly, s 137 states:

137     Caveat against dealings with land under Act

(1)       Any person may lodge with the Registrar a caveat in the prescribed form against dealings in any land or estate or interest under this Act if the person—

(a)       claims to be entitled to, or to be beneficially interested in, the land or estate or interest by virtue of any unregistered agreement or other instrument or transmission, or of any trust expressed or implied, or otherwise; or

(b)      is  transferring the  land  or estate  or  interest  to  any other person to be held in trust.

…

(4)      Caveats under this section must be entered on the register as of the day and hour of their receipt by the Registrar.

[14]     The caveator must have a specific legal or equitable interest in the land caveated.2

[15]     The onus is on the caveator to show that it has an arguable case for the claimed interest in land.  Once the onus is satisfied the balance of convenience will, in the normal course and in the absence of any special consideration, be in favour of leaving the caveat in existence until the proceedings to enforce the interest claimed are tried.3

[16]     An order for removal of a caveat will not be made unless it is particularly clear that the caveat cannot be maintained either because there is no valid ground for lodging it or because the valid ground for lodging it no longer exists.4

40 percent interest in the land?

[17]     Counsel for the applicant was at some difficulty to identify in the evidence any claim that the applicant has a 40 percent interest in the property.  He pointed, however, to the applicant’s evidence that he had a shareholding in a company that did own the land, but that no longer exists, and that prior to its being struck off, the company’s interest in the land was transferred to the present registered proprietors.

[18]     Quite apart from the deficiencies in the evidence which does not lend any support for a claim to a 40 percent interest in the property, I agree with counsel for the respondents’ submission that a shareholding in a company, in this case a defunct

company, does not give rise to an interest in land.

2      Holt v Anchorage Management Ltd [1987] 1 NZLR 108 (CA) at 114.

3      Castle Hill Run Ltd v NZI Finance [1985] 2 NZLR 104 (CA) at 106.

4      Sims v Lowe [1988] 1 NZLR 656 (CA) at 659-660.

Mutual agreement giving rise to an interest in the land?

[19]     I turn then to the evidence relied on in support of the claim that there was a mutual  agreement  that  the  applicant  would  have  a  share  in  the  property.    The applicant says in his evidence in support that:

18.In about 2005 Graeme, Cecelia, Lynne and I had a meeting as we were not happy with the company circumstances.  Whilst we could not  agree  on  the  company  structure  and  long  term goals  it  was agreed that the property … would be put in trust for our family; that being Lynne, myself and our children (Max and Greer).

…

23.Graeme’s plan was that he required full control of the company, but that he would put the … property in trust for our family, and that we all still had a financial interest in [the property].  Lynne and I agreed that this was the best solution.   There was a delay in creating the trust which Lynne had serious concerns about however I thought I could trust Graeme.

24.In 2006 Graeme visited us.  The relationship between Graeme and I had soured.  Graeme organised a meeting with a mediator and a lawyer   to   resolve   the   company’s   circumstances   between Adrienne, Mike, and Lynne and myself.   It was agreed by everyone at that meeting that the property … would be put in trust for our children. … [Emphasis added]

[20]     This evidence points to a dispute between the parties that was unresolved until a mediation in 2006 when agreement was reached that the property would be placed in trust for the two children.   I find there is nothing in this evidence that supports a clear and unequivocal commitment on the part of the applicant’s father that the applicant and his wife were to have a beneficial interest in the property. There is no evidential foundation which might infer a commitment, statement, or action giving rise to a constructive trust, pursuant to which a beneficial interest would be held in trust for the applicant.  The applicant’s own statement at para 10 in his affidavit evidence in reply agrees with his father’s evidence that the property was to be placed in trust for the applicant’s children and that no other agreements were entered into.  The highest that the applicant places the resulting interest of himself and his wife is that “we expected to be part of the trust and its decisions for the best of our children”.  But even there he does not say whether there was any agreement that his role was to be as a trustee, holding the legal interest in the property for the beneficiaries, or merely in an advisory capacity.

[21]     I  am  satisfied  that  the  applicant  has  not  discharged  the  onus  he  has  of showing an arguable case for the claimed interest set out in the caveat.  There is no evidential foundation out of which might be inferred that the registered proprietors hold a beneficial or, indeed, a legal interest for the applicant.  I am satisfied that there is no basis on which to order the continuation of the caveat.

[22]     It is clear from what counsel has said that the applicant has lodged his caveat out of a genuinely held concern that his hold on the home in which he, his wife and children reside may not be as secure as he and his wife had hoped.  That is a matter they  can  hopefully  resolve  with  the  trustees,  but  on  the  basis  of  the  evidence presently before me it is not something that rests on any demonstrably arguable interest  that  the  applicant  may hold  in  the  property.    Conceivably,  but  without wishing to be seen to rule on the matter, the children may be entitled to caveat the property if they have the right under the trust deed to reside in the house before it rests in them absolutely.

Result

[23]     For  the  above  reasons,  the  caveat  must  lapse,  and  I  make  an  order accordingly.

[24]     As costs follow the event under the statutory costs regime I make an order for costs in favour of the respondents on a 2B basis together with disbursements as fixed

by the Registrar.

Associate Judge H Sargisson