Elbers v Hart
[2024] NZHC 1582
•17 June 2024
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2024-470-0019
[2024] NZHC 1582
UNDER The Land Transfer Act 2017 IN THE MATTER OF
an application that a notice of claim not lapse
BETWEEN
GAVIN JOHN ELBERS
Plaintiff
AND
DENISE CATHERINE HART
Defendant
Hearing: 8 April 2024
Further submissions on 17 May 2024 and 31 May 2024
Counsel:
K Hoult for the Plaintiff
M J Matthew for the Defendant
Judgment:
17 June 2024
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 17 June 2024 at 2 pm.
Pursuant to r 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
Solicitors/Counsel:
Niemand Peebles Hoult, Hamilton Rennie Cox, Auckland
ELBERS v HART [2024] NZHC 1582 [17 June 2024]
Introduction
[1] The plaintiff, Mr Elbers, and the defendant, Ms Elbers,1 began a de facto relationship in 2004, married in 2006 and separated in 2022. On 19 September 2005, Mr Elbers and Ms Elbers executed a written agreement (the contracting out agreement) contracting out of some of the provisions of the Property (Relationships) Act 1976 (PRA).
[2] Ms Elbers is a trustee of the Denise Elbers Investment Trust (the Trust). The other trustee is the Denise Elbers Trustee Company Ltd. Mr Elbers has registered a notice of claim under the PRA against three properties owned by the Trust.
[3] Ms Elbers commenced the lapsing procedure under the Land Transfer Act 2017 (LTA), and Mr Elbers now applies for an order sustaining his notice of claim. Mr Elbers must establish that he has a reasonably arguable claim to an interest in the three properties.
[4] The contracting out agreement includes provisions which confirm that Ms Elbers’ interests in the Trust are separate property. Mr Elbers seeks to set the contracting out agreement aside. The parties filed further submissions on the issue of whether it is reasonably arguable that the contracting out agreement should be set aside.
[5] Mr Elbers argues that the Trust’s acquisition of each property amounts to a disposition of property by or on behalf of Ms Elbers made with the intention of defeating his rights under the PRA.
[6] Mr Elbers argues, in the alternative, that if the contracting out agreement is binding and his claim under s 44 of the PRA is rejected, then he has a right under the contracting out agreement to compensation for contributions that he has made to the Trust’s properties, which, taken together, are sufficient to sustain his notice of claim.
1 The defendant was named in this proceeding as Denise Hart. However, the defendant’s legal name, which she continues to use, is Denise Catherine Elbers.
[7]The following issues arise:
(a)Was there a disposition of property by or on behalf of Ms Elbers when the Trust acquired each property?
(b)If so, was the disposition made to defeat Mr Elbers’ rights under the PRA?
(c)If the contracting out agreement is valid, does it confer rights on Mr Elbers sufficient to sustain a notice of claim?
Background
[8] The Trust was established by a deed dated 1 October 2004 as part of financial arrangements put in place following the end of the prior marriage of Ms Elbers. Ms Elbers settled two trusts:
(a)the Denise Hart 2004 Trust, settled on 1 September 2004. In 2006, the trust changed its name to the Denise Elbers 2004 Trust (the DE 2004 Trust); and
(b)the Trust.
[9] The original trustees of both trusts were Ms Elbers and Ms Chapman. Ms Elbers was a discretionary beneficiary. The final beneficiaries were Ms Elbers’ children.
[10] Under a relationship property agreement dated 1 November 2004 between Ms Elbers and Mr Hart, Ms Elbers’ interests received substantial assets. As part of the implementation of that relationship property agreement, various property was settled on the DH 2004 Trust and the Trust, and the two trusts collectively owed a debt back to Ms Elbers. There is no evidence of the amount of these debts in 2004.
[11] The contracting out agreement provides that Ms Elbers’ separate property includes:
All Denise’s interest[s] including any interest as discretionary beneficiary in the Denise Hart 2004 Trust and any gifts, distributions, or income received from that Trust…
All Denise’s interest[s] including any interest as discretionary beneficiary in the Denise Hart Investment Trust and any gifts, distributions or income received from that Trust.
[12]Clause 7 of the contracting out agreement provides:
In the event that either Denise or Gavin make a contribution to property that would otherwise be the separate property of the other party, whether that contribution be through the application of any money or other assets to the property or whether it be through the application of work or labour to the improvement of that property then Denise and Gavin agree that, in the event that they separate, the value of that contribution shall be assessed by:
(a)The value of the property at the date of separation, assuming that the contribution has not been made shall first be determined.
(b)The value of the property at the date of separation, taking into account the contribution, shall then be determined.
(c)The party who has made the contribution shall be entitled to receive compensation for the difference between the two values from the party who owns the property.
(d)In the event that there is any dispute as to the value of the property or the value and nature of the contribution then that dispute shall be determined by a valuer and/or other expert suitably qualified appointed by agreement between the parties. In the event that the parties are unable to agree on the identity of the valuer or expert the then the appointment shall be made by the President of the Auckland District Law Society.
[13] The trustees of the DE 2004 Trust purchased 49 Harbour View Road in May 2007, using only trust funds for the purchase price. In 2013, the assets of the DE 2004 Trust, including 49 Harbour View Road, were resettled on the trustees of the Trust pursuant to an express power of resettlement in the deed of trust for the DE 2004 Trust. Ms Elbers continued to be a discretionary beneficiary of the Trust, and her children the final beneficiaries.
[14] The trustees of the Trust purchased 17 Robinson Road in April 2013 and 8 Albert Street in December 2016, utilising trust funds and mortgage advances from
ASB Bank to the Trust. Ms Elbers did not make any personal contributions to the purchase price for either property.
[15] Mr Elbers did not make any direct financial contributions to the purchase price of any of the three properties. Mr Elbers is a painter and decorator. He says that he has carried out work on the properties since they were acquired, making improvements to each of the properties that significantly increased their value.
[16] The financial statements of the Trust for the year ended 31 March 2015 record the balance of the debt owed by the Trust to Ms Elbers as at 31 March 2014, which was after resettlement of the assets of the DH 2004 Trust, as $860,794.
[17] Ms Elbers’ evidence is that she has never forgiven any part of the debts owed to her by the two trusts. She says that trust funds were used to fund the living costs of Ms Elbers and Mr Elbers during their relationship, and these distributions of trust funds reduced the trusts’ indebtedness to Ms Elbers. By 2023, the debt owed by the Trust had been reduced to $128,377.
Was there a disposition of property by or on behalf of Ms Elbers when the Trust acquired each property?
Legal principles
[18]Section 42(1) of the PRA relevantly provides:
42 Notice of interest against title
(1) A claim to an interest, pursuant to this Act, in any land subject to the Land Transfer Act 2017 shall be deemed to be a registrable interest for the purposes of that Act.
[19]There are two requirements to lodge a notice of claim:
(a)the claimant must be, or have been, in a qualifying relationship with the registered proprietor of the land, or a person who is entitled to or beneficially interested in the land;2 and
2 Martin v Guy [2023] NZHC 1963, [2023] NZFLR 702, at [27].
(b)there must be an unresolved claim under the PRA to an interest in the land in question.3
[20] The general rule is that a notice of claim cannot be lodged against land held in trust unless the land is vulnerable to an arguable claim under the PRA, including a claim arising under s 44 of the PRA.4
[21]Section 44(1) of the PRA relevantly provides:
Where the High Court or the District Court or the Family Court is satisfied that any disposition of property has been made, whether for value or not, by or on behalf of or by direction of or in the interests of any person in order to defeat the claim or rights of any person (party B) under this Act, the court may make any order under subsection (2).
[22] Section 44 of the PRA empowers a court to set aside dispositions of property made to defeat the rights of any person under the PRA. It is not confined to dispositions of relationship property.5
[23] A claim against trust property under s 44 requires as its foundation a disposition of property to a trust by or on behalf of a party to the qualifying relationship.6 Section 44 is engaged where property is diverted to a trust with the intention of defeating the rights of another party under the PRA.7
[24] The underpinning consideration is that the property disposed of is vulnerable to a claim under the PRA, for example, where funds used in a purchase of real property by a trust would otherwise form part of the pool of relationship property.8
[25] A disposition of real property can include a nomination to take title where funds that would otherwise form part of the pool of relationship property are used to fund the purchase. The expression “disposition” is to be given a broad meaning. For
3 At [29].
4 At [30]–[31].
5 Dyer v Gardiner [2020] NZCA 385, [2020] NZFLR 293 at [71].
6 At [80(c)] and [81].
7 At [5(a)].
8 For example, see Clayton v Clayton [2015] NZCA 30, [2015] 3 NZLR 293 at [140]–[141].
example, it encompasses a disposition by nomination that is a direction as to how the property is to be transferred.9
[26] An intention to defeat the rights of the affected party may be satisfied where the person responsible for the disposition is aware that the effect of the disposition is to defeat a claim or the rights of another person under the PRA.10
Analysis
[27] Mr Elbers does not challenge the establishment of the trusts in 2004, Ms Elbers’ transfer of assets to the trusts in 2004 and 2005, or the DE 2004 Trust’s acquisition of 49 Harbour View Road in 2007.
[28] Mr Elbers’ claim under s 44 of the PRA is confined to the resettlement of 49 Harbour View Road on the Trust in 2013, and the Trust’s purchases of 17 Robinson Road and 8 Albert Street in 2013 and 2016 respectively.
[29] The difficulty that Mr Elbers faces in respect of the Trust’s acquisition of all three properties is that there is no evidence, nor even a suggestion, that any part of the purchase price for any of the properties was sourced from funds or property that would otherwise form part of the pool of relationship property or be vulnerable to a claim under the PRA. That is so irrespective of whether the contracting out agreement is valid.
[30] There is no arguable basis for Mr Elbers to challenge the resettlement of 49 Harbour View Road from the DE 2004 Trust to the Trust in 2013 when he does not challenge the DE 2004 Trust’s acquisition of the property in 2007. There was no disposition of property to a trust by or on behalf of Ms Elbers.
[31] The evidence is that the Trust funded the acquisitions of 17 Robinson Road and 8 Albert Street by utilising only Trust funds and bank borrowings.
9 Clayton v Clayton, above, at [133] and [137]–[138]. See, for example, Re Polkinghorne Trust, Kidd v Kidd (1988) 3 FRNZ 636 (HC); Ryan v Unkovich [2010] 1 NZLR 434 (HC).
10 Dyer v Gardiner, above n 5, at [90].
[32] Mr Elbers does not have an arguable claim under s 44 of the PRA in respect of the Trust’s acquisition of the three properties in issue irrespective of whether the contracting out agreement is valid. Therefore, it is not necessary to consider the validity of the contracting out agreement.
Were dispositions made to defeat Mr Elbers’ rights under the PRA?
[33] For the same reasons, it is not arguable that the Trust acquired the three properties on behalf of Ms Elbers with the intention of defeating Mr Elbers’ rights under the PRA.
If the contracting out agreement is valid, does it confer rights on Mr Elbers sufficient to sustain a notice of claim?
[34] For Mr Elbers, it was argued that cl 7 of the contracting out agreement provides Mr Elbers with a right to compensation for contributions made to the Trust’s property, which is an equitable right that could be enforced under s 25(3) of the PRA.
[35]Section 25 relevantly provides:
25 When court may make orders
(1)On an application under section 23, the court may—
(a)make any order it considers just—
(i)determining the respective shares of each spouse or partner in the relationship property or any part of that property; or
(ii)dividing the relationship property or any part of that property between the spouses or partners:
(b)make any other order that it is empowered to make by any provision of this Act.
(2)The court may not make an order under subsection (1) unless it is satisfied,—
(a)in the case of a marriage or civil union,—
(i)that the spouses or civil union partners are living apart (whether or not they have continued to live in the same residence) or are separated; or
(ii)that the marriage or civil union has been dissolved; or
(b)in the case of a de facto relationship, that the de facto partners no longer have a de facto relationship with each other; or
(c)that one spouse or partner is endangering the relationship property or seriously diminishing its value, by gross
mismanagement or by wilful or reckless dissipation of property or earnings; or
(d)that either spouse or partner is an undischarged bankrupt.
(3)Regardless of subsection (2), the court may at any time make any order or declaration relating to the status, ownership, vesting, or possession of any specific property as it considers just.
…
[36] Clause 7 of the contracting out agreement does not create an equitable interest for Mr Elbers in any of the Trust’s properties. If he has made a contribution to a property then his remedy is limited to compensation. The contracting out agreement includes a mechanism for calculating the amount of any compensation due to Mr Elbers, together with prescription of a dispute resolution process if the amount is not agreed.
[37] The trustees of the Trust are not parties to the contracting out agreement and not bound by it. Mr Elbers’ claim for compensation under the contracting out agreement can only be against Ms Elbers and in respect of her separate property. Ms Elbers’ separate property in this context must be her powers under the Trust deed.
[38] Although cl 7 does not draw a distinction between the real property of the Trust and Ms Elbers’ property rights, being her rights under the Trust deed, the intent of the clause is plain enough. It requires any change in the value of Ms Elbers’ property, being her rights under the Trust deed, to be determined by reference to changes in the value of the real property owned by the Trust.
[39] Clause 7 of the contracting out agreement does not give Mr Elbers an interest in the land that can sustain a notice of claim.
Result and orders
[40]The application to sustain notice of claim No. 12795818.1 is dismissed.
[41] My preliminary view is that costs should follow the event on a 2B basis. If counsel are unable to agree on costs then:
(a)The defendant may file and serve a memorandum on costs, of no more than five pages, by 27 June 2024;
(b)The plaintiff may file and serve a memorandum on costs, of no more than five pages, by 4 July 2024.
(c)I will then determine costs on the papers.
Associate Judge Brittain
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