Findlay v Findlay HC Auckland CP 19/Im01

[2001] NZHC 474

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND
REGISTRY CP 19/IM01

BETWEEN LEE ANTHONY FINDLAY and MICHAEL ARNE SANDELIN as trustees of the LEE FINDLAY FAMILY TRUST
Plaintiffs

AND JOANNE MAREE FINDLAY
Defendant

Hearing: 2 May 2001

Counsel: A E Hinton for the Plaintiffs
D Hollings for the Defendant

Judgment: 8 June 2001

RESERVED JUDGMENT OF PATERSON J

[1] The plaintiffs (the Trustees) are the trustees of the Lee Findlay Family Trust (the Trust). They seek by way of summary judgment an order that Mrs Findlay vacate a property at 64 Arney Road, Auckland, (the property).

Background

[2] The Trustees are the legal owners of the property which is currently occupied by Mrs Findlay. She is married to, but separated from, Mr Lee Findlay (Mr Findlay), one of the Trustees.

[3] Mr Findlay has made demand on the Trustees for repayment of an on demand debt of more than $570,000 owed to him by the Trustees. The Trustees’ position is that they must sell the property in order to meet the demand.

[4] Mrs Findlay was invited by the Trustees to co-operate in the sale of the property on the basis that she could remain in it until it was sold. Alternative accommodation would be provided for her pending the resolution of her claims against Mr Findlay. She has declined to co-operate in the sale and has refused to vacate the property. The Trustees have issued these proceedings seeking vacant possession.

[5] The Trust was created by a trust deed dated 25 August 1995. Mrs Findlay is a discretionary beneficiary under the terms of the trust deed and as such, she is one of the beneficiaries to whom the Trustees in their discretion may pay or apply income.

[6] On 5 March 2001, Mrs Findlay issued proceedings against both Mr Findlay and the Trustees. The relief sought in those proceedings includes orders under the Matrimonial Property Act 1976 (the Act), determining the respective rights of Mr and Mrs Findlay to property, and orders that the Trust is void or invalid, and that its assets, including the property, are matrimonial property.

[7] The statement of claim in this proceeding alleges that Mrs Findlay does not have any licence or consent from the Trustees to occupy the property. A notice to quit has not been served on Mrs Findlay. Mr Sandelin, one of the Trustees and a solicitor, deposed in an affidavit in support of the summary judgment application, that he believed that Mrs Findlay had no defence to the proceeding.

No defence

[8] The principles upon which a Court determines a summary judgment application are well settled. While it is necessary to take a robust and realistic approach to worthless or unmeritorious defences, the Court must still be sure that there is no real defence before entering judgment. If the Court is not sure that there is no real defence, it should not enter summary judgment even if it has serious doubts about the defence.

[9] The notice of opposition to the application for summary judgment did not allege that Mrs Findlay has a licence or consent from the Trustees to occupy the property. Thus, in my view, the evidentiary onus to establish a defence entitling Mrs Findlay to remain in occupation of the property, in which she does not have a legal interest, shifts to Mrs Findlay. She has in her notice of opposition raised various alleged defences.

[10] The defences raised by Mrs Findlay in the hearing go beyond some of the grounds raised in the notice of opposition or raised in the statement of claim in her collateral proceeding referred to in paragraph 6 above. They fall into two categories. First, it was alleged that there were material procedural defects in the Trustees’ claim. Secondly, it was alleged that Mrs Findlay has strong defences to the Trustees’ claim. The defences are said to be:

(a) The Trust is a sham and as a result there is a resulting Trust in favour of Mrs Findlay due to her contributions to the purchase price of the property;

(b) The disposition of the matrimonial home to the Trustees is liable to be set aside under s 44 of the Act;

(c) The proposed sale by the Trustees could be restrained under s 43 of the Act;

(d) Mrs Findlay is entitled to an occupation order in respect of the property pursuant to s 27 of the Act;

(e) The Trustees have breached their fiduciary duty to Mrs Findlay and the children in bringing these proceedings.

The alleged defences will be considered first.

Trust a sham

[11] Mrs Hollings’ written submissions have a heading “Trust a Sham: Resulting Trust for Mrs Findlay due to contributions to purchase price:”. The submissions under this heading did not directly deal with the allegation that the Trust is a sham. They were directed at establishing a resulting trust. The proceedings brought by Mrs Findlay and referred to in paragraph G above do allege that the Trust is a sham. However, allegations unsupported by evidence are not sufficient to raise a defence. None of the allegations in Mrs Findlay’s affidavit are sufficient, in my view, to establish that the Trust was a sham and I do not intend to consider that allegation as a defence. It is unsubstantiated and, in my view, very unlikely to succeed in the substantive hearing.

[12] While considerable time was spent on the resulting trust allegation in the submissions, it is relevant to note that it does not figure in Mrs Findlay’s own proceedings. The nearest the proceedings get to a resulting trust allegation is an allegation that the property is “purportedly owned by” the Trust. It is surprising in the circumstances that Mrs Findlay has not in those proceedings alleged a resulting trust in favour of her, or sought an order that a proportion of the property is held on a resulting trust for her. These omissions raise serious doubts as to the validity of her claim under this head. It is, however, necessary to consider it and the facts upon which it was submitted this defence can be raised to the summary judgment application.

[13] Mr and Mrs Findlay married in November 1993 and separated at Easter in 1999. The property was the family home and since separation, Mrs Findlay and their two young children have continued to occupy it.

[14] The property was bare land when purchased in 1995. Mrs Findlay’s evidence was that the cost of the land and the dwelling house subsequently built on it was approximately $920,000.

[15] Mr Findlay did not swear an affidavit in these proceedings and the allegations made by Mrs Findlay are therefore uncontradicted. Her evidence was that the deposit of $36,000 paid on the section purchase came from joint funds and she has contributed from her own earnings towards the cost of the property. She alleged she did not consent to the home being put in the name of the Trust. The receipt for the deposit recorded that the deposit was received from the “Findlay Family Trust” but it is not clear from the evidence whether that trust is the Trust. Mrs Findlay’s evidence suggested that there was more than one trust and the trust deed creating the Trust was signed several months after the date of the receipt addressed to the Findlay Family Trust.

[16] It was Mrs Findlay’s evidence that when she found out that the family home was in the name of the Trust, she confronted Mr Findlay and he advised her that he had done this “in order to avoid any claim by me under the Matrimonial Property Act.”

[17] The allegation of a resulting trust in favour of Mrs Findlay is based on the uncontradicted evidence that she provided funds for the purchase of the land, and the erection of the dwelling house on it. She avers that she believed she would be a joint owner of the property with Mr Findlay. The title to the property was taken in the name of the Trust without her knowledge or consent, and when she discovered this, Mr Findlay advised her that this was in order to defeat any claim she might make under the Act. Unfortunately the evidence does not disclose when this conversation took place. If she made substantial contributions after the conversation, it is difficult to see how she can claim a resulting trust in respect of those contributions.

[18] Shortly after the parties separated they signed a separation agreement. It is not certified pursuant to the provisions of the Act but does purport to deal with the property. It provided for Mrs Findlay and the children to remain in the property until 31 December 1999 or to some other mutually agreed date or until the home was sold. The funds generated from the sale were to be apportioned in accordance with the formula set out in the agreement. Mrs Findlay now alleges that she signed the agreement under duress.

[19] Mrs Hollings relied upon the principle that where a person contributes to the purchase of a property title to which is taken in the name of another, a resulting trust in favour of the contributor of the purchase money arises subject to any contrary intention. Gibbs CJ in the Australian High Court case of Calverley v Green (1984) 155 CLR 242, at 246 stated the principle as follows:

“Where a person purchases property in the name of another or in the name of himself and another . . . it is presumed that the purchaser did not intend the other person to take beneficially. In the absence of evidence to rebut that presumption, money is provided by two or more persons jointly, and the property is put into the name of one only, there is . . . presumed to be a resulting trust in favour of the other or others.”

[20] The categories of resulting trusts were referred to by the Court of Appeal in Bateman Television Ltd v Bateman [1971] NZLR 453 (CA). It was there said that resulting trusts fall into three classes. The second class was described as follows:

“Secondly, where the purchaser, using funds provided by another, purchases in the purchaser’s own name in the absence of that other and the question is whether the other provided the money in the character of the purchaser or of a lender, as in Re Cooke (1857) 6 Ir Ch R 430.”

[21] There is a lack of conviction and substance in much of Mrs Findlay’s evidence in respect of this allegation. Some of the objective evidence does not point to a resulting trust. However, her uncontradicted evidence is that she contributed funds to the property and some at least of those funds would have been contributed prior to her discovering title to the property was in the name of the Trust. Mrs Findlay says she expected the property to be taken in the joint names of herself and her husband. In accordance with the second category referred to in Bateman she contributed the funds as a purchaser and not a lender. Therefore, I cannot preclude the possibility that Mrs Findlay may be able to establish that the Trustees hold the property on a resulting trust for both Mr and Mrs Findlay according to their respective contributions. If so, the property would appear to be clearly the matrimonial home. I can not therefore completely preclude the possibility that Mrs Findlay can establish she has some equitable interest in the property which entitles her to a legal interest. In other words, I can not be sure that Mrs Findlay does not have a defence to the summary judgment application. I note in passing that I do not accept the submission on behalf of Mrs Findlay that the family home is a matrimonial home if it is both legally and beneficially owned by the Trust.

[22] It is the possibility that Mrs Findlay may have a beneficial interest which will convert the property into a matrimonial home which, in my view, prevents me from giving summary judgment in this matter. If it were not for the definition of “matrimonial home” in the Act, I would have considered giving summary judgment because Mrs Findlay’s interest would appear to have been quite minor. However, if she has an interest which converts the property into a matrimonial home, her interest is enhanced.

Section 44 of the Act

The finding already made makes it unnecessary to consider the other possible defences. However, I propose to do so in case I am wrong on my first conclusion. The correspondence produced by Mrs Findlay as exhibits to her affidavit disclose that there is a acrimonious dispute between herself and her husband. Clearly, the present position under which Mrs Findlay is refusing to vacate the property may be costly to both parties and ultimately reduce the amount to which Mrs Findlay is entitled. The practical realities suggest that the house should be sold as its ultimate sale appears to be inevitable.

[24] Under s 44 of the Act, this Court has certain discretionary powers if satisfied that any disposition of property has been made by any person in order to defeat the claim or right of any person under the Act. I cannot assess the strength of any claim which she may have and this claim is purely based on a statement which Mr Findlay is said to have made at the time she confronted him about putting the property in the name of the Trust.

[25] It is likely, in my view, on the facts as disclosed in the affidavits that a Court would not order a transfer of portion of the property to Mrs Findlay but would order that she be compensated for her contributions to the property. Mrs Findlay appears to have made the greater proportion of her contributions after she became aware that the property was owned by the Trust. Further, she was not particularly explicit as to the amount of the contributions made. My provisional view is that any claim under this section is not sufficient to prevent the Trust from obtaining an order for possession.

Section 43 of the Act

[26] Section 43 gives the Court a discretion to restrain the disposition of property which is about to be made in order to defeat the claim or rights of any other person. Prima facie, the transfer is not for that purpose but to enable repayment of the loan to Mr Findlay and if Mrs Findlay has the claim against him which she believes she has, he will presumably still have the funds. As already noted, it appears inevitable that the house will need to be sold. Section 43 to my mind does not raise a defence.

Section 27 of the Act

[27] Under s 27 of the Act, the Court may make an order granting to either the husband or the wife for such period or periods and on such terms and subject to such conditions as the Court thinks the right personally to occupy the matrimonial home or any other premises forming part of the matrimonial home. If the family home is owned by a third party and neither the husband nor the wife have tenancy rights to it, I am of the view that an order cannot be made under this section. The Act applies to the matrimonial property and separate property of the spouses. It does not apply to the property of a third person. This defence cannot assist Mrs Findlay unless she is able to establish a resulting trust.

Fiduciary Duty

[28] It is alleged that the Trustees have breached their fiduciary duty to Mrs Findlay and their children in bringing these proceedings. It is suggested Mr Findlay is in a conflict of interest position. This submission can, in my view, be dealt with briefly. In making distributions under the terms of the trust deed, the Trustees are obliged to act fairly and in the interests of the beneficiaries. The sale of the property is in a different position particularly as the sale is needed to repay the debt to Mr Findlay. There is an express power in the trust deed which entitles the Trustees to exercise all or any of the powers contained in the deed, whether or not any trustee shall himself have an interest in his personal capacity in any investment transaction or dealing involving the trust fund or any part thereof. No breach of trust is involved.

Procedural defects

[29] Having come to the conclusion that the summary judgment application cannot succeed for substantive reasons, it is unnecessary to consider the alleged procedural defects.

Conclusion

[30] Because of the possibility that Mrs Findlay may have an interest in the property under a resulting trust, the application for summary judgment is dismissed.

Costs

[31] I propose to reserve costs in accordance with the principles stated in NZI Bank Ltd v Philpott [1990] 2 NZLR 403. If ultimately Mrs Findlay does not succeed on the defences which she raised in this application, she should, in my view, have to pay costs on this application. If, on the other hand, she does succeed, then she will be entitled to costs.

Future of proceedings

[32] A directions conference should be allocated on the first available date for both this file and Mrs Findlay’s proceedings under CP247-SD0l. Consideration should be given to the consolidation of the proceedings and to the need, if Mrs Findlay intends to pursue some of the allegations she has made in this proceeding, to amending the statement of claim in that proceeding.