Flavell v Chote

[2021] NZHC 2262

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2021-419-188

[2021] NZHC 2262

IN THE MATTER OF

the Estate of DIANNE BEVERLY MENZIES late of Turua, Deceased

BETWEEN

DALE THOMAS FLAVELL
Applicant

AND

PETER ROBERT CHOTE

Respondent

Hearing:	30 August 2021
Appearances:	G N Bradford for the Applicant C M Earl for the Respondent
Judgment:	31 August 2021

JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 31 August 2021 at 2:00pm

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:

Michael J Walmsley, Paeroa, for the Applicant Jane Hunter, Thames, for the Respondent

Copy for:

G N Bradford, Auckland, for the Applicant C M Earl, Hamilton, for the Respondent

FLAVELL v CHOTE [2021] NZHC 2262 [30 August 2021]

[1]        Mr Flavell, the executor of the estate of his late sister, Ms Dianne Menzies, applies under s 143 of the Land Transfer Act 2017 to sustain a notice of claim under s 42 of the Property (Relationships) Act 1976.

[2]        In an application to sustain a notice of claim, the claimant has to show to the standard of a reasonably arguable case that they have a relationship property claim against someone they are or were married to, in a civil union with or a de facto relationship with, or against the personal representative of that person. That person must be the registered proprietor or have a beneficial interest in the land against which the notice of claim is lodged. The land against which the notice is lodged may be the subject of orders under the Property (Relationships) Act. The claimant does not have to begin a relationship property proceeding when they lodge the notice. Nor does there need to be a live dispute between the claimant and the person with the interest in the property. The court has a residual discretion whether to uphold the notice. There are varying views on that discretion: whether it is a reasonable requirements test1 or the same as for a caveat.2

[3]         The notice of claim is lodged against record of title SA53B/248 for a residential property  at 775 Hauraki Road, Turua.   The notice of claim says that    Ms Menzies was in a de facto relationship with Mr Chote for 23 years. The record of title to the property shows that at the date of her death, Mr Chote and Ms Menzies owned the property as joint tenants. Ms Menzies died on 16 March 2020. Mr Flavell, her brother, is the executor of her will under a grant of probate dated 3 August 2020. Under her will dated 16 November 1993, she left her entire estate in equal shares to her three sons, Aaron, Lee and Timothy.

[4]        The notice of claim was lodged on 19 March 2021. Mr Flavell says that the value of the property at 775 Hauraki Road, Turua, is believed to be about $720,000. Mr Chote does not take issue with that.

1      Rusden v Rusden (1980) 3 MPC 157.

2      Hayball v Lewis [1996] 1 NZLR 717 (HC).

[5]        Mr Chote gives a brief history of their relationship. It began in 1997. At the start Ms Menzies owned a residential property at Matamata which was subject to a bank mortgage. She also had a BNZ retirement fund. Ms Menzies and Mr Chote lived in the Matamata property. Mr Chote is a driver. He became an owner/operator, transporting meat for an abattoir outside Thames. They bought a truck and Mr Cote began working from a base at Kopu. Eventually they moved into a house at the yard they were leasing at Kopu and Ms Menzies rented her Matamata property to her son Lee and his friends. That was to cover the mortgage and outgoings on the Matamata property. They incorporated a company, Coro Meat Tranz Ltd in 2001. They were both directors. Ms Menzies had 75 shares and Mr Chote had 25 shares, but they later adjusted that to become equal shareholders.

[6]        In 2002, they made a contracting-out agreement under s 21 of the Property (Relationships) Act. The agreement provided that certain assets and liabilities were hers alone: the Matamata residential property, her household effects she owned at the start of their relationship, her BNZ retirement fund, any other property she owned at the start of the relationship, any property she acquired by gift, under a trust or by inheritance, and as well, “any former property into which the property of the foregoing clauses might pass or the proceeds of sale or income or profits generated by any of the above property categories”. She was to be solely liable for debts against her separate property, but if a debt secured against the property was for a joint liability, they would be jointly responsible for that debt. The agreement was to be final and binding in all circumstances including death.

[7]        Apart from designating certain assets as Ms Menzies’ sole and separate property, they did not otherwise contract out of the Property (Relationships) Act. That is, for any assets not covered by the agreement, they kept their rights under the Act.

[8]        In September 2003 they bought the property at 775 Hauraki Road, Turua. That remained their family home until Ms Menzies’ death. Mr Chote believes that the purchase price was in the order of $190,000 and they borrowed $170,000 from a bank, contributing the rest of the purchase price themselves.

[9]        In February 2005, Ms Menzies sold her Matamata property. Her son Lee moved into the Turua property to live with them. Mr Chote says that Ms Menzies received $10,900 from the proceeds of sale of the Matamata property. A copy of the solicitor’s trust account records has been put in evidence. Mr Chote says that their business had expanded significantly and at one stage they were operating five or six truck-and-trailer units and employing between 8 and 10 people. But they came under financial pressure in November 2007. They refinanced the mortgage over the Hauraki Road property, borrowing $230,000. Mr Chote says that Ms Menzies held onto the proceeds of sale of her Matamata house and then used it to buy a caravan with joint funds. The caravan cost $16,000. They put it on a camp ground near Coromandel. They later sold the caravan. He does not say what became of the proceeds of sale.

[10]      In 2008-2009, the Thames abattoir closed and that put an end to their meat transport business. In August 2009 they started a new company, M & C Transport Ltd in which they were both directors and equal shareholders. They took on a Coromandel-wide rubbish collection contract using their one remaining truck-and- trailer unit. That continued for six or seven years. When they were not able to re- negotiate an increase in their payments, they allowed both their companies to be removed from the Companies Register. He sold the truck. Since then, Mr Chote has been working as a driver for a local contractor. Mr Chote also says that as an interim measure after her death, he paid rates to the Matamata-Piako District Council and the Waikato Regional Council, and fire insurance for Ms Menzies’ parents’ home in    Te Aroha. This was after her father died in 2019.

[11]      At this stage, affidavits as to assets and liabilities for a relationship property proceeding have not been filed.   Mr  Chote outlines the major assets that he and    Ms Menzies owned at her death: they owned the Turua property which was subject to a mortgage to the ANZ bank of $246,000, giving an equity of about $473,000. There is a Cigna life insurance policy for $98,800 – he received the proceeds. The estate solicitor has also received $118,300 for the proceeds of another life policy owned by Ms Menzies. Mr Chote says that they both contributed to that policy. The total potential relationship property, after taking into account the ANZ mortgage, is accordingly about $680,000. If no claims are made under the Property (Relationships) Act, then her estate receives $118,300 for the life policy owned by her. Mr Chote

receives the Cigna policy of $98,800 plus the Turua property which he takes by survivorship. He would accordingly receive assets worth about $572,000 and her estate receives $118,300. These figures at this stage are only indicative. I take it that the major assets have been disclosed.  Ms Menzies’ estate receives approximately  16 per cent and Mr Chote receives 84 per cent.

[12]      There is one other asset which Mr Chote recognises as Ms Menzies’ separate property: the proceeds of a “BNZ retirement fund” of $15,900. The other assets are arguably relationship property.   The Turua property was the family home under      s 8(1)(a) of the Property (Relationships) Act and it was in any event owned by them jointly (s 8(1)(c)). The proceeds of the life insurance policies are arguably relationship property under s 8(1)(g).

[13]      Under s 11 of the Property (Relationships) Act, de facto partners are, subject to exceptions in the Act, to share equally in the family home, family chattels and other relationship property. No one suggests that there are any extraordinary circumstances under s 13 that would require the court to depart from equal sharing.   This was a    de facto relationship of 23 years. It was accordingly not a short duration de facto relationship under s 14A of the Act. On that account, this seems an ordinary case for equal division of relationship property.

[14]      The matter falls for consideration under Part 8 of the Property (Relationships) Act which deals with the division of property when one spouse or partner dies.

[15]      Under s 81 of the Property (Relationships) Act, all the property that was owned by a deceased partner at his or her death is presumed, in the absence of evidence to the contrary, to be relationship property. That would appear to apply to the life insurance proceeds of $118,300 but not to the funds in the BNZ retirement fund which are excluded under the 2002 agreement.

[16]Section 83(1) says:

If, on the death of a spouse or partner, any property of that spouse or partner passes to the surviving spouse or partner, whether by survivorship or otherwise (but not by succession), then unless, in any proceedings under this Act, the court decides otherwise,—

(a)that property is not automatically to be treated as the separate property of the surviving spouse or partner; and

(b)the status of the property as relationship property or separate property is to be determined according to the status that it had if the deceased spouse or partner had not died.

Under this provision, the fact that Mr Chote has taken the Turua property by survivorship does not mean that it has been excluded from the pool of relationship property to be divided. As the property was relationship property immediately before Ms Menzies died, it remained relationship property after her death.  Even though   Mr Chote may take the property under survivorship, it is available for division as part of the relationship property pool.

[17]The executor of Ms Menzies’ estate is entitled to apply for a division of

property. Section 88(2) says:

The personal representative of the deceased spouse or partner may, with the leave of the court, apply for an order under section 25(1)(a). The court may grant leave only if it is satisfied that refusing leave would cause serious injustice.

[18]Under s 25(1)(a), 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 part of that property between the spouses or partners.

[19]      Under s 25(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.

[20]      It is open to Mr Flavell as the executor to apply under s 25(3) for a division of the Hauraki Road property without first seeking leave. Alternatively, he can apply for an order for the division of all the relationship property and in that event he would need leave under s 88(2). On the basis of authorities such as Public Trust v Whyman3

3      Pubic Trust v Whyman [2005] 2 NZLR 696 (CA).

it is reasonably arguable that there would be a substantial injustice if leave were not granted. Given their years of joint commitment to their relationship, an 84 per cent – 16 per cent division of relationship property runs entirely contrary to the equal sharing philosophy of the Property (Relationships) Act. Under s 1M(b) one purpose of the Act is to recognise the equal contribution of … de facto partners to the de facto relationship partnership.

[21]      There is, however, a limitation difficulty. So far, Mr Flavell has not begun a proceeding in the Family Court. Under s 89(1)(a), proceedings may be commenced after the death of one of the spouses or partners if:

at the date of the death of the deceased spouse or partner, the spouses or partners are living together.

It is not in dispute that they were living together when she died.

[22]      There is, however, a time limitation under s 90(1)(b). Proceedings may be commenced no later than 12 months after the administration of the estate of the deceased spouse is granted in New Zealand.   In this case, probate was granted on     3 August 2020 and no proceeding in the Family Court to seek a division of relationship property had been started by 3 August 2021. Mr Earl submitted that this was a small estate and therefore the time limit under s 90(1)(a)(i) applied: 12 months after death. Under the definition in s 2, a small estate means an estate that can be distributed without the need for a grant of administration. Section 65 of the Administration Act 1969 allows certain payments to be made to executors without requiring a grant of administration, including payments under life insurance policies (s 65(5)). The payment must be no more than the prescribed amount - $15,000.4 As Mr Flavell needed a grant of administration to obtain the payment of $118,300 under the insurance policy to the estate, this was not a small estate.

[23]      There is, however, a power to extend time under s 90(2). I take it that applications for extension of time under s 90(2) are considered in a similar way to applications for extension of time under s 24(2) of the Act. I note here that time limit

4      Administration (Prescribed Amounts) Regulations 2009, reg 4.

has just passed. The estate has not been fully distributed and accordingly the bar under s 90(4) does not apply.

[24]      On the evidence presented so far, Mr Flavell appears to have a reasonably arguable case for bringing a claim for division of relationship property which may include a division of the Turua property. I cannot say that it is patently clear that an application to extend time will fail or that he will not obtain leave under s 88(2).

[25]      It is relevant that on 23 April 2021 Mr Chote made an election under s 61 of the Act. He chose option A – to bring a claim against Ms Menzies’ estate. As he apparently accepted that there should be a relationship property proceeding between him and the estate, it may be difficult for him to argue that leave should not be granted under s 88(2) and that time should not be extended under s 90(2).

[26]      Now for the notice of claim under s 42. The notice has been lodged to protect a claim against the Turua property as one part of the relationship property pool. Under s 42(5), the notice may be registered even though no proceedings have been started yet.

[27]      Mr Earl raised three objections to the notice. He submitted that the notice of claim did not comply with the statutory form in the Property (Relationships) Forms Regulations 2001, Schedule 1. To lodge a notice of claim by e-dealing, it is necessary to use the form created by Land Information New Zealand, as was done in this case. I note that reg 4 states that a notice of claim must be in the form set out in the schedule. The e-dealing form did not however follow the format of the form in the regulations. The notice in this case was therefore invalid.

[28]      Mr Earl said that this was the first time he had raised this objection. He had not tried the argument in the Family Court. Although he is experienced in relationship litigation, he was not aware of the argument having been raised before. If the argument were right, it would cause confusion and put at risk a large number of notices that had been lodged in reliance on the LINZ form. He accepted that the form should have been amended to allow for e-dealing.

[29]      I do not however accept that if the statutory form has not been followed exactly, the form in this case is on that account invalid. The form in the regulation and the form created by LINZ provide for the same information to be given. The difference is in formatting. The LINZ form is for e-dealing whereas the form in the regulation may also be used on paper. Now that e-dealing for transactions under the Land Transfer Act 2017 has become standard, it would be inconvenient if a routine instrument such as a notice of claim could not be lodged by e-dealing. LINZ has created a form for an instrument to do that. Under s 26 of the Land Transfer Act 2017:

An instrument may be lodged for registration or notation only if the instrument complies with the requirements of this Act and any other enactment.

It would make for inconvenience and inefficiency if claimants could only use notices of claim in paper form. The better approach is to treat a notice of claim as complying with the form in the regulation if it contains the information required, even if it does not follow the same format. That is, differences in formatting do not go to validity. Accordingly, the notice in this case does not fail on that point.

[30]      Mr Earl next submitted that s 42 does not allow an executor to lodge a notice of claim. For authority he cited Petrie v Henderson,5 where a divorced person was held not to be able to lodge a notice of claim. There is however more recent authority that the executor of a deceased spouse or partner may lodge a notice of claim: Yeoh v Xu.6 All the property of the deceased vests in an executor including all rights of action. If the spouse or partner could lodge a notice of claim while alive to protect a right to seek relief under the Property (Relationships) Act, there is no principled reason why a personal representative cannot have the benefit of the same protection for any relationship property claim available to the estate. There is nothing in s 42 to bar a claim by an executor of the estate of a spouse or de facto partner.

[31]      Finally, Mr Earl pointed out that the name of the claimant in the notice is “Dianne Beverley Menzies”. When the notice was lodged, she was dead. As she no longer existed, she did not have capacity and could not make a claim. She could not

5      Petrie v Henderson (1978) 1 MPC 156 at 157.

6      Yeoh v Xu Auckland HC M1252/02, 3 December 2003.

have authorised the lodging of the notice. The notice was invalid as having been lodged on behalf of someone who did not exist. That point is sound but can be cured.

[32]      The notice should have been lodged in the name of Mr Flavell as the executor of her estate. The flaw in the notice is a technical one only. It does not mean that a new notice giving the correct name of the claimant cannot be lodged. The way to deal with it is to give leave for a new notice of claim under s 146 of the Land Transfer Act 2017, this time in the name of Mr Flavell as executor of the Ms Menzies’ estate. Allowing a second notice of claim in these circumstances is consistent with authorities on second caveats.7

[33]      While Mr Flavell has not so far begun a proceeding under the Property (Relationships) Act 1976, he has started a common law claim in this court against  Mr Chote. The cause of action is for unjust enrichment. The statement of claim attached to Mr Flavell’s affidavit seems to assume that as Mr Chote has taken the Turua property by survivorship, it is not available for division and that is said to be contrary to the agreement the parties made in 2002.

[34]      There are problems with that proceeding. A notice of claim can be used only to protect claims under the Property (Relationships) Act, not other claims. If a claimant says that they have an orthodox property claim, for example that they are the beneficiary under a trust for the land, the appropriate mechanism is a caveat, not a notice of claim. But here, the appropriate remedy is a claim under the Property (Relationships) Act.

[35]      A common law claim for unjust enrichment is not available. As I have already explained, Ms Menzies’ estate has a claim under the Act. For division of property in a marriage, civil union or de facto relationship, the rules in the Act apply. They are a code and under ss 4 and 4A of the Property (Relationships) Act 1976 they displace the ordinary common law rules for property claims when the parties who are in a relevant relationship.

7      See Lowther v Kim [2003] 1 NZLR 327 (HC).

[36]      This court is the wrong forum. Under s 22 of the Property (Relationships) Act proceedings for the division of relationship property must be heard and determined in the Family Court, unless they are later transferred to this court under s 38A. It is not possible to start a property relationship proceeding directly in this court.  Instead,  Mr Flavell will have to begin his proceeding under the Property (Relationships) Act in the Family Court.

[37]      Accordingly,  the  current  proceeding  in   this   court   is   misconceived.   Mr Bradford accepted the point and invited me to a make an order striking the proceeding out. Mr Earl did not oppose.

[38]      In summary, Mr Flavell has an arguable case for a claim by him as executor of his sister’s estate against Mr Chote under the Property (Relationships) Act. That claim is subject to obtaining any leave required under s 88(2) and to obtaining an extension of time under s 90(2), but those requirements do not mean that he cannot lodge a notice of claim to protect it. His present notice is invalid because it is in the name of a claimant who does not exist, but that can be cured by allowing a new notice in      Mr Flavell’s name. There are no discretionary reasons counting against the notice, either under the reasonable requirements test or the caveat test. The property against which the notice is lodged is the major asset of the relationship.

[39]I make these orders:

[a]Leave is granted to Mr Flavell to lodge a second notice of claim under s 146 of the Land Transfer Act 2017. That is to be lodged in his name as executor of his sister’s estate. It may properly rely on the de facto relationship between Ms Menzies and Mr Chote and may be lodged against the title to the Turua property. Mr Flavell is to lodge that notice of claim within two weeks.

[b]On that new notice of claim being lodged, the current notice of claim 12061708.1 will lapse.

[c]It is a condition of these orders that within four weeks Mr Flavell will begin a proceeding in the Family Court seeking orders under either s 25(1) or s 25(3) of the Property (Relationships) Act. If he applies under s 25(1) he will also need to obtain leave under s 88(2). Mr Flavell will also need to seek an extension of time under s 90(2) of the Property (Relationships) Act.

[d]Leave is reserved to remove the notice of claim if he does not obtain an extension of time under s 90(2), if he does not  obtain leave under  s 88(2) if he applies under s 25(1), or if he does not pursue the relationship property claim with due diligence.

[e]Mr Flavell’s unjust enrichment claim against Mr Chote in this court is struck out, without prejudice to Mr Chote’s right to claim costs in that proceeding.

[f]As Mr Flavell has substantially succeeded in this case, he is entitled to costs. Costs will be on a category 2 basis. If counsel cannot agree costs, submissions from both sides  should  be  filed  no  later  than  30 September 2021.

[g]Leave is reserved to apply for further directions.

…………………………………….

Associate Judge R M Bell