Gale v Doyle

[2013] NZHC 365

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-6280 [2013] NZHC 365

UNDER  Section 145A of the Land Transfer Act,

1952

BETWEEN  CHRISTINE ANNE GALE Applicant

ANDROLAND MICHAEL DOYLE AND KEVIN FRANCIS GOULD Respondents

Hearing:         27 February 2013

Appearances: Mr D A Wood for Applicant

Mr K F Gould for Respondents

Judgment:      1 March 2013

JUDGMENT OF ASSOCIATE JUDGE DOOGUE

This judgment was delivered by me on

1 March 2013 at 12 noon., pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Counsel:

K F Gould, P O Box 1011, Auckland

D A Wood, P O Box 1452, Shortland Street, Auckland

GALE V DOYLE AND ANOR HC AK CIV-2012-404-6280 [1 March 2013]

Background

[1]      Ms  Gale,  the  applicant,  and  Mr  Doyle,  the  first  named  respondent, commenced a de facto relationship in or about August of 1998.   In December of

1999 they moved into a property at Unit 1, 8 Sarsfield Street, Herne Bay, Auckland. The property was  acquired in November 2003  by a  trust which was  settled 11

November 1999, with Mr Doyle being one of the two trustees.    Ms Gale and Mr Doyle, to whom I shall refer to as “the parties” lived at that property until May 2011 when they separated.  In June 2011 the applicant lodged a caveat against the title to the property.  She also lodged caveats against several other properties but they are not in contention in this proceeding.

[2]      The caveat stated the estate or interest claimed is as follows:

The caveator claims an interest as a beneficiary by way of a constructive trust whereby the registered proprietors, Roland Michael Doyle and Kevin Francis Gould is (sic) the trustee of such trust.

[3]      The respondents made an application to the Registrar-General to lapse the caveat and he gave notice of such to the applicant on 10 October 2012.  Thereafter, the  applicant  applied  to  the  Court  on  23  October  2012  by  way  of  notice  of originating application seeking an order that the caveat, caveat 8793410.3, not lapse. The application was said to be made in reliance on ss 137 and 145A of the Land Transfer Act 1952.

[4]      The contents of the application call for some comment and the relevant part, paragraph 2.0, which set out the grounds, is now reproduced in full:

(a)       The applicant  has  taken  relationship  property  proceedings  in  the Family Court at Auckland under FAM 2011-004-1566.   Those proceedings are current.

(b)       The  first  respondent  in  the  Family  Court  proceeding  is  Roland Michael Doyle.  The second respondents named in that proceeding are also the respondents in this application.

(c)       Included in the property against which the applicant has brought her relationship   property   proceedings   is   the   present   property   1/8

Sarsfield Street which is subject to the caveat which the respondents

are endeavouring to lapse.

(d)       The   entitlements   which   the   applicant   may   have   under   her relationship property application have therefore not yet been determined.   It is appropriate that the caveat be sustained in those circumstances.

[5]      It will be seen that the notice of application does not make any reference to the fact that a constructive trust has come into existence or the grounds upon which that has occurred.  Further comment will be made on that aspect of matters below. What the notice of application does refer to are the matrimonial property proceedings which the applicant filed in the Family Court at Auckland in July 2011 seeking orders pursuant to the Property Relationships Act 1976.   The applicant in those proceedings seeks, amongst other things, an interest in the Sarsfield Street property. She  has  not,  however,  made  an  application  under  s  44C  for  compensation  for property disposed of to trust.  Mr Gould submitted that because the trust acquired the Sarsfield Street property from day one the view may have been taken that there was no basis to make such a claim.  Nor do the proceedings in the Family Court attempt to seek any declaration as to the existence of a constructive trust relating to the property.   That is consistent with the fact that the Family Court does not have jurisdiction to rule on equitable matters such as the existence of constructive trusts.

[6]      The proceedings in the Family Court have yet to come to trial.  Orders for discovery have been made in those proceedings and other interlocutory steps have yet to be complied with.

Principles

[7]      The central principle which the courts apply when considering applications for sustaining the caveat pursuant to an order under section 145A of the LTA is that it is for the applicant to demonstrate a reasonably arguable case for concluding that the interest that he/she claims has in fact come into existence.1   There is an onus on

the applicant to establish that that is the case.

1 N R Campbell “Caveats” in Hinde McMorland and Sim Land Law in New Zealand (online ed, LexisNexis) at 10.019(c).

[8]      The parties agreed that the applicable authority in the area of constructive trusts which ought to guide the Court in this case is the Court of Appeal decision in Lankow v Rose.2    Mr Gould who appeared for the respondents correctly identified the elements that an applicant has to prove in the following submission, referring to Lankow v Rose:

Accordingly, to establish that claim, namely, to be a beneficiary under a constructive trust the evidence has to be examined to establish the following factors:

i)         Has the Applicant contributed in more than a minor way to the   acquisition,   preservation   or   enhancement   of   the property?

ii)        In all circumstances are the parties to be taken reasonably to have  expected  that  the  Applicant  would  share  in  the property?

iii)      The Applicant’s  contribution  must  manifestly  exceed  the

benefits and that she received;

iv)       The Applicant’s contribution need not have been in money, but there must be a causal relationship between them and the acquisition, preservation or enhancement of the property

[9]      The only comment that I make is in relation to the third point above, and is that when direct contributions are relied upon as the basis for contending that a constructive trust came into existence, those contributions must have been rendered in circumstances where there has been an unjustified deprivation caused to the party making the contributions.

[10]     The next matter that I consider is the principles that relate to applications under section 145A of the LTA.  Mr Woods submitted, correctly in my view,  that the position is covered by the Court of Appeal judgment in Sims v Lowe3  where it was stated that:4

It is clear that this summary procedure for the removal of a caveat against dealings is wholly unsuitable for the determination of disputed questions of fact.  From this it follows, and has been consistently held, that an order for the removal of such a caveat will not be made … unless it is patently clear

2 Lankow v Rose (1995) 1 NZLR 277 (CA) at 282.

3 Sims v Lowe [1988] 1 NZLR 656 (CA) at 660.

that  the  caveat  cannot  be  maintained  either  because  there  was  no  valid ground for lodging it, or that such a valid ground as then existed no longer does so. .. The patent clarity referred to will not exist where the caveator has a reasonably arguable case in support of the interest claimed.

[11]     Mr Wood also accepted that the following passage also had application: 5

As a matter of principle it seems right that the (caveator) must justify the continued existence of his caveat.  He will do that if he can show he has a reasonably arguable case for the interest he claims.

The contributions which the respondent claims to have made

[12]     The review of the authorities set out above makes it clear that in a case of this kind attention will be focussed on what contributions the party assuming entitlement to a constructive trust made with regard to the property.

[13]     The position of the respondent was that the purchase of the Sarsfield property came entirely from funding provided by the Albany Trust with no contribution from the applicant at all.

[14]     The applicant on the other hand says that she spent some time looking for properties in the period before the Sarsfield Street property was acquired and that it was her who identified that property as being suitable for the two parties as a couple. The respondent filed an affidavit in the Family Court in the Property Relationships Act proceedings which are pending hearing in that jurisdiction.   A copy of that affidavit was put in evidence before me.  The affidavit canvassed a wider range of subjects than the limited issues that are under examination in the present proceeding. There  was  discussion  about  the  background  of  the  parties’  involvement  in  the various businesses that were apparently initiated by Mr Doyle.  These were mostly cafes and bars although there was one other project involving a race-car simulator. One of the businesses was called “The Copper Room”.  It is relevant to the present discussion because in her Family Court affidavit the respondent said:

16.The Copper Room proved to be very successful and allowed us to finance our next family home at 1/8 Sarsfield Street, Herne Bay, approximately  5-6  years  ago,  being  around  2004/2005.     This property was purchased by one of the respondent’s trusts.

5 Sims v Lowe, above n 4, at 660.

[15]     The only other category of evidence which needs to be considered is the documents that came into existence as part of the transaction for the acquisition of the Sarsfield Street property.  These include the statement from the solicitor acting for the purchaser which was described, in his bill of costs dated 4 December 2003, as “the trustees, the Albany Trust”.  The heading to the bill of costs reads “purchase 1/8

Sarsfield Street, St Marys Bay National Bank of New Zealand – mortgage”.  Shortly after that document was produced the solicitor issued a statement showing the customary debits and credits generated by the transaction.   This document, too, is directed to the trustees of the Albany Trust and one of the lines in the statement narrates the following:

By: You transfer of funds to complete settlement          $619,958.35

[16]     There is no doubt that the transfer of Sarsfield Street was to the Albany Trust, in distinction to the applicant and respondent.

Discussion

[17]     It is incumbent upon the applicant to demonstrate that she made direct or indirect  contributions  to  the  acquisition,  preservation  or  enhancement  of  the property.  She has to demonstrate only a reasonably arguable case.  To meet the onus which is on her, she must place before the Court evidence which establishes the substantial outline of the matters that she intends to rely upon in the evidence.  While not being required to descend into detail, the evidence must be such that it enables the Court to comprehend what the contributions are that are relied upon, and the way in which they meet the requirements of the principles in Lankow and other relevant decisions.

[18]     The closest that the applicant comes to meeting these requirements is by suggesting that income from The Copper Room bar/cafe was used for the acquisition of Sarsfield Road.  It is apparently suggested that either this was the source of the capital that had to be accumulated in order to pay the deposit on the property and/or to meet the cost of servicing the mortgage.  It also has to be demonstrated that a not insignificant part of the funds from The Copper Room were property out of which the applicant was able to make a contribution that she says she made.

[19]     I consider that the evidence of the applicant falls well short of establishing a reasonably arguable case in all of those areas.  The Copper Room business may well have enabled the parties to buy Sarsfield Street, but that is irrelevant if contributions forthcoming from that quarter were in no sense the property of the applicant.  There is no basis upon which the Court could draw such an inference founded on the present  evidence.    Reliance  on  this  evidence  as  a  basis  for  imposition  of  a constructive trust may reflect confusion between what the applicant must prove in this Court to establish a trust, on the one hand, and the matters that she will have to prove in the Family Court to qualify for a claim under the PRA.  It may be that in the Family Court she will ultimately be taken to have a claim in respect of the proceeds of income from The Copper Room.  It would be nothing more than speculation if for the purposes of this application, the Court was to assume that, because the applicant was in a de facto relationship with Mr Doyle at the time when the property was acquired,  and  because  The  Copper  Room  belonged  to  Mr  Doyle  or  interests associated with him, the money from that source which was used to pay for the house can be regarded, in part, as a financial contribution by the applicant.

[20]     The applicant also said that she looked at a number of houses before the Sarsfield property was settled upon as being the one that was suitable.  In my view it is not reasonably arguable that looking at a number of residential properties amounts to a contribution in kind which would justify an expectation that the applicant would receive a financial interest in the property so acquired.

[21]     In general terms, the applicant has given evidence that she contributed to the household income.   That is not sufficient either.   There is not even an attempt to show in outline form that such contributions she made were greater than the benefits she received back from participating in the domestic relationship, which was the context in which she says she made her contributions.

[22]     Looking at the evidence overall, it is clear that the property was acquired by a trust.   I will assume for the purposes of argument that in such circumstances contributions made to a domestic relationship where the trust is to be equated with the other de facto partner can give rise to a constructive trust over the property.  But, such evidence as there is shows that the finance for the acquisition of the property

was provided by the trust.  The deposit on the property was $67,500 and the balance of the money was borrowed from the bank.  The solicitor’s statement shows that this was the origin of the funds.  There is no evidence that establishes where the trust got the deposit from or from what source it was able to pay the principal and interest payments on the mortgage.   The absence of evidence in this area means that the applicant cannot point to monetary contributions to the purchase of the home as justifying a constructive trust in her favour.

[23]     The case for the applicant laid considerable stress on the fact that there ought to be a caveat put in place while the Family Court carries out an enquiry into what entitlements the applicant has under the Property (Relationships) Act.   I do not accept that that is a relevant matter to be taken into account for the purposes of an application under section 145A.  The issue under that section as I have tried to make clear is whether the applicant has a reasonably arguable case to make, establishing that he or she has an equitable or legal interest in the land which ought to be determined at trial, pending which the caveat should be permitted to stay on the title to the property to hold that position until the substantive decision of the Court is to hand.

[24]     For the reasons that I have given, I conclude that the application must be dismissed.

Orders

[25]     The application is dismissed.  It remains for the Court to fix costs.  It would seem that the main issues so far as costs are concerned these

a)        whether the provisions of HCR 14.2 apply or should be departed from in the circumstances of this case;

b)whether the usual classification as category 2B ought to be departed from.

[26]     If counsel wish to make submissions on these matters   they should do so within seven days by filing memoranda that do not exceed five pages in length.

Counsel are not obliged to file memoranda and if they do not I will be happy to

decide the question of costs without their doing so.

J.P. Doogue

Associate Judge