Harrison v Harrison
[2016] NZHC 574
•27 April 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-2895
CIV-2016-404-162 [2016] NZHC 574
UNDER s 143 Land Transfer Act 1952 IN THE MATTER
of removal of Caveat No 9612733.1
BETWEEN
GRAEME ROSS HARRISON AND ADRIENNE HARRISON
Plaintiffs
AND
PAULINE JANICE HARRISON First Defendant
ANGELA JANICE HARRISON Second Defendant
Hearing: 26 April 2016 Counsel:
RO Parmenter for plaintiffs in summary judgment proceeding and in respect of the applicants seeking the setting aside of a caveat
No appearance by the defendants, who were also respondents
Judgment:
27 April 2016
JUDGMENT OF FAIRE J
Solicitors: Birdsey & Associates, Auckland (N Birdsey)
To: PJ and AJ Harrison
Harrison v Harrison [2016] NZHC 574 [27 April 2016]
[1] Two proceedings were list before me at 9 am on 26 April 2016. They are:
(a) the plaintiffs’ application for summary judgment, for which related
papers were filed on 3 December 2015; and
(b) an application for removal of a caveat, filed on 9 February 2016.
[2] Both proceedings seek the same relief, namely the removal of caveat
9612733.1.
[3] Both proceedings were the subject of an application for substituted service. Whata J made orders for substituted service. Service was effected in terms of the order which was made.
[4] The respondents/defendants have filed memoranda with the court. They were referred to me. I issued a minute dated 23 March 2016, which contained the following:
[7] It is not appropriate for me to deal with matters raised in the memoranda that have been filed. The appropriate place is either by filing position documents provided by Part 19 of the High Court Rules in respect of the originating application and, as provided in Part 12 of the High Court Rules in respect of the summary judgment application. Additionally, if the defendants seek to dismiss or stay one of the proceedings, they may consider whether an application under Part 15 of the High Court Rules is appropriate.
[8] I detect there may be a wish on the defendants’ part to challenge the order for substituted service. If they determine that there have been grounds for doing so, the starting point for such an application would be a consideration of r 7.49 of the High Court Rules.
[9] I have set out the procedural route which must be followed. … I repeat: the current memoranda are not the appropriate course which should be followed, if those applications are to be opposed.
[5] Mr Parmenter advised that if this Court orders that the caveat be removed, he would seek leave to withdraw the summary judgment application and discontinue that proceeding. In the orders that I make in this judgment, that position is taken into account.
[6] The interest claimed in the caveat, the subject of this proceeding, is described as follows:
The above named caveators claim a beneficial interest in the land contained in C/TNA18C/1222 as cestui que trust which is property purchased from the Trust Fund of the VALERIE GEARD TRUST made by Deed of the First Caveator’s Sister which the registered proprietor Graeme Ross Harrison and Adrienne Harrison (nee Sewell) are trustees and as also shown in the attached copy of the Agreement dated 12 November 2006 for Sale and Purchase Agreement for the trust property:
a)For Caveator PAULINE JANICE HARRISON with Beneficial Ownerhip Interest via tracing as a fixed primary final beneficiary in VALERIE GEARD TRUST in equal share as tenant in common absolutely which is set out in clauses 1(f) and 11.1(a) of the attached Deed of Trust;
b)For ANGELA JANICE HARRISON via tracing as a Remainder Beneficiary in the VALERIE GEARD TRUST as daughter of the aforenamed primary final beneficiary which is set out in clause
11.1(a) of the attached Deed of Trust.
Please take notice this Caveat is claimed under separate interest from a previously lodged Caveat which was lodged under the “ESTATE OF VALERIE GEARD” . This Caveat is lodged under the separate “VALERIE GEARD TRUST” . This Caveat is to protect the trust property from breach of trust by the trustees who have been discovered self-dealing from the Trust Fund for themselves against Beneficial Interest set out in the imperative terms of the enforceable Trust Deed and Trust Law.
[7] The applicants are the trustee of the Valerie Geard Trust. The settlor of that trust was Valerie Geard, now deceased. The applicant, Graeme Harrison, was her brother. The other applicant was her brother’s wife.
[8] Assets of the Valerie Geard Trust include a property at 19 Causeway Road, Waiheke Island. The applicants brought a proceeding under s 66 of the Trustee Act
1956. What they sought, in effect, was an order that a resettlement of the Waiheke Property Trust was valid. In a judgment I delivered on 24 November 2015, I concluded the resettlement was not valid.1 That same judgment had also to deal with
the subject caveat. I recorded in relation to the caveat the following:2
Given that the plaintiffs only sought the order to remove the caveat over
19 Causeway Road, Waiheke if I answered the first question in the negative, it is unnecessary for me to make the order for the removal of the caveat. Further, in the absence of argument on the applicable legal principles, I am
1 Harrison v Harrison [2015] NZHC 2935.
2 At [84].
unable at this stage to determine whether the first defendant, as a final and/or default beneficiary, has a caveatable interest in the property at 19 Causeway Road, Waiheke. For this reason I decline to remove the caveat at this time.
[9] The Valerie Geard Trust has a vesting date 80 years from its settlement, ie
18 October 2005, “or such earlier date as the trustees may by deed appoint”. The Trust Deed defines the final beneficiaries as the siblings of the settlor, which includes the first respondent. It also defines discretionary beneficiaries which include the final beneficiaries and other named persons.
[10] The Trust Deed empowers the trustees to pay, or transfer the whole or any part of the capital of the trust fund, for the benefit of such of the beneficiaries to the exclusion of the others as the trustees think fit. It also provides that the trustees shall hold the vesting date that part of the trust fund which still remains on trust for the final beneficiaries, and with a substitution provision for the children of any deceased final beneficiary. There is the normal provision recording that the discretion vested in the trustee is absolute and uncontrolled and every power vested in them may be exercisable at their absolute and uncontrolled discretion. There is a provision against self-dealing.
[11] Although the first respondent is a bankrupt, I made an order under s 119(2) of the Insolvency Act 2006 on 19 October 2015, vesting her interest in the Valerie Geard Trust in her.
[12] The position of the respondent, Angela Harrison, in the trust is that she is the only child of the respondent, Pauline Harrison.
[13] On 6 May 2014, Associate Judge Matthews made an order sustaining the caveat on an unopposed basis. The current trustees did not appear or take any steps. It is important that I record that the Associate Judge was there dealing with an application under s 145A of the Land Transfer Act 1952 and not an application under s 143 of the Land Transfer Act 1952, which is before me now.
[14] The current application raised issues which are similar to those considered by the court in Madsen v O’Brien. This case concerned a claim by the caveator that he
had an equitable mortgage. By default, the caveator has sustained the caveat. The applicant applied to remove the caveat, so the background facts are not that dissimilar to this application. His Honour says:3
The First Defendant contended that the doctrine of res judicata operates to prevent the Plaintiff from raising the issues raised on the present proceedings. The submission is that the Order made by Mr Justice Sinclair on 1 October 1985 is conclusive against the Plaintiff in the present proceedings. As previously mentioned, that Order was obtained by default. This topic is dealt with by Spencer-Bower and Turner Res Judicata 2 Ed. pp. 157-160. It suffices to say that the authorities require a default judgment to be very carefully scrutinised before finding that it is conclusive against having essentially the same matter litigated again. In particular, at p. 160 the author states:
"The fact that a judgment has been taken by default may signify no more than that the defendant for unascertained reasons, negligence, ignorance, or indifference, has suffered judgment to go against him; if no more than this is known there may be grave and obvious dangers in a rule precluding the defendant from re-opening on another occasion, perhaps of very different significance, whatever issues can be discerned as having been involved in the judgment obtained by default."
In my view, the issue in the first proceedings was different from the present issue. In the first proceeding, the issue was whether an order should be made that the caveat do not lapse after the requisite procedure had been complied with following the presentation to the District Land Registrar of an instrument for registration. The present proceedings, on the other hand, are by the registered proprietor for an order that the caveat be removed. While the basis for the support of the caveat was the same in both proceedings, namely clause 22 of the Deed of Partnership, it is my judgment that the proceedings themselves are sufficiently different in procedure to warrant the Court taking the view, in this case, that the earlier Order of Mr Justice Sinclair is not conclusive of the present proceedings.
[15] I accept Mr Parmenter’s submission that the reasoning applied by Chilwell J in Madsen v O’Brien applies equally to this case and, in particular, there is no basis for the court not considering the application under s 143 of the Land Transfer Act
1952.
[16] It is helpful if I record a brief summary of the applicable principles to be considered in an application pursuant to s 143 of the Land Transfer Act 1952.
[17] Section 143 of the Land Transfer Act 1952 provides:
3 Madsen v O’Brien HC Auckland M246/86, Chilwell J 26 May 1986 at [14].
(1) Any such applicant or registered proprietor, or any other person having any registered estate or interest in the estate or interest protected by the caveat, may, if he thinks fit, apply to the [High Court] for an order that the caveat be removed.
(2) The Court, upon proof that notice of the application has been served on the caveator or the person on whose behalf the caveat has been lodged, may make such order in the premises, either ex parte or otherwise, as to the Court seems meet.
[18] Before proceeding with an analysis of the facts so far revealed to the Court by the parties, I set out a brief summary of the applicable principles to be considered in application pursuant to s 143 of the Land Transfer Act 1952.
(a) S 143 of the Land Transfer Act 1952 gives no guide as to the circumstances in which the Court may make an order that a caveat be removed.4
(b)If it is clear that there was no valid ground for lodging a caveat, or that the interest which in the first place justified the lodging of the caveat no longer exists, such a caveat should be removed.5
(c) The onus under s 143 of the Land Transfer Act 1952 lies on the caveator to show that he has a reasonably arguable case for the interest he claims.6
(d)The caveat, being a creature of statute, may be lodged only by a person upon whom a right to lodge it has been conferred by statute. It is not enough to show that the lodging and continued existence of the caveat would be in some way advantageous to the caveator.7
(e) For the purpose of this application, the caveator therefore must show that it is entitled to, or to be beneficially interested in, the estate
4 Catchpole v Burke [1974] 1 NZLR 620 at 623.
5 Sims v Lowe [1988] 1 NZLR 656 at 659.
6 Castlehill Run Ltd v NZI Finance Ltd [1985] 2 NZLR 104-106.
7 Guardian Trust & Executor Co of New Zealand Ltd v Hall [1938] NZLR 1020 at 1025.
referred to in the caveat by virtue of an unregistered agreement or an instrument or transmission or of any trust expressed or implied.8
(f) What the caveator must establish is an arguable case for claiming an interest of the kind in s 137 of the Land Transfer Act 1952
(g)Even if the caveator establishes an arguable case for the interest in the land claimed, the Court retains a discretion to make an order removing the caveat although it will be exercised cautiously.9
(h)Delay is a relevant factor to be weighed in the exercise of the Court’s wide discretion under s 143. Delay is more important where there is specific prejudice. What is required is a consideration of all the circumstances.10
(i)The summary procedure for removal of a caveat against dealing is wholly unsuitable for the determination of disputed questions of fact. Accordingly it has been said:
. . . that an order for the removal of such a caveat will not be made under s 143 unless it is patently clear that the caveat cannot be maintained either because there was no valid ground for lodging it or that such valid ground as then existed no longer does so. Sims v Lowe [1988] 1 NZLR 656 at pp 659-660.
(j)The last matter is part of an overall discretion which the Court exercises once the caveator has established an arguable case for the interest claimed as to whether the balance of convenience is for or against leaving the caveat in place.11
[19] I deal briefly with the position of the second respondent. I accept
Mr Parmenter’s submission that Angela Harrison cannot have a caveatable interest.
8 Section 137, Land Transfer Act 1952.
9 Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 at 656.
10 Varney v Anderson [1988] 1 NZLR 478 at 480.
11 McMahon v McMahon [1997] NZFLR 145 at 149.
She is a simply a possible beneficiary should her mother die. Accordingly, her interest will not support a caveat.
[20] Mr Parmenter referred to a number of texts and authorities which establish the proposition that where a specific parcel of land has been transferred to a trustee upon trust for a named beneficiary, it is clear that the beneficiary may lodge a caveat against the title. That beneficiary, however, must be able to show the existence of a trust that confers on him or her a beneficial interest in the land to be caveated. It will not apply to a beneficiary under a discretionary trust. Such a beneficiary only has the right to have the trust property administered and therefore does not have a caveatable interest in the land held by the trust unless and until the trustees have
resolved to distribute that land to the beneficiaries.12
[21] When the trust deed is analysed it is apparent that Pauline Harrison, the first respondent, does not have a caveatable interest in the land. She is a beneficiary under a discretionary trust.
[22] Although it has not been appropriately pleaded by way of a notice of opposition as required by the Rules, nor has it been supported by an appearance before me on the respondents’ behalf, I have nevertheless read an affidavit filed by the respondents. In that affidavit reference is made to a proceeding which has been issued by the respondents against the current plaintiff trustees and which has not been brought to finality. That proceeding, by itself however, does not create a caveatable interest. I understand the proceeding is currently subject of an order of stay until security for costs has been paid. That is appropriate route by which the respondents can pursue their alleged basis for relief, if they wish to. I repeat, however, that the interest claimed in that proceeding does not support a caveat for the purposes of the Land Transfer Act 1952.
[23] The affidavit makes complaints about matters being determined contrary to the Rules, complaints about lawyers, and the fact that an invalid resettlement took
place. None of the matters that have been mentioned can give rise to an interest
12 Neil Campbell Campbell on Caveats (LexisNexis, Wellington, 2012); Garrow & Kelly Law of Trusts and Trustees (7th ed, LexisNexis, Wellington, 2013) at 25.52; Holt v Anchor Management Ltd[1987] 1 NZLR 108 at 114; Guardian Trust & Executors Co v Hall, above n 7.
which supports a caveat, which is the subject matter of this application. Further, I have referred to the decision in Madsen v O’Brien which sets out the reason why no estoppel prohibits the court from dealing with this particular application arising out of a previous judgment of the High Court.13
[24] I have already referred to the reason why I did not deal with the removal of the caveat application in the judgment I delivered on 24 November 2015.14 That cannot raise an estoppel which would prevent this application being disposed of.
[25] I make it plain that this judgment does not determine whether or not there is any validity in complaints that the respondents have made against the applicant trustees in respect of the Valerie Geard Trust. It simply deals with the question of whether or not the interest claimed in the caveat that they have registered against the title is an interest that can support a caveat and I find that it does not.
[26] Accordingly, I order that Caveat No 9612733.1 be removed from the
Certificate of Title, identifier NA 18C/1222.
[27] The applicants seek costs on a 2B basis on the originating application. Such costs may include the specific application that was necessary to deal with the question of service. Costs are ordered accordingly, plus disbursements as fixed by the Registrar.
[28] In view of the orders made in this judgment on the originating application I
strike out the summary judgment application and the proceeding in respect of which it was filed. No order for costs is made in respect of that proceeding.
JA Faire J
13 Madsen v O’Brien, above n 3.
14 Harrison v Harrison, above n 1.
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