Hitchcock v Murphy
[2020] NZHC 2207
•28 August 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-000524
[2020] NZHC 2207
BETWEEN STEPHEN LESTER HITCHCOCK
Applicant
AND
SUSAN KERRIE MURPHY
Respondent
Hearing: 13 August 2020 Appearances:
C Baker for the Applicant
B J Lupton and K E Hogan for the Respondent
Judgment:
28 August 2020
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 28 August 2020 at 10.30 a.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Price Baker Berridge, Auckland Insight Legal Ltd, Auckland
HITCHCOCK v MURPHY [2020] NZHC 2207 [28 August 2020]
[1] The applicant, Mr Hitchcock, applies for an order under s 143 of the Land Transfer Act 2017 (the LTA) that caveat 11425446.1 (the Caveat) not lapse. The Caveat is lodged against the land contained in Record of Title NA20A/1228 (the Property) owned by the respondent, Ms Murphy. Mr Hitchcock claims that he has an interest in the Property capable of supporting the Caveat on at least two alternative bases:
(a)An oral agreement for the sale and purchase of part of the Property and the equitable doctrine of part-performance; and
(b)A constructive trust arising from contributions made by Mr Hitchcock to the development of the Property, where he had a reasonable expectation of receiving an interest in the Property.
[2] Ms Murphy opposes the order being made. She contends that the nature of her relationship with Mr Hitchcock is one of debtor/creditor.
[3] Prior to the hearing, Ms Murphy gave notice to cross-examine Mr Hitchcock as of right under r 9.74 of the High Court Rules 2016. Mr Hitchcock was produced and cross-examined.
Factual background
[4] In November 1973, Ms Murphy and her then husband became the owners of the Property. Following her divorce, Ms Murphy became the sole owner in July 1990 after buying out her ex-husband’s share. The Property is 10 acres of relatively flat pasture. The front part of the Property has been divided into five paddocks — four small and one large. The rear part of the Property has been divided into two large paddocks. Ms Murphy’s house is located at the front part together with a barn and a small cottage.
[5] Mr Hitchcock and Ms Murphy are siblings. Since about 2003, Mr Hitchcock started residing at the Property. In 2003, Mr Hitchcock paid Ms Murphy’s outstanding mortgage repayment after she suffered a cancer scare. Ms Murphy says the money was regarded as a loan. There is some disagreement about the amount loaned in the
affidavit evidence of Mr Hitchcock and Ms Murphy. Ms Murphy says she was loaned
$147,262.16, whereas Mr Hitchcock says the sum was $187,000. At the hearing Mr Hitchcock said that he did not dispute Ms Murphy’s figure of $147,262.16.
[6] In 2004, Mr Hitchcock assisted Ms Murphy with the renovation of her house. Ms Murphy maintains that Mr Hitchcock loaned her the money to pay for the renovation, and it was understood between them that she would repay him when she sold the Property or was able to subdivide the Property and sell part of it. She calculates that the total amount she owes Mr Hitchcock, attributable to the renovation costs and the 2003 loan for the mortgage repayment, is $366,179.
[7] Mr Hitchcock, in his affidavit evidence, concurs that he assisted Ms Murphy with her renovations but says that the total sum he advanced her in 2003/2004 was
$500,000. At the hearing, Mr Hitchcock denied that he funded her house renovation and said that the $500,000 Ms Murphy later offered to pay him was offered as a gift.
[8] Sometime between 2003 and 2005, Mr Hitchcock commenced clearing the area of the Property he now lives on, cutting a building site and carrying out fencing and other improvements. It is unclear from his evidence when this work started. He maintains that he carried out this work with his sister’s knowledge and consent. She disputes that and says that she gave him permission to put a caravan behind the barn on the Property (as the barn had power and a telephone), but that he was not to construct any permanent structures on the Property as she might wish to subdivide it in the future.
[9] In 2006, Mr Hitchcock was arrested for cultivating cannabis at a factory in Onehunga, Auckland. He was bailed to the Property following his arrest. In 2007, Mr Hitchcock was convicted on the charges of possession for supply and cultivating cannabis and sentenced to a term of imprisonment. In 2010, he was paroled to the Property.
[10] Following his release from prison in 2010, Mr Hitchcock returned to the Property. Over the course of 2010/2011, he established a place to live on the South-Eastern half of the Property. This involved moving a Portacom onto the area
and developing the area around it. Mr Hitchcock installed three-phase power, driveway access, drainage, fencing, planting and telephone services. He estimates the costs of this work to be $108,500. Previously (in 2005/2006) he had built an underground water tank with a garage/tool shed over the top. He also built a free- standing water tank.
[11] In 2016, Ms Murphy decided that the Property was becoming too large for her to manage. Having spoken with a local real estate agent, she planned to subdivide the property into two 5-acre blocks to maximise her return. She deposes that she had the rear 5-acre block valued by a local real estate agent at $1.7 million. She engaged Cato Bolam, a local land development and planning consultancy.
[12] Ms Murphy obtained a loan from the ASB Bank to fund the subdivision. However, she was unable to meet her repayments because she had not completed the subdivision within the expected timeframe. In 2017, Mr Hitchcock advanced Ms Murphy two sums of money to repay the loan and a revolving credit facility. There is some dispute about the total sum advanced in 2017. Ms Murphy maintains it was
$75,000; Mr Hitchcock says that it was $85,000.
[13] Ms Murphy deposes that, on 4 May 2016, Mr Hitchcock expressed an interest in purchasing the rear 5-acre block (offsetting the money he had advanced to her from the purchase price). This block included the area of the Property on which Mr Hitchcock lived.
[14] In February 2017, Cato Bolam secured a resource consent from Auckland Council to enable the subdivision of the Property into two 5-acre blocks. That subdivision is subject to conditions, including: fencing, planting, weed and pest control, and that the subdivision be completed by 31 July 2021.
[15] On 22 February 2017, Mr Hitchcock proposed to Ms Murphy that the proposed 5-acre rear block be further subdivided into two 2.5-acre blocks, one of which he would acquire, and the other Ms Murphy would sell. Mr Hitchcock maintains that Ms Murphy agreed to this proposal. Ms Murphy disputes that, saying that she was prepared to explore Mr Hitchcock’s proposal as a possibility but she would only
proceed if she would achieve the same profit as she would by selling the full 5-acre block on the market.
[16] Mr Hitchcock undertook physical works to enable the first subdivision of the Property into two 5-acre blocks. He installed subdivision fencing between the two 5-acre blocks, a gate, stone walls and pillars, brought in soil for barns for planting, undertook boundary planting around the perimeter of the 5-acre block and weed and pest control. He concreted the gravel driveway all the way to the proposed rear 2.5-acre section, with passing bays every 100 metres. He also undertook drainage works. Mr Hitchcock says that he undertook this work pursuant to the agreement he had reached with Ms Murphy and on the understanding that he would be reimbursed by her. Mr Hitchcock says that this work cost him $58,000, and the cost was agreed to by Ms Murphy. Ms Murphy disputes this sum.
[17] Mr Hitchcock also undertook physical works for the second subdivision proposed by him, including installing three-phase power cabling to the entrance of the potential rear 2.5-acre section, telephone cabling, fibre cabling, and electronic gates and pillars.
[18] In late 2018, Ms Murphy listed the proposed rear 2.5-acre block for sale (conditional on title issuing). She says this was to test the viability of Mr Hitchcock’s proposal. There was not a great deal of interest, and Ms Murphy concluded that the second subdivision as proposed by Mr Hitchcock would be uneconomic for her. She advised Mr Hitchcock that she would revert to the original proposal, that is, the subdivision of the Property into two 5-acre blocks.
[19] On 2 May 2019, Mr Hitchcock lodged the Caveat against the Property. On 18 March 2020, LINZ issued a notice to lapse the Caveat. On 25 March 2020, Mr Hitchcock filed this originating application.
[20] On 30 April 2020, the Police searched the part of the Property occupied by Mr Hitchcock. On 27 July 2020, he appeared in court on charges of cultivating cannabis. Under cross-examination at this hearing, Mr Hitchcock confirmed that he had pleaded guilty to possession and was awaiting sentencing.
Legal framework
Applications that caveats not lapse
[21] The right to lodge a caveat is set out in s 138(1) of the LTA. The relevant part of the section reads:
A person may lodge a caveat against dealings with an estate or interest in land (a caveat against dealings) on the basis that the person—
(a)claims an estate or interest in the land, whether capable of registration or not; or
(b)has a beneficial estate or interest in the land under an express, implied, resulting, or constructive trust; or
(c)is transferring the estate or interest in the land to another person to be held on trust; or
(d)is the registered owner of the estate or interest in the land and—
(i)has an interest that is distinct from that of registered owner; or
(ii)establishes to the satisfaction of the Registrar that at the time the caveat is lodged there is a risk that the estate or interest may be lost through fraud.
[22] The courts have long held that the caveator must have a specific legal or equitable interest in the land caveated.1
[23] By s 141 of the LTA, the effect of a caveat is that while it remains in force the Registrar shall not make any entry in the register having the effect of charging or transferring, or otherwise effecting, the estate or interest protected by the caveat.
[24] The Court of Appeal in Botany Land Development Ltd v Auckland Council summarised the principles to be applied when considering an application for an order that a caveat not lapse.2 These are:
1 Holt v Anchorage Management Ltd [1987] 1 NZLR 108 (CA) at 114.
2 Botany Land Development Ltd v Auckland Council [2014] NZCA 61, (2014) 14 NZCPR 813. See also Philpott v Noble Investments Ltd [2015] NZCA 342.
(a)The onus is on the applicants to demonstrate that they have an interest in the land that is sufficient to support a caveat, but they need not establish that definitively.
(b)The caveator must put before the Court a reasonably arguable case to support the interest they claim.
(c)The summary procedures involved in applications of this nature are not suited to the determination of disputed questions of fact. An order for the removal of a caveat will only be made if it is patently clear that the caveat cannot be maintained — either because there was no valid ground for lodging one in the first place or, alternatively, that such ground has now ceased to exist.
(d)Where the applicant has discharged the burden upon it, the Court retains a residual discretion to remove the caveat which it exercises cautiously. Before it does so, the Court must be satisfied that removal would not prejudice the caveator’s legitimate interest.
[25] Where there is a conflict between the affidavits, the Court will generally prefer the evidence of the caveator.3 However, the Court is not bound to accept uncritically statements in an affidavit that are equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable.4
Oral agreements for the sale and purchase of land/part performance
Section 24(1) of the Property Law Act 2007 (the PLA) provides:
A contract for the disposition of land is not enforceable by action unless—
(a)the contract is in writing or its terms are recorded in writing; and
3 Bethell v Rickard [2013] NZCA 68 at [22]. See also MacRae v Rapana HC Auckland M633/94, 17 June 1994.
4 Barrett v IBC International Ltd [1995] 3 NZLR 170 (CA) at 175 citing Eng Mee Yong v Letchumanan s/o Velayutham [1980] AC 331 (PC) at 341.
(b)the contract or written record is signed by the party against whom the contract is sought to be enforced.
[27] Section 24 does not affect the operation of the law relating to part performance.5
[28] It is established that an oral agreement for the sale and purchase of land, which is unenforceable by reason of s 24, may support a caveat if the purchaser may be entitled to specific performance of the agreement by the equitable doctrine of part performance.6
[29] In Campbell on Caveats, the author, citing the pre-PLA case of Westpac Banking Corp v Russell,7 states that an oral agreement to lease provides an interest capable of sustaining a caveat:8
There is strong authority for the proposition that an oral agreement for the sale and purchase of land, which is unenforceable (but not illegal or void) by reason of s 24 of the Property Law Act 2007, may be sufficient to support a caveat if the circumstances are such that the purchaser may be entitled to specific performance of the contract by virtue of the equitable doctrine of part performance, and may thus be regarded as the equitable owner of the land.
(footnotes omitted)
[30]As Associate Judge Andrew noted in North 12 Ltd v Beech Orchard Ltd:9
… Reliance on the doctrine of part performance is only available where there was a concluded contract that would be enforceable, but for the formal requirements in the Property Law Act 2007. Alleged acts of part performance are irrelevant where the parties are still negotiating.
[31] The leading cases in New Zealand on part performance are TA Dellaca Ltd v PDL Industries Ltd,10 Mahoe Buildings Ltd v Fair Investments Ltd,11 and Fleming v Beevers.12 In Dellaca, Tipping J set out the essential elements of the doctrine which
5 Property Law Act 2007, s 26.
6 Cribb v Austin Chalk Company Ltd HC Christchurch M150/02, 22 August 2002.
7 Westpac Banking Corp v Russell HC Tauranga M43/98, 13 August 1998 at 3.
8 Neil Campbell Campbell on Caveats (3rd ed, LexisNexis, Wellington, 2019) at [10.009(g)].
9 North 12 Ltd v Beech Orchard Ltd [2020] NZHC 1075 at [70].
10 TA Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 (HC) at 99–109.
11 Mahoe Buildings Ltd v Fair Investments Ltd [1994] 1 NZLR 281 (CA).
12 Fleming v Beevers [1994] 1 NZLR 385 (CA).
were slightly amended in Fleming v Beevers. Those elements were set out by the Court of Appeal in Nguyen v SM & T Homes Ltd as follows:13
(a)Is there a sufficient oral agreement such as would have been enforceable but for the PLA?
(b)Has there been part performance of that oral agreement by the doing of something that:
(i)clearly amounts to a step in the performance of a contractual obligation or the exercise of a contractual right under the oral contract; and
(ii)when viewed independently of the oral contract was, on the probabilities, done on the footing that a contract relating to the land, consistent with that alleged, was in existence?
(c)Do the circumstances in which that part performance took place make it unconscionable (fraudulent in equity) for the defendant to rely upon the PLA?
Constructive trust
[32] In the Caveat and its application, Mr Hitchcock asserts a constructive, implied or resulting trust. At the hearing, Mr Baker, counsel for Mr Hitchcock, only advanced a constructive trust in reliance on the principles in Lankow v Rose.14 In that case, the Court of Appeal set out the essential requirements for a constructive trust (in the context of de facto relationship):
(a)The party claiming the interest contributed in more than a minor way to the acquisition, preservation or enhancement of the other party’s assets, whether directly or indirectly; and
(b)That in all the circumstances the parties must be taken reasonably to have expected that the party claiming the interest would share in the other party’s assets as a result.
[33] In terms of the first requirement, direct financial contributions as well as indirect contributions that assist in the acquisition, improvement or maintenance of the property or its value will qualify. However, a claimant’s contribution must be causally
13 Nguyen v SM & T Homes Ltd [2016] NZCA 581, [2017] 3 NZLR 281 at [32].
14 Lankow v Rose [1995] 1 NZLR 277 (CA) at 282.
related to acquisition, preservation or enhancement of the property, and manifestly exceed the benefits the claimant derives from the arrangement.15
Doctrine of clean hands
[34] Finally, it is a trite maxim of equity that one who comes in equity must do so with clean hands. Laws of New Zealand explains the doctrine as follows:16
In any proceedings in equity under its inherent jurisdiction, a Court will examine the conduct, in the transaction or arrangement which is the subject of the suit, of the party seeking relief. Should a petitioner be guilty of any impropriety, in the legal sense, in a matter pertinent to the suit then equity may refuse the decree sought. The impropriety must be direct and immediately related to the equity relied on; if the relationship of the impropriety to the cause of action relied on by the plaintiff is indirect, it is irrelevant. “Unclean hands” is not an absolute bar to relief in equity and the whole circumstances must be taken into account before deciding whether the plaintiff’s claim is defeated by a lack of clean hands.
(footnotes omitted)
Submissions of the applicant
[35] While the Caveat itself identifies six alternative interests in the Property, at the hearing Mr Baker confined his submissions to two alternative grounds:
(a)An oral agreement for the sale and purchase of land (the northernmost 2.5-acre lot proposed to be subdivided) and the equitable doctrine of part performance by which it is claimed Mr Hitchcock may be regarded as equitable owner of that portion of the Property; and
(b)A constructive trust based on contributions made to the Property by Mr Hitchcock which, together with Ms Murphy’s representation, gave rise to a reasonable expectation that Mr Hitchcock would have an interest in the Property.
[36] In terms of the alleged oral agreement, Mr Hitchcock says that he proposed, and Ms Murphy agreed to, the following:
15 At 282. See also Wakenshaw v Wakenshaw [2017] NZCA 252, [2018] NZAR 532 at [25].
16 Charles Rickett Laws of New Zealand Equity (online ed) at [12].
(a)A surveyor would, at Ms Murphy’s cost (to be paid initially by Mr Hitchcock but repaid by her), be engaged to undertake the first subdivision of the property into two 5-acre lots. Mr Hitchcock would assist with physical work required for this first subdivision.
(b)Mr Hitchcock would attend to all the costs and physical works for the second subdivision of the rear 5-acre section into two 2.5-acre sections. That would include obtaining two titles for the two newly-created lots.
(c)The rearmost 2.5-acre section would be sold, and Ms Murphy would retain the net proceeds of the sale. Mr Hitchcock would acquire the other 2.5-acre section, where he had been living, by “off-setting the value of the rear 5-acre section against the sums owing to him, and less the amount realised by her for the sale of the rear 2.5-acre section”.
[37] Mr Baker submits that Mr Hitchcock’s evidence of the oral agreement reached in 2017, his expenditure on the Property, and the loans he made to Ms Murphy are enough to support a reasonably arguable case. He contends that the different view of the arrangement deposed by Ms Murphy in her affidavit evidence supports his submission that the issue of Mr Hitchcock’s rights should not be determined on a summary basis. He says that the cross-examination of Mr Hitchcock at the hearing only reinforces this submission. He maintains that there should be a substantive hearing with full discovery, evidence and cross-examination. He referred to Botany Land Development, where the Court of Appeal noted:17
As this Court has previously held, applications under provisions such as s 145A of the [LTA] are “quite unsuitable to determine the rights of the parties”. This is particularly so where there are disputed questions of fact. …
(footnotes omitted)
Submissions of the respondent
[38] Ms Murphy denies that an oral agreement existed. She maintains that much of the work undertaken by Mr Hitchcock was without her knowledge and consent, and
17 Botany Land Development Ltd v Auckland Council, above n 2, at [23].
some of the work was undertaken against her wishes. Further, she considers that most of the work was for the benefit of Mr Hitchcock and his cannabis cultivation enterprise.
[39] Ms Murphy says that the doctrine of part performance is not available because there is not a concluded and enforceable contract, there was no agreement on the purchase price, who would apply for the resource consent for the second subdivision, or who would pay for the costs associated with that second resource consent. At most, the agreement between the parties was conditional upon obtaining a resource consent for the second subdivision and the exercise providing enough profit to Ms Murphy to warrant it being undertaken, neither of which were fulfilled.
[40] Counsel for Ms Murphy relied on the decision of Associate Judge Bell in Murphy’s Park Development LP v Green City Developments Ltd, in which His Honour noted:18
[24] As s 138(1)(a) [of the LTA] makes clear, the interest does not have to be registerable. A personal or contractual right is not enough. The caveator must show an entitlement to a beneficial interest in the land under the caveat. Something more than a potential or future interest is required. An interest in the proceeds of sale of a property is not an interest in the property and cannot be protected by a caveat.
(footnotes omitted)
[41] Ms Murphy maintains that at best Mr Hitchcock has a potential or future interest. In response, Mr Baker relies on McDonald v Isaac Construction Co Ltd, where Tipping J, relying on the Court of Appeal decision of Bevin v Smith,19 confirmed that an equitable interest in land capable of sustaining a caveat can arise under a conditional contract before specific performance could be ordered of the contract.20 The Court of Appeal noted, however, that the nature of the condition may be important. If the condition is such that, until fulfilment, it can be said that the parties did not intend to create any interest in land, there will be no caveatable interest unless and
18 Murphy’s Park Development LP v Green City Developments Ltd [2020] NZHC 813.
19 Bevin v Smith [1994] 3 NZLR 648 (CA).
20 McDonald v Isaac Construction Co Ltd [1995] 3 NZLR 612 (HC).
until the condition is fulfilled.21 The key point is: at what point did the parties intend to be bound?
[42] In terms of an interest based on a constructive trust, Ms Murphy says that the authorities establish that it is necessary for a person making such a claim to establish that more than a minor contribution was made to the acquisition, preservation or enhancement of the defendant’s assets, whether directly or indirectly, and that in all the circumstances both parties must be taken reasonably to have expected that the claimant would share in the assets as a result.
[43] Ms Murphy submits that the contributions of Mr Hitchcock, when viewed in the context of the overall value of the Property, were no more than minor, and that there is no evidence that Ms Murphy intended to cede an interest in the Property to Mr Hitchcock, and there is therefore no reasonable basis for him to expect that. Further, Ms Murphy maintains that even if Mr Hitchcock was found to have made out the basis for a constructive trust, he should not be entitled to the equitable remedy sought because of the equitable doctrine of clean hands.
Issues
[44]Against that background, the issues arising in this case are the following:
(a)Whether, in 2017, there was a concluded oral agreement between Mr Hitchcock and Ms Murphy for the sale and purchase of 2.5 acres of the Property that Mr Murphy lived on;
(b)If that is so, whether Mr Hitchcock can overcome the absence of any writing by recourse to the doctrine of part performance; and/or
(c)Whether Mr Hitchcock contributed in more than a minor way to the enhancement of the Property in circumstances that both he and Ms Murphy must be taken reasonably to have expected that he would acquire an interest in the Property as a result; and
21 At 619.
(d)If so, whether Mr Hitchcock should be denied the equitable relief afforded by a constructive trust as he has not come with clean hands.
Discussion
Was there a concluded agreement?
[45] The pre-requisites for the formation of a contract are summarised in Fletcher Challenge Energy Ltd v ECNZ Ltd. They are:22
(a)An intention to be immediately bound (at the point when the bargain is said to have been agreed).
(b)An agreement, express or found by implication, or the means of achieving agreement (for example, an arbitration clause), on every term which (i) was legally essential to formation of the bargain or (ii) was regarded by the parties themselves as essential to their bargain.
(c)Whether the parties intended to enter into a contract and whether they have succeeded in doing so are questions to be determined objectively. In considering whether the negotiating parties have formed a contract, it is permissible to look beyond the words of their ‘agreement’ to the background circumstances from which it arise — the matrix of facts. This can include statements the parties made orally or in writing during their negotiations and drafts of the intended contractual document.
[46] The oral agreement asserted by Mr Hitchcock is set out at [36] above. In his affidavit dated 2 July 2020, Mr Hitchcock explains how the arrangement would result in Ms Murphy receiving the same sum she expected to receive if she sold the one 5-acre block — $1.7 million. The net proceeds of the sale of the rear 2.5-acre block would be deducted from the then anticipated $1.7 million figure. From that difference, he could deduct:
22 Fletcher Challenge Energy Ltd v Electricity Corp of New Zealand Ltd [2002] 2 NZLR 433 (CA) at [53]–[54]; and Electrix Ltd v Fletcher Construction Co Ltd (No 2) [2020] NZHC 918 at [41]– [44].
(a)$500,000 for renovation work he had undertaken on her house and the payment of her mortgage in 2003/2004;
(b)$85,000 for two loans he made to her in 2017; and
(c)$58,000 for costs associated with the physical work he undertook to assist with the first subdivision into two 5-acre sections.
[47] At the hearing, Mr Hitchcock expanded on this explanation, saying that assuming the rear 2.5-acre section sold for $1.45 million (based on an estimated market value of $1.5 million) and considering the cost of a transferrable title of
$200,000 and agents fees, the net profit from that section would be $1.2 million. The
$500,000 which Mr Hitchcock said under cross-examination Ms Murphy had offered to give him (as opposed to repay him) would take the figure to $1.7 million. The result of the arrangement was that he would receive the 2.5-acre section without paying anything, except for the costs associated with the second subdivision which he had undertaken to cover. Mr Hitchcock conceded at the hearing that although his intended 2.5-acre section had never been valued, it was likely to have a similar value to the rear section — $1.5 million.
[48] There is no written record of the alleged oral agreement. The only objective evidence before the Court to support Mr Hitchcock’s assertion is the fact that Ms Murphy did engage Bayleys to market the rear 2.5-acre section for sale (subject to title). Ms Murphy says that she was happy to explore Mr Hitchcock’s proposal if the sale of the proposed 2.5-acre block would generate at least the same level of profit she expected to receive from the sale of the consented 5-acre block.
[49] Mr Hitchcock refers to three letters written to him by Ms Murphy. The first, which he says she wrote in October 2016, sets out two possible scenarios for subdivision and sale of the rear 5-acres. The first involves selling the rear 5-acres as one lot for $1.8 million, which after repaying Mr Hitchcock the $500,000 she owed him and deducting costs would result in a profit of $820,000. The second scenario involved subdividing the rear into two 2.5-acre sections, with Mr Hitchcock retaining one and the other selling for $900,000, yielding a profit of only $46,000 for
Ms Murphy. In my view this letter does no more than indicate that Ms Murphy was exploring different options and that, based on her calculations, subdividing into two 2.5-acre sections with Mr Hitchcock retaining one was not a viable option. In any case, this letter pre-dated the alleged 2017 agreement.
[50] Mr Hitchcock also relies on letters from Ms Murphy dated 8 and 16 March 2019, in which she informs him that she is withdrawing the rear 2.5-acre section from the market and will be marketing the 5-acre block for sale, and acknowledges that the 2.5-acre proposal amounted to “an opportunity for you.”
[51] I do not consider the abovementioned letters to be evidence of anything more than the fact that Ms Murphy and Mr Hitchcock had discussed the possibility of the rear 5-acres being further subdivided into two 2.5-acres and Mr Hitchcock somehow acquiring the front of those. As to the listing of the potential rear 2.5 acres on the market, subject to title, this evidences nothing more than Ms Murphy exploring the possibility. There is no evidence of a mutual intention to be bound or of agreement on essential terms, namely how the deal would work between them. Mr Hitchcock’s explanation for the accounting between them is inherently implausible, involving Ms Murphy giving (not repaying) him $500,000; and him acquiring the section, at an estimated value of around $1.5 million, without paying anything other than the modest costs necessary to subdivide it from the other 2.5-acre section. There is no evidence to suggest that Ms Murphy agreed to such an improbable transaction.
[52] For these reasons I am satisfied that Mr Hitchcock has not established a reasonably arguable case that he and Ms Murphy intended to reach a binding oral agreement for the sale and purchase of 2.5 acres of the Property to him.
Part performance
[53] The doctrine of part performance is available only where there is a concluded and otherwise enforceable contract. It will not apply if the act of part performance preceded that agreement, or where the parties are still negotiating, fail to agree on all essential terms or, the contract is void for some other reason.23 As I have found there
23 TA Dellaca Ltd v PDL Industries Ltd, above n 10, at 109.
was no concluded agreement between Mr Hitchcock and Ms Murphy, the doctrine does not assist the applicant.
Constructive trust
[54] There is no doubt that Mr Hitchcock has expended money on the Property and undertaken physical works himself. The issues for this Court to determine are:
(a) whether these contributions were more than minor; (b) for what purpose the works were undertaken; and (c) on what understanding between Mr Hitchcock and Ms Murphy the contributions were made and works undertaken.
[55]The potentially relevant contributions made by Mr Hitchcock are:
(a)The repayment of Ms Murphy’s mortgage in 2003 of $147,262.16;
(b)The funding of Ms Murphy’s house renovation in 2004 of
$218,916.84/$313,000;
(c)Clearing the area on which he would live, installing three-phase power, driveway access, drainage, fencing, planting and telephone services in 2003 to 2005 and 2010/2011, which Mr Hitchcock estimates cost him
$108,500;
(d)Physical works and costs he incurred for the subdivision into two 5-acre blocks, at an estimated cost of $58,000 (this sum being disputed by Ms Murphy);
(e)Physical works for the potential second subdivision, including installing three-phase power to the rear proposed section, telephone cabling, fibre cabling and electronic gates and pillars; and
(f)The two 2017 advances to Ms Murphy so she could repay her mortgage.
[56] It is unclear whether Mr Hitchcock accepts that the 2003 mortgage repayment and 2004 expenditure on the house renovation were loans (as Ms Murphy maintains).
In his affidavit at paragraph 16 he says, “… I am owed $500,000 by her.” However at the hearing he said that the $500,000 he would deduct from the proceeds of sale according to the alleged agreement would be a gift from Ms Murphy. He also said, in contrast to his affidavit evidence, that he did not fund her house renovation. This evidence is contradictory. In any event, the circumstances of these advances are not such that it can be said that he and Ms Murphy would reasonably expect that through them he was acquiring an equitable interest in the Property. They took place many years before discussions began about Mr Hitchcock potentially acquiring a portion of the Property.
[57] Mr Hitchcock himself describes the 2017 advances as loans (see his affidavit dated 7 August 2002 at para 12), so there are not relevant.
[58] That leaves the work on the rear half of the Property which Mr Hitchcock undertook and paid for during 2003 to 2005, 2010/2011 and from 2017.
[59] Ms Murphy says that the work Mr Hitchcock did to develop the rear part of the Property was for his own benefit and, in hindsight, was to enable him to undertake the illegal cultivation of cannabis on the Property. During cross-examination, Ms Hogan, for Ms Murphy, put to Mr Hitchcock that the underground water tank installed in 2006, the three-phase power supply, the concreted driveway and electric gates were installed to enable his cannabis growing enterprise. Mr Hitchcock denies these allegations. Mr Hitchcock’s explanation stretches credibility and I am mindful that Mr Hitchcock was found by the Police to be drying cannabis in the same water tank during their search in April 2020. However, I am not, on the evidence before me, able to make a finding as to when Mr Hitchcock began cultivating cannabis on the Property and whether the work he did from 2003 onwards was for that intended purpose.
[60] Despite that, I do not consider that the contributions he has made to the Property exceed the benefit he has received from being able to reside on Ms Murphy’s property, rent-free, for at least 10 years.
[61] The initial work in 2003 to 2005 and 2010/2011 was (giving Mr Hitchcock the benefit of the doubt) to create a habitable place for him to live. I am not satisfied that
work — being the placement of a Portacom, an underground tank/bunker (which has been used for drying cannabis), a tool shed/garage, a driveway to these structures and some planting — has improved the Property significantly, or at all. A purchaser would almost certainly demolish these structures.
[62] I accept that the work carried out for the consented subdivision is likely to have enhanced the Property’s value. However, by Mr Hitchcock’s own account, it was agreed between them that Ms Murphy would repay him for these costs out of the sale proceeds. It is a debt rather than a contribution that gives rise to an equitable interest in the land itself. Further, the sum ($58,000 as claimed by Mr Hitchcock) is minor compared to the estimated value of the Property and each potential subdivided section. The physical work he undertook was no more than minor when viewed in the context of the benefit he received from living on the property, and does not indicate an intention by Ms Murphy that she would cede an interest to him because of it.
[63] Finally, Mr Hitchcock says he undertook work to further the possible second subdivision. He has not specified the value attached to this work in his affidavit evidence and, under cross-examination, was unable to do so. He says the agreement was that he would pay these costs. I do not consider that this expenditure and physical work amounts to a contribution justifying an interest in the Property. Again, it is minor compared to the value of the Property and the possible section to which it relates (having an estimated value of $1.5 million). Further, the contribution is outweighed by the benefit Mr Hitchcock has received by living on the area rent-free for at least 10 years. In addition, there is doubt about whether some of the work (for example, the electric gates) was completed for the purposes of the proposed subdivision or for his own personal benefit. I can see no circumstances from which an argument can be made that the applicant has a reasonable expectation to an interest in the Property or that Ms Murphy can be reasonably expected to yield any interest to him.
Result
[64] The application is dismissed. I hereby order that Caveat 11425446.1 lodged by the applicant against Record of Title NA20A/1228 shall lapse.
[65] Ms Murphy is entitled to costs on a 2B basis. If the parties are unable to agree on costs I will receive submissions by memoranda within 14 days from Ms Murphy and from Mr Hitchcock seven days thereafter.
Associate Judge Gardiner
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