Hughes v Johnston

[2021] NZHC 1642

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE

CIV-2021-412-42

[2021] NZHC 1642

UNDER

Land Transfer Act 2017

IN THE MATTER

of an application that a caveat lapse

BETWEEN

NIGEL WARREN HUGHES and HAWEA

TRUSTEES LIMITED as trustees of the WHERE A WHA KAWE FAMILY TRUST

Applicants

AND

TOBY GREGG JOHNSTON

Respondent

Hearing:	(Determined on the papers)
Counsel:	S Caradus and A V Foote for the Applicants
Judgment:	5 July 2021

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 5 July 2021 at 10.30 am Pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

…..

HUGHES v JOHNSTON [2021] NZHC 1642

[1]                  The applicant trustees apply to remove a caveat over a property of which they are the registered proprietors in Wanaka.

[2]                  The respondent, Mr Johnston, was a former trustee of the Where A Wha Kawe Family Trust (the Trust) and is a beneficiary of the Trust.

Background

[3]                  The background to  the  applicants  being  appointed  trustees  in  place  of  Mr Johnston and his former partner, Ms Brown, is set out  in  the  judgment  Johnston v Brown.1 In that judgment, orders were made for the sale of the Wanaka property by the newly appointed trustees. An order was also made requiring the new trustees to pay to Ms Brown a sum from Mr Johnston’s share of the sale proceeds of the Wanaka property.

[4]                  Mr Johnston applied to stay the judgment removing him as trustee and the sale. A stay was only granted to the extent that the sale proceeds of the Wanaka property would be held pending determination of Mr Johnston’s appeal against the order granting Ms Brown a share of the sale proceeds which would otherwise have gone to Mr Johnston.2

[5]                  Mr Johnston lodged a caveat against the Wanaka property in January 2021. The caveatable interest claimed by Mr Johnston in his caveat is: “I am a beneficial owner/interest in the land under an express trust, WWK Family Trust, of which the registered owners are trustees.”

[6]                  Accordingly, the present application is by court appointed trustees who are giving effect to a court order that the trust property be sold. The application to remove the caveat is made on the basis that Mr Johnston does not have a caveatable interest. He is only a discretionary beneficiary of the trust and as such not a beneficial owner of the property. Mr Johnston has also acknowledged in the course of the proceedings that the property should be sold.

1      Johnston v Brown [2020] NZHC 2298.

2      Johnston v Brown [2021] NZHC 507.

[7]                  I am satisfied Mr Johnston, as a discretionary beneficiary of the trust, has no caveatable interest in the property.3 No appointment of the land to him has been made and of that fact Mr Johnston was well aware. Subject to the issue of whether the present application has been brought to his attention, I am satisfied that an order should be made removing his caveat.

[8]                  Even if I am incorrect about Mr Johnston not having a caveatable interest in the Wanaka property, this is a case where the caveat should be removed as Mr Johnston has throughout the proceedings accepted the property should be sold, and there is an order to that effect.

Service

[9]                  The applicant trustees acknowledge they have not achieved personal service. Mr Johnston is evading service or, at the very least, not co-operating in service being achieved. The applicants seek an order for substituted service under r 6.8 of the High Court Rules 2016  (the  Rules)  on  the  basis  that  this  application  has  come  to  Mr Johnston’s knowledge.

[10]              I am satisfied that reasonable efforts have been made to serve the documents on Mr Johnston.

[11]              Mr Johnston is now employed in Wellington and phone calls to Mr Johnston at his workplace were not accepted by him. On a number of occasions, the process server visited the residential address understood to be Mr Johnston’s residence and left telephone and text messages on Mr Johnston’s mobile phone, all without success.

[12]              The  application  to  lapse  the  caveat  was  emailed  to   Mr  Johnston  on   24 May 2021. The affidavit in support did not accompany the email as it was too large. The applicants’ solicitor asked Mr Johnston if he required a physical copy and, if so, where it could be sent and whether a Dropbox link was sufficient. In response, Mr Johnston confirmed that he required a hard copy but did not provide details of where service could be effected. Accordingly, I am satisfied that the present

3      Morrison v Morrison HC Auckland CIV-2006-404-7824, 27 February 2007 at [4], citing R & I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1993) 10 WAR 59 (WASC).

application came to the knowledge of Mr Johnston given he confirmed receipt of the email with the application but not the affidavit.

[13]              The applicants’ solicitor offered to arrange for the affidavit to be served by courier. Mr  Johnston  said  he  would  not  accept  documents  by  courier.  While Mr Johnston insisted on personal service, he would not provide a time or place where service could be completed.

[14]              It seems Mr Johnston may have wanted to make an offer for the Wanaka property himself. A copy of the share-file link containing the affidavit was sent to the solicitor Mr Johnston instructed to assist with his interest in buying the Wanaka property. That solicitor responded that they would take instructions about service and respond.   It is a reasonable inference that that solicitor would have forwarded to    Mr Johnston the share file link to the affidavit.

[15]              In any event, the merits of the application to remove the caveat are set out in the originating application itself. The application relies on the earlier judgments of the Court.

[16]              The applicants have sold the property to a third party and the caveat is standing in the way of that contract.

[17]              Accordingly, I am satisfied that, for the purposes of r 6.8 of the Rules, that the application to lapse the caveat has come to Mr Johnston’s attention. However, even if Mr Johnston’s solicitor did not provide him with a copy of the link to the affidavit then I am satisfied this is an appropriate case to dispense with personal service of that affidavit.

[18]              The contents of the affidavit filed in support of the application to remove the caveat are well known to Mr Johnston. The affidavit does little more than produce the judgments of the Court that Mr Johnston already has in his possession. The application to set aside the caveat could have proceeded on the basis of the judgments already issued by the Court.

[19]              Mr Johnston is also aware of the sale of the Wanaka property as the sale is referred to in a letter from his solicitor to the trustees dated 11 June 2021.

[20]              Mr Johnston’s position in respect of this application does him no credit. The applicants offered to attend to service in any manner he required.  However, when Mr Johnston required personal service, despite numerous follow-ups, he would not provide the information necessary for that to occur. Mr Johnston knows full well what the application concerns. The Court should not allow a meritorious application to be frustrated by a respondent who has received the application, already has the judgments on which the application is based, and who has nonetheless taken no steps.

[21]              Accordingly, I make an order as sought in relation to the lapsing of the caveat at para [1.1] of the application dated 21 May 2021.

[22]              The applicants sought an order that Mr Johnston be restrained from lodging a second or subsequent caveat. I do not have jurisdiction to make what amounts to an injunction order. What I do is reserve leave to the applicants to seek by memorandum in this proceeding an order removing any further caveat Mr Johnston lodges against the property.  If  that  becomes  necessary  then  service  of  that  memorandum  to Mr Johnston’s email address will be good service.

[23]              The applicants seek costs on a 2B basis along with disbursements. There is no reason why costs should not follow the event.

[24]              Accordingly, there is an order that Mr Johnston is to pay the applicants’ costs on a 2B basis along with disbursements as fixed by the Registrar. Those costs may be deducted from any funds due from the Trust to Mr Johnston.

Associate Judge Lester