Ivanovic v Jankovic

[2012] NZHC 1868

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-2771 [2012] NZHC 1868

IN THE MATTER OF     Caveat No. X7305937.1

BETWEEN  IGOR IVANOVIC Applicant

ANDBOJAN JANKOVIC AND TAMARA JANKOVIC

Respondents

Hearing:         25 July 2012

Appearances: Mr D Grove for applicant

Mr Gloyn for respondents

Judgment:      25 July 2012

ORAL JUDGMENT OF ASSOCIATE JUDGE DOOGUE

Counsel:

Mr D Grove, Chancery Street Chambers – [email protected]

Bytalus Legal, Birkenhead – [email protected]

IVANOVIC V JANKOVIC HC AK CIV-2012-404-2771 [25 July 2012]

[1]      The present caveat application relates to a property situated at Centennial Street, Te Aroha.  The registered proprietors of the property are the two respondents. The respondents have taken steps to lapse the caveat and accordingly the applicant has filed an application pursuant to s 143 and 145 of the Land Transfer Act 1952. Essentially the position taken by the applicant is that he has an equitable interest in the property which was created out of a partnership that he entered into with the respondents.  He says that it was always intended that the property would be shared between  the  applicant  and  the respondents  even  though  he  was  not  one of  the registered proprietors and that his interest would be a one-half share.

[2]      In his first affidavit filed in this matter the applicant said that:

Evidence of the partnership will be given by my payment towards mortgage payments, rates and other maintenance and upkeep on the property.

[3]      The property was acquired in 2005.  The property was acquired by the first named respondent alone.  It would appear that the purchase price was borrowed in its entirety.   It would also appear that the immediate cause for the parties taking an interest in buying a property in Te Aroha was that at that stage the first named respondent was in employment with a company which the applicant owned.   His employment was based in Te Aroha.   The applicant had been paying for the first named  respondent’s  accommodation  in  a  hotel  in  Te  Aroha.    It  was  thought preferable for a house property to be obtained hence the acquisition of the Centennial Avenue property.  No evidence has been put before the Court as to why the decision was made not to include the applicant as a registered proprietor.   There is some evidence that his business affairs were in extremis at that time and perhaps that had something to do with it but those considerations do not play any part in the decision that I have come to in this matter.

[4]      The applicant places considerable store by the circumstances in which an application for finance over the property was made in 2005. A mortgage broker who assisted has provided an email which provides at least hearsay evidence about the circumstances of the purchase.  He says in his email dated 18 May 2012:

[The acquisition of the house] was a joint venture that you were both doing together and the plan was that you would share in the profits once the property was completed.

[5]      That email was addressed by the mortgage broker to the applicant.

[6]      The first named respondent has provided a fairly detailed account of the circumstances in which the property was acquired.   He deposes that he paid the finance broker’s fee and the legal fees on the acquisition of the property.

[7]      In May 2005, which must have been around about the time when the property was acquired, the first respondent’s wife arrived in New Zealand and they began to renovate the house.

[8]      The first named respondent said that when the house was acquired that the applicant suggested that they purchase the property together, carry out the necessary repairs and improvements and sell it for a profit within six months and the profit would be shared equally.  He further said that it was the agreement of the parties that they would jointly contribute to all the costs of repairs and improvements as these were being carried out and share jointly in payment of all outgoings.  He regarded this as being a fair arrangement.   He did not accept that there was any agreement about what debit would be made against his interest by way of recognition of the rental value that he received from occupying the house.

[9]      In  December 2005 the  mortgage over the house was re-financed.   Work continued on renovations in the house.  This seems to have gone on some years. The applicant has given evidence that at one point the first named respondent sent to him a copy of the various expenses that had been incurred in acquisition, maintenance and retention of the house.  The list contained an itemisation of entries such as the cost of a limb report on acquisition and it sought to calculate what the applicants 50

%  share  of  the  various  costs  would  be  including  legal  fees,  payments  on  the mortgage that had been made so far, payments for materials for repairs to the house etc.  This statement appeared to cover the period up to 2006.  The statement shows credits due to the applicant for payments that he actually made which totalled some

$3,720.  At that point the total outgoings were shown in the statement as being in

excess of $10,000.  The first named respondent’s evidence was that the list was a statement of the costs that he and his wife had incurred and he said that the applicant had not made any payments or contributed to any work on the property and showed complete disinterest.  He said:

I  therefore  assumed  that  he  was  not  prepared  to  fulfil  his  end  of  the agreement and did not press him further about it.   I had for quite a while been of the view that there was no agreement.

[10]     Mr Grove drew attention to the actual payments that the applicant made which up until the present time totalled $3,720, and he also referred to the evidence which the applicant gave that in November 2006 he had paid an additional bill of approximately $3,000 in relation to an air conditioning unit.   His total financial contribution has been approximately $7,000.

[11]     The respondents continued to live in the property.  In December 2005 it was transferred to both respondents so that the first named respondent’s wife was added as a registered proprietor in the property.  In 2012 the respondents were interested in selling the property and entered into an agreement for sale and purchase.  They say that at that point it was revealed that the caveat which the applicant had lodged first became apparent to them.

[12]     The caveat is in handwritten form and in the annexure schedule the following statement appears:

The caveator claims a beneficial interest in the land contained in Certificate of Title SA 445/61 by virtue of a constructive trust between the registered proprietors .... and the caveator as beneficiary.

[13]     Mr Gloyn drew my attention to a scored out section of the annexure schedule which sets out in detail that the respondents would account to the caveator for 50% of the sale proceeds if and when the property contained in the Certificate of Title sold in the future after deducting the balance of any unpaid mortgage on the above property and it also added that in consideration the caveator has paid sums toward the property including but not limited to payments of interest and principal on the mortgage over the property.

[14]     While the reasons for scoring out the section in the annexured schedule to which I have just made reference is not clear, it would seem that even though it was erased  on  the  caveat  schedule  it  broadly  accords  with  the  grounds  which  the applicant now puts forward for maintaining the caveat.

[15]     The Court is required to consider whether the caveator has a reasonably arguable claim which would sustain a caveat.  The applicant needs to show that he has a reasonably arguable equitable interest in the property arising out of his partnership with the respondents for the acquisition, improvement, maintenance and retention of the house.  So far as the evidence is concerned, there have been quite a number of assertions made by the respondents which have not been responded to in detail by the applicant to the extent that they have not been rebutted and I consider that the Court should consider that the matters stated are actually established.

[16]     I conclude that over the years since the property was acquired – a period of some seven years – the respondents have carried the responsibility for the house in terms of paying the outgoings, the mortgages, the funding costs, insurance, maintenance etc.  There has been some contribution by the applicant.   It has been limited, as I have said, to the sum of approximately $7,000.

[17]     I conclude when the parties originally contemplated entering into the contract it was proposed that they would each contribute to the costs of the property as those costs fell due.  That has not occurred with the exception of the $7,000 approximately to which  I have made reference.   Over the same period  I accept that  the total outgoings which have been incurred with respect to the property and which the respondents have paid were approximately $131,000.  That appears from a “profit and loss statement” which the respondents provided to the applicant.

[18]     Before I consider the question of what expectations the applicant reasonably held with regard to the property I need to refer to two key pieces of evidence that Mr Grove  particularly  stressed.    The  first  was  that  earlier  this  year,  the  applicant deposed, the first named respondent telephoned his, the applicants, brother.  He said that he then offered $20,000 to finalise everything about the house forever.  Then, on

1 May 2012 the first named respondent sent an email to the applicant stating that a

profit of somewhere between $30,000 - $35,000 had been made on the property and asking  “please  tell  me  how  much  you  think  is  your  part”.    The  first  named respondent explains these exchanges by saying that he was ‘in shock’ when he found out about the caveat.   The respondents had the agreement for sale and purchase pending for settlement and that was the reason why he attempted to come to a settlement with him.   However because no agreement was forthcoming the first respondent’s says the parties elected to leave it to the Court to decide the matter.

[19]     Mr Gloyn for the respondents contended that the applicant had no equitable interest in the property.  He said that early in the history of the matter there had been a discussion about a joint venture but that had ‘fizzled out’ or had been abandoned by the applicant not proceeding to meet the obligations that were proposed for each party under the joint venture agreement.   Mr Gloyn referred me to the South Australian decision of Shepherd v Houston.[1]  That case was a caveat case which involved an agreement by the owner of land to allow the respondent to the caveat application an equal third share of the ‘net profits’ which the owner might make on

resale of the land.   The Supreme Court of South Australia concluded that in the circumstances of the case the caveator had no interest in the land and at most had a contractual claim to recover the amount of the profit that he had been promised.

[1] Shepherd v Houston (1927) SASR 144 as cited in Hinde McMorland and Sim land Law in New

Zealand online

[20]     In my judgment it does not resolve the situation to attach a label to the present arrangements as being a ‘joint venture’.  The question is, whether arising out of all the circumstances, it is apparent that it was the intention of the parties that the respondents would be trustees of the property for themselves and for the applicant in equal shares.

[21]     I have no doubt that at one stage it was in fact proposed that the parties would equally contribute to the property and that on that assumption the applicant would have a half interest in it.  Any equitable interest that the applicant would have in the property though  would  not  arise out  of that  understanding on  its  own.    It  was crucially dependent upon the applicant making contributions throughout the life of

the  venture  which  equated  broadly  to  one  half  of  the  financial  burden  of  the

arrangement.  Upon the evidence that has been given it is quite clear that he did not do so.  I am aware that the Court must proceed with caution in making findings of fact on an originating application for sustainment of caveat.   However critical observations  by  the  first  named  respondent  had  not  been  contradicted  by  the applicant   and   there   is   surrounding   circumstances   which   establish   that   the respondents carried on with the enterprise of essentially ‘developing’ the property and reselling it.  The applicant almost completely abstained from any participation in it apart from making the payments to which I have referred.   I do not say the applicant would not be entitled to some recompense for the money that he put into the property but what I do say is that his contribution in no way conformed to the expectation that the parties had when they were first mooting their partnership of joint venture.  It would not at all be unconscionable for the applicant to be denied an interest in this property.  He can be left to his remedies in contract or arising from other sources.  It is my view however that equity would not intervene in this case to recognise a trust in his favour over the land.  It may be that he has a more limited equitable interest in the eventual sale proceeds of the property in addition to having a contractual right in regard to them or some sort of restitutionary claim but given my conclusion that he has no equitable interest the caveat cannot stand and the application to sustain will therefore be dismissed.

[22]     The respondents seek costs and I consider that they are properly allowable on a 2B basis and I order accordingly.  The respondents will also have disbursements as fixed by the Registrar.  Mr Grove has asked that there be a stay of execution at least till Friday so that he can obtain instructions whether or not his client will wish to appeal my judgment.   I am prepared to grant a stay on the judgment until 5 p.m.

Friday 27 July 2012.

J.P. Doogue

Associate Judge