Joie De Vivre Canterbury Limited v Calder Stewart Industries Limited

[2013] NZHC 1045

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2012-409-002268 [2013] NZHC 1045

BETWEEN  JOIE DE VIVRE CANTERBURY LIMITED

Plaintiff

ANDCALDER STEWART INDUSTRIES LIMITED

Defendant

Hearing:         2 May 2013

Appearances: S P Rennie and J E Bayley for Plaintiff

B W F Brown QC and P R Castle for Defendant

Judgment:      10 May 2013

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]      In 2002 the plaintiff (JDV) and the defendant (CSI) entered an arrangement to develop areas of land in the vicinity of Christchurch Airport, parts of which were owned at the time by CSI and the remainder of which were bought in 2002 and 2003. Title to all the land was taken in the name of CSI, by agreement.   Each company contributed certain sums of money towards the cost of the land.  Part of it is located in Russley Road, and part in Shands Road.  On 22 May 2003 CSI and JDV entered a deed by which CSI declared that it held a one half share of the land in trust for JDV.

[2]      The parties intended to develop the land and over ensuing years progress was made with obtaining a variety of statutory consents to enable development to take place, and with physical works on the land.  In 2010, however, differences arose between CSI and JDV on a range of matters fundamental to the project they were undertaking.  In July 2010 CSI issued proceedings in this Court against JDV seeking

an order under the Property Law Act 2007 that the land be sold.

JOIE DE VIVRE CANTERBURY LIMITED V CALDER STEWART INDUSTRIES LIMITED HC CHCH CIV-

2012-409-002268 [10 May 2013]

[3]      On  13  August  2010  the  Court  convened  a  settlement  conference.    The companies agreed to settle their dispute on terms recorded in an agreement signed that day.  JDV maintains that CSI is obliged, by the terms of the agreement, to transfer to it an undivided one-half share of the remainder of the land in Shands Road (part of which has been sold to Foodstuffs (South Island) Limited).  In this proceeding it seeks an order that CSI take the steps necessary for JDV and CSI to be registered as tenants in common as to an undivided one-half share each of that land. In addition it says that it is the sole beneficiary of the trust recorded in the deed of 22

May 2003, which it wishes to terminate.  It seeks an order in the same terms as a result.

[4]      The issues in this case are first, whether, by the terms of the settlement agreement, CSI is required to transfer an undivided one-half share of the balance of the Shands Road land to JDV so they hold title as tenants in common in equal shares, and secondly, whether the Court should terminate the trust and so order.

[5]      This proceeding was brought on 15 October 2012.  However, on 26 July 2012

CSI had brought proceedings against JDV (the 1572 proceeding) in which it, too, seeks specific performance of the settlement agreement, though it says the obligation of JDV under that agreement is to take steps to partition the land so that titles are issued for separate parts of it, and transferred to each company respectively.  Thus there are two sets of proceedings before the Court for specific performance of the same agreement.  The differing orders sought reflect the respective views of each company of the interpretation of the settlement agreement.

[6]      The 1572 proceeding is scheduled for a fixture in July, but JDV does not oppose the subdivision of the land and transfer of agreed parts of it to the respective companies.

[7]      JDV asks that the order it seeks on this proceeding be made by way of summary judgment.   For this to occur it must satisfy the Court that CSI does not

have a defence to its claim.1     If JDV lays a foundation for this conclusion, an

1      High Court Rules, r 12.2.

evidential onus shifts to CSI to demonstrate a tenable defence but the onus of establishing entitlement to summary judgment remains on JDV.2

[8]      As well as opposing the entry of summary judgment, CSI has also applied to strike out this proceeding on the basis that it is an abuse of process, maintaining that JDV’s claim for the orders it seeks should have been brought by way of a counterclaim on the 1572 proceeding.  In the alternative, it asks for an order that this proceeding be consolidated with and therefore heard at the same time as the 1572 proceeding.  With my consent Mr Rennie presented argument in support of his application for summary judgment first, and in the course of argument accepted that if he were unsuccessful in obtaining summary judgment a consolidation order should be made.   Given that the key issues raised by Mr Brown on CSI’s application to strike out for abuse of process would be overcome by this course being followed, Mr Brown withdrew CSI’s application to strike out.

[9]      In the result, therefore, the entry of summary judgment would conclude this proceeding but leave issues concerning physical apportionment of the land and the consequences  of  that  step  for  determination  at  trial  of  the  1572  proceeding. Dismissal of the application for summary judgment would result in this proceeding being consolidated with the 1572 proceeding, with JDV’s claim becoming a counterclaim on that proceeding.

Is JDV entitled to be registered on the title to the balance of the Shands Road land pursuant to the settlement agreement?

[10]    By the time the settlement agreement was signed the companies were in negotiation with Foodstuffs (South Island) Limited to sell to it part of the Shands Road  land,  and  the  first  term  of  the  settlement  agreement  confirms  that  the companies would proceed with that sale.  The balance of the agreement deals with the Russley Road land, and separately with the balance of the Shands Road land.

The agreement in relation to the Russley Road land is in the following terms:

2      Auckett v Falvey HC Wellington CP296/86, 20 August 1986, per Eichelbaum J;

MacLean v Stewart (1997) 11 PRNZ 66 (CA).

2.    Russley Road land to be sold at no less than $27 million plus GST.

CIAL is preferred buyer and if it is the buyer then roading costs for its account.  If CIAL is not the buyer, roading costs to be the account of

purchaser.   If this land is not sold it will be held undeveloped by the

parties as joint owners simpliciter.  If Russley Road is not sold by December 2012, each party will pay 50% of the roading cost payable to CIAL under the agreement between CSI and CIAL.   Such amount is approximately $500,000.

CIAL is an acronym for Christchurch International Airport Limited.

[11]     In relation to the balance of the Shands Road land, the agreement provides:

4.    Balance of Shands Road (28 hectares) to be held undeveloped by the parties as joint owners simpliciter.  CSI has option to purchase JDV’s half share at $20 million plus GST within 6 months of the date of this agreement.  If CSI does not purchase, JDV has option to purchase CSI’s half share at $20 million plus GST in the subsequent six months period. If neither exercises these options, the parties agree to partition their interests in this land.

[12]     The agreement contains further brief provisions of no relevance to the current issues.

[13]     After this agreement was signed, it seems that negotiations with Foodstuffs proceeded positively, and this resulted in three further documents being signed on

20 December 2010.  First, JDV and CSI signed an agreement for sale and purchase by which JDV sold to CSI a one-half share in the land being sold to Foodstuffs. Secondly, CSI and Foodstuffs entered an agreement for sale and purchase by which CSI sold that land to Foodstuffs.  Thirdly, CSI and JDV signed a document titled “Agreement  for  Provision  of  Development  Services”.    In  this  document  they recorded agreement in relation to the services to be provided by CSI in developing the Russley Road land and the Shands Road land, and the payment of the costs of so doing.   This document records that CSI and JDV “co-own the land in half shares each” and the land is defined to mean the “two blocks of land co-owned by CSI and JDV in half shares commonly referred to as, respectively, the land at Russley Road and Shands Road in Christchurch”.

[14]     It is common ground between counsel that in order to decide the meaning the parties  intended  the  words  used  in  the  settlement  agreement  to  bear,  extrinsic

evidence is relevant.  The context in which the agreement was executed is a relevant element of that extrinsic evidence, as is evidence of conduct subsequent to the contract, if that will assist the Court in objectively assessing the meaning the parties ascribed to the words in the contract when it was entered.3     Each company emphasised different aspects of the evidence in support of its position.

[15]     The sentence in the settlement agreement on which Mr Rennie relies is the opening sentence in paragraph 4, above, and he says the words “to be held ... by the parties as joint owners simpliciter” mean that the title is to be held by CSI and JDV as tenants in common.  He says, first, that this is what the words plainly say.  He refers to the meaning of the word “simpliciter” given in a legal dictionary in the following terms:4

Indicating that a word or phrase in a document is used absolutely, unconditionally, and free from any shades of meaning given to it by surrounding words or phrases.

[16]    From this he says that “joint owners simpliciter” means unqualified joint ownership without disparity between the parties’ respective legal standings.  He says that clause 4 creates two successive options which the parties respectively may exercise on the terms stated and if neither option is exercised the balance of the land is to be partitioned.  The opening sentence of this clause directs how the land is to be held  unless  and  until  either  option  is  exercised  or  partitioning  takes  place. Mr Rennie notes that two experienced commercial property developers entered the agreement.  By using the words “half share” to describe the subject of each option the parties demonstrated an intention that they were to take separate shares on the title thereby creating a tenancy in common.

[17]     As context for this agreement, Mr Rennie refers to the obligation in clause 2 of the deed executed by the companies early in their relationship, in May 2003, by which CSI, after declaring that it holds a one half share of the land in trust for JDV,

agrees that it:

3      Vector Gas v Bay of Plenty Energy [2010] 2 NZLR 444 (SC).

4      J Law and E Martin A Dictionary of Law (7th ed, Oxford University Press, Oxford, 2009).

will on being so required by JDV transfer set over and assign to JDV or as JDV shall direct a one-half share of such property acquired by it and held by it as trustee pursuant to this deed.

[18]     Mr Rennie says that the interpretation of clause 4 for which JDV contends is also supported by two subsequent documents.   First, in a letter written by the solicitors for CSI to the solicitors for JDV, it is stated:

Clause 5.2 is necessary for certainty in the future as the land is now held effectively as tenants in common under the settlement agreement.

[19]     The reference to clause 5.2 is a comment on a draft of the development services agreement.  In fact, clause 5.2 in the draft does not appear in the executed agreement, but it is the acknowledgement of tenancy in common which Mr Rennie says is evidence of intention.

[20]     Secondly,  Mr  Rennie  relies  on  the  statements  within  the  development services agreement to which I have referred (see [12]) and also a statement in that agreement that the terms of the trust deed prevail over both the settlement agreement and the development services agreement.

[21]    Although neither counsel specifically referred to it, I also note that in the agreement between JDV and CSI by which the former sold to the latter its interest in the land to be sold to Foodstuffs, the land is described as “a one half share as tenants in common ...” (the legal description follows).

[22]     Mr Rennie says that as a matter of policy a title should reflect the true ownership structure.  He draws my attention to a note by the Law Commission that:5

... the register should reflect as accurately as possible the true state of title to land so that “persons who propose to deal with land can discover all the facts relative to the title”.

[23]     Mr A B Stewart, a director of CSI, filed an affidavit.  He says that from the beginning of the commercial relationship of the companies the arrangement has been that the name of CSI would be the only name that would appear on the title.  Under

the settlement agreement that would continue to be the position in relation to both

5      Law Commission A New Land Transfer Act (NZCL R116, 2010) at [1.11].

the Russley Road and the Shands Road land, it would continue whilst the successive option periods ran, and if no option was exercised the land would be partitioned.  He says there was an agreed change in the relationship between the parties from the time of the settlement agreement, whereby any obligations in the nature of fiduciary duties were extinguished, as JDV had previously alleged that CSI was acting in breach of fiduciary duties said to be owed to JDV.

[24]     Mr Brown says that the word “simpliciter” was intended to mean that the parties would simply own the land, and neither would owe any fiduciary duties to the other.  He says that the three documents executed after the settlement agreement are evidence of the parties’ intentions when signing that agreement, and should be considered in its interpretation.  First, he says these three agreements are inconsistent with a proposition that JDV was to take title.  The very structure of the documents is consistent only with CSI being the registered owner.  JDV first agreed to sell its half share in the land to CSI, CSI then sold the land to Foodstuffs, and simultaneously CSI and JDV signed an agreement for the future delivery of development services which makes no mention whatever of JDV being on the title.  Had it been agreed at the settlement four months earlier that JDV would be registered as a tenant in common, that step would have been taken first and then both parties would have sold to Foodstuffs, and the development agreement would have referred to the ownership in terms of the title rather than using phrases such as “co-own the land in half shares each” and “two blocks of land co-owned by CSI and JDV in shares ...”.

[25]     Secondly, Mr Brown draws attention to specific clauses of the agreement for sale and purchase from JDV to CSI.  In clause 18 JDV gives consent to and agrees to be bound by the terms and conditions of the sale agreement to Foodstuffs, and agrees to do all things reasonably necessary to enable CSI to carry out and complete its obligations to Foodstuffs under that agreement.  Under clauses 19 and 27 JDV agrees to withdraw its caveat over the land to allow the transfer to take place.  Under clause

28 it agrees to surrender an easement, and under clause 34 agrees to the terms of a new easement.  All these provisions, Mr Brown argues, are inconsistent with the proposition that four months earlier the parties had agreed that JDV would go on the title.

[26]     Mr Brown says that the reference in the letter of 16 December 2010 from CSI’s solicitor, to the land being “now held effectively as tenants in common under the settlement agreement”, should be the subject of evidence at trial as it is but one letter from the solicitors’ files and there are many others which a court should consider before drawing any inference from one phrase in one letter.

[27]     Mr Brown draws attention to the fact that in the settlement agreement the phrase “joint owners simpliciter” is used in respect of both Russley Road and Shands Road. The agreement contemplates that if the Russley Road land is not sold either to CIAL or another purchaser, it would be held, undeveloped.  The Shands Road land, on the other hand, was to be the subject of two successive option periods followed by a partition if neither option was exercised.   Despite those plainly different intentions  in  respect  of  the  two  pieces  of  land,  the  same  phrase,  relating  to ownership, is used, yet no suggestion is made that both companies should be on the title to the Russley Road property as tenants in common.  On this basis the phrase should be interpreted as meaning that the parties continue to own the land jointly, but free of any suggestions that either owes the other any fiduciary duties, with the Shands Road property being partitioned if neither party exercised its option so that separate titles were held.  The parties could easily have provided for the titles to both properties to be held as tenants in common in equal shares, but didn’t.

[28]     Mr Brown says that although the order sought on the second cause of action is phrased as termination of the trust created in 2003, that is not correct as the Russley Road land would remain in its present registered ownership and be held under the same trust.  In addition, the traditional rules relating to trusts, relied on by

JDV,6   should  not  prevail  over  the  commercial  and  financial  agreements  of  the

parties.7

[29]     The agreement between CSI and Foodstuffs contains a clause banning CSI from transferring the land to any other party until certain physical works have been carried out and a proposed transferee enters a covenant with Foodstuffs on certain

terms.  Mr Brown says this is part of the matrix of commercial arrangements JDV

6      Saunders v Vautier (1841) 4 Beav 115,49 ER 282 (Ch).

7      Target Holdings Ltd v Redferns [1996] 1 AC 421 at 435.

and CSI made after the settlement agreement which prevents the Court simply directing a transfer of the land from CSI to itself and JDV as tenants in common. Although Mr Rennie suggested that the Court could make the order JDV seeks with a direction that JDV sign an appropriate deed of consent, Mr Brown says the deed of covenant must be entered by Foodstuffs, and it cannot be ordered to sign a deed as it is not a party.

[30]     For these reasons, Mr Brown submits that the plaintiff cannot establish, as it must in order to succeed on an application for summary judgment, that CSI does not have a defence to its claim that the settlement agreement requires title to be held in both names.

Discussion

[31]     In  my view,  five  factors  stand  in  the  way of  JDV’s  contention  that  the settlement agreement obliges CSI to transfer to it an undivided one-half share of the balance of the Shands Road land so they hold title to it as tenants in common equal shares.

[32]     First, the words “held undeveloped by the parties as joint owners simpliciter” do not, in my opinion, mean on their face that the land will be held as tenants in common in equal shares.  The phrases by which estates in land are held by more than one owner are so time-honoured and in such frequent use that they lie on the tip of the tongue of most, if not all, practising lawyers.  The phrase “as tenants in common in equal shares” could, and in my opinion almost certainly would, have been used by the lawyers who drafted the agreement had it been agreed that a tenancy in common was intended.  Indeed the phrase would have been used in the oral discussions and agreement that was recorded in writing and executed.  Further, the phrase in the agreement “as joint owners” is as capable of being construed to mean “as joint tenants”, as it is to meaning “as tenants in common in equal shares”, yet given the relationship of CSI and JDV as owners and developers of the land on an arms-length commercial basis it is inconceivable that a joint tenancy, with attendant rights of survivorship, would have been intended.

[33]   Secondly, the context in which this agreement was signed supports an interpretation of the words to mean that CSI and JDV would continue to both have ownership interests in the land, without changing the way that ownership rights are registered on the title. The context to which I refer is:

(a)     The relationship between the parties which I have noted.8

(b)The initial and continuing agreement of the parties prior to entering the settlement agreement that CSI alone would hold the legal estate in the land as registered proprietor, over a period of seven or eight years from

2002/3 to 2010.

(c)    The agreement was signed to settle a dispute in which a breakdown in the relationship of the parties was pleaded and partition orders were sought.  The pleaded reasons for seeking partition would, in my view, have caused the companies to reflect with great care on how the land would be held until sold to a third party (Russley Road) or sold to one or other of the companies, or partitioned (Shands Road).

[34]     Thirdly, the phrase “held undeveloped as joint owners simpliciter” is used in respect of both blocks, but the intended duration of holding the land differs, as do the parties’ intentions in relation to each of the blocks.  It seems the Russley Road land is either to be sold to CIAL, or held long term, unless another purchaser materialises. There is no intention recorded in the settlement agreement to partition it.   Shands Road, however, is to be dealt with entirely differently; plainly the parties agree to sever their relationship in respect of that land, either by one party buying out the other or by it being partitioned into separate blocks with new titles issued.  There does not seem to be any logical reason why the phrase used to describe the way the land would be held should be the same in each case, but only mean in relation to the Shands Road land that it should thenceforth be held as tenants in common in equal shares.

[35]     In this context I note that Mr Stewart’s evidence is that from the outset the

arrangement was that only the name of CSI would be on the title, and that continues

8 At [31].

to be the position now.  This evidence is not contradicted.  Whilst the thrust of the JDV case might be seen as a contradiction of this evidence, it was open to a representative of JDV to give evidence in reply to this, but that opportunity was not taken.     On  an  application  for  a  summary  judgment  this  lays  an  evidentiary foundation for this aspect of the defences relied on by CSI with which JDV has not chosen to take issue.

[36]     Fourthly, if the settlement agreement has the meaning contended for by JDV, a transfer to JDV as tenant in common in equal shares with CSI could have been effected pursuant to the agreement, and, presumably, promptly.  There was a need to pursue the possible sale to Foodstuffs which is referred to in the agreement.   A transfer to JDV would have placed Foodstuffs on notice that it was dealing with both companies.  There is no evidence from JDV why that step was not taken, nor any evidence that JDV attempted to have title transferred to it earlier than 2012: yet in the meantime JDV and CSI entered agreements which are completely at odds with agreement having been reached in the terms for which JDV now contends.  I have canvassed the three December 2010 agreements; neither the structure of the documentation entered for the sale to Foodstuffs (sequential agreements for sale and purchase) nor some of the detailed clauses in that documentation, as identified by Mr Brown, would have been necessary if an agreement had been made as JDV now says.  Further, in the development agreement descriptions of the parties would have been as tenants in common, but that is not the case.  These documents are, in my view, compelling evidence of the intention of the parties at the time they signed the settlement agreement.

[37]     Fifthly,  under  clause  30.2  of  the  agreement  for  sale  and  purchase  to Foodstuffs, CSI (which is the vendor) is prohibited from transferring, assigning or otherwise disposing of all or any part of its land until the subdivision under that agreement has been completed and settlement of the sale to Foodstuffs has been completed.  That is not due to occur until 10 days after issue of title for the land sold to Foodstuffs.   That will not occur until the subdivision of the land has been completed.  Mr Stewart, in an affidavit, said CSI wishes to complete those works and the requirements specified in the subdivision resource consent decisions issued for the Shands Road land.

[38]     Therefore, clause 30.2 of the agreement between CSI and Foodstuffs prevents CSI transferring a half share of the land to JDV as tenant in common, as JDV seeks. Although JDV is not a party to this agreement, its terms were negotiated between CSI and JDV, and in the CSI/JDV sale agreement, JDV expressly agrees to be bound by it and do all that is necessary to enable CSI to comply with it.  So it forms an integral part of the three agreements executed on the same day for the purpose of effecting the sale to Foodstuffs and recording agreement in relation to the provision of, and liability to pay for, development services required for the subdivision.

[39]     Notwithstanding the clear terms of clause 30.2, clause 30.3 of the agreement between CSI and Foodstuffs appears to allow CSI to transfer, assign or otherwise dispose of all or part of its land after a certain stage has been reached in the physical development of the land, and a deed of covenant has been executed at the instigation of CSI by the proposed transferee and Foodstuffs.  Essentially the thrust of the deed of covenant would be to require a transferee to comply with CSI’s obligations and not to further transfer the land to another party without a similar deed of covenant having been executed.  CSI’s obligation is to procure the execution of such a deed; the obligation to sign it rests on the new owner and on Foodstuffs.  Mr Rennie indicated JDV’s willingness to execute such a deed of assignment, but Mr Brown is correct in his submission that as Foodstuffs is not a party the Court cannot direct it to sign such a deed of covenant.   There is no evidence before me of this prospect having been raised with Foodstuffs, let alone of it agreeing to do so.  Therefore if the Court were to make the order sought by JDV, it would be doing so contrary to the contractual rights of Foodstuffs without its consent or, as far as I am aware, knowledge.

[40]     That position is plain from the wording of the Foodstuffs agreement and would have been in the knowledge of CSI and JDV at the time.  This is a further element of the subsequent conduct of the parties relevant to establishing their intention in executing the settlement agreement.

[41]     Two further points relied on by Mr Rennie can be discussed briefly.  First, in a letter from CSI’s solicitors to JDV’s solicitors sent on 16 December, four days before the documents giving effect to the sale to Foodstuffs and the development

services agreement were signed, CSI’s solicitors noted that the land “is now held effectively as tenants in common under the settlement agreement”.  In my view, that is a statement of the position as the solicitors saw it and, even if correct, is of little value in interpreting the settlement agreement, given the context in which the letter was sent: negotiation of acceptable terms of the three contracts executed four days later which, as discussed, acknowledge and proceed upon a completely different basis.

[42]    Secondly, the development services agreement provides that if there is any inconsistency between that agreement and either the declaration of trust or the settlement agreement, those agreements prevail over the development services agreement.  The clause does not say, however, that the declaration of trust prevails over the settlement agreement, and it is the settlement agreement which is in issue in the first cause of action in this proceeding.  This clause in the development services agreement does not therefore assist JDV.

[43]     For  these  reasons,  JDV  has  not  established  that  CSI  does  not  have  an arguable defence to its claim based on the settlement agreement.

[44]     The dispute in this case stems from the drafting of the settlement agreement and the documents executed in December 2010.  Before turning to the second cause of action I make the following observations.  The settlement agreement refers to the land being held “as joint owners simpliciter” and to it being “partitioned”.  Both of these overlook the way the land was then (and is) owned.  CSI owns the entire legal estate and an undivided half share of the equitable estate.  JDV owns the other half share of the equitable estate.  Its entitlement as beneficiary is to receive an undivided half share of the legal estate.  That is achieved by distributing the trust, not by partitioning.  A partition occurs when joint tenants or tenants in common divide land and take separate parts.  The phraseology in the settlement agreement may have stemmed from the way the settled proceeding was framed: an order for partition was sought under s 339(1)(b) Property Law Act 2007.  That section was not applicable, as it applies to property of co-owners, defined in s 4 to be joint tenants or tenants in common.   The remedy which CSI wanted might better have been defined as distribution of the trust on terms reflecting the respective interests of the companies

in the land, CSI as half owner outright, as trustee for JDV of the other half, and JDV

as beneficiary of that trust obligation.

[45]     Against that background it is easier to see how the settlement agreement came to be phrased.  There appears to have been a less than clear understanding of precisely what the legal position was, and the correct (and only) way from that position to the desired outcome.  Clause 4 must be interpreted, in my view, in that context.  The agreement to “partition” is an agreement to distribute the part of the Shands Road land held for JDV to that company, with the balance, owned from the outset and throughout by CSI as its own property, retained by it.  And the reference to the parties holding all the Shands Road land as “joint owners simpliciter” is not a sufficiently clear term to denote an intention to distribute the trust as to an undivided half share to JDV in the meantime.

[46]     The same conceptual approach is perpetuated in the description of JDV’s share of the land in the transfer to CSI: a half share as tenant in common.  In fact it had no legal estate to transfer.   It  had  an  equitable estate which  it could have assigned (for the stated consideration) to CSI, by deed.

[47]     These observations provide context for consideration of the second cause of action.

Is JDV entitled to be registered on the title to the balance of the Shands Road land by termination of the trust?

[48]    The second cause of action is headed “Termination of Trust (the rule in Saunders v Vautier)”.  JDV pleads that CSI holds upon trust an undivided one-half share  of  the  balance  land  for  the  benefit  of  JDV.    It  then  pleads  that  as  sole beneficiary of the trust, it wishes to terminate the trust of that undivided one-half share of the Shands Road land and take legal ownership of it.  On that basis it seeks an order that CSI cause JDV and CSI to be registered as tenants in common in equal shares.

[49]     Clause 2 of the trust deed provides:

CSI doth hereby declare that henceforth it will accordingly stand possessed of the said agreement and a one-half interest in the land described in the Schedule hereto created by such agreement and of all moneys from time to time paid to it by JVC for the purpose of meeting the obligations of the said agreement and any other property hereafter acquired by it for JVC in trust for JVC as to a one-half share and will on being so required by JVC transfer set over and assign to JVC or as JVC shall direct a one-half share of such property acquired by it and held by it as trustee pursuant to this deed.

JVC is the acronym applied in that document to JDV.

[50]     JDV does not plead that a demand has been made to CSI to “transfer set-over and assign to [JDV] or as [JDV] shall direct a one-half share of [the property]” in terms of its right under the trust deed.  On the face of the trust deed, were it to stand on its own, an obligation on the part of CSI to do so is plain.  Two letters sent by JDV’s solicitors just before this proceeding was issued asked whether CSI would oppose the relief now sought, which interpreted liberally, might be seen as such a requirement.

[51]     However, since the trust was executed JDV has taken steps which CSI says impinges on that right, first by executing the settlement agreement and secondly by being party to the drafting and execution of the contracts of 20 December 2010 and assuming the obligations imposed on it by them.  As I have explained, my view is that the settlement agreement is not to be interpreted as requiring the title to be held by CSI and JDV as tenants in common.  The opportunity for that to occur certainly existed at the time of the settlement agreement because JDV’s right to call for title under the deed of trust existed at that time, but rather than taking that course JDV entered an agreement which, as I have found, does not have the effect of bringing that about, and is inconsistent with this right.  Further, two years later JDV executed the December 2010 agreements which, as I have said, are inconsistent with the proposition that the settlement agreement required the title to be transferred to the companies as tenants in common; equally those agreements are inconsistent with JDV calling for title pursuant to the trust deed.

[52]     In the 1572 proceeding, set down for trial in July, CSI seeks partition of the land, pursuant to the settlement agreement.  The pleadings show that JDV does not oppose that course but raises related issues including development costs.  Partition of

the land, given that JDV is not on the title, is a misnomer;9 transfer of part of the land to JDV would be distribution of that land pursuant to the original trust.  But the intention to divide the land is clear.

[53]     Thus in the present proceeding JDV seeks distribution of the trust (as to one asset,  a  half  interest  in  the  Shands  Road  land)  and  in  the  1572  proceeding distribution of the same asset is sought by CSI, unopposed by JDV.   The sole difference  is  that  JDV wants,  now,  distribution  so  it  receives  title  as  tenant  in common of an equal but undivided share, and in the 1572 proceeding it will accept partial distribution of the trust in the form of a divided part of the land into its sole name.  This serves to underscore how manifestly inappropriate it is to seek the remedies JDV seeks in this proceeding, separately from the 1572 proceeding.

[54]     If this application is seen as an attempt to terminate the trust (as pleaded), it is inappropriate to enter summary judgment having that effect when a trial to determine the basis of partition – or, more accurately, distribution of the trust asset - is pending. If it is seen as an application to distribute the trust so the trust assets are held as tenants in common, it is also inappropriate to enter summary judgment when the

1572 proceeding will shortly be tried.  In that proceeding the “partition” order is sought pursuant to the settlement agreement.  As a matter of logic the settlement agreement is an agreement by which the parties have determined how JDV’s interest in the trust is to be held and dealt with.  So far as the Shands Road land is concerned, on the expiration of the consecutive option periods the land held on trust for JDV is to be ascertained and transferred to JDV.

[55]     On  this  application  it  is  unnecessary  to  decide  whether  the  settlement agreement is a variation of the terms of the trust, a supplementary agreement in relation to distribution of the trust, a waiver of JDV’s right to call for distribution of the trust asset until the title of the trust asset is issued, or the foundation of an estoppel preventing JDV calling for registration on the title without subdivision of

the land.  However it is classified, it binds the parties to proceed in a certain way.  It

9      See [44]-[46] above; G W Hinde et al Hinde McMorland & Sim Land Law in New Zealand

(looseleaf ed, LexisNexis, Wellington) at chapter 4; and ss 339-343 Property Law Act 2007.

.

is at least arguable that on any of these bases, this provides a defence to JDV’s

application for summary judgment.

Outcome

[56]     For the foregoing reasons I am satisfied that CSI has arguable defences to the application for summary judgment, and I dismiss the application.

[57]     I direct that this proceeding is consolidated with proceeding CIV-2012-409-

1572.

[58]     I reserve leave to both companies to apply for further directions in relation to steps that may be required in the period leading up to trial of proceeding 1572, should counsel not be able to agree.

[59]     Counsel asked that if the application were dismissed, costs be reserved and the parties given an opportunity to file submissions.  Submissions on costs may be made  by  memoranda  not  exceeding  three  pages  in  length,  by  CSI  within  five working days, and in reply by JDV within five working days.   I will then make a

decision on costs on the basis of those memoranda.

J G Matthews

Associate Judge

Solicitors:

Rhodes & Co , P. O. Box 13 444, Christchurch. Email: [email protected]/[email protected]
Arthur Watson Savage (AWS Legal, N Elder), P O Box 1207, Invercargill.

Counsel: B W F Brown QC. Email: [email protected] / [email protected]