Kairmore Construction Limited (in liquidation) v Wichman
[2016] NZHC 936
•10 May 2016
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2015-409-000834 [2016] NZHC 936
BETWEEN KAIRMORE CONSTRUCTION
LIMITED (in liquidation) Plaintiff
AND
EXHAM PETER WICHMAN First Defendant
AND
ODESSA MURIEL JEFFERIES Second Defendant
Hearing: 5 May 2016 Appearances:
S D Munro for Plaintiff
Judgment:
10 May 2016
JUDGMENT OF DUNNINGHAM J
[1] The plaintiff sues the defendants upon the basis of a resulting trust. It claims that three properties, two of which are in the name of the first defendant and one of which is in the name of the second defendant, were paid for in full by the plaintiff company. As the plaintiff company is now in liquidation, the liquidators seek to have the properties transferred back to the plaintiff for the benefit of creditors.
[2] The specific orders sought are:
(a) a declaration that each defendant holds the particular properties on trust as a bare trustee for the plaintiff;
(b)an order that each defendant sign the relevant conveyancing document so that the particular properties can be transferred to the plaintiff;
KAIRMORE CONSTRUCTION LIMITED (in liq) v WICHMAN [2016] NZHC 936 [10 May 2016]
(c) an order under s 52 of the Trustee Act 1956 that the particular properties are to vest in the plaintiff in the event the defendants do not comply with the second order.
Background
[3] The plaintiff company was in the business of recruitment but, on
11 December 2004 the Court placed the company into liquidation and appointed liquidators following an application made by the Inland Revenue Department following the plaintiff’s failure to pay PAYE tax over a two year period prior to liquidation.
[4] The first defendant is a director of the company and the second defendant is the former wife of the first defendant.
[5] The plaintiff claims, and the defendants have not disputed, that the
company’s funds have been used to purchase the following three properties:
(a) Flat 2, 592 Pages Road, Bexley, Christchurch, more specifically described as Flat 2 DP 24663 on Lot 18 DP 21618 with unique identifier CB12F/98 (the first property);
(b)Flat 1, 592 Pages Road, Bexley, Christchurch, more specifically described as Flat 1 DP 24663 on Lot 18 DP 21618 with unique identifier CB12B/654 (the second property); and
(c) 2/586 Pages Road, Bexley, Christchurch, more specifically described as Lot 21 DP 21618 and Flat 2 DP 33286 on Certificate of Title CB12K/305 (the third property).
[6] The first defendant is named as the registered proprietor of the first and second properties. The second defendant is named as the registered proprietor of the third property.
[7] The plaintiff’s statement of claim alleges that the first defendant holds the first property and second property on a resulting trust for the benefit of the plaintiff, and that the second defendant holds the third property on resulting trust for the benefit of the plaintiff.
Is the claim that the properties are held on resulting trust made out?
[8] A resulting trust arises because of a presumption of law in favour of the settlor. Where A (the transferor) pays for the property and transfers it into the name of B (the transferee), who has given no valuable consideration, B holds the property for A on a resulting trust. Equity presumes, in the absence of a contrary intention, that A who paid for the property, intended to retain beneficial ownership.1
[9] To support the plaintiff’s claim, it has filed evidence from Malcolm Grant Hollis, one of the joint liquidators of the company and from Ms Lisa Paton, an employee of Price Waterhouse Coopers, who was working alongside Mr Hollis, and assisting him in the liquidation.
[10] The relevant evidence is that agreements were signed on 20 July 2014 to purchase the first and second properties. The deposit payable under those agreements was $5,000 for each agreement, payable to the Public Trust. Two $5,000 cheques were issued to the Public Trust from the plaintiff’s bank account on
18 July 2014.
[11] The purchase price for each of the first and second properties was $40,000. On 29 July 2014 a $35,000 cheque, drawn from the plaintiff’s bank account was presented to the first defendant’s solicitor, Linwood Law. On 4 August 2014,
$1,074.68 was transferred from the plaintiff’s bank account to Linwood Law, and which exactly matched the amount that was required to settle the purchase of the first property as shown on the settlement statement dated 7 August 2014.
[12] On 18 August 2014, a $35,000 cheque was drawn from the plaintiff’s bank
account and presented to Linwood Law and a further $1,035.65 was transferred from
1 Jessica Palmer “Resulting Trusts” in Andrew Butler (ed) Equity and Trusts in New Zealand
(2nd ed, Thomson Reuters, Wellington, 2009) at [12.3.1].
the plaintiff’s bank account to Linwood Law on 20 August 2014. Again, it is clear from the settlement statement dated 22 August 2014 that this was the full amount that was required to settle the purchase of the second property. The first defendant has also admitted to the liquidators of the plaintiff, that the plaintiff’s funds were used by him to purchase the first and second properties.
[13] The liquidators’ investigations show that an agreement for sale and purchase in relation to the third property was reached on 28 October 2014. The sale price for the third property was $46,000. On the same day that agreement was entered into, there were two cash withdrawals made from the plaintiff’s account, one in the sum of $26,000 and the other in the sum of $20,000.
[14] On 13 November 2014, the purchase of the third property settled and the title was transferred to the second defendant.
[15] The plaintiff says that this evidence is sufficient to invoke the presumption of a resulting trust in favour of the plaintiff in respect of all three properties. It acknowledges that the presumption of a resulting trust can be rebutted in a number of ways. For example:
(a) evidence of an intention to the contrary to the presumption;
(b) the application of the counter presumption of advancement; and
(c) by establishing that the trust would, if it existed, effect a fraudulent or illegal purpose.
[16] As the first and second defendants have not filed a statement of defence, nor any evidence in opposition to the plaintiff’s claim, the plaintiff says there is no evidence which would enable any of the above presumptions to be rebutted by the first and second defendants. Indeed, in relation to the first and second properties, the first defendant has advised the liquidator that the two properties which were purchased using the company’s funds and then put into his name “belong to the company and should be in the company’s name”.
[17] In relation to the third property, it was responsibly pointed out that the second defendant has communicated to IRD staff that she purchased that property with a loan from the first defendant. However, she has acknowledged that there is no loan agreement and she has taken no steps to defend or dispute the plaintiff’s claim or to provide any evidence to corroborate the suggestion of a loan.
[18] In the absence of there being any evidence to support this assertion, I consider I am able to draw the inference that there was not in fact an agreement for a loan in this case. I therefore accept that the evidence before the Court is sufficient to demonstrate that the first and second defendants are bare trustees for the plaintiff as a consequence of the resulting trusts. That means they have a duty to the plaintiff, as beneficiary, to convey the trust property to the plaintiff at its direction.
The need for orders to transfer the property
[19] The liquidators have given evidence that they have provided authority and instruction forms to the first and second defendants on 5 October 2015 and requested that they sign those so that the properties could be transferred to the plaintiff. The first and second defendants have failed to respond to the liquidators and have not returned the authority and instruction forms.
[20] In these circumstances, the plaintiff seeks, first, orders directing that:
(a) the first defendant sign an authority and instruction form within
28 days of judgment so that the first property and second property can be transferred to the plaintiff; and
(b) the second defendant sign an authority and instruction form within
28 days of judgment so that the third property can be transferred to the plaintiff.
[21] The plaintiff has also sought a “back up” order under s 52 of the Trustee Act
1956 in the event that the above orders are not complied with. Section 52(1)(g)
provides:
…
(g) Where a trustee jointly or solely entitled to or possessed of any interest in land, or entitled to a contingent right therein, has been required, by or on behalf of a person entitled to require a conveyance of the land or interest or a release of the right, to convey the land or interest or to release the right, and has wilfully refused or neglected to convey the land or interest or release the right for 28 days after the date of the requirement:
…
Consequential order
[22] Given my conclusion that the evidence demonstrates that the plaintiff company advanced the funds for the purchase of all three properties and that there is no credible evidence to rebut the presumption of a resulting trust, I am satisfied the declarations sought by the plaintiff that the properties are held by the defendants on trust should be made.
[23] That finding makes it appropriate to direct both the first and second defendants to sign authority and instruction forms within 28 days of the judgment so that the three properties can be transferred to the plaintiff.
[24] Furthermore, given the evidence of their refusal to respond to the plaintiff’s request to date, I consider it is appropriate that, as a “back-up” to that order, orders are made under s 52 of the Trustee Act confirming that the relevant properties vest in the plaintiff from the 29th day after judgment in the event that the defendants, or either one of them, do not comply with the previous order.
Costs
[25] The applicant has sought costs in the sum of $7,805 together with $1,607 for disbursements. It is appropriate to award costs as the proceedings were necessitated by the defendants’ failure to transfer the properties when requested to do so by the plaintiff. These costs are calculated on a 2B basis and I see no reason to depart from making an award of costs on that basis. I also consider the disbursements which are sought to be properly claimable. The defendants are to be jointly and severally liable for that costs award.
Summary of orders made
[26] As a consequence of my findings I make the following orders as sought by the plaintiff.
Against the first defendant
(a) the Court makes a declaration that the first defendant holds Flat 2,
592 Pages Road, Bexley, Christchurch more specifically described at Flat 2 DP 24663 on Lot 18 on DP 21618 with unique identifier CB12F/98 (the first property) and Flat 1,592 Pages Road, Bexley, Christchurch more specifically described as Flat 1 DP 24663 on Lot
18 DP 21618 with unique identifier CB 12B/654 (the second property)
on trust as bare trustee for the plaintiff;
(b)the first defendant is directed to sign an Authority and Instruction form within 28 days of judgment so that the first property and the second property can be transferred to the plaintiff;
(c) an order is made under s 52 of the Trustee Act 1956 that the first property and the second property vest in the plaintiff on the 29th day after judgment, in the event that the first defendant does not comply with the order at (b) above;
(d)the first defendant is jointly and severally liable with the second defendant to pay the plaintiff costs in the sum of $7,805.00 together with $1,607.00 for disbursements.
Against the second defendant
(e) the Court makes a declaration that the second defendant holds
2/586 Pages Road, Bexley, Christchurch, more specifically described as Lot 21 DP 21618 and Flat 2 DP 33286 on Certificate of Title CB 12K/305 (the third property) on trust as bare trustee for the plaintiff;
(f) the second defendant is directed to sign an Authority and Instruction form within 28 days of judgment so that the third property can be transferred to the plaintiff;
(g)an order is made under s 52 of the Trustee Act 1956 that the third property vest in the plaintiff on the 29th day after judgment, in the event that the second defendant does not comply with the order at (f) above;
(h)the second defendant is jointly and severally liable with the first defendant to pay the plaintiff costs in the sum of $7,805.00 together with $1,607.00 for disbursements.
Dunningham J
Solicitors:
Anderson Lloyd, Christchurch
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