Kereopa v Brunsha Limited

[2023] NZHC 3753

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2023-419-060

[2023] NZHC 3753

UNDER

Section 143 of the Land Transfer Act 2017

IN THE MATTER OF

an application to sustain a caveat

BETWEEN

RANGIMONEHU KEREOPA

Applicant

AND

BRUNSHA LIMITED

Respondent

Hearing:	29 November 2023
Appearances:	No appearance for Applicant J Taylor for Respondent
Judgment:	18 December 2023

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 18 December 2023 at 3.00 pm.

Pursuant to Rule 11.5 of the High Court Rules.

…………………..

Registrar/Deputy Registrar

Solicitors:

Bylatus Legal, Hamilton

KEREOPA v BRUNSHA LTD [2023] NZHC 3753 [18 December 2023]

Introduction

[1]    The applicant, Rangimonehu Kereopa, seeks an order sustaining her caveat registered against the title to 669 Wainui Road, Raglan (the Wainui Road property), owned by Brunsha Limited (Brunsha), a company associated with her son,

Dennis Kereopa, and his wife Heather Kereopa.1

[2]    Rangimonehu maintains a strong connection to the Wainui Road property. It was originally Māori land. Rangimonehu and her husband Piripi Kereopa, now deceased, were the first registered owners of the Wainui Road property when it became general land. They remained the registered owners until 2002.

[3]    In 1999, Rangimonehu and Piripi used the Wainui Road property as security for a bank loan to their daughter, Te Mania Kereopa, to enable Te Mania to purchase a property at 39B Government Road, Raglan (the Government Road property).

[4]    In 2002, Rangimonehu and Piripi were in financial difficulty. Rangimonehu says that she agreed to transfer the Wainui Road property to Dennis and Heather, based on their agreement that they would hold the property for the benefit of the wider Kereopa whānau, including all of Rangimonehu and Piripi’s children.

[5]In 2002, Rangimonehu and Piripi entered into transactions which resulted in:

(a)the Government Road property being transferred to them; and

(b)the Wainui Road property being transferred to Dennis, Heather and their friend, William Waters.

[6]    In 2008, Dennis, Heather and Mr Waters transferred the Wainui Road property to Brunsha. Dennis and Heather are directors and shareholders of Brunsha. Rangimonehu says that in about March 2022, she discovered that the Wainui Road property was on the market. That led her to instruct a lawyer, resulting in the caveat. Rangimonehu claims to be the beneficiary of a cestui que trust.

1      For convenience, I will refer to members of the Kereopa whānau by their first names.

[7]Rangimonehu’s application to sustain her caveat gives rise to two issues:

(a)Does Rangimonehu hold an interest in the land sufficient to support her caveat?

(b)Does the caveat contain an adequate description of the nature of the interest claimed by Rangimonehu and how that interest is derived from Brunsha?

Does Rangimonehu hold an interest in the land sufficient to support her caveat?

Background

[8]    Rangimonehu has limited recall of the relevant events of 2002. She cannot recall exactly what documents were signed at the time. Rangimonehu says that Dennis and Heather’s solicitors, TFG Law, acted for all involved, and that she and Piripi did what they were asked to do by Dennis and Heather.

[9]    Rangimonehu’s solicitors have recently obtained a copy of TFG Law’s file on the transfer of the Government Road property, which sheds some light on the transactions in 2002. TFG Law’s file on the transfer of the Wainui Road property is not available.

[10]   On 12 May 2002, Tina McLennan of TFG Law sent the following email to another solicitor of TFG Law, Stuart Gloyn:

You are acting (or RG) for Mr and Mrs Kereopa. Their son and [daughter-in- law] are purchasing their property for them. They have got behind in rates and other payments and are unable to afford all of their payments at present. The bank [has] issued them with a notice to pay their rates. Heather and Dennis are purchasing the property in order that it does not go to mortgagee sale and go to a third party as no other family members are in a position to help.

The bank has their property as security for their daughter’s mortgage over another property and will not let their security go. Accordingly the parents are going to purchase that property with the sale funds. The parents are currently living in a shed on the land without running water and toilet facilities as they have not been able to keep up with payments and accordingly have had to rent out the property which is on the land.

Heather and Dennis can only raise from the bank $220,000.00. The property has been valued at approx $260,000 to $270,000.00. There will be some gifting to be done from the parents to their son and the price will have to change from the current amount on the agreement. Hence the agreement is really their only option so the land is not lost to the family. It was Māori Land previously.

This is just a background for you so you know when you have to communicate with the parents.

[11]   The transfer of the Wainui Road property from Rangimonehu and Piripi to Dennis, Heather and Mr Waters records the consideration as $265,000. A copy of an agreement for sale and purchase is not in evidence.

[12]   The agreement for sale and purchase of the Government Road property records a purchase price of $122,500. This is confirmed in the transfer. The settlement statement for Government Road confirms that TFG Law acted for vendor and purchaser but records a purchase price of $123,500.

[13]   A fax dated 17 May 2002 from the National Bank to TFG Law confirms that the bank was to advance $220,000 to Dennis and Heather on settlement, to be secured against the Wainui Road property.

[14]   A fax dated 28 June 2002 from the National Bank to TFG Law confirms that the bank was to receive $123,201.62 on settlement, to release its mortgage over the Government Road property.

[15]   A fax dated 1 July 2002 from the National Bank to TFG Law confirms that the bank was to receive $94,410.97 on settlement, to release its mortgage over the Wainui Road property.

[16]   It appears that the advance of $220,000 to Dennis and Heather was used to discharge the National Bank mortgages of $94,410.97 and $123,201.62. Rangimonehu says that no funds were received by her and Piripi on settlement.

[17]   There is a deed of trust dated 27 June 2002, which records Rangimonehu and Piripi as the settlors of the “Secret Legends Trust”. The trustees are Dennis, Heather and Mr Waters. This appears to be a family trust for the benefit of Dennis and Heather

and their children and grandchildren, on conventional terms. Rangimonehu and her other children are not beneficiaries.

[18]   There is no evidence that confirms that Dennis, Heather and Mr Waters received the Wainui Road Property in their capacity as trustees of the Secret Legends Trust.

[19]   In his affidavit, Dennis expresses his view that the events relied on by Rangimonehu as giving rise to a trust occurred well before Brunsha was incorporated in 2008, but otherwise he does not take any issue with Rangimonehu’s account of events. It is therefore worth repeating the relevant parts of Rangimonehu’s evidence in full:

21.Heather told us that her and Dennis needed to take over the ownership of the Wainui Road property and that Piripi and I needed to go into someone’s office and sign some papers. It wasn’t until sometime later that Dennis informed me that Piripi and I owned Government Road.

22.My understanding of what we were doing was transferring the Wainui Road property to Heather and Dennis on the basis that it was for the Kereopa family, letting our descendants from the Kereopa name know that this is their turangawaewae — upholding the tikanga and the kaitiakitanga of their whenua. In other words, the Wainui Road property  would  forever  be  kept  within  the  wider  Kereopa  family — that is: Piripi and I, my children and their children and grandchildren, and so on. Piripi and I made it very clear to Dennis and Heather that the Wainui Property was for our Kereopa Family — it was not to be sold to anyone else. They understood and respected our wishes.

23.Dennis and Heather arranged for Piripi and I to go to an office in Hamilton (which I now believe to be Ray White Real Estate’s office in Victoria Street, Hamilton) to sign the necessary documents. I recall that five of us went to the offices — myself, Piripi, Dennis, Heather and William Waters. (William is a friend of Dennis and Heather). The meeting took place in the evening — outside of work hours.

24.We trusted Dennis and Heather and their lawyers do what was necessary to keep the Wainui Road property in the family.

25.I do not recall who we met with at the Hamilton office, but I have seen some documents which were witnessed by Tina McLennan so I gather it must have been Tina who we met.

26.Heather arranged the meeting and instructed her lawyer (who I now know is Tina McLennan) to carry out what we thought were our wishes.

27.Piripi and I signed the documents that Heather and Dennis asked us to sign. I do not recall exactly what we signed at the time — I thought it was just the documents necessary to transfer the Wainui Property to Heather and Dennis so they could hold it for the Kereopa Family. We did not get independent legal advice — Heather and Dennis’ lawyers prepared everything and we did as we were asked by Heather and Dennis. We went on the faith that Dennis and Heather were doing all of this to help us to ensure that the Wainui Road Property would remain in the family.

[20]   The record of title for the Wainui Road property records the transfer from Dennis, Heather and Mr Waters to Brunsha in 2008. There is no other evidence before the Court relevant to the transfer, or explaining the transaction. Dennis has elected not to give evidence on those matters.

Legal principles

[21]   The legal principles applicable to applications to sustain caveats were confirmed by the Court of Appeal in Philpott v Noble Investments Ltd:2

(a)The onus is on the applicants to demonstrate that they hold an interest in the land that is sufficient to support the caveat, but they need not establish that definitively;

(b)It is enough if the applicants put forward 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 is no valid ground for lodging it in the first place, or because such a ground no longer exists; and

(d)When an applicant has discharged the burden upon it, the Court retains discretion to remove the caveat which it exercises on a cautious basis. Before it does so the Court must be satisfied that the caveator’s legitimate interest would not be prejudiced by removal.

[22]   An institutional constructive trust (or orthodox constructive trust) is capable of sustaining a caveatable interest.3 That is because, unlike a remedial constructive trust, an institutional constructive trust arises upon the happening of events which bring it

2      Philpott v Noble Investments Ltd [2015] NZCA 342 at [26] (footnotes omitted).

3      Trustees Executors Ltd v Eden Holdings 2010 Ltd [2010] NZCA 626.

into being,4 and as such, amounts to the required present, as opposed to potential, interest in land.5

[23]   In Jeb Management Ltd v Grubz United Whanau Trust,6 this Court held that where a claim to a constructive trust is based on an allegation that the registered owner is liable to the caveator in knowing receipt, the claim will only support a caveatable interest if it is reasonably arguable that the registered owner has committed fraud to the land transfer standard.7 It would be inconsistent with indefeasibility of title to allow an in personam claim to succeed merely on the basis of liability in knowing receipt, since the knowledge requirement for such liability is less than that of land transfer fraud.8

[24]   The Land Transfer Act 2017 (LTA) defines fraud as “forgery or other dishonest conduct by the registered owner or the registered owner’s agent in acquiring a registered estate or interest in land”.9 If the alleged fraud is against an owner of an unregistered interest, the registered owner or registered owner’s agent must have had actual knowledge of, or have been wilfully blind to, the existence of the unregistered interest; and intended, at the time of registration, that the registration would defeat the unregistered interest.10 Constructive fraud will not suffice.11 A finding of fraud is necessarily fact-dependent.12

Discussion

[25]   In my view, it is arguable that from 2002, Dennis, Heather and Mr Waters held the Wainui Road property subject to a beneficial interest in favour of Rangimonehu, under an institutional constructive trust. The transfer of the Wainui Road property in 2002 can potentially be impugned in equity, as an unconscionable transaction, for

4      Fortex Group Ltd (in rec and liq) v MacIntosh [1998] 3 NZLR 171 (CA) at 172–173.

5      Philpott v NZI Bank Ltd (1989) 1 NZ ConvC 190,246 (CA) at 190,248.

6      Jeb Management Ltd v Grubz United Whanau Trust [2015] NZHC 157, (2015) 15 NZCPR 705.

7 At [46].

8 At [44].

9      Section 6(1).

10     Section 6(2)(b).

11     Section 6(4).

12     Waimiha Sawmilling Co Ltd (in liq) v Waione Timber Co Ltd [1926] AC 101 (PC) at 106–107.

undue influence exerted over Rangimonehu by Dennis and Heather, or on the basis of promissory estoppel.

[26]   Therefore, it is arguable that the transfer of the property from Dennis, Heather and Mr Waters to Brunsha in 2008 was in breach of their obligations as trustees. Notably, Brunsha did not argue that Rangimonehu did not acquire a beneficial interest in 2002.

[27]   Brunsha submitted that it obtained an indefeasible title in 2008 and that there is no evidential basis for a finding of the intention required for LTA fraud. I reject that submission. Both Dennis and Heather are directors of Brunsha, and their actual knowledge of their own breaches of trust is imputed to Brunsha.

[28]   It is arguable that Brunsha intended that the registration of the transfer in 2008 would defeat Rangimonehu’s interest as beneficiary of a constructive trust, amounting to LTA fraud. Rangimonehu’s claimed interest is sufficient to sustain the caveat.

Does the caveat contain an adequate description of the nature of the interest claimed by Rangimonehu and how that interest is derived from Brunsha?

The interest stated in Rangimonehu’s caveat

[29]Rangimonehu’s caveat states the following interest:

The abovenamed caveator claims a beneficial interest in the land contained in the above record of title as cestui que trust of which the registered owner, Brunsha Limited is trustee.

Legal principles

[30]   The information required to be included in a caveat is prescribed by the Land Transfer Regulations 2018. Relevantly, a caveat must contain “[a] description of the nature of the estate or interest claimed by the caveator” — which must be stated with “sufficient certainty” — and “[d]etails of how the estate or interest claimed is derived from the registered owner”.13

13     Schedule 2. The requirements mirror those previously included in s 137(2) of the Land Transfer Act 1952.

[31]   In Zhong v Wang,14 the Court of Appeal was required to consider whether two caveats, with identical wording to the caveat at issue in this proceeding, were sufficiently detailed to comply with the prescribed formalities. In that case, the caveator claimed an interest in land as a beneficiary of a constructive trust, with the registered owner of the land as the alleged trustee. The Court endorsed a  line of  New Zealand cases favouring a liberal approach to caveat formalities and emphasised the following principle as a guiding test:15

What is important is that the registered proprietor and the Court understand the nature of the interest claimed and the basis of that claim.

[32]   In terms of the requirement that the interest claimed be stated with sufficient certainty, the Court held that, as a general rule, it would be enough to “identify the form of trust alleged”.16 The Court commented that it would have been preferrable for the caveator to have referred expressly in his caveats to a resulting or constructive trust but concluded that on the facts of the case the registered owners could have had no doubt that an interest of the type to which s 137(1)(a) of the Land Transfer Act 1592 (now s 138(1)(a) of the LTA) referred, was claimed.17

[33]   Turning to the requirement that a caveat describes how the interest claimed is derived from the registered owner, the Court applied its guiding test and held that the language of the caveats established a clear link between the named trustee and the registered owners, of which the trustee was one.18 The caveats also made clear that the interest was derived from the caveator’s involvement with the named trustee.19 The Court considered that the nature of that involvement would have been evident to the registered owners.20

14     Zhong v Wang (2006) 7 NZCPR 488 (CA).

15 At [53].

16 At [54].

17 At [54].

18 At [55].

19 At [55].

20 At [55].

Discussion

[34]   The interest of a cestui que trust claimed by Rangimonehu is sufficiently stated in the caveat, as it was in Zhong v Wang.

[35]   Regarding derivation of the interest from Brunsha, the words used in the caveat to describe the interest do not expressly record how Brunsha came to be trustee for Rangimonehu. The caveat simply describes Brunsha as the trustee.

[36]   However, Dennis and Heather, in their capacities as directors of Brunsha, would have understood that the claimed interest arose from the 2002 transactions and Brunsha’s acquisition of title with actual knowledge of those transactions. Brunsha, by its directors Dennis and Heather, could have had no doubt about what was claimed. The link to Brunsha was self-evident.

[37]   In the circumstances, the wording of the caveat is sufficient to provide the registered owner with an understanding of the nature of the interest claimed and the basis of that claim against the registered owner.

Result

[38]   I am satisfied that Rangimonehu has established grounds to sustain her caveat. This is an appropriate case for the Court to sustain the caveat on condition that Rangimonehu commence and pursue a substantive proceeding to establish her claim.

[39]   I order caveat 12420793.1 registered against record of title identifier SA69A/668, being the property known as 669 Wainui Road, Raglan, shall not lapse pending further order of the Court, and on the following conditions:

(a)the applicant shall file a substantive proceeding to establish her claim to a beneficial interest in the property within 30 working days of this judgment; and

(b)the applicant shall prosecute the substantive proceeding diligently.

[40]   Leave is granted to the respondent to apply for an order that the caveat shall lapse if the applicant fails to comply with the conditions.

[41]   Regarding costs, my preliminary view is that costs should follow the event. Rangimonehu’s application and supporting affidavit were prepared and filed by her solicitors, who subsequently withdrew. Any claim for costs must be limited to step 37, which would result in an award of costs of $4,780 together with disbursements.

[42]   The respondent may file and serve submissions on costs by 26 January 2024. I will determine costs on the papers after that date.

Associate Judge Brittain