Klimenko v Klimenko
[2025] NZHC 271
•25 February 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-2362
[2025] NZHC 271
BETWEEN ANDREI KLIMENKO
Plaintiff/Respondent
AND
ANTON KLIMENKO
and
ANNA GONCHARENKODefendants/Applicants
Hearing: 16 December 2024 Appearances:
Penelope Stevenson/Serge Roud for the Plaintiff/Respondent Defendants/Applicants are self-represented
Judgment:
25 February 2025
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
[Defendants’ application to lapse caveats]
This judgment was delivered by me on 25 February 2025 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
Solicitors:
Loughlin McGuire (S Roud), Auckland, for the Plaintiff/Respondent
Copy for:
Penelope Stevenson, Barrister, Foundry Chambers, Auckland, for the Plaintiff/Respondent Anton Klimenko and Anna Goncharenko, Auckland, Defendants/Applicants
KLIMENKO v KLIMENKO [2025] NZHC 271 [25 February 2025]
TABLE OF CONTENTS
Paragraph
Introduction [1]
Background [2]
Defendants’ application that the caveat should lapse [3]
Caveated properties [4]
Legal principles [6]
Anton and Anna’s submissions [12]
The defendants say [13]
Financial hardship [13]
No reasonably arguable case of entitlement to or
beneficial interest in the caveated properties [16]No valid grounds for lodging the caveats [21]
Disputed questions of fact [23]
Separation [27]
Andrei’s opposition [32]
Analysis [33]
Hardship [35]
Result [39]
Exercise of residual discretion [40]
Orders [46]
Introduction
[1] Anton Klimenko (Anton) and Anna Goncharenko (Anna) (together, the defendants) apply for orders that caveat 12110027.1 and caveat 12110510.1 (the caveats) lodged by Andrei Klimenko (Andrei)1 against six properties (Caveated Properties) registered in their names are removed.
Background
[2] The background to the substantive proceeding is set out in Associate Judge Brittain’s judgment of 27 November 2023:2
[1] The plaintiff, Andrei Klimenko, is the father of the first named defendant, Anton Klimenko. The second named defendant, Anna Goncharenko, is Anton’s de facto partner.
[2] Andrei lives in Russia. Anton and Anna live in New Zealand. In 2010, a bank account was opened in New Zealand in the joint names of Andrei and Anton. Between April 2011 and October 2018, Andrei deposited a total of NZD 1,370,713 into the account. Anton had control of the account. He used the funds, at least in part, to purchase residential property in New Zealand, tools and building materials, and a Landcruiser vehicle.
[3] Andrei says that, by agreement, Anton was to use the funds in the account to purchase residential properties in New Zealand for Andrei’s benefit. Anton says that the funds were an unconditional gift to him, and he was free to use the funds for his own benefit as he saw fit.
[4] The first property purchased by Anton was 1 Aberley Road in Albany. It is agreed that funds from the account were used to purchase that property. Since then, Anton, either alone or together with Anna, and sometimes using other entities, has been involved in the sale and purchase of 12 residential properties.
[5] Andrei claims against Anton alleging a resulting or constructive trust. Andrei seeks to trace his funds through the property transactions involving Anton, to establish a resulting or constructive trust in respect of real estate or other property that now constitutes the ultimate fruits of Andrei’s source funding.
1 Because of the commonality of surnames, I have referred to the parties by their Christian names, no disrespect intended.
2 Klimenko v Klimenko [2023] NZHC 3380.
The defendants’ application for caveat to lapse
[3] The defendants seek orders that the caveats lodged against six properties registered in their names be removed.3 The application to lapse the caveats over the properties was made pursuant to s 142 of the Land Transfer Act 2017.
Caveated Properties
[4]The Caveated Properties are:
a) 1 Aberley Road, Schnapper Rock, Auckland (Title 76463) (Aberley Road);
b) 14 Dalry Street, Mornington, Dunedin (Title OT360/121);
c) 101A Pohutukawa Drive, Owhata (Title SA42D/781);
d) 31 Pencarrow Street, Dunedin (Title OT 131/74);
e) 152 Teviot Street, Invercargill (Title SL117/4); and
f) 47 Boyne Street, Invercargill (Title SLSC/704)
[5] The defendants are trustees of the Triple A Family Trust (the Trust) which was the purchaser of a number of the Caveated Properties. The caveats record the estate or interest claimed as beneficial interest in the Caveated Properties by virtue of financial contribution and a constructive trust between the defendants as trustees and Andrei as caveator and beneficiary.
Legal principles
[6]Section 138 of the Land Transfer Act 2017 provides, relevantly:
138 Caveats against dealings with land
(1)A person may lodge a caveat against dealings with an estate or interest in land (a caveat against dealings) on the basis that the person—
(a)claims an estate or interest in the land, whether capable of registration or not; or
3 Notice of interlocutory application by defendants to lapse the caveats dated 26 September 2024 at [1].
(b)has a beneficial estate or interest in land under an express, implied, resulting or constructive trust[.]
…
[7]Schedule 2 of the Land Transfer Regulations 2018 provides:
Caveat against dealings document s 138 of the Act
A description of the nature of the estate or interest claimed by the caveator (which must be stated with sufficient certainty) or, for a caveat under section 138(1)(d)(ii) of the Act, the matters that establish that there is a risk that the estate of interest may be lost through fraud.
Details of how the estate or interest claimed is derived from the registered owner.
[8] The principles governing the determination of applications to sustain caveats are well-established.4 The onus is on the caveator to demonstrate an interest in the land sufficient to support the caveat, and the caveator must demonstrate a reasonably arguable case to support the claimed interest.5 This means the caveator need not definitively establish his or her right to the interest.
[9] The process by which applications to sustain a caveat are determined is ill-suited to resolving disputed factual questions. An order for removal will only be made if it is clear the caveat cannot be maintained — either because there was no valid ground for its lodging in the first place, or because the ground on which it was lodged has now ceased to exist.
[10] Although the onus of proof lies with the caveator, any conflict between affidavits will generally be resolved in the caveator’s favour.6 This is not to say that the Court is bound to accept uncritically statements in an affidavit that lack precision, are equivocal, inconsistent with the documentary evidence or other statements of the same deponent, or inherently improbable.7
4 See generally Philpott v Noble Investments Ltd [2015] NZCA 342 at [26]. And, for a general statement of the principles, see Wallace v Studio New Zealand Ltd [2021] NZCA 392 at [39]–[41].
5 Botany Land Development Ltd v Auckland Council [2014] NZCA 61 at [24]–[25].
6 Bethell v Rickard [2013] NZCA 68 at [22]. See also MacRae v Rapana HC Auckland M633/94, 17 June 1994.
7 Barrett v IBC International Ltd [1995] 3 NZLR 170 (CA) at 175, citing Eng Mee Yong v Letchumanan s/o Velayutham [1980] AC 331 (PC) at 341; and Xie v 126 Waimumu Ltd [2020] NZHC 1109 at [8].
[11] While the Court retains a residual discretion to remove a caveat or allow it to lapse even if the caveator has a legitimate and caveatable interest, that discretion is to be exercised cautiously. The Court must be completely satisfied removal would not prejudice the caveator’s legitimate interests.8
Anton and Anna’s submissions
[12] The defendants make the submissions set out in [13] to [31] in support of their application for an order that the caveats lapse.
The defendants say:
Financial Hardship
[13] The defendants are suffering from significant financial hardship due to the inability to generate sufficient rental income from the caveated properties and the ongoing expenses related to maintaining them.
[14] The financial records together with all relevant supporting documents to establish the defendants' financial hardship were submitted to the Court on 16 August 2024 by memorandum of the defendants as per the minutes of Associate Judge Sussock on 7th of August 2024.
[15] The Invercargill properties (Caveated Properties [4](e)-(f)) have not been rented since purchase due to incomplete renovations. No income was generated from these properties and defendants had to make personal contributions to mortgage repayments.
No reasonably arguable case of entitlement to or beneficial interest in the caveated properties
[16] Andrei allegedly lent monies to Anton and expected repayment of the monies he paid into Andrei and Anton’s joint bank account (Joint Account) once he settled in New Zealand.
8 Pacific Homes Limited (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.
[17] Initially Andrei would transfer monies to Anton to be used by Anton at his discretion, for the purposes of investment and/or day-to-day living expenses. There was no agreement between Andrei and Anton that the monies would be repaid to Andrei and/or invested on his behalf.
[18] In October 2018 the relationship between Andrei and Anton deteriorated when Andrei realised that Anton purportedly “could not be trusted with money”. Andrei attempted to “protect his payments” by claiming that the monies he transferred to Anton in the Joint Account were under a loan. In an attempt to bolster his claim, Andrei prepared and asked Anton to sign a retrospectively written loan agreement, approximately seven years after the Joint Account had been opened and Andrei began depositing monies into it.
[19] Rather than taking steps to enforce the terms of the alleged unsecured loan, Andrei registered the caveats over the caveated properties some three years later without any factual or legal basis. Andrei’s claim is no more than a potential claim for money under an alleged unsecured loan or a mere expectation that he would receive property. On Andrei’s evidence, the relationship between Andrei and Anton is, at best, one of debtor and creditor.
[20] The circumstances of the advances are not such that it can be said that Andrei and Anton would reasonably expect that through them Andrei was acquiring an equitable interest in the caveated properties.
No valid grounds for lodging the caveats
[21] The caveats cannot be maintained because Andrei has not set out or proved a valid ground for lodging them or a valid ground which previously existed and which no longer exists.
[22] Andrei’s claim lacks evidence of direct or indirect contributions and of an expectation of an interest in any of the Caveated Properties required to establish that they were held for him as a beneficiary of a constructive trust. Andrei’s purported financial contributions to the caveated properties are not causally related to their acquisition, preservation or enhancement. The defendants personally, or as trustees
of the Trust, made payment of, amongst other things, the purchase price, rates, mortgage repayments, insurance premium payments, maintenance and the other day- today running expenses of the caveated properties.
Disputed questions of fact
[23] There is a material dispute of the facts underlying the relief sought by Andrei. Particularly, the existence of the unsecured loan which Andrei relies on, whether monies were gifted to Anton, whether unlimited or for a certain period of time.
[24] The declaration sought, declaring that the contributions gave rise to a constructive trust, is not capable of determination in this application. Any such determination requires extensive evidence relating to any contributions purportedly made by Andrei to the caveated properties, to be led at trial. Applications under s 143 of the LTA are unsuitable to determine the rights of the parties, particularly when there are disputed questions of fact.
[25] The alleged constructive trust derives from monies transferred by Andrei to Anton via the Joint Account between 23 September 2011 and 25 October 2018. However:
(a)The Joint Account was opened during early 2011 and Anton then used monies sent to him in the Joint Account by Andrei at his discretion.
(b)The purpose of the Joint Account was never certain, and it was never intended by the defendants that Andrei would have any beneficial interest in any of the Caveated Properties.
(c)There was no agreement governing the distribution of monies provided by Andrei to Anton and how the monies would be utilized.
(d)At no point did the defendants make representations to Andrei that he would one day reside at any of the Caveated Properties nor hold any other entitlement or benefit in any of them.
(e)The defendants invested in various properties and business ventures using monies from various sources, not only from the monies deposited into the Joint Account by Andrei.
(f)Apart from Aberley Road, the various properties purchased were sold by the defendants and before the other Caveated Properties were purchased.
(g)Various sums of money were transferred to Anton via the Joint Account and were used for other expenses such as tools, food, building and renovating materials, educational courses and general living expenses.
(h)None of the Caveated Properties were discussed with Andrei prior to Andrei transferring monies to Anton via the Joint Account. Nor were any of the caveated properties discussed with Andrei prior to the defendants purchasing them.
(i)The defendants purchased the Caveated Properties (apart from Aberley Road) during or about March 2020 to December 2020 and after Anton was removed from the Joint Account.
(j)In all of the circumstances, Andrei has failed to advance a reasonably arguable case that he holds an interest in the Caveated Properties.
[26] An order for the removal of a caveat must be made when it is patently clear that the caveat cannot be maintained. It is just and equitable that the order be sought be made.
Separation
[27] The Court proceedings, as well as various other factors, have taken their toll on the defendants' family relationship resulting in separation.
[28] The defendants are unable to move out of the family home and rent separately due to inability to sell the house. The defendants cannot afford to rent and pay the mortgage at the same time. They are having to manage living together in the interim.
[29] The Defendants have split their finances, dividing the remaining savings. Anton’s salary income is paid into a separate personal account. The former joint family account is now used by Anna for salary payments and for general shared living expenses with Anton compensating his share of expenses at the end of the month.
[30] The defendants have exhausted all avenues available to them to dispose of the issue of settlement on an informal basis. However, given Andrei’s attitude and declining any settlement proposals, the defendants are left with no other remedy than that afforded to them under High Court Rule 7.19.
[31] The defendants seek the caveats be removed to repay all the registered mortgages against those properties with the remainder of funds to be used to reduce the Bank of China mortgage against the family home at Aberley Road where the money originally came from. If the Aberley Rd mortgage is not repaid/reduced, then the defendants seek to lapse the caveat on it as well in order to sell it.
Andrei’s opposition
[32]Andrei opposes the application, in summary, on the following grounds:9
(a)Andrei’s claim to a constructive trust in respect of the caveated properties was included in the statement of claim, and is also included in the first amended statement of claim.
(b)The proceedings are yet to be heard and determined.
(c)Andrei has diligently pursued the proceeding despite the efforts of the defendants to delay and obstruct the hearing of his claim.
9 Notice of opposition to interlocutory application by defendants to lapse caveats dated 11 October 2024.
(d)After the defendants brought an application for security for costs in this proceeding, heard and determined in September 2022, the defendants then failed to meet their initial obligations as to standard discovery on the filing of their affidavit of documents dated 23 April 2023.
(e)The defendants then delayed in discovering documents they were ordered to discover, in a judgment dated 27 November 2023, until the documents were eventually all discovered on 5 February 2024.
(f)The defendants did not cooperate with Andrei’s request to produce bank account records until after a second interlocutory application for particular discovery which was heard on 26 July 2024, and then consented to the production of the bank account records after that hearing, thereby causing wasted costs to Andrei.
(g)The defendants initially denied that money paid to the Joint Account by Andrei had been used to purchase the property at Aberley Road, CT NZ/7643, but the discovery eventually completed on 5 February 2024 by the defendants of conveyancing files and trust account ledgers, and the report of a financial expert based on those records and the partial discovery of the defendants' bank account records, has established that, despite the denials of the defendants, it was Andrei’s money, paid into the Joint Account, which was used to purchase that property and Andrei has pleaded, in the first amended statement of claim, inter alia, that:
(i)when the property at Aberley Road, which comprises a main dwelling and a flat, was purchased in the name of Anton, the sum of $201,129.39 in total was withdrawn from the Joint Account to fund the purchase of that property, together with a loan secured by way of mortgage to the ASB Bank of
$596,250;
(ii)Anton did not contribute any of his own money to the purchase of the property at Aberley Road; and
(iii)Anna did not contribute any funds to the purchase of the property at Aberley Road.
(h)The statement of claim and the first amended statement of claim continue to plead the remedies of a resulting trust, and in the alternative a constructive trust, as two of the remedies sought in respect of the caveated properties.
(i)Andrei continues to have a reasonably arguable case that he has a constructive trust interest in the caveated properties, as pleaded in these proceedings.
(j)The defendants unsuccessfully argued that the caveats should lapse in proceedings in CIV 2021-404-1211 and the judgment that was delivered in that proceeding dated 30 September 202110 (the September 2021 Judgment) considered the evidence before the Court at that time, including evidence of communications between Andrei and Anton exhibited in affidavits filed by Andrei or in his support dated July 5, 2021 and September 15, 2021.
(k)The statement of claim and the first amended statement of claim plead the same or similar facts relied upon in the proceedings in CIV 2021- 404-1211 including evidence of financial contributions (both direct and indirect) by Andrei to the purchase of the caveated properties.
(l)There is no change in circumstances or facts as pleaded in support of the caveats not lapsing since the September 2021 Judgment.
(m)The Court's discretion should be exercised by allowing the caveats to remain.
Analysis
[33] The September 2021 Judgment determined that Andrei’s claim to an interest in the Caveated Properties pursuant to a resulting or constructive trust was sufficiently arguable to support an order that the caveats not lapse.11 It is not necessary in this judgment to again traverse the arguments put forward by the parties in relation to establishing that Andrei had an arguable caveatable interest in the Caveated Properties.
10 Klimenko v Klimenko [2021] NZHC 2592 [The September 2021 judgment].
11 Above, n 10, at [5] to [9].
[34] The issues to be determined in this judgment are whether the Court should exercise its residual discretion to remove the caveats as sought by Anton and Anna on the basis of hardship suffered or likely to be suffered by Anton and Anna as a result the caveats remaining in place; and whether the interests of Andrei as caveator can be adequately protected if the caveats are removed.
Hardship
[35] The defendants make the following submissions in relation to hardship caused by being unable to sell the caveated properties:
(a)Aberley Road cannot be rented out due to the need for extensive and costly renovations to bring it up to rentable standard. The renovations include:
(i)worn-out/damaged carpet in multiple areas in the house;
(ii)peeling wall paint; and
(iii)leaking showers.
(b)The rental income from the Dunedin and Rotorua properties (owned by the Trust) only covers their limited ongoing costs and expenses and does not contribute to the mortgage repayments of Aberley Road. They do not hold any reserves for any sudden major/capital maintenance.
(c)The Trust properties were purchased from deposits originating from a new mortgage against Aberley Road, taken out by the defendants from the Bank of China.
(d)The Invercargill properties (owned by the Trust) have not been rented since their purchase due to incomplete renovations. No income was generated from these properties and the defendants have had to make personal contributions for the mortgage repayments.
(e)The mortgage holiday provided by the Bank of China expired on 8 November 2024, at which time the defendants were required to repay
$37,669.88, a sum which the defendants say they do not have available.
(f)The defendants say they cannot afford to pay increased (due to interest rate rises) mortgage payments after the mortgage holiday expiry.
[36] In the memorandum submitted by the defendants dated 16 August 2024 regarding their financial position, the defendants submit (at [18] and [19]) that all of the caveated properties apart from Aberley Road, are at risk of a mortgagee’s sale.
[37] In response Ms Stevenson, for Andrei, submits that the defendants are not suffering financial hardship and to establish that they are would require proper and robust financial information. She submits that the defendants have only provided limited financial information and in particular have failed to provide the following information:
(a)evidence of outgoings under the mortgages;
(b)evidence of income of Anton and/or Anna;
(c)evidence of rental income from any of the caveated properties;
(d)evidence of an imminent mortgagee sale of any of the caveated properties;
(e)have not accounted for $230,000 received from the sale of a property at 72 Turoa Street approximately two years ago;
(f)no explanation as to how a 5-week holiday for Anna was paid for; and
(g)have not accounted for the income from Aberley Road.
[38] Ms Stevenson submits that Andrei has been suffering financial hardship himself as he has been deprived of his funds since 2018 and he is retired, receiving a Russian Federation pension.
Result
[39] As is noted at [33], the fact that Andrei has a reasonably arguable caveatable interest in the caveated properties has already been determined by this Court and nothing in the submissions or evidence put forward by the parties for this hearing has, in my view, changed that position. Accordingly, the issue is whether the Court, notwithstanding that Andrei has a caveatable interest, should allow the caveats to be removed by exercise of its residual discretion.
Exercise of residual discretion
[40] As noted at [11], the Court’s discretion to remove the caveat is to be exercised cautiously. The Court must be completely satisfied that removal would not prejudice the caveator’s legitimate interests.
[41] The defendants are proposing that all of the caveats be removed, and all of the properties owned by the Trust, being all of the caveated properties other than Aberley Road, be sold and the proceeds of sale be used to reduce the mortgage in respect of Aberley Road.
[42] Ms Stevenson in her submissions has proposed that the conditions of Andrei agreeing to release the caveats would be:
(a)an independent solicitor be appointed by the Court to supervise the sale of all of the properties;
(b)for each of the properties, once an unconditional agreement for the sale of that property and a confirmed settlement date is negotiated, the caveat over that property be released to enable settlement of the sale for that property (noting the settlement dates would be different for each property);
(c)the net proceeds of sale for each of the properties be retained, undisbursed, pending the hearing of the proceedings, or by agreement under the supervision of the Court, in an independent solicitor’s trust account;
(d)Anton and Anna sign all documents and do all things necessary as the registered proprietors to effect the sale of each of the properties; and
(e)leave be granted for the independent solicitors appointed by the Court to apply to the Court for further directions to implement the Court orders.
[43] At this point, I am not prepared to exercise the Court’s residual discretion to remove the caveats to allow sales of the Caveated Properties. The reasons for my view are:
(a)while there is some evidence of hardship produced by Anton and Anna, the information is incomplete. The information concerning their financial position, income from employment, income from the Caveated Properties and the status of any action from the mortgagees of the Caveated Properties in relation to any pending mortgagee sales is incomplete;
(b)the proposal by the defendants to use the net proceeds of sale of the Caveated Properties (other than Aberley Road) to reduce the mortgage on Aberley Road does not give Andrei the security of creating a fund to protect his interests if the caveats are removed;
(c)overall, I am not satisfied that Andrei’s interests can be adequately protected by what is proposed by Anton and Anna if the caveats are removed.
[44] I would invite the parties to consider the following conditions under which the Court would consider exercising its discretion to remove the caveats from the Caveated Properties (other than Aberley Road):
(a)an independent solicitor, agreed by the parties (with the parties being responsible for the fees of that solicitor) is to be appointed to supervise the sale of the caveated properties apart from Aberley Road. The Court will not appoint independent solicitors;
(b)for each of the properties, once an unconditional agreement for the sale of that property and a confirmed settlement date is negotiated, the caveat for that property is to be released to enable settlement of the sale of that property and repayment of any mortgage which is registered against it;
(c)the net proceeds of sale of each of the sale properties is to be retained, undisbursed, in the independent solicitor’s trust account pending determination of the substantive proceedings;
(d)the parties are to sign all documents and do all things necessary to effect the sale of the properties, Anton and Anna as registered proprietors, and Andrei as caveator;
(e)leave may be granted for the independent solicitor to apply to the Court for further directions to implement the Court orders;
(f)the caveat is to remain on Aberley Road pending determination of the substantive proceedings.
[45] If the parties wish to pursue an arrangement as outlined at [44], they are invited to each make further submissions to the Court in this respect.
Orders
[46]I make the following orders:
(a)Anton and Anna’s application for removal of the caveats is dismissed.
(b)If the parties wish to pursue an arrangement substantially as set out at paragraph [44], they are invited to make further submissions to the Court.
(c)Costs are reserved pending being determined whether the parties wish to pursue an arrangement substantially in the form set out at paragraph [44].
(d)If the parties do not pursue an arrangement substantially in the form of paragraph [44], as Andrei has been the successful party costs should follow the event. Counsel for Andrei, and Anton and Anna, are directed to endeavour to agree costs and, failing to agree, counsel for Andrei will submit a memorandum as to costs (not to exceed five pages) and Anton and Anna will submit a memorandum as to costs in reply (not to exceed five pages) within 10 working days of receipt of counsel for Andrei’s memorandum as to costs. A decision as to costs will then be made on the papers.
…………………………….. Associate Judge Taylor
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