Klimenko v Klimenko

[2021] NZHC 2592

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-1211

[2021] NZHC 2592

IN THE MATTER

of Part 19 High Court Rules 2016

AND IN THE MATTER

of an application by Andrei Klimenko for orders pursuant to Section 143 of the Land Transfer Act 2017 in respect of caveat claims 12110027.1 and 12110510.1

BETWEEN

ANDREI KLIMENKO

Applicant

AND

ANTON KLIMENKO

First respondent

ANNA GONCHARENKO

Second respondent

Remote hearing:

22 September 2021

Appearances:

P J Stevenson for the applicant

G Steyn for the first and second respondents

Judgment:

30 September 2021

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 30 September 2021 at 10.00am.

Pursuant to Rule 11.5 of the High Court Rules.

………………………… Registrar/Deputy Registrar

Counsel/Solicitors:

P J Stevenson, Barrister, Auckland McVeagh Fleming, Auckland

KLIMENKO v KLIMENKO [2021] NZHC 2592 [30 September 2021]

[1]        Given the commonality (but not universality) of surnames, meaning no disrespect, I refer to the parties by their given names.

[2]        The applicant (“Andrei”) seeks orders caveats lodged over six properties — variously in North Auckland, South Auckland, Otago and Southland Land Districts, of which the respondents (Andrei’s son, “Anton”, and Anton’s wife, “Anna”) are registered owners as joint tenants — not lapse.

Background

[3]        The caveats are expressed in terms of Andrei’s claim to a “[b]eneficial interest in the land by virtue of financial contribution and a constructive trust between Anton

… and Anna … as trustee and Andrei … as caveator and beneficiary”.1 Andrei

contends directly or indirectly to have funded the properties’ purchase by Anton and Anna for joint investment. Anton and Anna argue Andrei’s funds were at best an unsecured loan for repayment as demonstrated by subsequent dealings between the parties, and thus incapable of supporting Andrei’s claim.

The law

[4]The Court of Appeal recently stated:2

Section 143 of the Land Transfer Act provides that the registered owner of an estate or interest affected by a caveat can apply to the Registrar for the lapse of the caveat.3 The Registrar must give notice of the application to the caveator and the caveat lapses unless, within 10 working days after the date on which the Registrar gives notice, the caveator gives notice to the Registrar that an application has been made to the Court for an order that the caveat not lapse, and, within 20 working days after the caveator gives notice to the Registrar, an order made by the Court is served on the Registrar.4 There are provisions permitting this time period to be extended until the Court can deal with the application.

The principles on which the jurisdiction to remove or extend a caveat falls to be exercised are not set out in the section but they have been developed by the Courts. … [T]he relevant principles were succinctly restated by this Court in Philpott v Noble Investments Ltd as follows:5

1      Andrei’s name is misspelled “Andrey” in respect of one of the Dunedin properties.

2      Wallace v Studio New Zealand Ltd [2021] NZCA 392 at [39]–[41].

3      Land Transfer Act 2017, s 143(1)(b).

4      Section 143(2) and (3).

5      Philpott v Noble Investments Ltd [2015] NZCA 342. Recently approved in Melco Property Holdings (NZ) 2012 Ltd v Hall [2021] NZCA 184 at [19] and [36].

[26] The applicable legal principles which governed the application to sustain the caveats, and which now govern this appeal, are as follows:

(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;6 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.7

It was common ground between counsel that caveat lapse applications are summary in nature and that they are not suitable for deciding disputed questions of fact. Where there are disputed questions of fact, the proper course will normally be to extend a caveat until the conflicting claims of the different parties are determined in proceedings brought for that purpose. However, as noted in Philpott, an order for the removal of a caveat can be made if it is patently clear that the caveat cannot be maintained, either because there was no valid ground for lodging it in the first place, or because such a ground no longer exists.

Discussion

[5]        There is no dispute Andrei alone deposited substantial sums to a joint account held with Anton in mid-2011, from which withdrawals were made at and about the times (and annotated) for payment of deposit and settlement of the first of the six properties later that year. Subsequent properties may similarly have been acquired with the balance of funds paid by Andrei, or using the initial property or properties as security for funds for others’ acquisitions. There is conflicting evidence of the parties’ contended joint investment intentions, or separate loan and repayment arrangements.

[6]        The nature of Andrei’s payments thus is in dispute. Because that dispute cannot here be determined, I observed Andrei’s “financial contribution” on which the caveats

6      Sims v Lowe [1988] 1 NZLR 656 (CA) at 660; and Zwarst v Saxton [2012] NZHC 448 at [12].

7      Stewart v Kaipara Consultants Limited [2000] 3 NZLR 55 (CA) at [23].

partly are claimed may give rise to battling rebuttable presumptions:8 the presumption of advancement, by which a parent is presumed by devotion to their children’s interests to have gifted any sum of money provided to them;9 and the presumption of a resulting trust, by which contributors to a property’s purchase price are presumed not to have relinquished beneficial ownership of the funds provided.10

[7]        On the latter presumption, Andrei’s claim is not a mere money claim. It gives him a reasonably arguable interest in the properties.11 Even short of the latter presumption, the flexibility of a remedial constructive trust may commend itself as to “assets in the defendant’s hands in respect of which the Court considers it appropriate to impress a trust in favour of the plaintiffs”,12 thus also affording a valid ground for lodging the caveats. I distinguish that from the institutional constructive trust argued for Andrei, and opposed by Anton and Anna, which nonetheless also is reasonably arguable. I resist more determinative analysis, as in ‘proper course’ the subject for substantive trial.

[8]        I am given no reason to conclude Andrei’s legitimate interest nonetheless would not be prejudiced by the caveats’ removal. I will order the caveats not lapse. But ‘reasonably arguable’ does not conclusively establish Andrei’s interest in the properties. He must issue a proceeding to do so promptly, and pursue it with due diligence. Otherwise, Anton and Anna may seek the caveats be removed.13 Thus my order should only be interim, pending any final order made on Andrei’s established interest.14

8      Horsfall v Potter [2017] NZSC 196, [2018] 1 NZLR 638 at [50], n 29.

9      Woolf v Kaye [2018] NZHC 2191 at [157]–[203].

10 Chang v Lee [2017] NZCA 308, [2017] NZAR 1223 at [18]–[20], citing Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 (HL) at 708, applied in Crampton-Smith v Crampton-Smith [2011] NZCA 308, [2012] 1 NZLR 5 at [35].

11     Compare MacDonald v Lobb [2020] NZHC 2206.

12     Fortex Group Ltd (in rec & liq) v MacIntosh [1998] 3 NZLR 171 (CA) at 173.

13     Land Transfer Act, s 142.

14     Section 143(4)(b) and (6)(a). See Lu Trustee Ltd v Parklane Infrastruct Ltd [2020] NZCA 682 at [60].

Result

[9]        Pending this Court’s final order on a substantive proceeding yet to be issued, I make an interim order the caveats not lapse, conditionally on Andrei’s prompt issue and diligent pursuit of that proceeding.

Costs

[10]      In my preliminary view — given both the uncertainty as to Andrei’s substantive interest in the properties, and their family context — costs in this proceeding are better determined consistently with those of the substantive proceeding. If that is not accepted, or the parties cannot otherwise agree, I reserve costs for determination on short memoranda of no more than five pages — annexing a single-page table setting out any contended allowable steps, time allocation, and daily recovery rate — to be filed and served by Andrei within 10 working days of the date of this judgment, with any response and reply to be filed within five working day intervals after service.

—Jagose J