Lance Edward Baker and Robert Edward Baker and Christopher James McFadden as Trustees of the Re Baker Family Trust and Joan Valda Baker and Christopher James McFadden as Trustees of the JV Baker Family Trust s

[2024] NZHC 2699

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2024-419-153

[2024] NZHC 2699

IN THE MATTER

of an application to sustain a caveat under s143, Land Transfer Act 2007

BETWEEN

LANCE EDWARD BAKER

Applicant

AND

ROBERT EDWARD BAKER and CHRISTOPHER JAMES MCFADDEN as

Trustees of the RE Baker Family Trust and

JOAN VALDA BAKER and CHRISTOPHER JAMES MCFADDEN as

Trustees of the JV Baker Family Trust Respondents

Hearing:	13 September 2024
Appearances:	G D Stringer and T A Yim-Loy for applicant P J Morgan KC for respondents
Date of judgment:	18 September 2024

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 18 September 2024 at 3.30pm.

Pursuant to Rule 11.5 of the High Court Rules.

………………………… Registrar/Deputy Registrar

Counsel/Solicitors:
P J Morgan KC, Hamilton

Cooney Lees Morgan, Tauranga

BAKER v BAKER [2024] NZHC 2699 [18 September 2024]

[1]                 Under s 143(3)(a) of the Land Transfer Act 2017, the applicant (Lance) seeks an order his caveat, registered against the title to land in which his parents (Robert, known as Toby, and Joan) are interested, not lapse. Given commonality of surname,  I mean no disrespect in referring to parties by their usual names.

Background

[2]                 The land at issue, known as Eversley, is owned in half-shares by the respondents as trustees on mirror family trusts settled by each Toby and Joan. The land comprises some 174 hectares on Morrinsville-Walton Road in the Waikato’s Richmond Downs, between Morrinsville and Matamata. It is split by the intersecting Hutchinson Road into easterly and westerly sections in roughly 60/40 proportions.

[3]                 The land supports a working stock and cattle breeding enterprise, conducted in informal partnership between Lance, his partner (Sandy Redman) and his parents. Formerly, Joan and Toby conducted farming operations on other land, known as Tauriko, similarly owned by the trustees. From about 2001, Lance and Sandy lived at Tauriko, where Joan and Toby also then resided. When Tauriko was sold and Eversley bought in 2016, the farming operation and residences relocated to Eversley. Toby and Joan later acquired a residential property in Matamata to which they moved.

[4]                 Lance is 60 years old. Toby and Joan are in their 80s. They have two other children, Lance’s sisters. Lance comprehends there was agreement the easternmost half (approximately) of the land to the east of Hutchinson Road was to be partitioned and transferred into his ownership and, on the later of Joan’s or Toby’s death, the other half of that section also to be transferred to him (and the western section to his sisters).

[5]                 Lance says the initial transfer was to be made in recognition of his contributions to the farm(s) and properties. In a separate proceeding,1 Lance claims the land is subject to an institutional (either common intention or reasonable expectations) constructive trust in his favour by reason of his “direct and indirect contributions to the property” (meaning Eversley). Apprehending his parents sought to sell Eversley — an apprehension supported by advice from a farmer grazing cattle

1      Baker v Baker HC Hamilton CIV-2024-419-0163.

at Eversley under a written grazing agreement, on 14 March 2024, Joan had told him the property had been sold and he needed to find grazing elsewhere for the coming season — Lance lodged the caveat at issue in this proceeding on 18 March 2024. The caveat claims a beneficial interest in the land “under a constructive trust arising from an oral agreement in or about 2020” between Lance and Toby and Joan.

[6]                 Joan and Toby dispute there was any agreement to transfer any portion of the land to Lance. Rather, they say the land is held on their respective family trusts, for the benefit of their children, grandchildren and great grandchildren, as may be determined by the trustees (presently, respectively Toby or Joan and an independent trustee). If the trusts are so distinctly managed from Joan’s or Toby’s own benefit, control or direction may be belied by, for example, Joan’s evidence “Toby and I have already offered to leave a sizeable portion of the proceeds of sale of the Eversley farm in our solicitor’s trust account” in preference to “see[ing] the Eversley farmland owned by the trusts locked up so that we cannot sell it and use any part of the proceeds available to us”.

[7]                 From Toby and Joan’s perspectives, Lance’s contributions, such as they were, were to the parties’ partnership, afforded him by reason of their concern he lacked the financial substance to buy into any farming operation. And, after they ceased to participate in day-to-day management of the farm, their own contribution to the partnership was the trusts’ consent to the partnership’s use of the land.

[8]                 Whatever the nature and extent of the relationship(s) between the parties (which I hesitate to explore in any depth to avoid influencing fact-finding in the other proceeding), regrettably, it appears common ground the relationship has broken down.

The law

[9]                 It is well-established “the settled principles governing an application that a caveat not lapse” are those set out by the Court of Appeal in Philpott v Nobel Investments Ltd,2 as follows:3

2      Wyllie v Firmin [2024] NZCA 291 at [12].

3      Philpott v Noble Investments Ltd [2015] NZCA 342 at [26]. Also confirmed in Lendich v Codilla

[2023] NZCA 222 at [9]; Green & McCahill Holdings Ltd v Ara Weiti Development Ltd [2022]

(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;4 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.5

[10]In Wallace v Studio New Zealand Ltd, the Court of Appeal observed:6

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

[11]              An institutional constructive trust is “a consequence of an unconscientious assertion of ownership in respect of property to which another has contributed”.7 Whether there is any material distinction to be drawn between its establishment on the basis of either ‘common intention’ or ‘reasonable expectation’ is indeterminate.8 To be successful, a claimant to such as beneficiary must show direct or indirect contributions

NZCA 218 at [80]; Wallace v Studio New Zealand Ltd [2021] NZCA 392 at [40]; Melco Property Holdings (NZ) 2012 Ltd v Hall [2021] NZCA 184 at [19] and [36], upheld on further appeal in Melco Property Holdings (NZ) 2012 Ltd v Hall [2022] NZSC 60, [2022] 1 NZLR 59 at [56]; and Mahon v The Station at Waitiri Ltd [2017] NZCA 387 at [23]. Similarly, see McLennan v Livaja [2017] NZCA 446 at [28]–[30].

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

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

6      Wallace v Studio New Zealand Ltd, above n 3, at [41].

7      Li v 110 Formosa (NZ) Ltd [2020] NZCA 492 at [134], referring to Lankow v Rose [1995] 1 NZLR 277 (CA) as “the leading case”.

8      Harvey v Beveridge [2014] NZCA 72 at [46]; Mills v Laboyrie [2021] NZCA 450, [2022] 2 NZLR 258 at [52]–[54].

to the property at issue, “in more than a minor way to the acquisition, preservation, or enhancement” of the property,9 made with reasonable expectation of obtaining an interest in it, which interest the owner should reasonably expect to yield.10 Those ‘reasonable expectations’ may be inferred from any ‘common intention’.11

[12]              If such present proprietary interest is established here on either foundation claimed by Lance — because that was the parties’ common intention (even although oral agreements for the disposition of land are not generally enforceable),12 or should otherwise have been their reasonable expectations regardless — will depend on ultimate determination of the parties’ respective contentions at trial. That the land here is held on express trusts is not disqualifying of such an interest.13

[13]              Lance’s evidence of an ‘agreement’ comprehensively lacks specificity as to expected detail of between whom, when, where and how. On its own, it may not suffice to establish the qualifying interest, even if not ‘definitively’. But it is not disputed Lance made contributions at Eversley — illustrated by Joan’s admission in the other proceeding Lance and Sandy “have operated the farm in a partnership” with them, and “managed much of the day-to-day farming tasks through to the 22nd October 2022 and from that date managed all day-to-day farming tasks” — the exact characterisation and consequences of which must await trial. Directly in dispute is if those contributions are in fact to the partnership or to the property, or perhaps if those are mutually exclusive. Particularly given the informality of any partnership between the parties, which legal status also may depend on judicial decision,14 it cannot be said Lance lacks a reasonably arguable case for determination of the consequences of his contributions.15 Certainly it is not ‘patently clear’ his caveat cannot be maintained.

9      Lankow v Rose, above n 7, at 282.

10     At 294.

11     Mills v Laboyrie, above n 8, at [53].

12     Property Law Act 2007, s 24.

13     Vervoort v Forrest [2016] NZCA 375, [2016] 3 NZLR 807 at [71].

14     Partnership Law Act 2019, s 8(1) (definition of “partnership”).

15     See, for example, Heazlewood v Joie de Vivre Canterbury Ltd [2015] NZCA 213 at [34], referring to Lankow v Rose, above n 7, at 295.

[14]              Lance accordingly has discharged the onus on him to be entitled to maintain the caveat pending trial. The usual expectation is trial is progressed expeditiously. Resort to my residual discretion nonetheless to lapse the caveat is “relatively rare”.16

[15]              For Joan and Toby, Philip Morgan KC strongly asserted they should not be held out of their only significant asset in the twilight of their years, driven to obtain funding from other family members to be able to acquire their present residence on effective retirement from day-to-day farm operations, while Lance and Sandy continue to occupy and operate the farm at Eversley without accounting to Toby and Joan for its use except in partial distribution of net profit from their partnership.

[16]              As some of the cases on which Lance relies illustrate,17 Toby and Joan are not materially more detrimentally affected than other respondents to a family member’s successful application against a caveat’s lapse. To some degree, the position they find themselves is because of the presently indeterminate nature of Lance’s (and Sandy’s) contributions, which arguably should have been formalised to avoid such uncertainty.

[17]              Regardless, Lance plainly now would be prejudiced by the caveat’s removal, because the respective trustees could dispose of the land without reference to him. But the caveat’s presence does not exclude the prospect he may consent to its withdrawal in circumstances, if that was to accommodate any desired disposition. None presently is identified and Toby and Joan have not pointed to any more pressing reason on which I should exercise my residual discretion in their favour, beyond the unfairness of their constraint if Lance ultimately is unsuccessful. Such is not an uncommon contest in interlocutory relief.18 Had there been more pressing reason, it could be addressed by conditions on making the order (if consistent with the caveat’s maintenance).19

[18]              I recently gave directions by consent in the substantive proceeding between the parties for discovery by 30 November 2024, interlocutories by 20 December 2024 and further case management after 1 February 2025.20 For Lance, Tayla Yim-Loy advised

16     McLennan v Livaja, above n 3, at [30].

17     For example, Cerny v Cerny [2015] NZHC 2256.

18     Green & McCahill Holdings Ltd v Ara Weiti Development Ltd, above n 3, at [82].

19     Philpott v Noble Investments Ltd, above n 3, at [63] and [68].

20     Baker v Baker, above n 1, 10 September 2024 (Minute of Jagose J).

dates for mediation also were being sought. Joan says she and Toby have agreed to attend mediation “but the problem has been to find a suitable time for that to occur with Lance now maintaining he is too busy”. Lance responds he and Sandy originally asked for mediation on 4 October 2023 and proposed it again later. But he says “we are in the middle of calving, so cannot be away from the farm to deal with this issue”. I encourage the parties to make themselves available for mediation as soon as possible.

[19]              I have contemplated if I could order the caveat not lapse on condition the substantive proceeding remains expeditiously pursued, or make an interim order the caveat not lapse while directed dates in the substantive proceeding are met. But I am drawn ultimately to the same conclusion as the Court of Appeal in Philpott,21 the caveat is to be upheld on the basis it is reasonably arguable Lance has a caveatable interest. That is the ‘proper course’. Whether Lance is able ultimately to establish that interest remains at issue. I expect he will prosecute the substantive proceeding with expedition.

Result

[20]              I  order   caveat   12935656.1   registered   against   the   interests   of   Robert Edward Baker and Joan Valda Baker as registered owners of the land comprised in SA1015/191 at 2175 Morrinsville-Walton Road, RD1, Walton not lapse.

Costs

[21]              I was not addressed on costs. In my preliminary view, costs on Lance’s application may better be determined in conjunction with costs on the substantive proceeding. If the parties disagree, and cannot agree costs between themselves, costs are reserved for determination on short memoranda each 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 Lance within ten working days of the date of this judgment, with any response or reply to be filed within five working day intervals after service.

—Jagose J

21     Philpott v Noble Investments Ltd, above n 3, at [69].