MA v MA
[2016] NZHC 1426
•28 June 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-837 [2016] NZHC 1426
IN THE MATTER OF an application that Caveat 10252404.1
against 16 Wineberry Place, Albany, Auckland, not lapse
BETWEEN
LULU MA Applicant
AND
GUO LIANG MA AND LK TRUSTEES (NO.91) LIMITED (AS TRUSTEES OF THE GOOD HOPE TRUST)
First Respondent
GUO LIANG MA Second Respondent
Hearing: 28 June 2016 Appearances:
R S Pidgeon for the Applicant
D K Wilson for the RespondentsJudgment:
28 June 2016
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
Solicitors:
Hong Hu Lawyers Ltd, Auckland, for Applicant
Loo & Koo, Auckland, for Good Hope Trust and Guo Liang Ma
Raymond S Walker, Auckland
Counsel:
R S Pidgeon, Auckland, for Applicant
David K Wilson, Auckland, for Respondents
MA v MA AND LK TRUSTEES (NO.91) LIMITED (AS TRUSTEES OF THE GOOD HOPE TRUST) [2016] NZHC 1426 [28 June 2016]
[1] Lulu Ma applies for an order that caveat 10252404.1 not lapse. The caveat was lodged against the title to the property at 16 Wineberry Place, Albany, Auckland, described in identifier NA96D/301. The first respondents are the registered proprietors. The interest claimed in the caveat is:
The abovenamed caveator claims a beneficial interest in the land contained in the above certificate of title NAS96D/301 as cestui que trust of which the registered proprietors: Guo Liang Ma and L K Trustee (No.91) Ltd are trustees.
General principles on caveat applications
[2] In Holt v Anchorage Management Ltd, McMullin J stated the purpose of a caveat against dealings under the Land Transfer Act:1
Once lodged, a caveat is notice to all who search the title to the land against which it is registered and to the registered proprietor of the land (to whom notice of its receipt is given pursuant to s 142) that the caveator claims the estate or interest the subject of the caveat. It is both a warning to the persons mentioned that the caveator asserts rights against the land and a protection of those rights. (Section 143(1) uses the phrase "protected by the caveat".) Once the caveat is lodged the Registrar is prohibited from making any entry on the register which has the effect of charging or transferring or otherwise affecting the estate or interest protected by the caveat (s 141).
[3] In caveat applications under ss 143, 145 and 145A of the Land Transfer Act
1952, the caveator generally has the onus of showing a reasonably arguable case for the interest claimed. The interest must come within s 137(1) of the Act:
137 Caveat against dealings with land under Act
(1) Any person may lodge with the Registrar a caveat in the prescribed form against dealings in any land or estate or interest under this Act if the person—
(a) claims to be entitled to, or to be beneficially interested in, the land or estate or interest by virtue of any unregistered agreement or other instrument or transmission, or of any trust expressed or implied, or otherwise; or
(b) is transferring the land or estate or interest to any other person to be held in trust.
1 Holt v Anchorage Management Ltd [1987] 1 NZLR 108 (CA) at 113.
[4] A personal or contractual right is not enough. The caveator must show an existing entitlement to a beneficial interest in the land under the caveat.2 Something more than a potential or future interest is required. In Philpott v NZI Bank Ltd, Cooke P said:3
Counsel for the respondent sought to maintain the caveats by various arguments, all of which come to substantially the same. It was said for instance that in s 137(a) the words 'beneficial interest' have a wider scope than equitable interest; that a caveat is supportable if the caveator has some
'potentially' enforceable right; and again that, although the respondent had to accept that this was not an equitable charge, nevertheless it was an equitable interest. No authority was cited supporting any of these interpretations of s 137(a). In my opinion, for all purposes material to the present case the words 'beneficial interest' refer to equitable interests and the section cannot be stretched to include mere potentialities which have not ripened into interests in any particular properties.
[5] Caveat applications are summary and are therefore not suitable for deciding disputed questions of fact. On the other hand, the court is not required to accept uncritically as raising a dispute of fact which calls for further investigation every statement in an affidavit, however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable it may be.
[6] For a caveat to be removed, it must be patently clear that the caveat cannot stand either because there was no ground for lodging it at the outset, or because any such ground no longer exists. In addition, the court has a residual discretion not to uphold a caveat but that is exercised cautiously, as when the caveat could serve no useful purpose or alternative safeguards are available.
[7] To establish a reasonably arguable case there must be evidence tending to prove the facts relied on. Assertion, whether in pleadings or affidavit, is not enough. The evidence need not be as extensive as that given in a hearing on the substantive merits. It may be circumstantial. But if there is no evidence to prove the facts contended for, the caveator will not have made out a reasonably arguable case for
those facts.
2 Guardian Trust and Executors Company of New Zealand, Limited v Hall (No 2)
[1938] NZLR 1020 (CA) at 1025.
3 Philpott v NZI Bank Ltd (1989) 1 NZConvC 190,246 at 190,248.
[8] The matter in issue is whether the applicant has a caveatable interest.
Background
[9] The applicant is a student aged 26 years. Guan Liang Ma, the second respondent, is her father. Her mother is Zengyun Wang. The mother and father married in China in 1998. The applicant was born in China in 1990. The father moved to New Zealand in 2002. The applicant joined him two years later. The mother, on the other hand, lived mainly in China.
[10] In 2004 the father bought the Wineberry Place property. There is a contest between the mother and the father as to the source of the funds for the purchase of the property. For this case, however, I accept that it is arguable for the applicant that the property was relationship property under s 8 of the Property (Relationships) Act
1976. The parents’ marriage came to an end in 2007. They divorced in China. Both parents have since remarried. The mother came to live in New Zealand in 2007. Since then the applicant has lived with her.
[11] On separation, the parents divided their property. Both of them described it as a relationship property settlement. The mother says that assets were divided as follows: she kept a furniture business in China, a sum in Chinese currency, and while she lived in China she undertook to pay a sum for the applicant’s support. The husband kept a furniture business in New Zealand, cash in New Zealand bank accounts and motor vehicles in New Zealand. The mother also says that the father promised that when the applicant turned 18 he would transfer the Wineberry Place property into her name. The mother says that she agreed to that as the basis for the husband retaining the greater share of relationship property.
[12] That was an oral agreement. The parties do not state where they entered into the agreement but I infer that they made it in China. Neither of them gave any attention to making a written agreement dividing relationship property which would comply with the requirements of the New Zealand Property (Relationships) Act.
[13] After the separation the father established the Good Hope Family Trust. By a trust deed dated 29 January 2008 he and L K Trustee (No.91) Ltd (the first respondents) are the trustees. Shortly after establishing the trust the father transferred the Wineberry Place property to the trustees. Apparently the property is let out on residential tenancies. The father says that he put the Wineberry property into the trust because of his remarriage in 2007 as he says that he wanted to protect his position and that of the applicant.
Does the applicant have a vested interest under the trust deed?
[14] Under the trust deed the applicant is a final beneficiary. I issued a minute inviting counsel to consider whether her status as a final beneficiary gave her a caveatable interest in the trust property. I am grateful to both counsel for providing submissions on the point. What triggered my thought was the dictum of Allan J in B v M:4
The position of the parties as final beneficiaries is different. Those rights are
vested and therefore fall within the definition of ‘property’ in s 2 ...
[15] That was a relationship property case. The suggestion that a final beneficiary may have a vested interest raised the question whether such an interest might support a caveat.
[16] The trust deed includes definitions of “beneficiary”, “discretionary beneficiaries”, “final beneficiaries” and “ineligible class”, the “trust period” and the “vesting day”:
“beneficiary” means any person who receives or may receive any interest in
the trust fund.
“discretionary beneficiary” means:
(a) the settlor;
(b) the final beneficiary;
(c) any issue of any final beneficiary;
4 B v M [2005] NZFLR 730 (HC) at [101].
(d) any trust which includes for the time being amongst its beneficiaries (contingent or otherwise) any beneficiary or any issue of any beneficiary;
(e) such other person, not being a member of the ineligible class, appointed pursuant to clause 8.1(a); and
(f) any association, society, organisation or trust whose funds are applied wholly or principally to any civic, community, charitable, philanthropic, benevolent or cultural purpose, whether within New Zealand or elsewhere; but does not include any person who has been removed from the class of discretionary beneficiaries pursuant to cl 8.1(b).
“final beneficiary” means:
the settlor’s daughter, Lulu Ma; and
Lulu Ma’s children.
“ineligible class” means any person or persons irrevocably removed from the class of beneficiaries pursuant to clause 8.1(b).
“vesting day” means:
(a) the day upon which the period of eighty years from the date of this deed expires and the perpetuity period applicable to the trust created by this deed is specified accordingly; or
(b) such earlier day as the trustees may by deed appoint.
[17] The deed contains provisions typically found in a discretionary trust. There are provisions for income distribution, for capitalisation of income, and distribution of capital before the vesting day. The trustees have an unfettered discretion. They have the power to appoint and remove discretionary beneficiaries but no power to remove final beneficiaries. They also have the power to resettle the trust. Their powers also include the powers to change investments – that includes the power to dispose of the Wineberry Place property, and apply the proceeds of sale to other investments.
[18] Paragraph 10 of the trust deed says:
10.1 Distribution of capital
Subject to any directions given by the trustees under clause 7.1, the trustees shall hold the trust fund on the vesting day upon trust:
(a) If there are any of the final beneficiaries or any issue of a final beneficiary then living: then
(i) For such of those final beneficiaries and those issue or such one or more of them to the exclusion of the other or others of them in such shares as the trustees may by deed appoint on or before the vesting day.
(ii) In the event that the trustees do not make an appointment pursuant to clause 10.1(a)(i) on or before the vesting day, then for such of the final beneficiaries then living and if more than one as tenants in common in equal shares.
If any final beneficiary dies before the vesting day leaving issue then such issue shall take per stirpes and, if more than one, as tenants in common in equal shares, all the interest in the trust fund which such deceased final beneficiary would have taken had such final beneficiary been living on the vesting day;
(b) If none of the final beneficiaries nor any of their issue are then living, then such person or persons, and if more than one, as tenants in common in equal shares, who would have been entitled to the estate of the survivor of the settlor under the law in New Zealand on the vesting day governing the distribution of intestates had that settlor died intestate on the vesting day, then such shares as that person or persons would have been so entitled.
[19] The question here is whether the applicant’s rights as final beneficiary amount to a present interest in the property rather than an expectancy of receiving something in the future. For that, it is necessary to note the distinction between “vested interests” and “contingent interests”. A vested interest is not subject to any condition precedent. A beneficiary may have a vested interest in trust assets, even though he or she is not entitled to immediate enjoyment of those assets under the terms of the trust. An interest may be vested in interest or vested in possession. An interest vested in possession confers an immediate right to present enjoyment of the property, while an interest that is merely vested in interest confers a present right to future enjoyment. Both are distinct from a contingent interest which will not vest unless and until some requirement is satisfied, other than the determination of a prior interest. A vested interest may be defeasible, for example, by the exercise of an overriding power of appointment.
[20] Under this trust deed, the applicant’s interest as a final beneficiary turns on more than the determination of a prior interest. She attains vested rights only on the vesting day being reached. Before the vesting day it cannot be said that she has a vested interest. Her rights depend on more than simply the expiry of prior interests.
It is the contingency of attaining the vesting day that prevents her from having an interest that is vested now. On that basis, I do not consider that the trust deed confers on her a present interest in the property. It is therefore not a caveatable interest.
[21] Counsel also cited authorities as to rights arising under discretionary trusts. Some of those cases concerned proceedings under the Property (Relationships) Act. B v M is one such case, where rights of the beneficiaries were considered as potentially being property under s 2 of the Act. Similarly, in Q v Q,5
Judge Fitzgerald in the Family Court considered that the wife’s interest as a final
beneficiary amounted to property under s 2 of the Act. That was even though the interest was identified not as a vested interest but a future contingent one.
[22] The scope of “property” under the Property (Relationships) Act may be broader than a caveatable interest under s 137 of the Land Tranfer Act. For example in Clayton v Clayton, the Supreme Court said:6
We accept the submission for Mrs Clayton that the property definition in s 2 of the PRA must be interpreted in a manner that reflects the statutory context. We see the reference to “any other right or interest” when interpreted in the context of social legislation, as the PRA is, as broadening traditional concepts of property and as potentially inclusive of rights and interests that may not, in other contexts, be regarded as property rights or property interests.
[23] So far as caveatable interests are concerned, the court is necessarily concerned with existing interests. A vested interest is a present right to a future interest as opposed to a contingent interest. At best, the applicant has no more than a contingent interest under the trust deed. I accordingly find that her rights as final beneficiary do not give her a caveatable interest. In this I also follow Associate
Gendall in Jamieson-Bell v Hankins and Faire J in Harrison v Harrison.7
5 Q v Q [2005] 24 FRNZ 232 at [117]-[128].
6 Clayton v Clayton [2015] NZSC 29, [2016] NZFLR 230 (SC) at [38] .
7 Jamieson-Bell v Hankins HC Whanganui, CIV-2008-483-294, 11 December 2008, at [23]-[30].
Associate Judge Gendall and Faire J in Harrison v Harrison [2016] NZHC 574.
The applicant’s claim based on the oral promise
[24] That leads to the main basis for the applicant claiming a caveatable interest in the property. She contended for an interest in the property relying on the oral promise made by her father under the agreement with her mother when they divided their property.
[25] I referred earlier to the fact that the parents had no regard to the formal requirements of New Zealand law for division of relationship property. The affidavits, however, make it clear that under the agreement they did intend to divide property between each other. Insofar as they were dealing with immovable property in New Zealand, the Property (Relationships) Act applies. That is clear from s 7(1):
7 Application to movable or immovable property
(1) This Act applies to immovable property that is situated in New Zealand.
[26] Any agreement to divide property must comply with the requirements of Part 6 of that Act. The agreement described by both the father and the mother is an agreement under s 21A to settle differences. There are formal requirements for agreements under Part 6. Section 21F says:
21F Agreement void unless complies with certain requirements
(1) Subject to section 21H, an agreement entered into under section 21 or section 21A or section 21B is void unless the requirements set out in subsections (2) to (5) are complied with.
(2) The agreement must be in writing and signed by both parties.
(3) Each party to the agreement must have independent legal advice before signing the agreement.
(4) The signature of each party to the agreement must be witnessed by a lawyer.
(5) The lawyer who witnesses the signature of a party must certify that, before that party signed the agreement, the lawyer explained to that party the effect and implications of the agreement.
[27] In this case the agreement does not comply with any of the requirements of s
21F. It is not in writing, the parties have not signed it, neither of them had independent legal advice before signing the agreement, the agreement was not
witnessed by a lawyer, and no lawyer certified that they had explained to that party the effect and implications of the agreement. The effect of that total non-compliance is that the agreement is entirely void.
[28] Mr Pidgeon submitted that s 21H give the power to relieve against s 21F. He did not cite any authorities showing where s 21H had been applied. I regard that submission as over-optimistic. I have no doubt that the Family Court would not give the time of day to an application to have the agreement upheld under s 21H. The agreement on the face of it appears to be one-sided, and unfair to the mother as reserving the Wineberry Place property to the husband - evidently the most valuable asset of the marriage. It would be unjust to deprive the wife of a claim to have relationship property rights determined between herself and her husband according to the Act by holding her to this agreement. Certainly the court would be concerned, in the absence of independent advice to both parties, whether they had a clear appreciation of what they were entering into. In short, I see no prospect of this agreement being validated.
[29] That means that the agreement remains void and cannot be the source of any obligations falling on the husband in favour of the daughter. Just as the husband cannot enforce the agreement against his wife, so the wife cannot enforce the agreement against her husband. Even though she was arguably a beneficiary of a promise made to the mother, the daughter is not in any stronger position than her mother to enforce the agreement.
[30] There is no contract between the applicant and her father directly. Equally, she is not in a position to demand that her father complete the gift because equity will not require a gift to be completed. There is no evidence of her having provided any consideration for the promise. After all, she was not a party to the agreement.
[31] Sections 25 and 26 of the Property Law Act 2007, which impose formal requirements for agreements to sell land and for dispositions of interest in land, also pose difficulties for the applicant. Clearly there is no written disposition of any existing legal or equitable interest in the Wineberry Place property (except for the trust deed, which I have already discussed).
[32] I regard the attempt to raise arguments based on a constructive trust and on part-performance of unwritten agreements as not having any sound foundation. The essential point is that the daughter is claiming as a beneficiary of an oral promise based on a void agreement. That cannot, in my view, give any basis for her to claim a constructive trust nor to rely on part-performance. I am also at a loss to understand what matters could amount to part-performance.
[33] Overall, I am satisfied that there is no basis for the caveat lodged by the applicant. That means I must dismiss the application. The caveat will accordingly lapse.
[34] The lapse of the caveat will take effect from 19 July 2016. That is to allow Mr Pidgeon to take instructions whether to appeal. If he does have instructions to appeal he will have the opportunity of applying for interim relief under r 12(3) of the Court of Appeal (Civil) Rules.
Costs
[35] Mr Wilson wishes to take instructions as to costs. If the parties cannot resolve costs then memoranda may be filed and I will decide costs on the papers. I trust that the parties will be able to resolve any cost issues themselves.
………………………............
Associate Judge R M Bell
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