Mallon v Griffiths
[2023] NZHC 1371
•12 June 2023
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE
CIV-2023-463-3
[2023] NZHC 1371
BETWEEN ANTHONY PAUL MALLON
and
CAROLYN ANN MALLON
PlaintiffsAND
LEWIS HUGH GRIFFITHS
Defendant
Hearing: 10 May 2023 Appearances:
Judgment:
12 June 2023
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
[Application to sustain a caveat]
This judgment was delivered by me on 12 June 2023 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
Solicitors:
Phillips & Co Law (Minka Bodd -Phillips), Rotorua, for the Plaintiffs
Morshead Law Limited t/a Law Box (Roslyn Morshead), Rotorua, for the Defendant
MALLON v GRIFFITHS [2023] NZHC 1371 [12 June 2023]
TABLE OF CONTENTS
Paragraph
Introduction [1]
Background [2]
Mallons’ application for caveat to not lapse [11]
Mr Griffiths’ opposition [13]
Affidavits [14]
Affidavit of Carolyn Ann Mallon dated 16 December 2022 [14]
Affidavit of Lewis Hugh Griffiths dated 1 February 2023 [24]
Further and reply affidavit of Carolyn Ann Mallon and
Anthony Paul Mallon dated 14 February 2023 [35]
Affidavit of Bruce Ward dated 15 February 2023 [47]
Reply affidavit of Lewis Hugh Griffiths dated 24 February 2023 [49]
Legal principles [50]
Hearing [56]
Analysis [59]
Do the Mallons have a caveatable interest in the property? [61]
Conclusion in respect of caveatable interest [77]
Should the Court exercise its residual discretion to remove the caveat
or allow it to lapse? [79]
Conclusion in respect of the exercise of the Court’s discretion to lapse
or remove the caveat [80]
Result [81]
Costs [82]
Orders [83]
––––––––––––––
Introduction
[1] Anthony and Carolyn Mallon (together, the Mallons) have applied for an order sustaining caveat number 12565933.1 (the caveat) lodged by them against a property registered in the name of their stepson/son, Lewis Griffiths (Mr Griffiths), on Tawhero Street, Mamaku, Rotorua (the property).
Background
[2] Mr Griffiths agreed to buy the property from Mr and Mrs Ward in 2016. In March 2017, Mr Griffiths was $10,000 short of being eligible for the requisite home loan and requested it from the Mallons. In May 2017, the Mallons made a further
$10,000 payment to Mr Griffiths upon request.
[3] The sale settled in July 2017 and Mr Griffiths’ girlfriend, Ms Josephine Mead (Ms Mead), also moved into the property. The property was to be extended for the Mallons to live in, and they eventually relocated to the property in around June 2019. In the meantime, they paid Mr Griffiths $50 weekly, totalling $5,650, either to go towards the property’s mortgage, as the Mallons contend, or towards renting a sleepout on the property, as Mr Griffiths contends.
[4] The Mallons had some involvement in the extension, with them Mr Griffiths and Ms Mead engaging Graeme Leigh, a mortgage broker, to discuss financing it. The Mallons contend they paid Mr Griffiths the following money towards the extension:
$8,637.88 for the draft architectural plans, $1,814 as their half share of the building consent, and $426.94 as their half share of a further architecture invoice.
[5] The extension was financed through extending Mr Griffiths existing mortgage with the bank. To satisfy the bank’s requirements, the Mallons paid off $24,500 of Mr Griffiths personal debt, signed a tenancy agreement to live at the property, and signed a gift certificate in respect of $25,000, which included the two $10,000 payments they made to Mr Griffiths in March and May 2017.
[6] On 10 October 2019, at Mr Leigh’s suggestion, Mr Griffiths, Ms Mead and the Mallons entered into a Deed of Acknowledgement of Debt (the Deed) for $66,000.
[7] On 22 February 2022, they all entered into a Property Sharing Agreement (the PSA), witnessed by Mr and Mrs Ward. There is a dispute over the nature of the PSA and as to whether it provides for an equitable interest capable of sustaining a caveat. In any event the Mallons paid $285.00 weekly to Mr Griffiths, which they claim was their share of the extension’s mortgage, rates and insurance, while Mr Griffiths claims it was simply their weekly board payment.
[8] In around April 2022, Mr Griffiths and Ms Mead separated. Ms Mead subsequently sought a portion of the property under the Property (Relationships) Act 1976 (the PRA). There is some dispute over when Ms Mead first sought a portion of the property, although Family Court proceedings under the PRA, in which the Mallons have sought to be joined, are ongoing. Regardless, there is agreement that Mr Griffiths and his lawyers repeatedly told the Mallons they would have to vacate the property as it would need to be sold to pay out Ms Mead.
[9] On 28 September 2022, the Mallons former lawyer lodged the caveat claiming a beneficial interest arising from cestui que trust in which Mr Griffiths was trustee and further claiming an equitable mortgage against Mr Griffiths pursuant to the Deed and PSA. Ongoing discussions ensued between both parties lawyers with Mr Griffiths’ asserting the Mallons must vacate the property, and the Mallons’ asserting they had occupational rights and a constructive trust capable of sustaining a caveat.
[10] On 1 December 2022, Mr Griffiths filed an application for the caveat to lapse, which lead to this application filed 16 December 2022 that the caveat be sustained. This judgment determines that application.
Mallons’ application for caveat to not lapse
[11]The Mallons seek orders that the caveat not lapse and for costs.1
1 Originating application for order that caveat not lapse dated 16 December 2022 at [a] and [b].
[12]The grounds on which the orders are sought are:2
1. The Applicants and the Respondent reside at the Property subject to these proceedings.
2. On or around 22 February 2020, the Applicants and the Respondent (together with the Respondent's former de facto partner) entered an Informal Property Sharing Agreement ("PSA") in respect of the Property.
3. The terms of the PSA included, but were not limited to, an agreement to build an extension on the Property for the Applicants to reside in. The Applicants were required to service the mortgage associated with that extension and pay for any additional costs (as required) and have duly done so.
4. The Applicants were intimately involved in the build of the extension, being their retirement residence, with the plans/permits referring to the extension as the "Mallon-Griffith's extension”.
5. As at the date of this Application, the Applicants have contributed the sum of $131,409.53 towards the Property. Of this sum $66,000.00 is subject to a Deed of Acknowledgement of Debt ("Deed").
6. Pursuant to s 138(b) of the Land Transfer Act 2017 and the terms set out in the PSA, the Applicants have a beneficial interest in the Property in respect of the balance not subject to the Deed being, $65,409.53 plus capital gain (if any) being held on Trust by the Respondent.
7. In or around October 2022 the Respondent's former de facto partner filed proceedings in the Family Court for the Division of Relationship Property under the Property (Relationships) Act 1976 ("PRA") ("Relationship Property Proceedings").
8. On 14 December 2022 the Applicants filed an Interlocutory Application to be Joined as Interested Parties in the Relationship Property Proceedings pursuant to sections 37 and 92 of the PRA and Rules 386 and 394 of the Family Court Rules 2002.
9. The Applicants rely on the Affidavit of Carolyn Ann Mallon filed in support of this Application, and on sections 138 and 143 of the Land Transfer Act 2017, Rule 19(2) of the High Court Rules and Somme v Central House Movers Limited [2012] NZAR 295
Mr Griffiths’ opposition
[13]Mr Griffiths opposes the application on the grounds that:3
1. Carolyn Ann Mallon, one of the applicants, is my mother. Anthony Paul Mallon, the other applicant, is my mother's husband.
2 At [1]–[9].
3 Notice of opposition to application that caveat not lapse dated 1 February 2023 at [1]–[3].
2. Paragraph 1 of the Application for Order that Caveat not Lapse ("the Application") is accepted.
3. Paragraph 2 of the Application is acknowledged in so far as the existence of a document (referred to by the applicants as a 'property sharing agreement' or 'PSA') but say further the document content is about living arrangements at the property on a day-to-day basis, not a document conferring a beneficial or equitable interest in the said property.
4. Paragraph 3 of the Application is opposed, and I say further that the PSA was not an agreement that I would build an extension to my home. I further oppose the allegation that the applicants were required to service the mortgage payments and meet additional costs.
5. Paragraph 4 of the Application is opposed, and I say further that the resource consent and other invoices for the extension were in my name to the best of my knowledge and belief.
6. Paragraph 5 of the Application is opposed.
7. Paragraph 6 of the Application is opposed.
8. Paragraph 7 of the Application is admitted in so far as such an application has been filed.
9. Paragraph 8 of the Application is admitted in so far as the applicants applying to joined to my relationship property proceedings, but say further that the application has not yet been heard.
By way of further grounds, I repeat the allegations above and say further:
10. In March and May 2017, respectively, the applicants gave the respondent two sums of $10,000 each toward the purchase of the respondent's property at 53 Tawhero Street, Mamaku ("Tawhero Street").
11. In or around mid-2018 the respondent proposed adding an extension to the existing dwelling to the property at Tawhero Street, later applying for a build loan mortgage increase in the vicinity of $230,000 to pay for the work.
12. On 5th October 2019 the two sums of $10,000 dating to 2017 when the Tawhero Property was purchased were formalized as gifts by way of a gift certificate signed by the applicants.
13. The 5 October 2019 gift certificate stated:
a. The sums were gifted to assist with construction of a property at 53 Tawhero Street;
b. The gifted amount is non-interest bearing;
c. Repayments are not required;
d. No encumbrance will be registered on the title.
14. On 10 October 2019 the parties entered into a 'deed of acknowledgement of debt' regarding an alleged loan to the respondent in the amount of
$66,000 which, interalia, included the gifted sums referred to in paragraphs 12 and 13 herein. The deed does not establish how the debt is quantified.
15. On 22 February 2020 the parties entered into an informal document ('PSA') outlining day to day shared living arrangements at Tawhero Street, outlining board and utilities payments by the applicants to the respondent. The PSA also referred to the alleged loan in the 'deed of acknowledgement of debt'. The PSA did not confer on the applicant's a beneficial or equitable interest or contain an agreement to mortgage or caveat capable of maintaining a caveatable interest.
16. The respondent further relies on his affidavit filed in support of this notice opposition affirmed 1 February 2023, and the rules in Shepherd v Houston [1927] SASR 144 and Rayner v Kilburn (1981) 1 NZCPR 395.
17. I claim, in reply to the application, the following relief:
a. A Final Order under section 143(7)(a) of the Land Transfer Act 2017 for lapse of caveat in respect of the property at 53 Tawhero Street, Mamaku, comprised in Record of Title SA604/136; and
b. Costs against the applicants in relation to this proceeding.
Affidavits
Affidavit of Carolyn Ann Mallon dated 16 December 2022
[14] Mrs Mallon has made an affidavit in support of the application that the caveat not lapse.4 She deposes that she and Mr Mallon have a caveatable interest in the property in the form of a trust. She relies on an annexed affidavit, dated 13 December 2022, filed in support of joining them to the Family Court proceeding.5 This annexed affidavit largely repeats the facts set out above, while making some further key points.
[15] Regarding the initial plan, Mrs Mallon deposes that Mr Griffiths approached her and Mr Mallon to assist in purchasing the property at which they would all live. She notes the first $10,000 was subject to an agreement signed on 26 March 2017 that the money would be used to create additional accommodation in which the Mallons
4 Affidavit of Carolyn Mallon in support of an application for an order that caveat not lapse dated 16 December 2022.
5 Affidavit of Carolyn Mallon in support of application to be joined as interested parties in the proceedings dated 13 December 2022.
were to live. She also deposes that Mr Griffiths had said he would repay the money after receiving his father’s inheritance — repayment never occurred.
[16] Regarding the $50 weekly payments prior to move in, she deposes that these were towards supporting Mr Griffiths with the mortgage. She confirms they were recorded as rent to comply with the bank’s terms.
[17] Regarding the two lots of $10,000, Mrs Mallon asserts they were included in the Deed’s $66,000 figure and were debts acknowledged therein, despite her and Mr Mallon signing a gift certificate to comply with the bank’s terms.
[18] Regarding the PSA, she deposes this agreement included provisions clarifying that the property cannot be sold without mutual agreement or written consent of the other party, that if Mrs Mallon died Mr Mallon could still reside on the property and could not be evicted except by mutual agreement, and that if the property were to be sold the $66,000 loan and any further loans and property investments must be repaid with interest. She deposes the PSA worked well for the first two years.
[19] Regarding the extension, she deposes they were fully involved in the extension, including picking their colours, fabrics and cabinetry. Her and Mr Mallon paid $285 weekly being for the mortgage, rates and insurance for the extension. They also paid half any additional bills, which were calculated monthly and paid by whomever still owed money. Larger payments for the extension were halved with their half being paid into Mr Griffiths account to pay the supplier.
[20] Regarding the separation, Mrs Mallon deposes that her and Mr Mallon agreed to support Mr Griffiths to retain the property despite Ms Mead’s claim. She states they took on household chores in an attempt to relieve Mr Griffiths’ day-to-day stresses.
[21] Regarding the caveat, Mrs Mallon says that in early September 2022 their relationship with Mr Griffiths begun to deteriorate, Mr Griffiths disagreed over the extent of any debt owed, and so her and Mr Mallon sought legal advice to protect their interest in the property. They subsequently lodged the caveat. She then details an
incident of Mr Griffiths’ attempting to remove their car and belongings from the property on 11 October 2022, which ended in a medical event for Mr Mallon.
[22] On 17 October 2022, Mr Griffiths’ lawyer wrote to the Mallons former lawyer giving notice they must vacate within one month. Mrs Mallon deposes she was told by their lawyer the notice was invalid and the caveatable interest stood. A locksmith changed locks on the house on 22 October 2022, except after some arguments to their section of the house. However, the locks on the sleepout which contains many of the Mallons belongings was subject to the change.
[23] In conclusion, Mrs Mallon asserts they have nowhere to go and have invested their retirement monies into the property. They seek recovery of their contribution, totalling $131,409.53 and a half share of the capital gains on sale.
Affidavit of Lewis Hugh Griffiths dated 1 February 2023
[24] Mr Griffiths has made an affidavit in support of his opposition to the Mallons’ application.6 At the outset, Mr Griffiths believes that reference to Mrs Mallons’ Family Court affidavit is inappropriate as it provides background only and is filled with unsubstantiated allegations of events dating back to well before those precipitating these proceedings. Mr Griffiths affidavit largely repeats the facts set out above, while making some further key points.
[25] Regarding the initial purchase, he deposes he purchased the property with his savings, a bank mortgage and $20,000 in gift deposits from the Mallons.
[26] Regarding the $50 payments weekly prior to move in, Mr Griffiths says those were not for his mortgage but instead for the Mallons use of a powered sleepout on the property, which he kept available for them rather than renting it out at a higher rate.
[27] Regarding the extension, Mr Griffiths explains that he took out the mortgage to add the extension for the Mallons to live in, but claims that there was never any
6 Affidavit of Lewis Hugh Griffiths in support of notice of defence to application that caveat not lapse dated 1 February 2023.
agreement, nor intention, that the Mallons would have any financial investment or beneficial or equitable interest of any kind in the property.
[28] Regarding the caveat, Mr Griffiths deposes that it was lodged before Ms Mead had started proceedings and before he had had the house appraised or listed for sale. He does not believe that even if the loans are established, they give rise to a caveatable beneficial or equitable interest. He further deposes that the Mallons did the same thing in early 2017 in lodging a caveat over a separate converted garage they had been living in at his sister’s property. He then deposes that the Mallons interest, even if proven, are only capable of personal enforcement as unsecured creditors and not capable of sustaining a caveat.
[29] Regarding the two lots of $10,000, he understood that was a gift and only signed the 26 March 2017 agreement about the first lot out of concern for Mrs Mallon and wishing to keep the peace. He never intended to provide any proprietary, beneficial, or equitable interest in the property. He deposes that this understanding was cemented once the Mallons signed the gift certificates acknowledging the $20,000 as a gift with no repayments required, in order for the bank to approve the extension loan.
[30] Regarding paying for the extension, he deposes that he paid for it using the loan and payments were either made by him or directly by the bank. He accepts on review that the Mallons made some payments into his bank account which appear to be for the architect’s plan and resource consent and total just over $10,000. However, he states he was not aware they had done that as Ms Mead had managed the finances. Further, he does not consider those payment conferred a beneficial interest or equitable mortgage, which he would never have agreed to.
[31] Regarding the Deed, he reiterates that any documents he signed were out of concern for Mrs Mallon as she had nowhere else to live and he wanted to keep the peace. He says he is not big on words or reading documents very well and that he had no legal advice in signing it. He notes it was not his intention that it create a beneficial or equitable interest and that it did not contain an agreement to mortgage or caveat.
He is also unaware of how the $66,000 was arrived at, how it connects to his purchase of the property, and notes that the gifted $20,000 is wrongfully included in any event.
[32] Regarding the PSA, he deposes that the agreement did not grant any interest and rather was agreeing to boundaries in living spaces, clarifying board and mortgage payments, and determining what would happen if someone died. Similarly, he did not have any legal advice.
[33] Regarding the payments of $285.00 per week by the Mallons post their move to the property, he admits that the Mallons paid $250.00 weekly board and $35.00 weekly utilities, but claims they were nowhere close to the total mortgage repayments and outgoings.
[34] He concludes that the Mallons have no caveatable beneficial or equitable interest and that if he owes any money, it is a personal right enforceable against him as the debtor.
Further and reply affidavit of Carolyn Ann Mallon and Anthony Paul Mallon dated 14 February 2023
[35] Mr and Mrs Mallon have made a joint affidavit with further evidence and in reply to Mr Griffiths’.7 At the outset they deny that the property’s ownership was only intended to be by Mr Griffiths.
[36] Regarding the two lots of $10,000, they deny that such money was a gift. The property was settled in 2017. The gift certificate is for $25,000, dated 5 October 2019, and arose out of funding the planned extension.
[37] Regarding their daughter’s garage, they deny it was ever converted for them to live in. They utilised an already built sleepout when they immigrated. They agreed with their daughter and paid to convert the sleepout into a two-bedroom cottage for their retirement, providing a caveatable interest.
7 Further joint affidavit of applicants dated 14 February 2023.
[38] Regarding the payments by the Mallons of $50.00 per week prior to moving into the property, they deny it was to rent a sleepout and reassert it was to assist with mortgage payments and to build up the equity in the property.
[39] Regarding the mortgage for the extension, the Mallons state that some of the money was used for alterations to the main house. They depose that they initially preferred amenities alterations to the sleepout, but that Mr Griffiths insisted on the extension. They were further worried by Mr Griffiths’ asserting that the extension would not be a separate mortgage, given the assistance they had given him with his first mortgage.
[40] The Mallons deny there was no intention that they would have a beneficial interest in the property, as it makes no sense for them to gift their limited retirement savings without the security of knowing the property would be their retirement residence.
[41] The Mallons outline the various help and support they provided subsequent to Mr Griffiths and Ms Mead’s separation. They claim they only went to see a lawyer after Mr Griffiths told them in September 2022 they would have to leave. They would have nowhere else to go as their money was tied up in the property. They then detail the events that led them to lodge the caveat having been told to leave and having totalled up their contribution to the property.
[42] Regarding the investment into the extension, the Mallons state that the extension was a joint venture in which they invested their savings and were involved in planning. They deny that Mr Griffiths was not aware of their payments into his account as they were only supporting him when he could not otherwise pay the architect.
[43] Regarding the Deed, they deny having nowhere else to live as they had a self- contained campervan, Mr Mallon was still working and it was Mr Griffiths who wanted them to live together. Ms Mead calculated the $66,000 which Mr Griffiths knew. They drafted the agreement at Mr Leigh’s suggestion as Mr Griffiths needed the gift certificate to satisfy the bank he had no further debts to secure the loan for the
extension. The Mallons in addition to the $20,000 also had to pay off $24,500 of Mr Griffiths debts so he could get the mortgage. Therefore, the Deed is clearly linked to the property as, but for it, the loan for the extension would not have been possible.
[44] Regarding the PSA, they deny they were ever borders and dispute that Mr Griffiths was ever responsible for a significantly larger portion of the mortgage. They provide evidence they were responsible for paying half the mortgage.
[45] Since September 2022, they say they have been unable to contribute their half of the mortgage as Mr Griffiths has refused to provide the invoices. They have limited use of the property. They further depose that they would often pay cash for Mr Griffiths to pay his workers.
[46] In conclusion, they reassert that they were investing in the property for their retirement and are the reason the loan for purchase could ultimately be obtained to begin with. They invested in, and were heavily involved in, the extension plans.
Affidavit of Bruce Ward dated 15 February 2023
[47] Mr Ward has made an affidavit with evidence in further support of the Mallons’ application.8 In it he deposes the background around Mr Griffiths initially renting the property from him and his wife, and subsequently agreeing to sell it with time to save for the deposit.
[48] He deposes that he and his wife were witnesses to the PSA signing, which from what he recalls dealt with obligations Mr Griffiths had to his parents, acknowledged the Mallons investment and talked about what would happen in the event of death and the right to remain at the property. It was clear to Mr Ward that no party could do anything with the property without the others’ consent. Finally, he deposes his understanding that the extension was intended to be the Mallons’ retirement home.
8 Affidavit of Bruce Ward in support of the applicant's application that caveat not lapse dated 15 February 2023.
Reply affidavit of Lewis Hugh Griffiths dated 24 February 2023
[49] Mr Griffiths has made an affidavit in reply to the Mallons’ joint affidavit and Mr Ward’s affidavit.9 The affidavit largely reasserts the contents of his prior affidavit. He again reiterates there was never any intention, agreement, or meeting of the minds that the Mallons would have any ownership interest in the property. He did not require the Mallons assistance for his mortgage and they were not contributing to its payment. He concludes they have no caveatable interest.
Legal principles
[50]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
(b)has a beneficial estate or interest in land under an express, implied, resulting or constructive trust[.]
…
[51]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.
[52] The principles governing the determination of applications to sustain caveats are well-established.10 The onus is on the caveator to demonstrate an interest in the land that suffices to support the caveat, and the caveator must demonstrate a
9 Affidavit in reply by Lewis Hugh Griffiths in relation to application that caveat not lapse dated 24 February 2023.
10 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].
reasonably arguable case to support the claimed interest.11 This means the caveator need not definitively establish his or her right to the interest.
[53] 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.
[54] Although the onus of proof lies with the caveator, any conflict between affidavits will generally be resolved in the caveator’s favour.12 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.13
[55] 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.14
Hearing
[56] The matter was heard in the High Court in Rotorua on 10 May 2023. Oral evidence was given as follows:
(a)by each of Mr and Mrs Mallon, who were asked to confirm the contents of their affidavits and were then cross-examined by Ms Morshead, counsel for Mr Griffiths; and
11 Botany Land Development Ltd v Auckland Council [2014] NZCA 61 at [24]–[25].
12 Bethell v Rickard [2013] NZCA 68 at [22]. See also MacRae v Rapana HC Auckland M633/94, 17 June 1994.
13 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].
14 Pacific Homes Limited (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.
(b)by Mr Griffiths, who was asked to confirm the contents of his affidavits and then was cross-examined by Ms Boddé-Phillips, counsel for the Mallons.
[57] The Mallons gave evidence, in my view, consistent with their affidavits as to the circumstances of the sums advanced to Mr Griffiths, the circumstances relating to the extensions to the property and the funding arrangements in respect of it, and their understanding they were investing in the property as their permanent retirement home.
[58] Mr Griffiths gave evidence, in my view, consistent with his affidavits as to the fact that it was not his intention at any time for Mr and Mrs Mallon to acquire any beneficial interest in the property. In Mr Griffiths’ assertion, he was always the sole owner of the property, and amounts paid by the Mallons were either loans or gifts, or were paid as board for living at the property.
Analysis
[59]The issues to be determined in this judgment are:
(a)Do the Mallons have a caveatable interest in the property?
(b)If so, should the Court exercise its residual discretion to remove the caveat or allow it to lapse?
[60]I deal with each of these in turn.
Do the Mallons have a caveatable interest in the property?
[61] Ms Boddé-Phillips, in her submissions, at [4]–[11], summarises the background facts to the application. She highlights the following as supporting the argument that the Mallons hold a beneficial interest in the property:
(a)When the sum of $10,000 was advanced by the Mallons to Mr Griffiths in March 2017 to allow him to complete the purchase of the property from the Wards, the advance was recorded in a document:15
“On Settlement Date, for the purchase of 53 Tawhero Road, Mamaku, by Lewis Griffiths, the $10,000 will be used to create additional separate accommodation at 53 Tawhero Road, Mamaku, to enable Paul and Carolyn to live on the property.”
(b)At paragraph [5] of the affidavit of Mr Ward:16
“Shortly before settlement was supposed to take place, in or about April 2017, Lewis brought his parents, Carolyn and Paul Mallon to meet us. He told us that they were all looking to purchase the property as a family.”
(c)The Mallons paying $50.00 per week towards the mortgage, with total payments of $5,650.00 prior to their relocation to the property in around June 2019.
[62] Ms Boddé-Phillips submits that the Mallons were intimately involved in the entire process of the extension project and that it was always intended that the Mallons would have a beneficial interest in the property as they were investing their retirement savings into it. She points to Mr Griffiths’ email to the architect, copied to the Mallons, dated 16 August 2018 in which he stated:
Hiya Rob
Thanks for the Work with Plans & Steps for our new Extension @ 53 Tawhero Street Mamaku. Please would you submit the necessary Plans with the Council in order For Me To Progress To have the Extension built For My Parents to move into. The New Extension is going to be there New permanent residence/accommodation … [emphasis added].
[63] In further support of her contention that the extension was a family project in which the Mallons were investing for their retirement home, Ms Boddé-Phillips points to the fact that the plans for the extension were entitled “Mallon-Griffiths Extension” and to the fact that the Mallons transferred the sum of $8,637.88 to Mr Griffiths in December 2018 to pay the architect.
15 Affidavit of Carolyn Mallon, above n 5, at exhibit B.
16 Affidavit of Bruce Ward, above n 8.
[64] In relation to the financing of the extension, Ms Boddé-Phillips points to correspondence from Mr Graeme Leigh, mortgage broker, advising in respect of such financing and in particular his email of 22 March 2019 which read:
Hi Jo, Lewis, Paul, and Carolyn
It was nice to meet with you all this morning. To summarise:
You’re all looking to extend the existing house at Mamaku by adding a dining room, family room, and extra bedroom and bathroom.
You’re also looking to add a garage to the existing garage and workshop. Total cost is estimated to be approx.. $190,000.
Funding is sought by you all to complete these extensions. Plans are complete and a Geotech report has been completed. There is still work to be done relating to drainage matters.
I ran you through the procedure in respect of how the project might be funded and also a lender’s requirements.
Lewis would be the borrower and remain the owner. [emphasis added]
[65] As further evidence of the Mallons’ integral involvement in the extension, Ms Boddé-Phillips points to the Mallons paying a further sum of $1,814.00 to Mr Griffiths on 4 June 2019, being a one-half share of the building consent invoice and payment on 3 September 2019 to Mr Griffiths of $426.94, being a one half share of the architect’s invoice.
[66] With regard to the gift certificate and the tenancy agreement in relation to the property signed by the Mallons, Ms Boddé-Phillips submits that the evidence has established that these were prepared and signed only as a requirement of Mr Griffiths obtaining bank funding for the extension. She also notes that the Mallons paid off Mr Griffiths’ debt to facilitate the bank funding and, following these actions, the parties entered into a Deed of Acknowledgment of Debt dated 10 October 2019, recording a debt owed by Mr Griffiths to the Mallons of approximately $66,000.
[67] Ms Boddé-Phillips submits that the PSA is clear in its intention to provide the Mallons with an equitable share in the property. She points to the following clauses:
(a)… the said property being 53 Tawhero Street, Mamaku, cannot be sold by the one party without the mutual agreement or written consent of the other party. Both parties cannot give each other any type of eviction notice without mutual agreement.
(b)In the event of the death of Carolyn Ann Mallon proceeding [sic.] any of the parties Anthony Paul Mallon may still reside in the property built for their retirement and not be given an eviction notice unless by mutual agreement or unable to take care of himself or the authorities feel he needs to be in care facilities.
(c)The expected contribution towards the mortgage repayments weekly by the Mallons will be $250.
[68] As to the authorities cited in Ms Boddé-Phillips’ submissions at [37]–[39], they either reflect settled law relating to applications to sustain a caveat, or relate to cases where fraud was alleged, which the evidence does not establish on Mr Griffiths’ part in the present case.
[69]Ms Boddé-Phillips submits that the Mallons are seeking to recover the sum of
$131,409.53 plus a one-half share of any capital gain on the sale of the property. Of the sum claimed by the Mallons, $66,000 is under the Deed of Acknowledgment of Debt and the balance is subject to a constructive trust claim. She submits that the Mallons have established substantively that they have a reasonably arguable case to sustain the caveatable interest.
[70] Ms Morshead submitted on the authority of Blundell Concrete Ltd v Hodgkins, that to establish an arguable standard that the claimant has a caveatable interest, assertions, whether in pleadings or affidavit, are not enough for the caveat to stand.17 There must be evidence, and while the evidence need not be extensive and may be circumstantial, there must still be evidence to prove the facts relied on. She submits that the decision in Blundell is authority for the proposition that the qualification to be “reasonably arguable” standard shifts considerably when there are allegations of fraud or other reprehensible conduct giving rise to a claim of a constructive trust, and that the onus is on the caveator to show a prima facie case.
[71] Ms Morshead submits that the authorities relied on by the Mallons in submissions they have advanced where fraud is alleged, are cases where proven or
17 Blundell Concrete Ltd v Hodgkins [2017] NZHC 2359.
accepted fraud, with the defrauder being in a fiduciary relationship with the caveator. She submits that for the fraud allegations to stand in this proceeding, the Mallons must show evidence that establishes a prima facie case supporting those allegations. If they do not, and Ms Morshead submits they have not, the caveat must lapse.
[72] Ms Morshead submits that in relation to the Mallons’ equitable mortgage claim, the question is whether or not an equitable mortgage arose from the following documents:
(a)the advance of $10,000 on 26 March 2017 (which was subsequently subsumed into a gift certificate of $25,000 dated 5 October 2019 and submitted to the ANZ Bank);
(b)the aggregated Deed of Acknowledgment of Debt in the amount of “approximately $66,000” dated 10 October 2019.
She submits that the Deed and supplementary agreements between the parties record an unsecured debt and a personal right, and do not confer any interest in the property by way of equitable mortgage, and therefore are not sufficient to maintain the caveat. She relies on the decision in Blundell and on the decisions in Rayner v Kilburn and New Zealand Limousin Cattle Breeders Society Inc v Robertson.18 She refers to the fact situation in Rayner v Kilburn where a purchaser borrowed money from a vendor pursuant to a deed of acknowledgment of debt, and the Court held that at the time of lodging the caveat the applicants had no legal or equitable interest in the land and accordingly the caveat was lapsed.
[73] In relation to the New Zealand Limousin Cattle Breeders decision, Ms Morshead submits that this was a case of established fraud by embezzlement by Mr Robertson who had agreed that he would repay Limousin when he sold his home and recorded that in a letter between the parties. Limousin lodged a caveat on his property and Mr Robertson applied for it to lapse. The Court held that it was not possible to spell out any material intent by Mr Robertson to hold his property or any
18 Rayner v Kilburn (1981) 1 NZCPR 395 (HC); New Zealand Limousin Cattle Breeders Society Inc v Robertson [1984] 1 NZLR 41 (CA).
part of it on trust for Limousin as caveator, nor was there any link arising from the documents between the parties and the right to register a caveat. The caveat was lapsed by the Court.
[74] Accordingly, in summary, Ms Morshead submits the documentation between the Mallons and Mr Griffiths records debt obligations, and the PSA relates to a family living arrangement in respect of the property and not to the creation of a beneficial interest in the property in favour of the Mallons.
[75] Ms Morshead submits that the Mallons cannot advance both a claim of a trust and a loan simultaneously. She points to the decision in Potter v Potter, where the Court discussed rights in personam and rights in rem and that a resulting trust is incompatible with a loan.19 Ms Morshead also refers to the Family Court decision of MSL v JSK.20 She cites this decision as further authority for the fact that the claimant cannot advance the proposition of a trust and a loan — it cannot be both.
[76] In summary, Ms Morshead submits there is no clear evidence establishing Mr Griffiths intended to hold his land or any part of the land on trust for the Mallons, and there is no proven or accepted fraud. She submits that the Mallons have not satisfactorily explained their reasons for, or satisfactorily demonstrated, a prima facie case for those claims.
Conclusion in respect of caveatable interest
[77] In my view, the Mallons have established an arguable case that they have a beneficial interest in the property by way of a constructive trust and therefore a caveatable interest in the property. The reasons for this view are as follows:
(a)There is evidence that the purchase of the house and the building of the extension were carried out as a family joint venture project in order that the Mallons would have a place to live in their retirement and they invested their retirement savings in the property on that basis. This
19 Potter v Potter CA94/02, 12 June 2003 at [13].
20 MSL v JSK FC Papakura Fam-2003-055-186, 6 July 2007 at [59] and [64].
intention is recorded in a number of documents including the architect’s documents and the mortgage broker documents as set out at [61] to [64].
(b)There is clearly a pattern of documentation of loans and the Deed of Acknowledgment of Debt which indicate loans, rather than a beneficial interest being created in the property. However, given the overall circumstances of the Mallons’ desire to live in the property during their retirement, and the fact that these documents were all prepared by the parties without the benefit of legal advice, there is an arguable case that the Mallons’ intention was to record their investment in the property to secure their retirement accommodation.
(c)The PSA does deal with a number of family living arrangements and in that sense could be regarded as being created for that purpose. However, considering that it was written by Mrs Mallon without the benefit of legal advice, it was arguably intended to secure an interest in the property for the Mallons and in particular this is evidenced by the clauses in the PSA as set out at [67].
(d)Ms Morshead has pointed to the gift certificate and the tenancy agreement as indicating there was no intention by the parties to create a beneficial interest in the property in favour of the Mallons. In my view, the explanation of how these documents came into existence as part of the requirements for Mr Griffiths obtaining a loan from the bank to fund the extension is plausible.
(e)Ms Morshead advanced the argument that the Mallons could not make a claim to both a loan and a trust — their interest had to be one or the other. My view in relation to this is that even if the $66,000 recorded in the Deed could be treated as a loan (although this is an arguable issue as the Mallons, in the absence of legal advice, may have intended the document to record their interest in the property even though described as a deed of acknowledgment of debt) there is at least an arguable case
that the balance of the approximately $131,000 invested in the property by the Mallons is subject to a constructive trust imposed upon Mr Griffiths.
[78] As I have determined the Mallons have an arguable caveatable interest based on a constructive trust, it is not necessary for me to consider whether an equitable mortgage was created. However, I will comment on this briefly to the extent that in my view the evidence falls short of creating an equitable mortgage. In my view, the Deeds and PSA do not establish an equitable mortgage. Ms Boddé-Phillips referred me to the decision in Jiang v Highrise Apartments Limited in support of her argument that the documents between the Mallons and Mr Griffiths created an equitable mortgage.21 In my view, that decision does not assist as the language used in the Jiang documents was very different to the language used in the present case, with specific references to “security” and “mortgage” being influential in Associate Judge Gardiner’s decision.22 This gave rise to a reasonable argument that the documents conferred an equitable charge or an equitable mortgage over the relevant properties. There is not such language in the documents between the Mallons and Mr Griffiths.
Should the Court exercise its residual discretion to remove the caveat or allow it to lapse?
[79] As noted at [55], the discretion to remove or lapse a caveat must be exercised cautiously and the Court must be completely satisfied removal would not prejudice the caveator’s legitimate interests. In this instance, given the Family Court proceedings are extant in relation to Ms Mead, and that the property may need to be sold to achieve any division of relationship property ultimately ordered by the Family Court, removing the caveat would clearly be prejudicial to the Mallons and their claim of an equitable interest in the property and any capital gain on sale.
21 Jiang v Highrise Apartments Limited [2023] NZHC 249.
22 At [31].
Conclusion in respect of the exercise of the Court’s residual discretion to remove or lapse the caveat
[80] Accordingly, I am of the view that the Court should not exercise its residual discretion to remove or lapse the caveat.
Result
[81] As a result of the conclusions I have reached at [77] and [80], the application by the Mallons to sustain the caveat should be granted.
Costs
[82] The Mallons have sought costs against Mr Griffiths on an indemnity basis. In my view, the matters raised in the proceeding by Mr Griffiths in support of lapsing the caveat were sufficiently arguable that indemnity costs are not appropriate. Accordingly, costs are awarded to the Mallons on a 2B basis, as set out below.
Orders
[83]I make the following orders:
(a)That caveat (no.12565933.1) lodged by the Mallons against the property shall not lapse, pending further order of the Court.
(b)Costs are awarded to the Mallons as the successful party on a 2B basis, together with disbursements.
…………………………….. Associate Judge Taylor
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