Matthews v Memelink
[2012] NZHC 2284
•5 September 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2010-404-008520
CIV 2011-404-001400 [2012] NZHC 2284
BETWEEN CECILE ANN MATTHEWS Plaintiff
ANDHARRY MEMELINK AND C M S TRUSTEE LTD, AS TRUSTEES OF THE LINK TRUST NO. 1
Defendant
Hearing: 14-16, 30 May 2012 (final submissions received 13 July 2012) Appearances: D Rooke for Plaintiff
C J Tennet for Defendants
Judgment: 5 September 2012
(RESERVED) JUDGMENT OF ANDREWS J
This judgment is delivered by me on 5 September 2012 at 2:30pm pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
Solicitors:
David Rooke Law Office, DX EP84015, Botany Town Centre
Peter C Gilbert, DX SP23516, WellingtonCounsel:
C J Tennet, PO Box 12456, Thorndon, Wellington 6144
MATTHEWS V MEMELINK AND C M S TRUSTEE LTD, AS TRUSTEES OF THE LINK TRUST NO. 1 HC AK CIV 2010-404-008520 [5 September 2012]
Introduction
[1] These proceedings concern the ownership and occupation of a property at Pakuranga, Auckland (“the property”). As at 20 September 2006 the property was owned by Ms Matthews (applicant in the proceeding CIV-2010-404-8520 and plaintiff in the proceeding CIV-2011-404-1400) (“the plaintiff”) and her husband, John Hoyte, in equal shares. On 21 September 2006 the property was transferred to the defendants. At all material times the property was occupied by the plaintiff and Mr Hoyte.
[2] The plaintiff alleges that, at the time the property was transferred to the defendants, an agreement was entered into with the defendants, the terms of which included that the plaintiff and Mr Hoyte would have the right to live in the property for their lifetime, at no cost to them, and that Mr Hoyte would receive a salary of
$5,000 a month, also for his lifetime.
[3] The plaintiff and Mr Hoyte have lodged a caveat against the title to the property to protect their alleged interest. In the proceeding CIV-2010-404-8520 (“the caveat proceeding”), the plaintiff seeks to sustain the caveat. In the proceeding CIV-2011-404-1400 (“the substantive proceeding”), the plaintiff seeks a variety of remedies to give effect to the agreement allegedly entered into in September 2006.
[4] The defendants deny that any such agreement as alleged by the plaintiff exists. They counterclaim for an order that the plaintiff vacate the property, and for an order that she pay the defendants a fair market rental for the property, as from 21
September 2006, with interest.
[5] The two proceedings were heard together.
Background
[6] The following is an outline of the relevant background. The facts relating to matters at issue in the proceeding are set out in more detail when those issues are considered.
Mr Memelink and Mr Hoyte in business together
[7] In 1998, Mr Hoyte and the first-named defendant, Mr Memelink, each acquired minor shareholdings in two associated companies, Enterprise Tools Limited and Engineering Supplies Limited. These companies will be referred to as “ETL”. In early 1999 Mr Hoyte and Mr Memelink (or nominee) entered into an agreement to buy ETL’s business. Prior to settlement of that agreement, Mr Hoyte incorporated a company John Hoyte and Associates Limited (“JHAL”). Mr Hoyte held all 100 shares in JHAL. JHAL was the eventual purchaser of ETL’s business.
[8] On 20 April 1999 Mr Memelink and Mr Hoyte, as shareholders, entered into a shareholders’ agreement with JHAL. That agreement recited, as background, that Mr Hoyte currently held all of the 100 shares in JHAL, that JHAL was party to the agreement to purchase ETL’s business, that Mr Hoyte and Mr Memelink had agreed to sell their shares in ETL, that moneys owed to Mr Hoyte and Mr Memelink were to be set off against the purchase price payable by JHAL for ETL’s business, and that it had been agreed between Mr Hoyte and Mr Memelink that Mr Memelink would acquire a shareholding in JHAL on the terms and conditions set out in the agreement.
[9] The shareholders’ agreement then provided that upon JHAL acquiring ETL’s business, Mr Memelink would acquire 17 shares in JHAL, with Mr Hoyte retaining the remaining 83 per cent, and that their respective shareholdings reflected their capital contributions to JHAL.
[10] The shareholders’ agreement went on to provide as follows:
3. FUNDING
3.01 It is acknowledged that the balance of the purchase price required by [JHAL] being $230,000.00 provided to [JHAL] by BNZ is provided on the basis of:
(1) A debenture granted by [JHAL] in favour of BNZ;
(2) Unlimited personal guarantees from [Mr Hoyte and
Mr Memelink] to BNZ;
(3) A mortgage granted by [Mr Hoyte] over his property at 4 Suzetta Place, Pakuranga.
3.02 It is acknowledged by [Mr Hoyte and Mr Memelink] that further funding of $230,000.00 will be required to enable [JHAL] to expand and grow.
3.03 [Mr Memelink] agrees that he will provide the further funding which is anticipated to be required not later than three months of the date of this agreement.
3.04 [Mr Memelink] will, when called upon to do so by [Mr
Hoyte] provide either:
(1) An advance to [JHAL] of $230,000.00;
(2) Sufficient security to BNZ so that it will provide to
[JHAL] $230,000.00.
3.05 Upon [Mr Memelink] providing such advance or security in accordance with paragraph 3 above [Mr Hoyte] shall transfer to [Mr Memelink] 33 shares in [JHAL] so that [Mr Hoyte and Mr Memelink] own 50% of the shares each in [JHAL].
[11] The shareholders’ agreement was executed by Mr Hoyte and Mr Memelink in their personal capacities, and as directors of JHAL. I record here that Mr Memelink was critical in his evidence of the circumstances under which the agreement was signed, and whether it accurately reflected his and Mr Hoyte’s respective contributions. However, it appears that he accepted the agreement, as he later said that Mr Hoyte had not complied with the agreement
Alleged agreement between Mr Memelink and Mr Hoyte in November 2003
[12] Differences developed between by Mr Hoyte and Mr Memelink concerning, among other things, compliance with the shareholders’ agreement. Mr Hoyte claimed that Mr Memelink had refused to provide an unlimited guarantee for the BNZ’s initial advance of $230,000. As a result, he said, the BNZ refused to continue to provide finance, and in 2001, replacement funding was arranged with the ASB Bank. The funding from ASB Bank was secured against the property. Mr Hoyte also claimed that Mr Memelink failed to provide further funding of $230,000 (or security for further bank funding), in accordance with the shareholders’ agreement.
[13] Mr Memelink claimed that he had contributed cash and stock into JHAL, significantly in excess of $230,000, but Mr Hoyte had refused to transfer shares to him, and refused to record his 50 per cent shareholding in JHAL in the company’s
records. Mr Memelink also claimed that he had not been paid for stock sold to JHAL, and that Mr Hoyte had agreed to pay him $64,000 for that stock. Mr Memelink said he issued proceedings against Mr Hoyte, but later reached agreement that JHAL would assume liability for the debt.
[14] Mr Memelink further claimed that Mr Hoyte was using company funds to pay personal expenses, such as life insurance, credit card costs, travel, and house maintenance, and that Mr Hoyte was using company funds to make payments on the borrowings secured against the property. Mr Memelink said that he discovered that Mr Hoyte had established an overdraft, which had reached $90,000 because of Mr Hoyte’s personal expenses. Mr Memelink said he arranged to pay this off from his own resources, in order to avoid the cost of interest, but it soon reached a similar level.
[15] Mr Memelink said that in late 2003 he had lost faith and confidence in Mr Hoyte. At the same time, he said, he heard rumours that Mr Hoyte was intending to move all of the stock he had put into JHAL out of the company’s premises at Petone, Lower Hutt. He said that early on the morning of Saturday 29 November 2003 he, and his then partner, Ms Terpstra, arrived at the company’s premises to find Mr Hoyte loading stock (including stock Mr Memelink said was his own property) into a container.
[16] Mr Memelink said that, after discussion with Mr Hoyte, agreement was reached that the stock could be moved, on the basis of a written agreement being entered into, that Mr Hoyte would disclose all bank accounts and assume personal liability for payment of money owed to Mr Memelink.
[17] Mr Memelink said that Ms Terpstra typed out an agreement (“the November
2003 agreement”), which was signed by Mr Hoyte, as follows:1
29th November 2003.
I John Hoyte officially recognize Harry Memelink as a 50% shareholder of
John Hoyte and Associates Limited (Enterprise Tools). Balance out as
1 Link Technology 2000 Ltd, which is referred to in the November 2003 agreement, is a company
controlled by Mr Memelink. JHAL was trading as “Enterprise Tools”.
according to original agreement (i.e. Stock & Cash input for balance out of shareholding still to be done.)
I John Hoyte agree to grant a mortgage and guarantee over my house at 4
Suzetta Place, Pakuranga, Auckland, life insurance policies and personal guarantee to Harry Memelink, Link Technology 2000 Ltd. and associated
companies, as security for any debt that John Hoyte and Associates Limited
(Enterprise Tools) owe. This includes advanced monies, interest, stock, outstanding invoices, rent, power etc.
As discussed and agreed access to all bank accounts and financial information will continue to be given for both prior and ongoing records regarding John Hoyte and Associates Limited (Enterprise Tools).
I also understand and agree that the previous outstanding debt prior to the full take over/buying of Enterprise Tools by John Hoyte and Associates Limited, is to be pursued by Harry and Link Technology directly with Engineering Supplies or directors there of. This outstanding debt is separate to the debt of John Hoyte and Associates Limited. (Enterprise Tools).
Signed: [Signature]
Mr John Hoyte Witnessed: [Signature]
Kirsten Terpstra. 9.46am (29th November 2003)
(At premises of Link Technology 2000 Limited. 417 Cuba St, Alicetown. Lower Hutt)
[18] Mr Hoyte said no such agreement was signed. He said he had signed a handwritten document a short time before that, to the effect of the first paragraph in the document of 29 November 2003. He said he would never have signed such a document.
Caveats registered by Mr Memelink and Link Technology 2000 Limited
[19] On 5 December 2003 a caveat by Mr Memelink’s company Link Technology
2000 Limited (“Link Technology”) was registered against the title to the property, claiming an interest pursuant to the November 2003 agreement. On 11 December
2003 a caveat by Mr Memelink was registered against the property, claiming the same interest as that claimed by Link Technology.
[20] Mr Hoyte agreed that the caveats had been registered, but asserted they were invalid, as it is not claimed by the defendants that the plaintiff had signed any agreement to mortgage. However, no steps were taken to remove the caveats.
Merger of businesses
[21] During 2004, Mr Hoyte became involved in discussions to merge JHAL with two companies, Global Mechanical Supplies Ltd (“GMS”) and Geoffrey Shortt Ltd (“Short”). The merger was achieved through the incorporation of a new company, GSE Group Ltd (“GSE”).
[22] GSE took a lease of premises in Penrose, Auckland. Mr Hoyte signed the lease as guarantor. GSE failed to meet payments under the lease and a claim was made against Mr Hoyte as guarantor. After judgment was entered against him, Mr Hoyte was adjudicated bankrupt on 27 January 2009.2 Mr Memelink has held a controlling interest in GSE since February 2005.
Mortgagee action by ASB Bank
[23] On 3 August 2006 solicitors acting for the ASB Bank served a Property Law Act Notice under s 92 of the Property Law Act 1952 (“the PLA notice”) on the plaintiff and Mr Hoyte. The notice recorded that the plaintiff and Mr Hoyte were in default under the mortgage of the property, in that they had failed to pay $92,031.84, which had been demanded in a letter of demand dated 28 July 2006.
[24] Mr Hoyte acknowledged receiving the PLA notice. The plaintiff said she had not received it, and had not read the notice sent to Mr Hoyte.
Sale of the property to the defendants
[25] Mr Memelink received a copy of the PLA notice as the holder of a caveat against the title to the property. While Mr Hoyte was concerned that he and the
plaintiff could lose their home if the property went to a mortgagee sale,
2 Mr Hoyte was discharged from bankruptcy on 13 February 2012.
Mr Memelink was concerned that he stood to lose the ability to recover money he and Link Technology were owed by Mr Hoyte, by enforcing the November 2003 agreement. After the PLA notices were served, there were discussions and email correspondence between Mr Hoyte and Mr Memelink as to the possibility of saving the equity in the property.
[26] On or about 9 August 2006, an agreement for sale and purchase for the property (“the 2006 agreement for sale and purchase”) was signed by the plaintiff and Mr Hoyte as vendors, and Link Trust No. 1 (“the Link Trust”) as purchaser.3
The purchase price was stated as being $570,000, and the date of possession as 31
August 2006, on which date the purchase price was to be paid in full.
[27] On 12 September 2006, Mr Hoyte’s solicitors wrote to Mr Hoyte’s then solicitors, advising that the purchaser was in a position to complete settlement. Settlement was completed on 21 September 2006, and setting out the basis of which settlement was to proceed.
[28] It appears from the settlement statements prepared by the respective solicitors that Mr Memelink obtained mortgage funding of $400,118. The sum of $232,569.34 was required to discharge the existing ASB mortgage and cover lawyers’ fees and disbursements. Following deductions for rates and other incidental costs, the sum of
$162,548.66 was paid to Mr Memelink.
Alleged agreement between Mr Hoyte and Mr Memelink at the time the property was sold
[29] Mr Hoyte claimed that at the same time as agreement was reached to sell the property to the defendants, he and Mr Memelink reached a further agreement (“the property agreement”) as to, among other things, continued occupation of the property by himself and the plaintiff. Mr Hoyte said that the property agreement was reached in a series of telephone discussions and email exchanges between 17 August
and 20 September 2006. He said that the terms of the property agreement included:
3 The trustees of Link Trust No. 1 (one of whom is Mr Memelink) are the defendants in the proceedings.
(a) Title to the property would be held in trust for the use of the plaintiff and himself;
(b)He and the plaintiff would have the right to lifetime occupancy of the property at no cost to them;
(c) GSE would meet all the obligations as borrowers and mortgagors on loans from ASB secured against the property;
(d)GSE would pay all outgoings on the property, health insurance for himself and the plaintiff;
(e) GSE would make him a payment of $20,000, and pay him a salary of
$5,000 a month for his lifetime, and provide a motor vehicle for his use;
(f) The plaintiff would be appointed a director of GSE; and
(g)He and the plaintiff could take back title to the property in return for their shares in GSE, when Mr Hoyte wanted to retire.
[30] Mr Memelink said that no such agreement was ever reached.
Events after September 2006
[31] The plaintiff and Mr Hoyte continued to occupy the property. They did not enter into any form of rental agreement, or pay any rent. A lease agreement was entered into between Link Trust No. 1 and GSE, pursuant to which the property was leased to GSE for three years, with two rights of renewal, each of three years. The specified rental was $480 a week, plus GST, subject to “rent review from time to time”.
[32] On 20 May 2008, Mr Memelink sent Mr Hoyte an email in which he noted that he had not had a response from Mr Hoyte as to paying ongoing rent on the property. Mr Memelink sent Mr Hoyte a further email on 3 June 2008, recording
that he had asked “many times” for Mr Hoyte to sign a rental agreement. Mr Hoyte’s response on 10 June 2008 was that he was “anxious to conclude this matter”, and wished to purchase the property, not rent it. On 12 June 2008, Mr Memelink advised Mr Hoyte by email that he intended to put the property on the market, as he needed to get interest, rates, and insurance paid.
[33] On or about 15 June 2008, Mr Memelink had trespass notices served on the plaintiff and Mr Hoyte. Further trespass notices were served on 23 June 2008. The trespass notices were rejected by Mr Hoyte and the plaintiff. In their response to the trespass notices, they referred to the agreement they claimed was reached in September 2006.
[34] The defendants applied to the Tenancy Tribunal for an order against the plaintiff and Mr Hoyte. The application was dismissed on 19 August 2008, on the grounds that, as no tenancy agreement had been signed, and no rent paid by the plaintiff or Mr Hoyte, the property was not subject to a “tenancy” as defined in the Residential Tenancies Act 1986.4 Accordingly, the Tribunal considered it lacked jurisdiction to deal with the application.
[35] The defendants made a further application to the Tenancy Tribunal in 2010 for an order for possession of the property or, in the alternative, for an order determining a market rental for the property. On 10 June 2010, the Tribunal ordered that that proceeding was to be transferred to the District Court.
[36] On 13 October 2008 a caveat was lodged against the title to the property, on behalf of the plaintiff and Mr Hoyte, claiming an interest as beneficiaries by virtue of a cestui que trust, arising out of the agreement claimed to have been reached in September 2006. That caveat subsequently lapsed. On 1 December 2009, pursuant to an order of this Court made on 4 November 2009,5 the plaintiff lodged a second caveat (8356684.1), identical to the first caveat. On 21 December 2010, the
defendants applied to the Registrar-General of Land, to lapse the second caveat. The
4 “Tenancy” is defined in s 2 of the Residential Tenancies Act as “the right to occupy the premises
... in consideration for rent”.
5 Matthews v Memelink and CMS Trustees Limited HC Auckland CIV-2009-404-6303, 4
November 2009.
plaintiff filed the caveat proceeding on 23 December 2010. The substantive proceeding was filed on 11 March 2011.
The plaintiff ’s claims and defendants’ claim and counterclaims
[37] In the caveat proceeding, the plaintiff seeks an order that caveat 8356684.1 not lapse.
[38] In the substantive proceeding, the plaintiff alleges that the 2006 agreement for sale and purchase was only partially settled by the defendants in September 2006, and that the defendants failed to take the steps required to complete settlement. The plaintiff alleges that $337,430.66 of the purchase price remains unpaid. By way of relief, the plaintiff seeks:
(a) an order for specific performance directing the defendants to perform the terms of the 2006 agreement for sale and purchase;
(b)an order by way of declaration that the defendants hold the property in trust for the plaintiff and Mr Hoyte;
(c) an injunction restraining the defendants from taking any steps to defeat the rights of the plaintiff and Mr Hoyte to the property; and
(d) damages for loss suffered by the plaintiff and Mr Hoyte, including:
(i)all outgoings on the property, and their health insurance premium;
(ii)salary of $5,000 per month for Mr Hoyte, and the use of a motor vehicle; and
(iii) general damages for inconvenience and distress.
[39] In their amended statement of defence and counterclaim in the substantive
proceeding the defendants, after denying the plaintiff’s claim, counterclaim for:
(a) a declaration that the property is and remains the exclusive property of the defendants; and as a further and alternative counterclaim:
(b) an order that the plaintiff and her family vacate the property;
(c) an order that the plaintiff pay the defendants a fair market rental from
21 September 2006 to the present day; and
(d) interest on the rental arrears.
Issues to be determined
[40] The following issues require determination:
(a) Can the plaintiff sue on behalf of Mr Hoyte?
(b) Did Mr Hoyte sign the November 2003 agreement and, if so, what are
the implications for the plaintiff’s interest in the property?
(c) What were the terms of the September 2006 agreement for sale and purchase? In particular, what agreement was there regarding payment of the purchase price?
(d) Did Mr Hoyte and Mr Memelink make the property agreement in
September 2006, in the terms asserted by the plaintiff and Mr Hoyte? (e) What orders should be made?
Evidence
[41] Evidence was given for the plaintiff by Mr Hoyte, Mr Hoyte’s son Brett Hoyte, and the plaintiff. For the defendants, evidence was given by Mr Memelink, Ms Terpstra, and Mr Allan Dewsnap. A brief of evidence of Mr John Tomlinson was admitted by consent.
[42] It is appropriate to record at this point that a great deal of the evidence and cross-examination of the plaintiff, Mr Hoyte, Mr Memelink, and Ms Terpstra was concerned with allegations by Mr Memelink and Ms Terpstra that the plaintiff and Mr Hoyte had wrongfully taken substantial sums of money from JHAL and GSE, and that Mr Hoyte had acted in breach of his duties of good faith in his dealings in respect of (in particular) GSE. For the purposes of this proceeding, I am not required to decide whether those allegations are proved. That evidence was, therefore, not relevant to the issues that are to be determined.
Can the plaintiff sue on behalf of Mr Hoyte?
Introduction
[43] Mr Hoyte is not a party to either of the proceedings. At the time each proceeding was issued he was an undischarged bankrupt. Pursuant to s 101 of the Insolvency Act 2006, all of his property, and any powers that he could have exercised in respect of any property, vested in the Official Assignee. It was not contended by the plaintiff that the Official Assignee’s consent had been sought to Mr Hoyte’s being a party to the proceedings. As a consequence, Mr Hoyte had no standing to bring proceedings.
[44] Mr Hoyte was discharged from bankruptcy on 13 February 2012. Did his discharge alter his standing to bring proceedings, or the plaintiff’s ability to bring proceedings on his behalf?
Submissions
[45] For the plaintiff, Mr Rooke submitted that the plaintiff had claimed on behalf of Mr Hoyte, pursuant to r 4.24 of the High Court Rules. Mr Tennet submitted that r 4.24 was not available in the present case.
Discussion
[46] Rule 4.24 provides:
4.24 Persons having same interest
One or more persons may sue or be sued on behalf of, or for the benefit of,
all persons with the same interest in the subject matter of a proceeding—
(a) with the consent of the other persons who have the same interest; or
(b) as directed by the court on an application made by a party or intending party to the proceeding.
[47] As noted earlier, at the time each of the two proceedings were issued, Mr Hoyte was an undischarged bankrupt, and all his property vested in the Official Assignee. Under r 4.24, the plaintiff could sue on behalf of Mr Hoyte only if she and Mr Hoyte had “the same interest in the subject matter of the proceeding”. As an undischarged bankrupt, whose interest in the property had vested in the Official Assignee, Mr Hoyte had no interest in the property. Accordingly, it cannot be said that he had the same interest in the property as the plaintiff. At the time the proceedings were issued, r 4.24 did not allow the plaintiff to sue on behalf of Mr Hoyte.
[48] That position was not altered by Mr Hoyte’s discharge from bankruptcy. Under s 304 of the Insolvency Act 2006, upon discharge, a bankrupt is released from all debts provable in the bankruptcy, except certain debts listed in s 304(2) (which are not relevant for present purposes). In Official Assignee v Probert,6 Master Williams QC (as he then was) held in a judgment delivered on 12 November 1990 that a discharge from bankruptcy:
... does not terminate both the right and the obligation of the Official Assignee to continue to administer the bankrupt’s estate. Those rights and obligations, by statute, continue until the granting of the application to the Court which the Official Assignee is required to make for an order releasing him from the administration of the estate pursuant to s 133(1). ... There is no section divesting the Official Assignee of [the bankrupt’s] property at any stage, certainly not on the bankrupt’s discharge, whether automatic or following application.
[49] Official Assignee v Probert was decided under the Insolvency Act 1967. Under the Insolvency Act 2006, an application to release the Official Assignee is made under s 408. It was not contended at any stage in the present proceedings that any order had been made under s 408.
[50] In Official Assignee v 15 Insoll Avenue Ltd,7 Paterson J referred to Official
Assignee v Probert and held that the Official Assignee was entitled to bring
6 Official Assignee v Probert [2001] 2 NZLR 506 (HC).
7 Official Assignee v 15 Insoll Avenue Limited [2001] 2 NZLR 492 (HC) at [30].
proceedings in respect of property in which a bankrupt had claimed a beneficial interest at the date of his adjudication, notwithstanding his subsequent discharge from bankruptcy.
[51] I find, therefore, that the plaintiff cannot sue on behalf of Mr Hoyte.
The November 2003 agreement
Introduction
[52] The text of the agreement has been set out above, at [17]. Briefly, the agreement provided that Mr Hoyte recognised Mr Memelink as a 50 per cent shareholder in JHAL, and that Mr Hoyte agreed to grant a mortgage over the property, and to guarantee any debt owed by JHAL to Mr Memelink or his company, Link Technology.
[53] The November 2003 agreement was relied on by Mr Memelink and Link Technology when they lodged caveats against the title to the property early in December 2003. The ability to enforce the agreement was, Mr Memelink said, an impetus for the discussions which led to the 2006 agreement for sale and purchase.
Submissions
[54] Mr Rooke submitted that the November 2003 agreement was never signed by Mr Hoyte. He referred to Mr Hoyte’s evidence that he had signed a handwritten document agreeing to transfer shares to Mr Memelink, but would never have signed any document agreeing to mortgage the property or guarantee payment of JHAL’s debts. Mr Rooke also referred to the evidence of Brett Hoyte, who said he was at Link Technology’s premises at Petone with his father on 29 November 2003, had his father in his sight all the time, and never saw him sign an agreement.
[55] Further, Mr Rooke submitted that the November 2003 agreement was not signed by the plaintiff, and there was no evidence that she had agreed to a mortgage over the title to the property.
[56] Mr Tennet submitted that the evidence of Mr Memelink and Ms Terpstra, that Mr Hoyte signed the November 2003 agreement in the office at Link Technology’s premises, should be accepted. He submitted that Mr Hoyte’s evidence was equivocal: in his supplementary brief of evidence he said “I do not consider I would ever have signed such a statement”. Mr Tennet also submitted that Brett Hoyte’s evidence was unreliable, as it was as to events which had occurred more than eight years ago, but which he had first been asked to recall shortly before the hearing.
[57] Mr Tennet further submitted that although the defendants had expressly referred to the November 2003 agreement in their statement of defence and counterclaim (and their amended pleading), the plaintiff had called no expert evidence to support Mr Hoyte’s assertion that he had not signed the agreement.
Discussion
[58] Mr Hoyte’s evidence was not as equivocal as Mr Tennet submitted: in answer to a question in cross-examination Mr Hoyte said that he did not sign the November
2003 agreement. Mr Hoyte’s evidence was supported by the plaintiff who said, again in cross-examination: “Well it doesn’t look like his signature”, “It just doesn’t look like it”, “I don’t think that’s his signature, he has more dots than that”, “No that doesn’t look like his signature”.
[59] However, the signature on the November 2003 agreement appears (to a non- expert eye) to be that of Mr Hoyte, when it is compared with his signature on other documents – for example, the 2006 agreement for sale and purchase, and documents filed in the proceedings. In the absence of any expert evidence that the signature on the November 2003 is a forgery (and none was adduced), it is reasonable to infer that the signature is Mr Hoyte’s. I conclude that Mr Hoyte signed the agreement.
[60] My conclusion that Mr Hoyte signed the November 2003 agreement is supported by the fact that he did not challenge the caveats lodged by Mr Memelink and Link Technology in reliance on the agreement. Although Mr Hoyte said he did not recall receiving notice that the caveats had been lodged, he did not positively assert that he had not received notice. I am satisfied that he, as a registered
proprietor, would have been given notice of the caveats in the normal course, by the Registrar-General of Land. Further, I am satisfied that, having received such notice, Mr Hoyte would have strongly objected to, and formally challenged, the caveats, if it had been the case that he had not signed the agreement to mortgage referred to in the caveats.
[61] That conclusion raises the further question of what was the implication, if any, of the November 2003 agreement on the plaintiff’s interest in the property.
[62] The plaintiff and Mr Hoyte were recorded on the title to the property as owners “in equal shares”. The words “in equal shares” are words of severance: that is, they indicate that Mr Hoyte and the plaintiff took distinct and separate shares in the property. They held the property, therefore, as tenants in common in equal shares, rather than as joint tenants. Accordingly, Ms Matthews held a separate half interest, which Mr Hoyte could not mortgage by entering into the November 2003
agreement.8
The September 2006 agreement for sale and purchase
Introduction
[63] The agreement for sale and purchase was made on the standard form agreement approved by the Real Estate Institute of New Zealand and the Auckland District Law Society. It named Mr Hoyte and the plaintiff as “vendor” and the Link Trust as “purchaser”. The purchase price was stated as $570,000, to be paid in full on settlement date, 31 August 2006. The only stated condition was that the purchaser was to obtain finance by 18 August 2006.
[64] Both parties were represented by solicitors for the sale and purchase. Mr Memelink and the Link Trust were represented by Collins & May, a Lower Hutt firm. The plaintiff and Mr Hoyte were represented, initially, by Ms McMahon of Knight Coldicutt McMahon Butterworth, and subsequently, by the Conveyancing
Shop, both Auckland firms.
8 See Laws of New Zealand Land Law (online ed) at 53.
[65] On 12 September 2006 Collins & May wrote to Knight Coldicutt McMahon
Butterworth, as follows:
HOYTE & MATTHEWS – LINK TRUST (NO. 1) – 4 SUZETTA PLACE, PAKURANGA
1. We write further to previous correspondence.
2.We thought that we would let you know that Link Trust (No. 1) is now in a position to complete settlement of this matter. We are now entirely in your hands and would appreciate your urgent advice once you are in a position to pass clear title.
3.We understand from the purchaser that settlement will be completed on the following basis:
(a) We will pay to you sufficient funds for you to attend repayment of the existing indebtedness under Mortgage D607761.2 to ASB Bank Limited. We suggest on the morning of settlement you forward to us a copy of the ASB Bank Limited repayment statement. That will constitute the settlement statement.
(b) We will require your undertaking that there is no arrears of Auckland City Council, Auckland Regional Council and water rates.
(c) Prior to settlement you are to forward your firms undertaking that in consideration of our paying into your trust account by bank cheque the amount to attend repayment of ASB Bank Limited, that you will immediately forward to us in registerable form the signed Transfer and Discharge of Mortgage D607761.2.
(d) Prior to settlement please confirm that Charging Order
5817719.1 has expired.
(e) Prior to settlement you are to confirm on behalf of the vendor that our firm is authorised to release the balance of the purchase price directly to the purchaser by way of a set- off in respect of the outstanding debts due pursuant to the two caveats registered against the Certificate of Title.
4.We are holding a withdrawal of caveat 5836008.1 and 5827690.1 on our file and you do not need to forward them to us.
5.Further, we should point out to you that settlement will take place upon the abovementioned basis but without prejudice to any outstanding balance of debt due by the vendor to Harry Memelink and Link Technology 200 Limited.
6.We look forward to hearing from you when you are in a position to settle.
Yours faithfully ...
[66] At some point between 12 and 21 September 2006 Knight Coldicutt McMahon Butterworth ceased acting for the plaintiff and Mr Hoyte, and the Conveyancing Shop commenced acting. Mr Hoyte’s evidence was that Ms McMahon was “unhappy with the set up” and would not act in the matter. He said that Mr Memelink “arranged for us to go to [the Conveyancing Shop]”.9 Mr Hoyte and the plaintiff signed a memorandum of transfer on 20 September 2006, before Ms Inglin, a solicitor at the Conveyancing Shop.
[67] On 21 September 2006 the Conveyancing Shop wrote to Collins & May, enclosing a settlement statement. The letter was as follows:
HOYTE AND MATTHEWS – LINK TRUST NO 1
Property: 4 SUZETTA PLACE
As discussed we act for the purchasers.
In anticipation of settlement today, 21 September 2006, Bell Gully have let me have a faxed copy of the discharge of mortgage and have undertaken to forward the original of same to me on settlement. Please note that Bell Gully require settlement to be effected by 3.30pm. They are forwarding me their settlement statement shortly. Copy of our deposit slip and settlement procedure herewith.
Client has advised that your client will be paying all costs for this transaction including the rates and water. In the circumstances we propose to settle the matter without providing any undertakings as to the rates and water. The outstanding Manukau City Council rates are $2244.92, and Auckland Regional Council is $249.61. We do not know the status of the water account as yet.
We hereby enclose the copies of the following documents:
1. The signed transfer.
2. The discharged mortgage.
Upon completion of settlement we undertake to provide the originals of the abovementioned documents together with our cheque for $75 for agency and disbursements for the discharge of the mortgage.
Please acknowledge receipt of documents per fax in due course. Yours faithfully
...
9 Mr Memelink denied that he had arranged for the Conveyancing Shop to represent the plaintiff and Mr Hoyte, but that issue does not need to be resolved.
[68] The settlement statement set out the following:
RE: John Hoyte & Cecile Matthews to H Menenlink [sic]
Settlement Statement
Balance required to settlement $231,844.34
Fees and Disbursement $ 700.00
Special Water Reading change [sic] $ 25.00
Balance required from client $232,569.34
Total $232,569.34 $232,569.34
The settlement date is on 21st Sep, 2006, we require cleared funds in our account on or before this date. The balance required from you can be transferred electronically to our trust account as per attached deposit slip or alternatively you may be bring a bank cheque (not a personal cheque) to our offices.
EE&OE Conveyancing Shop
[69] Settlement was completed on 21 September 2006. On 22 September 2006
Collins & May sent a statement to the Link Trust (care of Mr Memelink) concerning the purchase. The statement recorded:
PURCHASE 4 SUZETTA PLACE, PAKURANGA
DR
Conveyancing Shop – being balance required to settle purchase in accordance with attached settlement statement
Our costs and disbursements – as per attached account
Retention moneys – pending payment of rates
CR
$232,569.34
$ 1,555.00
$ 5,000.00
ASB Bank Limited – mortgage advance $440,118.00
Self on account – 21.9.2006 – costs $ 1,555.00
Balance due to you $162,548.66
$401,673.00 $401,673.00
E.&O.E.
...
[70] Mr Memelink said that $162,548.66 (the balance of the mortgage funding after repayment of the ASB mortgage) was used to make the following payments:
(a) $10,000 to the plaintiff, to pay off a credit card debt;
(b) $25,000 to the defendants to clear an overdraft and outstanding rates; (c) $2,000 to reduce Link Technology 2000 Limited’s overdraft;
(d) A further $10,000 to the plaintiff, for a credit card debt; (e) $20,596.05 to Ms Terpstra, to pay a credit card debt;
(f) $70,000 to S H Locke, to reduce indebtedness to that company; (g) $150 to an employee; and
(h) $8,500 to reduce GSE’s overdraft.
[71] I observe that these payments in fact total $146,246.05, not $162,548.66.
[72] Bank statements produced to the Court show that $10,000 was direct credited by GSE to the plaintiff’s bank account on 21 September 2006, and $10,000 was direct credited to a joint account of the plaintiff and Mr Hoyte on 28 September
2006.10 A further $3,000 was direct credited by GSE to the plaintiff’s account, and
$500 to the joint account, on 29 September 2006.
[73] Mr Memelink said that he retained the balance of the purchase price (approximately $170,000) to pay Mr Hoyte’s debts to himself and his company, pursuant to the November 2003 agreement.
[74] Mr Hoyte’s evidence was that he did not see the letter of 12 September 2006
to Knight Coldicutt McMahon Butterworth at the time, that he did not remember
10 $10,000 (in two payments of $5,000) was direct credited to Mr Hoyte’s account on 26
September 2006, but these payments were re-credited to GSE on 27 September 2006.
whether the solicitor at the Conveyancing Shop had received a file from Ms McMahon, and that he never received a report on settlement from the Conveyancing Shop. His evidence was that he and the plaintiff saw the solicitor on two occasions.
[75] However, Mr Hoyte also said, in answer to questions in cross-examination, that he had given the Conveyancing Shop instructions that the sale was to go through, and that he had picked up an envelope of papers from Knight Coldicutt McMahon Butterworth (left for him to collect) and taken it to the Conveyancing Shop. It was clear that this was before settlement was completed.
Submissions
[76] Mr Rooke submitted that the correspondence and statements referred to above demonstrated that the defendants had only partially settled the agreement for sale and purchase. That is, as against the agreed purchase price of $570,000,
$232,569.34 went to discharge the ASB mortgage and to meet other costs, leaving a balance of $337,430.66 of the purchase price unpaid. He submitted that, even if the defendants were entitled to retain moneys for payment of debts owed to Mr Memelink and Link Technology (pursuant to the November 2003 agreement) that could not affect the plaintiff, as her separate half share of the property could not be charged by way of the November 2003 agreement. He submitted that the plaintiff’s half share had been unlawfully retained by the defendants.
[77] Mr Rooke further submitted that there was no evidence that Knight Coldicutt McMahon Butterworth provided the confirmation sought by Collins & May at paragraph 3(e) of their letter of 12 September 2006, or that the Conveyancing Shop was provided with that letter. He also submitted that, notwithstanding that the agreement for sale and purchase referred only to “payment in full” of the purchase price of $570,000, the Conveyancing Shop had completed settlement for the amount required to discharge the ASB mortgage, only. He submitted that this was consistent with the plaintiff’s understanding that the purpose of the transaction was solely to refinance the ASB mortgage.
[78] Mr Tennet submitted that the balance of the purchase price (after discharge of the ASB mortgage, rates, etc) was, by agreement, used to prop up GSE including, in particular, a significant payment to a creditor, S H Locke. He referred also to Mr Memelink’s evidence that the remaining balance (approximately $170,000) was to be retained for payment of debts owed to Mr Memelink and his associated entities.
Discussion
[79] I do not accept Mr Hoyte’s evidence that he knew nothing about Collins & May’s letter of 12 September 2006. That evidence is inconsistent with his evidence that Ms McMahon was “unhappy with the set up”. It is unlikely that he could have known that Ms McMahon was “unhappy” without being aware of what the “set up” was – that is, the transactions and the basis on which the purchase price would be paid. I find that he was aware of Collins & May’s letter.
[80] None of the solicitors gave evidence. However, in the light of the following:
(a) the explicit requirement for confirmation as to the basis on which
settlement was to proceed, as set out in Collins & May’s letter of 12
September 2006;
(b)Mr Hoyte’s evidence that he collected an envelope of papers from Knight Coldicutt McMahon Butterworth and delivered it to the Conveyancing Shop, before settlement;
(c) Mr Hoyte’s evidence that he instructed the Conveyancing Shop that settlement was to proceed;
(d) my finding that Mr Hoyte was aware of Collins & May’s letter of 12
September 2006; and
(e) the fact that settlement proceeded on the basis outlined in Collins &
May’s letter,
I am satisfied on the balance of probabilities that, insofar as Mr Hoyte’s separate share in the property is concerned, a variation to the agreement for sale and purchase was agreed, such that his share of the balance of the purchase price was paid or applied in accordance with the terms set out in Collins & May’s letter of 12
September 2006.
[81] However, I am not satisfied that the variation to the agreement for sale and purchase extended to the plaintiff’s separate interest in the property. At [62], above, I concluded that the agreement to mortgage in the November 2003 agreement did not affect the plaintiff’s half share. I am not satisfied that the evidence supports a finding that the plaintiff agreed to her separate share of the purchase price being used to meet debts for which Mr Hoyte was responsible. There was no evidence of any agreement that she guaranteed payment of such debts.
[82] The plaintiff was, however, responsible for her own debts. I have noted at [72], above, that $10,000 was direct credited to her bank account from GSE’s account on 21 September 2006, and a further $3,000 was direct credited to her account on 29 September 2006. Mr Memelink’s evidence was that those payments were made from the balance of the new mortgage funding, after the ASB mortgage was discharged, and was for the purpose of clearing the plaintiff’s credit card debt. Those payments were for the plaintiff’s benefit, and should be deducted from any balance of the purchase price due to her.
[83] I have also noted at [72], above, that $10,000 was direct credited to the plaintiff and Mr Hoyte’s joint account on 28 September 2006, and a further $500 direct credited to the joint account on 29 September 2006. Both of those payments have “J Hoyte” entered in the “particulars” column of GSE’s bank statements. I am, therefore, satisfied that those payments were for Mr Hoyte’s benefit and do not affect the plaintiff’s share of the balance of the purchase price.
[84] I therefore find that the plaintiff succeeds in her claim based on partial settlement of the agreement for sale and purchase, in respect of her half share, only, and is entitled to be paid $155,715.33, as follows:
Purchase Price $570,000.00
Less ASB mortgage, rates etc $232,569.34
$337,430.66
Plaintiff’s half share $168,715.33
Less payments for plaintiff’s benefit $13,000.00
$155,715.33
[85] That finding is only a preliminary one, as it is necessary to consider, first, the
plaintiff’s claim as to the property agreement, and then the defendants’ counterclaim.
The alleged property agreement
Introduction
[86] The plaintiff claims that the property agreement was made between Mr Hoyte and Mr Memelink in the course of oral discussions and email correspondence between 17 August and 20 September 2006.
[87] The emails referred to by Mr Hoyte were as follows (all as per originals):
(a) 17 August 2006, 10.51, Mr Memelink to Mr Hoyte (“email (a)”):
Hi john just to confirm our conversation, once the house is tranfered and the funds come through tha bank will be totally cleared and the balance put strat into GSE group, I would be happy to put the house into the ownership of GSE group and put arrangements in place to cover us both, kind regards
Harry
(b) 17 August 2006, 15.35, Mr Hoyte to Mr Memelink (“email (b)”):
Harry,
What I want is for you to send me an E Mail covering the points below.
I need to put a positive spin on this whole deal
You need to realise that for Cec – she sees the only she has – which is 1/2 the house – being sold, with no tangible return to us/her, and further more – no house in her name.
What I want is for a promise that an agreement will be signed assigning/selling the house to GSE, in lieu of shares, and with the option to swap the shares for the house.
That GSE will pay the mortgage/loan repayments
That GSE will pay the outgoings
I would want a payment of $20K out of the proceeds from the loan
Of course you need to put in that the monies will be to pay the ASB and to pay Lockes, and therefore the total will reflect in shareholding.
I my self do not require a shareholding – all I want is a guarantee of a perpetual salary for my lifetime.
As regards salary, I need, and think it is deserved, to take $5K per month –
I will be away 2day – please reply, and I will pick up the message later in the evening.
Regards
(c) 17 August 2006, 19:25, Mr Memelink to Mr Hoyte (“email (c)”):
Hi john, here is what I suggest we do, is after the sale, the signing of a agreement assigning / selling the house to GSE, in lieu of shares and with options to swap shares for the house.
That GSE pay the mortgage / loan repayments
That GSE will pay certain out goings
A payment of 10-15k out of the proceeds from the loan after ASB is fully cleared and paid, a guarantee of salary for your lifetime subject
to circumstances etc.
I also suggest with the paying off of depts. That you should get a salary of between 3-5K per month.
— John I am sure this will be very good for you guys as at the moment the money is totally wasted and very expensive, we have to do these strait away to get the caveats and the bank off our backs, kind regards
Harry
(d) 20 September 2006, 9.02, Mr Hoyte to Mr Memelink (“email (d)”):
Harry,
As a follow up to our discussions yesterday, after my visit to our
(personal) Solicitor.
As you are aware, her recommendation was that Cec & I do NOT proceed with the proposal, and I have to say that she was giving me the best advice that she could, given the information that she had.
HOWEVER, both Cec & I signed the documents, which our
Solicitor is holding, pending advice from us.
One of the main contention issues, was that there is no written agreement of the issues and arrangements that we have made, and documented in your E Mails to me.
Cec and I have spoken, and we have agreed to proceed on the basis that the following takes place.
We are also happy to allow you to find another Solicitor to act for us. Remember, that Cec leaves for Australia on Saturday 6.00am.
Cec would like you to phone and speak to Neff McMahon –
you have her phone number
The agreement should cover a number of points:-
1. That the house be owned by G S E Group Ltd
2. That Cec & I have a lifetime tenancy, with Nil rental
3.That GSE pays and covers all our goings concerning the house – e.g. Rates, water rates insurance etc
4.That on my death – or sooner by arrangement – the shares in the Company that are owned by me are replaced by the house – “Swapped”
5.That the value of the shares at any time are to equate to the value of the house
6.That our shareholding is to be 49% of the Company – can be negotiated
7. That Cec be appointed a Director of the Company
8. That both Cec and I can nominate alternate Directors
9. That I receive a lifetime Salary/drawings of $6100.00 NETTper month.
(e) 20 September 2006, 10.26, Mr Memelink to Mr Hoyte (“email (e):
Hi john, once we have done all the share sort out and finical sort out from the past etc we will get everything correctly done to show true holdings and financial position it has been a mess as you know and is getting cleaned up, I agree in principal for you to get a constant salary or drawing, a amount to be started this week with a affordable amount, also as the profit increases and loans / advances paid back salary / drawing increases, I agree after this sale is done then the house to be sold to GSE groups, john we need to sort out with our accountant how we do lease, rates insurance etc, as this will have to be set up correctly so we don’t get caught out with tax issues etc, you will be able to stay in the house for as long
As you want. I agree for Cec to be appoint as a director asap and that you both would be able to appoint alternate directors. kind
regards Harry
[88] Mr Hoyte’s evidence was that the negotiations with Mr Memelink were on the understanding that “the finer details would be committed to writing in proper legal form and subject to accounting assistance to avoid any tax issues”, and that Mr Memelink was to arrange the legal documentation and funding.
[89] Mr Memelink agreed that he had discussions with Mr Hoyte, orally and by email, as to the plaintiff and Mr Hoyte remaining in the property after it was sold, but it was on the basis that they had to agree to a rental figure and a term. He also said that his response to the many proposals put to him by Mr Hoyte was that an arrangement could be entered into “once we had sorted my debt out”. Mr Memelink’s evidence was that the deal was always to be that he would take over the ownership of the property to satisfy, in part, moneys owed to him, and that Mr Hoyte would be a tenant paying rental and outgoings.
[90] Mr Memelink accused Mr Hoyte of having forged the emails he relied on.
[91] Mr Allan Dewsnap was called to give evidence for the defendants as to the authenticity of the emails set out above. Mr Dewsnap is the owner of an IT consultancy business, which provides IT services to a range of clients. Those services include supplying, installing, and managing clients’ servers, mostly with the Microsoft Exchange email system, and the end users’ desktop client Microsoft Outlook system.
[92] Mr Dewsnap was called to give evidence as an expert, and gave evidence on two occasions: on 16 May 2012 and then on 30 May2012.
[93] When he gave evidence on 16 May, Mr Dewsnap gave his opinion that emails (a) and (b) were authentic, while the emails (c), (d), and (e) were not. His reason for his opinion as to emails (d) and (e) not being authentic related to the formatting of the emails and their date and time stamps.
[94] Regarding email (c), Mr Dewsnap’s opinion was that this was created from a “template” (itself created from a genuine email with the message deleted from it) into which lines of text had been inserted from various other emails. Mr Dewsnap pointed to a number of features of email (c), including the fact that the message appeared in three different fonts and font sizes, and that it included a paragraph inserted from a forwarded email.
[95] When he returned to give evidence on 30 May 2012, Mr Dewsnap advised the Court that, with the assistance of a software package on his own computer, he had been able to satisfy himself that emails (a), (b), (d), and (e) were authentic, and had been received by or sent from the computer in Mr Memelink’s office. His opinion that email (c) was not genuine was unaltered.
Submissions
[96] Mr Rooke submitted, on the basis of emails (a), (b), (d), and (e) that the plaintiff and Mr Hoyte were led to believe that, while the property would be transferred to the Link Trust No 1, that was on the clear understanding that there would be no change for them, personally, because they would be entitled to remain in possession, that the outgoings on the property would be paid by GSE, that their medical insurance would be paid, and that they would be provided with a motor vehicle.
[97] Mr Rooke submitted that evidence of all of the elements of an enforceable agreement could be found in the 2006 agreement of sale and purchase, and the property agreement, as evidenced by the emails. He submitted that the defendants had taken title to the property pursuant to the property agreement. Although he did not expressly acknowledge that email (c) was not genuine, Mr Rooke did not put it forward as one of the emails supporting the property agreement.
[98] Mr Tennet submitted that the emails did not establish a concluded agreement. He submitted that Mr Hoyte’s emails were no more than a “wish list”, and that there was no meeting of the minds.
Discussion
[99] I accept that there appear to be grounds for serious concern as to the authenticity of email (c). However, I am not required to decide whether that email is a forgery. Regardless of the authenticity or otherwise of that email, I am not satisfied that the email correspondence supports the plaintiff’s claim as to the alleged
property agreement. The emails do not show clearly that any agreement was reached, let along an agreement in the terms alleged by the plaintiff.
[100] In email (b) from Mr Hoyte to Mr Memelink, on 17 August 2006, Mr Hoyte asked for a salary of “$5,000 a month”. Then in his email (d) sent on 20 September
2006, he asked for “a lifetime salary/drawings of $6,100 NETT per month”. Mr Memelink’s reply on 20 September 2006 (email (e)) said only that he agreed “in [principle]” for Mr Hoyte “to get a constant salary or drawing, [an] amount to be started this week with [an] affordable amount ...”. Leaving aside the point that drawings are not equivalent to a salary, the emails do not show that any agreement was reached. Mr Memelink’s response lacks the requisite certainty for a contractual agreement.
[101] There are other demands in Mr Hoyte’s email of 20 September 2006 (email (d)), such as the “lifetime tenancy with Nil rental”, the payment of all outgoings, and the “swap” of shares for title to the property on Mr Hoyte’s death (or sooner by arrangement), to which Mr Memelink does not refer in his reply (email (e)), let alone agree.
[102] Further, Mr Memelink’s reply is couched in terms which are the antithesis of a concluded agreement – for example: “once we have done all the share sort out and [financial] sort out from the past etc we will get everything correctly done ...”; “I agree in [principle] ... [an] affordable amount ... as the profit increases and loans/advances paid back salary/drawing increases”; “we need to sort out with our accountant how we do lease, rates insurance, etc ...”.
[103] I have considered the plaintiff’s evidence that she would not have signed the
2006 agreement for sale and purchase, had Mr Memelink not promised her everything that is claimed to have been agreed in the alleged property agreement. The plaintiff ’s evidence is disputed by Mr Memelink. In the light of that dispute, it is necessary to turn to the email correspondence, as the plaintiff’s case was that the alleged property agreement was evidenced in the email correspondence.
[104] I conclude that the email correspondence does not establish a concluded agreement. I find that the property agreement alleged by the plaintiff was not made.
[105] In particular, I find that there are no grounds on which I could hold that the defendants hold title to the property in trust for the plaintiff and Mr Hoyte, that the plaintiff and Mr Hoyte have a right to lifetime occupancy at no cost, that GSE would meet all obligations and pay all outgoings on the property, that Mr Hoyte would receive a salary of $5,000 a month for his lifetime and be provided with a motor vehicle, that the plaintiff would be appointed a director of GSE, or that the plaintiff and Mr Hoyte could take back title to the property in return for their shares in GSE on Mr Hoyte’s death, or at some earlier time.
[106] The plaintiff ’s claim in the substantive proceeding in respect of the alleged property agreement therefore fails. As a consequence, it must follow that the caveat against the title to the property lodged by the plaintiff and Mr Hoyte on 13 October
2008 (which claimed an interest arising out of the alleged property agreement) cannot be sustained, and must lapse. The plaintiff’s claim in the caveat proceeding must fail.
The defendants’ counterclaims
Introduction
[107] The defendants’ first counterclaim was for a declaration that the property is and remains the exclusive property of the defendants. This can be dealt with very briefly. It is not necessary to make such a declaration. The defendants are the registered owners of the property. I have found that the plaintiff’s claim that the property is held in trust for herself and Mr Hoyte fails, and that the second caveat lodged against the title to the property must lapse. No further order as to the defendants’ ownership is needed.
[108] The defendants’ second counterclaim sought, first, an order that the plaintiff and Mr Hoyte vacate the property and, secondly, an order for payment of a fair market rental for the property, as from 21 September 2006. I deal with those two
matters in the reverse order – that is, the claim for rental first, and then the claim for an order to vacate the premises.
Claim for rental
[109] In their statement of defence and counterclaim, the defendants claimed for rent at $900 a week. In his evidence to this Court, Mr Memelink said that “When my claim was at the Tenancy Tribunal I established that a fair market rental was
$750 a week”. However, Mr Memelink went on to suggest that a fair market rent might be the rent fixed in the lease between the Link Trust and GSE, which was
$480 plus GST ($540.00 GST inclusive) a week, which would have been increased to $552 a week with the increase in GST to 15 per cent.11
[110] Mr Tennet did not articulate the legal basis for the defendants’ counterclaim for rental, other than to submit that a “fair rental” or “occupation rental” should be paid.12
[111] Mr Rooke did not address the counterclaim for rent in his submissions. In answer to questions in cross-examination Mr Hoyte accepted that if the plaintiff’s claim that he and she were entitled to occupy the property for their lifetimes, at no cost, were to fail, it would follow that the defendants’ counterclaim for rental would succeed.
[112] In the light of the absence of any agreement, in September 2006 or subsequently, that the plaintiff and Mr Hoyte could stay at the property for nil rental, the defendants would appear to have a claim against them in trespass.13 On such a claim, the defendants could claim damages by way of mesne profits (that is, a
reasonable rental) for the period the plaintiff and Mr Hoyte have used the property.
11 GST was increased to 15 per cent as from 1 October 2010.
12 I note, however, that the term “occupation rent” refers typically to situations where a co-owner has sole occupation of the property and is made to pay occupation rent to another co-owner and is not at issue here: see Bennion and others New Zealand Land Law (2nd ed, Brookers, Wellington, 2009) at [6.6.06].
13 As noted at [33], above, the defendants had trespass notices served on the defendants in June
2008.
[113] In Inverugie Investments Ltd v Hackett,14 the Privy Council held that the appellant was liable to pay the respondent a “reasonable rent” when it had wrongfully occupied the respondent’s property (apartments in a hotel complex) for many years. In Horsford v Bird,15 the Privy Council held that the respondent was liable to pay the appellant mesne profits for the use of the appellant’s land. In that case, the respondent had had a boundary wall built which encroached onto the appellant’s land.
[114] I am satisfied in this case that the plaintiff and Mr Hoyte are liable in trespass to pay the defendants a reasonable remuneration (by way of a fair market rental) for their use of the property since 21 September 2006. As they both committed the same trespass, they are joint tortfeasors, and are each liable for the full amount of the rent
payable.16
[115] What, then, is a fair market rental? The most reliable evidence of a fair market rental for the property is, in my view, the rental fixed in the lease agreement between the Link Trust and GSE: that is, $480 plus GST a week. As noted above, that is $540 a week up to September 2010, and $552 a week thereafter, GST inclusive.
[116] I therefore find that the defendants succeed in their counterclaim for rent, and that the plaintiff must pay rent, as set out above. Mr Memelink calculated that the amount due for rent, as at 16 May 2012, was $159,792.
Claim for an order that the plaintiff and Mr Hoyte vacate the property
[117] Mr Tennet submitted that the plaintiff and Mr Hoyte should be ordered to give the defendants vacant possession of the property within (at most) two weeks of the date of this judgment. He submitted that the plaintiff and Mr Hoyte have been “on notice” at least since the Court hearing. No submissions were made for the
plaintiff on this point.
14 Inverugie Investments Ltd v Hackett [1995] 1 WLR 713 (PC).
15 Horsford v Bird [2006] UKPC 3.
16 See the discussion in Stephen Todd (ed) The Law of Torts in New Zealand (5th ed, Brookers, Wellington, 2009) at [24.2.01].
[118] I do not consider it appropriate to make an order that the plaintiff give vacant possession of the property to the defendants within the short time period sought by the defendants. The property has been the plaintiff’s home since April 1982. Since September 2006, the plaintiff has occupied the house in the belief that she was entitled to do so. While I have found that that belief was mistaken (in that I have found that the alleged property agreement was not made in September 2006, as claimed), I accept that, subjectively, the plaintiff believed that there was such an agreement.
[119] I have considered whether the parties should be given an opportunity to enter into a formal lease agreement, on the same terms as that between the Link Trust and GSE. However, given the animosity between the plaintiff and Mr Hoyte, and Mr Memelink, that was evident at the hearing, I have concluded that it would not be appropriate to make such an order. I have therefore concluded that it is appropriate to allow the plaintiff and Mr Hoyte three months to vacate the property.
Result
[120] The plaintiff succeeds on her claim against the defendants in the substantive proceeding for a half share of the purchase price for the property, in the amount set out at [84] above; that is, $155,715.33. The plaintiff is entitled to interest at the applicable rate under the Judicature Act, up to the date of payment.
[121] The plaintiff fails on her claim against the defendants in the substantive proceeding, based on the alleged property agreement. As a consequence, her claim in the caveat proceeding for an order that caveat 8356684.1 not lapse also fails.
[122] The defendants fail in their counterclaim in the substantive proceeding for an order that the property is and remains their exclusive property.
[123] The defendants succeed in their counterclaim against the plaintiff in the
substantive proceeding for rental for the plaintiff ’s occupation of the property since
21 September 2006. A fair market rental for the property is $480 a week, plus GST. As at 16 May 2012, the total amount owing was $159,792.00. The defendants are
entitled to interest on the rental at the applicable rate under the Judicature Act, on each rental payment as it fell due.
[124] The plaintiff and Mr Hoyte are given until 30 November 2012 to vacate the property and provide vacant possession to the defendants. They remain jointly liable to pay rent at $480 a week plus GST for so long as they continue to occupy the property.
[125] It will be necessary for counsel for the plaintiff and the defendants to co- operate in preparing a draft order which sets out the above result, and to determine the final balance payable.
[126] Both the plaintiff and the defendants have succeeded in part and failed in part on their respective claims, counterclaims, and defences. In the circumstances, I consider that no order for costs should be made, and that costs should lie where they
fall.
Andrews J
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