Mazany v MacDonald

[2013] NZHC 2456

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-002438

[2013] NZHC 2456

BETWEENDOROTHY MAZANY AND PETER CHARLES MAZANY

First Plaintiffs

BRUCE HARVEY REID
Second Plaintiff

AND  IAN ALEXANDER MACDONALD

First Defendant

DG LAW LIMITED
Second Defendant

DANIELLE MAZANY
Third Defendant

Hearing:

19 September 2013

Appearances

PJP Grace and R Harrington for the Plaintiffs

P M Fee and A Durrant for the First and Second Defendants SWM Piggin for the Third Defendant

Judgment:

19 September 2013

ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

D MAZANY AND P C MAZANY v B H REID & ORS [2013] NZHC 2456 [19 September 2013]

[1]  The first plaintiffs are trustees of the Danielle Mazany Home trust (the trust). The second plaintiff is a practising lawyer.

[2] The first defendant is a practising lawyer who is employed by the second defendant.

[3]     The third defendant (Danielle) is the granddaughter and daughter respectively of the first plaintiffs. The trust was settled on 27 October 2005. Danielle is the only named discretionary beneficiary.

[4]   On 11 October 2005 a sum of $572,552.14 was received by the trust to enable the purchase of a residential property at 8 Aaron Street, Ellerslie. Danielle has lived in that property since purchase and until it was sold on 30 November 2012 by the first plaintiffs. Vacant possession was to be given on 12 December 2012 but on 4 December 2012 a caveat was lodged on behalf of Danielle. The interest claimed in the caveat recorded:

As beneficiary of cestui que created by the Danielle Mazany Home Trust Deed dated 27 October 2005 whereby the trustees (registered proprietors) hold the land on trust for the named beneficiary.

[5] A formal request for the removal of the caveat was not agreed to. On 12 December 2012, the day of settlement, the defendants agreed to remove the caveat if the second plaintiff would in his capacity as solicitor for the trust, provide an undertaking that the net proceeds of sale after deduction of real estate commission and reasonable legal costs and disbursements, would be held on term deposit pending agreement between the parties or pursuant to an Order of the Court.

[6] The second plaintiff (it is said under the pressure of impending settlement) gave an undertaking on the terms sought.

[7] The plaintiffs plead that the first and second defendants did not  have reasonable cause to lodge the caveat because, it is claimed:

(a)Neither sighted the trust deed purporting to give the third defendant the right to lodge a caveat;

(b)A reasonable solicitor in their position would have sighted the trust deed before lodging the caveat; and

(c)A reasonable solicitor would have known or ought to have known the third defendant did not have a caveatable interest in the land; and

(d)They were expressly notified that the third defendant did not have a caveatable in the land.

[8] In a second cause of action it is pleaded that the third defendant did not have reasonable cause to lodge the caveat because:

(a)She knew or ought to have known that her interest was solely as a discretionary beneficiary and that she did not have any interest in the land;

(b)She was expressly notified through her agents, the first and second defendants, that she did not have a caveatable interest in the land.

[9]   In a third cause of action the plaintiffs seek a mandatory injunction requiring the second defendant to release the second plaintiff from the settlement undertaking because they say that undertaking had been improperly elicited, and because:

(a)The undertaking was in substitution for the caveat which the defendants had no reasonable grounds to lodge;

(b)The undertaking was solicited under the pressure of settlement.

[10] In a fourth cause of action the plaintiffs seek an order releasing the second plaintiff from the undertaking because the undertaking expressly contemplated its release by order of the Court and because the undertaking had been improperly elicited.

Summary judgment

[11]     The plaintiffs have applied for summary judgment on the grounds, inter alia:

(a)That the caveat lodged by the first and second defendants on behalf of Danielle was without due cause.

(b)That the second plaintiff ought to be released from the settlement undertaking.

Background

[12]  The second named first plaintiff (Mr Mazany) deposes that he and his mother set up the trust for the purpose of providing a secure and stable environment for Danielle. He said Danielle has had and he believes she still has addiction problems with drugs and alcohol.

[13] In July 2012 Mr Mazany visited the property. He says it was apparent Danielle was destroying it. He said the trust spent some $20,000 upon repairs and painting. He warned Danielle that she had to keep it clean and tidy, despite which, he says, within three weeks it had deteriorated to near its previous condition.

[14] It is apparent there was a breakdown in the relationship between father and daughter.

[15] When shortly after Danielle went to Melbourne for a period of weeks Mr Mazany decided to renovate the property for sale. He deposes having to pay personally or through his company, and by the trust, sums totalling about $50,000 to clean the property up for sale. He sold the property during Danielle’s absence. She knew nothing of the sale until her return. She instructed the second defendant law firm to assist her.

[16] It was after the caveat had been lodged that the second plaintiff (Mr Reid) challenged the first and second defendants regarding the caveat’s lodgement.  The

plaintiffs say that only because of the pressure of settlement was an undertaking agreed to because the defendants would not agree to remove the caveat otherwise.

[17]  Since the sale Mr Reid has retained the net proceeds sum of $664,889.77 in an interest bearing account in accordance with the undertaking. He has many times requested to be released from his undertaking but Danielle refuses to agree.

Opposition to summary judgment

[18] In opposition by the first and second defendants to the summary judgment application it is pleaded:

(a)There is insufficient evidence before the Court to be satisfied that the first and second defendants did not have reasonable cause to lodge the caveat.

(b)That the caveat was withdrawn prior to settlement of the sale and no claim for losses can arise from the lodging of the caveat.

(c)Cogent evidence of quantifiable and recoverable losses has not been provided.

[19] The second defendant no longer acts for Danielle and has no interest in whether the undertaking of Mr Reid is released. The second defendant’s position is that it will abide the decision of the Court in that regard.

[20] Mr Miller of the second defendant denies that the first or second defendants lodged a caveat without reasonable cause. He obtained instructions from Danielle which he cannot disclose because privilege to same has not been waived. He said those satisfied him that their existed a reasonable basis for an interest in the property.

[21] Danielle’s instructions to the second defendant recounted claims of financial contribution to her grandmother which Danielle says was used to fund the purchase of the house. Her instructions also provided claims of historical family abuse.

[22] Mr Miller denies that Mr Reid’s undertaking was “improperly elicited”. He said the form of undertaking was Mr Reid’s own. Mr Miller requested information of the trust and copies of trust bank statements for the three previous years.

[23] Mr Miller says that information has never been provided. He formed the view that the trustees were obstructing the resolution of the dispute by failing to provide proper information that should have been supplied.

[24] The first defendant Mr MacDonald is also employed by the second defendant. Again because Danielle has not provided any waiver of client privilege he cannot provide any detailed outline of the instructions received from her. He deposes however that Mr Miller obtained a detailed briefing from Danielle regarding her relationship with her grandmother, the intention of the trustees to provide a home for Danielle and her children, and her asserted financial contributions to the purchase and upkeep of the property which she had occupied from the time it was purchased. He also noted the name of the trust and that Danielle was the only adult beneficiary in the class of discretionary beneficiaries.

[25] It was Mr MacDonald’s view that there was sufficient evidence to support Danielle’s claim to have a beneficial interest under the express words of the trust deed or alternatively an equitable interest under a constructive trust by reason that of money she send she contributed to the property.

[26] He observed that there was much about the trustee’s conduct which he felt was troubling. He deposed:

8.... in particular there were indications that the trustees were failing to act in the best interests of the beneficiaries. Without notice to her the trustees had precipitously sold the property that had long been her home, had made no arrangements for the acquisition of a substitute property, and evicted her and her children from the property. This appeared to be an exercise of their power in spite or malice.

9.I honestly (and in my view reasonably) believe that Danni maybe entitled to claim an interest in the property on the basis that she was the intended beneficiary of the property’s acquisition and that she may have financially contributed to its acquisition and upkeep. In my view DG Law had an honest and reasonable basis for lodging the caveat.

[27] In her notice of opposition to summary judgment Danielle pleads that she had reasonable cause for lodging the caveat in the she had an equitable interest in the property and as a beneficiary of the trust and by providing funds for the purchase of the property and subsequently.

[28] Danielle also pleads that the trustees have acted maliciously and in bad faith towards their beneficiary by:

(a)Selling her home of seven years without notice and whilst she was overseas.

(b)Intending to use the sale proceeds to Mr Mazany’s benefit.

(c)Trying to put pressure on her in respect of care proceedings affecting her children and as retaliation regarding the disclosure by her of the conduct of her father.

[29]   She said the trustees intend to dissipate the funds in the purported repayment of alleged advances to the trust which Danielle denies could have come from her father or a related entity.

[30]   She believes that her father has dissipated or spent other trust funds collected as rent from her which she estimates at $90,000.

[31] Danielle claims that funds to purchase the property were provided or substantially provided by her personally, that the property is held on trust for her notwithstanding the trustees’ claims of reliance on the terms of a discretionary trust. Also she says that funds paid personally by her by way of rent, together with rent collected from other occupants, are held on trust solely for her.

[32] In her affidavit Danielle says when she was born she was adopted by her father’s mother who brought her up.

[33] Danielle is 26 years of age and has a son and daughter aged three and five. She receives the domestic purposes benefit and now lives in Mt Wellington.

The summary judgment hearing

[34] In submissions filed on 20 August 2013 on behalf of the plaintiffs, counsel noted that the principle objective of the application was to release Mr Reid from the undertaking he gave in consideration of the caveat being removed. It was submitted there was no legal justification for the caveat to have been registered at all. Counsel submitted that the trust deed did not confer an interest in the property and therefore a claim of an interest was not caveatable.

[35] The submissions made it clear that the plaintiffs regarded the defendants’ solicitors as without a defence to a claim of compensation for lodging a caveat in circumstances where they knew or ought reasonably to have known that Danielle did not have a caveatable interest in the property.

[36]   However, the submissions signalled for the first time a concession in relation to the summary judgment claim against Danielle. In paragraph 23 of counsel’s submissions it was noted:

23.The plaintiffs’ second cause of action against the third defendant for lodging the caveat without due cause. The plaintiffs acknowledge that the third defendant has made factual allegations which make the determination of this claim unsuitable for summary judgment.

[37] It appeared then that the primary objective of the summary judgment application was to prove the liability of the defendant lawyers and to obtain a release of Mr Reid’s undertaking.

[38] Two days ago on 17 September the Court received a further memorandum on behalf of the plaintiffs. The memorandum noted that the plaintiffs would no longer, upon their summary judgment application, seek orders against the first and second defendants or the third defendant and that therefore that the hearing would be confined to obtaining the release of Mr Reid’s undertaking to hold the property sale proceeds in trust. Paragraph 11 of the 17 September memorandum on behalf of the plaintiffs noted:

11.Essentially, the applications to release the Undertaking encapsulated in orders 1(c) and 1(d) will require a determination of whether the

third defendant had a caveatable interest in the property the subject of the proceeding.

[39] When the matter was called before me this morning I queried with counsel the apparent discrepancy or conflict of paragraph 23 of the submissions and paragraph 11 of the memorandum.

[40] Counsels’ response was to advise the Court that the plaintiff no  longer expected the Court to release Mr Reid of his undertaking until issues surrounding Danielle’s claims of a caveatable interest were determined by trial. Instead counsel requested the Court to make a ruling on the words in the caveat by which Danielle’s claim of a beneficial interest was identified. Counsel sought a ruling about whether in the terms the caveat described in interest such an interest could properly be claimed by reference to the trust deed.

[41] I indicated the Court’s concern at what appeared to be a request to have a discrete issue determined in absence of any of the other considerations by which Danielle’s claim of an interest arose.

[42] Counsel for the defendants both rejected any suggestion of issue determinations prior to trial. Both counsel said that it would be futile to deal with a preliminary issue of this kind.

[43] With respect I agree with counsel and adopt Ms Fee’s statement regarding the futility of a slice and dice process which is otherwise significantly complicated by the background facts in this case.

Conclusion

[44] In that outcome I informed the plaintiffs that the summary judgment application would be dismissed. I also directed that costs be reserved for determination in the substantive proceeding.

[45]   In discussion with counsel I fixed timetable orders to progress the proceeding to a hearing. Those orders are:

(a)Any  amended  statement  of  claim  is  to  be  filed  and  served  by

4 October 2013.

(b)Defences to the amended statement of claim are to be filed and served by 25 October 2013.

(c)Affidavits of documents are to be filed and served by 15 November 2013.

(d)Any  interlocutory  applications  are  to  be  filed  and  served  by

6 December 2013.

(e)The Court is to schedule a telephone conference after 6 December 2013 for the purpose of addressing interlocutory needs and to discuss the scheduling of a trial. It is for that purpose that counsel are to file memoranda no later than two days prior to the telephone conference.

Associate Judge Christiansen