Millar v Millar

[2024] NZHC 3876

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE

CIV-2024-470-155

[2024] NZHC 3876

IN THE MATTER OF

An originating application for an order that caveat not lapse under s 143 of the Land Transfer Act 2017

BETWEEN

BLAIR PETER MILLAR

Applicant

AND

SAMANTHA JAYNE MILLAR

Respondent

Hearing:

10 December 2024

Further submissions 16 December 2024

Counsel:

TG Conder / GTB Coleman for the Applicant D Fraundorfer / A Needham for the Respondent

Judgment:

17 December 2024

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 17 December 2024 at 4 pm.

Pursuant to Rule 11.5 of the High Court Rules.

…………………..

Registrar/Deputy Registrar

Solicitors/Counsel:

Holland Beckett, Tauranga Bush Forbes, Tauranga

D Fraundorfer, Tauranga

MILLAR v MILLAR [2024] NZHC 3876 [17 December 2024]

Introduction

[1]                 The applicant, Blair Millar (Mr Millar), is married to Margaretha (Marjonna) Millar (Ms Millar). They separated in February 2024 and are in dispute regarding division of their relationship property.

[2]                 The respondent, Samantha Millar (Samantha),1 is their daughter and the registered owner of a property at 69 Santa  Cruz Drive,  Papamoa  (the  property).  Mr Millar claims that Samantha holds the entire property on trust for Mr Millar and Ms Millar, forming part of the pool of their relationship property.

[3]                 Samantha acknowledges that her parents have a beneficial interest in the property. Samantha says that beneficial ownership is shared by Samantha, Mr Millar and Ms Millar, each holding a one-third share. Ms Millar supports that position.

[4]                 Samantha wishes to  sell  the  property  to  realise  her  beneficial  interest.  Mr Millar has lodged a caveat against the title, and Samantha commenced the lapsing process under the Land Transfer Act 2017 (LTA). Mr Millar applied for an order sustaining his caveat.

[5]                 Mr Millar now agrees that the property should be sold, and his caveat should lapse when a sale is settled, provided that the proceeds of sale are held in trust. The parties agree that the Court should exercise its residual discretion to allow the caveat to lapse on terms that will be sufficient to protect Mr Millar’s interest. The issue that I need to determine is what those terms should be.

Background

[6]                 The property was purchased in 2009 as bare land for $140,000. Initially, the registered owners were Samantha, her brother Blair Millar and his wife Sara-Louise Chubb. Samantha paid the deposit of $30,000 for the purchase. There is a dispute as to whether that was a loan to Mr Millar and Ms Millar, or a contribution of equity. The balance of the price was financed.

1      I refer to Samantha by her first name to avoid confusion with her mother, and mean no disrespect to her.

[7]                 In 2011, a house was constructed on the property and a mortgage to Westpac was refinanced. Samantha became the sole registered owner. Mr Millar, Ms Millar and Samantha have all lived there at times. Samantha has made payments which have been utilised to help meet the mortgage. There is a dispute as to whether those payments were “board”, or contributions towards Samantha’s beneficial interest in the property.

[8]                 In 2019, Mr Millar engaged a solicitor to document the arrangements between Mr Millar, Ms Millar and Samantha. That process was not completed. However, in emails sent by Mr Millar to the solicitor on 7 May 2019 and 14 August 2019, Mr Millar appears to acknowledge that Samantha was the beneficial owner of one third of the property.

[9]                 Mr Millar argues that the emails refer to a potential future state of affairs and do not comprise an acknowledgement of an existing state of affairs. He says that he and Ms Millar are the beneficial owners of the entire property.

[10]             The interests of Mr Millar and Ms Millar in the property are held jointly and are accepted to be relationship property. Once the extent of their joint interest is declared by a court, then that interest may be subject to further adjustment between Mr Millar and Ms Millar under the Property (Relationships) Act 1976 (PRA).

[11]             The property now has a rateable value of $1,210,000 and a registered first mortgage of approximately $46,000.

The residual discretion

[12]             The Court has a residual discretion to remove a caveat or to allow a caveat to lapse if the Court is completely satisfied that the legitimate interests of the caveator will not be prejudiced.2

[13]             It may be appropriate for a caveat to be removed if the caveator’s interests can be reasonably accommodated in some other way, notwithstanding that the right to the

2      Pacific Homes Ltd (in receivership) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.

claimed interest is undoubted.3 The onus is on the party challenging the caveat. The discretion is to be exercised on a cautious basis.4

[14]             Reasonable accommodation can include security over a new property purchased with the proceeds of sale of the property subject to the caveat.5

Analysis

The terms proposed by Samantha

[15]             Samantha wishes to sell the property so that she can realise her one-third share and purchase her own property. Ms Millar supports her. Samantha acknowledges that she will need first mortgage finance to secure her own property.

[16]To protect her parents’ interest in the property, Samantha proposes that:

(a)the property is sold by her and that initially the entire net proceeds of sale, after payment of the costs of sale and the mortgage (net proceeds), be held on trust;

(b)Samantha be entitled to utilise one third of the net proceeds, which will be in the vicinity of $400,000, to purchase a property for her occupation (Samantha would need to raise first mortgage finance for the balance of the price);

(c)two thirds of the net proceeds  would then remain held on trust for   Mr Millar and Ms Millar (the fund); and

(d)Mr Millar could lodge a caveat against the property purchased by Samantha to protect any claim he and Ms Millar might have to more than a two-thirds share of the net proceeds.

3      At 656.

4      Stewart v Kaipara Consultants Ltd [2000] 3 NZLR 55 (CA) at 60.

5      May v Elson HC Christchurch M293/96, 18 July 1996.

[17]             During the hearing, I questioned counsel for Samantha, Mr Fraundorfer, regarding the nature of the equitable interest that would support the proposed caveat, and how Mr Millar would enforce any claim he and Ms Millar might have to more than a two-thirds share of the net proceeds.

[18]             Mr Fraundorfer accepted the Court’s suggestion that Samantha could agree to mortgage her new property to secure any payment due to Mr Millar and Ms Millar in respect of the net proceeds in excess of the two thirds of the net sale proceeds already in the fund. This would be a second mortgage. Mr Fraundorfer confirmed that he had instructions that Samantha would agree to such a term.

[19]             Mr Fraundorfer submitted that the Court could be completely satisfied that the proposed terms would protect Mr Millar’s legitimate interests.

The terms proposed by Mr Millar

[20]Mr Millar proposes that the entire net proceeds should form the fund.

[21]             Counsel for Mr Millar, Mr Conder, submitted that the proposed second mortgage over a new property carried the risk that Samantha’s equity in the new property might dissipate, leaving Mr Millar exposed. Mr Conder identified three risks:

(a)a fall in market values generally;

(b)Samantha might purchase a substandard property, for example, with inherent defects; and

(c)if Samantha defaulted in payment of the first mortgage, then a forced sale might not produce sufficient funds to meet any claim Mr Millar and Ms Millar might have.

Issues that emerged during the hearing

[22]             Two issues emerged during argument that counsel were not able to deal with immediately, relating to the risk posed by the proposed agreement to mortgage:

(a)An issue of fact — what is the approximate amount of a one-third share of the net proceeds likely to be?

(b)An issue of law — should Mr Millar’s position under the terms proposed by Samantha be compared to:

(i)Mr Millar’s present position as caveator; or

(ii)Mr Millar’s position under the terms proposed by Mr Millar?

[23]Counsel agreed to file a joint memorandum confirming:

(a)the current value of the property for rating purposes; and

(b)the amount currently due to the mortgagee.

[24]I called for further submissions on the issue in [22(b)] above.

Discussion

[25]             The Court must be completely satisfied that the terms proposed by Samantha protect Mr Millar’s legitimate interests currently protected by the caveat. The required comparison is between Mr Millar’s rights as caveator and his rights under the proposed fund and agreement to mortgage.

[26]             As things stand, Mr Millar and Ms Millar (jointly) and Samantha each have a reasonably arguable claim to a beneficial interest in the property. The proportions of those shares of beneficial ownership cannot yet be determined. It will require findings of disputed fact in respect of the parties’ contributions to the property and their common intention. It is not possible to resolve the parties’ respective beneficial interests in the property on the affidavit evidence filed in this proceeding and following a summary hearing.

[27]             Mr Millar, Ms Millar or Samantha are each entitled to file a proceeding seeking a declaration of a constructive trust. Mr Millar, Ms Millar or Samantha all have

standing to bring a proceeding under s 339 of the Property Law Act 2017, seeking a sale of the property and division of the proceeds among co-owners, which includes beneficial co-owners. The parties have not yet taken one of those steps.

[28]             If Mr Millar’s caveat remains, then any right that Mr Millar and Ms Millar have to a share of the net proceeds is unlikely to be defrayed — the caveat would only be removed on payment of the share of the net proceeds due to Mr Millar and Ms Millar.

[29]             If Mr Millar brings a substantive proceeding against Samantha and is successful in obtaining a declaration that Samantha holds more than a two-thirds interest in the property on trust for Mr Millar and Ms Millar jointly, then he will be prejudiced if the property has been sold and only two thirds of the net proceeds are held on trust without further protection of his interests in respect on the one-third share that Samantha wishes to employ in the purchase of a new property.

[30]             An agreement to mortgage is one option to protect Mr Millar and Ms Millar. Another option would be to recognise a continuing equitable interest for Mr Millar and Ms Millar in the one third of the proceeds claimed by Samantha, and any property purchased with those proceeds.

[31]             The advantage of an agreement to mortgage is that the value of any interest of Mr Millar and Ms Millar in the one-third share would crystallise on a court judgment as to the extent of their beneficial ownership of the property, avoiding issues with valuing their interest after tracing part of it into the new property.

[32]             It is necessary to consider the risks of an agreement to mortgage. I do not consider the risk of a deterioration in the residential property market to be material. Under the status quo, any future movement in the value of the property will accrue to all beneficial owners according to their ownership shares. I do not consider that risk to be materially different under Samantha’s proposed terms.

[33]             However, if Samantha is permitted to extract one third of the equity and invest it in a new property, then this exposes that share of the equity to new risks, such as inherent defects in the land or building purchased or a failure to achieve market value

on a forced sale. These risks would be the same, irrespective of the form of the equitable interest that Mr Millar and Ms Millar were to hold in the new property.

[34]             It is not possible to appraise these risks until the specifics of a new property and funding are known. Staged orders imposing conditions on the removal of the caveat can deal with these uncertainties.

[35]             The parties agree that Samantha should be able to sell the property and the caveat should be removed when the property is transferred to a bona fide purchaser and the entire net proceeds of sale are paid into trust. That is stage one.

[36]             Samantha is free to enter into an agreement to purchase a new property at any time, although it would be prudent for her to include a suitable condition for her benefit making her purchase conditional on her ability to access part of the net proceeds of sale held in trust, which would require further orders of the Court.

[37]             Samantha can be permitted to apply for further orders if she wishes to purchase a specific property. That application could be supported by evidence of the details of: the proposed property and any contract for purchase; any due diligence undertaken; the proposed funding; and Samantha’s ability to service that funding. That is stage two.

[38]             Further orders allowing Samantha to access part of the net proceeds of sale would only be made if the Court is completely satisfied that Mr Millar’s interests are adequately protected.

Orders

[39]I make the following orders:

(a)Caveat 13039475.1 registered against Record of Title Identifier 283150 (the caveat) shall be removed immediately before the registration of a transfer of the land from the respondent as vendor to a third party as purchaser under an arms-length agreement for the sale and purchase of the property on the open market.

(b)The caveat is sustained pending the implementation of order (a).

(c)The respondent shall place the property for sale on the open market within 30 working days of the date of this judgment and take all reasonable steps to pursue a sale at market value.

(d)Upon settlement of a sale of the property, the respondent shall pay the net proceeds of sale, after deduction of the direct costs of sale and repayment of the registered first mortgage, into a solicitor’s trust account to be held in the names of the applicant, Margaretha Johanna Millar and the respondent (the fund).

(e)The fund shall only be released on the written agreement of the parties or further order of the Court.

(f)The applicant shall file a proceeding in this Court within 30 working days to establish the extent of the beneficial interest of the applicant and Ms Millar in the property and pursue the proceeding with diligence.

(g)Leave is reserved to the respondent to make an interlocutory application in this proceeding for a variation of these orders to provide for a release of part of the fund to the respondent on terms to protect the interests of the applicant. Any such application shall be listed for first call in a chambers list.

(h)Leave is reserved to the parties to seek a variation of these orders, or for further directions to implement these orders.

Costs

[40]             The respondent discharged the onus on her to satisfy the Court that it should exercise its residual discretion to remove the caveat on terms. Both parties have achieved a measure of success regarding the terms ordered. My preliminary view is that costs should be reserved until the conclusion of the litigation and the final release of the fund.

[41]If the parties are unable to agree on costs, then:

(a)the applicant may file submissions on costs of no more than three pages by 31 January 2025;

(b)the respondent may file submissions on costs of no more than three pages by 14 February 2025; and

(c)I will fix costs on the papers.

Associate Judge Brittain