Murray v Piggott

[2019] NZHC 2568

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-002149

[2019] NZHC 2568

BETWEEN

HUGH LAWRENCE REECE MURRAY

Plaintiff

AND

JAYNE SUSAN PIGGOTT

Defendant

Hearing:

30 September 2019

Appearances:

D A Towle for Plaintiff

P J Kennelly for Defendant

Judgment:

9 October 2019

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

MURRAY v PIGGOTT [2019] NZHC 2568 [9 October 2019]

Introduction

[1]    The plaintiff is the defendant’s father (the father). He sues the defendant daughter (the daughter) in respect of a payment he made to her of $151,079.78 in March 2016.

[2]    The father contends that the payment created a resulting trust. He says there was an arrangement with the daughter whereby he would enjoy occupancy of his daughter’s home for an indeterminate period, in exchange for which his daughter would be entitled to use the money for various purposes, including repayment of the mortgage, outgoings and renovations to the property.

[3]    The daughter says that the payment was expressed to be an “early inheritance” and it was therefore a gift.

[4]    In the present proceeding, the daughter has made application for security for costs pursuant to r 5.45(1) of the High Court Rules 2016.

[5]    The father accepts that the threshold test of impecuniosity has been established; the critical issue is whether the Court should exercise its discretion to make an order for the payment of security.

Relevant legal principles

[6]    The general approach is well established. As held by the Court of Appeal in  A S McLachan Ltd v MEL Network Ltd, whether or not to order security and, if so, the quantum, are at the discretion of the Court.1 In accordance with Busch v Zion Wildlife Gardens Ltd (in rec and in liq) it is necessary to address the following steps:2

(a)Has the applicant satisfied the Court of the threshold under r 5.45(1)?

(b)How should the Court exercise its discretion under r 5.45(2)?

1      A S McLachan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA).

2      Busch v Zion Wildlife Gardens Ltd (in rec and in liq) [2012] NZHC 17 at [2].

(c)What amounts should security for costs be fixed at?

(d)Should a stay be ordered until any order for security of costs is met?

[7]    In exercising its discretion, the Court must balance two competing interests: the defendant’s interest in being protected from a barren costs order and the plaintiff’s right of access to the court.3 As part of this enquiry, as far as possible, the Court will endeavour to assess the merits and prospects of success of the claim.4

[8]    If a plaintiff’s impecuniosity is caused by the defendant’s actions, then this is a factor that mitigates against the making of an order for security.5

Background facts

[9]The father is 81 years old and retired.

[10]   The daughter separated from her husband in March 2016 and lives in a property registered in her name in Ruby Place, Orewa. Pursuant to a relationship property separation agreement, the ex-husband has no claim to the Ruby Place property.

[11]   In late March 2016, the parties met at the BNZ in Sylvia Park and spoke to the father’s bank manager. A bank cheque of $151,079.78, representing essentially the father’s life savings, was made out in favour of the daughter and then banked into her bank account.

[12]   In April 2016, the daughter used some of the funds to purchase a motor vehicle ($42,000).

[13]   The father subsequently moved into the daughter’s home in Orewa and lived there with the daughter and grandson for a little less than two years.

3      Clear White Investments Ltd v Otis Trustee Ltd [2016] NZHC 2837 at [4].

4      See Ambrose v Pickard [2009] NZCA 502.

5      Bell-Booth Group Ltd v Attorney-General (1986) 1 PRNZ 457 (HC).

[14]   The father initially occupied a front bedroom but subsequently moved into a new bedroom that had previously been a carport area and converted into a bedroom with monies expended by the daughter.

[15]   The Police were called to the daughter’s house in May 2018 and the father was served with a Police Safety Order. He has not lived at the Ruby Place property since that time.

[16]   The father now lives with his ex-wife (not the daughter’s mother). He has no assets of value and his sole income is the New Zealand Pension which pays him approximately $450 per week.

Analysis and decision

[17]   In support of his contention for a resulting trust, the father relies upon the Court of Appeal decision of Chang v Lee.6 In that case, the Court held that:

[20] The rationale for a resulting trust is that, absent evidence to the  contrary, the law presumes a person intends to retain the beneficial ownership of funds which he or she advances towards the purchase price of a property. [In those circumstances] [t]he legal owner holds title to the property subject to the payer’s equitable interest. In this way a trust results to the payer to the extent of his or her contribution. Evidence which might contradict or rebut the presumption is traditionally of an intention to gift or of consideration in the nature of satisfaction of independent indebtedness …

[18]   The father also relies on the recent Court of Appeal decision Reid v Castleton- Reid, where it was held that an inheritance is not an inter vivos gift.7 In that case, it was held that the evidence supported a conclusion that, at most, Mr Reid (the alleged donor) may have intended his son to inherit the balance of the money in the trading account (the alleged gift in dispute) on his death, but that was not an inter vivos gift. It further held that the father’s age and personal financial position counted strongly against a presumption that he intended to gift the disputed amount to his son outright (that is, the presumption of advancement).

6      Chang v Lee [2017] NZCA 308.

7      Reid v Castleton-Reid [2019] NZCA 372.

[19]   The principal ground advanced by the daughter in support of the contention that the Court should exercise its discretion to order security for costs, is that the father’s claim for a resulting trust is a weak one which lacks any real merit. The daughter says that the evidence clearly demonstrates that the father unconditionally gifted her the $150,000, describing it to her at the time, and clearly acknowledged by both of them, to be her “early inheritance”. The daughter says that the funds were not intended to purchase any property; she already owned her house at Orewa, her ex- husband had no claim to it, and she was already meeting the mortgage payments with her own income. The daughter says that her father had been under some pressure from his ex-wife (not the daughter’s mother) and that in gifting the funds to his daughter outright, and as part of her inheritance, he was trying to ensure, before it was too late, that both his daughter and his grandson should receive an inheritance.

[20]   The daughter says that the father’s reliance on the Court of Appeal decisions, Chang v Lee and Reid v Castleton-Reid, are misplaced – there is no direct link between the money gifted and the acquisition or improvement of the home; substantial funds were expended on other matters such as a car (42,000); and all the evidence points towards an intention to gift.

[21]   The proceedings have been set down for a five-day trial in July 2020. In the circumstances, the daughter contends that it would be quite unfair and wrong for her to expend significant costs in preparing for a five-day trial and to find, following a successful defending of the proceedings, that the plaintiff father could not afford to pay any costs.

[22]   While there may be some force in the submission of Mr Kennelly, for the daughter, I do not accept that I can conclude, at this stage, that the father’s claim to a resulting trust is a weak one.

[23]   The evidence on the critical issue of the purpose for which the funds were provided to the daughter (namely, the father’s intention) is clearly disputed, and there is little documentary evidence directly on that key point. With loose, undocumented family arrangements of the kind at issue here, in my view, caution is required in determining, on a summary and premature basis, that no equitable remedy would be

available to the father and that his claim lacks merit. The father did, after all, divest himself of virtually his total life savings, moved into his daughter’s house and at least some of the funds have been applied directly to the property, including the construction of a new bedroom (in  which  the  father  lived  for  some  time).  Furthermore,  as Mr Towle, on behalf of the father, submitted, the evidence as to how and when the unaccounted-for balance of the funds was applied is unclear and needs to be tested.

[24]It is clearly arguable, in my view, that in return for advancing the sum of

$150,000, the father expected something in return. He had divested himself of his life savings, then moved into the Ruby Place property and started making regular payments to his daughter for his living expenses. The evidence suggests that he had intended to continue living there but could not do so following his eviction in May 2018. I find that he does have some tenable basis for contending that he intended to retain some beneficial ownership of the funds that were arguably used by the daughter to both improve the value of, and increase her equity in, the home. There is thus a link to the property.

[25]   It may be that the daughter was under no financial pressure at the time the funds were provided to her and that her ex-husband has no claim to her Orewa property. The documentary evidence tends to support those claims. Assertions to the contrary by the father might impact on his credibility. However, even if those factors are decided in favour of the daughter, that does not necessarily mean that the father cannot establish a presumption that he intended to retain the beneficial ownership of the funds or at least those funds that were applied to the property.

[26]   I thus reject the daughter’s claim that the father’s claim to a resulting trust is a weak one.

[27]I now turn to address other factors relevant to the exercise of my discretion.

[28]   In Highgate on Broadway Ltd v Devine, Kós J held that impecuniosity per se does not require the making of an order of security for costs.8 Security for costs is

8      Highgate on Broadway Ltd v Devine [2012] NZHC 2288 at [20].

relatively exceptional; where it is likely to result in a denial of access to justice, it is entirely exceptional.9

[29]   I find that the principle of access to justice for the plaintiff father in this case is a matter to be given significant weight. To order security for costs here would prevent the father from having his case heard and determined and in circumstances where I have already concluded that his claims are tenable. I also find that the evidence establishes that his impecuniosity was caused by his using his life savings for his daughter’s benefit.

[30]   In balancing the respective interests of the parties (the overriding and most important consideration),10 I conclude that there should be no security for costs. As noted above, the daughter’s submissions focused on an alleged lack of merit to the father’s claims, and I have already rejected that submission. No other credible grounds have been advanced in support of the application.

[31]   Finally, I note that the parties have not, to date, embarked upon a mediation or alternative dispute resolution process. In my view, it would be a prudent use of what appears to be limited means on both sides for a more efficient and cost-effective process such as mediation to be pursued. It is also surely a more appropriate forum for these sorts of family issues to be ventilated.

[32]   For all these reasons, I conclude that the daughter’s application for security for costs should be dismissed.

Result

[33]   The defendant daughter’s application for security for costs (dated 11 July 2019) is dismissed.

[34]   The plaintiff has, of course, been successful and I am of the preliminary view that the defendant daughter should pay costs to him and on a 2B basis.

9      At [22(e)].

10     At [24(c)].

[35]   If the parties cannot agree on costs, then submissions are to be filed within  14 days and the Court will determine the matter on the papers.

Associate Judge P J Andrew