Naran, Naran and Bhikha v Sim HC Auckland CIV 2010-404-1015
[2010] NZHC 683
•7 May 2010
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-001015
UNDER The Land Transfer Act 1952
BETWEEN MANU NARAN, MAYA NARAN AND KIRAN BHIKHA AS TRUSTEES OF
THE NARAN & DAYA FAMILY TRUST Applicants
ANDSHIRLEEN SHIA LING SIM Respondent
Hearing: 7 May 2010
Appearances: A Gilchrist for Plaintiff
D Singh for Defendant
Judgment: 7 May 2010
ORAL JUDGMENT OF VENNING J
Solicitors: Dyer Whitechurch, Auckland
Shean Singh, Auckland
Copy to: A Gilchrist, Auckland
NARAN V SIM HC AK CIV-2010-404-001015 7 May 2010
Introduction
[1] This is an application for an order that a caveat lodged by the respondent against a property owned by the applicants be removed.
[2] The basis of the interest claimed by the respondent in the property is set out in the caveat. The respondent claims an interest against the “title or estate of Manu Naran as beneficiary under cestui que trust and/or constructive trust between the [respondent] and registered proprietor Manu Naran”.
[3] It is apparent that the interest the respondent claimed is through the interest of Manu Naran in the property. During the course of the hearing Mr Singh clarified the basis for the claim. He submitted that it was effectively a claim to an interest in the property as a security or charge for the repayment of a debt owed by Mr Naran to the respondent.
Background
[4] It is necessary to consider the background in a little detail to put that claim in perspective.
[5] The property in issue is not owned by Mr Naran personally. The property is owned by a trust of which Mr Naran is a trustee. The trust was established by a trust deed and settled on 11 October 2001. The property in issue, known as 4 Shelly Beach Road, was purchased by the trust under an agreement for sale and purchase dated 12 December 2002. To settle the purchase the trustees borrowed a substantial sum from the ANZ Bank of $889,600. It appears from the title that the mortgage to that bank was registered on 14 April 2003, although I note that under the agreement for sale and purchase and the loan documentation it was contemplated that settlement of the property would be on or about 15 March 2003.
[6] The circumstances in which the respondent claims the interest in the property to support the caveat arose some months after March or April 2003. In fact they arose in October 2003. On 9 October Mr Naran had entered an agreement to sell another property at Ngapipi Road to the respondent’s husband’s aunt. The respondent’s evidence is that Mr Naran wanted more than the usual 10 per cent deposit. She says:
I clearly recall that Mr. Naran told me that he had recently purchased a property at 4 Shelly Beach Road, Herne Bay with 20% of his cash money (“the property”).
Mr Naran said to me that he needed the extra money to fund his mortgage payments and that on payment of $273,000.00 I will have an interest in the property which he owned.
[7] As noted, by October 2003, the settlement of the Shelly Beach property had been concluded and the loan moneys drawn down.
[8] Mr Naran’s evidence about the arrangement with the respondent regarding the money she advanced him is quite different. He says that at time of the sale of the Ngapipi Road property he was also finalising settlement of a property at 56 Paritai Drive. To support that he has produced an agreement for sale and purchase for that property which records that settlement was to be on 31 October 2003. Mr Naran says that was the same day that he required the large deposit on the sale of the Ngapipi Road property and that he can recall requesting the purchaser and/or those connected with her, which included the respondent, for a larger deposit to assist with the purchase of 56 Paritai Drive. He denies referring to the Shelly Beach property.
[9] Although the respondents’ relative registered a caveat against the Ngapipi Road property after the respondent had paid the money requested by Mr Naran, settlement did not take place. I understand that the property was sold by mortgagee sale. The caveat over the Ngapipi Road property was then discharged leaving the respondent with the claim against Mr Naran for the moneys that she had advanced him.
[10] The caveat, the subject of the present application, was not registered against the Shelly Beach property until 10 July 2006.
Mr Naran’s personal obligations
[11] On the evidence before the Court it is clear that Mr Naran personally owes the respondent a substantial sum of money. On the respondent’s evidence, at least, the principal sum of $273,000. There is a relationship of debtor/creditor between the respondent and Mr Naran. That relationship of itself does not support a caveat.
[12] A creditor with only personal rights against a debtor has no right to lodge a caveat against a title to the debtor’s land, even if the creditor has lent money to the owner of the land for the express purpose of buying the land or for paying off mortgages on the land. Reference can be made to the case of Rayner v Kilburn.[1]
[1] Rayner v Kilburn (1981) 1 NZCPR 395.
[13] It is also clear enough that the respondent cannot claim an interest against the land based on any beneficial interest that Mr Naran may have in the property at 4
Shelly Beach as a discretionary beneficiary of the trust which owns that property. Accepting, for present purposes, Mr Singh’s submission that Mr Naran is a discretionary beneficiary under the trust, a beneficiary under a discretionary trust only has the right to have the trust property administered and does not himself have a caveatable interest in the land: R & I Bank of Western Australia Ltd v Anchorage
Investments Pty Ltd.[2]
[2] R & I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1992) 10 WAR 59.
[14] As Mr Naran does not have a caveatable interest he could not, in his capacity as such a discretionary beneficiary, create or grant a caveatable interest in the trust property.
Mr Naran’s role as trustee
[15] During the course of argument it became apparent that the respondents’ claim is now based on the proposition that, as a trustee, Mr Naran granted the respondent an interest in the land at Shelly Beach. As noted the interest is said to be some form of charge or security for the moneys that the respondent had advanced Mr Naran.
[16] Essentially the respondent claims that she has an equitable charge over the property which provides her an interest in it. But such an interest could only be granted by the owner of the property, the trustees. Such an interest could not be granted by Mr Naran in his personal or beneficial capacity. On the face of the interest claimed in the caveat the interest claimed by the respondent is directed to Mr Naran’s personal interest. That creates a major difficulty for the respondent. The terms of the caveat do not support the argument now advanced.
[17] However, there is a further and more fundamental difficulty for the respondent in seeking to support the caveat on the basis that an equitable charge was granted over the property by Mr Naran as trustee.
[18] The interest granted is said to be a security or charge on the land to support the moneys she had advanced to Mr Naran. Section 2 of the Contracts Enforcement Act 1956 applies. Every contract to create a charge on land must be in writing. The contract or agreement in the present case relied on by the respondent is an oral agreement.
[19] To answer that Mr Singh submitted that there was an equitable claim which should be sufficient to support the caveat.
[20] To support the equitable claim, however, there must be sufficient certainty of the terms of the oral agreement and it would be necessary to show that in some way there had been acts amounting to part performance. The cases of TA Dellaca Ltd v PDL Industries Ltd[3] and Fleming v Beevers[4] are relevant.
[3] TA Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88.
[4] Fleming v Beevers [1994] 1 NZLR 385.
[21] The issues the Court is directed to consider are:
a) Was there a sufficient oral agreement that would have been enforceable but for the Act?
b) Has there been part performance of the oral agreement?
c) And do the circumstances in which the part performance took place make it unconscionable for the other party to rely on the Act?
[22] In this case, on the evidence, I accept there has been part performance in that the respondent has paid across money. The issue is whether there was a sufficient and enforceable oral agreement.
[23] The respondent must show an arguable case that there was a sufficient oral agreement between Mr Naran in his capacity as trustee and the respondent, to grant her an interest in the Shelly Beach property owned by the trust.
[24] The respondent’s evidence about that is very brief. It is to the effect that Mr Naran said he needed extra money to fund his mortgage payments, (I infer, although she does not expressly say so, in relation to Shelly Beach), and that on payment of the $273,000 she would have an interest in that property. Again, I infer she refers to the Shelly Beach property. The respondent accepts that she did not know at the time the property was owned by two other people. So on her own evidence it does not seem that the respondent understood that the agreement was made by Mr Naran on behalf of the trust.
[25] But in addition to her evidence there is also the evidence of Mr Naran about the circumstances in which the money was requested from the respondent. There is documentation to support his version that he required the additional money from the respondent to enable him to deal with the Paritai Drive property, which was due for settlement at the end of October 2003, which is around the time that he was dealing with the respondent in the present case.
[26] As noted the Shelly Beach property had been settled by at the latest April
2003, some six months earlier. There was no reason for Mr Naran or the trust for that matter, to seek additional money in relation to the Shelly Beach property.
[27] The loan from the ANZ Bank was to run for a period of 30 years. It had only been running for six months by October 2003. On the interest rate in the documentation before the Court interest on an annual basis would have been no more
than approximately $60,000 to $65,000. For the six month period from April to October 2003 interest would have been in the region of $30,000. There is just no logic or reason for the $273,000 that Mr Naran sought from the respondent to have be needed or used in any way towards the Shelly Beach property.
[28] I also note that, despite the purported interest the respondent says was granted to her in October 2003 against the Shelly Beach property she took no steps to register a caveat to protect that interest until some years later, in July 2006.
[29] While the Court is always cautious about making findings of fact against an applicant on the basis of affidavit evidence, the Court is not required to accept uncritically every allegation contained in an affidavit where it is contrary to other contemporaneous documents or inherently improbable as was confirmed in the recent decision of Asher J in Capital & Merchant Investments Ltd (In Receivership) v Russell Management Ltd.[5]
[5] Capital & Merchant Investments Ltd (In Receivership) v Russell Management Ltd (2009) 10
NZCPR 199.
[30] In this case it seems to me inherently unlikely that the advance of $273,000 had anything to do with the Shelly Beach property at all, and that it is much more likely and the truth of the matter that Mr Naran wanted to use that money towards the Paritai Drive property.
[31] The respondent’s evidence in her affidavit, with respect, strikes me as based on ex post facto reasoning. I do not accept that she can prove an arguable oral agreement that Mr Naran as trustee had granted an interest in the Shelly Beach property owned by the trust to her.
[32] In the course of his submissions Mr Singh submitted that there were charging orders registered against the interest of Mr Naran in the Shelly Beach property, which supported his argument that the caveat could also be sustained, even if the respondent was claiming an interest against Mr Naran’s personal interest in the property. As a matter of fact, those charging orders were registered against Shelly Beach claiming an interest in the property. However, as a matter of law there is no
basis for them to be registered and they would undoubtedly be set aside. The law is quite clear. The bare legal estate of a trustee has never been able to be made subject to a charging order: Motor Vehicles Dealers Institute Inc v UDC Finance (1991) Ltd.[6] That is the position which applies in the present case.
Result
[6] Motor Vehicles Dealers Institute Inc v UDC Finance (1991) Ltd [1994] 1 NZLR 659.
[33] It follows that the terms of the interest claimed in the caveat is not able to be supported on the evidence. There is no basis for a claim directed towards any interest Mr Naran might personally have in the property to support a caveat. Finally, the alternative basis argued to support the caveat that, Mr Naran as trustee granted an interest in the property is not made out on the evidence, even on an arguable basis.
[34] For those reasons I conclude that the application must be granted. There will be an order removing the caveat forthwith.
Costs
[35] The applicant is entitled to costs on a 2B basis plus disbursements.
Venning J
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