Nelson v Meier
[2016] NZHC 787
•22 April 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-005091 [2016] NZHC 787
BETWEEN THELMA EDITH NELSON
Plaintiff
AND
SANDRA LEANNE MEIER AND EAN INNES BROWN AS TRUSTEES OF THE SANDRA MEIER FAMILY TRUST
First Defendants
AND
ALFRED MEIER, SANDRA LEANNE MEIER AND IAN AUSTIN HARWOOD AS TRUSTEES OF THE ALFRED MEIER FAMILY TRUST
Second Defendants
AND
SANDRA LEANNE MEIER Third Defendant
Hearing: 9, 10, 11 February 2016 and 18 April 2016 Appearances:
D Rooke for the Plaintiff
No appearance by or for the First and Second Defendants
R S Pidgeon for the Third DefendantJudgment:
22 April 2016
JUDGMENT OF HINTON J
This judgment was delivered by me on 22 April 2016 at 5.00 pm pursuant to Rule 11.5 of the High Court Rules
……………………………………………………………………
Registrar/Deputy Registrar
Solicitors:
David Rooke Law Office, Botany Town Centre, Auckland
Counsel:
R S Pidgeon, Barrister, Auckland
NELSON v MEIER & ORS [2016] NZHC 787 [22 April 2016]
Introduction
[1] Edith Nelson is 74. She has two daughters from her first marriage, Sandra and Annwyn. Mrs Nelson built a unit on Sandra’s property at Waiheke. Mrs Nelson and Sandra have fallen out, and the property has since been sold. Mrs Nelson seeks compensation in respect of the unit and to recover additional money she says she lent to Sandra.
Facts
[2] Mrs Nelson’s second husband, Tom Nelson, died in 2000. Mrs Nelson inherited assets in her own right, which she sold for about $300,000. She also received a life interest in a farm, the sale of which netted approximately $280,000. The residue was to go to her step-son, Jim Nelson, on her death. Instead of the farm proceeds being held in trust and the income paid to Mrs Nelson, the estate’s solicitor paid the full amount to her. Mrs Nelson then dealt with the trust money as well as her own. Mrs Nelson bought a property to live in at Orewa. She sold that in 2003 for about $70,000 more than she had paid for it. It appears that Mrs Nelson then had access to about $650,000, including the profit she made on the Orewa property, but a sizeable part was money in which she only had a life interest.
[3] In July 2002, Mrs Nelson gifted $80,000 to Annwyn to enable her to buy a house.
[4] At about the same time, Sandra and her husband, Alfred, bought land at Seaview Road, Waiheke (the property). It was registered in the names of their two trusts, which are the first and second defendants (the Meier Trust Partnership).
[5] Sandra and Alfred built a house on the property (the house). They had wished to build a unit as well as a house, but the cost was beyond them, so the unit did not progress beyond a bare floor plan. From May 2003, Sandra and Alfred lived in the house with their two daughters, Kelsie and Danielle.
[6] Between March and October 2003, Mrs Nelson lent Annwyn about $120,000 in total, mainly to help fund a restaurant business called “Annwyn’s Barfly”.
[7] The relationship between Mrs Nelson and Sandra had not been close for many years, but things improved around 2002/2003.
[8] In about July 2003, Mrs Nelson, Sandra and Alfred agreed that Mrs Nelson would build a unit at the property (similar to the concept that Sandra and Alfred had considered) and Mrs Nelson would occupy it. Both parties say it was agreed at this stage that Mrs Nelson was in effect to be the owner of the unit. It was also agreed that, because Sandra was attending university and Alfred had brain damage, which affected his ability to care for their two daughters, Mrs Nelson would assist with their care.
[9] Mrs Nelson asked her lawyer, Clive Patterson of Kaitaia, to draft a suitable document to cover her position with regard to the unit. He sent a draft deed which gave her a licence to occupy for her life and the right to remove the unit if she wished to do so. Sandra took her own legal advice on the draft, but the deed was not signed or progressed.
[10] Resource consent for the unit was issued in about January 2004 and construction appears to have finished in about December 2004, with Mrs Nelson then moving in.
[11] Annwyn’s business went into liquidation. In late 2004 or early 2005, Sandra learned both about the money that had been put into the business and the fact that the business had been closed down. She says her mother also told her at that point that she could be in difficulty with her step-son, Jim, because the money she had lost should have been held in trust. Sandra and Alfred, and Mrs Nelson for that matter, were all concerned then to protect themselves from a potential claim by Jim Nelson against Mrs Nelson.
[12] In February 2005, Sandra asked her lawyer, Henderson Reeves, how Mrs Nelson’s interest in the money she contributed to the unit could be preserved. A series of communications followed.
[13] On 29 August 2005, Mrs Nelson and the Meier Trust Partnership entered into a deed granting Mrs Nelson a licence to occupy the unit during her lifetime (licence to occupy). The licence to occupy was drafted by Sandra (based on the earlier Clive Patterson draft) but issued by Henderson Reeves. It provided that the unit was to be used only as a personal residence of Mrs Nelson and her guests and was not to be used for rental purposes. It also provided that Mrs Nelson would pay rent to be set by the Meier Trust Partnership and reviewed on a two-yearly basis. The rent was to be based on the cost of servicing an $80,000 bank loan, plus a contribution towards the property rates. At the same time, the Meier Trust Partnership took out an
$80,000 bank loan and paid that amount to Mrs Nelson, in effect, as a purchase price for the unit.
[14] On 31 August 2005 Mrs Nelson received the $80,000 sum.
[15] The cost of construction of the unit was approximately $138,000. Mrs Nelson paid for this by depositing a larger sum of about $167,000 into the Meier Trust Partnership bank account. Sandra then kept scrupulous records of each payment made out of Mrs Nelson’s money. In September 2005, following the last entry on the spreadsheet, Mrs Nelson was repaid the surplus of about $30,000.
[16] At the same time as Mrs Nelson received the surplus, she was repaid a sum of
$15,200, being an amount that she had separately lent to the Meier Trust Partnership to meet the last of the payments due on the house.
[17] The rental fixed and paid thereafter by Mrs Nelson under the licence to occupy was $300 per fortnight.
[18] On 23 November 2005, Jim Nelson filed proceedings in the High Court, suing Mrs Nelson and all of the defendants to this proceeding.
[19] At around that same time, Mrs Nelson issued proceedings against Annwyn to recover the $120,000 which she said she had lent to her.
[20] Sandra assisted Mrs Nelson considerably with both sets of court proceedings, particularly the Jim Nelson claim.
[21] Mrs Nelson received only $16,000 from Annwyn. It appeared that the loan was made to the company which had gone into liquidation, and not to Annwyn personally. The net effect was that over $180,000 of Mrs Nelson’s money had been either gifted to Annwyn, or lost in Annwyn’s business.
[22] In October 2006, Mrs Nelson paid $70,000 to settle all claims made by Jim Nelson. She says this left her then with only about $80,000 of her own, although given her subsequent spending, it must have been more.
[23] In May 2008, Mrs Nelson installed a kitchen in the unit at a cost of about
$19,000. She had spent a further $10,000 on the unit over the years since she had moved in, including plumbing and electrical work; carpet and lino; screens and blinds; and a dishwasher.
[24] In October 2008, Sandra and Alfred separated and Alfred left the house.
[25] Between February 2008 and September 2012, Mrs Nelson made a series of payments to Sandra, or on her behalf. This included payment of Sandra’s bank card bills; payment of Sandra’s legal fees on her separation; and lump-sum cash cheques.
[26] In February 2010, at Mrs Nelson’s suggestion and cost, Danielle started at ACG Senior College in Parnell. At the same time, Mrs Nelson moved from the unit into the house, to enable Sandra to rent the unit. Mrs Nelson said she did so of her own free will. Sandra needed the rent because, although Mrs Nelson was paying the school fees, there were extra associated costs for Sandra, including Danielle’s travel to-and-from Waiheke. The unit was the subject of three tenancy agreements in 2010 alone at rentals of $250, $230 and $310 per week. Fifty per cent of the rental was paid to Alfred.
[27] Counsel advised that Danielle’s attendance at ACG Senior College cost
Mrs Nelson about $30,000.
[28] In May 2011, Sandra and Alfred settled their property dispute. Sandra received title to the property. She paid Alfred $250,000 immediately, with a further
$65,000 due in May 2013. She increased the mortgage against the property to make the $250,000 payment. Sandra and Alfred were concerned about the status of Mrs Nelson’s licence to occupy, but received legal advice that they had no liability. The agreement recorded that Sandra was to include her mother’s interest “in her half share”.
[29] The relationship between Mrs Nelson and Sandra deteriorated considerably during 2012, not helped by the fact that Sandra was in very poor health.
[30] In July 2012, Sandra put the property on the market.
[31] In September 2012, Mrs Nelson left the property, she says because Sandra made things so intolerable.
[32] On 17 December 2012, Sandra sold the property and, shortly afterwards, purchased a cheaper property on Waiheke.
[33] In August 2013, Mrs Nelson’s lawyers made demand for $67,591, attaching a schedule of payments made by her in 2008 and 2010-2012, which she says Sandra agreed she would repay on sale of the property. Mrs Nelson also made demand for
$149,236, attaching a schedule of contributions to the unit. These figures were amended at the hearing to $166,995 and $54,991 respectively, as a result of clerical errors in the original schedules.
Issues
[34] In broad terms, Mrs Nelson seeks:
(a) compensation for the cost of the unit which she puts at $166,995, on the basis of a constructive trust or a resulting trust. She also seeks a tracing order;
(b) damages for breach of the licence to occupy; and
(c) recovery of alleged loans totalling $54,991.
Discussion
Equitable claims regarding the unit
[35] The various equitable claims based on the construction costs of the unit cannot succeed. They would have had some traction but for the arrangement the parties reached in August 2005, whereby Mrs Nelson received $80,000 and the benefit of the licence to occupy the unit for her life. This arrangement settled the parties’ rights.
[36] Mrs Nelson says she did not understand that she was relinquishing her claim to “ownership” of the unit. She says the $80,000 payment was a loan to her, albeit a loan that was ignored in any calculation of her claim, whereas it would necessarily have had to be deducted. It is true that there was no documentation of the unit “purchase” as such, but it is clear, from correspondence and ledger records between Henderson Reeves and Sandra, and the dealings as a whole that, in exchange for having spent about $140,000 on construction costs, Mrs Nelson was receiving
$80,000 back and a licence to occupy for her life on favourable terms. I am quite sure none of this was hidden from Mrs Nelson, though I accept she may have become confused subsequently.
[37] It was clear that Mrs Nelson was confused on a number of fronts when giving evidence. She was certain, for example, that she had paid rent before entering into the licence to occupy, but there was no evidence to support that contention and, in my view, it was erroneous. Mrs Nelson said that she had not received any legal advice before, or at the time of signing the licence to occupy, but remembered later in her oral evidence that she probably was in receipt of legal advice from Connell & Connell. A letter from Sandra refers to her mother having seen a solicitor in April 2005, and Mrs Nelson was in contact with Connell & Connell in October 2005, so I consider it very likely she had legal advice regarding the August 2005 arrangement.
[38] I note, furthermore, that the concept of the August 2005 arrangement was not materially different from the concept put forward by Mrs Nelson’s Kaitaia solicitor at the outset, before the litigation issues besetting her came to the fore. If anything, I consider the August 2005 agreement to be more beneficial to Mrs Nelson than her own lawyer’s earlier draft, particularly in light of Mrs Nelson’s reduced financial circumstances, where removal of the unit would be of little value to her. She could not afford to buy land and relocate the unit. The unit had been valued on a relocatable basis at only $45,000.
[39] In any event, I find that the parties are bound by the August 2005 arrangement, and the claims in equity are consequently rejected.
[40] For the sake of completeness, I record that the further payments Mrs Nelson made regarding the unit post-August 2005 (notably for the kitchen), cannot have led to any reasonable expectation of an interest in the unit. These payments were made entirely at Mrs Nelson’s own instigation, and, in any event, the creation of a kitchen within the unit was unlawful.
Breach of the licence to occupy
[41] That brings me to the claim for breach of the licence to occupy.
[42] Mrs Nelson left the property in September 2012, after living there for nearly eight years. She says she was effectively evicted. While Mrs Nelson did leave after a very heated argument with Sandra, where Sandra admits that she yelled at her mother, I do not consider Mrs Nelson was forced out of the property. She certainly was not forced out of the unit, which she had vacated voluntarily in February 2010, to move into the house.
[43] Nor do I accept, however, that Mrs Nelson abandoned her licence to occupy. This was originally argued on behalf of Sandra, but Mr Pidgeon very fairly conceded in closing submissions that the facts did not adequately support such a claim.
[44] It follows that, when the property was sold, the Meier Trust Partnership (and
Sandra for effecting the sale) were in breach of the deed of licence to occupy.
Mrs Nelson was deprived of the opportunity to re-exercise her right of occupation of the unit. The breach occurred at the date of sale in November 2012.
[45] I agree with Mr Rooke that the appropriate measure of damage is the residual value of the life interest as at November 2012. Mr Davies, an expert actuary for Mrs Nelson, calculated the residual value at August 2012 at $136,724, based on the difference between a market rental of $300 and the amount Mrs Nelson was paying to occupy the unit (which he put at approximately $190 per week, including rates and other “owner” outgoings paid by Mrs Nelson), multiplied by Mrs Nelson’s life expectancy.
[46] However, Mrs Nelson only has a right of personal occupation; such a right is not assignable to anyone else, and the licence to occupy expressly prohibits rental of the property. Any number of contingencies might mean that Mrs Nelson would not or could not live in the unit, including the need to go into a rest home, or finding she did not get on well enough with Sandra or other members of Sandra’s household. Further, I do not consider it appropriate to assess damages based on a full market rental in a context where Mrs Nelson was not in a position to rent the property out, even on a sub-letting basis. She could only have guests to stay. Someone renting on that basis would not pay a full market rental. I note in this regard that the third of the
2010 tenancy agreements for the unit, while it recorded a rental of $310 per week, also stipulated the unit had a maximum permanent occupancy of four people. I do not consider the unit was worth $310 per week to Mrs Nelson on her own.
[47] I have decided that the fairest approach to Mrs Nelson’s annual loss is to take the difference between the rental paid by the tenant who moved into the unit after Mrs Nelson moved out, which was $250 per week, and the amount Mrs Nelson had to pay under the licence to occupy in respect of which I adopt Mr Davies’ figure of
$190 per week. The difference is $60 per week, or $3,120 per year. I note the tenant was required to carry out some external maintenance, but Mrs Nelson did likewise when she occupied the unit.
[48] I consider six years to be an appropriate period that Mrs Nelson might reasonably have occupied the unit after November 2012, but for the sale.
Mrs Nelson would be aged 77 at the end of that period. Her evidence was that she is struggling even now, having fallen over and incurred a head injury. It was certainly clear that Mrs Nelson was confused when giving evidence. She has moved into one of the Masonic Villages in Whangarei. Further, it seemed to me very unlikely that she would have wished to go on living at the property past the age of 77, given that the parties were not getting on. In my view, that was a two-way street, and not just the fault of Sandra.
[49] I do not see the need to adjust the annual amount for inflation. The market rental for a one-person occupation might increase, but so might the rental payable under the licence to occupy.
[50] The total loss is therefore fixed at $18,720.
[51] The plaintiff also sought general damages of $25,000 for distress, upset and inconvenience. Such damages are not awarded in contract, except when mental satisfaction is an object of the contract.1 In any event, damages for distress would not be applicable in circumstances where, as I have found, the plaintiff had already elected to move out of the unit and then out of the house. She was not evicted, either as at September 2012, or as a consequence of the sale.
Loans
[52] Finally, I need to determine whether the list of payments totalling $54,991, or any of them, were loans.
[53] It was accepted by both parties that there had been a number of payments made over the period since Mrs Nelson had moved into the unit, to or on behalf of Sandra, including the payments listed in Mrs Nelson’s “Schedule of Loan Advances”.
[54] In her claim, Mrs Nelson singled out most of these payments, accepting that some were gifts. The payments that were singled out commenced on 8 February
2008 and continued through until September 2012. Mrs Nelson says she was owed
1 Bloxham v Robinson (1996) 7 TCLR (CA).
about $23,000 by the end of 2008. No loans are alleged to have been made in 2009. In February 2009, Sandra started paying $43.33 per month into her mother’s bank account, which Mrs Nelson says was for interest. In 2010, there were two more alleged loans totalling $6500, of which $6000 was an advance for Kelsie’s benefit. Mrs Nelson agreed under cross-examination that the $6,000 sum was a gift. In May 2010, Sandra increased the monthly payment into her mother’s bank account to
$90 per month. There is then a series of alleged loans throughout 2011, with increasingly frequent payments in 2012, although lesser amounts were involved.
[55] Sandra says that from the time her mother came to live in the unit, financial assistance was provided by her mother and any amount that was to be repaid was recorded in a ledger kept by her mother. She says that any loan was promptly repaid. However, Sandra accepts that, as at early 2009, when she started making the monthly payments, she did owe her mother too much to easily repay, which was why she suggested converting the then debt to a loan and paying interest. She says she relied on the ledger for the amount of that debt, but the ledger has since disappeared. She says she believes that the amount of the loan at the beginning of 2009 was about
$5,300 and that, although she offered to pay interest, her mother said the monthly payments could be treated as principal repayments. On that basis, Sandra says she has repaid $2,687, leaving a debt owing to her mother of about $2,613, going back to the 2008 period. Sandra says the further payments made by her mother in 2010 to
2012 were gifts. She says $2,613, or thereabouts, is the only sum she owes her mother.
[56] Where money has been paid by one person to another without consideration, the burden of proof lies on the person asserting a gift to show an intention on the payer’s part to make a gift, unless the presumption of advancement applies.
[57] The presumption of advancement applies between parent and child where the relationship is in loco parentis, i.e. the child is dependent on the parent. The presumption implies the donor intended to make a gift to the donee because of the relationship between the parties, which assumes a natural obligation for the parent to provide for the child.
[58] Mr Pidgeon argued the presumption of advancement applies here. I do not agree. In my view, the relationship here is not one of dependency. I accept that Sandra was in poor physical and mental health in the years between 2009 and 2012, but nonetheless, I consider that Mrs Nelson and Sandra were assisting each other in different ways, rather than Sandra being dependent on her mother.
[59] I have decided that the presumption of advancement has not been validly raised. Sandra therefore has to prove that the monies, which she agrees were paid to her, were in fact gifted. The authorities suggest that cogent evidence is required.2
[60] I accept Sandra’s evidence that the monthly payments of $43.33, and then
$90, made by her were to be treated as principal repayments, not interest payments. In her reply evidence, Mrs Nelson did not challenge Sandra’s evidence in that regard.
[61] In terms of the quantum of the loan, it seems that Mrs Nelson has singled out amounts largely on the basis that her cheque butt notation records the payee as “SL”. She says that stands for “Sandra Loan”. However, Sandra’s middle name is Leanne so it could equally, and more likely, stand for “Sandra Leanne”. I note that in the case of a payment which Mrs Nelson says was a gift, she has recorded “SL”. So quite clearly in that context “SL” was not “Sandra Loan”.
[62] Mr Rooke suggested that I could extrapolate from the “interest” calculation of $43.33 per month that the total debt might then have been, as Mrs Nelson says, approximately $22,000, the $43.33 representing 2.4 per cent per annum. He said the increase to $90 per month is consistent with the fact that the lending increased to
$39,000 by 3 June 2011. However, the increase to $90 per month began on 3 June
2011, at which point there had been minimal increase in the claimed debt, given Mrs Nelson accepted at the hearing that the $6,000 for Kelsey was a gift. In circumstances where I do not even know whether the $43.33 monthly payment was fixed before or after it was agreed to be a principal repayment, I do not think I can
extrapolate from the quantum of the monthly payments.
2 See Narayan v Narayan HC Auckland CIV-2009-404-2398, 20 November 2009.
[63] In a situation which is undoubtedly very messy, I have to fall back on my view as to the most reliable and credible witness. I found Sandra’s evidence throughout to be very thorough, and with one exception that follows, consistent with the documents. I have already referred to a number of examples where Mrs Nelson’s evidence was unreliable. She was confused. I hasten to add, as she helpfully explained to me, this will be in considerable part due to her recent accident, but not entirely so. To repeat one example only: Mrs Nelson approached this entire proceeding on the basis she should be reimbursed for the full costs spent on the unit (even down to the purchase price of a dishwasher bought by her some years before) without giving any credit for the $80,000 paid to her by the Meier Trust Partnership. She had developed a mindset that she was owed over $160,000 for the unit, when, at the very most, that could only be about $80,000. Even $80,000 was clearly excessive, bearing in mind use and age of the unit. My impression is that when it comes to financial matters, Mrs Nelson often gets the wrong end of the stick. Consistent with that, Mrs Nelson said in evidence: “Sandra’s got all my money.” That was clearly not only incorrect, but unfair. Money had gone in all directions, including over $180,000 to Annwyn.
[64] I also think it odd, where payments went back to 2008 and some were acknowledged as gifts, that there was no record of loans. The cheque butts (apart from the last few), certainly did not constitute such a record. In fact, the annotations were indistinguishable between claimed “gifts” and “loans”. Further, it was clearly Mrs Nelson’s intention to provide for Sandra, as when Sandra commented earlier on the gifting to Annwyn, Mrs Nelson said “your turn will come”.
[65] I have therefore concluded that Sandra’s version of events is more likely to be
correct.
[66] The exception to this is that, between 4 July 2012 and Mrs Nelson’s departure from the property in September 2012, there were four payments to Sandra which were the only payments where Mrs Nelson’s cheque butts recorded a loan, as opposed to, for example, “SL”. They totalled $2,665. While I do not know for sure when those annotations were made, I consider that the cheque butts tip the weight of the evidence in favour of Mrs Nelson with regard to that sum.
[67] I therefore find that Sandra owes her mother $5,278, being the residual
2008 debt of $2,613, plus the latter 2012 debt of $2,665.
Conclusion
[68] For the reasons given, judgment is entered against all defendants on the third cause of action for breach of, or interference with, contract in the sum of $18,720 and against the third defendant on the fourth cause of action for debt recovery in the sum of $5,278.
[69] The third defendant is legally aided. Under s 45(2) of the Legal Services Act 2011, no order for costs may be made against an aided person in a civil proceeding, unless the court is satisfied there are exceptional circumstances. Having considered the conduct of the third defendant, I am not satisfied there are exceptional circumstances to warrant an order for costs against her.
[70] The trusts, of which the second and third defendants were trustees, have been wound up. Counsel asked that I afford the second and third defendants, who did not participate in the hearing, an opportunity to consider the judgment and the matter of costs. If these defendants have any opposition to costs on a 2B scale, I direct they file memoranda within 14 days. The plaintiff can then file a memorandum in reply within a further 14 days. Otherwise I will proceed to order costs on a 2B basis.
Further comments
[71] I raised with counsel whether, given on the basis of the legal advice received by them, the licence to occupy would not have been factored into the relationship property settlement, Mr Alfred Meier should consider contributing equally to the
$18,720 damages sum.
[72] I also pointed out that, while family members were critical of Mrs Nelson in their evidence, she had been very generous to Annwyn, Sandra and Sandra’s two daughters. Mrs Nelson had also worked a night shift at the local rest home while living in the property, but was criticised for not pulling her weight around the house. In circumstances where Mrs Nelson now has very little money and is unable to work,
the family members should all respond appropriately, quite apart from any Court order.
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Hinton J
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