Nichols v Nichols HC Auckland CIV 2007-488-729

[2008] NZHC 2399

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2007-488-729

BETWEEN  MARK WILLIAM OWEN NICHOLS Plaintiff

ANDROY SIDNEY BRUCE NICHOLS AND RHONDA MARIE NICHOLS

Defendant

Hearing:         18 June 2008

Appearances: W Woodd for Plaintiff

M Schamroth for Defendant

Judgment:      4 July 2008 at 4 pm

JUDGMENT OF ASSOCIATE JUDGE ROBINSON

This judgment was delivered by me on 3 July 2008 at 4 pm pursuant to Rule 540(4) of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:           Neumegan & Co, PO Box 5968 Wellesley Street, Auckland

Boyle Mathieson, PO Box 21-640 Henderson, Waitakere City

MARK WILLIAM OWEN NICHOLS V ROY SIDNEY BRUCE NICHOLS AND RHONDA MARIE NICHOLS HC AK CIV 2007-488-729  4 July 2008

[1]      The plaintiff applies for an order pursuant to section 145A Land Transfer Act

1952 that a caveat he lodged in respect of certificate of title identify NA87A/226 does not lapse. In the caveat the plaintiff claims a beneficial interest in the land by virtue of an express, implied, or constructive trust pursuant to which the registered proprietors Roy Sidney Bruce Nichols and Rhonda Marie Nichols are trustees and the caveator is beneficiary.

[2]      The plaintiff’s application to preserve his caveat was filed on 5 November

2007  following  service  of  a  notice  from  the  Registrar  General  of  Land  issued pursuant to section 145A of the Land Transfer Act and dated 24 October 2007.

[3]      Within the time required by section 145A(3), the plaintiff on 16 November

2007 obtained an order directing that his caveat is not to lapse pending further order of this court.

[4]      The  property  which  is  the  subject  of  the  plaintiff’s  caveat  is  a  farm  at Mangonui consisting of 434.6324 hectares. In 1989 the Mangonui farm was owned by Landcorp. The plaintiff along with two others purchased a renewable lease of the farm for a total of $45,000. In 1992 the plaintiff purchased the interest of the other two in the lease.

[5]      In 1997 Landcorp gave the plaintiff the first option to purchase the freehold for the sum of $125,000. The plaintiff says he discussed the option with his brother Roy Sidney Bruce Nichols. Roy Sidney Bruce Nichols and his wife Rhonda Marie Nichols are the defendants. The plaintiff claims that along with Roy Nichols and a friend Gary Panther, he agreed to purchase the Mangonui farm from Landcorp. The plaintiff claims that the arrangement was for each to have a one third interest in the farm.

[6]      Pursuant to that arrangement by transfers registered on 23 January 1997, the Mangonui farm was transferred first to the plaintiff and then to Gary Panther and the defendants. However, the plaintiff maintains that he was to retain a third interest in the farm. The plaintiff states: -

It was agreed that the Farm would go into the names of Roy and Gary. I understood that was because Roy and Gary would be doing all of the paper work, so it would be easier and cleaner if the Farm went into their names, with me being the silent partner. Roy said he would get his lawyers to sign, which I did. I have to say that I did not really understand any of it, I just signed on Roys say so and on the understanding that I have described.

[7]      The plaintiff claims to have signed what he describes as a silent partner agreement at the home of the defendants which was retained by Roy Nichols. The plaintiff acknowledges that he does not have a copy of the agreement.

[8]      In 1997, the defendants and Gary Panther transferred the Mangonui farm to Gary  Robert  Burch  and  Irene  Malvinia  Sarah  Burch.  Mr  and  Mrs  Burch  were trustees of a trust established for the benefit of the defendants, their children, Gary Panther and Gary Panther’s de facto wife. At some stage the defendants purchased Gary Panther’s interest in the Mangonui farm.

[9]      Following the purchase of the farm from Landcorp, the plaintiff remained in occupation. On the 26 January 2007, the solicitors acting for the defendants served a notice to quit on the plaintiff requiring him to vacate the farm and to remove all items belonging to him on the farm within one month. By letter dated the 21 March

2007, the solicitors threatened to obtain the assistance of the police to evict the plaintiff if he did not vacate the farm property.

[10]     Following  receipt  of  those  notices,  the  plaintiff  consulted  solicitors  who advised the defendants solicitors as follows: -

We act for Mark and understand that you act for his brother Mr RSB Nichols (“Roy”) in connection with a Northland property. The identifier 87A/226 (“the land”).

We are instructed that:

Roy has requested that Mark vacate the land and has advised that he (Roy)

intends to sell the land.

Mark has a beneficial interest in the land, under an agreement made in or about  1997  with  Roy  and  Mr  GPG  Panther.  The  agreement  was  to  be recorded in writing. Roy produced an agreement for signature that had been drawn up by solicitors. This was signed and Roy then undertook to have his solicitors (your firm) hold Mark’s copy for safe keeping on behalf of Mark.

Would you please forward to us a copy of the agreement and any other document you are holding on behalf of Mark. An authority for this purpose is enclosed.

As  a  separate  request,  would  you  please  forward  to  us  copies  of  all documents which refer to or contain information that is directly or indirectly about Mark. We enclose herewith an authority and request signed by Mark pursuant to the Privacy Act for this purpose. If it is proposed to withhold any document or any portion of any document, please provide the reasons and the grounds in support of the reasons for such withholding.

[11]     The solicitors for the defendants in reply advised that they do not have any agreements or other documents held on behalf of the plaintiff. They also advise that although they acted for the plaintiff in respect of some matters, the majority of files were uplifted several years ago and that they are holding nothing of relevance in their filing system.

[12]     The evidence of the defendants in opposing the application is to the effect that the plaintiff does not have any beneficial interest in the property. In his affidavit in reply, Roy Nichols states: -

After discussion, the plaintiff and I agreed as follows:

Gary Panther and I would pay the purchase price for the freehold interest in the Wharanaki property to Landcorp;

The plaintiff would transfer the title in the Wharanki property to Gary and I

once it was registered in his name;

The plaintiff would be entitled to remain living at the property as a tenant until such time as the Wharanaki property was sold with him paying all rent, rates and other outgoings on the house. Annexed hereto marked “A” is a copy of the tenancy agreement dated 1 April 1996. No rent was paid by the plaintiff at any time during the tenancy. I did not enforce payment as he is my brother;

Once my Mangonui farm was subdivided, I would transfer a section of the plaintiff’s choice to him at no cost (“the verbal agreement”).

[13]     The tenancy agreement produced by the defendants is dated 1 April 1996. The copy produced for the court appears to be a photocopy of a faxed copy received some time in November 2007. It records that the plaintiff was to pay rent of $100 per week. It is in a form supplied by tenancy services, a division of the Ministry of Housing. It is significant that it predates the transfer of the property from Landcorp by the defendants by some eight months.

[14]     The plaintiff disputes the validity of the tenancy agreement. The evidence establishes that he has never paid rent to the defendants in terms of such agreement. Whilst the plaintiff acknowledges receiving a section from the defendant following the subdivision of the defendant’s farm, he claims that that was as a result of a separate independent transaction.

[15]     The plaintiff’s claim to have a beneficial interest arises out of the agreement entered into when the farm at Mangonui was acquired from Landcorp. The plaintiff claims  that  he  was  entitled  under  that  agreement  to  a  one  third  interest  in  the property. He also claims that pursuant to such agreement, he surrendered his lease to Landcorp, exercised his option, and together with the defendants and Gary Panther acquired the farm property. He claims that the defendants and Gary Panther acquired the property on the basis that Gary Panther would have a one third interest, the defendants would have a one third interest and the plaintiff would have a one third interest.

[16]     On the basis of those facts, the plaintiff is claiming a one third interest under a constructive trust relying upon the decision of Avondale Printers & Stationers Limited v Haggie [1979] 2 NZLR 124. In that case Mahon J at page 164, gave the following reasons when concluding that there was a constructive trust: -

The plaintiff abandoned its rights under the deed on the faith of the promise of  the  defendants  that  after  taking  title  they  would  not  only  contribute

$30,000 towards further development expenditure but that they would grant

Thomas the option to purchase in terms which I have previously expressed, thus giving him the opportunity to recover either the whole or part of the

moneys  which  he  had  spent,  and  was  still  spending,  in  the  course  of

improving the land. As I have held already, I am satisfied that Thomas would not have surrendered the plaintiff’s right to purchase in the absence of that oral undertaking. I am not aware of any decided case in which the facts were comparable to the facts of this case, but there was here, as I have held, a common intention whereunder a beneficial interest in the land, in the form of an option to purchase, was to be vested in the plaintiff by the defendants after legal title was taken. Subsequent denial of that common intention, and refusal to grant the option, is only another example of the type of fraudulent conduct which in equity will raise a constructive trust.

[17]     In the present case, the plaintiff claims that the defendants prevailed upon him to exercise his option to purchase the property and thereby surrender his leasehold interest in the property on the basis that he would have a one third interest

in the title. It is therefore submitted that it would be fraudulent for the defendants to deny the plaintiff his one third interest in the property and that in the circumstances equity imposes a constructive trust for a one third share in the plaintiff’s favour.

[18]     In opposing the application to preserve the caveat, counsel for the defendants submits that the plaintiff has not established an arguable case to support the caveat. Counsel for the defendants referred to the judgment of Lord Diplock in Eng Mee Yong & ors v Letchumanan s/o Velayutham [1980] AC 331, 341: -

Although in the normal way it is not appropriate for a judge to attempt to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbably in itself it may be. In making such order on the application as he “may think just” the judge is vested with a discretion which he must exercise judicially. It is not for him to determine in the first instance whether statements contained in affidavits  that  are  relied  upon  as  raising  a  conflict  of  evidence  upon  a relevant fact have sufficient prima facie plausibility to merit further investigation as to their truth.

[19]     Counsel  for  the  defendants  submitted  there  to  be  inconsistencies  in  the plaintiff’s evidence, lack of good reason advanced by the plaintiff for permitting the defendants to acquire the property without the plaintiff being included as purchaser on the title, and inconsistencies with the documentation. Counsel for the defendants submitted these circumstances clearly established that the plaintiff was to have no interest in the property.

[20]     However, the plaintiff’s evidence as to his entitlement to a one third share in the property is corroborated by Gary Panther who purchased the property along with the defendants in 1997. His evidence is as follows: -

It was agreed between Roy, Mark and myself that Roy and I would put

$60,000 each into finance the purchase and we would own the land in one third shares each. Mark’s contribution being that he got the land at the

favorable   price.   We   were   each   to   be   one   third   beneficial   owners,

notwithstanding that only Roy and myself would be on the legal title.

[21]     Roy Nichols to a certain extent concedes that the plaintiff was entitled to some consideration for surrendering his lease and enabling the defendants and Roy Panther to exercise his option to purchase the property from Landcorp when he gives

evidence that the plaintiff was to receive a section following subdivision of Roy

Nichol’s farm.

[22]     The plaintiff’s evidence is also corroborated by the evidence of Gary Robert

Burch when he says: -

I have had several conversations with Roy in the years after the purchase of the Farm in 1997, in which Roy has talked about Mark as still having a share in the Farm. I cannot understand why he would now try to deny Mark his share.

[23]     Having  regard  to  the  evidence  of  Gary  Panther  and  Gary  Burch,  which conflicts with the evidence of the defendants, I have no hesitation in concluding that such evidence creates sufficient prima facie plausibility as to merit further investigation.  I  also  take  into  account  the  implied  acknowledgement  by  the defendants that when on the acquisition of the property following the plaintiffs purchase from Landcorp the plaintiff was entitled to some consideration and the unusual  circumstances  relating  to  the  agreement  to  lease  which  predates  the plaintiff’s surrender of his lease to Landcorp by eight months. It is also significant that the plaintiff has not paid any rent in terms of that agreement for lease.

[24]     In all these circumstances, I certainly could not conclude that the plaintiff does not have an arguable case for an interest in the property based on a constructive trust. Consequently, his application to sustain his caveat must succeed.

[25]     However, it is now incumbent upon the plaintiff to commence proceedings forthwith to establish his claim to an interest in the property. His counsel has advised that  such  proceedings  can  be  issued  within  thirty  days.  It  will  therefore  be  a condition of the order I now make that such proceedings do issue within thirty days.

[26]     Counsel for the defendants sought a further condition requiring the plaintiff to give an undertaking as to damages. In this respect counsel relied upon the decision of BP Oil New Zealand Limited v Van Beers Motors Limited [1992] 1 NZLR 211. In that case it was observed that section 146 Land Transfer Act gave to the registered proprietor a statutory right to claim damages only against those who lodge a caveat other than in good faith and without reasonable grounds. Consequently, as a caveat

could seriously infringe the right of a registered proprietor to do whatever he or she did with his or her land, the caveator should be liable to pay damages should the caveat, although lodged in good faith, turn out to be misconceived.   At page 219

Barker J stated: -

I accept that there must be a discretion, even if jurisdiction exists. One would imagine that, in the vast bulk of cases, including the present, there can be little argument but that the discretion should be exercised in favour of the registered proprietor. In this case, there is prima facie evidence to suggest that if the caveat is ultimately not sustained, then the registered proprietor will have suffered damages of a sort for which relief under s 146 would not be possible.

[27]     Although there is no specific evidence as to any loss the defendants are going to suffer if the caveat is not maintained, I have to take into account the delay by the plaintiff in bringing proceedings to support his claim to a one third interest in the property. The plaintiff has been on notice since service of the notice to quit in January 2007 that the defendants were disputing his claim to the property. Having regard to the delays likely to be experienced in resolving any proceedings that the plaintiff may now issue for an interest in the property, there is an increasing risk of loss to the defendants if the plaintiff’s claim does not succeed. In particular whilst the plaintiff’s claim is pending and the caveat is maintained, the defendants are unable to dispose of the property. In a falling market this could cause them financial loss. Without an appropriate undertaking from the plaintiff, the defendants could be without remedy if such loss is sustained and the plaintiff’s claim to an interest does not succeed.

[28]     I therefore require, as a condition of the making of the order preserving the caveat, that the plaintiff give an appropriate undertaking to pay such damages as this court may see fit to award to the defendants if it is ultimately held that the plaintiff’s caveat should not have been filed.

[29]     For the above reasons therefore there will be the following orders:

a)        That the order preserving the plaintiff’s caveat is to continue until further order of the court subject to the following conditions:

i)That within thirty days, the plaintiff is to bring proceedings for an order vesting a one third interest in the property in his name.

ii)That the plaintiff shall within seven days file an undertaking to pay such damages as this court may see fit to award to the defendants if it is ultimately held that the plaintiff’s caveat should  not  have  been  filed  by  reason  of  the  fact  that  the plaintiff   will   not   have   succeeded   in   his   substantive proceedings.

iii)Leave is reserved to the defendants to apply for an order discharging the caveat should the plaintiff be in breach of the above conditions or not pursue his claim to an interest in the property with due diligence.

[30]     As the plaintiff has been successful the plaintiff is entitled to costs on a 2B

basis with disbursements as fixed by the registrar.

Associate Judge Robinson