Paul v Paul

[2013] NZHC 3231

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

CIV 2013-463-000375 [2013] NZHC 3231

UNDER

Section 145A of the Land Transfer Act

1952

IN THE MATTER

of an application that caveat not lapse

BETWEEN

ROBERTA LORRAINE PAUL Plaintiff

AND

CORENE GEORGINA PAUL Defendant

Hearing:	3 December 2013
Appearances:	N J Edwards for the Applicant F Wood for the Defendant
Judgment:	4 December 2013

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on

04.12.13 at 4:30 pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

R L PAUL v C G PAUL [2013] NZHC 3231 [4 December 2013]

[1]      The applicant and respondent are daughter (Roberta) and mother (Corene). Their dispute concerns Corene’s property situated at 27 Old Quarry Road, Rotorua (the Property).  Roberta and/or her children have lived there since 2001.

[2]      On 27 February 2013 Roberta lodged a caveat against the Property.  Roberta claimed an equitable interest in the Property alleging there was an agreement made in 2005 for her to purchase the Property.  Roberta filed an application to sustain that caveat.  Corene opposed that application.  I heard the application on 14 August 2013. I issued a judgment on 16 August.  I held:

[55]     The evidence clearly supports the conclusion that no agreement for purchase was concluded, but that an option to purchase became available after Corene’s death.

[56]      The right of occupancy and acquisition created by Corene’s Will was insufficient to create a proprietary right.   Therefore there is no caveatable interest.

[57]     The court is conscious of the fact that there is a significant dispute between the parties regarding the terms of their arrangement.  However the Court  does  not  consider  that  Roberta’s  claims  pass  the  threshold  of credibility.

[3]      Thereupon I dismissed Roberta’s application.

[4]      Four days later on 20 August 2013 Roberta lodged a second caveat over the

Property.  By that caveat Roberta:

Claims an equitable interest in the property at 27 Old Quarry Road, Rotorua as mortgagee under an agreement to mortgage that was granted by the registered proprietor, Corene Georgina Paul, on 20 August 1996.   The agreement to mortgage is contained in a term loan contract dated 20 August

1996 between the caveator as lender and the registered proprietor as a caveator (together with her late husband).  The term loan contract records an

advance of $50,000 from the caveator to the registered proprietor’s (and her late husband’s) former company, R G Paul Limited, on the basis of the

registered proprietor providing security for the loan advance that included, inter alia, the agreement to mortgage.   The loan advance is repayable on demand.    The  loan  advance  has  not  been  repaid  and  $50,000  remains

outstanding.  The caveator has requested, by way of letter to the registered
proprietor’s  solicitor  dated  29  July  2013,  that  the  registered  proprietor

provide a registered mortgage on the all obligations form published by the Auckland District Law Society.  The registered proprietor has not responded to this request.

[5]      On 27 September 2013 Roberta applied to this Court to sustain her caveat.

[6]      Corene opposes Roberta’s claim of an interest in the Property on the basis that Corene repaid the loan by purchasing shares in Pleasant Heights Dairy Limited (the Dairy) on Roberta’s behalf.

[7]      A raft of affidavits have been filed by or on behalf of both Roberta and Corene.  Those focus on the loan Roberta gave to her parent’s company and on the security documents that were completed at that time, and about Corene’s purchase of shares in the dairy business, and also whether or not the loan was repaid at all in the last 17 years.

[8]      If the loan has been repaid then the claim of an interest cannot be sustained. If it had not been repaid it is still available to the Court to order the caveat to be removed.

[9]      It seems to be the position on behalf of Roberta that there is a sufficient dispute as to whether or not it was repaid and therefore the Court should err on the side of sustaining the caveat.

Legal principles

[10]     The caveator has the onus of proof to show that there is an arguable case that there is a serious issue to be tried that entitles the caveator to the protection of the caveat.  In this case Roberta bears the onus to prove to the appropriate standard that she has an arguable case that the loan has not been repaid. Therefore more than mere assertion that it has been repaid is insufficient.   Unless Roberta’s claim can be supported by contemporary documents or other reliable first hand evidence then she may have difficulty in sustaining her caveat.

[11]     In Macrae v Rapana 1 Fisher J noted:

Except where patently lacking in credibility on its face, the evidence advanced by and on behalf of the plaintiff should be accepted as correct for present purposes.

[12]     This does not mean the Court must accept Roberta’s evidence.   Indeed the Court may take a robust view of vague, contradictory, or implausible assertions and may take an adverse view of assertions made by the caveator which are clearly contradicted by unequivocal contemporary documentation. 2

[13]     Of course where there are significant conflicts of evidence a Court should be cautious before preferring the affidavit evidence of one party against another.

[14]     Of significance in this case is that at its core are conflicting claims about whether  or  not  a  sum  of  $50,000  is  owing.    Roberta  has  not  filed  ordinary proceedings in the District Court to recover that sum.  Her clear purpose in lodging the caveat is to prevent Corene from recovering that property where Roberta and or her family have lived for the last 12 years.

[15]     Although the present caveat application concerns an advance Roberta made to her parent’s company 17 years ago, that advance was not the subject of Roberta’s first caveat.  Instead the first caveat relied on Roberta’s claim that her mother had agreed to sell the Property to her.   In my judgment upon the matter I rejected the claim of an agreement to purchase and held instead that Roberta had an option to purchase after Corene’s death and that that was insufficient to create a proprietary right.

[16]     The  present  caveat  issue  is  about  Roberta’s  claim  of  an  interest  in  the Property on the basis of an agreement to mortgage.  Roberta’s case is that the loan has not been repaid and that she is entitled to maintain her caveat.  Roberta says she has not formally demanded payment of the loan because she is aware that Corene could not repay her; that the loan is repayable on demand and for as long as the loan is outstanding then Corene has an obligation to provide an agreement to mortgage as security.

Background

[17]     On  20 August  1996  Corene  together  with  her  late  husband  Robert  and Roberta entered into a term loan contract.   It recorded a loan of $50,000 from Roberta to R G Paul Limited, a logging company.   It was not a personal loan to Corene and her husband although they were guarantors.   As well the Company provided a debenture and a caveatable interest was granted to Roberta over the Property.

[18]     Three days later a caveat was lodged by Roberta’s securing the advance. About one month later and before 25 September 1996 the caveat was withdrawn. Roberta says she does not recall that event but believes it may have been removed at the time she agreed to release the debenture she had over R G Paul Limited’s assets.

[19]     Roberta said she agreed to this not because she had been repaid but because Corene wanted to borrow money from Westpac to purchase the shares of her sister’s husband Dennis in the dairy business.

[20]     Corene says the caveat was removed because the money advanced was repaid in full by the purchase of shares in the dairy on behalf of Roberta; that the funds to pay for those came from Westpac and that bank registered a mortgage over the Property.

[21]     Both sides say the explanation of the other does not stand up to scrutiny.

[22]     The dairy was originally owned by Corene’s twin sister and her husband

Dennis through their company D & P K Chand Limited.

[23]     Both  parties  agree  that  Corene  purchased  Dennis’  shares  in  the  dairy business, but they cannot agree when this occurred.   Corene says the caveat was withdrawn to purchase her sister’s shares on Roberta’s behalf.  Roberta says it was withdrawn so that Corene could borrow money to purchase Dennis’ shares in her own name.  Corene says she purchased her sister’s shares for $50,000 on Roberta’s behalf  in August/September  1996.    It  is  around  that  time the  1996  caveat  was

withdrawn.  Roberta says that Corene purchased her sister’s shares in her own name in December 1997 and that there never was any discussion or agreement about the shares being purchased in repayment of the loan.

[24]     Corene confirms she purchased 50 per cent of the shares in the dairy owned by the company from Dennis and then operated that dairy with her sister, Dennis’ wife.  There appears to be no dispute about this.  However, Corene denies that at any stage she was a 100 per cent shareholder in the company which owned the business. To the contrary Roberta argues that after Corene acquired 50 per cent of the dairy from Dennis she subsequently acquired the balance from her sister and owned 100 per cent, and that she later promised Roberta those 50 per cent shares in the business in  recognition  of  Roberta’s  hard  work  in  the  dairy  for  years  without  pay.    By Corene’s account her sister’s 50 per cent shareholding was brought at Roberta’s request for $50,000 which was the repayment amount owed to Roberta.

[25]     It  appears the Companies  Office records  have  never recorded  Corene  as owning 100 per cent of the shares in the corporate entities that owned the dairy business.

Discussion

[26]     In the first caveat application Roberta had deposed that she was never a shareholder in the company that owned the dairy.  Her position is now that Corene had agreed to give her a 50 per cent shareholding in recognition of her years of hard work without pay.  When copies of company office records were disclosed and they showed that Roberta was both a director and shareholder of the company in question Roberta’s response then became that she could not recall signing the documents. She said she was surprised when she discovered this.

[27]     Roberta’s position is now that she accepts having received a half share in the dairy but she claims it was not worth $50,000 and she claims also to have “worked off” her shares.   Her initial position was that she was unaware of either her shareholding or her directorships of D & B K Chand Limited or of Pleasant Heights Dairy Limited to which the business was transferred.  It follows that she could not

recall completing any of the documents that would have been required of her in her capacity as a shareholder or director.

[28]     Roberta claims the events of September 1996 concerned the acquisition of Dennis’ shares at that time and not, as Corene claims for the purchase of her sister’s shares at that time on behalf of Roberta.

[29]     Affidavits have been filed on behalf of the son and daughter of Corene’s sister and Dennis.  According to their son Roberta removed the caveat so that her parents could borrow more money and not because Roberta had been repaid.  The daughter believes Corene’s half share in the dairy was not sold to Corene until 1997 and that there had never been any mention of Roberta buying those shares.   Two neighbours have given evidence that when Corene purchased her sister’s shares she then “owned 100 per cent” of the dairy.

[30]     Ms Edwards on behalf of Roberta notes that the mortgage to Westpac which was registered on 25 September 1996 does not show what the money was used for or the reason the 1996 caveat was withdrawn.   Also there are few company office records and unsurprisingly they do not show that Roberta acquired shares in return for repayment of her loan or that she acquired her shares from Corene’s sister.

[31]     Affidavit evidence of Marina, Corene’s daughter and sister to Roberta was also provided wherein she recounted Roberta’s offer to buy the shares of Corene’s sister and a conversation regarding how those shares would be paid for.  She recalled Roberta saying that she would remove her caveat over her parent’s property to enable them to get a loan to pay Roberta $50,000 so that she could buy her Aunt’s shares; prompting Marina’s observation that this is what happened and this is how Roberta came to be a 50 per cent shareholder in the dairy business.

[32]     Ms  Edward’s  submission  is  that  Marina’s  evidence  is  vague  and  lacks specificity and is unreliable because Corene lives with Marina and her family.  Also Roberta believes Marina may not have been living with her parents at the time and may have been living in Australia.

[33]     Ms Edwards submits that Corene’s case rests solely on the withdrawal of the

1996 caveat in August/September 1996.

[34]     It  is  a matter of curiosity to  the Court  that  Roberta professes  a lack  of knowledge regarding the circumstances of her agreeing to withdraw her caveat and her debenture over her parent’s logging business within a month or so of her having arranged the security of those documents for her loan of $50,000.  Moreover Roberta has a poor recollection  of having signed documents by which she acquired her interests in the dairy owning companies or indeed in relation to the adjacent liquor supply business that had been run by her father.

[35]     Roberta claims the money was not paid back and was still owing when she had not placed another caveat on the Property for more than 16 years; she had not made demand to her parent’s logging company for repayment; she did not make demand of her father during his lifetime or following his death to repay the money as co-guarantor; nor was a claim made against the logging company prior to it having been struck off the Companies Register in 1999; nor was any demand made to her mother prior to her solicitor’s letter of 29 July 2013.

[36]     Also and as Mr Wood points out, Roberta released the debenture over the company’s assets which secured the loan but made no attempt to obtain a new debenture over the company’s assets afterwards which she would surely have done had the money not been repaid.

[37]   Roberta deposed having recalled that when the term loan contract was completed that Corene told her she would only get the money back when Corene died when Roberta would then be able to take it from the proceeds of the sale of the Property.  However, Corene’s loan was to her parent’s company at a time when her father was alive and he was a co-guarantor and jointly owned the house with Corene.

[38]     Significantly, it appears, in the previous caveat removal proceeding Roberta gave no evidence in relation to the outstanding $50,000 other than to claim it was still owing.   If as she now claims there was an agreement that she could take her

$50,000 out of Corene’s estate then why was that not raised in the first caveat

proceeding?

[39]     Why, one may ask, did Roberta work for those long hours each week without pay, in order to acquire a 50 per cent shareholding in a business she now maintains was worth very little.

[40]     Companies Office records show Roberta was a director of D & B K Chand from 16 March 1998 and was a 50 per cent shareholder in that company.  She was a director of Pleasant Heights Dairy Limited from 15 April 1999 and was a 50 per cent shareholder in that company.  Regarding the liquor supply business Roberta claims to be unaware why it was incorporated or why she was an office holder.

[41]     However, Corene’s case contains confusion also.   It seems clear that the events of August and September 1996 concerned the borrowing of funds to enable Corene to purchase Dennis’ shares at that time so that it is likely Corene did not purchase the shares of her twin sister until about a year later when the logging company business obtained refinancing from AGC a portion of which arguably was used to acquire the twin sisters shares.

[42]     There has been much focus in the claims of Roberta and her supporting deponents that when Corene purchased her twin sister’s shares she acquired a 100 per cent interest in the dairy business.  But, those claims are based on assumptions that Corene purchased her sister’s shares for herself.  Contemporary documentation does not support that view but official records identify the transfer of shares and the appointment  of  Roberta  as  a  company  director.    Those  same  records  confirm Corene’s account that she never owned 100 per cent of the dairy business.

[43]     Corene’s position may now well be that she did not purchase those shares for Roberta until late 1997 for it seems from about that time Roberta worked in that business pretty much full time for around two years before she took on the role of looking after the liquor supply business.

[44]     Whilst the evidence is not clear about exactly when Roberta acquired those shares Companies Office records disclose her interest as a director of the dairy ownership company from March 1998, that is within a relatively short period of that time when the logging business company refinanced through AGC.

[45]     In that conclusion of things it is likely that the 1996 Westpac funding was arranged for the purchase of Dennis’ shares and that, if the AGC refinancing event occurred to enable the purchase of her twin sister’s shares then, if Corene purchased those for Roberta then that did not occur until about the end of 1997.

[46]     Roberta says she was given the shares for her very hard work in the dairy. However the evidence does not really suggest she provided effort to the extent claimed when by her own acknowledgement she became involved only upon the twin sister’s retreat from the business – possibly about the end of 1997.   Yet the shares were registered to her name within about four months thereafter.

[47]     Nor is Roberta’s case enhanced by her claims of reasons why she has not before now made formal demand for repayment of the $50,000.  She claimed at the time she lent the money Corene told her that she could not repay the money and the only way Roberta would retrieve her money was from Corene’s estate when she died.  This account appears to ignore the fact that the funds in question were loaned to the logging company and the fact that Roberta’s father was alive at the time and the co-guarantor of the loan and jointly owned the house with Corene.

Conclusions

[48]     Until earlier this year Roberta and Corene’s relationship had been long and trusting.  It is not clear what the reason is for the relationship change.  Corene’s Will provided Roberta with an option to purchase following her death.  Roberta claimed to give her a proprietary right interest prior to Corene’s death.   My decision upon Roberta’s first caveat application I disagreed with Roberta’s contention.  That matter is now headed for an appeal hearing next year.

[49]     The second caveat application brought by Roberta is of concern for a number of reasons not the least of which is that the current dispute of the parties is about the claim of an unpaid debt concerning funds advanced 17 years ago in circumstances where significant security was provided for that advance including the right for Roberta to lodge a caveat.  However, the caveat was withdrawn about a month later and whilst Roberta had the ability to arrange replacement securities, she never did; nor did she ever make demand for payment of the sum she now says is due.  Her position has always been that the sum has never been repaid just as Corene’s position throughout has been that repayment was effected by a transfer of shares in 1996 or it could even have been 1997 that Corene had purchased from her sister.

[50]     Ms Edwards urges upon the Court a need in the circumstances to recognise that the dispute arises in the breakdown of a family relationship where dealings were based on trust and not formality.   The Court accepts those factors should be considered.  The Court is very aware that it should not without good cause assume any  responsibility for  judgments  regarding  disputed  facts  of  significance  in  the parties’ disagreement.  But, in this case the clear fact is that the shares purchased by Corene from her twin  sister were registered into the ownership of Roberta and Roberta (probably at about the same time) became a director of the dairy business companies.   Initially Roberta refused to accept she owned shares at all in those companies.  When confronted with the details of official record Roberta claimed she was given those shares free because of the work that she had put into the running of the dairy.  Yet it appears Corene paid either $50,000 or $70,000 for those shares of her sister, and Corene had worked for a relatively short period only before there was a transfer of those shares to her account.

[51]     The Court has issues with the reliability of Roberta’s evidence.

[52]     Of concern to the Court is that this caveat has been lodged claiming a debt is due when no action has been taken to recover that debt when nearly six months ago it was clear there was a dispute about whether or not that debt was due.  Roberta says her mother has no ability to pay the debt except as any equity in the Property provides; that her mother would likely transfer the Property out of her name given the opportunity and this would prevent Roberta’s rights of recovery at all.

[53]     The situation has arisen in a falling out between mother and daughter.  It is sad.  There has been recourse to Court process.  That process is constrained by rule and principle which does not assist Roberta at this time.  Indeed it seems to the Court there is an element of abuse of process about the tactic of registering a caveat 17 years after one had been released in relation to that same debt which now provides the basis for its return; that meanwhile no claim for repayment of the debt has been made.  The evidence of a purchase of shares by Corene on behalf of Roberta appears to  be supported  sufficiently by contemporary documents,  and  that  such  support significantly outweighs Roberta’s explanations of how it came to be that those shares were registered in her name.

[54]     Reliable  evidence  supports  claims  that  Corene  has  purchased  the  dairy business shares for Roberta and that a sum of not less than $50,000 was paid to Corene’s sister for those; probably within a short period after purchase for records note Roberta as owning those shares and assuming authority as a director.

[55]     The parties’ dispute appropriately lies with an ordinary proceeding claim filed in the District Court.   It is not appropriate to use the caveat challenge process to decide an issue about whether or not a 17 year old debt has been repaid.

Judgment

[56]     The application to sustain the caveat is dismissed.

[57]     Costs are fixed on a 2B basis and those together with disbursements are ordered to be paid by Roberta to Corene.

Associate Judge Christiansen