Sain v Millie Erceg Trustee Limited
[2020] NZHC 1723
•16 July 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-000546
[2020] NZHC 1723
UNDER the Land Transfer Act 2017 IN THE MATTER
of an application under s 143
BETWEEN
VINKA PATRICIA SAIN
ApplicantAND
MILLIE ERCEG TRUSTEE LIMITED
Respondent
Hearing: 13 July 2020 Counsel:
DR Bigio QC and GA Ireland for Applicant DM Hughes and RA Idoine for Respondent
Judgment:
16 July 2020
JUDGMENT OF DOWNS J
This judgment was delivered by me on 16 July 2020 at 2.00 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors/Counsel: LawWorks, Auckland. Anthony Harper, Auckland. DR Bigio QC, Auckland.
SAIN v MILLIE ERCEG TRUSTEE LTD [2020] NZHC 1723 [16 July 2020]
The case
[1] In 2005, Michael Erceg died in an accident. Michael was very wealthy. Litigation has since befallen the family. In this case, Michael’s sister, Vinka Sain, seeks to sustain a caveat over property controlled by their brother, Ivan Erceg, once in the name of their mother, Millie Erceg.1 Vinka contends Michael promised the property to her when Mrs Erceg died. Ivan says Vinka’s claim to the property is not reasonably arguable, hence the caveat should not remain.
[2] It is common ground Vinka’s claim is not supported by contemporaneous documentation.
Background
The claim (to the property)
[3] In late 2004, 17 Withiel Drive, Epsom, was auctioned. Michael attended. So too Ivan, Peter Sain (Vinka’s husband) and Petar (Vinka’s son). Mrs Erceg, for whom Michael wanted to buy the property, stayed in the car. Ivan placed Michael’s bids, so attention was not on him. Michael won. He bought the property for $1.7 million. Mrs Erceg later moved in. Her name went on the title. Michael paid the entire purchase price.
[4] Vinka says Michael repeatedly said she was to have the property when their mother died, so Mrs Erceg’s interest was lifelong only. Petar says Michael made this clear to his mother immediately after the auction, during a celebratory conversation in its grounds. Peter offers the same account.
[5] Andrew Peat is a builder connected to the Erceg family. Mr Peat worked on the property. Mr Peat says Mrs Erceg threw a party when renovations were complete. Mr Peat says Mrs Erceg said to Vinka, “all this is going to be yours one day as that is what Michael wanted”.
1 Mrs Erceg.
Ivan’s position
[6] Ivan was at the auction too. Ivan says there was no discussion about the house going to Vinka on their mother’s death. Ivan also says Mr Peat is not independent, as Mr Peat used to work for a business owned by Ivan. Ivan says Mr Peat left “in acrimonious circumstances in around 2004”.2
[7] Ivan believes Michael gave Mrs Erceg an interest-free loan in relation to the purchase price, which Michael forgave in his will when forgiving all family members of their debts to him.
Post-purchase events
[8] On 14 June 2005, Mrs Erceg made a will. Mrs Erceg left the property to Michael, not Vinka.
[9]Michael died 4 November 2005.
[10] On 9 November 2007, Vinka registered a caveat against the property. The caveat referred to a memorandum of mortgage signed by Mrs Erceg. Vinka says her mother told her Ivan had taken as much as $2 million from her bank account, and her mother was worried he would place further financial demands on her, in turn jeopardising the property. Graeme Bennett, the Erceg family’s longstanding solicitor, suggested Mrs Erceg grant Vinka a mortgage as “a device” to protect the property against “the influence of Ivan”. Mrs Erceg did so. Mr Bennett later confirmed these arrangements in an affidavit sworn 2016 in relation to other family litigation.
[11] On 3 May 2010, Mrs Erceg made a new will. Mrs Erceg left the property to the Withiel Trust. Mrs Erceg established that trust the next month.
[12]Ivan was adjudicated bankrupt in 2010. He was discharged in 2014.
2 Mr Peat acknowledges his involvement with the business but says it is not true he left in these circumstances.
[13] In November 2012, Mrs Erceg terminated Mr Bennett’s representation. Mr Bennett had been acting for Mrs Erceg for half a century.
[14] On 19 December 2012, Vinka registered a second caveat against the property.3 The caveat was based on the claim.
[15] On 17 May 2013, Mrs Erceg applied to remove the second caveat. Mrs Erceg swore an accompanying affidavit. Mrs Erceg said:
Michael provided me with the whole of the purchase price and also further amounts to enable me to make certain renovations to the [Property] (“the Loan”).
There were no arrangements to make any repayments or to pay any interest on the Loan, nor did I sign any acknowledgment of debt or other document evidencing the Loan. It was simply something which he did for me as his mother.
Under the terms of Michael’s Will dated 24 June 2005 (“the Will”), all debts owed by me to him were forgiven.
At no stage did Michael say to me that he wanted the Epsom Property to be given to [the Applicant] on my death. As far as he was concerned the property was mine to do with as I liked, and there was never any discussion of me only having a life interest in it.
I do not recall [the Applicant] ever speaking to me about the [Property] or the Loan.
Again, I am not aware of the basis on which [the Applicant] claims I have only a life interest in the [Property], or why she thinks there is a trust.
To date [the Applicant] has not provided any information to show why she considers she has an interest in the [Property]. I do not believe she has any rights to the [Property] and ask that the Court remove the [2012 Caveat] and make orders preventing any further caveats being lodged.
[16] Vinka withdrew the caveat the same day, but before she had been served with her mother’s opposition and affidavit. Vinka says she did so because of “pressure from my mother”, and believing she could lodge another caveat as necessary. Her withdrawal was expressed “without prejudice to the interest claimed in the property”. Vinka also says the first and second caveats caused “a rift” with her mother, and her
3 Vinka allowed the first caveat to lapse.
mother had forgotten why she and Vinka had placed the first caveat against the property.
[17] On 6 June 2013, Mrs Erceg made another will. Mrs Erceg also established the Millie Erceg No 1 Trust.4
[18] On 1 October 2013, Mrs Erceg gifted the property to herself and Millie Erceg Trustee Limited, of which Ivan is the sole director and shareholder, as trustees of the Trust.
[19] On 14 October 2014, Mrs Erceg signed a brief of evidence in relation to a case about Michael’s estate. She said:
Against the background of the wealth our family had built up, and Michael’s encouragement to retire as I would have plenty of money to live on, I was looking forward to having the time to enjoy the fruits of almost 6 decades of hard work.
Michael gave me the [P]roperty at Withiel Drive, Epsom. Lyn found the [Property] which was going up for auction. Michael (and Ivan) attended the auction and succeeded in buying the [P]roperty. Michael provided the money to purchase that [P]roperty and forgave that debt in his will.
[20] On 1 April 2017, Mrs Erceg made her final will. She made little provision for Vinka. Gerard Molloy advised Mrs Erceg and prepared her will. Mr Molloy says Mrs Erceg appeared “strong-willed and independent”, and explained why she structured her affairs this way.
[21] On 5 November 2015, Vinka registered a third caveat against the property. Like the second, it too was based on the claim. Mrs Erceg was then in a coma in Switzerland. Ivan was with her. Vinka withdrew this caveat when Mrs Erceg recovered.
[22]On 6 October 2019, Mrs Erceg died.
4 The Trust.
[23] On 13 November 2019, Vinka registered a fourth caveat over the property— that underlying this case.
Vinka’s case
[24] On behalf of Vinka, Mr Bigio QC contends it is reasonably arguable Mrs Erceg held the property on an express or constructive trust for Vinka; Mrs Erceg breached that trust in transferring the property to herself and Millie Erceg Trustee Limited; and that company holds the property on constructive trust for Vinka (knowing the property was to go to her).
[25] Mr Bigio contends Vinka’s evidence and that of her husband, son, and Mr Peat can establish the claim. Mr Bigio argues the wide-ranging factual disputes between Vinka and Ivan cannot be resolved in this context; the claim should go to trial. Mr Bigio also argues the absence of supporting contemporaneous documentation should not be decisive because of the idiosyncrasies of this case.
Ivan’s case
[26] On behalf of Ivan, Mr Hughes contends the claim is not reasonably arguable, hence the caveat should be removed. Mr Hughes contends the claim is inconsistent with the title to the property (which is silent on the point); Mrs Erceg’s 2005 will; the claimed interest for the first caveat; Mrs Erceg’s 2010 will; Mrs Erceg’s 2013 affidavit; Mrs Erceg’s 2013 gifting to the Trust; Mrs Erceg’s 2014 brief of evidence; and Mrs Erceg’s 2017 will.
[27] Mr Hughes also contends the claim is “inherently implausible” given the sequence above and other aspects. Mr Bennett says nothing about the claim in his 2016 affidavit, even though Vinka says she raised it with him. Mrs Erceg specifically asked Vinka for detail of her alleged interest in the property on 20 February and 7 March 2013 (through lawyers). Vinka did not reply to this correspondence. Vinka says her mother frequently referred to the property being Vinka’s in the presence of others, and to the extent it became “embarrassing”. Mr Hughes asks rhetorically, where are all these witnesses?
Principle
[28] Principle is not contested.5 A party seeking to uphold a caveat must demonstrate she, he or it has a reasonably arguable case of an interest in the land to sustain the caveat. If this standard is not met, the caveat must be removed. Proceedings of this nature are not suitable to determine rights and obligations, or matters of fact. However, a Judge is not required to accept evidence uncritically, particularly if it is unsupported by, or contrary to, contemporaneous documentation.6
Analysis
[29] I am satisfied Vinka’s claim is reasonably arguable. First, her evidence and that of her witnesses could establish the claim if their evidence is accepted. Ivan does not argue otherwise.
[30] Second, while an express trust in relation to land must be in writing (and signed by the settlor), it has long been held if a person takes land and agrees to hold it on trust, she or he cannot defeat that trust by observing the arrangement was oral.7
[31] Third, while an absence of supporting contemporaneous documentation can make a claim untenable, the feature is not decisive. Michael appears to have been very generous, but was not always the most careful historian. There is evidence from Mrs Erceg (in earlier litigation reproduced for this claim):8
Michael worked on the basis of verbal undertakings, that his word was his bond, and that there was no need to put anything in writing. This approach was adopted by Michael from Michael’s father Mijo who had the same philosophy.
There is little reason to doubt this, at least as a general proposition. The point can be illustrated this way: Ivan’s contention that Michael made an interest-free loan to their mother vis-à-vis the property is also not supported by any contemporaneous
5 Bishop Warden Property Holdings Ltd v Autumn Tree Ltd [2018] NZCA 285 at [22]–[25].
6 Eng Mee Young v Letchumanan [1980] 1 AC 331 (PC) at 341.
7 Smith v Ball [2020] NZHC 944 per Gordon J is a recent example. See Crampton-Smith v Crampton-Smith [2011] NZCA 308, [2012] 1 NZLR 5 at [57].
8 Emphasis added.
documentation. So, atypically, the absence of contemporaneous, supporting documentation is neutral.
[32] Fourth, Mrs Erceg’s admittedly strident rejection of the claim is not decisive either, and a matter for trial. Mrs Erceg said this in her affidavit when opposing the second caveat in 2013:
I was not aware of the Initial Caveat until I applied to ANZ Bank New Zealand Limited (“the Bank”) to borrow money using the Henderson Property as security, in November 2012. At that stage I was advised by the Bank that the Initial Caveat was registered against the titles to the Epsom Property and the Henderson Property.
Under the Initial Caveat Vinka alleged that there was an unregistered memorandum of mortgage between the two of us. In fact there was no such mortgage and at no stage did Vinka lend me any money. I do not know why Vinka made this claim.
It was quite a shock to me to discover that the Initial Caveat had been lodged by Vinka, as she had not told me that she had done so and I did not think she had any right to a caveat.
When I found out about the Initial Caveat I asked Vinka to remove it but she refused to do so, and I then instructed my lawyer to take steps to have it removed. I understand that my lawyer made an application to Land Information New Zealand for the Initial Caveat to lapse (“the Application”) and a copy is annexed marked “MME-5”. Vinka took no steps in respect of the Application, and the Initial Caveat lapsed on 3 January 2013. This enabled a mortgage in favour of the Bank to be registered on the title to the Henderson Property on 3 January 2013.
[33] It is clear Mrs Erceg did know about the memorandum of mortgage with Vinka—Mrs Erceg signed it. Moreover, Mr Bennett said this “device” was a direct response to Mrs Erceg’s (and Vinka’s) concerns about Ivan; see [10]. It follows Mrs Erceg’s documented position in relation to the property does not necessarily undermine Vinka’s claim. The same is true of Mrs Erceg’s (many) dealings with the property contrary to the claim; such dealings do not necessarily mean Michael did not intend Vinka to have the property, especially given the backdrop of internecine conflict.9
9 Mr Hughes contends Mrs Erceg’s 2005 will predates such conflict. Again, evidence of contrary dealings does not exclude a trust’s potential existence.
[34] I do not overlook Mr Hughes’ submission that if Mrs Erceg told others about the property going to Vinka as frequently as Vinka says, more evidence should exist of this. However, this submission also has a blind spot: evidence does exist from four witnesses, including one who is not a family member.10 Nor do I overlook that Mr Bennett’s evidence does not appear to support Vinka’s contention she mentioned the alleged arrangement to him, or Vinka’s silence in the face of the 2013 correspondence (see [27]). These points are for trial. They implicate credibility but are not fatal.
Abuse of process?
[35] Section 146 of the Land Transfer Act 2017 provides protection against serial registration of caveats in relation to the same interest in specified circumstances. It is common ground the section is not engaged as the first caveat was in relation to a different interest (the memorandum of mortgage), and the second and third were withdrawn. This explains why Ivan relies on the allied doctrine of abuse of process:11
Where a caveator seeking to lodge a second caveat against the same land does so in respect of a new interest or otherwise has a meritorious claim it can be expected that an Order of the High Court will be readily granted. But there is nothing unreasonable in the safeguard of Court sanction for a second caveat. It guards against abuse which would undermine the policy of the Act in providing for caveats to lapse if caveators do not act promptly to vindicate their underlying claim.
[36] Ivan contends Vinka’s registration and withdrawal of successive caveats in relation to the property is an abuse of process, particularly as Mrs Erceg, now Ivan, have had to respond, including through lawyers. Or, as Mr Hughes puts it:
The Applicant has shown a pattern of utilising the caveat mechanism as a means of applying pressure on either Millie or the Respondent, with no intention of pursuing her rights. The Applicant’s conduct has put Millie and/or the Respondent to significant cost and inconvenience over a prolonged period of time.
[37] I do not doubt a pattern of caveat registration and withdrawal will often constitute an abuse. But, the pattern in this case could also be explained by
10 I accept Mr Peat is not independent given his connection to the family through Ivan’s business. Mr Bigio says more witnesses may come forward at trial, under subpoena. I place no weight on this submission. It encourages speculation.
11 Attorney-General v Langdon [1999] 3 NZLR 457 (HC) at 473.
idiosyncratic family dynamics. The first caveat was brought with Mrs Erceg’s apparent support. Indeed, her signature is on the memorandum of mortgage. Mr Bennett says Mrs Erceg wanted to protect her property from Ivan. The second caveat, Vinka says, she withdrew in the face of significant pressure from her mother. The third Vinka registered out of concern Mrs Erceg may die, leaving Vinka unprotected. Vinka immediately withdrew the caveat when her mother recovered. Vinka says the earlier caveats caused a rift with her mother. Ivan accepts as much.
[38] Mr Hughes contends Vinka had no intention of pursuing her rights. I acknowledge the possibility. However, it is at least as likely Vinka was torn, as she says. On one view, registration and withdrawal of a series of caveats may ultimately support, rather than detract from, Vinka’s testimony.
[39] This frames the final aspect of my thinking. A conclusion of an abuse of process amounts to a form of summary judgment against a pool of untested evidence. The water is (very) deep, and caution required. I am not persuaded of an abuse.
Result
[40]The caveat is sustained providing Vinka:
(a)Files a statement of claim within 30 calendar days of this judgment.12
(b)Diligently prosecutes her claim to a conclusion.
[41] If Ivan considers (b) to have been breached, he may raise this by memorandum of counsel marked for my attention. I impose the condition because the claim is ultimately traceable to events of late 2004.
……………………………..
Downs J
12 Mr Bigio accepts this condition should be imposed.
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