Siddiqui v Siddiqui
[2021] NZHC 1234
•28 May 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-000798
[2021] NZHC 1234
BETWEEN AMIN AZHAR SIDDIQUI AND USHA AMIN SIDDIQUI
Plaintiffs/Counterclaim DefendantsAND
ASHISH SIDDIQUI AND YASHIKA SIDDIQUI
Defendants/Counterclaim Plaintiffs
Hearing: 26, 27, 28 August 2019, 7, 8, 9, 10 December 2020 Counsel:
A E Hansen & L A Sheppard for Plaintiffs/Counterclaim Defendants
G D Stringer & R Rao for Defendants/Counterclaim Plaintiffs
Judgment:
28 May 2021
JUDGMENT OF PAUL DAVISON J
This judgment was delivered by me on 28 May 2021 at 3:00 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Heimsath Alexander, Auckland Inder Lynch, Manukau, Auckland
SIDDIQUI v SIDDIQUI [2021] NZHC 1234 [28 May 2021]
Introduction
[1] This is a dispute between family members over the beneficial ownership of a residential property situated at 126A Gloucester Road, Manurewa, in Auckland (the property). The plaintiffs, Amin and Usha Siddiqui are the parents of the first-named defendant Ashish Siddiqui. His wife Yashika, is the second-named defendant. The defendants are the registered owners of the property.
[2] The plaintiffs claim that they are the beneficial owners of the property which is held on trust for them by the defendants. Alternatively, the plaintiffs claim that the defendants obtained title to the property by falsely representing that they would assist the plaintiffs to purchase the property while concealing that the defendants themselves would be the registered owners of the property.
[3] The plaintiffs say that although when the property was purchased in May 2006 it was registered in the names of the defendants as owners, that was arranged by Ashish to facilitate obtaining bank finance for the purchase. The plaintiffs say that after the property was purchased in 2006 through until April 2015 they made payments to the defendants in respect of the ANZ bank mortgage Ashish had arranged on their behalf to enable them to effect the purchase, as well as meeting the other outgoings on the property including rates and insurance, and maintenance. They say that they only ceased making these payments in April 2015 after they had discovered that they were not registered as owners of the property and after the defendants had refused to transfer the property into their names.
[4] The plaintiffs seek an order vesting the title to the property in their names or alternatively an order directing the defendants to transfer the property to them. The plaintiffs also seek to recover money they claim to have paid to the defendants to meet amounts payable in respect of the mortgage over the property, but which the defendants retained.
[5] The defendants deny these allegations and deny that they hold the house on trust for the plaintiffs. The defendants counter-claim seeking an order for possession of the property. They allege that around the time of the purchase of the property in May 2006 Ashish made an oral agreement with his father Amin, that the defendants
would permit the plaintiffs to reside at the property and continue living there for as long as they paid $800.00 per fortnight together with all outgoings on the property. The defendants say that the plaintiffs ceased paying the $800.00 per fortnight on 2 April 2015 and since that date have accumulated arrears which amounted to
$83,000.00 at the date of the filing of their counterclaim. The defendants seek to recover these arrears together with interest on the unpaid amount from 2 April 2015, together with an inquiry as to damages in respect of loss caused to them by the plaintiffs carrying out unauthorised modifications to the property, and refusing them access to the property to carry out maintenance work themselves.
[6] The defendants further say that in the event that the plaintiffs are found to be the legal and beneficial owners of the property, they seek to recover the funds they have paid in respect of the ANZ bank mortgage over the property since 2 April 2015 of $68,255.21 together with interest.
Background
[7] The Siddiqui family are originally from India. They immigrated to New Zealand in January 2001 with their 19 year old son Ashish and 15 year old daughter Supriya. Prior to coming to New Zealand Amin worked in senior positions as a project management in India. He holds a Bachelor of Science and Masters in Business Administration. A year or so after arriving in New Zealand he secured employment at Westpac Bank receiving, checking and analysing credit card applications. Usha is qualified as a geologist. In India she worked as a clerk in retail banking, and in New Zealand she secured employment as a relief teacher.
[8] During their first year in New Zealand Ashish met Yashika. The plaintiffs strongly disapproved of the relationship. They wanted Ashish to concentrate on obtaining tertiary qualifications at the Manukau Institute of Technology where he was studying engineering. Despite his parents’ wishes Ashish maintained his relationship with Yashika leading to deep conflict between him and his parents and eventually, in January 2002, he moved out of the family home. The conflict over Ashish’s relationship with Yashika was such that having left the family home he and the
plaintiffs had no contact for several years. Ashish considered he had been effectively banished from the family.
[9] In 2003 Ashish and Yashika were married. Although the plaintiffs and Supriya knew that Ashish and Yashika were getting married they were not invited to the wedding and they did not attend. In November 2003 the defendants purchased their first home in Manukau Heights.
[10] Ashish’s estrangement from his family caused him considerable distress. He wished to restore his relationship with his parents and be part of the family again. However all his attempts at reconciliation were rebuffed.
[11] In mid 2005 the plaintiffs notified Ashish that a close relative of the family in India had died. In accordance with Indian funeral custom, Yashika cooked and sent food to the plaintiffs, and Ashish visited the plaintiffs. This meeting led to further visits and a progressive thawing of the plaintiffs’ attitude towards him and Yashika.
[12] In October 2005 the plaintiffs and Supriya moved residence and rented a house in Balmoral Road at a weekly rent of $295 per week. They were also responsible for paying for electricity, telephone, and contents insurance. Ashish would visit them at this house and during a visit around April 2006 the plaintiffs advised him that they had recently received notice of a rent increase which would result in them paying around
$400 per week. Ashish suggested that as the Balmoral Road house was old and belonged to someone else, rather than renting, after renting in Auckland for five years it was time for them to look to buy their own home. As Ashish had experience of purchasing his and Yashika’s home at Manukau Heights, he offered to assist his parents to buy their own home. He encouraged them to start looking at houses and although they did not have any savings with which to pay a deposit, they began looking at houses which Ashish identified for them and they went with him and Yashika to view a number of open homes. When Amin questioned Ashish as to how he and Usha would be able to finance the purchase of a house, Ashish responded by telling him not to worry about that and saying that they should look at houses and if they found something they liked, “..then we will see”. At the time the defendants were also looking to purchase a house for themselves as an investment property.
[13] In the course of this process the Gloucester Road property was identified and viewed and the plaintiffs were keen to buy it for themselves if they could arrange the necessary finance. The house had three bedrooms with a garage and garden and was considered by them to be ideal for themselves and Supriya. Ashish assisted his father with an introduction to the Ray White mortgage broker that he and Yashika had been dealing with regarding their own application for pre-approved finance in relation to their intended purchase of an investment property.
[14] On 24 April 2006, with Ashish’s assistance, Amin completed a Ray White Financial Services application form for bank finance. In accordance with Ashish’s advice, Amin completed the form as “Applicant 1” and giving Ashish’s and Yashika’s address as his residential address rather than the Balmoral Road address, saying he would complete the form as the second applicant, and provide the form to the bank.
[15] As Ashish had taken the application form for finance and as Amin had provided Ashish’s residential address the plaintiffs waited to hear from Ray White Financial Services regarding the application.
Plaintiffs’ version of the purchase arrangements
[16] Ashish subsequently advised Amin and Usha that Amin’s application for mortgage finance had been declined, and that they would be unable to obtain mortgage finance based on Amin’s income. Ashish told his parents that because of their ages and inability to service a bank mortgage they would not be able to purchase the Gloucester Road property by themselves. He said that the bank would not consider them suitable to lend money to as at 50 years, they were too old.
[17] Ashish and Amin then discussed whether there was some way in which they could go ahead with the purchase. Amin says that Ashish told him that he would assist his parents with any bank requirements to enable them to purchase the property in their own names, and that he told Ashish that he wanted ownership of the house to be in the names of himself and Usha and also Supriya who would be living with them.
[18] Amin says that he was subsequently telephoned by Ashish and asked whether he and Usha would agree to Ashish’s name being included in the mortgage application,
as that would make it easier for them to obtain a mortgage. He said that even with Usha’s income from her work as a relief teacher and Supriya’s income from her part- time job, their combined incomes would not be sufficient to satisfy the bank. Amin says that Ashish explained that by having his name included on the mortgage would benefit him by $10,000 and that he could give the money to Amin.
[19] Amin says that he and Usha agreed to Ashish’s suggestion that he include his name in the application for loan finance as being the best way to proceed. Amin says that he told Ashish that the plaintiffs’ agreement that his name be included was being given on the basis that Usha, Supriya and himself were also included in the mortgage. He says that there was no mention of Yashika’s name being included in the application for mortgage finance or as a registered owner of the property. Amin says that in the same conversation Ashish asked him what he and Usha could afford by way of mortgage payments, and that he had told him that they could afford up to $400 per week. Amin says that Ashish said that the plaintiffs would have make fortnightly payments of $800 into his personal bank account, and that he would make the required mortgage payments to the bank.
[20] Amin says that he was assured by his son that he could arrange the finance to enable the purchase to proceed and that he and Usha trusted him to do so. He says that thereafter he and Usha were not involved in any further dealing or required to execute any bank mortgage documentation. At the end of May 2006 they went with Ashish to the Ray White office to collect the house keys. Amin says that on that occasion he asked Ashish if his name (Amin’s), was on the title and Ashish told him that it was. Amin says that he and Usha did not know much about what was involved in purchasing a house and had entirely relied on their son to arrange the purchase for them.
Ashish’s version of the purchase arrangements
[21] Ashish says that he was advised by the mortgage broker that there was no prospect of Amin getting mortgage approval having regard to the level of his income, his age and the amount the plaintiffs were looking to borrow to purchase Gloucester Road. He says that when he reported this back to his father, they discussed whether there was some way in which the plaintiffs could nevertheless proceed to purchase the
property. Ashish says that his father asked him whether he would join in the making of the application for mortgage finance, but that he was not prepared to do that as he and Yashika were looking to buy their own investment property. He says that he told his father that he and Yashika were prepared to buy the Gloucester Road property as an investment and that the plaintiffs could rent it from them for as long as they wanted, on the basis that they paid $800 per fortnight and met the other outgoings on the property. Ashish says that this arrangement would enable his parents to live in better accommodation than they had at Balmoral Road, and they would not have to worry about future rent increases or dealing with a landlord.
[22] Ashish says that his proposal was accepted by the plaintiffs. He says however that he made it clear to them that he and Yashika would purchase the property as an investment property in their names alone and he says that there was never any suggestion or arrangement that he and Yashika would buy the property on the plaintiffs’ behalf or that as the registered owners they would be holding it for them.
The purchase of Gloucester Road is settled
[23] On 25 April 2006 Ashish entered into a conditional agreement to purchase the Gloucester Road property for the sum of $249,000. The purchaser was described in the agreement as “Ash Siddiqui &/or nominee”, and the agreement was conditional on the purchaser arranging finance from “any lending institution…sufficient to complete” by 5 May 2006. A deposit of $4000 was payable on the date the agreement became unconditional. The agreement records that the deposit was paid to the Ray White trust account on 8 May 2006.
[24] Ashish and Yashika had previously sought pre-approval of finance from the ANZ Bank for the purchase of an investment property which they had been given, subject to the bank’s approval of the property to be purchased and provided as security for the loan.
[25] On 19 May 2005 the ANZ Bank provided the defendants with a loan agreement confirming a “Residential Investment Loan” of $250,000 for a term of 30 years. The loan agreement provided that interest at 7.35 per cent was to be fixed for the initial five years of the term of the loan being 130 fortnightly payments of $791.02.
[26] On 24 May 2006 Ashish and Yashika effected settlement of the purchase of Gloucester Road. Settlement was effected on their behalf by means of a loan advance of $250,000 from the ANZ National Bank, which exceeded the amount they required to settle with the vendor by approximately $5,000. On the day or day before, the plaintiffs moved into Gloucester Road, Amin went with Ashish to the Ray White real estate office to uplift the keys for the property. Amin asked Ashish if his (Amin’s) name was on the title of the property, and Ashish told him that it was. Ashish said he would give Amin a copy of the documents.
[27] On the same day, the plaintiffs and Supriya vacated the Balmoral rental property and they moved into Gloucester Road. Ashish wrote his parents a letter which he left for them in the kitchen of Gloucester Road. He said:
Wednesday, May 24th 2006 My darling Mum [and] Dad, Congratulations!!
Welcome to your new home.
May God bless this house with good fortune, happiness and prosperity always [and] forever.
I pray that god blesses you both with a very long life [and] the best of health. May all your sorrows vanish – like darkness at sunrise; and may all your wishes come true.
May their (sic) always be a smile on your faces [and] a sparkle in your eyes.
I may have never said this, but I am privileged to have you as parents. I can never ever thank you both for all that you have done – all the years of hard work [and] love [and] dedication [and] support [and] perseverance.
I cannot remember the last time I said this – but I do love you both very very much, although I may not show it very often.
I pray to God to give you all my happiness, for I will gladly have all your sorrow in return.
Love always, Ashish.
[28] Ashish and Yashika paid the removal fees for the plaintiffs’ relocation from Balmoral Road to Gloucester Road and also purchased some furniture including beds, a stove, washing machine and a stereo unit for the plaintiffs.
[29] However, commencing on the day they moved into Gloucester Road the plaintiffs began making what they understood were mortgage payments of $800 per fortnight into Ashish’s bank account. These $800 payments from 8 June 2006 were made pursuant to an automatic payment instruction and were described in Amin’s Westpac bank account as: “houseashish mortgage ashish repayment”. These fortnightly payments continued until 2015. Upon receipt of these payments into the defendants’ bank account, they transferred the amount required to meet the fortnightly mortgage payment to the ANZ Bank.
[30] The plaintiffs also paid the Auckland Council rates on the property. The Combined Rates Assessment and Tax Invoices were addressed to Ashish at 126 Gloucester Road and were paid directly by the plaintiffs to the Auckland Council. Similarly invoices from Watercare in respect of the property were also addressed to Ashish at Gloucester Road and paid for by the plaintiffs directly to Watercare.
[31] Although it appears from the evidence that settlement of the purchase was effected on 24 May 2016 when the loan funds were drawn down by the defendants, the transfer of the property into their joint names was not registered until 6 June 2006 and the mortgage to the ANZ National Bank Ltd was not registered until 22 June 2006.
[32] Amin arranged Home Insurance for the house at Gloucester Road with Westpac commencing 27 July 2006 and the plaintiffs have thereafter maintained Home Insurance cover for the house and its contents with Westpac. The plaintiffs have also maintained the property and met the cost of roof repairs, and repairs to the kitchen, garage, and electrical system as well as installing underfloor and roof insulation. The plaintiffs have also maintained the lawns and exterior of the property ever since they moved into it.
The defendants purchase other investment and residential properties
[33] On 29 September 2006 the defendants obtained a property valuation of Gloucester Road from Quotable Value Ltd (QV) which valued it $262,000 and estimated a selling range of between $250,000 and $270,000. On 22 November 2006 the defendants became the registered owners of a unit title property at 1420/72 Nelson Street, Auckland, which was subject to a mortgage to Westpac New Zealand Ltd.
[34] On 14 November 2007 the defendants obtained a valuation of 126A Gloucester Road from a Registered Valuer, Marsh & Irwin Ltd, addressed to the Manager ANZ Banking Group (NZ) Ltd. This valuation assessed the value of the property at
$275,000. The valuation report stated that the valuers had inspected the property on 13 November 2007 in order to assess its market value for mortgage lending purposes. The valuation report described the exterior and interior of the house and its amenities in detail and noted that the services at the property had been upgraded and the exterior repainted with some original joinery replaced, commenting that it was in good condition externally and average to good condition internally. The report stated that the valuers considered the property as providing adequate and suitable security for a first mortgage advance of up to $185,000.
[35] On 6 December 2007 the defendants became the registered owners of a second unit title property situated at 72 Nelson Street, Auckland.1 The property was subject to a mortgage to the ANZ National Bank Limited.
[36] On 31 March 2008 the defendants became the registered owners of Flats 1 and 2 situated at 252A Flaxmere Avenue, Hastings. These two properties were also subject to a registered mortgage to the ANZ National Bank Limited.
The plaintiffs discover that they are not recorded as registered owners of the property
[37] In 2008 during a visit to the defendants’ home, Supriya saw a document that listed the defendants as the owners of the Gloucester Road property. Upon her return home to Gloucester Road she reported this information to Amin and Usha who were
1 Unit 1320/72 Nelson Street.
surprised to learn that they were not listed as owners of the property. The plaintiffs were distressed by this information as they had expected their names and Supriya’s name to be recorded as the registered owners. They immediately sought an explanation from the defendants regarding the matter. A heated meeting took place at the defendants’ home at which the plaintiffs and Supriya were present. The plaintiffs confronted the defendants and alleged that by putting the house in their own names the defendants had cheated the plaintiffs, as it was Amin who was paying for the house. The defendants responded by confirming that they were the registered owners of Gloucester Road. Ashish explained that he had Yashika had only taken the necessary steps to become the registered owners of the property in order to help the plaintiffs move into their own property instead of renting. Ashish said that it had not been possible to put their names on the title of the property when it was purchased because at that time he and Yashika had already fixed the terms of the mortgage finance required to purchase the property. He said however that when the plaintiffs were able to obtain a mortgage themselves, the property could be transferred to them and they would then take on the mortgage. He said that a good time to do that would be when the ANZ Bank mortgage over the property came up for renewal in 2011. He said that until then the terms of the mortgage were set and could not be changed.
[38] Ashish told his parents that he was willing to sign a document to confirm that they were the owners of the property, and he offered to sign a “blank piece of paper” if they wished. However nothing was recorded as a result of the conversation and thereafter the plaintiffs maintained their fortnightly “mortgage” payments and rates payments.
Bathroom repairs at Gloucester Road
[39] In 2010 the plaintiffs realised that the floor of the only bathroom in the house was rotten and unsafe and the bathroom urgently required extensive renovation. Amin asked Ashish if he could arrange for a top-up to the house mortgage of about $20,000 to cover the cost of the work, and enabling the plaintiffs to pay off the additional borrowing under the mortgage over time. Ashish said that rather than arranging any further borrowing under the mortgage, he would just pay for the repairs with his credit card
[40] A builder was engaged to undertake the remedial work which included replacement of the toilet. Usha and Yashika went together shopping for items such as tiles and fittings. Some of the items were purchased by Yashika using the defendants’ credit card.
[41] The plaintiffs also hired a portable toilet for their use while the work was being done, and were also considering staying at a motel. However, when Ashish learned that that they were planning on staying in a motel, he insisted on them staying with him and Yashika at their home which they proceeded to do.
Further proposals for transfer of Gloucester Road
[42]On 29 March 2010 Ashish sent an email to his father saying:
Can you please make enquiries to see if you can get a home loan for the balance amount.
As you and mum want the title to be in your names, if you are able to get the loan, we can look at transferring this to you when the fixed period rolls over in 2011.
Or, if you want to sell the place, you need to start marketing it at least a year beforehand. i.e around now.
We spoke about this earlier, and you did not come back to me with a clear answer.
please (sic) confirm by email, because I don’t (sic) want to end up in the same situation again, where you all conveniently blame me for picking the house.
[43] However nothing more was done at that time to follow up Ashish’s suggestions until shortly before the five year fixed interest period of the ANZ Bank mortgage was due to expire in May 2011 when there were further discussions between Amin and Ashish regarding the property. During a social visit by the defendants at Gloucester Road, Ashish said that the mortgage was due for renewal of the interest rate and that he wanted to fix the loan again. In this context he asked his father whether the plaintiffs wanted to arrange the transfer of the property into their names. He said that if the plaintiffs wanted they could sell the house and look for something else. However nothing further was done about transferring the house to the plaintiffs at that time.
[44] During a visit to the defendants’ home in August 2014 an argument developed between Supriya and Ashish regarding Gloucester Road and the fact that it remained registered in the defendants’ names as the owners. Once again Ashish said that he would sign “any piece of paper” required to effect a transfer of the property. Supriya left the meeting saying that by the end of the year she would ensure that the required paperwork would be provided to him.
[45] Following that meeting Amin, assisted by Supriya, engaged another mortgage broker and took steps towards obtaining pre-approval for a new mortgage to finance the property following its transfer into the plaintiffs’ names. Amin told Ashish what he was doing and said that the plaintiffs wanted the transfer to take place as soon as could be arranged. He asked Ashish to provide him with details of the amount owing on the mortgage and the amount of the deposit paid for the property. He also requested details of the amount loaned to them by the defendants to meet the cost of renovating the bathroom at Gloucester Road.
[46]On 18 December 2014 the plaintiffs and Supriya received a loan offer of
$264,000 from the ANZ Bank to enable them to refinance the existing mortgage over Gloucester Road and thereby purchasing it to have it transferred into their names. The loan offer was made on the basis that it would remain valid for 60 days.
[47] Following receipt of the loan offer, Amin advised Ashish that the plaintiffs and Supriya were ready to proceed with arrangements for the transfer to proceed.
[48] The plaintiffs obtained legal advice regarding the transfer and were advised that a transfer of the property to them would need to be made at market value, and that the difference between market value and what was owed to the bank should be forgiven by the defendants. The defendants also obtained a written valuation of the property from Property IQ which estimated its value to be $365,000. On 22 January 2015 Amin sent the defendants an unsigned agreement for sale and purchase of the property. The purchase price specified in the agreement was $365,000. Also included with the agreement was a copy of the Property IQ valuation.
[49] On 3 February 2015 Yashika sent Amin an email referring to the agreement saying:
Hi Dad
The amount owing what Ashish has given is correct.
NO top ups have been taken on that house. Don’t know if you remember but you wanted to take a top up to repair the bathroom but that would have increased the interest rate so Ashish had used our visa card.
Draw down amount was $250,000. Keeping in mind the interest as well and changes to interest rate. See the link below I used this to understand – hopefully it clears things for you as well.
(our savings – I mentioned last night)
$15,000.00 (bathroom repairs)
** Total to clear = $236,635.09
As for the contract (sale), we can settle on 1st April 2015. I will email you the document tomorrow day time as he has made changes. Once the new document is done with the changes re-send it and we will sign it.
Thanks,
Yashika
[50] Following receipt of the email and agreement, Ashish contacted Amin and was critical of the legal advice obtained by the plaintiffs. On 4 February 2015 the defendants returned the draft agreement to the plaintiffs by email. The draft agreement had been amended with a number of handwritten alterations and deletions, including the deletion of a special clause which stated that the parties intended that the property was being sold for its current market value. Also deleted was a clause stating that the purchase price of $365,000 was to be paid on settlement by a cash sum of $237,500 and by the purchasers providing a Deed of Acknowledgement of Debt as to the balance of $127,500 and by the vendors executing a corresponding deed of forgiveness of the debt. In place of that clause the defendants proposed a clause stating that the basis on which the vendors agreed to forgive the debt was that the forgiveness of $127,500 was to be in lieu of the maintenance required on the property and other general wear and tear. Ashish explained to his father that this amendment was to provide justification
for reduction of the value and purchase price so that the defendants could claim that they were selling the property at a loss which would enable them to adopt an advantageous tax treatment of the transaction.
[51] Because the plaintiffs were unsure of the propriety of the approach proposed by Ashish and Yashika regarding their proposed terms of transfer, they engaged another lawyer to obtain a second opinion on the appropriate manner of effecting a transfer of the property. There followed a series of text messages exchanged between Amin and Ashish regarding the draft agreement in which Amin advised his son that he was seeking a second opinion from another lawyer regarding the transfer. The nature and tone of these communications is evident from the following:
Ashish (25 February 2015 23:20)
Have you finished talking to your lawyer?
What’s your plan for the transfer? If not doing it that’s fine. Let me know either way, so I can structure accordingly.
Amin (25 February 2015 23:29)
No we are going ahead but am in the process of taking a second opinion from a “not stupid” lawyer about your 3 options. So you structure according to this. And keep this out of your structure. Will get back to you soon.
Ashish (04 March 2015 18:16)
What do you want to do? I’ll be fixing on the 20th if I haven’t heard [from] you as I can’t keep it open forever.
Amin (04 March 2015 18:58)
Don’t start getting smart as the problem is your making not ours. I have already consulted another lawyer with your options and am waiting on a working way out because of all the conditions you’re making. I’m still waiting for the statements which you’re to provide me. Why is it taking this long? I want this asap
Ashish (04 March 2015 20:09)
Not being smart. Did txt you before and got no response. Then you will send stuff and expect me to rush around and it to be done straight away. Don’t think conditions are that complicated. You put them there not me.
Amin (04 March 2015 20:23)
I need the bank statements. When are you providing me with that information?
Ashish (04 March 2015 20:27)
I’m not. I’ve already told you this. If you need to work out what you’ve paid, please use the online calculators.
Amin (04 March 2015 20:29)
I need the statements because I want to see how and when the deposit was paid and to see whether all the money I have transferred across to you has gone into paying off the loan. This is a monetary transaction, it’s business. Why are you so hesitant to give the information?
Also, I’m not sure what conditions I am putting on you? You need to understand that all I suggested was showing the transfer as a gift.
This was what two lawyers have now suggested as the best method. On one knew that your getting into a business is going to complicate this transaction so much further. (20:34)
Further both lawyers have confirmed that no settlement can be made without your being represented by a lawyer. (20:35)
Ashish (05 March 2015 18:51)
Just get the documents done as you want them. After reading your earlier crap I just can’t be bothered with this crap. You guys don’t trust us that’s fine. Once again deposit money we paid. You didn’t pay anything. Amount borrowed for your loan – 249. I’ve already given you the rest of the amounts previously. There is nothing further to see or show. I won’t be holding it on floating past the 20th.
[52]On 15 March 2015 Amin sent the following email to the defendants.
Hello Ashish and Yashika,
This is just to let you both know that the lawyer is working on the transfer documents for 126A Gloucester Rd.
I will be sending you this soon and just want to reiterate that you can do the needful with fixing the mortgage rates for the rest of your properties, but please do not include 126A Gloucester Rd when fixing mortgage rates with your bank. I am happy to pay a few days’ extra interest to the bank, along with the usual fortnightly payments I make. Even if the deed is not ready by 20/03/2015, please be assured that I will have the paperwork to you by the end of March 2015.
Please note that I will be sending this to you as soon as it is handed to me by my lawyer.
Thanks, Amin.
The plaintiffs cease making the fortnightly payments
[53]On 20 March 2015 Amin sent another email to the defendants. He said:
Hi Ashish and Yashika,
Hope you both are well. I have emailed you a couple of days ago and I had texted Ashish to call me to discuss the house transfer issue but have received no response from either of you. I also just called Ashish and he said that he was busy and will need to talk to me later.
We have met two independent lawyers and have received advice from both, and the advice we have received has been identical. The second lawyer has also said that the best way to go about the transfer of this property to my name is by way of gifting, that is, a sale and purchase agreement and a gift deed. I have confirmed that there are no tax implications (gift tax or otherwise) for you due to such a transaction. If you know anything different, please let me know via email so that I am able to get legal advice on the same.
The sale and purchase agreement drafted by my lawyer was sent to you on 04/02/2015, and I have re-attached it in my current email. I have got this looked at by two independent lawyers as well, and it is a standard property sale and purchase agreement. I am still happy to use this for the transfer of this property – if you would like any clauses added/removed/amended, please get your lawyer to draft these changes and email them to my lawyer directly and send me a copy for my records. If you have any queries/doubts with the deed or the terms and conditions therein please ask you lawyer to contact my lawyer as get things sorted out. The name and contact details of my lawyer are on the sale and purchase agreement.
Since the deed is to be signed immediately on April 1 or before, I have stopped all mortgage payments with immediate effect. I will now make the mortgage payment directly once the property is transferred to my name directly to the bank.
When we spoke on Sunday 08/03/2015, you both mentioned that you don’t mind what route is taken to transfer the property to my name. So now please expedite the process.
Awaiting your immediate action. Thanks,
Amin.
[54] Amin followed his email of 20 March 2015 with a text message to Ashish advising him that he had sent an email, and over the following week he sent him further text messages asking when he could expect a reply and the return of the signed agreement. And on 23 March 2015 Amin sent Ashish a further version of the
agreement for sale and purchase which had some minor amendments to correct the spelling of his middle name and the spelling of “Gloucester”.
[55] Ashish responded by text messages on 31 March saying that he would try to get it done that week and querying why there was any need for it be completed before 1 April. When he did not receive the agreement back as he had requested and expected, Amin sent a series of follow-up text messages to Ashish during April and July without receiving a response.
The $365,000 agreement for sale and purchase is signed
[56] The defendants eventually signed the agreement for sale and purchase on 3 December 2015 and returned it to Amin by covering email that day, saying:
Hello Dad
Please see attach, (sic) updated signed document as amounts have changed. Last payment made by you to our account was on 02/04/15.
Break down as below:
Payment not made after 2 April 15 = $16,800 ($400x 42 weeks)
Bathroom = $ 20,000
Loan amount left = $220,000
Total = $256,800
Regards Ashish and Yashika
[57] While the sale price of $365,000 had not been altered, the original version of the agreement had been amended by the defendants in several respects: to provide for the payment of a deposit of $20,000 upon signing of the agreement and for settlement to take place on 29 January 2016 rather than 1 April 2015 as originally proposed. The agreement had also been amended to provide for the payment of a cash sum of
$236,800 on settlement date, and by the purchasers executing a deed of acknowledgement of debt in favour of the vendors for the sum of $108,200 and by the vendors executing a corresponding deed of forgiveness of debt of that same amount.
The $480,000 agreement for sale and purchase
[58] However, when the plaintiffs referred the amended agreement to their solicitors they were advised that as the current market value of the property had increased during the period that had elapsed since the agreement was originally prepared an updated valuation would be required and further consequential amendments would need to be made to the agreement. Accordingly a further valuation of Gloucester Road was obtained. This valuation obtained from QV.co.nz dated 20 January 2016 stated that the estimated value of the property at 18 January 2016 was $480,000. Accordingly the agreement signed by the defendants on 3 December 2015 was amended to provide for a purchase price of $480,000 and the amount of the deed of acknowledgement of debt to be increased to $223,200.
[59] These amendments to the agreement were made by the plaintiffs’ lawyer at the Property Law Centre who also drafted a Deed of Acknowledgement & Forgiveness of Debt in respect of the sum of $223,200 as provided for in the agreement.
[60] On 10 December 2015 the defendants became the registered owners of Unit 22/21 Birdwood Crescent, Parnell. The property was subject to a registered mortgage to the ANZ Bank New Zealand Limited.
[61] On 26 January 2016 Amin sent an email to the defendants attaching the amended agreement for sale and purchase and the Deed of Acknowledgement of Debt & Forgiveness. He said:
Hi Ashish and Yashika,
Ashish, please find documents as per our discussion yesterday afternoon. In the attached document(s), the value of the gifting amount has changed from what was originally stated as the original papers were from Dec 2014 when this process was started. The new amounts represent changes as per present values.
The attached deed of acknowledgement is an additional document I am required to have you both sign off as a bank legal requirement (from my side).
Could you and Yashika please sign in the following places:
·Sale and Purchase Agreement
· Purchase price on the first page;
· Initial the amendment to clause 18(c);
· Initial all amendments to clause 19.1(a) and 19(1)(b).
·Deed of acknowledgement & forgiveness of debt
o Initial all pages;
o Please sign this in all required places – note that you have to sign in front of a witness.
If this transaction needs to be completed in full as requested by 29 January 2016, we now need the details of your solicitor urgently. Please email me all solicitor details asap so things can be moved further.
Thanks, Amin.
[62] Ashish responded to his father’s email straight away. He said having read his email and the attached documents he noted that the amounts referred to as the purchase price and the debt to be forgiven had changed considerably without prior consultation with him. He said:
This agreement has been in place for a long time now, and the dates have kept changing.
When I originally asked for the deed to be done separately to the agreement you refused and there was a big scene. That is what caused the delays.
Now we are back to square one, and you expect me to IRB this around in a day or two which isn’t possible.
Please reinstate the numbers to how they were when last sent. This is an agreement with an extended settlement date.
The date has been varied but the numbers haven’t.
Not sure why the numbers have been changed as you haven’t given any detail.
We cannot keep going back and forth on this with you making changes every time to a signed agreement.
Alternatively please work out an amount you want us to pay you to offset any payments you feel you have made and are due.
[63]Amin replied that same evening, 26 January 2016:
Hi Ashish,
The changes have been made by our solicitors on the recommendation that the property be sold and purchased at current market value. Is there any particular reason you are unable to accept these changes?
The settlement amount and deposit amount remain unchanged from what you had proposed and signed on the agreement and emailed through in Dec 2015, so we thought the changes will not be an issue.
If you can give us the reason(s) then we can go back to our solicitors and see if the original amounts can be reinstated.
Thanks,
Amin.
[64]Ashish emailed his father on 29 January 2016 saying:
I am working on this and it is taking time as the changes you made require bank re approval for the sale.
You have changed the numbers at least 3 times now, and also it is a private sale and is a non standard agreement.
To add to the complication you have made no payments since April last year which does not help at all.
So the bank now needs a valuation before they agree to release the security on the property, and possibly now a different release amount before approving the sale.
The person working on this is away until the 8th.
I can’t do anything until the bank decides what they want to do because it is up to them to release the security without which the transfer cannot be completed.
This is why I had asked you to do the sale and purchase completely separate to the deed paperwork right from the start.
This has been made unnecessarily complicated by your refusal to sign the original agreement more than a year ago, and now I am having to deal with the fallout as usual.
[65] Amin took Ashish’s email to his solicitor for advice as to how he should proceed before he responded to Ashish in a lengthy email on 9 February 2016, saying:
Thank you for your email.
Neither the lawyers nor we can understand why your bank will be interested in the gifting value at all as this is not something that will affect them at all as this is your property and is selling at market valuation. – unless of course, you’ll have used this as a security for your other properties or for your business or taken a top up for something which you obviously do not want to reveal.
I had made the fact amply clear to you both that we need the property transferred to our names way back in November 2014 itself. I have been paying moneys fortnightly into your bank account for the last 10 years to pay off the mortgage which in the first place should have included at least my name. I have made every payment for this regularly till I found that you both are stalling transferring the property which should be on (sic) our names to us. All Auckland city council taxes, water bills and electricity has been paid for by me for the last 10 years. All repairs and maintenance on the property has been paid for by me except for the 1 instance when you helped with the bathroom payments and now are claiming that we still have $20000 to pay besides the moneys I had spent from the insurance amounts received towards the bathroom. (I have as per your statement showing balances owing even accepted this though I know this is not possible). All insurance on this property is being paid by me and is still in my name.
Why will your bank ask for a different release amount if the mortgage amounts I have been paying into your ANZ bank account have gone directly to pay for this property? You are not willing to show me or give me statement copies of mortgage amounts paid by me for the last 10 years even though I have been asking for this for the last couple of years. Either you have not paid the full amounts I have been transferring to you regularly or have topped up or used the property as security to buy other properties or towards some business/es run by you’ll. (sic) If you have nothing to hide send me all the mortgage statements for this house. I know you never will because you’ll both have made good use of my property.
You had asked for the sale and purchase agreement to accompany a deed showing a loss which was and is not acceptable to every lawyer we have consulted on this. All the complications are from your side as this is a standard sale and purchase agreement made with the value being at current market prices which is what the bank and IRD require.
Again there is no original deed signed by you in 2014 which was given to me and as usual you are trying to sidetrack the main issue of transfer. I will pay the mortgage amount to the bank directly once the property is transferred as required. If the amounts are different then I need to know why and where the amounts differ. I have also not received any intimation from you though you told me you will send the bank email. Still waiting for it.
I too have my commitments to keep and cannot wait forever for you both to give me what is mine. You’ll have had this in your possession for far too long already.
[66]Ashish replied that same evening. He said:
How easy it is to forget what actually happened …
You were declined a loan from the bank in 2006 as your serviceability was too low. You were refused a mortgage from ANZ, and from Westpac.
Yashika and I went out of our way and took a huge step back by putting the property in our names, simply to make things happen for you guys.
I can’t believe you’re actually accusing me of not making payments – how ungrateful and foolish.
Given that we have been paying for almost a year now while you’ve been freeloading. Do you think we have money lying around here to fund you?
I have NOT borrowed or topped up or whatever other ridiculous accusation you wish to insert (sic) or claim.
Whilst you may have worked for a bank, you clearly do not understand how mortgage lending works in NZ.
The bank holds, and has always held a mortgage over Gloucester road.
The purchase is not possible without this as you will no doubt find out yourself.
The bank loans money as a total pool. They hold security against properties as they deem fit.
Neither me, nor the broker can dictate to any bank, as to what rules they apply, and don’t apply. i.e. we can’t tell them what to do apart from the basic stuff like fixed terms and so on. Feel free to consult your bank or broker about this directly.
Currently, the bank requires:
1. A registered valuation for the property because the values on the agreement you have sent have changed a number of times.
2. The release security and consent for the sale, they need $360k or so. I don’t make up this number, and none of that amount comes to me.
The problem[s] you have created are:
1. You want to pay $260k.
2. That leaves a balance of around $100k
3. You have made NO payments for a year …that’s around $20k without adding in any penalties and interest…
I don’t have that money lying around to throw at the bank …
Surely, you did not expect me and Yashika to keep waiting around for you forever to decide to transfer the property when it suited you…?
We have mentioned this to you to do this since as early as 2010 and you only decided to wake up in 2014 at your convenience.
The other option is that to sell the property and pay you what you think you’ve paid so far. Please calculate that and let me know what number you have in mind.
Option 1:
Pay amount required by bank to release mortgage.
Option 2:
Sell house and pay what you think is owed to you.
Pick an option and let me know what you want to do as I simply cannot keep paying the mortgage on it forever, so one way or another we need to come to a mutual agreement. I have absolutely no interest in your money or the property, and simply want this mess fixed.
This whole thing was done purely out of intent to help you …and get you out of the rotten units you were renting and whinging about.
Remember you chose the place, not me … we spent hours taking you around to view places and haggling prices with agents.
Only for you to turn around and make fucked up accusations like you have
…perhaps it runs in the family…
[67]On 14 February 2016 the defendants sent an email to Amin saying:
We need to know which option you want to go with, let us know by 19th Feb so this can be completed.
[68]Amin replied later that evening saying:
Re: Transfer of 126 Gloucester Road
Happy to wait till the bank completes the registered valuation.
With regard to the 100 K can you confirm if this is solely in relation to the loan taken for 126A Gloucester Road?
Confirm this and send me up to date statements of the mortgage from the beginning. We will proceed from there.
Also send me your lawyer’s name so that this can be settled directly by the lawyers.
[69] The defendants did not respond immediately to Amin’s email of 14 February 2016, and Amin sent them a follow up email on 22 February 2016 requesting a reply. This produced a response from the defendants by email on 24 February 2016 repeating
their request that Amin pick one of the two options they had previously proposed. Ashish wrote:
…
You need to pick one of those options and let me know what you want to do.
I have no further interest in making any other arrangement, and do not want to be involved with this property any further.
It is very frustrating and expensive for us and you refuse to acknowledge the financial impact this is having on us.
I simply cannot keep paying the mortgage on it any longer.
As for lawyers detail – that is not relevant till we agree on one of the options and there is a signed agreement in place from your end if you choose option 1.
Once we agree the lawyers details will follow.
Regarding bank statements, we have already gone through this last year. If you don’t trust or have doubts, there is nothing that I will do or show that will fix that. You have already made up your mind.
I need to know this by 9th March 2016 at the latest which option you prefer.
[70] On 3 March 2016 the plaintiffs and Supriya registered a caveat on the title of the property claiming that the defendants held the property for them pursuant to an implied or constructive trust.
[71] Also on 3 March 2016 the plaintiffs’ solicitors, The Property Law Centre, wrote to the defendants. In their letter they noted that the defendants had requested the plaintiffs to pay an additional $100,000 on settlement of the sale and purchase of the property, and which the defendants had said was required by the ANZ bank to obtain a discharge of the bank’s mortgage. The plaintiffs’ solicitors requested the defendants or their solicitors to provide a copy of the bank’s repayment statement in relation to the mortgage to confirm the defendants’ demand for the payment of the additional sum. The defendants did not respond to the letter and the plaintiffs’ solicitors wrote to the defendants again on 16 March 2016. In their letter the plaintiff’s solicitors said:
… Further, we have been advised by our clients that you have made an application to the Tenancy Tribunal (Ref:4018001). We would like to bring to your attention that your relationship with our clients has never been one of
landlord and tenant. We have been provided with email correspondence that confirm you have been holding the property on trust for our clients.
[72] On 16 March 2016 the defendants emailed a notice of cancellation to the plaintiffs’ solicitors in the following terms:
16th March 2016 Notice of Cancellation
Re: Siddiqui to Siddiqui: Purchase of 126 Gloucester Road, Manurewa
Your client has failed to satisfy the conditions by the due date and accordingly the agreements are avoided and at an end.
[73] On 6 April 2016 the MBIE sent a Notice of Hearing to the plaintiffs advising that Ashish had made an application to the Tenancy Tribunal for an order for termination of the tenancy and possession of the Gloucester Road premises which had been scheduled for hearing on 18 May 2016. The application also sought orders for the payment of rental arrears and refund of the application fees.
[74] On 17 May 2016 Heimsath Alexander Solicitors, who had been instructed by The Property Law Centre to act for the plaintiffs wrote to the defendants. In their letter Heimsath Alexander set out a detailed summary of their instructions regarding the history of the dispute. They advised the defendants that they were instructed by the plaintiffs to commence proceedings in the High Court, but that before doing so the plaintiffs wished to make a comprehensive settlement offer, which they set out.
[75] The Tenancy Tribunal heard and dismissed Ashish’s application at the hearing on 18 May 2016. It made the following orders:
The Tribunal hereby orders:
There is not and was not at any material time a tenancy agreement to which the Residential Tenancies Act 1986 applies between Ashish Siddiqui and Amin Siddiqui, Usha Siddiqui, and Supriya Siddiqui in respect of 126 Gloucester Road Manurewa. The Tenancy Tribunal does not have jurisdiction to hear the dispute between the parties.
The plaintiffs obtain information regarding the ANZ loans
[76] The defendants engaged barrister Mr Peter Driscoll, to represent them. Mr Driscoll obtained instructions and subsequently provided information to the plaintiffs’ solicitors regarding the defendants’ purchase and financing of the Gloucester Road property. In response to the plaintiffs’ request for a copy of the ANZ Bank statement and information detailing the payments made in relation to the Gloucester Road mortgage the defendants provided ANZ Bank statements confirming the defendants had drawn down an “ANZ Investment Loan” of $250,000 on 24 May 2006 and that thereafter fortnightly deposits of $791.02 were made into their account, which were described in the bank statements as “Loan Payment A Siddiqui & Y Dev.” As at 24 May 2011 the outstanding balance of the Investment Loan was $236,590.51.
[77] In May 2011 the defendants restructured and transferred the borrowing to an ANZ Home Loan with an opening balance as at 1 June 2011 of $196,853.00. The Home Loan for the sum of $196,853.00 was drawn down into another ANZ account operated by the defendants on 1 June 2011, and fortnightly deposits of $568.28 were made into that account which were described on the bank statement as, “Loan Payment A Siddiqui & Y Dev”. The amount of the fortnightly deposits subsequently reduced as the interest rate applicable to the ANZ Residential Invest loan progressively reduced or increased. In November 2011 the ANZ Home Loan account was changed and thereafter described as an “ANZ Residential Invest” account. By 25 October 2012 the outstanding balance of the loan was $191,237.66. On 1 October 2013 the account was changed from being in both the defendants’ names to be held solely in Yashika’s name.
[78] On 24 June 2015 when the loan balance was $179,411.70 it was repaid in full. The same day a new ANZ Home Loan for $221,036.97 was drawn down into Yashika’s ANZ account. This loan which included an increase of $41,625.27 from the balance of the loan repaid on 24 June 2015, was for a term of 20 years to mature on 10 April 2036. Initially the fortnightly deposits were $706.40 but these amounts altered as the interest rate progressively reduced or increased over the following years. As of 11 February 2016 the outstanding balance of the loan was $216,783.57. As at 18 April 2019 the outstanding loan balance was $194.436.
The defendants demand payment of rent for Gloucester Road
[79] On 7 February 2017 the defendants’ barrister wrote to the plaintiffs’ solicitors noting that the defendants had provided the plaintiffs with information regarding the mortgage and application of the funds paid by the plaintiffs. The letter advised that the plaintiffs’ failure over the previous two years to pay any rent for Gloucester Road could not continue, and said that unless arrangements were made for a solution of the dispute within 10 days, the defendants would require the plaintiffs to vacate the premises by 7 March 2017. The plaintiffs’ solicitors responded by letter of 27 February 2017. They said:
…
Your clients are well aware of the reasons for our clients ceasing ongoing payments; namely your clients’ reluctance to provide transparency, the provision of conflicting information, and unmet assurances to transfer title to our clients’ property to them. Our clients have at all times provided assurances that they are able and prepared to make payment towards the mortgage. Indeed they have repeated (sic) advised which they do again, that they have set aside all amounts due for the purpose of applying these to the mortgage once all matters are addressed, including most importantly the transfer of their property into their names. They confirm that they continue to directly meet all other obligations on the property including insurance, rates and maintenance costs.
Our clients acknowledge that with your assistance, partial financial information has now been provided. That initially restored some faith that progress is possible. However, a full accounting of the funds already paid by our clients has not been provided, contrary to your comments in your letter. Your clients’ recent demand for them to vacate their home has diminished that restored faith.
The documentation provided reveals that without our clients’ authority, your clients rearranged the loan facility for the property on 25 June 2015, splitting the facility into two sums we are told. The bank statements showing transactions on the balance of that facility ($40,000) have not been provided. No explanation has been provided for this restructuring. Likewise, details of the bathroom costs have only partially been provided.
…
[80] On 5 August 2017 Ashish arrived at Gloucester Road. He had not made any prior arrangement to visit his parents. When Amin answered the door a scene developed when Ashish endeavoured to prevent his father from shutting the door. Voices were raised and Ashish demanded that his parents pay what was owed to him for their occupation of the house. He said that he wanted his parents and sister to
vacate the house that day and move to a motel for a few days which he would pay for. Usha and Supriya became distressed and Amin telephoned the Police. Police officers attended immediately and having spoken to Amin and Ashish, requested Ashish to leave.
The Property Law Act notices and the defendants’ Application for Possession
[81] On 13 November 2017 the defendants arranged for notices issued under the Property Law Act 2007 to be served on each of the plaintiffs. The notices alleged that the plaintiffs had occupied the house at Gloucester Road from April/May 2006 pursuant to an oral licence granted by the defendants on the condition that they pay
$800 per fortnight together with all outgoings on the property as a licence payment for their occupation. The notices stated that the plaintiffs had failed to make a total of 68 fortnightly payments between 16 April 2015 and 9 November 2017 resulting in arrears of $53,600 as at 9 November. The notices advised that unless the breaches of the licence were remedied within 11 working days of service of the notices the defendants would cancel the licence and exercise their remedies available under the Property Law Act.
[82] On 14 December 2017 the defendants commenced proceedings in the High Court at Auckland in which they applied for orders granting them possession of the land at 126A Gloucester Road, and cancelling the licence granted to them by the defendants to occupy the property.2 The plaintiffs filed a Notice of Opposition with supporting affidavits on 19 January 2018.
[83] After these present proceeding were commenced by the plaintiffs on 27 April 2018, the defendants discontinued their proceedings in which they sought an order for possession of the property. The plaintiffs were awarded costs.
Submissions
The plaintiffs’ submissions
[84] Ms Hansen for the plaintiff submits that the property was to be purchased in the plaintiffs’ and Supriya’s names with Ashish’s assistance. She submits that the
2 Siddiqui v Siddiqui HC Auckland CIV-2017-404-002992.
plaintiffs were able to afford $400 per week in mortgage payments and that Ashish told them to pay that sum into his bank account, which he would then use to make the mortgage payments. Ms Hansen refers to the occasion when Amin and Ashish went to the Ray White offices to collect the Gloucester Road key, and notes that Ashish said that Amin’s name was on the title but then failed to comply with Amin’s request for a copy of the sale and purchase agreement. Ms Hansen’s submissions then review the 2008 incident when Supriya discovered her parents’ names were not on the Gloucester Road title, which I have detailed above at [37] and [38].
[85] Counsel then notes that the plaintiffs realised in 2014, that they would be able to obtain mortgage finance for the property and engaged with the defendants regarding arranging a transfer to them. In support of the plaintiffs’ decision on 2 April 2015 to stop making the fortnightly payments to Ashish, Ms Hansen submits that the plaintiffs believed they would be able to take title on 1 April 2015 and expected that they would be making mortgage payments directly to the bank from that point. Their later refusal to pay Ashish was because of his failure and refusal to provide the plaintiffs with information showing the extent of the debt owing to the bank; his failure and refusal to facilitate a transfer of the property to them; and their concerns that the defendants had used the property as security on their investment properties. Ms Hansen says that the plaintiffs had met all other outgoings and maintenance obligations.
[86] Ms Hansen submits that the defendants hold the Gloucester Road property on constructive trust for the plaintiffs.3 Ms Hansen further submits that where a contribution is made based on a pre-existing common intention, that the contribution will result in a proprietary interest, and there will be no difficulty in establishing a reasonable expectation.4 Ms Hansen then refers to textbook examples of institutional constructive trusts, as including situations where:5 a fiduciary who makes an improper profit from their fiduciary position; where a person makes an unconscionable assertion
3 Fortex Group Limited (in rec and liq) v MacIntosh [1998] 3 NZLR 171 (CA) at 171-172. Ms Hansen submits with reference to appellate guidance Lankow v Rose [1995] 1 NZLR 277 (CA), the four elements that must be proved, in order to impose an institutional constructive trust.
4 Gormack v Scott [1995] NZFLR 289 (CA), (1995) 13 FRNZ 43 at 47-48.
5 Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Brookers New Zealand, Wellington, 2013) Jessica Palmer at [13.2.1].
of ownership in respect of property to which another has contributed; and in relation to a property obtained by fraud.
[87] Ms Hansen notes that where property has been obtained as a result of a party’s fraudulent actions, that party is compelled to hold that property as a constructive trustee.6
[88] Responding to the defendants’ first counterclaim that Amin and Usha were licensees and in default of their obligation to pay their license fees, Ms Hansen submits that this claim cannot succeed as the property is held by the defendants on constructive trust for the plaintiffs. Turning to the second counterclaim, in which the defendants say that if the plaintiffs are found to be beneficial owners of the property, then they must account to the defendants for payments they have made since April 2015 (this amount being $68,255.21 including interest), Ms Hansen submits that the quantum has not been proved. She says that the defendants have withheld $25,879.37 of the fortnightly payments they received from the plaintiffs and have failed to apply that sum towards the mortgage; and the defendants have also drawn down $41,625.27 from the mortgage which they must account for; and also that the plaintiffs are still owed
$13,112.88 plus interest in Court costs. Ms Hansen submits that these amounts should be taken into account when calculating the final sum payable.
[89] Ms Hansen seeks an order that the property be vested in Amin and Usha’s names, or alternatively that the Court makes an order directing Ashish and Yashika to transfer the property to the plaintiffs. Ms Hansen also seeks an order that the defendants refund the amount of the payments paid for the mortgage, but not applied by the defendants to the mortgage, together with interests and costs.
Defendants’ submissions
[90] Mr Stringer for the defendants submits that the plaintiffs have failed to prove on the balance of probabilities that the plaintiffs and defendants agreed and understood that the plaintiffs and Supriya were, with Ashish’s assistance, to be the registered proprietors and beneficial owners of the Gloucester Road property. The defendants
6 Avondale Printers & Stationers v Haggie [1979] 2 NZLR 124 at 163.
deny that there was any such agreement at the time they purchased the property and it was registered in their names. The defendants say that there is nothing in writing that supports the existence of the agreement that the plaintiffs allege was the basis on which the property was purchased. They say that they purchased the property as an investment property for themselves as the plaintiffs were unable to borrow the necessary finance to purchase the property.
[91] The defendants say that the arrangement they made with the plaintiffs was that the plaintiffs would live at Gloucester Road and pay rent of $800 per fortnight and also meet the outgoings on the property such as rates. This arrangement would provide the plaintiffs with a higher standard of living than they had at the rental premises in Balmoral Road, and they would have the security of dealing with a family member as their landlord. The arrangement would also enable the plaintiffs to remain living at the property for as long as they wished. The defendants say that these arrangements were made in the course of telephone conversations between Ashish and his father, and that as Ashish used a speaker phone during the conversations what they said and agreed was overheard by Yashika, who said in evidence that she would listen in, but not participate in these conversations, and she confirms Ashish’s account regarding the rental arrangements.
[92] The defendants say that after it was determined that the plaintiffs would be unable to obtain bank finance to purchase the property and Amin asked Ashish whether there was some other way that they might still go ahead with the purchase, Ashish told him that as he and Yashika were looking to buy an investment property for themselves, they were prepared to buy Gloucester Road as an investment for themselves, and the plaintiffs could rent it from them for as long as they wished, for $800 per fortnight as well as meeting the other outgoings on the property.
[93] The defendants say that their account of the arrangements regarding the plaintiffs’ renting Gloucester Road is supported by Ashish’s actions of entering into the agreement to purchase the property, the defendants paying the $4000 deposit and using the existing equity they had in their own home to arrange to borrow $250,000 from the ANZ National Bank on mortgage to settle the purchase of the property. The defendants say that they were personally liable for the borrowing from the bank and
they note that the plaintiffs were not required to guarantee the mortgage borrowing and had no legal liability for the money borrowed to finance the purchase of the property.
[94] The defendants acknowledge that until 2013 the rental of $800 per fortnight paid by the plaintiffs exceeded the market rental for the property, but say that from 2013 the $800 per fortnight they were paying was less than the market rate, and meant that thereafter they had the benefit of a better quality of housing without increased rent.
[95] The defendants say that the plaintiffs’ actions of ceasing the fortnightly payments in April 2015 were not in accordance with the arrangements they had made, and have meant the plaintiffs have been living at Gloucester Road for over five years rent-free, leaving he and Yashika to service the borrowings without receiving any income from the property.
The bathroom renovations
[96] The defendants say that their action of meeting the cost of the renovations to the bathroom totalling approximately $20,000 is and was consistent with their ownership of the property. They note that the plaintiffs and Supriya stayed with them in their home when the bathroom renovation work was being done, and submit that it is significant that this occurred at a time after Supriya and the plaintiffs had found out that they were not the registered owners of the property. The defendants submit that consistent with their ownership of the property, they did not seek repayment of the amount they paid for the bathroom renovations at that time, and only did so later in the context of their proposed sale of the property to the plaintiffs in 2015.
The plaintiffs’ failure to take steps to have the property transferred into their names
[97] The defendants say that the plaintiffs’ failure to take any steps or legal action to have the property transferred into their names following Supriya’s discovery that the defendants were the registered owners of the property and their confrontation of Ashish regarding the matter is also relevant. They say that it was only because they were shocked by the confrontation that they said that they would agree to sell the
property to the plaintiffs as a means of resolving the disputed family issues. However despite the defendants’ advising the plaintiffs that they would sell them the property, the plaintiffs took no steps to pursue the matter, and continued on, making rental payments and meeting property outgoings in accordance with the original 2006 arrangements.
[98] The defendants say that despite Ashish offering to confirm the matter in writing, the plaintiffs took no steps to obtain a written acknowledgement regarding their ownership of the property. They submit that if the plaintiffs’ allegations regarding the existence of a genuine belief that they were the owners of the property is correct, it is inconceivable that they would have taken no steps to have that formally acknowledged by the defendants in writing.
The splitting of the mortgage borrowing in 2011
[99] The defendants say that the ANZ National mortgage loan balance at the end of May 2011 of $236,590.51 was restructured and split into two amounts of $196,000 and $40,000 in order to take advantage of lower interest rates. The two separate loans were serviced by the defendants and they were subsequently consolidated into a single loan on 24 June 2015 with a new loan of $221,036.97.
Amin Siddiqui’s business experience
[100] The defendants say that Amin had acquired considerable commercial knowledge and experience from having obtained a qualification in business administration, and over the course of his employment with Westpac and in the financial services area. The defendants submit that having regard to Amin’s commercial knowledge and experience he could not have been misled as to whether he, Usha and Supriya were to be named as the registered owners of the property, and he could not have been unaware that they were not named on the title of Gloucester Road prior to Supriya seeing the document at the defendants home in 2008.
[101] The defendants note that although Amin completed a loan application, he did not sign the agreement for sale and purchase of the property, and he had no dealings with a solicitor regarding arrangements for the purchase, and never signed any other
documents in relation to the purchase of the property. The defendants also note that the Auckland City rates demands which were addressed to Ashish but sent to Gloucester Road, were another clear indication that the property was not registered in the plaintiffs’ names.
[102] The defendants submit that Amin’s commercial and business knowledge and experience meant that he could not have been unaware of the procedures involved in obtaining a loan from a bank, and they say that his claim to have been taken advantage of by the defendants lacks credibility.
Ashish’s motivation for assisting his parents
[103] The defendants submit that after the dispute that had arisen between Ashish and his parents over his relationship with Yashika, Ashish was motivated to reconcile with them and his actions in purchasing Gloucester Road as a home for them to live in as a means of regaining their acceptance and restoring family unity.
Constructive trusts and relevant legal principles
[104] A constructive trust will arise in relation to the acquisition by one party of a legal title to a property whenever that party has so conducted themselves that it would be inequitable to allow them to deny a beneficial ownership in the property acquired to another party.7
[105] The Court of Appeal in Fortex Group Ltd (In Receivership and Liquidation) v MacIntosh explained constructive trusts as follows:8
[This appeal] concerns the law of trusts; specifically the circumstances when express trusts and institutional constructive trusts come into existence and when remedial constructive trusts may be imposed. For present purposes, these three types of trust can be described as follows. An express trust is one which is deliberately established and which the trustee deliberately accepts. An institutional constructive trust is one which arises by operation of the principles of equity and whose existence the Court simply recognises in a
7 See Elders Pastoral Ltd v BNZ [1989] 2 NZLR 180 (CA) at 185: and Beatty v Guggenheim Exploration Co, 225 NY 380 (1919) at 386 per Cardozo J: “When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee.”
8 Fortex Group Ltd (In Receivership and Liquidation) v MacIntosh [1998] 3 NZLR 171 (CA) at 172.
declaratory way. A remedial constructive trust is one which is imposed by the Court as a remedy in circumstances where, before the order of the Court, no trust of any kind existed.
The difference between the two types of constructive trust, institutional and remedial, is that an institutional constructive trust arises upon the happening of the events which brings it into being. Its existence is not dependent on any Order of the Court. Such order simply recognises that it came into being at the earlier time and provides for its implementation in whatever way is appropriate. A remedial constructive trust depends for its very existence on the Order of the Court; such order being creative rather than simply confirmatory.
[106] In Commonwealth Reserves I, LC v Chodar,9 Glazebrook J further explained the distinction between institutional and remedial constructive trusts. She said:
The first is that the institutional constructive trust is a mandatory consequence of certain events, while the remedial constructive trust is a discretionary remedy. The second is that the institutional constructive trust exists from the time the events giving rise to it occur, while a remedial constructive trust becomes effective at the time of the Court Order.
[107] Irrespective of whether an express common intention existed between the parties that the beneficial ownership of the property is not to follow the legal ownership, the court may inquire into the conduct of the parties to determine whether such a common intention should nevertheless be inferred.10
[108] In Lankow v Rose which concerned a claim to an interest in property based on a constructive trust in the context of a de facto domestic relationship, Tipping J set out the essential elements required to be established by a claimant alleging the existence of a constructive trust and that the defendant’s denial of the claimant’s interest is unconscionable:11
1.Contributions, direct or indirect, to the property in question.
2.The expectation of an interest therein.
3.That such expectation is a reasonable one.
4.That the defendant should reasonably expect to yield the claimant an interest.
9 Commonwealth Reserves I, LC v Chodar [2001] 2 NZLR 374 (HC) at 382.
10 Lloyd’s Bank PLC v Rosset [1991] 1 AC 107 at 132.
11 Lankow v Rose [1995] 1 NZLR 277 at 294.
If the claimant can demonstrate each of these four points, equity will regard as unconscionable the defendant’s denial of the claimant’s interest and will impose a constructive trust accordingly.
[109]In Gormack v Scott Cooke P elaborated on these principles. He said:12
First, …where there has been an express common intention applicable to the circumstances that have arisen, it is unnecessary to fall back on reasonable expectations.
Secondly, if (as the Judge thought here) the common intention was too vaguely expressed to receive implementation as such, the evidence bearing on common intention may still be relevant in considering the reasonable expectation of the parties.
Thirdly, in considering reasonable expectations, attention is not to be confined to the inception of the relationship or the time when any property in question was purchased. The inquiry extends to the whole circumstances and history of the relationship.
[110] The purpose of a constructive trust is generally not to create an ongoing trust relationship, but to force the disgorging of money or property by the constructive trustee.13 In this way, “a constructive trust is a means to an end”.14
Factual findings and analysis
[111] Here, there is no dispute between the parties that in the period leading up to the purchase of Gloucester Road, Ashish had been encouraging his parents to look for a home to purchase for themselves with a view to providing security for themselves in their old age. Ashish told his parents that it appeared that the property market in Auckland was rising, and strongly recommended that they should take steps to purchase a house before it increased further, making it even more difficult for them to ever own their own home.
[112] Having purchased a house in Manukau with Yashika in 2003, Ashish advised his parents to look for a house in South Auckland where prices were still at a level that they would be more able to afford. Following up on this advice, Ashish identified a number of properties that he considered were suitable possibilities for the plaintiffs to buy, and he and Yashika accompanied them to view these properties at open homes.
12 Gormack v Scott [1995] NZFLR 289 (CA), (1995) 13 FRNZ 43 at 47-48.
13 Commonwealth Reserves I v Chodar [2001] 2 NZLR 374 (HC) at 382.
14 At 382. Recently endorsed in Almond v Read [2019] NZCA 26 at [70].
During this time when they were assisting the plaintiffs to find a suitable house to buy, Ashish and Yashika were themselves looking to buy another house as an investment property, and through Ray White Financial Services they had obtained a pre-approval of bank finance which would enable them to make an unconditional offer to purchase a residential investment property.
$40,000 for savings. While these differences have persisted and the terms on which the property should be transferred by the defendants to the plaintiffs, those matters do
not have any material bearing on the fundamental issue of whether the defendants became the registered owners of Gloucester Road on the express basis that they were holding it as constructive trustees for the plaintiffs.
[136] The plaintiffs’ action of ceasing to make any further fortnightly payments from April 2015, the subsequent unsuccessful negotiations to reach agreement on the terms on which the property would be transferred to the plaintiffs, and the defendants’ unsuccessful claim to the Tenancy Tribunal have compounded the depth of the disputes between the parties leading to plaintiffs lodging a caveat on the title and commencing these proceedings. I reject the defendants’ submission that by stopping the fortnightly payments the plaintiffs thereby ceased to have any expectation of an interest in the property. The plaintiff’s termination of the payments followed their repeated requests to Ashish for details of the mortgage balance and the actual mortgage ledger from its commencement. Ashish’s refusal to provide the requested information coupled with his rejection of the plaintiffs’ proposal to effect a transfer of the property by means of a purchase at market value with the difference between that amount and the outstanding balance of the mortgage and other adjustments property, left the situation in a stalemate. In such circumstances the stopping of the mortgage payments did not involve the plaintiffs making any concession as regards the validity of their claim to have an interest in the property.
The Lankow v Rose criteria and whether the defendants’ denial of the plaintiffs’ interest in Gloucester Road is unconscionable
[137] It is clear that since Gloucester Road was purchased in May 2006, the plaintiffs have made substantial contributions to the property. Between June 2006 and April 2015 they made payments of $800 per fortnight which amount exceeded the actual sum required to meet the ANZ National Bank fortnightly mortgage payments. In total over that period they made approximately 230 fortnightly payments totalling
$184,000. While the defendants applied most of that money to meet the mortgage payments for Gloucester Road, the amounts payable reduced over the years as interest rates altered and reduced. It appears that the defendants applied any surplus money to their other property investment borrowings. Nevertheless it is clear that the plaintiffs’ fortnightly payments made between May 2006 and April 2015 exceeded the amount required to meet the mortgage payments made by the defendants in respect of the
property, and mean that the plaintiffs have made a significant direct contribution to the property. By reason of the circumstances in which they came to make the fortnightly payments, the plaintiffs had a justifiable and entirely reasonable expectation that they had an interest in the property as its beneficial owners. I further find that having regard to findings I have made regarding the circumstances in which the defendants purchased the property for the plaintiffs and became the registered owners of the property, having arranged to borrow all of the money required for the purchase, which borrowing was to service the mortgage with funds provided by the plaintiffs as well as meeting all other outgoings on the property, the defendants should reasonably expect to yield the plaintiffs an interest in the property as the beneficial owners.
[138] Furthermore during 2015 - 2016 when Amin after taking legal advice sought to obtain a transfer of the property to the plaintiffs by the mechanism of an agreement for sale and purchase, and the plaintiffs had arranged the necessary mortgage finance enabling them to do so, the defendants, and Ashish in particular, adopted an essentially obstructive and unreasonable position and refused to cooperate to arrange a transfer. The defendants’ initial delay resulted in the need to revise and increase the price of the property and consequently also alter the forgiveness of debt amounts. The defendants balked at the need for these amendments and maintained what was in my view an unjustifiable and inflexible position and refused to proceed with transferring the property to the plaintiffs.
[139] I accordingly find that the defendants’ refusal to recognise the plaintiffs’ interest in the Gloucester Road property as the beneficial owners is unconscionable, and I accordingly find that the plaintiffs have established that the defendants hold the property pursuant to an institutional constructive trust for and on behalf of the plaintiffs.
[140] Had I not found that the plaintiffs have proven the existence of an institutional constructive trust, I would nevertheless find that the circumstances warrant exercising the Court’s discretion to impose a remedial constructive trust in order to recognise the equitable interest of the plaintiffs in the property as beneficial owners, and provide them with a remedy.
Defendants’ counterclaims and adjustments
For cancellation of licence to occupy and possession
[141] As a consequence of those findings the defendants’ counterclaim seeking an order for cancellation of a licence granted by the defendants and by which the plaintiffs are alleged to be occupying the property fails, as does the defendants’ application for an order for recovery of possession of the property.
Claim for rental
[142] The defendants say that should the Court find the plaintiffs to have been occupying the Gloucester Road premises as tenants, then they are liable for rental arrears totalling $132,000. However, as I have rejected Ashish’s evidence and claim that he arranged with the plaintiffs that they would rent the house at Gloucester Road for $400.00 per week, and have found that the plaintiffs have occupied the house as its beneficial owners, they have no liability to pay rent to the defendants and this claim is dismissed.
For recovery of mortgage payments and interest
[143] As I have previously noted the plaintiffs stopped making the fortnightly payments from the beginning of April 2015 and have since occupied the property for a period of six years without making any further payments to the defendants on account of the mortgage or any payments direct to the ANZ National Bank.
[144] The defendants counterclaim, saying that if the Court finds that the plaintiffs are the legal and beneficial owners of Gloucester Road, they seek an order directing the plaintiffs to account to the defendants for the amounts the defendants have continued to pay to the ANZ National Bank in respect of the bank’s mortgage over the property since April 2015 to the present. The defendants calculate that sum as at 1 September 2020 at $86,848 which updated at a rate of $620 per month for seven months to 30 April 2021 yields a total of $91,188.00.
[145] Had the plaintiffs not discontinued their fortnightly payments of $800.00 the defendants would not have had to fund the mortgage payments in respect of the
Gloucester Road property. I consider that the defendants’ expenditure in meeting the mortgage payments since the plaintiffs ceased making payments in April 2015 should be recognised as their payment of the mortgage during that period is directly connected with the plaintiffs’ interest as beneficial owner and is an expense which the plaintiffs would have been required to make themselves. The defendants’ action of meeting the mortgage payments has clearly benefitted the plaintiffs and, subject to an adjustment which I will explain, I shall allow the defendants’ claim for reimbursement of the mortgage payments they have made since April 2015, and I will make an order that the sum is to be paid to the defendants contemporaneously with the transfer of the title to the plaintiffs.
[146] However, I reject the defendants’ claim for interest on the mortgage payments which they calculate at the rate of 5 per cent per annum and quantify at $10,670. As I have said, throughout the period that the plaintiffs were making payments of $800 per fortnight they were paying the defendants more than was required to service the mortgage. The defendants appear to have applied this surplus towards their other property investment borrowings. The plaintiffs have calculated the amount not applied by the defendants to meeting the Gloucester Road mortgage as being $25,879. It is therefore clear that the additional portion of the plaintiffs’ fortnightly mortgage payments which was retained by the defendants for purposes unrelated to Gloucester Road, exceeds the amount of the defendants’ claim for interest on the mortgage payments they made by a sum of $15,209. I accordingly also disallow the defendants’ claim for interest on the mortgage payments they made, and I will adjust and reduce the amount allowed to the defendants for reimbursement of the mortgage payments made since April 2015 by $15,209 to yield a net amount of $75,979.00
The $41,625
[147]As I have noted earlier, as at 24 May 2011, the Gloucester Road mortgage was
$236,590.51. In May 2011 the defendants restructured the loan and it was transferred to become an ANZ Home Loan having an opening balance on 1 June 2011 of
$196,853, this being a difference of approximately $40,000. On 24 June 2015, by which time the Gloucester Road mortgage loan had been changed by the defendants to become an “ANZ Residential Invest” account loan, the outstanding balance was
$179,411.70. On that day the loan was repaid and replaced by a new ANZ Home Loan which was drawn down in the sum of $221,036.97, representing an increase of
$41,625.27 over the loan balance prior to that loan restructuring.
[148] It is relevant to note that at the time that this restructuring was effected, the plaintiffs were pressing the defendants for information regarding the Gloucester Road mortgage loan payment history and the amount outstanding, and from March 2015 had been waiting for the defendants to sign an agreement for sale and purchase of the property based on a market value ascertained by the plaintiffs in accordance with the legal advice they had obtained. Between March 2015 and December 2015 the defendants delayed responding and eventually on 3 December 2015, Yashika sent Amin an email attaching the agreement which had been signed with amendments providing for reimbursement of $20,000 for the bathroom expenses, and changing the settlement date from that initially proposed (1 April 2015), to 29 January 2016. In this email Yashika advised Amin that the balance of the loan was $220,000.
[149] It is now clear that the defendants had delayed responding to the plaintiffs earlier in 2015, and declined to provide details of the mortgage repayment schedule because the Gloucester Road mortgage loan had been restructured in June 2011 with
$40,000 split off into another separate loan. In her email to Amin on 3 February 2015 rather than providing actual details of the mortgage loan history, Yashika included a link to an internet based mortgage calculator site. By doing so the defendants avoided disclosing to the plaintiffs that they had restructured the Gloucester Road mortgage loan and had used it as security for their borrowings in relation to their other investment properties.
[150] The plaintiffs note that on 1 June 2011, $40,000 had been severed from the Gloucester Road mortgage loan, and was transferred to another ANZ Home Loan facility in the defendants names called a “FlexiPlus” home loan. This loan, which was to be effective from 24 May 2011, required the defendants to make monthly payments of $191.64 and it was secured by a first registered mortgage already held by the ANZ National Bank over Gloucester Road and the defendants’ properties at Astella Place Manukau, 1320/72 Nelson Street, Auckland, and 252A Flaxmere Road Hastings.
[151] The plaintiffs say that had the plaintiffs’ mortgage payments been applied in full to the Gloucester Road mortgage including the severed $40,000 FlexiPlus loan, when the two loans were subsequently consolidated again on 24 June 2015, the FlexiPlus loan balance would have reduced over the intervening four years, not increased as was the case. The plaintiffs note that the defendants have not produced any bank statements or records to show the loan history of the FlexiPlus loan, and submit that against this background the Court should conclude that the $41,625.27 added to the Gloucester Road mortgage loan by the defendants on 24 June 2015 represented personal expenditure by the defendants rather than debt related to the purchase of Gloucester Road. The plaintiffs say that the amount of the Gloucester Road mortgage loan from 2015 should accordingly be discounted by the amount of the FlexiPlus loan ($41,625.27) that was added to the loan balance on 24 June 2015.
[152] For the defendants, Mr Stringer says that the $40,000 was a debt that had to be serviced and was not a credit to be spent by the defendants. He notes that the loan facility was on an interest only basis, and says that when the facilities were combined the overall mortgage debt was not increased. The defendants say that even if the plaintiffs’ fortnightly payments were not applied towards the $40,000 loan, that debt did not increase over the four year period and the defendants met the monthly payments of $191.94.
[153] I do not consider that any adjustment is required to account for the effect of the splitting off of the $40,000 into the FlexiPlus loan and then later consolidating it again with the Gloucester Road loan. In the period while the $40,000 debt was held under the FlexiPlus loan the Gloucester Road loan principal was reduced by $15,533.00 apart from the increase of $1,627, being the amount by which the FlexiPlus loan amount increased, I consider there is no proper basis for any other or further adjustment to be made in relation to the $40,000 component of the combined Gloucester Road mortgage loan balance.
The deposit of $4000 paid to the vendors on the purchase of Gloucester Road
[154] The defendants also seek an adjustment to recover the deposit of $4000 that they paid on the purchase agreement becoming unconditional, together with interest
on the deposit. However the settlement statement prepared by the solicitors who acted for the defendants on the purchase of Gloucester Road recorded that from the loan advance of $250,000, and after payment of the amount required to settle the purchase ($245,125), the balance of $4074.00 was returned to the defendants. That sum represented the amount of the $4000 deposit that had been paid by Ashish on 8 May 2006 and which had reduced the amount required to settle the purchase. It is accordingly apparent that the defendants have already been repaid the deposit and the plaintiffs have borne that expense as it is included within the $250,000 borrowed from the bank and on which they have indirectly been meeting the mortgage payments, or will be responsible for as part of the payment of the financial adjustment I shall order.
Guarantee fee
[155] The defendants further claim a set-off to recognise the advantage derived by the plaintiffs of the defendants having effectively guaranteed the mortgage by being personally liable to the bank for the money they borrowed to purchase Gloucester Road. Mr Bhikha who is an accountant and who was called by the defendants as an expert witness to quantify the value to be accorded to the defendants for effectively guaranteeing the mortgage says that the commercial fee for the provision of a mortgage guarantee in respect of an amount of $250,000 borrowed to fund the purchase of Gloucester Road would be in the order of three per cent for each year the amount is borrowed, which he calculates as being $92,000.
[156] I reject the defendants’ claim for such an adjustment. The defendants voluntarily entered into the arrangement to borrow the $250,000 from the bank in order to assist the plaintiffs to purchase Gloucester Road. As borrowers they were personally liable for the loan. However, they were not asked by the plaintiffs to make those arrangements and take on that personal liability. I do not consider that there is any justification for such an adjustment and it is disallowed.
Capital improvements
[157] Under this heading the defendants seek an adjustment of $21,143.00 to recognise the sums paid by the defendants for various items installed in the house or work done on the house. In addition the defendants seek a further $11,300 for interest
on the capital cost items. Shortly after the plaintiffs moved into Gloucester Road, Usha found it to be rather cold. Ashish offered to have an HRV system installed at the house to make it more comfortable for his mother especially. At the same time he arranged for a similar system to be installed in his own home. There was no suggestion at the time that the plaintiffs were to pay for the HRV system and there is no basis on which the defendants should now be compensated for what was clearly treated at the time as being a gift.
[158] The defendants also seek an adjustment to recognise the costs they met for various bathroom and shower fittings, tiles and other items including labour and contractors’ invoices they claim they paid for in relation to refurbishment of the bathroom at Gloucester Road in 2010. The bathroom was in desperate need of repair and refurbishment in 2010 after the floor, which was rotten, collapsed leaving it unusable. When Ashish learned that his parents had arranged to rent a portable toilet and were looking at having to stay in a motel while the work was being done, he invited them and Supriya to stay with him and Yashika in their home. The defendants also assisted the plaintiffs to select and purchase a number of items required for the bathroom refurbishment.
[159] Now ten years later the defendants are seeking to recover the cost of those items on the basis that they had paid for them on the understanding that as the owners of the property they were responsible for maintaining the property including the bathroom. Despite the time elapsed since the payments were made, the defendants were able to produce documentary evidence for most of their expenditure on the bathroom, and have supported their claim with invoices for work done and for bathroom and plumbing fittings.
[160] The defendants seek to recover the sum of $20,000 for the Gloucester Road bathroom refurbishment costs they paid for. The plaintiffs submit that they should meet only $3,466 of the bathroom costs which were paid for by the defendants. Amin said in evidence that he did not think that the defendants had paid a total of $20,000 for the bathroom refurbishment, but said that if Ashish was able to prove the amounts he paid he was “fine with it”. He said that he had applied the sum of $1,500 which the plaintiffs received as an insurance payment towards meeting the bathroom
refurbishment costs. Under cross-examination however, Amin accepted that he had not paid for the labour costs totalling over $11,000 and accepted that someone must have done so without being able to identify who.
[161] There is no evidence to show that Amin met or reimbursed the defendants for any of the bathroom refurbishment costs they paid for, and I am satisfied that the defendants have proven that they did pay for various bathroom related expenditure totalling approximately $20,000. Whether or not Amin applied the insurance money of $1,500 towards meeting some of the costs does not alter the amount expended by the defendants. It appears however that the defendants’ calculation of expenditure totalling $20,000 includes some double counting of some of the labour cost, and I find that an adjustment in the sum of $18,500 in their favour is an appropriate sum to compensate them for the bathroom refurbishment costs they paid for.
Conclusion regarding mortgage payments met by the defendants and adjustments
[162] The defendants’ action of repaying the original loan and replacing it with further borrowings further confuses the matter and makes it difficult to precisely determine the actual amount by which the plaintiffs’ payments reduced the originally borrowed amount of $250,000. Some indication can however be derived from a mortgage amortisation/repayment calculation prepared by Ashish and produced as an exhibit. According to this calculation the loan balance as at 15 April 2015 would be
$214,475, and in the absence of proof of the actual balance outstanding, I shall adopt that figure as representing the outstanding amount of the mortgage at that date.
[163] The total of the adjustments to be made in favour of the defendants is $92,852 comprised of:
(a)Mortgage payments they made from 15 April 2015, adjusted to allow for their application of a portion of the plaintiffs’ fortnightly payments for unrelated expenditure by the defendants - $75,979.00.
(b)The sum of $18,500 for the defendants’ expenditure on bathroom fittings and refurbishment costs.
(c)And the deduction of $1,627.00 being the amount by which the $40,000 split from the core mortgage on 24 May 2011 had increased when it was later consolidated with the core mortgage debt on 24 June 2015.
Relief
[164] The plaintiffs say that having established that the defendants hold the property for them pursuant to a constructive trust, they seek an order directing the defendants to effect a transfer of the Gloucester Road property to them within a period of three months of the making of the order to enable the plaintiffs themselves to arrange mortgage finance to repay and obtain a discharge of the ANZ National Bank mortgage.
[165] The plaintiffs submit that in the event that the ANZ National Bank requires payment of a greater sum than presently remains owing under the Gloucester Road mortgage by reason of the defendants having used the property as security for their borrowing in connection with their other properties, then such additional sum as may be required be met by the defendants. The plaintiffs also seek an order quantifying the net amount they are required to pay the defendants in respect of the mortgage payments made by the defendants since 15 April 2015, adjusted in accordance with the Court’s findings regarding the bathroom refurbishment cost and other matters claimed by the parties.
[166] Alternatively, in the event that the plaintiffs are unable to obtain mortgage finance to enable them to obtain a discharge of the ANZ National Bank mortgage, the plaintiffs seek an order directing that the property be valued by a registered valuer and placed on the market for sale by auction with a reserve set in accordance with the valuation. Following sale the proceeds to be applied to the payment of :the costs of sale (real estate agent’s commission and fees, and vendors’ legal fees); discharge of the ANZ National Bank mortgage; payment to the defendants of the net amount of the defendants’ mortgage payments as adjusted by the Court, and further adjusted for any additional amount required by the bank to be paid by the defendants arising from the financing of their other property investments.
[167] Mr Stringer for the defendants submits that in the event that the Court finds in favour of the plaintiffs and that the defendants hold the property pursuant to a
constructive trust, then having regard to the amount of the defendants’ contributions to paying the mortgage since 15 April 2015 which equates to approximately 13 per cent of the current value of the property (which the defendants say is currently around
$600,000), the Court should determine them to have a 13 per cent interest in Gloucester Road, and accordingly make orders regarding either the transfer of the property or the application of the proceeds of sale which recognise the defendants’ 13 per cent interest as well as the amount they have paid in relation to the mortgage and are otherwise entitled to by way of adjustments.
[168] I reject the defendants’ claim to any entitlement to a share of the owners’ equity in Gloucester Road. Their action of paying the mortgage from 15 April 2015 was undertaken out of their need to meet their obligations as liable borrowers not only as regards Gloucester Road, but also by reason of the securities held by the bank in respect of their borrowings for their investment properties. Moreover the circumstances which led to the plaintiffs stopping their fortnightly payments were, as I have said, the result of the defendants, (principally Ashish), adopting an obstructive approach to the plaintiffs’ requests to have the legal title transferred to them.
Land Transfer Act 1952 claim
[169] The correct statute to apply in this matter, is the Land Transfer Act 1952.16 The plaintiffs make an application to be protected against ejectment under the Land Transfer Act 1952, s 63(1)(c). Ms Hansen submits that the defendants are fraudulent registered proprietors and that they ought to be required to give effect to the rights of the party with an unregistered interest (being the plaintiffs’). The defendant submits that fraud in the context of the Land Transfer Act 1952, involves forgery or dishonest tricks causing an interest not to be registered, or registering false documents. The defendants submit that the plaintiffs’ claim of fraud must fail as the defendants’ actions in acquiring the property were undertaken for the purpose of assisting the plaintiffs by helping them into Gloucester Road, and there was no deception involved.
16 These proceedings were commenced on 27 April 2018 and the Land Transfer Act 2017 came into force on 12 November 2018. See Land Transfer Act 2017, sch 1, cl 2(1) and (2).
[170] Section 183 of the Land Transfer Act 1952 protects a bona fide purchaser for valuable consideration against most defects in the title of the vendor. Fraud is a recognized exception to the principle of indefeasibility.17 Fraud is not defined in the 1952 Act,18 however, the classic definition of fraud in the Land Transfer Act context is that set out by the Privy Council in Assets Co Ltd v Mere Roihi:19
[Sections 62, 63, 182 and 183 of the Land Transfer Act] appear to their Lordships to show that by fraud [in this Act] is meant actual fraud, ie, dishonesty of some sort, not what is called constructive or equitable fraud – an unfortunate expression and one very apt to mislead, but often used, for want of a better term, to denote transactions having consequences in equity similar to those which flow from fraud. Further, it appears to their Lordships that the fraud which must be proved in order to invalidate the title of a registered purchaser for value, whether he buys from a prior registered owner or from a person claiming under a title certified under the Native Land Acts, must be brought home to the person whose registered title is impeached or to his agents. Fraud by persons from whom he claims does not affect him unless knowledge of it is brought home to him or his agents. The mere fact that he might have found out fraud if he had been more vigilant, and had made further inquiries which he omitted to make, does not of itself prove fraud on his part. But if it be shown that his suspicions were aroused, and that he abstained from making inquiries for fear of learning the truth, the case is very different, and fraud may be properly ascribed to him. A person who presents for registration a document which is forged or has been fraudulently or improperly obtained is not guilty of fraud if he honestly believes it to be a genuine document which can be properly acted upon.
[171] Fraud in the Land Transfer Act context must operate against a prior identifiable interest in the land.20 A title acquired by fraud is not indefeasible, and s 63(1)(c) makes it clear that a claim for possession may be brought by a person who has been deprived of any land by fraud, provided that a bona fide transferee for value has not become the registered proprietor.21 The defendants’ acquisition of title to Gloucester Road did not occur in a fraudulent manner for Land Transfer Act purposes because: the plaintiffs did not have an interest in Gloucester Road prior to the transfer and the defendant did not obtain title by means of fraud or dishonesty; and further, any ‘fraudulent’ conduct on the part of the defendants did not occur at the time of the transfer. The transfer of
17 Land Transfer Act 1952, s 62. See appellate endorsement in Bunt v Hallinan [1985] 1 NZLR 450 (CA) at 457 referring to s 62 as the “cornerstone” of the Land Transfer system.
18 Although for completeness it was defined in the Act’s 2017 iteration: Land Transfer Act 2017, s 6(1): “fraud means forgery or other dishonest conduct by the registered owner or the registered owner’s agent in acquiring a registered estate or interest in land.”
19 Assets Co Ltd v Mere Roihi [1905] AC 176 at 210.
20 Waller v Davies [2007] NZCA 51 at [33].
21 Land Transfer Act 1952, s 183.
the property to the defendants was not done to cheat the plaintiffs of a known existing right.22
[172] I accordingly dismiss the plaintiffs’ second cause of action in which, relying on s 63(1)(c) of the Land Transfer Act 1952, they allege they have been deprived of gaining title to the property by fraud by the defendants. Specifically, by the defendants purporting to assist them to purchase their own home while concealing from the plaintiffs that they had arranged to purchase the property themselves and become the registered owners. In my view the defendants did not set out to mislead the plaintiffs or conceal any material information from them at the time when they were offering to assist them to buy their own home and arranged the finance required to purchase the property by themselves borrowing the money required for the purchase from the bank. By putting themselves forward as the borrowers, the defendants overcame what was realistically regarded as being the insuperable hurdle of Amin having insufficient income to satisfy the bank’s lending criteria.
[173] When Gloucester Road was purchased the defendants and particularly Ashish was genuinely motivated to assist his parents to purchase their own home. However, when Ashish realised that his father’s income would not be sufficient to support a mortgage a purchase, the defendants’ decision to step in and utilise their own borrowing credentials to obtain the necessary finance was a means by which that obstacle could be overcome.
[174] In my view the defendants’ actions of becoming the borrowers and registered owners of Gloucester Road were not undertaken as a dishonest trick to bring about the outcome of the plaintiffs’ interest in the property not being registered. Their actions were initially undertaken as a well-intentioned means of circumventing the bank’s lending criteria to enable the plaintiffs to purchase a house for themselves. This is evident from Ashish’s letter congratulating them on their purchase and welcoming them to their “new home”. However, soon after this arrangement had been put in place, the defendants used Gloucester Road as security and proceeded to borrow further funds from the bank to finance the purchase of their own investment properties.
22 Waimiha Sawmilling Co Ltd v Waione Timber Co Ltd [1912] AC 101 at 106, (1925) NZPCC 267 at 273 (PC) per Lord Buckmaster.
It appears that from that point on they had decided not to disclose to the plaintiffs what they were doing as regards further property purchases, and when asked Ashish told Amin, that his (Amin’s) name was on the Gloucester Road title. While that was clearly untrue and misleading, it was a means of the defendants maintaining their concealment of the fact that they had used the Gloucester Road property as security for further borrowing. The changing nature of the relationship between the parties and the deep disharmony that arose thereafter led the defendants to reframe the arrangements they had made to suit themselves and advance the explanation that the plaintiffs were renting the house from them. Against this background I consider that the plaintiffs cannot show that the defendants became the registered owners of the property as a result of a trick or fraudulent misleading of the plaintiffs and the plaintiffs’ claim under the Land Transfer Act 1952, s 63(1)(c) is unsuccessful.
Conclusion and orders
[175] Having found the plaintiffs to have established the existence of an institutional constructive trust pursuant to which the defendants hold the property as trustees for the plaintiffs, I make an order directing the defendants, forthwith when called on by the plaintiffs to do so, to transfer the legal title to the Gloucester Road property to the plaintiffs.
[176]Such transfer to be on the following terms:
(a)Pending transfer of the title to the plaintiffs, the defendants are to pay and maintain all periodic payments due under the ANZ National Bank mortgage registered on the title of the Gloucester Road property. Also pending the transfer, the defendants are not to further encumber the property by means of any additional borrowings. In the event of the defendants defaulting in respect of any mortgage payments, subject to the adjustments provided for hereunder, they are to be solely liable for any such amount/s.
(b)Contemporaneously with the transfer, the plaintiffs are to pay the defendants such principal sum as then remains owing under the mortgage together with the sum of $92,852 being the net amount
payable by the defendants in accordance with the adjustments I have determined and detailed above (the adjustment sum).
(c)In addition to the adjustment sum payable to the defendants, the plaintiffs are also to pay the defendants the amount of any further mortgage payments (being both interest and principal - if any) they have made since 30 April 2021.
(d)Both parties are to meet their own respective legal costs in connection with the transfer of legal title by the defendants to the plaintiffs.
[177] In the event that the plaintiffs are unable to obtain sufficient mortgage finance to enable them to call upon the defendants to transfer the title to them within three months following the date of this judgment, the plaintiffs are at their own cost to obtain a written valuation of Gloucester Road from a registered valuer, and upon receipt of the valuation, the property is thereafter to be marketed for sale by means of public auction, with the auction reserve being either that agreed by the parties in writing or in the absence of agreement the amount of the written valuation.
[178] The arrangements for the sale and the legal attendances incidental to the sale are to be undertaken by the plaintiffs’ solicitors.
[179] Upon sale and settlement of the property, the proceeds following repayment of the ANZ National Bank debt and obtaining a discharge of the bank’s mortgage shall be applied as follows:
(a)The real estate agent’s costs of sale together with any disbursements and incidental costs. The legal costs of the plaintiffs’ solicitors.
(b)The adjustment sum of $92,852 being the net amount payable by the defendants in accordance with the adjustments I have determined and detailed above.
(c)In addition to the adjustment sum payable to the defendants, the plaintiffs are also to pay the defendants the amount of any further
mortgage payments (being both interest and principal - if any) they have made since 30 April 2021.
(d)Following payment of the secured debt and other payments specified above, the net proceeds of the sale are to be retained by the plaintiffs as their sole property.
Costs
[180] The plaintiffs having succeeded in their constructive trust claim, they are entitled to an award of costs. I consider that scale 2B is appropriate for this proceeding.
[181] I direct the plaintiffs to file and serve their costs memorandum by 5:00 pm on 14 June 2021, and the defendants to file and serve their costs memorandum in reply by 5:00 pm on 28 June 2021. The costs memoranda are not to exceed three pages in length excluding the intituling cover page and any annexed schedule of costs and documents related to disbursements.
Upon receipt by the Registrar of the costs memoranda, I shall determine the award of the plaintiffs’ costs on the papers.
Paul Davison J
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