SM v MH HC New Plymouth CIV 2007-443-656
[2008] NZHC 2653
•28 October 2008
ORDER PROHIBITING PUBLICATION OF NAMES OR IDENTIFYING PARTICULARS OF THE PARTIES AND THE CHILDREN OF THE APPLICANT UNTIL FURTHER ORDER OF THE COURT.
IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY
CIV 2007-443-656
IN THE MATTER OF the Law Reform (Testamentary Promises) Act 1949
BETWEEN SM Applicant
ANDMH Respondent
Hearing: 1 July 2008
Appearances: S Hughes QC for Applicant
G Calver for Respondent
Judgment: 28 October 2008 at 3.30 pm
JUDGMENT OF MALLON J
Contents
Introduction............................................................................................................... [1] The evidence ............................................................................................................. [6] Ms M and Mr H’s relationship and the purchase of the property......................... [6] Events after Mr H’s death ................................................................................... [24] Assessment of the competing evidence .............................................................. [34] Testamentary promise............................................................................................. [38] The legal principles............................................................................................. [38] Application of the principles............................................................................... [40] Trust ........................................................................................................................ [43] The legal principles............................................................................................. [43] Application of the principles............................................................................... [50] Result ...................................................................................................................... [63]
SM V MH HC NWP CIV 2007-443-656 28 October 2008
Introduction
[1] Ms M lives with her two daughters, who are now aged 13 and 8 years, at a New Plymouth property purchased by the daughters’ father, Mr H. Although Ms M and Mr H had not lived together for some time Ms M and Mr H continued an intimate relationship for many years. The property was purchased in 2001 at a time when they were no longer living together. At this time Mr H worked in Hastings but was a regular visitor to the New Plymouth home. On one of these visits, which took place on 1 March 2003, Mr H died unexpectedly. He did not leave a will.
[2] The main asset of Mr H’s estate is the New Plymouth property. In this proceeding Ms M seeks an order vesting the New Plymouth property in her name. She seeks this under the Law Reform (Testamentary Promises) Act 1949, (“the Testamentary Promises Act”) contending that Mr H made a testamentary promise that the property would be a permanent home for her and her children. Alternatively she claims that Mr H held the property on trust for her and their daughters.
[3] Ms M accepts that she and Mr H did not specifically discuss or agree what was to happen in respect of the property in the event of his death. Nor did they discuss or agree whether Ms M was to have or acquire any legal interest in the property. Her claims are based on an understanding she says she had with Mr H under which Mr H provided a home for Ms M and their daughters, Ms M was to pay half of the mortgage and provide day-to-day care of their daughters and Mr H was to be free to come and go as he pleased. The claim under the Testamentary Promises Act is therefore based on an implied rather than an express promise and the trust is claimed on the basis of common intention or reasonable expectations.
[4] Mr H’s mother has been appointed administratrix of Mr H’s estate. She opposes the order Ms M seeks. Her view is that the house is the daughters’ inheritance. She believes Ms M will be unable to meet the mortgage repayments and other outgoings and is concerned that if the property vests in Ms M the daughters will end up losing their inheritance. She contests that the relationship between Mr H and Ms M was a close one. On the testamentary promise claim she says there were
no qualifying services, and no testamentary promise as a reward for those services. On the trust claim it is said there was no common intention, nor any qualifying contributions by Ms M to the New Plymouth property from which a reasonable expectation of an interest in the property could arise.
[5] Accordingly all aspects of the claims are at issue.
The evidence
Ms M and Mr H’s relationship and the purchase of the property
[6] Ms M and Mr H began their relationship in 1989. At this time Ms M was 17 and Mr H was 27 years. Initially they dated each other. The evidence does not establish precisely when they began living together, but it was within a few years of their meeting. In early 1995 Ms M became pregnant with their first daughter, S. At this time Ms M and Mr H had been living together in the South Island. Ms M says the pregnancy was planned and that she and Mr H’s intentions were to live happily ever after together as a family. Prior to S’ birth they moved to Hastings to be closer to Mr H’s family. S was born in October 1995. Mr H worked to provide financial support for Ms M and S and Ms M stayed at home to provide the care for S.
[7] Ms M found motherhood difficult and became depressed. Ms M says that because of this she and S moved to New Plymouth so that she would be close to her family and would get the support she needed. The evidence does not establish precisely when this move took place although it seems to have been within a short time-frame of S’ birth. Mr H did not move to New Plymouth with Ms M and S. Ms M said that the relationship did not end but it became more casual. Mr H would travel from Hastings to visit her and S and on these visits the intimacy between Ms M and Mr H continued.
[8] Ms M’s evidence is that in about 2000, again it is not clear precisely when, Mr H moved to Australia for a period and worked for his father. At this time Ms M was briefly involved with another person. When S was four, S and Ms M visited Mr H in Australia because they had not seen him for a few months. On this visit
Ms M became pregnant with C, the second daughter of Ms M and Mr H. Ms M and
S returned to New Plymouth to live with Ms M’s parents and C was born in May
2000. Ms M says that during this time Mr H phoned and texted her from Australia all the time and that when he was in New Zealand they “would get back together and pickup where they left off”.
[9] Ms M, S and C continued to live with Ms M’s parents until 2001 when Mr H purchased the New Plymouth property. At this time S had just started school and C was one year old and Mr H was back living in Hastings. Ms M’s evidence is that:
[Mr H] and I agreed, that he would purchase the [New Plymouth property] because we both recognised the need to provide a stable home for the girls. [S] had just started school and we both decided, that whether we lived together or not the children were entitled to be raised in a happy, stable household.
...
The arrangements, that we had was that provided I maintained full time care of the girls and allowed him unimpeded access to them as and when he wished, he would pay the deposit for the house and we would then go halves in the costs of maintaining the mortgage. It was intended, that this would be a house for me and the girls forever.
[10] In accordance with these arrangements Ms M paid half of the mortgage while Mr H was alive. The payments were made by automatic payment from Ms M’s domestic purposes benefit. Those payments were described in the bank records as being for “rent”. Ms M said that this was how she described it to the bank and it was not something she discussed with Mr H.
[11] Ms M’s evidence is that Mr H had unrestricted access to his daughters. She says that Mr H was travelling from Hastings to New Plymouth every weekend more or less to see them. Mr H paid child support but also helped with other household items on these visits and bought things for the children. Ms M says that on these visits she and Mr H were intimate. She says that there was nobody else in her life. She says that by this stage of their relationship it did not work for them to live together full time, but they continued to care for each other and were committed parents to their daughters. It was on one of these visits that Mr H suffered an asthma attack which resulted in his death.
[12] The challenge to Ms M’s evidence came from Mr H’s mother, the only witness called by the respondent. Mrs H refers to her son as living a “very nomadic life” from the time of leaving school at the age of 17. She says that he had convictions for dishonesty and drug offences but she understands that none of his convictions were particularly serious and he was not sentenced to any periods of imprisonment. She says that Ms M and Mr H travelled around in a house truck living a gypsy lifestyle. She understood that Mr H took on casual work, for example in orchards, from time to time but offered her belief that he supplemented his income by dealing in drugs. The basis for her belief is not explained. Mrs H says that she was happy when Mr H and Ms M moved to Hastings (when S was born) but she says their gypsy lifestyle continued and she was not happy that S was part of that lifestyle.
[13] Mrs H says that her observation was that the relationship was often problematic. She refers to Ms M having terminated a pregnancy prior to becoming pregnant with S and that after S was born Mr H was not always faithful to Ms M and nor was Ms M fully committed to Mr H. Her understanding was Mr H and Ms M visited Mr H’s father (Mrs H’s former husband) in Australia in 1999 and that they stayed weeks rather than months. She says that Mr H and Ms M were not close. She referred to Ms M having initially completed C’s birth certificate with “father unknown” and that it was not until C was DNA tested, at Mrs H’s request, that it was established that Mr H was C’s father. Mrs H says that she required the testing to be carried out because she was concerned that if her son had children in addition to S then they should share equally in Mr H’s estate.
[14] Mrs H says that Mr H bought the New Plymouth property because he wanted to provide a stable residence for the children. She says that Mr H wanted to keep Ms M grounded so that she did not move around and shift the children from school to school as she moved. She accepted that it was important to Mr H that his family have a secure home, but she says that Mr H saw the house as a stepping stone towards buying a house in Coromandel, an area which he loved, and that Mr H told her repeatedly that he was going to sell the house. She says that a further reason for Mr H purchasing the property was Mr H did not feel welcome at Ms M’s parents’
place (where Ms M, S and C had been living) and had been denied the sort of access to the children that he wanted.
[15] Mrs H also says that even when he bought the New Plymouth property he was not always welcome and could not obtain access to the girls because Ms M had someone staying in the house. She says that as a result Mr H sometimes slept in his car at the nearby beach. Mrs H also says that prior to his death Mr H told her that he was going to get Ms M to sign a tenancy agreement. She says she found a blank tenancy agreement in his car when he died. She was unable to produce a copy of that agreement and Ms M was not cross-examined as to whether any such agreement was discussed by Mr H with Ms M. (Ms M denied having heard of any such agreement.)
[16] Ms M’s evidence of the nature of her relationship with Mr H was supported by Mr R, a friend of Ms M and Mr H. Mr R gave evidence by affidavit and was not required for cross-examination. Mr R’s evidence was that he had known Ms M and Mr H from about 1988. He and his partner have two daughters of broadly similar ages to S and C. His daughters were regular visitors to the New Plymouth property and often stayed the night. He referred to two occasions where he recalled Mr H referring to the New Plymouth property as “home”. On one of these occasions he suggested Mr R come round to his home for a coffee. On the other occasion Mr H told Mr R that he was working away from home and trying to get home for the weekends. Mr R said that “all seemed good” between Mr H and Ms M.
[17] He further commented on Mr H and Ms M’s relationship in these terms:
[Mr H] was what I call a “roamer”. He never seemed to stay in the one place for long and some people might say the relationship was unconventional but I’ve reached that time in my life where I don’t know what a conventional relationship looks like! It seemed to work for them. I have never seen [Ms M] with any other bloke and I have never see[n] any other bloke at [Ms M’s] house when I have dropped off the girls or picked them up.
As far as I was concerned the day that I bumped into [Mr H] in town they were in a relationship. By that I mean, that they were in a relationship but not the sort of relationship where he stayed there all the time and indeed, he was always working away. I don’t know whether they shared a bed or not, that wasn’t any of my business, I do know the pair of them loved their daughters a great deal and worked hard to be good parents to the girls.
…
… I have no doubt, that [Mr H] would spin in his grave if he knew that his family were being evicted from the house. It was important for [Mr H] that his daughters have a secure home and from what I have seen, [Ms M] does everything she can to ensure that that is what they get.
[18] Ms M’s evidence was also supported by Mr H’s father, who I will refer to as Mr H Senior. Like Mrs H, Mr H Senior described his son as a gypsy who lived to be on the move. Unlike Mrs H, Mr H Senior says that Mr H was an extremely hard worker and he is appalled at Mrs H’s allegation that their son was supplementing his income by dealing in drugs. He says that Mr H and Ms M decided to “give it a go” in Australia. He says that they and S first lived with him for several weeks until they found a home to rent. He does not say when Ms M and S went back to New Plymouth, but says that Mr H returned to New Zealand after several months living in Australia. He says that Ms M and Mr H “had been together on and off for a very long time and had two children together”. The arrangement worked for them and they worked together to provide a secure home for their daughters.
[19] Mr H Senior referred to earlier properties that his son had purchased and the assistance he and his former wife had provided with that. Mr H Senior says that Mr H sold his first property to purchase the New Plymouth property. He says:
When [Mr H] and I talked about what his plans were for the house, he made it clear to me that he intended to provide a home for the girls and [Ms M]. It was very important to him that they have a stable home life. I think he had reached that point where he understood that he could not commit to such a life but that he wanted to be a good father and to provide for his daughters. It was a selfless act and one I admired him for.
…
The various discussions I have [sic] with [Mr H] left me in no doubt at all that his first priority was the girls’ welfare, [Mr H] wanted to ensure that [Ms M] was able to provide full time care for the girls and that he could have access to the girls whenever he liked. I don’t mean to imply that [Mr H] was unreasonable in his requests for access but he lived a transient lifestyle where it would be difficult for him to predict where and when he might be at any particular time. He was never going to be the sort of father that would take the kids every Wednesday and Saturday for instance.
[20] Mr H Senior does not agree with Mrs H’s evidence that Mr H intended to sell the New Plymouth property and rebuild in Coromandel. Mr H Senior says that Mr H
had told him he would never return to the Coromandel and that the “sole reason” he purchased the New Plymouth property was to “provide a home for [Ms M] and the girls”.
[21] As to Mr H’s relationship with his mother, Mr H Senior is confident that Mr H was more regularly in contact with him, that Mr H complained to Mr H Senior about Mrs H’s controlling and smothering nature and that Mrs H seemed unable to accept their son’s lifestyle and his unconventional relationship with Ms M. Like Mr R, Mr H Senior believes Mr H “would be horrified” if he knew Mrs H was trying to evict Ms M and the two girls from the home and that the sale of the property “is totally against what [Mr H] wanted for his family”.
[22] Mr H Senior was not cross-examined about any of this, the cross-examination being confined to limited matters concerning costs he paid in the administration of the estate which he does not claim from the estate.
[23] The only other evidence came from S. S gave evidence by affidavit and was not required by Mrs H for cross-examination. She said she had difficulty remembering details about her father because (from her perspective) he died a long time ago. She said that her father would sleep on the sofa when he came, that her mother was okay about her father’s visits and they talked nicely to each other, that she didn’t remember any time when her father slept on the beach, that her father was nice to her, and that she liked his visits but she never knew when he would visit next.
Events after Mr H’s death
[24] In the period immediately after Mr H’s death there was some communication between Mrs H and Ms M concerning the funeral and S remembers that Mrs H was nice to her and gave her a teddy bear that had belonged to one of S’ cousins. Mrs H also offered that Ms M and the girls move to Hastings but they did not wish to move from New Plymouth. After that there seems to have been little if any direct communication between Mrs H and Ms M until Mrs H and her son B arrived unannounced at the New Plymouth property on 26 July 2007 (discussed below).
[25] Before that visit Mrs H had applied for and was granted letters of administration. Mrs H’s application was to some degree opposed on Ms M’s behalf although Ms M did not recall the details and seems to have left matters in the hands of her solicitor.
[26] The evidence is that after Mr H died there was $6,000 in an account from which Mr H’s share of the mortgage came. Ms M cancelled her automatic payment. The result of Ms M cancelling her automatic payment was that the bank applied the
$6,000 to the mortgage repayments until that sum was used up. At some point the mortgage repayments fell into arrears. Mrs H’s evidence, which was not contradicted by any other evidence, was that she twice managed to persuade the bank out of taking mortgagee proceedings in the hope that the property could be sold privately at a better price.
[27] Mrs H’s evidence was that the purpose of her unannounced visit on
26 July 2007 was to see her grandchildren who she loved dearly and to discuss the administration of the estate. Mrs H says that when Ms M greeted her, Ms M’s hands were covered in slimy massage oil, that Ms M did not want Mrs H to come in and that she presumed Ms M “was working at some sort of thing”. Mrs H went into the living room. She says that it was in a deplorable, unliveable state and that it was a disgrace. She said that there were crayon drawings on the wall and mats out the front door. She says she was concerned to see marijuana plants growing in the hallway. She had real concerns about her grandchildren living in a “druggie” environment. She called the police about the marijuana she believed to be there (who subsequently visited and found no cannabis plants although they did find a small amount of cannabis). Mrs H says that she told Ms M that she felt there was no choice but to sell the property to provide capital for the children and that she offered to have them come and live with her in Hastings until they found alternative accommodation.
[28] Ms M’s evidence was that she found the visit upsetting and felt she was being evicted from the house. Mrs H’s evidence that the house was a disgrace is not supported by any other evidence. S gave evidence that the house was generally in the state as shown in photographs produced to the Court. Mr R said he would
recognise cannabis plants and he had never seen any in the house and would not have let his daughters stay at a house where cannabis was openly on display. Mrs H’s counsel did not seek to place any reliance on Mrs H’s evidence of the state of the house as she perceived it to be when she visited and accepted in submissions that Ms M looked after the property (by, for example, mowing the lawns and weeding the gardens) although he submitted that this was no more than the maintenance that any long term tenant would undertake.
[29] At around the time of the visit (there was some dispute about whether Mrs H handed this letter to Ms M at the 27 July 2007 visit or whether it was sent to her), by a letter dated 25 July 2007, Ms M was advised by a solicitor acting for Mrs H that:
a) Ms M’s “licence to occupy the property is revoked forthwith”;
b) She was required to vacate the property “immediately”;
c) That she had until 15 August 2007 to find alternative accommodation or an application to the Court for her removal would be made.
[30] For a period the mortgage was in arrears. But, by the time of the hearing before me, the mortgage arrears had been rectified by:
a) A series of deposits on dates between 5 September 2005 to
20 October 2006 made by various people;
b)A deposit of just over $7,200 made on 23 May 2008 by Ms M’s father; and
c) Ms M resuming making payments from her domestic purposes benefit.
[31] Mrs H appears to have seen the deposits referred to at a) as suspicious but she made no real enquiry about them. Ms M was asked about them but maintained they were not from anyone she knew, that she did not know any of the people who made the payments and she did not know until recently that these payments had been
made. She assumes that these are payments made by people who must have owed money to Mr H.
[32] Through rectifying the mortgage arrears the position at the time of the hearing was that, apart from costs incurred by Mrs H in the administration of the estate, there was approximately $60,000 owing to the ANZ Bank. The property has a Government valuation of $230,000. On 16 August 2007 Ms M received an offer of finance from the TSB Bank of $80,000 (to cover the amount owing under the mortgage and costs incurred by Mrs H as administratrix) with repayments set at
$150.69 per week (being similar to the amount of “rent” Ms M had been paying consistently when Mr H was alive). The costs of administering the estate have since increased as a result of this proceeding.
[33] Ms M has not vacated the property. Attempts to reach a settlement were made by both sides but were not successful.
Assessment of the competing evidence
[34] I prefer the evidence of Ms M over that of Mrs H in respect of the nature of the relationship between Ms M and Mr H and Mr H’s intentions with respect to the New Plymouth property because:
a) Ms M, although upset and nervous in the witness box, gave direct answers without any apparent embellishment. Her fondness for Mr H appeared genuine and deep and she struck me as having the best interests of her children at heart and as someone who wanted their father to be involved in their lives and who would be prepared to co- operate with Mr H for that to happen;
b)Ms M was cross-examined about the nature of her relationship with Mr H only in a limited way, concerning whether Mr H slept on the beach (to which Ms M said she had not heard of that), that Ms M had initially registered C as “father unknown” (to which Ms M said that she always knew that C was Mr H’s daughter even though Mr H was initially uncertain, and she had not got around to changing the birth
certificate) and that their relationship did not disqualify Ms M from claiming the domestic purposes benefit;
c) Ms M’s evidence was supported by Mr H Senior and Mr R;
d)S’ evidence was not inconsistent with Ms M’s evidence. While she said Mr H slept on the couch she was young and would not necessarily have known whether her parents had sexual intercourse;
e) It seemed to me that Mrs H’s perception of matters was affected by her view about the lifestyle of Mr H and Ms M. This perception has led her to speculate that her son was dealing in drugs. She seems also to have speculated that something inappropriate was going on in the house when she visited Ms M on 26 July 2007 merely because she was not allowed into any rooms except the living room and that Ms M had oil on her hands. Her view that the house was “an absolute disgrace” when she visited in July 2007 was contrary to the other evidence that the house was generally kept in a tidy manner; and her evidence that there were cannabis plants growing in the hallway was not what the police found and was contrary to Mr R’s evidence who said he had never seen cannabis plants in the hallway and would not have allowed his daughters to stay in the house if that were so;
f) Mrs H’s knowledge of her son’s personal affairs seems to have been quite limited – I prefer the evidence of Ms M and Mr H Senior in this respect because Mrs H did not appear to be the sort of person, in view of Mrs H’s view of his lifestyle, in whom Mr H would have regularly confided about his personal affairs;
g) Counsel for Mrs H points to Ms M’s lack of credibility in respect of the source of the deposits viewed as suspicious by Mrs H. However, Ms M’s evidence concerning these payments did not alter my assessment of her evidence concerning her relationship with Mr H and his intentions concerning the New Plymouth property. It was not
established that Ms M knew who made the deposits. Ms M’s lack of knowledge of them is consistent with her general lack of precision about financial matters. Ms M seems to be the kind of person who sets up automatic payments so that bills are covered, spends whatever little is left to cover daily living expenses but other than that takes little interest in financial details unless and until she has to.
h)On the other hand, I did form the view that Mrs H at times exaggerated things, for example the state of the house on her visit and Mr H stating “repeatedly” that he was going to sell the house. Further, the letter dated 25 July 2007, whether delivered or sent, was received by Ms M at or about the time of the visit by Mrs H and her son. It confirms that the visit was associated with Mrs H’s intent that Ms M vacate the New Plymouth property rather than out of a desire to see her grandchildren.
[35] Accordingly I find that from the early 1990s Ms M and Mr H lived together as a couple (that is, in the kind of relationship that would now fall within the definition of a de facto relationship in the Property (Relationships) Act 1976), and that over time their relationship became more casual, but throughout and until Mr H’s death in March 2003, it remained an intimate relationship where each cared for the other and they were committed parents to their daughters and worked together to provide a happy and stable upbringing for their children.
[36] I find that the New Plymouth property was purchased by Mr H to provide a home for his daughters and their mother so that the daughters would have a permanent base. (To some extent this was accepted by Mrs H – see [14] above.) I reject Mrs H’s evidence that Mr H intended to sell the property to buy a property in the Coromandel, at least at any time while his children were dependants. This would be contrary to his purpose in buying the property (which Mrs H accepts) which was to provide his children with a stable residence with their mother. The arrangement enabled Mr H to continue to live and work where he wished to but visit as and when he could. In accordance with the arrangement I find that Mr H regularly visited the New Plymouth property and was able to do so as often as he wished. There was no
discussion about what would happen to the property in the event of his death or if there was any change in the nature of their relationship.
[37] Counsel for both parties made submissions about Ms M’s ability to meet the mortgage and other payments. I do not see this as relevant to the issues I have to decide and simply note that the TSB made an offer of mortgage finance to Ms M and Ms M’s present ability to meet such payments will be assessed by the bank in any future application.
Testamentary promise
The legal principles
[38] The first element of a testamentary promises claim is that Ms M must have rendered services to or performed work for Mr H during his lifetime. The second element is that there must have been an express or implied promise by the deceased (Mr H) to reward the claimant (Ms M) for the services or work. The third element is that the promise must be that the reward will be “by making some testamentary provision” for the claimant (Ms M) (s 3(1) of the Testamentary Promises Act). It does not matter whether the services or work were performed before or after the promise was made (s 3(2) of the Testamentary Promises Act). But there must be a causal link between the services and the promise.
[39] Services need not be capable of precise monetary assessment and so can include, for example, companionship. But to qualify they must go beyond the natural incidents and consequences of life within a family relationship: Byrne v Bishop [2001] 3 NZLR 780 at [6] to [7]; Re Welch [1990] 3 NZLR 1 at p 7-8. A promise includes any statement or representation of fact or opinion (s 2 of the Testamentary Promises Act). Courts have been prepared to take a generous interpretation of what may amount to a promise to make some testamentary provision. Nevertheless the promise must be to make a testamentary provision and not some other promise unconnected with a provision in the will: see, for example, Re Astill (deceased); Mackersy & Anor v Watt HC DUN AP3/98 21 July 1998 and Ramage v Alpers HC CHCH M467-68/97 18 August 1999 at 27-28.
Application of the principles
[40] Ms M says that she provided full time care for the children, provided Mr H with unlimited access to the children, cared for and maintained the property and paid one half of the mortgage up until Mr H’s death. It is said that the arrangement enabled Mr H to lead a life quite independent of his children. Mrs H submits that this is not services beyond “the norm”. It is said that no improvements were made to the property (except the installation of an HRV system and internal painting which occurred only recently and after Mr H’s death), in return for paying one half of the mortgage Ms M had the benefit of living in the house for a low rental, and that Ms M had the benefit and enjoyment of having the children.
[41] In the context of this relationship I consider that providing full time care for the children from a permanent home basis could constitute services. Ms M provided the full time care and stability for the children, while Mr H remained free to live his life as he wished free of the responsibilities of providing day-to-day care. The greater difficulty I have with the claim is as to the absence of a “testamentary” promise as a reward for these services. Mr H and Ms M simply did not turn their mind to what would happen in the event of his death. That makes it somewhat of a strain on the language of s 3(1) to say that there was even an implied promise that when Mr H died he would reward Ms M for her services by providing for her in his will. Contrary to the submissions advanced for Ms M, an implied promise does not arise by asking what Mr H would have provided in his will if he had turned his mind to it or what his attitude would have been to this application if he had known about it. There must be something to indicate he intended to reward Ms M in his will for the services she provided.
[42] I consider the facts are better considered under the second cause of action to which I now turn.
Trust
The legal principles
[43] The second cause of action is that Mr H held the New Plymouth property on trust for Ms M and the girls. The statement of claim does not particularise the nature of the trust that is claimed, but the submissions advanced for Ms M are that the trust arose by way of an express common intention or alternatively on the basis of a reasonable expectation of the kind recognised in Lankow v Rose [1995] 1 NZLR 277.
[44] A trust may arise from an unequivocal expressed intention (by words or conduct) by the partner with the power to dispose of the interest: Cossey v Bach [1992] NZFLR 673 at 688-689; cited in O’Connell v Muharemi CP546-SDO1 24
October 2003 at [112] and [113]; Belcher v Baldwin CA171/02 19 June 2003; see also Fisher on Matrimonial Property at 4.7, 4.9 and 4.35. As is said in Cossey v Bach (at p 689), reference is usually made to “common intention” because in many cases both parties will have some disposing power over the resources which were pooled in order to acquire the property. As is also said in Cossey v Bach, in cases of express trust (based on an unequivocal express intention) the absence of contributions is not fatal. The trust is created by the clear expression of the intention. (See also N Richardson, Nevills Law of Trusts, Wills and Administration (9ed 2004) at 1.3.2.)
[45] Where there is no unequivocal express intention, a trust by reasonable expectation may arise. To arise, the party claiming the trust must show contributions, direct or indirect, to the property, and that the parties must be taken reasonably to have expected that the plaintiff would share in the property as a result: Lankow v Rose at 282 and 294-295. The requirement to establish contributions for trusts of this kind arises because the trust is based on the principle that it would be a “fraud” or “unconscionable” not to recognise the contributions and the reasonable expectations on which they were made. The legal owner of the property has been enriched by the contributions made and it would be unjust for the legal interest not to yield to the beneficial interest so created: see Lankow v Rose at 282, 294; Fisher at
4.14, 4.33 and 4.35.
[46] Contributions include direct financial contribution to the acquisition of the property or other contributions to the improvement or maintenance of the property or its value. They also include other contributions that help the other party acquire, improve or maintain the property or its values. Those contributions may arise through contributions to the relationship. As was said in Richardson v Cassin CA
24/03 27 November 2003 at [19] if partners have children the activities of one in maintaining the household and caring for the children will usually amount to an indirect contribution to the assets acquired by means of the commercial activities of the other.
[47] Where contributions have been made to property from the ordinary circumstances of a shared life a reasonable expectation to share in the property may be inferred: Lankow v Rose at 282, 286, 295. In long term “de facto” relationships contributions to the relationship are more readily accepted by the Courts as giving rise to expectations which will result in proprietary or pecuniary awards: Peart v Cannell & Anor HC AK CIV 2002-404-2094 23 September 2003; and Castro v Thompson HC WN CIV 2004-485-1421 10 February 2005.
[48] However, the principles in Lankow v Rose are not confined to “de facto” relationships (long term or otherwise). A number of examples of the principles being applied outside de facto relationships are cited in O’Connell v Muharemi at [118] and [119]. That reflects the underlying rationale of the principles, which apply in any circumstance where contributions have been made to the property on the basis of a reasonable expectation of a share in the property. The nature of the relationship in which the expectation is said to arise will, however, be relevant to the reasonableness of the expectation and the interest that arises.
[49] Where an express trust arises the interest that arises depends on the interest intended to be created. In a constructive trust claim the remedy must broadly reflect the contributions. Arithmetical precision is generally unattainable and is not necessary. The Court must do its best to assess the value of the claimant’s contributions: Lankow v Rose at 295. A monetary award (in the form of equitable damages) can be granted in the place of the interest in the property which the
claimant has established: see, for example, Cossey v Bach at 693, O’Connell v
Muharemi at [150].
Application of the principles
[50] For Ms M it is said that the New Plymouth property is subject to a trust in favour of Ms M. It is said that the common intention was that provided Ms M fulfilled her promises to Mr H (that is, to provide full time care for the girls, to provide Mr H with unimpeded access to them and to meet one half of the mortgage payments) she was to have a permanent home for her and her children. Alternatively she says that a trust arises by reasonable expectation. It is said that this reasonable expectation arose in the context of a long term relationship which began as lovers and partners and moved more latterly to one of friends and mutually committed parenthood.
[51] For Mrs H it is said that the present case is one where the property was acquired by Mr H, in his name, after the de facto relationship had ceased. Reliance is placed on the evidence that Ms M returned to her family and became involved with someone else, that Ms M said that living together did not work for them, that Ms M was on a domestic purposes benefit and that, whereas Ms M said intimacy continued, S said Mr H slept on the couch. It is submitted that no contributions were made to the property before Mr H’s death. It is said that Ms M’s payments of the outgoings appear to have been sporadic and for much of the time she did not pay half. It is said that Ms M benefited by having a home at very modest cost. It is said that there is no evidence that Ms M enhanced the value of the house.
[52] For Ms M it is submitted that there is no evidence other than that Ms M did pay half of the mortgage during Mr H’s life (other than that she accepted in cross- examination that she may have missed the odd payment). After his death Ms M failed to make her share of the payments, but she has since rectified that. It is said that Ms M’s share of the payments did not provide her with a home at minimal cost as her rent would have been no more had she sought Housing Corporation assistance. It is accepted that, other than the recent painting and the installation of
the HRV system, Ms M did not directly enhance the value of the property but her contributions can be indirect rather than direct.
[53] There is no evidence that Mr H said that Ms M would become the owner of the house or obtain an ownership interest in the house. Nor does it appear that Mr H expressly said “if you do these things you can live in the house for as long as you are providing the care for the children”. Nevertheless, I consider that there was a common intention that Ms M would live in the house for as long as the children needed a home and she was providing the care for them. As part of the arrangement she was to pay half of the mortgage by way of rent and she was to allow Mr H access to the children whenever Mr H was able to visit. That common intention was evidenced by what occurred (ie. Mr H and Ms M’s conduct) and by Ms M’s evidence that from her discussions with Mr H this was her understanding of the arrangement.
[54] As was recognised in Lanyon v Fuller (1998) 4 FRNZ 134, 139 (and repeated in Gibb v MacDonnell [1992] 3 NZLR 475, 480) in the context of close or intimate relationships parties may order their lives on the basis of understandings that are so obvious that they go without saying. That Ms M’s understanding was also Mr H’s intention (Mr H being the person with the power to dispose of an interest in his property) is supported by the evidence of Mr H Senior and Mr R who also understood from their discussions and contact with Mr H that this was Mr H’s intent.
[55] Although contributions are not necessarily required to create a trust by express intention, in this case the common intention was that Ms M’s contributions were to meet half of the mortgage repayments, to provide the full time care for the children and to allow Mr H unimpeded access. It does not matter whether the rent was above or below what she would have otherwise paid (of which there was no comparative evidence). Nor does it matter that she wanted to look after the children and that this brought with it its own rewards. This was what Mr H and Ms M intended in return for which Ms M would live in the house with the girls. In providing the full time care Ms M was prepared to assume the day-to-day responsibility for the children, forego other opportunities in life and did not require Mr H to formalise access arrangements. As a result of the arrangement Ms M and
Mr H came to, Mr H was free to work where and when he wished and to visit his children when he was able to. This was an indirect contribution to the property in the same way referred to by the Court of Appeal in Richardson v Cassin (refer [46] above). However I consider the evidence falls short of establishing that Ms M was to have a proprietary interest in the home. Mr H intended to provide a home for his children and their mother, but it is not clear that he intended in the event of a breakdown in their relationship (whereby, for example, she prevented him access, or she began living with a new partner or married someone else and wished to move away) that she would have an interest in the property. Whereas that inference might have been drawn had, for example, the two of them shared their finances, that was not the case here. Ms M said in cross-examination that she understood that the house would continue to be available for the girls. At no stage did she say she understood or expected to obtain an ownership interest in the house at all and less so to the exclusion of the children. I consider that the common intention was to create a possessory interest: that is, Ms M had a right of occupation while she was looking after the children, allowing Mr H access and paying her share of the mortgage. The position is the same if viewed in terms of reasonable expectations.
[56] Ms M’s possessory interest did not come to an end in the event of Mr H’s death. Mr H’s intent was that the New Plymouth property would provide a permanent base for the children with their mother for so long as the children were dependents. It can be inferred that his intent, in the event of his death, was that Ms M’s possessory interest would continue while the children were dependent and she was meeting the mortgage repayments.
[57] The subject matter of a trust may comprise any property or interest in property, which a person may at law or in equity transfer, assign or dispose inter vivos or which by will can be settled in trust: Nevills Law of Trust, Wills and Administration at 2.3.2. Crosson v Fea CP1585/90 3 March 1993 and Gibb v MacDonnell are examples where possessory interests were found in relation to property where the expectation was that the property would provide a permanent home for the claimant. In those cases there were contributions made to the property and the relationships had broken down. Equitable relief in the form of monetary payments was made as restitution in respect of moneys spent on an expectation
which was defeated by the breakdown of the relationship. The monetary payments were assessed in a broad fashion to do justice in these cases.
[58] In the present case, Ms M has carried out what was required of her and has a possessory interest in the New Plymouth property as a result. In my view equitable relief, by way of a monetary payment, could be granted to Ms M if the possessory interest she has or expected to have is not to be recognised by Mrs H as the administratrix in the estate. This has not been specifically claimed. The prayer for relief seeks an order vesting the property in Ms M absolutely although it also seeks such alternative relief as the Court deems just. The submissions for Ms M do not address the issue of the award to be made to Ms M in the event that her claim for an order vesting the property in her absolutely is not successful.
[59] That a monetary payment was not claimed is not surprising in this case. Ms M wishes to remain in the house and bring up her children in it. Ms M’s counsel has advised that Ms M is anxious to provide Mrs H with comfort that she intends that the girls have the home as their asset rather than hers. (That is consistent with the possessory interest that I have found.) Ms M’s counsel says that this is not a case where a life interest is appropriate for reasons including Ms M’s relative youth. Her proposal is that Mr H’s intention is best achieved by the property being transferred to Ms M so that she can re-mortgage the property, repaying the existing mortgage and obtaining a mortgage on terms better suited to her situation. She is prepared to enter into a contract to confirm that on her death the house or any other asset acquired with the proceeds from the sale of the house is to be shared between the two girls.
[60] As I indicated to Ms M’s counsel at the hearing, I do not see how the Court can make an order in those terms even though that is consistent with the possessory interest that Ms M has. No submissions have been advanced as to how the Court could make this order and instead Ms M’s counsel submitted that the parties should endeavour to formalise an arrangement with leave to apply if necessary.
[61] In my view it is appropriate that the parties should be given a further opportunity to reach an agreement to give effect to the possessory interest that I have found: that is, an interest to live in the house while the children are dependents
(which is likely to extend for a period after their school years) and Ms M is meeting the mortgage and other outgoings. To enable this to occur would seem to require the property to be transferred into Ms M’s name but on trust for the children and for there to be an agreement with Mrs H (as administratrix) as to the terms on which the property could be sold and the proceeds held for the children. I allow the parties 30 days to reach an agreement to give effect to this and, given that it reflects Mr H’s intentions, I encourage the parties to reach a mutually satisfactory agreement.
[62] If the parties are unable to reach an agreement then the parties are to have a further 14 days (that is after the 30 day time period expires) to provide submissions on the monetary award to be made by Ms M in lieu of Ms M retaining the possessory interest she has in the property.
Result
[63] The claim under s 3(1) of the Testamentary Promises Act is unsuccessful. The alternative trust claim is successful to the extent that Ms M has established a possessory interest in the New Plymouth property while the children are dependents (a period likely to extend beyond their school years) and Ms M is meeting the mortgage and other outgoings. Ms M is entitled to equitable damages if this possessory interest is not to be given effect to. The parties are to have 30 days to reach an agreement failing which, and subject to submissions on quantum, damages will be ordered.
[64] If the parties are unable to resolve any issue of costs they may submit memoranda within the same time period as that set for the filing of submissions on damages.
Mallon J
Solicitors:
Nicholsons, Barristers & Solicitors, PO Box 68, New Plymouth (ph: 06 757 5609, fax: 06 758 8569) McDonald Brummer, Solicitors, PO Box 35, New Plymouth (ph: 06 876 5261, fax: 06 876 0291)
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