Smith v Aird - [2018] NZHC 2852

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-445

[2018] NZHC 2852

BETWEEN
MALCOLM ROY SMITH

Applicant

AND

DAVID AIRD

Respondent

Hearing: 11 October 2018

Appearances:

Mr John Gwilliam for applicant Mr Andrew Bell for respondent

Judgment:

5 November 2018

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1] The respondent, Mr David Aird, is a boat builder. He owns a property in Upper Hutt. The applicant, Mr Malcolm Smith, works in the building industry. Mr Aird and Mr Smith are acquaintances, if not friends. They share an interest in boating. Up until the events I am about to describe, they would get together occasionally and talk about boats.

[2] At some point during 2012, Mr Aird left the country to take up a position abroad. He left his property unoccupied. By mid-2017 it had become dilapidated. Around this time, Mr Aird and Mr Smith had a telephone discussion. There are differences between their accounts as to who initiated this. But they reached an arrangement concerning the property.

[3] It was agreed that Mr Aird would engage Mr Smith to renovate the property. Mr Aird obviously wished to rent it and he seems to have accepted that before he could

SMITH v AIRD [2018] NZHC 2852 [5 November 2018]

realistically expect to do so it would have to be tidied up. Various options for funding the work were discussed. In the end, it was agreed that Mr Smith would incur the costs involved, which both men appear to have accepted would be substantial, in consideration of being allowed to rent the property for a period to recoup those costs.

[4]I pause here to mention two areas of conflict in the affidavit evidence:

(a)Mr Smith’s evidence is that the arrangement was that he would have a free hand in renting the property out so as to enable him to recover the cost of the renovations. Mr Aird says that he agreed to Mr Smith renting the property out to a Ms Lily Meyrick and her partner (whose role in the narrative is expanded on below), on the basis of Mr Smith’s assurances that he knew them and that they would be responsible tenants, and that he was not otherwise authorised to lease the property out. I prefer Mr Smith’s evidence. It would have made no commercial sense for Mr Smith to agree to incur the costs of renovating the property had he not been able to see his way clear to recovering those costs by leasing it, and I do not accept that he would have assumed that level of risk without having a substantial level of control over the leasing.

(b)There is a difference between the parties as to the period over which this arrangement would extend. Mr Smith refers to three years. Mr Aird talks of one. I am not sure that anything turns on this, but I am inclined to prefer Mr Smith’s evidence simply on the basis that a right…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2018] NZHC 2852
Decision Date: 5 November 2018

CaseChat Overview and Summary

In this case, Malcolm Smith sought to sustain a caveat over a property owned by David Aird. The property was in a dilapidated state, and Mr Smith agreed to renovate it in return for being allowed to rent it out to recoup his costs. The case centred on whether Mr Smith had a caveatable interest in the property under section 137 of the Land Transfer Act 1952. Mr Smith argued that the renovation work and associated costs he incurred gave rise to a constructive trust, entitling him to an equitable charge or lien over the property. Mr Aird contested the claim, arguing that Mr Smith had not adequately described the nature of his claim in his caveat and that he had not met the criteria for establishing an equitable lien.

The court considered the arguments from both sides. It found that Mr Smith's claim was adequately described in his caveat and that the distinction between a charge and a lien was not fatal to his case. The court also found that the criteria for an equitable lien were met, as the property had been appropriated to the contract. Accordingly, the court sustained Mr Smith's caveat, subject to him commencing substantive proceedings within 15 working days. The court also indicated that it would likely order Mr Smith to be awarded his costs on a standard basis, reserving the final determination of costs for later.

This case highlights the importance of clearly articulating the nature of a claimant's interest in property when lodging a caveat and the potential for equitable remedies where parties have entered into arrangements that give rise to possessory rights over land.

Orders