Smith v Endean
[2022] NZHC 1246
•9 June 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-002210
[2022] NZHC 1246
BETWEEN JOCELYN LOUIS SMITH
Applicant
AND
WILLIAM ARTHUR ENDEAN as executor of the estate of George Clifford Smith
Respondent
Hearing: 8 March 2022 Appearances:
P Amaranathan for the Applicnat W Andrews for the Respondent
Judgment:
9 June 2022
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 9 June 2022 at 11.30 a.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors: Dawsons, Auckland
Rice Craig, Auckland W Andrews, Auckland
SMITH v ENDEAN [2022] NZHC 1246 [9 June 2022]
Introduction
[1] Jocelyn Smith and her late husband, George Smith, lived in their family home at The Glebe, Cockle Bay, Auckland for 45 years.
[2] Mrs Smith and the executor of Mr Smith’s estate, William Endean, each own a half share of the home as tenants in common in equal shares. In his will, Mr Smith specified that his residual estate, which includes his half share in the Glebe property, is to be transferred into a separate trust he established for the ultimate benefit of his grandchildren.
[3] As the time for any claim against Mr Smith’s estate has passed, Mr Endean intends to sell the house and transfer Mr Smith’s half share of the net proceeds to his trust, according to Mr Smith’s will. Mrs Smith does not agree to the sale, so Mr Endean intends to apply to the Court for an order under the Property Law Act 2007.
[4] Mrs Smith objects to the sale of the house because she wishes to continue to live there. She claims to have a life interest in the property, either as a discretionary beneficiary of Mr Smith’s trust, or under a constructive trust.
[5] Mrs Smith lodged a caveat against the title of the property to protect her interests. Mr Endean applied for the caveat to lapse. Mrs Smith now applies to the Court for an order that the caveat not lapse. Mr Endean opposes the application.
Factual background
Mr and Mrs Smith's relationship
[6] Mr and Mrs Smith began living together in a de facto relationship in 1959. They were married from 1981 until Mr Smith died on 9 August 2019. Mrs Smith is 83 years old. Mr Smith was 90 when he died.
[7] When Mr Smith and Mrs Smith met, they had no significant assets. They initially cleaned offices together. They saved their money and bought a business in 1965 — a meat transport company. They both worked full-time in the business.
[8] They bought a house in Mt Wellington together in 1965. Then, in 1976, they bought the Glebe property as their family home. They owned the property jointly. They had five children and raised them there.
[9] Mrs Smith says that she and Mr Smith each drew a roughly equal income from their business.1 She says that her share was deposited into a joint bank account and was used to pay for all household, family and property expenses. This included mortgage repayments for the Glebe property until the mortgage was repaid around 10 years ago. She says that Mr Smith operated a separate account into which his income from the business went and which he used as he wished.
Their separation
[10] Mr Smith and Mrs Smith's relationship became difficult in its later years. In 2014, they each instructed lawyers: Mr Flavell for Mr Smith, and Mr Wiltshire for Mrs Smith, who began corresponding about a relationship property and separation agreement. Mr Smith and Mrs Smith continued living together at The Glebe.
[11] In October 2014, Mr Smith, by his solicitor, gave notice requiring their interests in the home to be changed from joint tenancy to a tenancy in common in equal shares. Mrs Smith's solicitor replied advising that the change was agreed, without prejudice to any rights Mrs Smith might have under relationship property or other legislation, or at law.2
[12] In October 2016, Mr Smith settled a trust, the Fazakerly Trust (the Trust). He appointed his daughter Susan and son in law Asbjorn Widvey as co-trustees. Mrs Smith was identified as a discretionary beneficiary. Their 11 grandchildren were listed as final beneficiaries.
[13] In 2018, Mr Smith reviewed the Trust Deed with his solicitor Mr Flavell and prepared a Memorandum of Guidance for the trustees. I return to this later.
1 Affidavit of Jocelyn Lois Smith sworn 10 December 2021 at [7].
2 Annexures H and I to the affidavit of Jocelyn Lois Smith sworn 10 December 2021.
[14] In May 2019, Mrs Smith moved out of the Glebe house and into a rental property. At around the same time, Mr Smith moved in with the Widveys for approximately six weeks.
[15] Mr Smith instructed Mr Endean to finalise the division of their relationship property. Mr Endean wrote to Mr Wiltshire on 23 May 2019 about the division of chattels.
[16] Mr Wiltshire replied on 11 June 2019, attaching a Separation and Relationship Property Agreement (the Agreement) which had been drafted in anticipation of settlement with an accurate chattel list. Mrs Smith objects to this letter being admitted as evidence because it is marked “without prejudice”. I consider this objection justified in terms of the contents of the letter. However, it is in the interests of justice that the Court considers the draft Agreement, not as evidence of their agreement but as evidence of their “reasonable expectations.”3
[17] Mr Smith returned the signed Agreement in duplicate to Mr Flavell on 19 June 2019. It was sent to Mrs Smith's solicitors for her to sign that day. The Agreement identified the separate property of the parties and stated that Mrs Smith agreed she was not a beneficiary of the Trust, and that she had no claim against the Trust.
[18] Mrs Smith attended an appointment with her solicitors on 20 June 2019 but decided not to sign the Agreement. She says she never wanted to sell the home, but for a period she felt she had no choice. She says that when it came time to sign the Agreement, she was feeling emotional and could not bring herself to sign it.
[19] Mr Endean was not informed that Mrs Smith had decided not to sign the Agreement.
[20] In the period following the Agreement being signed by Mr Smith on 19 June 2019 and forwarded to Mrs Smith's solicitors, Mr Smith became very ill. He was hospitalised on 23 June 2019.
3 Evidence Act 2006, s 57(3)(d).
Mr Smith makes his final will and changes the Trust
[21] On 19 July 2019, Mr Smith was discharged from hospital. He went to stay with Mrs Smith.
[22] Mr Smith met with Mr Endean. Mr Endean deposes that by this time Mr Smith had fallen out with the Widveys. He no longer wished to live with them, or for them to be executors of his estate or trustees of his Trust. Further, he only wanted his grandchildren to benefit from his estate and Trust. Mr Endean offered to stand in as an independent trustee, and Mr Smith accepted that offer. Mr Smith signed an enduring power of attorney and gave Mr Endean instructions to update his will.
[23] Mr Smith was readmitted to hospital on 21 July 2019. On 24 July 2019, he met with Mr Endean to amend the Trust Deed to remove the Widveys as trustees. Mr Endean was made sole trustee of the Trust.
[24]Mrs Smith moved back into The Glebe on 24 July 2019.
[25] On 2 August 2019, Mr Endean and Mr Smith met again. Mr Smith executed his will by which he left his entire estate to the Trust.
[26] On 6 August 2021, Mr Endean prepared a codicil based on a telephone conversation with Mr Smith arranged by one of his daughters Jenny Strong, in which Mr Smith said he wanted his interest in the Glebe property go to his wife in return for her paying a sum of money. When Mr Endean met with Mr Smith later that day to execute the codicil, he considered that Mr Smith lacked testamentary capacity, so he did not have him execute it.
[27]Mr Smith died on 9 August 2019.
After Mr Smith's death
[28] Mrs Smith brought proceedings concerning Mr Smith's will. She sought orders that an order nisi not be made absolute; and an order directing the executor to file an application for probate in solemn form. Venning J granted probate in September 2020,
holding that there was no evidence that Mr Smith was under undue influence or lacked testamentary capacity when he made his will on 2 August 2019.4 He found that the correct procedure for Mrs Smith to advance her argument that the codicil document was a valid will was by an application under s 14 of the Wills Act 2007.
[29] Mrs Smith did not pursue a claim against the estate under the Wills Act to validate the codicil, or (at that time) under the Family Protection Act 1955, the Property (Relationships) Act 1976 or in equity. She says she did not wish to deprive her grandchildren of receiving the ultimate benefit of Mr Smith’s estate’s/the Trust's half share of the Glebe property. She says that she thought her status as sole discretionary beneficiary of the Trust would enable her to continue to live at the property.
[30] After 12 months, when the limitation period under the Family Protection Act and Property (Relationships) Act had passed, Mr Endean informed Mrs Smith, via her lawyers, that if she did not agree to purchase the estate's share of the Glebe property or to sell it, he would apply to the Court for a sale order.
[31] On 16 August 2021, Mrs Smith's solicitor wrote to Mr Endean via his counsel, requesting that as the sole discretionary beneficiary of the Trust, Mrs Smith be given a life interest in the Glebe property. On 13 September 2021, Mr Endean declined.
[32]On 23 September 2021, Mrs Smith lodged the caveat to protect her interests.
[33] On 15 October 2021, Mr Endean, acting as personal representative for Mr Smith as settlor, removed Mrs Smith as discretionary beneficiary of the Trust and appointed their 11 grandchildren in her place.
[34]On 5 November 2021, Mrs Smith filed:
(a)a claim under the Family Protection Act, seeking a life interest in Mr Smith’s estate's half share of the Glebe property (or such other relief the Court considers just); and
4 Endean v Smith [2020] NZHC 2365.
(b)with her grandson, Quintin Smith, a claim under the Trusts Act 2019, seeking removal of Mr Endean as trustee of the Trust and a review of her removal as discretionary beneficiary.
[35] None of the Smiths' grandchildren, all of whom were served with the application that the caveat not lapse, oppose Mrs Smith's application. Seven of the nine adult grandchildren, through emails or affidavits, express their support for Mrs Smith remaining in the property for long as she wishes.
Legal principles
[36] An application to sustain a caveat is determined on summary basis in which the Court has regard to the following principles:5
(a)The applicant caveator bears the onus of demonstrating that they have an interest in the land sufficient to support a caveat. However, they need not establish that definitively. It is enough if they present a reasonably arguable case.
(b)An order for a caveat's lapse will only be made if it is patently clear it cannot be maintained — either because there was no valid ground for lodging it in the first place or, alternatively, that such ground has now ceased to exist.
(c)The process by which these applications are determined is ill-suited to resolving disputed questions of fact. A conflict between affidavits will generally be resolved in the caveator's favour.6 However, the Court is not bound to accept uncritically statements in an affidavit that are equivocal, lacking in precision, inconsistent with undisputed
5 Botany Land Development Ltd v Auckland Council [2014] NZCA 61, (2014) 14 NZCPR 813. See also Philpott v Noble Investments Ltd [2015] NZCA 342.
6 Bethell v Rickard [2013] NZCA 68 at [22]. See also Macrae v Rapana HC Auckland M633/94, 17 June 1994.
contemporary documents or other statements by the same deponent, or inherently improbable.7
(d)Where the applicant has discharged its burden, the Court retains a residual discretion to remove the caveat. The Court will exercise this discretion cautiously and must be satisfied removal would not prejudice the caveator's legitimate interest.8
The caveat
[37] In her caveat Mrs Smith claims to have an interest in Mr Smith’s estate’s half share of the property:
(a)to protect her interest as sole discretionary beneficiary of the Trust, which is in turn the sole beneficiary of the estate of Mr Smith; and/or
(b)under a constructive trust arising from it being unconscionable to sell the property because she contributed to its purchase and has resided in it for 40 years; and/or
(c)under a resulting trust arising out of her contributions to the purchase of the property, her having resided in it for 40 years, and having a reasonable expectation of taking a life interest in the whole property.
[38] The notice of originating application seeking an order that the caveat not lapse also relies on the proceedings Mrs Smith has filed under the Trusts Act and the Family Protection Act.
[39] At the hearing, Ms Amaranathan for Mrs Smith conceded that even if Mrs Smith was a discretionary beneficiary of the Trust, this does not establish a beneficial interest in the land capable of supporting a caveat. That is correct. A discretionary beneficiary’s interest in a trust is no more than an expectation or hope
7 Molyneux v IBC International Ltd [1995] 3 NZLR 170 (CA) at 175, citing Eng Mee Yong v Letchumanan s/o Velayutham [1980] AC 331 (PC) at 341; Xie v 126 Waimumu Ltd [2020] NZHC 1109 at [8].
8 Pacific Homes Limited (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.
that the trustee’s discretion may be exercised in the beneficiary’s favour.9 A discretionary beneficiary has no interest, legal or equitable, in the assets of the trust, until a distribution is made to them (and then their interest does not extend beyond the distribution).10
[40] Ms Amaranathan also accepted that Mrs Smith's claim under the Family Protection Act to a life interest in the estate's half share in the property is not capable of supporting a caveat. However, she submitted that it is relevant to why, together with her age, health, the COVID-19 pandemic and her grandchildren’s interests, Mrs Smith has not yet filed a constructive trust claim. The same is the case with her claim under the Trusts Act.
[41] Thus, the only possible basis for sustaining the caveat, consistent with the wording of the caveat, is under a constructive or resulting trust. While the caveat referred to both in the alternative, Ms Amaranathan advanced Mrs Smith’s claim based on a constructive trust only. Specifically, the category of constructive trust arising out of the unconscientious assertion of ownership in property to which another has contributed, recognised by the Court of Appeal in the leading decision of Lankow v Rose.11
[42] Ms Andrews for Mr Endean submitted, in effect, that the caveat was defective in that it sought to protect Mrs Smith's interest as beneficiary of the Trust and not as beneficiary under a constructive trust.
[43] Undoubtedly, the caveat muddles the claim to an interest as a discretionary beneficiary of the Trust with the claim to an interest as beneficiary of a constructive trust and/or a resulting trust. Despite that, I find that the caveat gives adequate notice of Mrs Smith's claimed interest as beneficiary of a constructive trust. It refers specifically to a constructive trust and contributions Mrs Smith made to the property. I consider the application on that basis.
9 Hunt v Muollo [2003] 2 NZLR 322 (CA) at [11].
10 At [11].
11 Lankow v Rose (1994) 12 FRNZ 682 (CA) at 699.
Issues
[44]The issues that arise out of this application are:
(a)Is Mrs Smith’s claim to a constructive trust in Mr Smith’s estate’s half share of the Glebe property excluded by the Property (Relationships) Act?
(b)If not, does Mrs Smith arguably have an interest in Mr Smith’s estate’s half share of the property arising out of a constructive trust? That involves these questions:12
(i)Has Mrs Smith made direct or indirect contributions to Mr Smith’s share of the property which enhanced or maintained its value?
(ii)Did she have an expectation of an interest in his share of the property and is the expectation reasonable?
(iii)Should Mr Smith reasonably expect to yield an interest to Mrs Smith?
(c)If yes, should the Court nevertheless exercise its residual discretion to discharge the caveat.
Is Mrs Smith’s claim to a constructive trust excluded by the Property (Relationships) Act 1976?
[45] Notwithstanding their apparent separation in Mr Smith’s final years, there is no dispute that Mrs Smith and Mr Smith were married at all relevant times. It must be acknowledged that, as a married couple, Mrs Smith’s claim would seem to be covered by the Property (Relationships) Act. The Act concerns the division of property belonging to married couples upon their separation or either spouse’s death.13 Importantly, s 4 states that the Act is a code, such that:
12 Lankow v Rose, above n 11, at 699.
13 Property (Relationships) Act 1976, s 1C.
(1) This Act applies instead of the rules and presumptions of the common law and of equity to the extent that they apply—
(a) to transactions between spouses or partners in respect of property; and
(b) in cases for which this Act provides, to transactions—
(i) between both spouses or partners and third persons; and
(ii) between either spouse or partner and third persons.
(2) Subsection (1) does not apply where this Act expressly provides to the contrary (such as in subsection (5)).
(3) Without limiting the generality of subsection (1),—
(a) the presumption of advancement does not apply between husband and wife:
(b) the presumption of resulting trust does not apply between spouses, civil union partners, or de facto partners:
(c) the presumption that the use of a wife’s income by her husband with her consent during the marriage is a gift does not apply between husband and wife.
(4) Where, in proceedings that are not proceedings under this Act, any question relating to relationship property arises between spouses or partners, or between either or both of them and any other person, the question must be decided as if it had been raised in proceedings under this Act. …
[46] The Act defines “property” broadly to include real property, personal property, any estate or interest in real or personal property, any debt or thing in action, and any other right or interest.14 Relevantly, s 8 gives the meaning of “relationship property” as consisting of the family home whenever acquired, the family chattels whenever acquired, and all property owned jointly or in common in equal shares by the married couple or by the partners.15 As this Court has previously confirmed, the purpose of s 4 is to ensure that, subject to limited exceptions specified by statute, only one set of rules applies to property claims between spouses — the rules outlined by the Act.16
14 Section 2.
15 Section 8(1)(a)–(c).
16 Huang v Chung [2015] NZHC 686 at [31], and see Associate Judge Bell’s full discussion on why the applicant could not establish an interest in property pursuant to a constructive trust in that case at [27]–[39].
[47] In this case, Mr Smith and Mrs Smith purchased the Glebe property as their family home. They both owned the property, first as joint owners and subsequently as tenants in common with equal shares. The Glebe therefore is relationship property and any claim in respect of it should from all appearances be dealt with under the Act rather than equitable principles. As such, the caveat based on Mrs Smith’s interest in the property under a constructive trust cannot be sustained. Viewing her claim within the framework of the Property (Relationships) Act, the contributions she asserts she made to the property — set out later in this judgment — are considered transactions between spouses in respect of property under s 4(1).
[48] On this basis, the caveat must lapse. However, in case I am wrong, and Mrs Smith is not in fact precluded from advancing a claim to a constructive trust by the Act, I consider her claim under equity below.
Does Mrs Smith have an arguable interest in Mr Smith’s estate’s half share of the property arising out of a constructive trust?
[49] I will now analyse Mrs Smith’s claim according to the criteria enunciated by the Court of Appeal in Lankow v Rose.
Has Mrs Smith made direct or indirect contributions to Mr Smith’s share of the property which enhanced or maintained its value?
[50] In terms of the kind of contributions that are relevant, the Court of Appeal has given the following guidance.
[51] Any payment or service by the claimant qualifies as a contribution if it, by itself, assists in the acquisition, improvement, or maintenance of the property or its value, or its provision helps the other party acquire, improve or maintain the property or its value.17
[52] Further, contributions to a common household that are adequately compensated by the benefits the relationship itself confers are not the kind of contributions that give rise to a constructive trust. The claimant must have contributed
17 Lankow v Rose, above n 11, at 683.
to the acquisition, preservation or enhancement of the property in a more than minor way.18
[53] The contributions need not be in money; they may be in services or in any other respect. However, there must be a causal relationship between the contributions and the acquisition, improvement or maintenance of the defendant's assets. As a claim to a constructive trust is a claim to an interest in property, the contributions must be to assets — not necessarily particular assets, but certainly to the defendant's assets in general.19
[54] These principles underscore the difficulty involved in applying the Lankow v Rose constructive trust framework to this case. The courts developed this concept to deal with the situation where a partner in a de facto relationship had contributed to the value of property owned by the other partner over the course of their relationship and it would be unconscionable for that partner not to yield an interest to the contributing partner proportionate to their contribution.20 Since 2002, when the Property (Relationships) Act was extended to apply to de facto relationships, it is not necessary for partners to resort to a constructive trust to have their interests recognised. The contributions of spouses and de facto couples to property during the course of their relationship are considered under the Act.
[55] Here, as discussed above, Mrs Smith and Mr Smith owned the Glebe property jointly as a de facto and then a married couple for most of the time they lived in it. It was their relationship property and they were joint legal owners. During this time, any contributions Mrs Smith made to the preservation or enhancement of the property were not contributions to Mr Smith's asset(s) that might give rise to a constructive trust in her favour in those assets proportionate to her contribution. They were contributions to their jointly owned relationship property.
[56] If there is any scope for application of constructive trust principles, it can only be from 2014, when Mrs Smith and Mr Smith could be said to have separated and they
18 Lankow v Rose, above n 11, at 282.
19 At 686.
20 Vervoot v Forrest [2016] NZCA 375 at [43].
divided the legal ownership of the Glebe property between them. As Mrs Smith is legal owner of a half share of the property, the question is whether a constructive trust arises in her favour over Mr Smith's half share because of her disproportionately higher contributions to the maintenance or enhancement of the property from that point.
[57] Mrs Smith's evidence concerning the contributions she made towards the property relate to the entire period she and Mr Smith lived there.
[58]In her first affidavit she states that:
I have contributed significantly to The Glebe. I worked in our family business throughout my working life. I have always paid for all of the utilities. [Mr Smith] would usually contribute a half share towards the rates and insurance but he did not contribute a half share to the utilities. I pay the rates, insurance and utilities for the whole property now.
[59]Mrs Smith expands on her contributions in her second affidavit, saying that:21
When we purchased The Glebe we had a mortgage. I made all of the mortgage and interest repayments (even when interest rates were in the double digits) from "my share" of our money and the mortgage was paid off, more than 10 years ago now.
I raised our five children at 5 The Glebe. I continued to work full time throughout my working life as well as running the household. continued to pay for all of the family's needs from "my share" of our money, which had gone into the joint bank account, while [Mr Smith] used his own funds as he wished.
….
I paid for all of the outgoings on the house throughout our 60 year relationship, except for a short period between about 2016 to 2018 when [Mr Smith] contributed, most of the time, to a half share of the rates and insurance. He never paid for utilities.
To summarise, throughout our 60 years together and throughout our 43 years together at The Glebe (until 2019), I paid for:
a)All of the electricity costs;
b)All of the water charges.
c)All of the landline telephone charges.
21 Affidavit of Jocelyn Lois Smith sworn 10 December 2021 at [8]–[9], [15]–[18] and [20].
d)Any maintenance or improvement costs to the property;
e)Mortgage repayments and interest until the mortgage was repaid.
f)Groceries.
Until around 2014 I paid for:
g)Health insurance for both of us;
h)Sky TV;
i)[Mr Smith's] boat moorings. I annex copies of some of those receipts, marked C.
[Mr Smith] did not do any housework, cooking, gardening or lawn mowing. If we needed tradespeople, I organised for them to come and paid them.
…
In summary, as well as working full time, around the house I did:
j)All of the cleaning;
k)All of the cooking;
l)All of the gardening;
m)Organising any tradespeople;
n)Everything to do with the children;
o)All of the household (and company) payments.
[60] Mrs Smith says that after they sold the business in 2011, she continued to pay all their household expenses from her superannuation and interest from her savings. Mr Smith paid his superannuation into their joint account from May 2012 to March 2014 to help to cover these expenses. In 2014, when their lawyers began corresponding about their separation, she says that Mr Smith stopped contributing his superannuation into the joint account. She says that she changed their joint bank account into her name and continued to pay most property outgoings from that account.22 She has provided four bank statements from March to May 2014 which record payments for utilities, insurance and rates. Mrs Smith says that she and Mr Smith continued living together at the property and she continued to cook meals for Mr Smith and do the housework.
22 Affidavit of Jocelyn Lois Smith sworn 10 December 2021 at [31].
[61] She states that from 2014 Mr Smith only gave her money to pay for household expenses occasionally.23 Mr Smith paid half of the rates and insurance between 2016 and 2018 and his estate contributed that half share until approximately September 2021. She says otherwise Mr Smith paid nothing towards household expenses or the upkeep of the house.
[62] Her evidence is somewhat corroborated by her grandson, Brandon Ransfield, who deposes that “she paid all of the bills”. Another grandson, Quintin Smith, has given evidence that Mrs Smith “was still paying all of the bills for the house” after she and Mr Smith are said to have separated in 2014.
[63] Mr Endean submits that in paying most of the utilities and for most of the chattels, Mrs Smith did not preserve or enhance the value of Mr Smith’s half share of the property in a way that manifestly exceeded the benefit she sustained. It is correct that the payment of utilities, insurance and rates do not qualify, as they do not maintain or enhance the value of the property, directly or indirectly.
[64] Mrs Smith’s evidence of her contributions towards the property’s maintenance or improvement is unspecific and unsupported by evidence such as bank statements or receipts. However, for the purposes of this application, I accept her affidavit evidence that from the time of their separation in 2014 she continued to make all payments towards the maintenance of the property (Mr Smith only paying half of the rates and insurance for part of that time) and to work on the property herself. On that basis, and by a thin margin, I find that she has established an arguable case that she made more than a minor contribution to the maintenance of the value of the whole property, including Mr Smith’s half share.
Did Mrs Smith have an expectation of an interest in Mr Smith’s half share of the property, and was that expectation reasonable?
[65] Ms Amaranathan submits that Mrs Smith’s contributions to the property over 60 years mean it is reasonable for her to expect to have a beneficial interest in the
23 Affidavit of Jocelyn Lois Smith sworn 10 December 2021 at [32].
estate’s half share of the home. She contributed more than a half share towards the property, and she is certain that Mr Smith wanted her to stay in her home.
[66] Ms Andrews submits that Mrs Smith cannot possibly say that she expected an interest in Mr Smith’s half share in light of the separation in 2014 and transfer of ownership from a joint tenancy to tenancy in common in equal share. She submits that Mrs Smith understood from the time the ownership structure changed to prepare for the division of their relationship property that she would not benefit from Mr Smith’s interest in the property.
[67] I am not persuaded that Mrs Smith has a credible case that she had an expectation of an interest in Mr Smith’s half share of the property; or that if she did, such an expectation was reasonable.
[68] First, Mrs Smith’s evidence falls short of asserting that she expected Mr Smith to yield an interest in his share of the property to her when they were living together in the property and she was contributing towards it. Rather, Mrs Smith asserts that she now believes that Mr Smith would have wanted her to stay in the property for as long as she wished as a discretionary beneficiary of his family trust.
[69]In her first affidavit Mrs Smith states:
I acknowledge that [Mr Smith] wanted to leave his estate for the ultimate benefit of our grandchildren and understand that he wanted to do that…
I believe [Mr Smith]'s intentions were that our grandchildren be the final beneficiaries of his Trust, but that I be the sole discretionary beneficiary. In this way, my needs would be taken care of by his estate and Trust. I do not believe [Mr Smith] would want me to be forced out of our homeagainst my wishes. I understand my grandchildren do not want that either.
[70]In her third affidavit she states:
…I am absolutely clear that [Mr Smith] would have wanted me to stay in the Glebe for as long as I wished (especially when 7 of our 11 grandchildren want that as well). In all my conversations with [Mr Smith], although he said he wanted the grandchildren to have his money, he never once mentioned to me that he wanted them to have the house.
…
I do have a reasonable expectation of remaining at The Glebe. I am sure that is what [Mr Smith] would have wanted. It has been my home for 45 years, I contributed to it through 60 years of effort. I raised my children in it. I agreed to a tenancy in common only because I had no choice and on the basis I was reserving my rights…
I believe that [Mr Smith] did want me to remain as discretionary beneficiary because when he reviewed the trust in 2018 he did not remove me as discretionary beneficiary, or appoint the grandchildren as discretionary beneficiaries…
I firmly believe that [Mr Smith] would have wanted me to be able to remain in The Glebe. My contributions to The Glebe were considerable, were significantly more than [Mr Smith]’s contributions and were effectively made over a period of 60 years, during most of which time I lived frugally from our joint account paying for all of the property and family expenses and many of [Mr Smith]’s expenses as well.
[71] It is not enough for Mrs Smith to now “believe” that Mr Smith wanted her to remain in the property for as long as she wished. To establish a beneficial interest in Mr Smith’s share of the property she must have reasonably expected when they were living together, and she was contributing to the maintenance and improvement of the property, that she would have an interest in his share.
[72] Second, even if Mrs Smith did expect Mr Smith to yield an interest in his share of the Glebe property to her, this expectation was not reasonable. Such an expectation runs counter to the reality of what was happening between them at the time, recorded in the correspondence between their lawyers from 2014 concerning their separation and division of their relationship property.
[73] As noted, this correspondence began with the letter from Mr Smith’s solicitor in October 2014 requiring that they change the ownership of the Glebe home from joint ownership to interests as tenants in common in equal shares. By return, and without prejudice to her legal rights, Mrs Smith agreed.
[74] Then, on 8 July 2015, Mr Flavell wrote to Mrs Smith stating that he understood from Mr Smith that she and Mr Smith had agreed to separate and divide their relationship property. He stated that the property that required division was The Glebe and the contents of the house; and that Mr and Mrs Smith had agreed that the house would be sold by auction.
[75] Mr Wiltshire responded on 27 September 2016, stating that Mrs Smith agreed that the Glebe property was to be sold and the net sale proceeds divided equally. He also stated that Mrs Smith had confirmed that their finances had been separate for some time.
[76] Mr Flavell responded on 15 November 2016, confirming that Mr Smith agreed to the listing and marketing of the Glebe property with the net proceeds to be divided equally; and the division of the contents of the house in equal shares.
[77] In a letter dated 16 May 2017, Mr Flavell said that he had not received a response to his letter of 14 February 2017 and that the position stated in his letter of 15 November 2016 remained the agreed position between Mr Smith and Mrs Smith.
[78] It appears that negotiations then became complicated by disagreements between Mr Smith and Mrs Smith on the division of chattels and who was to sell the property.24
[79] Eventually, on 19 June 2019, Mr Smith signed the separation agreement Mr Flavell had prepared. The Agreement provided that the Glebe property would be sold by auction with the net proceeds divided equally between Mrs Smith and Mr Smith.25 It also provided that the parties had agreed to the division of the chattels and they each had their chattels in their possession. Further, Mrs Smith acknowledged that she was not a beneficiary of the Fazakerly Trust and she made no claims over the Trust funds, the Trust having been settled by Mr Smith from his separate property.26
[80] The Agreement was couriered to Mrs Smith’s solicitors. Mrs Smith’s evidence is that she met with her solicitors to sign the Agreement on 4 August 2019 but was feeling emotional and could not bring herself to do so.
24 Affidavit of Kelly Flavell sworn 27 January 2022 at [6]. See the letters annexed dated 20 October 2017 and 19 December 2018, as well as the letters dated 29 June 2018, 11 July 2018, 16 October 2018, 7 November 2018, 16 November 2018 and 21 December 2018 concerning division of the chattels and arrangements for sale of the property.
25 The Agreement, cl 3 (Affidavit of Kelly Flavell sworn 27 January 2022, annexure L).
26 Clause 8.
[81] Based on the chain of open correspondence described above, there was no reasonable basis for Mrs Smith to expect Mr Smith to yield any of his half share of the property to her. There is no mention in these letters of Mr Smith granting Mrs Smith a life interest in the property or allowing her to continue to live there. That would be directly contrary to the position stated by Mr Flavell on his behalf: that the property would be sold, and the proceeds divided equally between them. Mr Wiltshire for Mrs Smith did not object to the position stated by Mr Flavell and expressly agreed that the property would be sold, and the proceeds shared equally. He did not raise the idea of a life interest for Mrs Smith.
[82] Further, Mr Smith signed the Agreement that reflected this agreed position and that agreement was provided to Mrs Smith, through her solicitors, to sign. Mrs Smith could not possibly have expected Mr Smith to give her a life interest in the Glebe property when the agreement he had signed made no provision for one and explicitly envisaged the property being sold at auction (and the net proceeds being divided equally between them). It does not matter that she did not sign it. The focus is not on whether Mr Smith and Mrs Smith reached a binding agreement to that effect, but whether Mrs Smith could reasonably have expected to have an interest in Mr Smith’s half share of the property. The draft agreement, signed by Mr Smith, precludes such an expectation.
[83] The first time the idea of Mrs Smith having a life interest in Mr Smith’s share of the property appears in the evidence is after Mr Smith’s death, at the suggestion of Mrs Smith’s solicitors. Counsel for Mr Smith’s estate had informed them that as the time for challenging the will had expired, Mr Endean wanted to proceed with the administration and winding up of the estate. In response, Mrs Smith’s solicitors proposed that Mrs Smith be granted a life interest in the property (or another property purchased is substituted for the Glebe property once Mrs Smith was ready and able to move) consistent with her status as a discretionary beneficiary. When that was refused, Mrs Smith’s solicitors advanced the claim that Mr Smith, as settlor of the Trust, intended the Trust property to be used to care for Mrs Smith as the sole discretionary beneficiary until vesting date. As such, she should be granted a life interest in the property (or alternative property) and the Trust property should only be used during her lifetime for her benefit.
[84] This correspondence suggests that the catalyst for Mrs Smith’s caveat was Mr Endean’s refusal to grant Mrs Smith a life interest in the property as beneficiary of Mr Smith’s family trust, and Mr Endean’s subsequent removal of her as discretionary beneficiary. Mrs Smith’s evidence is that she was not aware that she was a discretionary beneficiary of Mr Smith’s trust until after his death. This reinforces that she could not reasonably have expected to have a life interest in Mr Smith’s assets, including his half share of the Glebe property, as a discretionary beneficiary of his trust during the time they lived together and she was contributing to the property.
[85] For the above reasons, I am not persuaded that Mrs Smith has a reasonable argument that she expected, or had reason to expect, that she had an interest in Mr Smith’s half share of the home at The Glebe. There is no evidence to support such an expectation. Rather, all the evidence points to she and Mr Smith having agreed that the property would be sold, and the net proceeds divided equally between them (without Mrs Smith having any claim on Mr Smith’s share of the proceeds).
[86] As I have found against Mrs Smith on the second requirement for a constructive trust, it is not necessary to consider the final issue of whether Mr Smith should reasonably yield an interest.
Conclusion
[87] On the basis that Mrs Smith’s claim to a constructive trust in the Glebe property is excluded by the Property (Relationships) Act, I find that the caveat must lapse.
[88] If I am wrong about that, Mrs Smith’s application fails because her claim to a reasonable expectation of an interest in Mr Smith’s half share of the property is untenable.
Result
[89] I order that Mrs Smith’s application that Caveat 12224365.1 lodged against Certificate of Title NA10B/35 (South Auckland Registry) Lot 3 Deposited Plan 47236 is dismissed.
[90] My tentative view is that as Mr Endean is the successful party he is entitled to costs. Further, that costs on a 2B basis are suitable, plus reasonable disbursements. If the parties are unable to agree a costs order, they may file submissions of not more than three pages, and I will decide costs on the papers.
Associate Judge Gardiner
0
7
0