Stapylton-Smith v Stapylton-Smith
[2014] NZHC 1314
•11 June 2014
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2014-409-000167 [2014] NZHC 1314
BETWEEN MILES MARTIN STAPYLTON-SMITH
Applicant
AND
KATHLEEN MARY MARTIN STAPYLTON-SMITH FRANCES MARTIN STAPYLTON-SMITH BRIDGET ANN KELLAND First Respondents
AND
JOHN MARTIN STAPYLTON-SMITH Second Respondent
Hearing: 26 May 2014 Appearances:
G P Tyrrell and M D W King for the Applicant
P M James and A L Worrill for the RespondentsJudgment:
11 June 2014
JUDGMENT OF PANCKHURST J
Introduction
[1] The applicant, Miles Stapylton-Smith, seeks an order pursuant to s 148 of the Land Transfer Act 1952 (the Act) authorising the lodgement of a second caveat. In late 2009 the applicant lodged a caveat against land at Camp Bay on Banks Peninsula owned by a family trust, of which Mr Stapylton-Smith is a discretionary beneficiary. However, the caveat lapsed in early 2010.
[2] If an order authorising a second caveat is made, Mr Stapylton-Smith will assert the same interest in the land based on a constructive trust. He considers that
work he undertook and expenditure on the land in the 1970s gives rise to an
STAPYLTON-SMITH v STAPYLTON-SMITH [2014] NZHC 1314 [11 June 2014]
equitable interest, or at least that he has a reasonably arguable case for an equitable interest.
Some background
[3] The applicant’s parents, Paul and Kathleen Stapylton-Smith, farmed the three blocks of land comprising over 300 hectares which are the subject matter of the equitable claim. Mr Stapylton-Smith Snr (Paul, or the father) died in 2004. Mrs Stapylton-Smith (Kathleen) survived her husband and recently the land has been offered for sale, but remains unsold. It seems the marketing of the property prompted the present application.
[4] Paul and Kathleen had four children: (a) the applicant – Miles
(b) Frances Martin Stapylton-Smith – Martin
(c) Bridget Ann Kelland – Bridget
(d) John Martin Stapylton-Smith – John. They were born between 1955 and 1961.
[5] In 1981 Paul and Kathleen established the Paul Henry Stapylton-Smith Family Trust. Land described in four certificates of title was settled on the trust, and the resulting debt owed to the parents was to be forgiven over time. Block 1 was created by severing off a 2275 m2 area upon which a cottage had been built (the “cottage block”). Block 2 comprised 306 ha, being an area known as the “lower farm”. Block 3 comprised 725 m2, being land on which a woolshed is located and is known as the “woolshed block”. Block 4 is land known as the “back farm” and comprises 320 ha. However, 15 years later in 1996 the Trust sold Block 4 to the youngest son, John. He farms the property and he also has a half share in the woolshed block.
[6] In 2002 the remaining land (Blocks 1, 2 and 3) was settled upon a new trust, the Camp Bay Trust, of which Kathleen, Martin and Bridget are the present trustees. The new trust was established because Paul was the only family member not a beneficiary of the previous trust and this was considered to be a mistake, since in part the trust was viewed as a vehicle to provide for the parents when they reached retirement age. The trust land was sold to the new trust, but unfortunately Paul died suddenly only two years later.
[7] Miles held various concerns about the establishment of the Camp Bay Trust. The beneficiaries of the original trust received a letter from The Perpetual Trust Limited advising them of the proposal, including that Paul would be a beneficiary of the new trust. Miles doubted the adequacy of the sale price for the land, $630,000, based on the then-rating values of the three blocks of land. Despite his concerns, and his taking legal advice, Miles did not contest the establishment of the new trust at the time, or over the next few years.
[8] However, in 2009 Miles became aware that the trust land had been, or was to be, offered for sale. He registered a caveat. Towards the end of 2009 the trustees of the Camp Bay Trust applied to have the caveat removed. Miles saw two lawyers and contemplated making a legal aid application, but did not obtain an order preserving the caveat within the prescribed period.
[9] In 2012, however, Miles again took legal advice concerning the establishment of the Camp Bay Trust and the validity of his intended constructive trust claim. As to the former, a solicitor’s letter was written asserting that the trustees of the first trust improperly invoked powers of sale and loan in order to establish the Camp Bay Trust, such that their actions gave rise to a fraud on the power. Further correspondence dealt with the constructive trust claim, the details of which I shall describe shortly. Neither claim was accepted.
[10] Finally in March 2014 Miles filed the present application seeking an order authorising a second caveat. The farm was on the market for purchase at a price “by negotiation”.
The principles relevant to s 148 applications
[11] Section 148(1) provides:
No second caveat may be entered
(1) If a caveat has been removed under section 143 or has lapsed, no second caveat may be lodged by or on behalf of the same person in respect of the same interest except by order of the High Court.
As can be seen, the section does not prescribe a test.
[12] Counsel, however, were in agreement as to the required approach. They referred to Lowther v Kim1 in which Randerson J said this:
[18] The Court of Appeal has held that an order under s 148 will not lightly be made. It is an indulgence and the applicant's claim is "scrutinised carefully": Cotton v Keogh and Others [1996] 3 NZLR 1, 8. In Mueller v Montagnat (1986) 2 NZCPR 520, 523-524, Thorp J reviewed previous authorities. He determined that the Court is given an unfettered discretion under s 148 but the Court will generally have regard to:
[a] The strength of the case made by the applicant to support the claimed interest in the land;
[b] Any explanation for failure to exercise the caveator's rights under s 145;
[c] Whether unavoidable prejudice would be suffered by those who have acted in reliance on the register and in the belief that the caveator was not pursuing the claim.
[19] Thorp J, rightly in my view, did not accept the submission made to him that an order under s 148 should only be made in exceptional cases. In considering the strength of the applicant's claim to an interest in the land, it is appropriate to adopt the standard of a reasonably arguable case as identified in Sims v Lowe [1988] 1 NZLR 656, 659-660 (CA), but with the reminder that careful scrutiny is required where leave to lodge a second caveat is sought.
I adopt this analysis.
[13] For completeness I note that there is an onus upon the applicant to establish the existence of a reasonably arguable case. Such case must relate to an interest in
land as defined in s 137 of the Act, which includes a beneficial interest under an
1 Lowther v Kim [2003] 1 NZLR 327 (HC).
implied trust. The interest must be that of the caveator, in this case Miles. Finally, and importantly, the summary procedure under s 148 is unsuited to the determination of disputed questions of fact. Hence, the decision-maker must assess whether there is a reasonably arguable case on the basis of the affidavit evidence alone, and conscious of the limitations of such an assessment.
Is there a seriously arguable constructive trust claim?
Basis of the claim
[14] There are three bases to Miles’ claim. The first is that he planted about 2100 trees, a mix of pine, cedar and redwood, on the land, which were subsequently known as “Miles’ trees”, and that this gave rise to a beneficial interest sufficient to support a caveat.
[15] The second aspect of the claim relates to the construction of a workshop which was subsequently extended and for the use of which Miles was subsequently paid rental by his father for a period of years. The third aspect concerns the work undertaken and materials supplied for the construction of a rammed earth house, or cottage, on what became Block 1 when subdivided off in 1998.
[16] The convenient course is to consider each aspect of the claim separately and at the same time note the responses to the claim from Kathleen, and in some instances from other members of the family. It is not appropriate to endeavour to resolve the conflicts in the evidence arising from competing contentions, but I shall note their existence.
Constructive trust principles
[17] This was also an area of common ground between counsel. It is sufficient to first refer to the leading case of Lankow v Rose.2 Tipping J, one of five judges in the Court of Appeal, provided a summary of the elements which the claimant must show,
being:3
2 Lankow v Rose [1995] 1 NZLR 277 (CA).
1. Contributions, direct or indirect, to the property in question.
2. The expectation of an interest therein.
3. That such expectation is a reasonable one.
4. That the defendant should reasonably expect to yield the claimant an interest.
The Court held that if a claimant established each of the four elements, equity will regard as unconscionable the defendant owner’s denial of the claimant’s interest and will impose a constructive trust, typically resulting in an order for payment of a sum equal to the value of that interest.
[18] It is important, I think, to understand the context in which Lankow v Rose was decided. As is frequently the case with constructive trust claims, the parties were de facto partners who lived together for a period of approximately 10 years. Focusing on the second and third elements (the expectation of an interest and the need to show that such expectation is reasonable), it is instructive to refer to another of the judgments. The appellant, in challenging the monetary award made in the High Court, argued that the relationship between the parties was conducted in such a manner that the respondent could not have entertained a reasonable expectation of an interest in the house property built by them.
[19] In responding to this submission Hardie Boys J referred to an answer from
the claimant’s evidence which encapsulated the essence of her claim, namely:
He never ever said I wouldn't share in the property, it was always called our house, our things, he used to often comment to people about how he wouldn't be where he was today if it wasn't for my help, he told people how we lived on my income for the first year. I was completely confident that he would be reasonable, that this wouldn't happen. I never had any worries at all. I was so sure he recognised I had a claim. Everything was ours, 10 years of living together and doing things together.4
[20] This is not to say, or even suggest, that constructive trust claims are confined to de facto relationships. Mr Tyrrell relied upon a more recent case, Hudson v Robway Farms Ltd5, a case with some parallels to this one. In seeking to sustain two
caveats the applicant claimed a beneficial interest in a farm property owned by a
4 At 283.
company, which her parents controlled as the directors and shareholders. The gist of her claim was that she and her partner had lived on the property, and farmed and improved it over a period of years, such as to justify a beneficial interest by way of a constructive trust.
[21] Allan J accepted that the claimant’s case was seriously arguable and ordered that the caveats be sustained. He did so after noting evidence provided by the complainant that the land was acquired and “intended to be hers”6 so that the joint efforts and work on the land of herself and her partner, including the repayment of a mortgage, occurred in light of that expectation, or understanding. In referring to the parents’ case Allan J noted the parents’ claim:7
… that there was never any agreement, or even an understanding, to the effect that she would become entitled to legal ownership of the caveated land when the mortgage over it was repaid.
But as the complainant’s evidence gave rise to a “credible factual narrative”8 Allan J held that the dispute must await resolution at a substantive hearing, and that there was a sufficient basis to sustain the caveats in the meantime.
[22] This case provides an example of circumstances sufficient to found a constructive claim divorced from a de facto relationship context.
The trees
[23] Miles deposed that while he was still at school he gained an interest in germinating seedlings. He left school in 1972, and the following year purchased seedling trees and, with his father’s permission, planted trees on “a steep, heavily eroded part of the farm”. The next year he planted a further block of trees in a valley behind the main house. He purchased smaller augers to attach to a posthole borer. The augers bored holes suitable for planting trees. To avoid the need to fence off the trees, Miles used his cousin’s truck to transport 200 litre drums onto the property. The drum ends were cut out so they could be used to protect the trees from sheep.
He further deposed:
6 At [7].
7 At [15].
8 At [54].
I continued to plant blocks of trees over different parts of the farm with my father’s blessing and on the understanding that I would benefit financially from these trees.9 (emphasis added)
[24] Some of the trees were planted on Block 4, the land subsequently sold to
John in 1996. As to the balance of the trees, Miles deposed:10
It is difficult to know how many trees remain on the property however, I would estimate their current worth to be between $30,000 and $50,000. John and the Trustees’ mismanagement of my trees has caused their value to diminish considerably.
Had the trees been managed properly, Miles considers that their total value would have been approximately $400,000. Indeed, if managed to produce “Clean Knot free finishing grade wood” the value would be approximately twice this figure.11
[25] Kathleen deposed that Miles left school in 1972 and took up a building apprenticeship from 1973 to 1975. After completing the apprenticeship he resided on the farm for the years to the end of 1979. During this time he undertook general paid farm work and also assisted with the construction of the cottage later subdivided off from the farm proper.
[26] Kathleen agreed that Miles purchased seedlings and planted trees, but with the assistance of family members and a farm employee. She doubted that the number of trees was over 2000, but deferred to Martin, her son, in relation to this detail. With regard to the care of the trees she deposed: 12
… Miles appeared to lose interest in the farm, and did not make any significant ongoing contribution to the maintenance of the trees, this was left to Paul and Martin after Miles left the farm in late 1979.
[27] Martin deposed that the cost of the seedlings was recorded at the time as $93. In April of this year he counted the trees actually in the ground and arrived at a total of 887, although he accepted that a significant number of trees had been lost to wind or other causes. With reference to value, Martin pointed out that the cost was minor
by comparison to the cost of maintaining the trees over the past 30-odd years. He
9 Affidavit of Miles Stapylton-Smith, 21 March 2014, at [13].
10 At [58].
11 At [57].12 Affidavit of Kathleen Stapylton-Smith, 6 May 2014 at [18].
deposed that Miles had not assisted with maintenance after he left the farm in 1979. Nonetheless, the trustees have no objection to Miles removing any of the trees which he planted. However, Martin doubts whether this will be viable, given the number, quality and location of the remaining trees.
[28] In the course of counsel’s submissions I raised whether Miles’ entitlement to the trees he planted (which entitlement appears to be accepted by other family members) gave rise to an interest in land as defined in s 137 of the Act. Mr Tyrrell responded by referring me to Halliday v Bank of New Zealand.13 This case concerned the ownership of trees planted on a Hawke's Bay farm and said to have a harvested value of about $500,000. Mallon J entertained a similar concern as to the status of trees planted on another’s land.
[29] However, her judgment contains this:14
The Land Transfer Act defines “land” as including “all trees and timber thereon or thereunder lying or being, unless specially excepted.”15 An interest in that part of the land that is a forestry can be granted by the owner of the land to another person. That interest can be registered on the title as a profit à prendre.16 A profit à prendre is a right to take from the land (i.e. to severe and remove) some part of it. In contrast, an easement confers only the right to utilise the land in some way (e.g. a right of way). Once severed and removed the trees are chattels (i.e. moveable goods).
In light of this analysis Mallon J accepted that specific contractual arrangements whereby the trees could be maintained and eventually harvested gave rise to an equitable interest in the trees, as well as the land upon which they were planted. I gratefully adopt this analysis.
[30] That said, I consider that the facts of this case are markedly different to those in Halliday v Bank of New Zealand. Perhaps unsurprisingly, given the family context, there appear to be no contractual arrangements as such. The trees were planted when Miles lived on the farm, and also believed that he would remain there for many years. More important, however, is a document located by Kathleen
amongst her husband’s papers. It is an IOU signed by Paul in favour of Miles for the
13 Halliday v Bank of New Zealand [2012] NZHC 3099.
14 At [39].
15 Land Transfer Act 1952, s 2.16 Forestry Rights Registration Act 1983, ss 2A and 3.
sum of $670 and dated 30 August 1975. In the body of the document there is reference to 2100 trees purchased for either three or 12 cents, to a total value of $99 and also a reference to 44 gallon drums worth $51. Beside these entries is written in Paul’s handwriting, “Had more than $150 worth of timber PHS-S.”
[31] In a reply affidavit Miles made various further statements. He confirmed that he planted the majority of the seedlings, although with some help from others. He did not accept that the remaining trees were of minimal, or no, economic value. Nor does he believe that the trustees will allow him to “harvest the trees in good faith”. With reference to the IOU document Miles stated that he wrote it (i.e the list of items purchased, together with their values), but the IOU in his father’s handwriting was something of which he was unaware until the document was exhibited to his
mother’s affidavit. He does not accept the IOU concept and stated:17
If I had seen it I would have raised concerns with my father as I was of the clear understanding, and my discussions with my father provided the basis of this understanding that the trees were to be mine, e.g. I owned them.
[32] In my view, even accepting Miles’ evidence at face value, and putting aside the opposing contentions, there is no credible evidence to show Miles had a reasonable expectation of an interest in the land. In his first affidavit Miles described his understanding to be that he would “benefit financially from these trees”. This statement seems to me to capture the essence of the claim. The trees were known as Miles’ trees and even now the trustees say that Miles can harvest the trees and retain the proceeds, assuming there is an excess.
[33] But there is no evidence of an understanding that Miles would acquire an interest in the land (as in Hudson v Robwell Farms), nor of specific contractual arrangements capable of giving rise to a beneficial interest (as in Halliday v Bank of New Zealand). This is not to say that Miles does not have an interest in the trees. The respondents seem to accept as much. But for these reasons that interest did not arise in circumstances capable of supporting a beneficial interest in the land and,
thereby, a constructive trust. Rather, Miles has at best a bare contractual entitlement
17 Miles Stapylton-Smith’s reply affidavit, May 2014, at [19].
to harvest and benefit from the sale of the trees, should he elect to do so and the operation proves profitable.
[34] But I am not persuaded that the claim, when scrutinised carefully, warrants the discretionary indulgence of an order permitting entry of a second caveat. Nor is there an adequate explanation for the lapse of the first caveat, and more particularly the delay of over four years before this application eventuated. There was ample time to have put the constructive trust claim to the test well before now, yet little was done.
The workshop
[35] Miles’ evidence concerning construction of the shed, or workshop, is to this effect:18
I built a workshop upon the farm to build furniture and boats in, all part of future plans for my time on the farm and a different income flow to just running sheep. In 1974, with my father’s permission I extended the workshop. I paid for this extension and the rebuild of the old existing workshop. In my father’s accounts there used to exist a debt for the money I had spent on building materials. This was part of the reason he paid me for renting the workshop in the 1980s.
Later in the affidavit Miles deposed that his father paid rent for the use of the workshop, being about $200 per annum paid each year through the 1980s.
[36] Kathleen responded in this way:19
Miles started building the shed around June 1975. We had records showing that the shed was previously used by Pat Gaze a potter until around May
1976. It was recorded in Paul’s farm books from around this time and a debt
was recorded to Miles in these accounts. The debt was originally removed from the accounts for the farm and I believe this is confirmation that Paul
paid Miles the amount recorded as a debt.
[37] In his reply affidavit Miles deposed that he constructed the shed over a period of two years and did so outside work hours. He recorded the cost of materials and labour, and annexed to his affidavit a page from his “ledger” in which he recorded
the cost of the shed at $2000. This was a not insignificant sum in the mid-1970s.
18 Miles Stapylton-Smith affidavit, 21 March 2014 at [15].
19 Kathleen Stapylton-Smith affidavit, 6 May 2014 at [10].
Other documentary evidence includes Paul’s farm accounts for the years ended June
1991 and 1992. These years show a sum of $1777 and $2770, respectively, owed to
Miles. In 2000 Paul recorded in a cheque butt payment of the sum of $2000, being a
1972 loan repaid to Miles. In his reply affidavit Miles rejected as “absolutely ludicrous” a suggestion that the $2000 was accepted by him as the value of his trees,20 but commented that “the $2000 may have been in relation to [construction of
the shed].21
[38] Again, and for similar reasons, I do not accept that the evidence provided by Miles raises a credible case in relation to his having a sensible expectation of an interest in the land upon which the workshop is situated. There is no evidence of anything said, or done, by either Miles or his father capable of supporting the expectation that an interest in the land would arise. The documentary evidence, such as it is, is more consistent with the agreed situation; that Miles constructed and paid for the materials to rebuild the workshop, the total was about $2000, this sum was owed to Miles for a period of years and in the meantime rent was paid for the use of the workshop. It may be that the debt was repaid in the year 2000, but if this is not the case Miles could have a personal claim for this amount, although the time lapse is problematic
The cottage
[39] Miles’ first affidavit contains this:22
[19] I came up with the concept of building a rammed earth house following discussion with fellow workers while working as an apprentice from 1973 to
1975. I introduced this concept to my family. My father agreed and I began to design the project gathering information from the Christchurch library and
Friends of the Earth publication.
[20] I dug out the foundations for the house which was located on the farm, bought steel, approximately 126 metre lengths of 12 mm steel and 60 six metre lengths of six mm steel, concrete blocks premix and cement which I used to pour the foundations and cut fallen logs for the beams. This was a joint venture enterprise with my father and mother however I never benefited from this joint enterprise.
20 Miles Stapylton-Smith reply affidavit, May 2014 at [23].
21 At [31].
22 Miles Stapylton-Smith affidavit, 21 March 2014 at [19] to [20].
This was the extent of the evidence at this point.
[40] Kathleen doubted several aspects of her son’s account. She deposed that the idea came from someone else, that her husband maintained a notebook entitled “cottage construction costs” in which he noted the cost of materials (including items similar to those claimed by Miles) and that Paul also kept a “tax book” which recorded the wages paid to Miles while he was working on the farm in the period to
1979.
[41] More generally, Kathleen stated this:23
Miles did provide assistance with the construction of the Cottage, and his building skills were useful, particularly with regard to the pillar support system involved in the construction. It was never discussed that the work undertaken by Miles was intended to provide him with any personal interest in the property or an interest in the land. Miles was paid a wage for the period during which he worked on the Cottage. In addition some assistance was provided by other members of the family. Paul and I certainly carried out the significant part of the work on the Cottage construction, which was built over a period of approximately eight years. (emphasis added)
[42] In reply Miles stated that the cottage was not built for the use of his parents in retirement, rather that he “assisted and provided materials for the construction of the cottage on the understanding that it would be for my benefit in that I would live there”.24 He continued that he was paid only minimal wages in the period to 1979, perhaps one-third of what he could have earned as a carpenter and that his work on the cottage reflected his belief that it was being built for his benefit. Further, as a
builder he could obtain trade discounts. For this reason he purchased many of the building materials, although he may have been repaid for some of these purchases.
[43] With reference to this aspect of the claim I am not satisfied that there is a credible narrative sufficient to show that there were discussions resulting in an understanding that Miles would have a beneficial interest in the cottage. Such is not asserted in his first affidavit. Instead Miles simply detailed his contributions, said it was a joint enterprise with his parents; however he “never benefited from this joint
enterprise”. In his reply affidavit he said, “I constructed the foundation and
23 Kathleen Stapylton-Smith affidavit, 6 May 2014 at [15].
24 Miles Stapylton-Smith reply affidavit May 2014 at [9].
purchased the steel because I thought the cottage was being built for my benefit”.25
This is the high point of the evidence, which only emerged in response to Kathleen’s
affidavit.
[44] Further, the contributions said to found the interest appear to be slight. The first affidavit describes work and materials contributed essentially to construction of the foundations (although Kathleen acknowledged that Miles’ building skills were particularly useful in relation to the pillar support system). The claim then changed to one that Miles was to have the use of the cottage. But this did not happen, and
35 years later a claim to a beneficial interest in the property is yet to be advanced as a pleaded cause of action.
[45] As with the trees and the workshop, Miles might at best have a personal debt claim – assuming that the delay is not fatal. But, by some margin, and for similar reasons, I am not persuaded that a constructive trust claim is seriously arguable.
Result
[46] I decline to make an order allowing a second caveat to be entered over the three blocks of land. The application is dismissed.
[47] Costs are reserved and may be sought by the filing of memoranda, if sought.
Solicitors:
Weston Ward & Lascelles, Christchurch
Saunders & Co, Christchurch
25 At [12].