Thomas v Thomas HC Christchurch CIV-2011-409-002514

[2011] NZHC 2019

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2011-409-002514

UNDER  the Land Transfer Act 1952

IN THE MATTER OF     an application under s 145A of that Act for an order that caveats not lapse

BETWEEN  PHILIP DEAN THOMAS Plaintiff

ANDNORMAN DEAN THOMAS Defendant

Hearing:         19 December 2011

Counsel:         A D G Hitchcock for Plaintiff

G M Brodie for Defendant

Judgment:      19 December 2011

INTERIM JUDGMENT (2) OF ASSOCIATE JUDGE MATTHEWS (Hearing by Telephone on 19 December 29011)

[1]      This is an application to vary or rescind the judgment of this Court dated

14 December 2011.

[2]      The applicant relies on r 7.49 of the High Court Rules.  The application was opposed and argued, by way of telephone conference with consent of counsel.  Rule

7.49 is in the following terms:

Solicitors:

Shirley Law, Christchurch. Email:  [email protected] /  [email protected]

Meares Williams, PO Box 660, Christchurch (R C Gray) Email:  [email protected]

PHILIP DEAN THOMAS V NORMAN DEAN THOMAS HC CHCH CIV-2011-409-002514 19 December 2011

7.49   Order may be varied or rescinded if shown to be wrong

(1)     A party affected by an interlocutory order (whether made on a Judge's own initiative or on an interlocutory application) or by a decision given on an interlocutory application may, instead of appealing against the order or decision, apply to the court to vary or rescind the order or decision, if that party considers that the order or decision is wrong.

(2)     A party may not apply under subclause (1) if the order or decision was made or given—

(a)   with the consent of the parties; or

(b)   on an interlocutory application for summary judgment under rule

12.4; or

(c)   by an Associate Judge in chambers.

(3)     Notice  of  an  application  under  subclause  (1)  must  be  filed  and served,—

(a)   if it is made by a party who was present or represented when the order was made or the decision given, within 5 working days after the order was made or the decision was given:

(b)   if it is made by a party who was not present and not represented, within 5 working days after receipt by the party of notice of the making of the order or the giving of the decision, and of its terms.

(4)     The application does not operate as a stay unless a Judge so orders.

(5)     Unless a Judge otherwise directs, the application must be heard by the

Judge who made the order or gave the decision.

(6)     The Judge may,—

(a)   if satisfied that the order or decision is wrong, vary or rescind the order or decision; or

(b)   on the Judge's own initiative or on the application of a party, transfer the application to the Court of Appeal.

[3]      Whilst a decision on an application under r 7.49 is a matter of discretion, factors of relevance have been identified in a number of cases and include:

(a)     Whether the order was made in court or in chambers. (b)         The amount involved.

(c)     Whether there were significant legal or jurisdictional issues.

(d)The nature of the hearing that resulted in the order sought to be varied or rescinded.

(e)     In particular:

(i)     whether the issues were fully argued;

(ii)    whether there is further evidence or other matters placed before the Court that would justify a reconsideration of the order: Wrightson NMA v McConnell,[1]  Profcom Systems Ltd v Madison Advertising Ltd.[2]

[1] Wrightson NMA v McConnell [1989] 2 NZLR 77

[2] Profcom Systems Ltd v Madison Advertising Ltd [1989] 2 NZLR 63

[4]      The grounds of challenge to the judgment are set out in the application dated

15 December 2011.   Apart from dealing with the merits of an Order being made sustaining the caveat, the applicant in this application relies on the principal application not having been fully and adequately argued before me on 13 December

2011.   Whilst not necessarily accepting that position Mr Brodie for the defendant was content to have the matter fully reargued on 19 December.  This judgment is issued as a result of that argument; consequently it does not deal with the question of whether or not the case was sufficiently argued on 13 December.  Rather, I am able to reconsider the principal application on the basis that it is accepted that it is appropriate that I do so.   I merely note that I have been informed that the land to which the caveat relates is valued at around $15m, and that the first argument of the case was at the conclusion of a List call, and was relatively brief.  Counsel appearing for the applicant on that occasion was acting on agency instructions, whereas counsel who has now argued the matter for the applicant, Mr Hitchcock, is the applicant’s instructed solicitor and counsel.  Thus there are sound grounds to recall and review the judgment.

[5]      In paragraphs [9] to [13] inclusive of a Minute I issued on 16 December I

raised with counsel an issue concerning sealing of the former judgment.  Mr Brodie accepted the position outlined; no issue arises in relation to sealing of that judgment.

[6]      In paragraph [8] of my interim judgment of 14 December I recorded that I am satisfied, to the extent required for this purpose, that the plaintiff has an option to purchase in the land in question, sufficient to sustain the caveat.  In argument before me at the rehearing, Mr Brodie pointed out that there may be real problems in drawing this conclusion when the matter is fully argued, because in the defendant’s view the option relied upon by the plaintiff has in any event lapsed, but the issue was not fully argued and for present purposes, on application for an interim order, I am satisfied that the Court should maintain the position recorded in paragraph [8] of the interim judgment of 14 December.

[7]      The entire thrust of the argument before me on the rehearing was devoted to the issues which are dealt with at paragraphs [9]-[11] inclusive of the interim judgment dated 14 December 2011.  It is unnecessary for me to repeat the principle recorded in paragraph [10] or the conclusion  I then drew.   The issue requiring determination is whether the caveat should be sustained entirely or whether registration of a transfer severing the joint tenancy should be permitted.

[8]      I start with the proposition relied upon by Mr Brodie, that one of the essential features of a joint tenancy is the absolute power of each tenant to sever the joint tenancy during the joint lifetimes of the joint tenants: Hargreaves v Fleming.[3]    On that basis Mr Brodie submitted that all his client wishes to do is to exercise that absolute right, but in conjunction with that he accepted, for the purposes of an interim order, that the plaintiff should otherwise have the full protection of the caveat

pending full argument on the merits of the application.   Thus it was Mr Brodie’s position that the Court was correct in determining that the caveat should be dealt with in such a way that the plaintiff’s claims were protected in the meantime, but his client’s right to sever the joint tenancy was also accommodated as this would not in any way affect either of the plaintiff’s claims to an interest in land which are cited in support of the application to sustain the caveat.

[3] Hargreaves v Fleming [1975] 1 NZLR 209 at 214

[9]      Mr Hitchcock accepted, quite responsibly, that the nub of the case for present purposes is whether or not changing the nature of the tenancy from joint tenancy to

tenancy in common would defeat or prejudice his client’s claim to an interest in the

land under an option to purchase or pursuant to a constructive trust.

[10]     Mr Hitchcock relied first on McCormack v Foley.[4]    In this case, the testator had covenanted that he would not alter the provisions of his will by which he had left certain farming assets to his brother.  After he died his sister brought a successful testamentary promises claim against his estate and was awarded $16,000 plus costs which could only be satisfied if the Order encroached on the farming assets which had been bequeathed to his brother under the will which he had covenanted not to alter.  The Court held that it had jurisdiction under the Law Reform (Testamentary Promises) Act 1949 to charge the award under that Act on the assets left to the brother.

[4] McCormack v Foley [1983] NZLR 57

[11]     Mr Hitchcock argued that in the present case there is a contractual entitlement to the land pursuant to, and on the terms contained in, the option to purchase.  He said that in accordance with the principle in McCormack v Foley that option could be defeated by claims against the estate of the defendant, in due course, if the land against which the caveat has been registered forms part of the defendant’s estate after his death, which would be the case if the caveat is not sustained in full, without it being permissible for the defendant to sever the joint tenancy.  Thus he maintained that the caveator’s interest cannot be accommodated, in terms of Pacific Homes

Limited  v  Consolidated  Joineries  Ltd  (In  Rec),[5]   (para  [10]  of  the  judgment  of

14 December) either by the method predicated in paragraph [12] of that judgment or by making an Order sustaining the caveat subject to a condition that a transfer severing the joint tenancy may be registered.

[5] Pacific Homes Limited (In Rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652

[12]     Mr Hitchcock then argued that his client’s claim to a constructive trust could

be diminished or extinguished in its entirety by a competing equitable claim.[6]

[6] Moriarty v Roman Catholic Bishop of Auckland  (1982) 1 NZCPR 459 at 463

[13]     Thus,  Mr  Hitchcock  said  that  allowing  a  transfer  from  joint  tenancy  to tenancy in common opens up the land to competing claims and to allow this would

be as prejudicial as allowing, for example, the registration of a mortgage.  In short,

the protection that his client has from the caveat as it stands would be diminished or lost.

[14]     There is no evidence before the Court of any other existing equitable claim, or of any existing notice of intention to make a statute-based claim, for example under the Law Reform (Testamentary Promises) Act or Family Protection Act 1955. Mr Hitchcock said, however, that there has been a falling out between the plaintiff and the defendant and there is evidence that the defendant now farms with his grandsons, with the result, he submitted, that family protection claims are probable.

[15]     Mr Brodie submitted that the caveat remaining on the title after a transfer severing the joint tenancy would provide to the plaintiff exactly the same protection as he has in respect of the rights or interests asserted in the caveat.  That being the case,  he  submitted  that  attempting  to  sustain  the  caveat  without  making  due provision  for  the  defendant  to  exercise  his  right  to  sever  the  joint  tenancy (Hargreaves v Fleming above), amounts to attempting to use a caveat in order to retain  the  benefit  the  plaintiff  potentially  has  of  receiving  all  the  land  by survivorship.

[16]     Mr Brodie informed the Court, and for present purposes I accept, that a deed severing the joint tenancy has already been entered so the joint tenancy is severed in equity.  However, Mr Brodie accepted that at present it is not severed as a matter of law, and cannot be without a transfer being registered from joint tenancy to tenants in common.

[17]     Mr Brodie’s argument was, in essence, this.  An option to purchase in favour of the plaintiff gives him, upon exercise, the right to receive the land in question upon payment of a sum of money calculated in accordance with the terms of the option.  In order to protect that right, the plaintiff is saying that it is necessary not only to prevent the defendant from selling the property to any other party, or otherwise creating any other charge over it, but also to ensure (by preventing a transfer from the defendant as joint tenant to the defendant as tenant in common), that the land is transmitted to the plaintiff without consideration, on the defendant’s death.  Thus Mr Brodie submitted that it would be quite wrong to characterise the

removal of the right of survivorship as prejudicial to the claimed rights or interests which are cited as the basis for the caveat; rather, the caveat is being wrongly used to protect the survivorship right under the joint tenancy.

Discussion of the application to sustain the caveat

[18]     Either of the interests claimed in the caveat is equally sustainable against the title of the defendant to the land whether that title be held by him as a joint tenant or a tenant in common.  Mr Hitchcock did not cite to me any authority to the contrary, nor have I become aware of any.  Transfer of the defendant’s share of the land from himself as joint tenant to himself as a tenant in common would instate an identical position to the present; neither claim would be defeated by that step being taken. Thus, Mr Hitchcock’s argument was focused on the consequential effect of such a transfer, namely the opening up of the land to other potential claimants after the death of the deceased which would not be the case if there were a joint tenancy. That, however, amounts to an argument that the caveat should remain in order to preserve a joint tenancy, and the attendant right of survivorship.

[19]     If the caveat is sustained but with a condition permitting the registration of a severing transfer only, the plaintiff remains able to bring his proceeding to enforce the option to purchase, and to declare the alleged constructive trust, just as he is able to at present whilst the title remains a joint tenancy.  The caveat against a dealing of this kind does not achieve anything by way of protecting the plaintiff’s claimed interests, on the evidence before me.  I accept that if the defendant were to die before the Court makes a final determination on these claims by the plaintiff, some issues could possibly arise which the Court would need to determine, in relation to claims that might be brought by others.  However, there is no evidence before the Court that any  such  claims  have  been  notified  or  are  likely,  and  even  if  there  were,  the plaintiff’s claims should stand or fall on their own merit just as they will if they are determined during the defendant’s lifetime.  I do not find compelling an argument that potential, but presently non-existent claims based on unidentified interests of unknown persons is sufficient to sustain the caveat against a transfer severing the joint tenancy.

[20]     I am mindful that the law does not encourage the Court to consider the balance of convenience, on applications of this kind – Orams Marine (Auckland) Ltd v Ports of Auckland Ltd,[7]  but in that case the Court did accept that there may be exceptional circumstances where such a consideration should be undertaken.  I am wary about  treading  into  this  area.    I record  that  Mr  Hitchcock  submitted  that allowing  a  transfer  severing  the  joint  tenancy,  though  otherwise  sustaining  the caveat, would seriously adversely affect not only his client but his client’s family because of the removal of the right of survivorship, and that Mr Brodie submitted

that sustaining the caveat without permitting severance of the joint tenancy would unnecessarily constrain his client’s right to own the land in such a way that he could benefit the remainder of his family as he considered appropriate, presumably by will (given  that  Mr  Brodie  accepted  that  in  all  other  respects  the  caveat  should  be sustained on an interim basis).

[7] Orams Marine (Auckland) Ltd v Ports of Auckland Ltd (1994) 6 TCLR 88

[21]     The relationship between the plaintiff and the defendant has broken down. They no longer farm in partnership.  The circumstances of their relationship which led them, evidently on professional advice, to place this land into joint tenancy in the first place have significantly altered, to the extent that the plaintiff wishes to exercise an option to buy the defendant’s half share of the land, or to receive a declaration from the Court that he is entitled to it under a constructive trust.  In the end I am not prepared to consider balance of convenience issues, and have mentioned this only to record and demonstrate to the parties that I have not overlooked these arguments advanced on their behalf.  If balance of convenience issues were to be considered in this context I consider they would favour the defendant by reason of the changed circumstances to which I have referred, but I expressly record that this has not formed any part of my judgment and the issue is referred to only for the reason just stated.

Outcome

[22]     I am satisfied that on an interim basis, and pending full argument of the application to sustain the caveat, the plaintiff is entitled to protection in respect of the

interests it seeks against all transactions save only for a transfer from the defendant

to himself for the purpose of sustaining the caveat.  In the interim judgment I issued on 14 December I resolved the application by providing that the caveat would lapse, and granting leave for the registration of a second caveat immediately after registration of such a transfer.  Counsel are agreed that a preferable course is to make an order sustaining the caveat, but on condition that a transfer as intended by the defendant may be registered. Accordingly, I make orders:

(a)     rescinding the orders made in paragraph [12] of the judgment dated

14 December 2011;

(b)Caveat 8628917.1 is sustained on condition that it will not prevent registration of a transfer from the defendant to the defendant having the effect of severing the joint tenancy of the plaintiff and the defendant;

(c)    the application will be determined at a fixture to be allocated by the Registrar.  Rule 7.39 applies, save that the periods in r 7.39(2)(a) and (b) are 5 days and 3 days respectively, and are to be strictly complied with.

Stay

[23]     Mr Hitchcock asked me to make an order staying the effect of my judgment in this matter, if it should not favour his client, pending an appeal to the Court of Appeal.   He submitted that failing to grant a stay would render nugatory such an appeal, because a transfer would be registered by the defendant.  Mr Brodie argued that taking that course would deprive his clients of the benefit of this interim judgment and in the circumstances of his client’s age and ill-health that should not be permitted to occur.   He submitted that if the transfer is registered the claim to an option to purchase, and the claim to a constructive trust, can still be brought. All that would happen is that if the defendant were to die the plaintiff would have lost the benefit of his right to the land by survivorship.

[24]     On an application for a stay the Court is required to balance the competing rights of the defendant who has been successful on this application, and the plaintiff

who wishes to preserve his position: Duncan v Osborne Buildings Ltd.[8]  A number of factors   must   be   considered   and   weighed   including   the   overall   balance   of convenience, and the apparent strength of the appeal.

[8] Duncan v Osborne Buildings Ltd (1992) 6 PRNZ 85 (CA)

[25]     I have already indicated that my view is that the balance of convenience favours the defendant.  Though I have not taken this into account in considering the principal application, it is relevant here.  I also consider that the plaintiff’s argument is not strong.  The plaintiff will retain the protection of the caveat in all respects save only for the change of the basis of the defendant holding the title from joint tenancy to tenant in common, and I am firmly of the view that this does not, in any material way, adversely affect the plaintiff’s interests as claimed in the caveat.   The only argument the plaintiff could bring in support of this contention was that his client’s claims might be opened up to competing claims. That may be the case, but equally it may not and even if, ultimately, that should be the case, that does not mean that the plaintiff’s claims would not prevail.  No such claims have been identified, let alone formulated, and weighing up all the circumstances of this case as I am required to do I am not satisfied that there should be a stay of this judgment pending an appeal. The application for stay is refused.

Costs

[26]     Costs are reserved.

J G Matthews

Associate Judge