Tiernan v Ferguson Trustee Limited

[2013] NZHC 1850

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2013-404-001495

2013 [NZHC] 1850

BETWEEN  MARGARET ELIZABETH AGNES TIERNAN

Plaintiff

ANDFERGUSON TRUSTEE LIMITED, ALEXANDER BURNS FERGUSON and HELEN ISABEL FERGUSON

Defendants

Hearing:                   23 July 2013

Appearances:           R O Parmenter for the Plaintiff

N Campbell QC for the Defendants

Judgment:                24 July 2013

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on

24.07.13 at 4:30pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

MEA TIERNAN v FERGUSON TRUSTEE LIMITED, A B FERGUSON and H I FERGUSON [24 July 2013]

[1]      The plaintiff (Mardi) applies for judgment upon her claim that her brother Sandy, the second-named defendant, declared, by his letter dated 21 December 1984 that the Woolleys Bay property formerly owned by their brother John “should be transferred to Sandy and Andrew [another sibling] for them to hold as trustees”.

[2]      Mardi  claims  that  the  letter  constituted  “an  immediate  intention  and declaration of trust on Sandy’s part to hold [the property] on trust”.   She says consideration was given for the creation of the trust and she claims she acted in reliance upon the trust being created.

[3]      Sandy and Mardi were two of five siblings.  Only John did not marry.  He owned the property at Woolleys Bay and built a bach on it.  His siblings and their families used the bach and contributed to its maintenance.  In 1980 John wanted to move to the United States to live.  He negotiated to sell the property to Mardi and to his other sister Sandra and his other brother Andrew.  Sandy says he was not part of those negotiations because he did not want to be involved in multiple ownership of the property.

[4]      No agreement was reached for the purchase of John’s property.

[5]      John moved to the United States.  Shortly after, in 1980, he was killed in an accident.   John’s Will dated 1974 appointed Sandy and Andrew as his executors. John’s property was left to Sandy who became the registered proprietor of it in December 1982.

[6]      After John’s death Sandy’s siblings and their families continued to use the bach.  There was a roster system in place for the Christmas period.  Sandy said that users “mucked in” with maintenance as they had before; and that the arrangements were the same as when John owned the property.

[7]      The siblings were requested to share the building outgoings.  Sandy says that until 1996 those contributions actually paid were not equal.  Those contributions he said were used to cover outgoings but not capital items which he paid for.

[8]      Sandra died in 1991 and thereafter her family stopped using and contributing to the Bach.

[9]      In March 2010 Sandy sold the property to the Ferguson Trust of which he and his wife are the trustees.

[10]     In March 2011 Sandy sent a letter to Mardi recounting his view of how he had made the bach available to his siblings for 30 years.   The letter stated his children would inherent the bach from the trust.  Sandy said there was no response to this  letter.    But,  when  the  defendants  decided  in  2012  to  sell  the  property  he contacted Mardi and the families of Andrew’s children to offer them the opportunity to purchase it before it was put on the market.   He said although there was some interest no agreement was reached.  He said there was no claim by Mardi then that she was already beneficially entitled to the property.

[11]     Two weeks before the property was to be sold by auction on 14 January 2013

Mardi lodged a caveat. The caveat prevented any sale.

The 1984 letter

[12]     It was written to Sandra and Mardi by Sandy and was signed by he and

Andrew ‘as executors’ of John’s Will.  It reads:

... John left the Woolleys Bay cottage to me in his will.  Our relationship was always trusting, and I was looking after his affairs while he was away.   I know he would have thought that if anything had happened to him I would handle it in the best way I could.

My first reaction after John’s death was, that because all three were in the process of negotiating the purchase of Woolleys Bay, the best approach would be to divide the title into four separate pieces and share the responsibility  for  running  it.    We  have  decided  not  to  do  this  for  the following reasons:

Two  people  close  to  the  settlement  arrangements  have  counselled against it: Jeremy Bradley, the solicitor, felt that a multiple family ownership was a messy provision because it passed problems on to our offspring in settling estates and shares, etc.  Jannie Morrison, who was very close to John, had precisely the same reaction and asked why I did not keep the title and share the use of the cottage among the family; there would be no arguments.   I must add that the only reason why I

was not joining the three of you in negotiating to purchase Woolley bay was this exact reason.

...

Andrew and I have tossed these thoughts backwards and forwards and believe the following considerations are relevant.  Firstly, should one or two people only retain title to the Woolleys Bay cottage and arrange it useage in the full spirit of John’s wishes to share with this brothers and sisters, then the common good would be served best.  To ensure equal access by all families, there should be an annual “order of choosing” for holiday periods.  The finances should also be arranged on a “user pays” principle to be fair to all.   Those who retain the title have the responsibility of ensuring that John’s spirit of sharing is continued on through this place as a memorial to him.

And it is this idea of a memorial, for us in our lifetime and for our children   in  theirs,   that  should   be  the   guiding  principle  in  the management of the Woolleys Bay cottage.   There is no profit for the title holder, only responsibility.  You will never see the Woolleys Bay cottage feature among my assets on paper as the capital is not mine to use.  It is John’s memorial, and I feel as protective about it as my own house.  Profit for the title holders in the next generation even is not on the cards because the four eldest children at least are very aware of John’s place in our lives, and I believe will carry on the responsibility of John’s memorial at least for their lifetime:  By that time, we won’t have much to worry about!

The practical arrangements for the running of the Woolleys Bay cottage will be as follows:

1.  TITLE

The title will be transferred into the names of the two Fergusons, Andrew and myself.   We have the responsibility of protecting the cottage as a memorial to John.  At the same time I will alter my will to accommodate my son Andrew as heir to my share in the event of my death.  I have full confidence that he has the gist of the whole thing and common sense to deal with it well.  In the event of both our deaths, it will pass back to my brother Andrew for him to make the decisions.  He would then choose one of you girls as a second member of our generation to share the title with.

Because Angus  is  very  young  still,  it  is  sensible  to  wait  before naming him in Andrew’s will when he is not old enough  to be chosen.  In the meantime Andrew will arrange that in the event of his death the title passes to me and it will be my responsibility to choose one of my sisters as a second title holder.  Apart from re-arranging our wills there is no easy legal solution to tying this agreement up and it will be John’s memory that ensures that we all conduct ourselves fairly over it.

1. THE PRACTICAL DAY TO DAY RUNNING AND FINANCING OF WOOLLEYS BAY COTTAGE

(a)     Bookings:

The present booking arrangement seems to work reasonably well, and we can continue to do this if it suits you all.  I am happy to pass it over to somebody else if you prefer it.  I believe regarding school holidays there needs to be a “choosing order” established which rotates each year.

(b)     Maintenance and Rates etc:

An annual budget will be drawn up by Andrew and me to cover outgoings and the four of us will pay a quarter share each.  To save the embarrassment of having to ask for money, which I can assure you is not a very practical way of handling it, the four of us will arrange bank automatics into a Woolleys Bay cottage account. Andrew and I will be responsible for arranging maintenance and will be signatories to this account.  The financial year for the cottage will run from 1 January to 31 December, and the first budget is enclosed.

[13]     Mardi and Sandy take a different view regarding the letter’s purpose and

whether it contained a declaration of trust.

[14]     It is Sandy’s letter.   In part it appears to be written on behalf of he and Andrew.   It is signed by them both.   It referred to how title should be held and proposed an arrangement for its use.  Constant reference was made to the property being a memorial to John.

[15]     Sandy’s explanation for retaining title in the name of one or two persons was that it would best serve “the common good”; that those who “retained the title have the responsibility of ensuring that John’s spirit of sharing is continued on through this place as a memorial to him”.

After the 1984 letter

[16]     In a letter dated 12 June 1996 Sandy and Andrew reported to their mother that they were the current owners and that legal transfer had not taken place, but that there would not be more than two owners and that they would perform a caretaker role and gain “nothing from the ownership except the responsibility to administer the use and maintenance of the bach for their generation”.

[17]     In language not dissimilar to that he used in the letter of 21 December 1984

Sandy also wrote:

It is up to us as John’s brothers and sisters to share equally and amiably in the wonderful memorial he has left us...   The ownership of the bach is a chore, the use of the bach is a privilege.

[18]     Events changed by 2010.  Sandra died in 1991 and not since has her family used the bach.  Andrew died in 2006 but his son Angus uses the bach and continues to contribute to its maintenance.

[19]     In 2010 Mardi claims that Sandy transferred the property to his family trust without the knowledge of his siblings.  In 2012 Sandy proposed selling the property because he needed funds following a business reversal.

Discussion

[20]     In this background of matters Mr Parmenter submits that the 1984 letter can have no other construction than that Sandy was declaring a trust over the Woolleys Bay property; that the 1996 letter to his mother is an aid to construction of the 1984 letter. As well there is the 30 years of adherence to the 1984 letters terms.

[21]     Sandy’s position is that what happened is neither a declaration of trust nor was it completed by Sandy’s transferring the title to he and his brother Andrew.

[22]     Of significance in this case is the fact that the property was left by John to

Sandy.

[23]     Why that is so is unclear because not long before his death John had been negotiating its sale to Andrew and his sisters Sandra and Mardi.  It did not sell and Sandy  says  he  was  not  prepared  to  purchase  an  interest  in  a  multi-ownership property. What then was the reason why the property was left to Sandy?

[24]     Mr Parmenter submits that Sandy, having declared in writing that he holds the Woolleys Bay property on trust, and both trustees having accepted the obligations of trustees of that trust (their signed 1984 letter), there was then no  transfer to

Andrew.   Mr Parmenter submits that the circumstances indicate the need for an imposition of a constructive trust over Sandy’s interest, because the circumstances are such that it would be unconscionable for Sandy to assert his own beneficial interest, and deny the beneficial interest of others.

[25]     Mr Parmenter also submits that when Sandy transferred title to the defendants they the defendants had actual or constructive notice that the transfer was in breach of Sandy’s commitment to transfer title to he and Andrew.

[26]     The defendants are now registered as owners of the property.  They have a prima  face  entitlement  to  an  indefeasible  interest.    The  issue  for  Mardi  is  to challenge that indefeasible right.  In this case that challenge suggests that Sandy, his wife and the Ferguson trust had constructive knowledge that they were taking title when they are not entitled to it.   In his submissions Mr Parmenter indicates suggestions that dishonesty may have been involved.

[27]     The evidence of Sandy and of Mardi contains disagreement in a number of respects including:

(a)       How the bach was rostered for use.

(b)      What maintenance contribution was required. (c)        Sharing the cost of outgoings.

[28]     Sandy says the arrangements were much the same as they had been when John owned the bach.   Mardi disagrees and says important differences can be discerned.

[29]     Sandy  points  out  that  when  he  wrote  to  Mardi  in  March  2011  he  had recounted how he had made the bach available to his siblings for 30 years, and stated that his children would inherit the bach from his trust.   He said Mardi did not respond.

[30]     Sandy deposes that when he decided to sell the property in 2012 he decided to give other family members an opportunity to purchase it before it was put on the market.  He said there was no response to suggest that those other family members were already beneficially entitled to the property.

[31]     Not until this proceeding has it been asserted by Mardi or any other person that the 1984 letter contained a declaration of trust.  On the other hand not until 2010 has Sandy directly claimed he alone owned the property.

[32]     Mr Campbell is critical of the manner in which the application has been argued. A pleading that the letter of 1984 was a declaration that the property “should be transferred” now has become a claim that the letter constituted an “immediate intention and declaration of trust on Sandy’s part to hold [the property] on trust”.

[33]     These claims need to be measured against an absence of effort by Mardi to assert a claim for a beneficial interest until last year.

[34]     Last year when the defendants contacted Mardi and the families of Andrew’s children regarding an opportunity for them to purchase the property before it was put on the market they (Mardi and others) obtained a valuation and an engineering report for their purposes of trying to negotiate a purchase.  No challenge was made at that time regarding the right of the Ferguson trust to sell the property.

[35]     The submissions of counsel address the respective claims about whether or not a trust exists, and what if any significance attaches to the fact that Sandy did not transfer the bach to Andrew and he; and when, if the bach was transferred in breach of the trust, whether all of the defendants had actual or constructive notice of that breach.

[36]     The Court does not consider it necessary to review those matters or whether the actions on behalf of the Ferguson Trust may have involved an element of dishonesty.   The Court is firmly of the view that this matter was not suitable for disposition by a summary judgment.  The affidavits of Sandy and Mardi disagree in important respects.

[37]     At  first  blush  the  1984  and  1996  letters  indicate  a  trust  management arrangement for the property.  On the other hand from the date of John’s death the property has affectively belonged to Sandy and it would appear that he has asked little more from other users than a contribution towards the cost of maintaining the property.  Claims of a beneficial interest by Mardi have only emerged after about 30 years.  Then again it was not until about 28 years later that Sandy positively declared that the property had belonged to him throughout.

[38]     Claims  of  constructive  knowledge  on  the  part  of  the  defendants  arise somewhat out of necessity in an attack upon the indefeasibility of the registered interest of the trustees.

Conclusion

[39]     Mardi bears the responsibility of satisfying the Court that Sandy does not have a defence to her claim that the 1984 letter was declaration of trust.   It is not appropriate for a Court to consider reaching such conclusions where critical evidence remains in dispute between the parties.  The Court will refrain from resolving factual disputes that bear on a question of interpretation.  In particular events post-1984 will be of assistance to a Court.  The Court needs to hear evidence about those events. Obviously the Court would be curious about the reasons why John left the property to Sandy.

Judgment

[40]     The application for summary judgment is dismissed. [41]      Costs are reserved to be determined in the cause.

[42]     Mardi’s caveat of the title will be permitted to remain pending resolution of the plaintiff’s proceeding but subject strictly to the requirement that she pursues her claim with all reasonable endeavours.

[43]     The Court does not consider it appropriate at this time to direct the plaintiff to provide an undertaking as to damages.  That matter can be reviewed in the event it appears the plaintiff’s claim is not being expeditiously pursued.

[44]     The Registry is directed to schedule a three day trial, in consultation with counsel.  Counsel agree a short notice listing is appropriate.  The standard pre trial directions shall apply.  If further management orders are needed counsel can apply and these can be dealt with on the papers.

[45]     Leave is reserved to the parties to apply on short notice for a telephone conference to be held.

Associate Judge Christiansen