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High Court of New Zealand Decisions |
IN THE HIGH COURT OF NEW ZEALAND
NELSON REGISTRY
CIV 2006 442 000501
BETWEEN TUI ROSALIE ELKINGTON BEING
TRUSTEE OF THE ESTATE
OF JAMES
HEMI ELKINGTON
Plaintiff
AND ESTATE OF PENE TURI RURUKU,
HAZEL RURUKU, TAMA HOERA
RURUKU, JENNY KING BEING
PARTNERS OF MADSEN MARINE
PARTNERSHIP
Defendants
Hearing: 26-27 November
(at Blenheim) and 10 December (at Nelson) 2007
Counsel: H Roose for Plaintiff
W F Freeman for Second and Third
Named Defendants
P Genet for Fourth Named Defendant
Judgment: 21 December 2007
JUDGMENT OF WILD J
Introduction
[1] Counsel put it to me that only one issue required decision in this proceeding.
In
fact there are two:
(1) Are the Ruruku partners/defendants entitled now to buy the
Partnership's property
on D'Urville Island at cost i.e. at the price the
Partnership paid when it purchased the property early in 1999?
TUI ROSALIE ELKINGTON BEING TRUSTEE OF THE ESTATE OF JAMES HEMI ELKINGTON V
ESTATE OF PENE TURI RURUKU, HAZEL RURUKU, TAMA HOERA
RURUKU, JENNY KING BEING
PARTNERS OF MADSEN MARINE PARTNERSHIP HC NEL CIV 2006 442 000501 21 December 2007
(2) If yes,
is the Partnership entitled to a prior order under s129 Property
Law Act 1952? The order sought is one which
vests in the
Partnership that piece of land encroached upon by the house on the
Partnership's property,
and vests an equivalent piece of land owned
by the Partnership in the adjoining owner (Pene Turi Ruruku but
now in his personal representative, as he is dead). This second issue
has two aspects. The first is whether
the Court has jurisdiction to
make the s129 order sought, as Pene's land is now (again) Mäori
freehold
land. The second aspect is whether if there is jurisdiction
the orders sought should be made, given the circumstances
disclosed
by the evidence.
[2] The parties are all partners, or the legal representatives of deceased partners,
in the Madsen Marine Partnership (the Partnership). The Partnership was formed by
members of the Elkington and Ruruku families in
1996. The Partnership is
evidenced by a written `Partnership Agreement for Property Owning Partnership'
dated 1 November
1996.
[3] The Partnership was dissolved by written notice given by partners Hazel
Ruruku and Tama Ruruku on 8 September 2005.
[4] In this proceeding the plaintiff, Tui Rosalie Elkington, as trustee of the Estate
of her late husband James (Jim) Hemi Elkington,
sought orders:
· By way of declarations, as to what comprised the Partnership's assets,
and the respective
shares in which the partners hold those assets.
· Pursuant to s52 Trustee Act 1956, vesting the Partnership assets, as
declared, in the partners in the shares declared.
· Winding the Partnership up, directing the taking of final
Partnership
accounts, directing the way in which the Partnership assets are to be
valued, and directing the
way in which the marine farm owned by the
Partnership is to be vested in the partners.
As all these matters have been
resolved, the orders are no longer required.
[5] The plaintiff also sought the orders pursuant to s129 Property Law Act, to
which I have referred. These orders are still sought and give rise to the issue (2) set
out in [1] above. It is in response to the application for those s129 orders that the
Ruruku partners claim the right to buy the Partnership's property at cost, which is
issue (1) set out in [1] above. That right is
claimed in reliance on a representation
allegedly made by Jim at the time the property was purchased.
[6] The Partnership purchased
the property in 1999 for $155,000. Its current (as
at 27 September 2007) value as the title stands is $605,000. With the benefit
of the
boundary adjustment orders sought pursuant to s129, the value rises to $650,000.
[7] Those figures indicate what is at
stake in terms of the issues for decision. In
short, issue (1) involves a value differential of about $450,000. The s129 orders
sought
in issue (2) involve a value differential of $45,000. The latter value
differential might be substantially greater, for
the reasons set out in [77] below.
Background
[8] Both the Elkington and Ruruku families are Ngati Koata, the iwi of D'Urville
Island. The families are closely related: Jim Elkington was the nephew of Hazel and
Pene Ruruku.
[9] Both families owned land
on D'Urville Island. The Elkington family owned
a lot of land surrounding Catherine Cove, particularly at Cherry Tree Bay. As I have
mentioned, Pene Ruruku owned the property in Catherine Cove adjoining the
Partnership's property. It is onto Pene's property that
the house on the Partnership's
property encroaches.
[10] After its formation in 1996 the Partnership obtained marine farming
and
resource consents for a six hectare mussel farm at Cherry Tree Bay. In his evidence
Tama indicated that the siting of this mussel
farm required the approval of the
Ruruku family. Tama stated:
We chose to put that in. (Jim Elkington) had come to us and
asked if he
could because its in front of our house. We agreed. It was part of the deal
...
[11] I gather Jim and
Pene were, between them, running the Partnership in its
early years. As I have mentioned, Jim was Pene's nephew and there was clearly
a
close bond and working relationship between the two men. In the course of his
evidence Tama referred to things Jim and Pene were
doing together at the time. I
asked Tama to elaborate on this. He answered:
A. My father was Chief of Ngati Koata at
the time, Jim was chairman
of their Board, they were delivering tuataras around the world, when
they
toured New Zealand Jim needed my father to get onto maraes
around New Zealand, he couldn't just walk on without my
father.
And he was brought up pretty much by my mum and dad, he lived
with my parents for many years,
hence the closeness between my
mum and dad and Jim.
Q. You refer to a close happy family tie, almost a
tribal tie at the time?
A. Yes. Mrs Elkington is the one that can clarify that. She was there
when all
this was done. She knows exactly what was said, she was
with my mother at the time, the whole family was a close knit
unit,
and now we are apart, which is sad.
[12] That is the family background to the Partnership's purchase of the
property.
The property was owned by Mr and Mrs Roach (in fact, only Mrs Roach was
registered proprietor). The Roachs had purchased
the property in 1978. The Ruruku
family became aware that the Roachs intended to sell the property. Although I am
unsure why perhaps
it was longstanding suspicion about the siting of the Roachs'
house this caused the Rurukus to have a survey done of the common
boundary
between the Roach and Ruruku properties. This survey disclosed that the Roachs'
bungalow style residence, set a little back
from the foreshore, was astride the
boundary. Somewhere between one-third and one-half of the house was actually on
the Ruruku property.
[13] Litigation over this encroachment ensued. I do not have the detail of this,
although I assume the Roachs applied for an order under s129 Property Law Act
vesting in them that
part of the Ruruku property onto which their house encroached.
[14] In the course of evidence, I asked Tama to explain to me
the commercial
rationale of Jim Elkington purchasing, for the Partnership, the property, on the basis
that Hazel and Pene could subsequently
buy it from the Partnership at cost price. In
the course of his answer Tama said this:
A. From what I understand (Jim)
Elkington done it for his uncle and
auntie, that was pretty much it, he just asked dad and mum would
they like it, we can get it real cheap now as the Roachs can't sell it
because of the encroachment, after the
survey I had done they had
no come back other than either to move the house, they couldn't buy
the
land, as Mäori Affairs said no, we cant sell it to Europeans, the
Council they went to the Council and they tried
to adjust the
boundary but the Mäori Land Court wouldn't let them do that as
they are not of the
blood and its inherited Mäori land, rather than let
someone we didn't know move in on the end of our flat where the
house is, is just to put it back into Mäori land. If we bought it.
...
Its no gain
for us really, we could let it go but Elkington and our
family didn't want Tom Jones moving in, the Roachs were trying
to
sell it to all sorts of people, as soon as they found out about the
encroachment it fell through.
I guess because it was on our land
hence the deal. The Elkingtons bought two other properties next to
that one. We were shutting it out from Europeans moving in there.
And Americans, Chinese.
[15] The solution
to the encroachment litigation between the Roachs and the
Rurukus was the agreement that the Partnership purchase the Roachs' property
for
$155,000. All parties accept that this agreement was reached orally on the wharf
serving the Roachs' property in late October
1998. The precise date is uncertain.
Present were Jim, Pene, Tama, the Partnership's solicitor Mr Michael Gilbert, Mr
and Mrs Roach
and their solicitor, Mr Tim Harley.
[16] The written agreement for sale and purchase which followed is dated 22
January 1999.
[17] Although I do not have evidence as to the value of the Roachs' property at
the time (whether with or without the benefit
of the s129 order the Roachs were
apparently unable to obtain), it is agreed that $155,000 was a very favourable price
from the Partnership's
viewpoint. In short, it seems that in selling at that price the
Roachs "cut their losses".
[18] Following the oral agreement
made on the wharf in late October 1998, both
solicitors and Mr and Mrs Roach left by boat or boats, the solicitors at least to return
to Nelson.
[19] The various members of the Elkington and Ruruku families then moved up to
the Roachs' house for a drink and
a chat. The families call this house "the Blue
House", and I will adopt this description.
[20] It is in the course of that family
gathering at the Blue House that Tama says
Jim Elkington made the representation giving rise to issue (1) in this proceeding.
Hazel
also recalls Jim making a representation, but her recollection of it differs from
Tama's.
[21] Present at the family gathering
at the Blue House were Jim, Jim's wife Tui
(also called Rose), Pene, Hazel and Tama. Pene died in May 2001 and Jim on 19
February
2006.
[22] I have now heard evidence from all the surviving family members/partners
who were at that family gathering.
[23]
I have also heard evidence from Mr Michael Gilbert. He was the
Partnership's solicitor at the time, and he continued
to act for the Partnership over
the ensuing years, at least until Jim's death in 2006. Mr Gilbert produced what
documentary evidence is available relating to the
representation allegedly made by
Jim.
[24] I will now outline the oral and documentary evidence, and then make my
findings of
fact.
The oral evidence
Hazel
[25] Hazel's evidence-in-chief was this:
Q. ... then you went to the Blue House
after that for a cup of tea?
A. Yes. We discussed there, Jim says and Rose, that the house is
bought for
auntie and uncle, that's me, I'm auntie, and my son
(Tama) says when the time is right can we buy you out, he said
yes,
and so that's the understanding I have as far as I know of that day.
...
Q. Was there
any discussion about how long that was going to take, you
said just now that Jim agreed you could buy him out, any
time limit
put on that?
A. No. I gathered from his statement they bought the house for my
husband and I, auntie and uncle, and I could live there for as long as
I wanted, it was bought for us, it was my house
I figured.
Q. Recall the agreed price of the Blue House?
A. I can't remember. I can't remember, I am not
going to make a
statement that ... might be wrong. You are taking me back a bit. I
do recall we got the
Blue House for less than the Roachs wanted, but
I can't tell you right now how much they accepted from us. ...
(2/7-25)
[26] The following parts of Mr Roose's cross-examination of Hazel are relevant:
Q. It was Tama your son
who said when the time is right can we buy
you out?
A. Yes.
Q. Are you sure?
A.
Yes. Tama did say that to Jim. When the time is right can we buy
you out, he said yes and put in, give you what you
put into it, he said
yes, however there's nothing written on that.
Q. Its not what you said in your affidavit?
A. What did I say?
Q. Don't you remember what you said in your affidavit?
A. No. I don't know
if that's a fair question right now because it's a
long time since I wrote that.
(3/24-31)
...
Q. I put it to you, the most you can say was said, was Tama asking Jim
if at some stage your family could buy
him out?
A. Right. I agree with that. That's right.
Q. There was no suggestion that it would be for the
price the Roachs
got?
A. I need to explain why we did take it, because of the encroachment
nobody wanted the place, it suits us as Jim said to buy it because of
the encroachment of the land, nobody wanted
the problem, so he
suggested it would be best in our interests to buy it through the farm
...
(7/26-33)
[27] I then questioned Hazel myself.
Q. ... tell me again as carefully as you can, your recollection of
what
Tama said to Jim?
A. My recollection is that he asked Jim that when the time is right can
we buy you out, he said yes. That's as much as I remember. When
the time is right.
Q. Do you remember
where you were, sitting inside, out on the deck, or
what?
A. Inside at the kitchen table.
Q.
Do you remember what Jim said in reply to Tama?
A. He said yes. When the time is right. Yes he said.
Q.
If that's all that was said, that is yes, when the time is right you can
buy me out, that's in practical terms the
Ruruku family buying out
the Elkington family, if that's all that was said it doesn't say
anything about
the buy out price?
A. No.
Q. Why we are in court today is a big difference between $155,000 that
you paid the Roachs and what the property is worth today, you know
that?
A. Yes.
Q. Its complicated by the boundary encroachment, but we'll just leave
that to one side. Can I take it that there's nothing in your
recollection of what was said by Tama to Jim or by Jim
to Tama that
helps me as the Judge decide that question about price?
A. There was no question on price
when they talked to each other.
While we were there.
Q. No discussion?
A. No discussion on
price. Except I don't want to say something I
can't remember, but there was no discussion on price. We figured in
all fairness of whatever was put in on his behalf that we would
reimburse him that back, that's our
feelings, today's world is another
thing. I am sure if he was here today he would honour that.
10/23-11/6)
Tama
[28] Tama's evidence-in-chief was:
Q. ... after the meeting on the wharf and you went up to the house for
a
cup of tea, something to eat, there was discussion about the house?
A. After we had the decision made
down below with Mr Gilbert and
Jim, my father, mum and myself, we went up to the other house, Jim
handed
the key over, we went in, I asked while we were sitting
there, I said to Jim, is it, are we going to be able to buy
this house,
just like its said in there, what would the story be on us buying the
house off of the farm,
his answer was once the farm starts paying we
pay to Jim half of what we had borrowed to purchase the house,
that's the actual statement said by Jim, we have to pay half of what
was owing, if we borrowed $150,000 or
$151,000 or borrowed,
don't recall exactly, from the bank, once the deal was done we never
heard anything
from Mr Elkington after that other than what I said.
Q. There was no other time limit put on?
A. No time
limit, he just said when the farm was paying and we start
receiving funds from the farm we could settle with Jim our
half of
the monies borrowed.
Q. Who was there at the Blue House meeting?
A. Rose, Jim, my father,
my mother, and myself.
Q. Jenny?
A. I think she went back home, don't remember if she was even in the
start of it when we went and spoke with the Roach family to do the
deal. Michael Gilbert had gone back already
with another lawyer
representing Harley, don't know if he took him back to Nelson or to
the Pass, don't
know what happened after they left.
(13/16-37)
[29] And under cross-examination by Mr Roose:
Q. We agree on
this, you didn't do anything about purchasing the
property from the Partnership?
A. We talked to Mr Elkington
after he offered it to my folks, I said can
we buy it from the farm, hence he said when the farm starts paying
and you receive some we could buy it from him at half the cost, we
would have to give him half the money
we borrowed, $150,000 or
$151,000.
(19/24-28)
...
Q. You talk of there being no time
limit when you gave evidence
yesterday, said there was no time limit?
A. I said that?
Q.
Is it your evidence to His Honour that if you had left it another 10-
15 years beyond even now do you say you believe
you would still be
able to step in and require what it is you are asking for now?
A. Elkington said to
you when we start receiving funds from the farm
when never came, a lot of money went through in those first years
and we haven't seen any of it, neither have we seen
the last of it.
(19/35-20/3)
...
Q. So, do you say to the Court its reasonable for you to have sat
back
and done nothing since that first conversation and now expect to be
awarded that property based
on the price paid for it back then?
A. We have done everything to the house, no partnership ever helped.
Q.
Apart from that?
A. You can't say I have done nothing.
Q. I am talking about buying it?
A.
We want to buy it, but we never got any money from Elkington, he
hasn't given us the funds we are owed so we can
pay him out.
(20/13-19)
Jenny
[30] In her evidence-in-chief Jenny said she had no recollection of being at the
family
discussion in the Blue House in October 1998. I questioned her about that:
Q. Going back to the meeting we have heard
so much about on
D'Urville Island, your memory is just a blank as to if you were there
or not?
A. I'm pretty sure I wasn't, I had a young child at the time, which kept
me occupied.
Q. Can I
take it its likely you would remember if you had been there?
A. Yes.
(38/24-28)
Rose
[31] Rose had been
required for cross-examination when the hearing of this case
began in Blenheim late in November. Rose was not at Court, her counsel
furnishing
a medical certificate dated 23 November stating that Rose was suffering from
depression, and would find a Court appearance
unsettling and distressing.
[32] Notwithstanding that, at Mr Freeman's insistence I gave a direction that Rose
make herself available
for cross-examination at the High Court at Nelson on 10
December. I did that because Mr Freeman said his instructions were that,
if required
to give evidence, Rose would be obliged to confirm Tama's account of the
representation made by Jim Elkington.
[33]
Rose duly attended and was cross-examined by Mr Freeman. It rapidly
became clear that Rose, who did not look well, genuinely had
no recollection of the
relevant events. Her position is captured by this question and answer, the last one I
put to her:
Q. Do you remember anything of the day when all of you in the
Partnership agreed to buy the Blue House from the
Roachs?
A. No. Sorry.
(39/38-40/2)
Mr Gilbert
[34] Mr Gilbert has also given evidence. He agrees he left
in his boat after
agreement had been reached, and was not at the lunchtime get together at the house.
His recollection is that Jim
approached the purchase of the Roach property in the
same businesslike manner that he took to all business dealings. Mr Gilbert
states
that Jim viewed the purchase of the Roach property as an investment for the Trust as
well as a means to assist Hazel and Pene
into a house on D'Urville Island next to the
farmhouse on the adjoining Ruruku land. Mr Gilbert says that the purchase price,
which
included a mooring, a wharf and some sheds was heavily influenced by the
boundary encroachment issue. He said that no discussions
took place that day in his
presence as to any on-sale of the Roach property to Hazel and Pene.
[35] Mr Gilbert considers that
the representation alleged by Hazel and Tama is not
consistent with Jim's subsequent conduct over the ensuing seven years until his
death. Mr Gilbert's evidence can be summarised in the following way:
a) Relations between the surviving partners started
to deteriorate
following Pene's death in May 2001.
b) One of the factors contributing to this was Mr Gilbert's
realisation,
after Pene's death, that he had incorrectly registered the Partnership
property as to a
one-third share in the names of Jim and Rose, one-
third to Pene and Hazel and one-third to Tama and Jenny. Although it
is now accepted that the correct shares
are one-half, one-quarter and
one-quarter respectively, it was not when Mr Gilbert first discovered
his
error. Amongst the papers on Mr Gilbert's file is a draft letter,
dated 18 December 2001 but never sent, addressed
to Hazel, Tama
and Jenny. It draws the mistake just mentioned to their attention and
continues:
Jim instructs me that he and Rose are prepared to transfer
their one-half share (of the property)
to Hazel, Tama and
Jenny and would like that transaction to happen sooner
rather than
later. Such sale would be at the current value.
c) There is a handwritten letter from Jim on Mr Gilbert's file. Although
undated the content of this indicates that Mr Gilbert probably received
it in the early part of 2002.
After noting that he is enclosing $10,000
"for house mortgage" Jim continues:
The Ruruku have asked could
they buy my 50% share of the
house. I have agreed I would, the sooner the better. The
longer this is left
the more it will cost them. I would like a
copy of all cost for the house to December 2001. I would
suggest
Ruruku pay me what it has cost me and transfer the
mortgage to the Ruruku. I would also like first opportunity
if they do sell in future and a clause on the mussel farm
giving each partner the opp to purchase. Jim.
d) Mr
Gilbert has two file notes dated 1 and 27 May 2002, and a third
undated (which Mr Gilbert can only date as between 2001/2002
and
Jim's death in 2006). The 27 May file note records:
I received a telephone call from Jim Elkington that during
the weekend he told Hazel and Tama that the Partnership
was at an end ...
The file notes are also consistent
with Jim telling Mr Gilbert that
Hazel and Tama were either trying to take over the mortgage
payments on the property,
or block Jim making any more without
their consent, and with Jim countering his instructions to Mr Gilbert
as to the dissolution
of the Partnership, presumably in the hope that a
solution could be negotiated. The undated file note records:
Half of the house. JE agreed to sell house share. Thinks this
should be done sooner than later i.e. now ... Trick is
Jim has
paid half of house and wants his money out as a half share.
e) Having acknowledged that the Partnership's
property was registered
in the incorrect shares, Hazel failed to call in to Mr Gilbert's office to
sign the correcting
transfer, despite numerous requests to do so
including in April and June 2003.
f) On 23 September 2003 Hazel telephoned
Mr Gilbert. Included in his
file note of the conversation is:
(Hazel) wants to take house payments on ... value
of land ...
Hazel wants a settlement ...
g) On 12 September 2004 Jim rang Mr Gilbert from Ward 5 in Blenheim
Hospital, where Jim was at the time. Mr Gilbert's file note includes:
Just got a letter re Madson Marine
Partnership. T & H to
have north half of mussel farm. House block to go to Hazel
& Tama and Jim to be compensated. ... Wants house value
found.
h) Mr Gilbert has on file
an 8 September 2005 letter from Tama
(purporting to sign for himself and Jenny) and Hazel addressed to Jim:
Kindly note that we, the undersigned, wish to dissolve the
Partnership. As agreed,
Tama and Hazel are to have the
northern half of the mussel farm. The house block is to be
transferred to Hazel and Tama and you are to be
compensated for payments made during Hazel's occupation
of the house block (that is,
the land and title no. NL2C
(612)).
[36] Following Jim's death in February 2006 there were meetings
between the
surviving partners, the first on 20 March, the second on 20 April. To the affidavit
sworn on 2 February, Jim's son Carl
Elkington annexes his file note of the 20 March
2006 meeting he attended with his mother Rose, Tama and Hazel. His note contains
a summary of Tama's concerns including:
...
2. Checking for payment of $50,000 to Ngati Koata and how
this was
paid. Also $14,000 paid to George Elkington. What was this for
and how was it repaid?
3. ...
4. The house and land assets to Madson Marine. Auntie (Hazel) and
Tama have
upgraded the house and land and want some
consideration for this as well as a verbal understanding that Hazel
and Tama could pay back to Jim Elkington 1/3 the value of the
house and land at the time of purchase.
Findings of fact
[37] On the basis of the evidence received, both the oral evidence of the witnesses
I heard and the available
documentary evidence, I make the following three findings
of fact.
[38] First, at the family gathering at the Blue House
late in October 1998 Jim did
represent to Hazel and Pene that they could buy the property just acquired by the
Partnership from
the Roachs at the price the Partnership was paying for it, when the
Partnership's mussel farm started paying i.e. producing income
for the partners.
[39] I make this finding because I accept Tama's evidence. I found him a credible
and reliable witness. Further,
his evidence was largely supported by Hazel, who I
also found to be a thoroughly credible witness. Although Hazel had no recollection
of any discussion about the price at which she and Pene could buy the property from
the Partnership, she recalled Jim saying that
they could buy out his share "when the
time is right".
[40] This first finding is also supported by Jim's own undated note to
Mr Gilbert,
set out in [35]c) above. Although that note is slightly equivocal, it records Jim
agreeing to the Ruruku buying his 50%
share and his suggesting "Ruruku pay me
what it has cost me and transfer the mortgage to the Ruruku".
[41] Second, the Ruruku
partners did approach Jim in or about January 2001 to
buy out his half share of the property.
[42] I make this second finding
because it is evidenced by Jim's handwritten letter
just referred to. Although that letter is undated, I find it was written by Jim
shortly
before 19 January 2001. Mr Gilbert reopened his office on that day, and deposited
into his trust account the $10,000 Jim
had enclosed with his note.
[43] Further, and significantly, that letter was sent by Jim at almost exactly the
time the Partnership
completed re-paying its loan to the National Bank, releasing its
future income for distribution to the partners, and making the buy
out affordable for
Hazel and Pene. The Partnership had borrowed $330,000 from the National Bank on
15 December 1997 to meet the capital
costs of setting up its mussel farm. The
Partnership made the last repayment on that loan, reducing it to a nil balance, on 5
January
2001.
[44] Third, beyond that approach in or about January 2001, I find that the Ruruku
partners did not, until after this proceeding
was commenced in October 2006, take
any steps to pursue or effect the buy out. The evidence about that is Tama's, as set
out in
[29] above (notes 19/25-33 and 20/18-20).
Decision
Issue 1
[45] Issue 1 arises because Hazel and Tama assert that the
buy out representation I
have found Jim made raises an estoppel. They claim Rose (and also Jenny, who
supports Rose's claim) is estopped from seeking, in the course
of the dissolution and
winding up of the Partnership, a distribution of its assets, including the D'Urville
Island property, in accordance
with the (half, quarter, quarter) shares stated in the
Partnership agreement.
[46] Although Hazel and Tama have argued for
a promissory estoppel, both
promissory and proprietary estoppel in New Zealand are subsumed by the general
doctrine of equitable
estoppel. That has been clear since the Court of Appeal's
judgment in Gold Star Insurance Co Ltd v Gaunt [1998] 3 NZLR 80, recently
reaffirmed by the Court in Juzwa & Rabinska v Hill CA214/05 1 June 2007. There
the Court of Appeal said:
[15]
Equitable estoppel operates to prevent a party from denying an
expectation which it had raised where to do so would
be unconscionable. In
Gold Star this Court said:
Before judgment can be given against the defendant on
the grounds
of estoppel, some action, or representation, or omission to act, must
have been carried
out by, or on behalf of, that defendant causing the
plaintiff to have acted in a manner causing loss.
Gold Star also disposed of any lingering suggestion that equitable estoppel
was only a shield, incapable of grounding
a cause of action.
[47] Earlier, in National Westminster Finance NZ Ltd v National Bank of NZ
[1996] 1 NZLR 548 (CA) Tipping J, delivering the Court's judgment, had
summarised the position in the following way:
The decisions of this
court in Wham-O MFG Co v Lincoln Industries [1984]
1 NZLR 641 and Gillies v Keogh [1989] 2 NZLR 327 have emphasised the
element of unconscionability which runs through all manifestations of
estoppel. The broad rationale
of estoppel, and this is not a test in itself, is to
prevent a party from going back on his word (whether express or implied)
when it would be unconscionable to do so.
...
Having considered the authorities we would venture to sum the
matter up in
the following way. There is a single doctrine of estoppel with a variety of
manifestations. For ease of
analysis it is convenient to examine the
particular ingredients of different manifestations but the underlying
conceptual
unity of the doctrine is important and should not be overlooked.
...
[48] A convenient summary of the elements of an equitable
estoppel is found in
para 16.2 in Butler's Equity and Trusts in New Zealand:
a) A belief or expectation created or
encouraged through some action,
representation, or omission to act, by the party against whom the
representation
is alleged;
b) The belief or expectation has been relied on by the party alleging the
estoppel;
c) Detriment will be suffered if the belief or expectation is departed
from; and
d) It would
be unconscionable for the party against whom the estoppel is
alleged to depart from the belief or expectation.
[49]
I do not consider Hazel and Tama have established these elements, in
particular c) and therefore d). As to c), the position is
that Hazel and Pene lived in
the house on the property rent free from January 1999 until Pene's death in May
2001, and Hazel has
continued living there alone rent free. In recent years, she has
only gone to the house occasionally. She has a kaumatua flat on
the Whakatu Marae
in Nelson and, at her age (she is 83), finds that a warmer and more comfortable home
for most of the year.
[50]
Although Pene and Hazel may have paid rates and insurances on the
property, the Partnership's accounts show those as Partnership
expenses, indicating
that Pene and Hazel were largely reimbursed by the Partnership. Any non-
reimbursement of Hazel
can be attended to.
[51] I accept that, in or around March 2006, Tama organised for renovations to be
made to the Blue House
and also to the wharf serving it. The cost of those
renovations was not in evidence. Again, Hazel and Tama can be reimbursed
for that
expenditure, which is comparatively recent and is documented.
[52] I cannot see how Hazel and Tama can point to detrimental
reliance on Jim's
representation. As I view it, they have enjoyed nine years of rent free occupation of
the property, and have been
reimbursed for most of the outgoings they paid. To the
extent that they have not been reimbursed, that can still be done. They can
also be
reimbursed for the renovation work Pene arranged to be carried out in the early part
of 2006.
[53] I should add that
I prefer the reliance-based measure of detriment to an
expectation-based remedy. The former avoids elevating non-contractual promises
to
the level of contractual promises. A reliance based remedy here would involve
compensating Pene and Hazel for their wasted effort
and cost in maintaining the
property and paying the outgoings on it, but overall equity and justice may demand
fixing a rent or occupation
charge which, I think, could not be less than the payments
Pene and Hazel have made on the property. I was provided with a report
dated 23
November 2007 by the plaintiffs' valuer, assessing the current weekly rental value of
the property at $300 inclusive of
GST if any. Despite asking that this report indicate
the rental values over the nine years since the Partnership purchased the property,
it
does not do so.
[54] I did not understand Hazel and Tama to assert that the fact that they have not
been able to buy out Jim's
half share of the property at cost is, in itself, detrimental
reliance. I would have rejected any such argument, because of my finding set out in
[44] above. Beyond the Ruruku approach recorded by Jim in his January 2001 note
to Mr Gilbert, there is no evidence that the Ruruku
partners took further and proper
steps to enforce the buy out right they claim to have.
[55] Turning to element d), I am firmly
of the view that it is not unconscionable
for Rose now to take the position that the buy out right is spent. All the available
evidence
indicates that Jim indicated the buy out right should be exercised when the
mussel farm began paying income to the partners, and
that the Ruruku partners
understood this.
[56] The buy out opportunity, while raised by the Ruruku partners early in 2001,
was
not pursued by them. In the interim, the value of the property has increased very
substantially. The equity and conscionability
of the present situation is firmly
against allowing Hazel and Tama now to raise an estoppel against Rose and Jenny.
[57] That
can be convincingly demonstrated by looking at the position from
Jenny's viewpoint. She has a one-eighth share in the Partnership
(or, strictly a joint
interest with Tama in a one-quarter share). She and Tama had married in February
1995. As mentioned, she had
a young child around the time the property was
purchased. (The two children of her marriage to Tama were aged 9 and 5 when she
made
her affidavit in February this year.) She and Tama separated in July 2002 and
their marriage was dissolved in September 2005. Her
interest now, as a partner, is to
maximise her take-out from the Partnership. She clearly was not consulted about the
decision of
the Partnership to buy the D'Urville Island property. That emerged from
the following part of her evidence:
Q. What
was your understanding of the basis of occupation of the Blue
House by Pene and Hazel?
A. I understood
it was being purchased by the mussel farm and it would
be the same shares as the mussel farm was set up as, that's
the
agreement I signed, initially Tama and I looked at buying the
property, that's why we did bring
the surveyors in and the valuers
and that was paid out of our partnership accounts JT Holdings, but
we couldn't afford to do that and the next I knew I was told the
mussel farm was buying the property and Hazel
and Pene would be
moving into the house and Tama and I would stay in the other
house.
Q.
Were you aware on what basis they moved in?
A. There were a lot of arrangements made without me being a party
to
the initial discussions.
(36/8-18)
[58] Not only does equity and conscionability not require that
Hazel and Tama be
able to exercise now the buy out right, but such exercise would be acutely unfair to
Jenny.
[59] Accordingly,
I hold that Rose is not estopped in the manner asserted by Hazel
and Tama. I answer issue 1: No.
Issue 2
Jurisdiction
[60]
Section 129 Property Law Act 1952 provides, relevantly:
129 Power of Court to grant special relief in cases of
encroachment
(1) Where any building on any land encroaches on any part of any
adjoining land (that part
being referred to in this section as the piece of land
encroached upon), whether the building was erected by the owner
of the
first-mentioned land (in this section referred to as the encroaching owner) or
by any of his predecessors
in title, either the encroaching owner or the owner
of the piece of land encroached upon may apply to the [[High Court]],
whether in any action or proceeding then pending or in progress and relating
to the piece of land encroached
upon or by an originating application, to
make an order in accordance with this section in respect of that piece of land.
(2) If it is proved to the satisfaction
of the Court that the encroachment
was not intentional and did not arise from gross negligence, or, where the
building was not erected by the encroaching owner, if in the opinion of the
Court it is just and equitable in the circumstances
that relief should be
granted to the encroaching owner or any other person, the Court, without
ordering the encroaching
owner or any other person to give up possession of
the piece of land encroached upon or to pay damages, and without granting
an injunction, may in its discretion make an order--
(a) Vesting in the encroaching owner or any other person
any estate or
interest in the piece of land encroached upon; or
(b) Creating in favour of the encroaching
owner or any other person any
easement over the piece of land encroached upon; or
(c) Giving the encroaching
owner or any other person the right to retain
possession of the piece of land encroached upon.
(3) Where the
Court makes any order under this section, the Court may, in
the order, declare any estate or interest so vested to be free
from any
mortgage or other encumbrance affecting the piece of land encroached upon,
or vary, to such extent as
it considers necessary in the circumstances, any
mortgage, lease, or contract affecting or relating to that piece of land.
(4) Any order under this section, or any provision of any such order, may
be made upon and subject to such terms and
conditions as the Court thinks
fit, whether as to the payment by the encroaching owner or any other person
of any sum
or sums of money, or the execution by the encroaching owner or
any other person of any mortgage, lease, easement, contract,
or other
instrument, or otherwise.
(5) Every person having any estate or interest in the piece of land
encroached upon or in the adjoining land of the encroaching owner, or
claiming to be a party to or to be entitled to any
benefit under any mortgage,
lease, contract, or easement affecting or relating to any such land, shall be
entitled
to apply for an order in accordance with this section, or to be heard
in relation to any application for or proposal to make
any order under this
section. For the purposes of this subsection the Court may, if in its opinion
notice of the application
or proposal should be given to any such person as
aforesaid, direct that such notice as it thinks fit shall be given to that
person
by the encroaching owner or any other person.
...
(8) Any order under this section may be registered
as an instrument under
the Land Transfer Act 1952 or the Deeds Registration Act 1908 [or Part 1 of
the Crown Minerals
Act 1991], as the case may require.]
[61] As Hardie Boys J recognised in Blackburn v Gemmell (1981) 1 NZCPR 389
at 393, s129(2) creates an exception to the principle of indefeasibility of title, and the
section thus ought to be applied with
caution, any order doing no more than is
necessary to achieve the purposes of the section.
[62] Here, the encroaching building
was not erected by the encroaching owners
i.e. by the Partnership. The Court's jurisdiction is thus a discretionary one to make
one
of the orders set out in s129(2) "if in the opinion of the Court it is just and
equitable in the circumstances that relief should
be granted ...".
[63] A possible complication raised by Mr Freeman is as I mentioned in [1](2)
above - that Pene's land is
now (again) Mäori freehold land. Mr Gilbert's search of
the title to Pene's land (NL2B/450 Nelson Land Registration District) on
20
November still showed Pene's land as general freehold land. However, this is
because the Mäori Land Court appears not to have
conveyed to the Nelson Land
Registry the order made on 19 September 2007 by Judge Wainwright in the Mäori
Land Court at Nelson
changing the status of Pene's land from general to Mäori
freehold land.
[64] Section 24 of the Te Ture Whenua Mäori Land Act
1993 empowers the
Mäori Land Court to exercise, with respect to Mäori freehold land, all the powers
conferred on the High Court by
s 129.
I consider that the jurisdictional position is that the High Court can make
[65]
orders under s129 in respect of
all land, whether it be general or Mäori freehold land,
and that the Mäori Land Court has jurisdiction to make s129 orders in respect
of
Mäori freehold land.
[66] It follows from this that I do not accept that the s129 jurisdiction as it applies
to Mäori freehold
land lies exclusively with the Mäori Land Court, where the
encroachment also involves general land. If that were the position it
potentially
creates a "Catch-22" situation whenever a s129 order is required, affecting both
general and Mäori freehold land lying
on either side of a boundary. Neither Court
would be able to provide a complete solution; application would need to be made to
both
Courts, and the first Court applied to would not know what the decision of the
other Court might be. I do not accept that such an
unsatisfactory position represents
the legislature's intention.
[67] There is nothing in the Property Law Act or the Te Ture
Whenua Mäori Act
excluding Mäori freehold land from the purview of s 129. I also note that the
Property Law Act 2007, due to come
into force on 1 January 2008, while it expressly
does not apply to Mäori customary land (s 8), does not exclude Mäori freehold land.
[68] I do accept that the High Court might decline to exercise its jurisdiction
where the order sought involved difficult questions
affecting Mäori freehold land,
which could adequately be dealt with only by the Mäori Land Court. That is not this
case.
[69]
Accordingly, I assume jurisdiction to make the orders sought by Rose.
Should those orders be made?
[70] I have been troubled
by this aspect. The Partnership acquired the property
because it was intended that Hazel and Pene live in the house on the property
and
buy the property from the Partnership "when the time was right". Unlike other
prospective purchasers, the Partnership was therefore
not concerned by the fact that
the Blue House encroached onto Pene's adjoining property and was able to buy the
property at a price
well below market value, because of the encroachment.
[71] Given that background, is it now appropriate that I make all or
any of the
s129 orders sought? Those orders will enable the Partnership to sell its property on
the open market. The benefit of that
open market price will accrue to all the
partners, not just to the Ruruku partners (Hazel and Tama). Yet the purchase by the
Partnership
at the discounted price came about because of Ruruku.
[72] In the end, my conclusion is that I should make an order under
s129. I have
reached that decision for two reasons. First, this encroachment needs to be tidied up.
It has caused problems in the past, and it has the potential to do so in the future
if not
put right. A situation where a house encroaches substantially onto the adjoining
property ought not to be left unremedied,
where a remedy is available and has been
sought.
[73] Second, Hazel and Pene, and latterly Hazel alone, did have the right
to buy
the property from the Partnership at cost. Although Ruruku sought in early 2001 to
exercise that right, they did not follow
through on it and I have held it is now lost to
them. I do not think it unfair to visit on them the financial consequences of that
lost
opportunity. Those consequences will be that, if they still wish to buy the
Partnership's property, they will have to do
so at its current value, if they can afford
that. If they cannot, then they will benefit from their share (three-eighths) of the
proceeds of the sale of the property at its current market value.
[74] Accordingly, I answer issue 2: Yes (to jurisdiction),
and Yes (to exercise of
that jurisdiction).
[75] What orders should I make? Rose seeks an order vesting in the Partnership
that
piece of Pene's land encroached upon by the Blue House. That is an appropriate
order which I will make.
[76] Rose then seeks
a further order vesting an equivalent piece of the
Partnership's land in Pene or, more strictly, in whoever is entitled now to be
registered as proprietor(s) of Pene's land (the land contained in Certificate of Title
NL2B/450 Nelson Land Registration District).
As I held in Anchorage Holidays Ltd
v Stevenson (2006) 5 NZ ConvC 194,304 at [145], such an order is not a form of
relief available under s 129(4). The common form of reciprocal relief is to order the
payment of a compensating sum of money. I would grant that relief here, if the piece
of land encroached upon had any value to the
Ruruku land. In his 27 September
report, Mr Hayward assesses that the piece of land (which has an area of .018
hectares) has a nil
value in terms of NL2B/450. Although Mr Hayward does not
explain why, it is doubtless because that piece of land represents an insignificant
part
of Pene's land in every respect. Measured against the 44.8619 hectares contained in
NL2B/450, its area is insignificant. In
terms of its utility to the Ruruku land, it is
insignificant. The aerial photograph at p2 of Mr Hayward's valuation report shows
that the encroachment land is at the very southern tip of the Ruruku land, well away
from the flat area around the Ruruku homestead,
which lies on either side of the
stream bisecting the Ruruku land. That area of flat land is the centre point of the
Ruruku property.
[77] By contrast, the value of the encroachment land to the Partnership's land is
significant. As I have pointed out, without
that land the Partnership's land is worth
$605,000, but with it $650,000. Further, if no s129 order is made, with the
consequence
that the Blue House has to be demolished, then the value of the
Partnership's land drops to $425,000. The reason for these
different values is
explained by this passage at p11 of Mr Hayward's valuation report. He is referring
to the site on which the Blue
House stands:
The present building site is, to our untrained eye, the best site on the block
and we were unable to
see another site which is likely to obtain engineering
consent for residential activity. That being the case the block would
revert
to camp-site value, the next highest and best use at approximately 10% of
present value stated above.
[78]
In my view, the Ruruku are adequately compensated for the effect of the s
129 order by their share of the increased value of
the Partnership's land. If I make a
s 129 order, both the Elkingtons and the Ruruku benefit by virtue of the greater value
of the
Partnership land with the Blue House sited wholly on it, unencumbered.
Conversely, were I to decline to make the order, the Ruruku
would neither gain nor
lose. In those unusual circumstances, it is appropriate to make a s 129 order without
ordering compensation
to the defendants.
Result
[79] I hold that the defendants are not now entitled to buy the Partnership's
property on D'Urville
Island at its cost price to the Partnership.
[80] I make the following orders under s129 Property Law Act 1952:
a) An order vesting in the proprietors of Certificate of Title NL2C/612
Nelson Land Registration District that
piece of land presently
included in Certificate of Title NL2B/450 which is encroached upon
by the
Blue House. The piece of land to be vested is to be that shown
on Plan 5921 "Possible Subdivision of Lot 1 DP 7187
Catherine
Cove" prepared by Gourdie & Ward Ltd, Registered Surveyors, and
dated November 1995.
b) An order that the proprietors of NL2B/450 permit access to the land
encroached upon for the purpose
of having it surveyed.
c) An order that the Partnership pay the costs of the survey and of the
preparation,
execution and registration of the documents necessary to
give effect to order a).
d) An order that,
if any person(s) who is required to execute the
documents referred to in order c) fails to do so within a month of
a
request for such execution, that the Registrar of this Court at Nelson is
to execute that document(s)
in their stead.
Leave
[81] Leave is reserved to all parties to apply in respect of the order made in [80]a)
above, should difficulties arise in giving effect to it.
Costs
[82] Costs are reserved. Any party seeking an order as to costs may apply.
[83] In the hope that it assists the
parties to agree costs, I indicate that, failing
agreement, I am likely to order that the costs of the plaintiffs and Jenny's costs
be
paid by the Partnership before distribution of its assets. That order is more
favourable to the defendants than the usual
order, that costs follow the event of the
proceeding i.e. here, an order that the defendants pay the plaintiffs' costs and those
of Jenny.
[84] Costs on a 2B basis, plus disbursements as fixed by the Registrar failing
agreement, are appropriate.
Solicitors:
M Gilbert, Nelson for Plaintiff
W F Freeman, Nelson for Second and Third Named Defendants
P Genet, Nelson for Fourth Named Defendant
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