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OOSTERHUIS V SAETRUM HC WN CIV-2004-485-813 [2007] NZHC 416 (2 May 2007)

IN THE HIGH COURT OF NEW ZEALAND
WELLINGTON REGISTRY
                                                                    CIV-2004-485-813



               BETWEEN                     PIET HEIN OOSTERHUIS
                                           Appellant

       
       AND                         KJERSTI SAETRUM
                                           Respondent


Hearing:       14 March
2007

Appearances: D G Dewar for Appellant
             A Gray for Respondent

Reissued:      2 May 2007         : see Memorandum
to Counsel of 2 May 2007

Effect ive date of judgment: 4 April 2007 at 3.30pm




                   RESERVED JUDGMENT OF GENDALL
J



[1]    This is an appeal from a judgment of the District Court at Wellington
delivered on 1 March 2004 declining to strike out
a claim brought by the respondent,
(plaint iff), against the appellant, (defendant) seeking compensation for her interest in
property
acquired during a de facto relationship between the appellant and
respondent. The appellant had argued, as a preliminary issue, that
the respondent's
claims were barred by the Limitation Act 1950 having been brought more than six
years after the date upon which
the parties separated.


Background


[2]    The parties lived in a de facto relationship for approximately seven years
ending on
2 October 1995.



OOSTERHUIS V SAETRUM HC WN CIV-2004-485-813 2 May 2007

[3]    The appellant owned a home prior to the relationship
commencing and the
respondent in her statement of claim alleged that she made contributions to the
relat ionship and to the home
in the form of money, services, household expenses,
meet ing children's needs, assisting in renovations and similar. She pleads that
the
appellant held her share in the home and the balance of property acquired during the
relat ionship in part for her benefit by
way of a constructive trust.


[4]    She further pleads that in 1993 she provided funds to enable the appellant to
pay off a loan
that he had incurred to a third party and that, when the de facto
relat ionship ended, the appellant agreed that he would repay the
amount of the loan
plus interest totalling $10,000.


[5]    The preliminary point argued before Judge Henwood was whether the
provisio
ns of the Limitation Act 1950 provided an absolute bar to the claims by the
respondent.


[6]    The Judge held that the respondent's
action was to recover property held
pursuant to a trust and accordingly the provisions of s21(1)(b) of the Limitation Act
1950 applied
and there was no limitation period applicable to such a claim.


[7]    Secondly, the Judge concluded that in the debt action, the
evidence would
establish whether or not the appellant had acknowledged the debt during the
limitation period and if, as a matter
of evidence, that was established, the claim
would not be statute barred.


Statutory provisions


[8]    Section 21 of the Limitation
Act 1950 provides:

       "21    Limitation of actions in respect of trust property

       (1)     No period of limitation prescribed
by this Act shall apply to an
       action by a beneficiary under a trust, being an action--

               (a)     In respect
of any fraud or fraudulent breach of trust to which
                       the trustee was a party or privy; or

              
(b)      To recover from the trustee trust property or the proceeds
                        ther eof in the possession of the trustee,
or previously
                        received by the trustee and converted to his use.

       (2)     Subject as aforesaid, an
action by a beneficiary to recover trust
       property or in respect of any breach of trust, not being an action for which a
 
     period of limitation is prescribed by any other provision of this Act, shall not
       be brought after the expiration of 6
years from the date on which the right of
       action accrued:

       Provided that the right of action shall not be deemed to
have accrued to any
       beneficiary entitled to a future interest in the trust property until the interest
       fell into possession.

       (3)     ...."

Counsel's
contentions


[9]    Counsel for the appellant argued that the cessation of the relationship
triggered the commencement of a limitation
period and, as the proceedings were
commenced more than six years after that date, they are statute barred. It was
contended that
the effect of the ruling if upheld would be that a former partner of a
de facto relationship would, without limitation have a right
to seek remedy by
pleading a constructive trust and that the law ought not countenance such limitless
right. The concept of the respondent
seeking relief through the "constructive trust
remedy" was said by counsel to have been confused by Judge Henwood because the
claim
was in effect, to seek equitable compensation or equitable damages despite a
constructive trust being pleaded. The appellant submitted
that the true nature of the
respondent's claim had to be examined and, if this was done, it could be seen the
action was to seek
a remedial remedy by a de facto party claiming wrongful denial of
ent it lements arising from reasonable common expectations within
the relationship
period. That is, that a remedial constructive trust is imposed for a breach of a legal
or equitable duty by the
Court giving the trustee status to remedy a wrong but that
was not related to a trust; Official Assignee of Collier v Creighton 
[1993] 2 NZLR
534 (CA).


[10]   So, counsel contended that a remedial constructive trust is created by the
Court after an event as a measure of justice,
and as it comes into existence only upon
the declaration by the Court s21(1)(b) does not come into play. It is not an action to
recover
trust property or the proceeds thereof in the possession of the trustee.

Counsel submits that the respondent is actually claiming
that the appellant had been
unjust ly enriched, and that to deny her compensation would be unconscionable, but
that such a claim
is statute barred by reason of the provisions of the Limitation Act
1950, and is not a claim as a beneficiary under a constructive
trust.


[11]   Counsel for the respondent submitted that property in respect of which the
claim is brought is held by the appellant
who had not accounted to his former partner
for her beneficial interest in such property, and such interest arising because it was
held pursuant to a constructive trust. It was argued that there is no legitimate basis
for excluding constructive trusts from the
provisions of s21(1)(b), the proceedings
plead an orthodox constructive trust and not a remedial constructive trust, so that
period
of limitation arises.


Discussion


[12]   There is no dispute that the cause of action seeking to recover the alleged
loan should
not be struck out at this stage as it will be a matter for evidence at the
hearing whether the provisions of ss25(4) and 26 of the
Limitation Act 1950 have
been established so as to protect that cause of action from any limitation defence.


Is the first cause
of action barred by the Limitation Act 1950?


[13]   The pivotal question is whether the nature of the respondent's claim is for
mo netary relief or compensation based upon unjust enrichment through IT BEING
unconscio nable for the appellant to retain property
or, on the other hand, whether it
is an action to recover property in which the respondent has a beneficial interest
under a constructive
trust.


[14]   As pleaded it is an action to recover trust property. Whilst the prayer for
relief speaks of compensation for the
respondent for "her interest in the house and
other property" the pleadings make it clear that it is alleged that the property is
held
by the appellant on behalf of the respondent "by way of constructive trust".

[15]   Though it was contended on behalf of the
appellant that the decision in
Wilson v Webster  [2003] NZFLR 1079 (CA), applied in this situation, I do not
accept that proposition. That case concerned claims to property following the ending
of
a de facto relationship and the Court did not deal with the matter as a claim to a
beneficial interest under a constructive trust,
but on the quantum meruit basis.
Delivering the judgment of the Court Anderson J said at [31]:

       "The question of reasonable
expectation, reasonable yielding of interest, and
       quantification of that interest are more logically and justly related to
a
       restitutionary evaluation than to a proprietary interest in the property."

[16]   Those remarks must be seen, however,
in the context of the case because it
was undisputed that the parties in a de facto relationship accepted that it was one
where they
had made it clear that property and finances were to be kept separate as
between themselves. Each remained responsible for cash outgoings
in respect of
investment properties and kept personal income and outgoings separate and there
was an expectation that there would
be eventually an accounting between them.
Such circumstances do not fit well with the principle of constructive trusts.


[17]  
Circumstances giving rise to a claim for a beneficial interest in a constructive
trust are well known and are described by Tipping
J in Lankow v Rose  [1995]
1 NZLR 277 (CA) at 293-294:

       "In the usual case in this field the legal title belongs to one only of the
       for mer de facto partners.
That partner, the defendant, seeks to retain not
       only the legal title but the whole beneficial interest. The other partner,
the
       claima nt, seeks a beneficial interest.... in return for her contributions in and
       to the former relationship."

[18]   Although in the present case the appellant says the respondent is seeking a
compensatory sum based on alleged "unjust enrichment"
and/or a common intention
that she should have an interest in the property, these seem to be merely two ways of
referring to the
same thing. That is apparent from the further remarks of Tipping J in
Lankow v Rose (supra) where he said at 294:

       "The constructive
trust...can be executed, ie put into practical effect, by such
       mea ns as the justice of the case requires. The two most likely
means are
       either a vesting order or an order for the payment to the claimant of the
       assessed value of her beneficial
interest. I do not myself regard it as
       necessary to classify such a payment as equitable damages or equitable

       compensation.
I regard the payment as the means whereby the constructive
       trustee is required to implement the trust. The payment satisfies
the trust.
       [Emphasis mine]

[19]   The italicised words emphasise that whatever way a claim is perceived in a
case such as
this, it is the imposition of a constructive trust (which already exists in
equit y) that provides a remedy, because equity would
not allow a legal owner to
deny the claimant a beneficial interest. This is apparent from an assessment of this
area of law and other
jurisdictions: see the further remarks of Tipping J in Lankow v
Rose (supra) at 293:

       "The Canadian Courts have used notions
of unjust enrichment to underpin
       the imposition of a constructive trust: see Pettkus v Becker  (1980) 117 DLR
       (3d) 257; Sorochan v Sorochan  (1986) 29 DLR (4th) 1 and Peter v Beblow
        (1993) 101 DLR (4th) 621. In Australia the underpinning has come from
       notions of unconscionable conduct: see Muschinski v Dodds [1985] HCA 78;  (1985) 160
       CLR 583 and Baumgartner v Baumgartner [1987] HCA 59;  (1987) 164 CLR 137. In
       New Zealand we have founded the imposition of a constructive trust mainly
       on the notion of reasonable expectations:
see Gillies v Keogh  [1989]
       2 NZLR 327 and Phillips v Phillips  [1993] 3 NZLR 159.

       All these approaches are in a sense interrelated. This is shown by the fact
       that in Canada the concept of reasonable
expectations is a necessary
       ingredient of unjust enrichment. In Australia the unjustness of the
       enrichment has been
seen as leading to the proposition that to deny an
       interest to the claimant would amount to unconscionable conduct on the
part
       of the party attempting to do so. The various roads which have been
       identified have different signposts but, as
I ventured to suggest in Partridge
       v Moller  (1990) 6 FRNZ 147, 153, they all lead to Rome."

[20]   If all these "roads lead to Rome" then a claim for relief in equity based upon
enriched unjustment
or unconscionable conduct by one party retaining property is
therefore recognised through acknowledgement of the existence of a constructive
trust. That is, it is something which already exists but is recognised, rather than
something that is created and imposed only at
the time of the Court's decision.


[21]   I am satisfied that there was little doubt that a constructive trust is something
which
has existed and is acknowledged or recognised by a Court decision, rather
than something that is brought into being or created by
that decision.                  Whilst
boundaries of defining a constructive trust are often vague; see Carl Zeiss Stiftung v
Herbert
Smith & Co (No. 2)  [1969] 2 Ch 276;  [1969] 2 All ER 367 (CA), the most
effect ive way to summarise the difference between the two forms of trust (orthodox
constructive trusts and remedial
constructive trusts) can be seen from the judgment

of Tipping J in Fortex Group Ltd (In Receivership and Liquidation) v MacIntosh
 [1988] 3 NZLR 171 (CA) at 172:

       "An express trust is one which is deliberately established and which the
       trustee deliberately accepts.
An institutional constructive trust is one which
       arises by operation of the principles of equity and whose existence the Court
       simply recognises in a declaratory way. A remedial constructive trust is one
       which is imposed by the Court as a remedy
in circumstances where, before
       the order of the Court, no trust of any kind existed.

       The difference between the two
types of constructive trust, institutional and
       remedial, is that an institutional constructive trust arises upon the happening
       of the events which bring it into being. Its existence is not dependent on any
       Order of the Court. Such order simply
recognises that it came into being at
       the earlier time and provides for its implementation in whatever way is
       appropriate.
A remedial constructive trust depends for its very existence on
       the Order of the Court; such order being creative rather than
simply
       confir matory."

It is quite clear that the remedial constructive trust does not exist at all until the Court
imposes
it but the remedial constructive trust has existed throughout by reason of the
circumstances giving rise to its existence and is
simply later recognised by the Court.


[22]   It does not matter in my view whether the Court grants monetary award
instead of a
proprietary interest in the trust property, and the grant of a monetary
award as opposed to a proprietary interest has been exercised
in cases involving
de facto property disputes in which a constructive trust was recognised, for example
Grace v Grace  [1995] 1 NZLR 1; Nash v Nash  (1994) 12 FRNZ 446.


[23]   As pleaded the case involves a claim to a beneficial entitlement pursuant to
an orthodox constructive trust being an action
to recover trust property or the
proceeds thereof. This would not now be necessary given the statutory provisions
which cover the
division of property under the Property (Relationships) Act 1976.
But I am satisfied that s21 was intended to include constructive
trusts.                 The
definit ion of "trustee" in the Limitation Act 1950 is that it has the same meaning as
in the Trustee
Act 1956 which provides:

       "trust... extends to implied and constructive trusts, and to cases where the
       trustee has
a beneficial interest in the trust property...and trustee has a
       corresponding meaning."

[24]      There could be no doubt
that in this case the appellant is in possession of trust
property and the constructive trust, if established, has always been in
place, with the
Court confirming its presence, so that s21(1)(b) applies and the claim is not statute
barred.


[25]      I note
the point emphasised on behalf of the appellant that as a matter of
policy this might give a former partner of a de facto relationship
a limitless right to
seek the imposition of a constructive trust as a remedy, however long the delay. But
I do not think that that
objection affects the conclusion which I have reached. Any
case of this nature will in future be rare given there is now a comprehensive
statutory
scheme in place to deal with division of property arising out of a de facto
relat ionship. It is inconceivable that a flood
of historic claims might now arise.
Also, if there was inordinate delay then, because such action seeks an equitable
remedy, then
the equitable defence of laches may be available. That is specifically
recognised by s31 of the Limitation Act 1950 which provides
that nothing in the Act
affects any equitable jurisdiction to refuse relief on the ground of acquiescence or
otherwise.


Conclusion


[26]      It follows that the decision of Judge Henwood is upheld and, on the
preliminary argument, the respondent's claim is not
statute barred. Delay in bringing
this matter to hearing has been unfortunate and it is proper that it should be set down
for hearing
as soon as possible, as the Judge observed in her decision.


[27]      The appeal is dismissed.




                           
                            ......................................

                                                            
    J W Gendall J
Solicitors:
Thomas Dewar Sziranyi Letts, Lower Hutt for Appellant
Annette Gray, Wellington for Respondent