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High Court of New Zealand Decisions |
Last Updated: 16 June 2010
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV 2007-488-295
BETWEEN ROSAMUND SUSAN KAYE HARVEY Plaintiff
AND WILLIAM HUD KAPUA Defendant
Hearing: 22 March 2009
Appearances: J W Watson for the Plaintiff
No Appearance by or on behalf of the Defendant
Judgment: 2 June 2010
RESERVED JUDGMENT OF ELLIS J
This judgment was delivered by me on 2 June 2010 at 3.30 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors: E A Gardner, PO Box 952, Whangarei 0140
Counsel: J W Watson, PO Box 502, Whangarei 0140
HARVEY V KAPUA HC WHA CIV 2007-488-295 2 June 2010
[1] Ms Harvey and Mr Kapua are the registered proprietors of
1350 State Highway 1, Hikurangi in the Whangarei District. They purchased the property on 5 April 2000 for $185,000 having commenced a de-facto relationship in January of that year. A child was born to Ms Harvey and Mr Kapua on
27 November 2000, but their relationship ended on 14 May 2001. The legal significance of these dates is that the Property (Relationships) Act 1976 does not apply to the property: s 4C(2).
[2] Since November 2001 Ms Harvey, through her solicitor, has attempted to reach a settlement with Mr Kapua in relation to the Hikurangi property. Notwithstanding a number of solicitors’ letters, however, Ms Harvey has never received a response from Mr Kapua in relation to any of her proposals. After a number of such attempts Ms Harvey discovered that Mr Kapua had at some point moved to Queensland, Australia.
[3] In May 2007, Ms Harvey filed a statement of claim in this court seeking various declarations or orders in relation to the property, but in particular orders that the land be sold and the proceeds of sale divided or that title be transferred to her as the sole registered proprietor under s 140 of the Property Law Act 1952. In the event of a sale, however, she also sought a division of proceeds based on an equitable accounting that recognised her beneficial entitlement to the property in question. Thus her second and subsequent (alternative) causes of action were based in:
a) A constructive or resulting trust; or b) Proprietary estoppel; or
c) An implied trust; or
d) An equitable charge or lien; or e) Quantum meruit.
[4] Again, because of the difficulties in communicating with Mr Kapua, service on him of the claim and notice of proceeding proved impossible for a considerable period of time. Eventually the proceedings were served on him in Australia in February 2008. That delay was compounded by a series of miscommunications with
the Court and it is for these reasons that Ms Harvey’s claim has only recently been heard.
[5] Notwithstanding service of the proceedings upon him, no statement of defence or any other document has ever been filed by Mr Kapua. It seems plain he has little interest in either these proceedings or the Hikurangi property.
Background Facts
[6] Ms Harvey swore an affidavit setting out in some detail the background to both the purchase of the property and the claim now made by her. The relevant facts are these.
[7] Before purchasing the Hikurangi property in April 2000, Ms Harvey and Mr Kapua lived at 67 Fisher Terrace, of which Ms Harvey was the sole registered proprietor. When the Hikurangi property was purchased by them both, the mortgage of $194,000 then obtained was secured over both the Hikurangi and Fisher Terrace properties. From May 2000 until approximately July 2001, the Fisher Terrace property was rented out to tenants. The rent was paid into Ms Harvey’s and Mr Kapua’s joint account and used to pay the mortgage and household expenses. The Fisher Terrace property was sold in July 2001 for $125,000.
[8] Although for a short period after the breakup Mr Kapua and Ms Harvey continued to live in different quarters of the same house, Mr Kapua left the house on
22 June 2001.
[9] The child has been in Ms Harvey’s sole care since May 2001 although Mr Kapua made some contributions for her maintenance and support immediately following the separation. Ms Harvey obtained a custody order in respect of the child on 17 October 2001 and it appears that Mr Kapua has not seen her since October
2001.
[10] Prior to Mr Kapua’s departure in June 2001, he had paid his wages into the joint account. His last such payment was made in August 2001, but after that time
he paid in $11 a week until May 2002. There is some suggestion that that weekly
$11 payment related to a debt owed by Mr Kapua to Ms Harvey.
[11] Ms Harvey worked full-time from March 2000 until October 2000 just before she gave birth to her daughter. She recommenced full-time employment in March
2001. Her wages were also paid into the joint account and were used to pay the mortgage and household expenses.
[12] Since August 2001 Ms Harvey has paid all the mortgage payments, rates and insurance on the Hikurangi property. She also paid for the purchase of the property on the basis outlined above with the exception of the mortgage contributions made by Mr Kapua between May 2000 and August 2001. During this period he paid approximately $32,000 into the joint account. As I have said, however, the money in that account was used to fund normal household expenditure and presumably Mr Kapua’s own expenditure.
[13] The joint bank account statements indicate that by the date of separation
(June 2001) the interest that had been paid on the mortgage was approximately
$18,000 with principal repayments of approximately $1,585.00.
Relevant Law
Sale and Division
[14] As I have said, the plaintiff’s central application was made under s 140 of the Property Law Act 1952 which provided that, in an action for partition of land, the Court could direct that the land be sold and the proceeds distributed. Section 140 was of course in force at the time the proceedings were filed. However, it has been repealed as from 1 January 2008 by s 366(c) of the Property Law Act 2007. Section
140 has been replaced by ss 339, 341, 342 and 343 of the new Act. The applicable transitional provision is s 367, the effect of which is, for present purposes, that proceedings commenced before 1 January 2008 under s 140 may be continued,
completed, and enforced under ss 339, 341, 342 and 343. The relevant parts of those provisions are as follows:
339 Court may order division of property
(1) A court may make, in respect of property owned by co-owners, an order—
(a) for the sale of the property and the division of the proceeds among the co-owners; or
(b) for the division of the property in kind among the co-owners; or
(c) requiring 1 or more co-owners to purchase the share in the property of 1 or more other co-owners at a fair and reasonable price.
(2) An order under subsection (1) (and any related order under subsection
(4)) may be made—
(a) despite anything to the contrary in the Land Transfer Act 1952;
but
(b) only if it does not contravene section 340(1); and
(c) only on an application made and served in the manner required by or under section 341; and
(d) only after having regard to the matters specified in section 342. (3) Before determining whether to make an order under this section, the
court may order the property to be valued and may direct how the cost
of the valuation is to be borne.
(4) A court making an order under subsection (1) may, in addition, make a further order specified in section 343.
(5) Unless the court orders otherwise, every co-owner of the property (whether a party to the proceeding or not) is bound by an order under subsection (1) (and by any related order under subsection (4)).
...
342 Relevant considerations
A court considering whether to make an order under section 339(1) (and any related order under section 339(4)) must have regard to the following:
(a) the extent of the share in the property of any co-owner by whom, or in respect of whose estate or interest, the application for the order is made:
(b) the nature and location of the property:
(c) the number of other co-owners and the extent of their shares:
(d) the hardship that would be caused to the applicant by the refusal of the order, in comparison with the hardship that would be caused to any other person by the making of the order:
(e) the value of any contribution made by any co-owner to the cost of improvements to, or the maintenance of, the property:
(f) any other matters the court considers relevant.
343 Further powers of court
A further order referred to in section 339(4) is an order that is made in addition to an order under section 339(1) and that does all or any of the following:
(a) requires the payment of compensation by 1 or more co-owners of the property to 1 or more other co-owners:
(b) fixes a reserve price on any sale of the property:
(c) directs how the expenses of any sale or division of the property are to be borne:
(d) directs how the proceeds of any sale of the property, and any interest on the purchase amount, are to be divided or applied:
...
(g) provides for, or requires, any other matters or steps the court considers necessary or desirable as a consequence of the making of the order under section 339(1).
[15] While aspects of these provisions effected certain important changes to the previous law those changes are not particularly material to the present case. The expansion in s 339 of the Court’s earlier limited (s 140) discretion and the listing in s 342 of matters required to be taken into account by the Court when exercising that discretion are, however, noted.
Division of Proceeds
[16] As to equitable accounting, Ms Harvey’s claim for a beneficial interest in Mr Kapua’s share of the property (and the proceeds of sale) is made by reference to the principles established in cases such as Gillies v Keogh [1989] 2 NZLR 327 (CA)
and Lankow v Rose [1995] 1 NZLR 277 (CA). Those principles have been more recently summarised by the Court of Appeal in the following way: 1
In summary, a party claiming a beneficial interest in property owned in law by another must first show a contribution to that property in order to establish a constructive trust: Gillies v Keogh [1989] 2 NZLR 327 (CA) at
334 per Cooke P. By this means equity impresses on the conscience of the legal owner an acknowledgement of the claimant’s contribution where to
deny an interest would amount to unconscionable conduct. A qualifying
contribution can either of itself assist in the acquisition, improvement or maintenance of the property or its value or by its provision help the
registered proprietor to achieve those objectives. A causal link between the
contribution and the acquisition or otherwise of the asset is essential: Lankow v Rose per Hardie Boys J at 282. While proof of a recognisable contribution is a prerequisite to imposing a constructive trust, a claimant must also prove his or her expectation of an interest; that the expectation was reasonable; and that the owner should reasonably be expected to yield an interest.
[17] As this statement makes clear the Court of Appeal in both Gillies and Lankow recognised that parties to a de facto union might act unreasonably. For that reason the rationale for a claim such as the present lies not in inferring an intention actually possessed by the parties but in making findings as to what both parties would have reasonably expected their respective property rights to be had each of them rationally considered the question having regard to the nature and duration of their particular relationship. Thus in Lankow v Rose emphasis was placed on the need to ensure that a legal owner of property did not unconscionably refuse to yield an interest in the legal estate in favour of a claimant (see, in particular, Tipping J at 294).
[18] I regard the following passage from Tipping J's judgment in Lankow v Rose
at 295 as accurately expressing the test to be applied:
... A de facto claimant must demonstrate first a case for an interest and then what that interest should be. The interest must broadly reflect the contributions. Arithmetical precision will generally be unattainable and is in any event not necessary. The Court must, however, do its best to reflect in the assessed shares the value of the claimant's contributions. That value will represent, if uncompensated, the amount of the unjust enrichment accruing to the defendant which in turn is the amount of the claimant's sacrifice. The contributions must be judged from a proprietary point of view. By contrast with the Matrimonial Property Act regime the focus in de facto cases is on contributions to property not contributions to the partnership: of course contributions to the partnership will often also be contributions to property. In the end the Court must assess as closely as reasonably possible what
1 Smyth v Wadland [2008] NZCA 578 at [13].
weight the claimant's contributions have had against the contributions of the defendant in the acquisition, improvement or maintenance of the property or its value.
[19] At this point, however, it should be noted that in both Gillies v Keogh and Lankow v Rose the property said to be the subject of an equitable interest was property that wholly belonged (in the legal sense) to one or other of the former de facto partners. Thus the factual premise on which the “reasonable expectation” doctrine was based was that (absent equitable intervention) such property would reside in the partner having legal ownership notwithstanding the contributions that had been made to that property by the other over the course of a relationship.
[20] That is, of course, not the case in relation to the Hikurangi property, in respect of which Ms Harvey and Mr Kapua are joint tenants.
[21] The issue of the application of the reasonable expectation jurisprudence in the context of a formerly de facto couple with jointly owned property has most fully been explored in Cossey v Bach [1992] 3 NZLR 612 (HC). In that case Fisher J said at 627:
[The model designed to deal with property in the name of one partner where the other had made contributions in the course of their relationship] may be contrasted with the present case. Here, both parties are already legal owners. The plaintiff provided the entire purchase price from independent sources but allowed the property to be put into joint names. During a subsequent relationship of only 14 months there was no improvement or direct or indirect contributions to the property by either partner and arguably little in the way of net benefits to the plaintiff. In those circumstances some attempt must be made to set the core principles of Gillies v Keogh into a wider context so that they can be applied to a radically different set of facts.
[22] Having first noted (at 626) that it would be “pointless and impertinent” to re- visit the choice of juristic foundations for division of property discussed in Gillies v Keogh or “to question the reasonable expectations test where applicable” Fisher J said the facts of the case before him raised "fresh problems which were not intended to be addressed" in Gillies v Keogh. He said at 626-627:
In those circumstances an imaginative jurisdiction was required to address the possibility that the non-owner spouse should be rewarded for his or her efforts during the relationship.
[23] Fisher J held that in a case of joint ownership the paramount principle was whether an expressed common intention could be found; only if such an intention could not be found was it necessary for “the more imaginative legal concepts [to] come into play”: at 627.
[24] Fisher J’s summary of his approach (at 631-632) relevantly stated as follows:
(a) The legal title is always the starting point. Without more, it will be taken to reflect the beneficial interests. It is for the party seeking to rebut that assumption to affirmatively establish his or her case. That principle applies with at least as much force to a joint legal owner claiming more than half.
(b) Expressed intentions will usually continue to be determinative if (i) unequivocally expressed, (ii) common to both parties or expressed by the party or parties with the then disposing power in the property in question and (iii) still pertinent to the circumstances currently before the Court.
...
(d) However, the Courts will no longer strain to fashion inferred intentions from equivocal conduct. The way in which the parties had arranged their legal title will often be a poor indicator of proprietary intentions, particularly if to the knowledge of both, the party or parties who had provided the original purchase price had not intended that division would follow the legal title in the events which have since occurred.
(e) If there is no governing expression of intention, a convenient starting point may be to ascertain ownership according to traditional proprietary principles before turning to reasonable expectations. Traditional proprietary principles include the presumption of resulting trusts and therefore a provisional distribution in accordance with respective proprietary contributions to the acquisition of the property in dispute. For this purpose a contribution will qualify only if it had value in money or money's worth, was made on or before the acquisition of the property, and formed part of, or was directly or indirectly traceable to, its purchase price.
(f) Ownership determined provisionally in that manner will then be subject to any reasonable expectation by one party (the "claimant") that he or she would receive an interest or greater interest in the property of the other (the "defendant") based upon the defendant's active or tacit encouragement of a belief that by taking certain steps the claimant would acquire such an interest and steps were taken by the claimant to his or her detriment in reliance thereon.
(g) In a stable and enduring de facto relationship, and in the absence of any expressed intention to the contrary, it will readily be accepted as reasonable for the claimant to expect that following those contributions and sacrifices normally associated with de facto marriage, family assets would be shared . For this purpose contributions may be of an intangible nature, need not be traceable to the property in dispute, and may have little measurable value. However, in each case the reasonableness of such an expectation must be
assessed against the general background including the parties' conduct and understandings at the time of acquisition, any inference which the claimant might reasonably have drawn from the way in which the defendant had chosen to arrange the legal title, the nature of any subsequent discussions and understandings, the value of contributions compared with corresponding benefits, the extent of any sacrifices made upon the strength of such an expectation and the nature and duration of the relationship.
(h) Once a successful claim has been demonstrated, its quantum will be determined by giving priority to any overriding expression of intention, secondly by reference to the value of the parties' respective proprietary contributions to the property and thirdly by reference to any reasonable expectation. The last will turn principally upon the net value to the owner of assistance and contributions provided by the claimant while acting in reliance upon the expectation after deducting the value of the benefits which the claimant had enjoyed during the same period, but it will also be affected by such matters as the terms and nature of the defendant's encouragement, the extent of the claimant's sacrifice, the value of the property and the duration and nature of the relationship. In the context of reasonable expectations, as distinct from provisional interests based upon traditional proprietary principles, "contributions" can be broadly equated with those applicable under the Matrimonial Property Act 1976.
...
[25] In O'Connell v Muharemi2 Heath J (at [115] and [116]) expressed the view that there was no inconsistency between the approach outlined in Cossey v Bach and the later Court of Appeal decision in Lankow v Rose. I respectfully agree.
Discussion
Sale and Division
[26] In the present case I am in no doubt that I should order a sale of the Hikurangi property and that the proceeds should be divided between Mr Kapua and Ms Harvey on the basis set out below.
[27] In terms of the specific s 342 matters I am required to take into account, in coming to that decision, I note as follows:
2 O'Connell v Muharemi HC Auckland CP546-SD01, 24 October 2003.
a) By virtue of her status as joint tenant Ms Harvey owns a 50 percent share in the property. While such a share is no longer a statutory prerequisite to the exercise of the sale and division power (cf s 140) it is nonetheless of some significance in that this is not a case of a sale being sought by a minority owner.
b) The nature and location of the property is of significance only in the sense that neither is a reason militating against sale or any other kind of impediment to sale.
c) There is one other co-owner, Mr Kapua, who prima facie has an equal share in the property.
d) Making the order sought would cause no obvious hardship to Mr Kapua who has shown no interest whatsoever in the property for nearly 10 years and who now resides overseas.
e) There is no evidence that Mr Kapua contributed to the cost of any improvements to, or the maintenance of, the property and indeed the evidence is that he has contributed nothing for a considerable length of time.
[28] In my view sale and division is necessary in this case in order that Ms Harvey can break the impasse that has arisen due to the long-standing difficulties she has had in engaging with Mr Kapua about the property. It seems to me that there is virtually no prospect of Mr Kapua voluntarily co-operating with a sale, notwithstanding that it appears that there is no evidence that he actively opposes it. His relationship with Ms Harvey ended over nine years ago and the desirability of achieving finality (I eschew the word “closure”) is obvious. Sale of the property is also likely to be the most equitable way of ensuring that Mr Kapua also receives fair compensation for his share of that property (as to which see the paragraphs that follow).
Equitable Division of Proceeds
[29] Having thus determined that the Hikurangi property should be sold, I turn now to how the proceeds of that sale should be divided. In accordance with the authorities I have referred to above, I begin with legal title, which resides in Ms Harvey and Mr Kapua equally as joint tenants.
[30] The question then arises as to whether there was, at the time of the property’s purchase, a governing expression of intention that either confirms or negates the strict legal position.
[31] First, and to the extent the fact of joint title is on its face a clear expression of intention, that expression is nonetheless not “pertinent” in the sense used by Fisher J in Cossey v Bach. I say that because the creation of joint title is explicable only on the basis that Ms Harvey and Mr Kapua believed or expected that their relationship would endure (Ms Harvey being pregnant with Mr Kapua’s child at the time of purchase). There is no indication that either party turned his or her mind to what would occur if the relationship ended and it seems reasonable to assume that they did not do so.
[32] More specifically, the circumstances at the time of the property’s acquisition make it unlikely in my view that Ms Harvey was intending to make Mr Kapua an unqualified gift of half the property. The mortgage over the property was in part secured by another property in which Mr Kapua had no interest, and when the relationship ended, it was Mr Kapua who moved out, apparently without demur. As well, the fact that Mr Kapua has subsequently expressed no interest in the property or in these proceedings suggests to me that he has never seen himself as a half or joint owner of the Hikurangi property.
[33] I conclude that neither party understood, or had reason to understand, that when the property was purchased, Mr Kapua immediately gained an unqualified and irrevocable right to a joint interest. While that position might have changed had he and Ms Harvey stayed together for a number of years, they failed unequivocally to
express any intention applicable to the situation if the relationship failed after only a short period, as it did.
[34] There being no governing expression of intention, it becomes necessary to consider conventional proprietary principles. The relevant evidence here is that the funds used to buy the Hikurangi property emanated entirely from Ms Harvey herself. More particularly, the evidence is that she used her equity in the Fisher Terrace property to finance the purchase. On the basis of the approach set out by Fisher J in Cossey v Bach (at 630) the entire beneficial interest would accordingly vest in Ms Harvey pursuant to a resulting trust. As Fisher J made clear, however, this provisional result may be displaced as a result of the reasonable expectations analysis.
[35] As to that, the starting point is that Ms Harvey’s consent to Mr Kapua’s name appearing with hers on the title must have given him some reasonable ground to expect an interest in the property when he moved in. As well (and in terms of detriment to Mr Kapua) he then contributed financially to the mortgage over the property, it seems shouldering all of that load for the short period while Ms Harvey was on maternity leave. He also contributed to household bills while in residence and (for a short time) to child care. Overall, however, and taking into account the very short duration of the time Mr Kapua was in residence, I consider that a fairly generous evaluation of his contributions to the property during that time would result in him retaining a 10% interest in the Hikurangi property.
Conclusions
[36] On the above basis I make the following orders:
iv) From the defendant’s 10% share, the cost of this application plus disbursements (to be calculated on a 2B basis) shall be deducted and paid to the plaintiff’s solicitors;
v) The plaintiff has leave to apply for any further directions.
Rebecca Ellis J
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