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High Court of New Zealand Decisions |
Last Updated: 24 October 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-004023 [2012] NZHC 2547
UNDER the Land Transfer Act 1952
IN THE MATTER OF an application for caveat not to lapse
BETWEEN CHRISTINE JILL MARSHALL Applicant
AND MICHAEL VICTOR BOURNEVILLE First Respondent
AND MARK GRAHAM BLEWDEN Second Respondent
Hearing: 1 October 2012 (Heard at Auckland)
Appearances: A Hart for Applicant
B P Carter for Respondents
Judgment: 2 October 2012
ORAL JUDGMENT OF ASSOCIATE JUDGE OSBORNE [as to caveat lapsing application]
Introduction
[1] Ms Christine Marshall and Mr Michael Bourneville were previously wife and husband. Prior to that they were in a de facto relationship, followed by a period of separation.
[2] Ms Marshall asserts that during their earlier de facto relationship she acquired an interest as a beneficiary in what the parties call “the Symonds Street property”, of
MARSHALL V BOURNEVILLE HC AK CIV-2012-404-004023 [2 October 2012]
which Mr Bourneville was initially the registered proprietor. He now shares that role with the co-trustee of the family trust.
[3] Ms Marshall, in late 2011, caveated the title to the Symonds Street property asserting that the respondents are trustees of an implied or constructive trust, having become proprietors with knowledge of Ms Marshall’s claims and interests as a beneficiary.
[4] The respondents then invoked the caveat lapsing procedure under the Land
Transfer Act 1952.
[5] Ms Marshall applies for an order that the caveat not lapse.
The principles
[6] As there was no difference between counsel on the applicable principles, I set out those principles which I adopt:
(a) The burden of establishing that the applicant has a reasonably arguable case for the interest claimed is upon the caveator (the applicant).
(b) The caveator must show an entitlement to, or beneficial interest in, the estate referred to in the caveat by virtue of an unregistered agreement, an instrument or transmission, or any trust expressed or implied: s 137 Land Transfer Act 1952.
(c) The summary procedure involved in an application of this nature is wholly unsuitable for the determination of disputed questions of fact – an order for removal of the caveat will not be made unless it is clear that the caveat cannot be maintained either because there was no valid ground for lodging it or that such valid ground as then existed no longer does.
(d) When an applicant has discharged the burden upon the applicant, there remains in a Court a discretion as to whether to remove the caveat, which will be exercised cautiously.
(e) The Court has jurisdiction to impose conditions when making orders.
Narrowing of the claim
[7] Ms Marshall gives as the specific ground of her application (that the caveat not lapse) that she has an arguable case that she has an equitable interest in the Symonds Street property by way of constructive trust.
[8] Ms Hart has confirmed that the abandonment of any reference to an implied trust was deliberate. The application is pursued upon the basis of the established principles in cases such as Gillies v Keogh1 and Lankow v Rose.2
[9] Accordingly, in the context of this case, Ms Marshall as applicant must establish that she has a reasonably arguable case for the proprietary interest which she claims in relation to the Symonds Street property.
A brief history
[10] I begin with a brief factual history. I will then turn to a brief litigation history.
The factual history
[11] A convenient summary of the relevant background was given by Arnold J, for the Court of Appeal, in Bourneville v Bourneville.3
The applicant lived in a de facto relationship with the respondent from February 1996. At the time their relationship commenced, each of the parties owned a property. The applicant sold her property and moved into the
1 Gillies v Keogh [1989] 2 NZLR 327.
2 Lankow v Rose [1995] 1 NZLR 277.
3 Bourneville v Bourneville [2009] NZFLR 69 at [2]-[7].
respondent’s home. The couple then purchased three sections at Matarangi on the Coromandel Peninsula, with the applicant contributing almost half of the purchase price from the proceeds of the sale of her property. They then built houses on each of the sections. One of these was sold, the couple moved into another (Ake Ake Avenue) and the third was rented (Corokia Place). In December 1997 the Corokia Place property was transferred into the respondent’s sole name. In February 1999, he used the Corokia Place property as security towards the purchase of a property in Seabrook Avenue, Auckland. Shortly after he sold the Corokia Place property and purchased another property in Symonds Street, Onehunga from the proceeds.
In November 1999, the respondent established a family trust. He transferred Symonds Street property to the family trust. It borrowed the bulk of the purchase price on the security of the property, with the balance left as a debt owed to the respondent.
In January 2000 the parties separated. They sold or divided up their jointly owned property (in particular, Ake Ake Avenue). The respondent then formed a new relationship with another woman.
Later, in September 2000, the applicant and the respondent reconciled and married five months later, in February 2001. They lived in the Seabrook Avenue property before moving to the Symonds Street property. The applicant became a trustee of the family trust and the respondent transferred the Seabrook Avenue property to the trust, with the purchase price left owing as a debt back to him.
In October 2002 the Seabrook Avenue property was sold. On 11 February
2005 the parties separated and their relationship ended.
The applicant then applied to the Family Court under the Act seeking to set aside the respondent’s transfer to the family trust of the Symonds Street and Seabrook Avenue properties. She relied on s 44 and 44C of the [Property (Relationships)] Act.
The litigation history
[12] I now turn to a summary of the litigation history between the parties.
[13] As Arnold J indicated, the applicant applied to the Family Court for orders as to relationship property. Part of her application sought to set aside Mr Bourneville’s transfer of the Symonds Street property (and another property) to his family trust. Judge L deJong heard the case over six days in late 2006. By judgment dated 20
April 2007,4 his Honour determined that the parties separated in 2000 and that the
period of the initial de facto relationship was therefore outside the jurisdiction of the
Family Court under the Property (Relationships) Act 1976 (“the Act”).
4 Bourneville v Bourneville FC AK FAM-2005-004-000807, 20 April 2007.
[14] In particular, Judge L deJong said, in a passage reproduced subsequently by both the High Court and the Court of Appeal, that:5
I have considered the evidence at hearing carefully and thoroughly. I have examined the case law relied upon by each counsel. I have come to the view that the parties relationship did in fact come to an end in 2000. This finding is not lightly made because of the implications for the wife. The prospect of this conclusion being reached was discussed at various points at the hearing. However, as Mr Carter correctly notes in his submission, the Court must work within a legal framework, wherever the perceived fairness might lie. This, of course, is no comfort to the wife.
Much was made by Ms Kay about credibility issues. I had the opportunity over three days to consider the demeanour and presentation of each witness. In particular, I found the husband and his supporting witnesses to be plausible and consistent in their account of events. In this regard, I preferred the evidence of the husband and his witnesses. On the balance of probabilities, I was persuaded that the parties were in fact separated in 2000 for reasons which include:
a) Them both being on benefits during the relevant period.
b) They sold 113 Ake Ake and divided the proceeds equally and separately.
c) Tensions between the parties were (sic) between January and September 2000 were such that it was necessary for them to see their conveyancing solicitor separately when 133 Ake Ake was sold.
d) The husband formed a new relationship during the relevant period.
The evidence suggests that when the parties resumed their relationship at the end of 2000, the husband continued a relationship
with both women for a period, apparently with the knowledge of those concerned. Presumably when he was confident of a complete
reconciliation, the parties’ relationship became exclusive once again.
[15] The specific provisions invoked by Ms Marshall in order to set aside the transfer to the trust of the two properties were ss 44 and 44C of the Act. In a passage (subsequently identified by Wild J as important in terms of the appeal to the High Court) Judge L deJong held that the transactions were bona fide, and in coming to that conclusion observed:6
I note in passing that there was in fact valuable consideration. The background to the acquisition of Symonds St, is the Corokia Ave property. The latter property was transferred into the husband’s sole name in December 1997. The evidence before me is consistent with the parties’ intention that Corokia be regarded as the husband’s separate property at a
5 At [36] and [37].
time when they were living in a defacto relationship. For reasons I come to later in this judgment, it is not necessary for me to necessarily determine the status of property owned by the parties prior to January 2000.
However the situation is viewed, Corokia was sold for $285,000 and Symonds Street was purchased for the same sum on February 1999. Based on what is before me, the evidence regarding valuations and market values in
1999 was uncontestable. These were bona fide transactions, and the Family
Trust later financed the purchase of Symonds Street.
[16] Ms Marshall appealed to the High Court. Wild J on 24 April 2008 dismissed the appeal and upheld the decision of the Family Court both in its reasoning and its determination.7
[17] As I have said, in relation to the timing of separation, Wild J identified the Judge’s critical findings. In relation to the bona fides of Mr Bourneville (which would have been of critical importance in the alternative scenario that the ss 44 and
44C jurisdiction had been available) the Judge identified in the relevant passage the
Family Court judgment on that issue.8
[18] The full discussion by Wild J on the issue of Mr Bourneville’s bona fides was
in these terms:9
The Judge dealt first with Symonds Street. He noted that it was purchased with the proceeds of the sale of the Corokia Avenue property. He held the transactions to be bona fide and accepted the husband’s evidence that he had set up the Family Trust to manage his separate property for the benefit of his own children. Important in terms of this appeal is this passage in the Family Court’s judgment:
[Paragraph [28] as set out above]
No matter how much he examined the situation, the Judge could find no evidence coming close to suggesting the Corokia and Symonds Street transactions occurred as a result of an intent to defeat the wife’s rights or claims. Such an intention is a prerequisite to an order under s 44 or s 44C.
Turning to the Seabrook property, the Judge noted that it was financed by
$25,000 borrowed against Corokia Avenue, $135,000 borrowed on a mortgage secured over Seabrook Avenue itself, and $10,000 from the
husband’s separate funds.
The Family Court’s judgment then contains this passage, which is also
important in deciding this appeal:
7 Bourneville v Bourneville HC Auckland CIV-2007-404-002656, 24 April 2008.
8 At [33].
9 At [33]-[37].
[33] On the face of it, the purchase of that property was intended to be the husband’s separate property. However, I take the point made by Mr Carter that if the parties’ relationship ended in January 2000, then the parties’ property rights at that time would need to be considered in the context of defacto property rights pre Property (Relationships) Act 1976 and therefore not subject to determination under the current proceedings.
It was at this point in his judgment that Judge de Jong made the critical finding of fact which I have set out in [23] above – that the parties’ de facto relationship came to an end in 2000.
[19] These passages in the Family Court judgment in relation to Mr Bourneville’s bona fides related to a matter which was distinctly raised in the proceeding. The husband’s bona fides, as the Family Court judgment implicitly indicates, fell largely to be determined by his credibility, which was undoubtedly tested in the course of a six-day hearing. The Family Court Judge had appropriately to make a determination as to bona fides. Any appeal would be an appeal on the record. As the trial judge hearing the evidence, Judge L deJong’s finding that “these were bona fides transactions” was a finding which would become directly relevant to any appeal in the event the High Court on appeal reversed the Family Court’s legal conclusion concerning the non-application of the Act.
[20] In the event, Ms Marshall’s High Court appeal failed.
[21] Wild J noted that the effect of the trial Judge’s conclusions was that:
The wife’s only remedy would be to resort to the common law – the principles established by the Court of Appeal in Gillies v Keogh [1989] 2
NZLR 327 and similar cases.10
[22] Ms Marshall sought special leave to pursue a further appeal. Wild J rejected that application. Ms Marshall then sought special leave directly from the Court of Appeal, which also declined the application.11
[23] As had Wild J, the Court of Appeal concluded with a comment as to the possibility of a claim in equity:
We reiterate that counsel should consider whether the injustice that the applicant feels in respect of the property division can be remedied through some mechanism other than the Act, in particular a claim in equity.12
10 At [41].
[24] As in the case of Wild J, these comments are clearly a reference to claims such as constructive trust claims under Gillies v Keogh.13 Neither Court can be taken to have made any implicit prediction as to whether Ms Marshall would be able to meet all the requirements of such a constructive trust claim. In particular, there is no indication by either Court that it anticipated a successful proprietary claim might lie against the trustees who now own the Symonds Street property, as opposed to an
in personam claim which Ms Marshall might have in equity.
[25] Undeterred in her relationship property claim, Ms Marshall sought leave to appeal to the Supreme Court. The Court of Appeal refused such leave. The Supreme Court then similarly refused leave.14 In refusing leave, the Supreme Court made an observation as to the situation which would have applied had the point of law which Ms Marshall sought to establish been found to be arguable. The Court commented:15
... the case for the applicant would still face formidable factual difficulties, if that argument were to succeed, both because there appears to have been a settlement of affairs between the parties after they first separated and because the applicant’s claim under ss 44 or 44C of the Property (Relationships) Act 1976 seems quite inconsistent with her act of transferring a predecessor property into the name of the respondent.
[26] The Court did not need to make further comment, although it would have been open to it, that Ms Marshall’s case was also complicated by the subsequent purchase by the family trustees of the Symonds Street property from Mr Bourneville.
[27] Ms Marshall’s submissions to the Supreme Court have been put before me in evidence. Ms Marshall had noted the identification, in the Courts below, of a possible proceeding through principles enunciated in Gillies v Keogh and similar cases. Ms Hart then put her application to the Supreme Court firmly on the basis that such a remedy was not available to Ms Marshall. She referred in particular to a
passage in Fisher on Matrimonial and Relationship Property.16 The cited
commentary comes within a chapter dealing with “Elements of a constructive trust
12 At [22].
13 Gillies v Keogh [1989] 2 NZLR 327 at [8].
14 Bourneville v Bourneville [2009] NZSC 19.
15 At [2].
16 R L Fisher (ed) Fisher on Matrimonial and Relationship Property (looseleaf ed, LexisNexis) at
[4.33].
based on reasonable expectations” (beginning with a discussion of the principles in
Gillies v Keogh and Lankow v Rose), and the particular passage reads:
Relief by way of a constructive trust is not available in respect of assets no longer owned by the defendant,17 or owned by a trust 18 but may extend to assets owned by a partner who has died.19
[28] The authority referred to in footnote 17 is Nuthall v Heslop.17 The footnote contains the following additional comment:
See, however, para 4.34 as to the possibility of an award in damages.
[29] The authority referred to at footnote 18 (in relation to assets transferred to a trust) is Miller v Stewart.18
[30] The final authority in relation to claims still lying against the estate of a deceased partner is McFetridge v Bowater-Wright.19
[31] In her submissions to the Supreme Court on the leave application, Ms Fisher noted that the Symonds Street property was no longer held by Mr Bourneville but by his family trust. She referred to the Fisher passage which I have set out. She concluded this discussion with the statement:
Thus the injustice cannot be remedied in equity.
[32] The concluding observations of the Supreme Court, as to the “formidable factual difficulties” which Ms Marshall would face may be seen as a gesture on the part of the Court to allay Ms Marshall’s sense of injustice.
The applicant’s case for an arguable interest
[33] In the brief written submissions filed by Ms Hart, a number of matters were referred to as substantiating a reasonably arguable case:
17 Nuthall v Heslop [1995] NZFLR 755.
18 Miller v Stewart [2000] NZFLR 433.
19 McFetridge v Bowater-Wright [1996] NZFLR 429.
(a) Ms Marshall’s transfer of her share of the Corokia Place property,20 had been for no consideration. Equity therefore presumes that the intention was that the transferor would retain beneficial ownership.
(b) Ms Marshall had reasonable expectations of a fee simple interest in
Symonds Street.
(c) The fides of the trustees (including the second trustee) were tainted by Mr Bourneville’s conduct in disposing of Symonds Street in order to defeat Ms Marshall’s interest.
(d) Contrary to the Fisher passage, the transfer to the trustees was not fatal to a constructive trust claim on a proprietary basis.
[34] I will go through each submission in turn.
The transfer of the applicant’s Corokia interest to the respondent
[35] In a sense, the transfer of Ms Marshall’s interest in the Corokia Place
property is irrelevant.
[36] If the subsequent transfer of the Symonds Street property to the trustees has eliminated the possibility of a proprietary constructive trust claim (which I will find to be the case), then the earlier dealings involving Corokia Place are irrelevant in a caveat context. They may have relevance in an in personam claim although, to avoid any sense of encouragement being taken out of that observation, I repeat the observation of the Supreme Court as to the formidable factual difficulties which Ms Marshall faces in that regard.
Ms Marshall’s expectations as to a fee simple interest
[37] Ms Hart, in her submissions, explored matters of evidence which were evidently before the Family Court. (I say “evidently” because the Family Court record is not before me).
[38] Ms Hart also took me to evidence given by Ms Marshall in this proceeding as to contributions she had made to property interests of the parties
[39] From these matters, Ms Hart submitted that her client had a reasonable expectation of an interest and that it would be unconscionable for the respondent trustees to deny her a proprietary claim in the Symonds Street property.
[40] Ms Hart’s submissions, by their reference to unconscionability, recognised that what is attacked in an equity claim of this nature is the conscience of the defendants.
[41] A claim of unconscionability is not reasonably arguable on the facts of this case. The Family Court having heard the evidence and the cross-examination of the parties at a six-day trial, made a factual finding that the transactions in question were bona fide. An issue estoppel precludes Ms Marshall from contending otherwise.
[42] The principle upon which the doctrines of res judicata and of issue estoppel turns is that stated by Lord Maugham LC in New Brunswick Railway Company v British & French Trust Corporation Ltd:21
If an issue has been distinctly raised and decided in an action, in which both parties are represented, it is unjust and unreasonable to permit the same issue to be litigated afresh between the same parties or persons claiming under them ....
[43] Halsbury’s Laws of England provides this explanation of “Issue estoppel; in general”:
Issue estoppel; in general
21 New Brunswick Railway Company v British & French Trust Corporation Ltd [1939] AC 1 (HL)
at 20.
Issue estoppel means that a party is precluded from contending the contrary of any precise point which, having once been distinctly put in issue, has been solemnly and with certainty determined against him. Even if the objects of the first and second claims or actions are different, the finding on a matter which came directly in issue in the first claim or action, provided it is embodied in a judicial decision that is final, is conclusive in a second claim or action between the same parties and their privies. Issue estoppel will only arise where it is the same issue which a party is seeking to re-litigate. This principle applies whether the point involved in the earlier decision, and as to which the parties are estopped, is one of fact or one of law, or one of mixed fact and law.22
[44] I now refer to a further financial transaction relied on by Ms Hart as evidence of expectation of a proprietary interest. Ms Marshall’s evidence indicates that she completed two sets of gifting in favour of the family trust in relation to the debt-back which had been created through a transfer of interest on her part. Such forgiveness of debt after a transfer might arguably say something as to Ms Marshall’s thinking as regards ownership (I will return to that shortly) but it is ultimately irrelevant when the trustees have been found to have earlier acquired the property bona fide.
[45] For completeness I say this about the family trust. In November 2001, Ms Marshall (some nine months after her marriage to Mr Bourneville) became a trustee of Mr Bourneville’s family trust. He appointed her trustee pursuant to his power of appointment. By dint of her marriage, she had become one of the discretionary beneficiaries of the trust. In such circumstances, gifting back to such a trust is entirely understandable. There is no reason to believe (nor evidence to suggest) that it was even then in Ms Marshall’s contemplation that she might cease to be the settlor’s wife and thereby cease to be a discretionary beneficiary. She had only very recently entered upon marriage.
[46] Ms Hart took me to a transcript of interviews of Ms Marshall and Mr Bourneville conducted by the Inland Revenue Department into their tax affairs. A ruling had previously been made in this proceeding that the initially introduced transcript was not to be read, but Ms Hart had introduced a truncated version of the transcript through a further affidavit. It still contained objectionable material including handwritten notes of another party. Mr Carter, while noting the Court’s previous ruling, did not seek a formal order from me in relation to the further
affidavit evidence. I do not consider it appropriate in the circumstances to allow the transcript to be read, although Ms Hart made submissions on a provisional basis in relation to it. I say this about those submissions. Her submissions related to comments made by Mr Bourneville to the effect that Ms Marshall’s children (of a previous relationship) were included as beneficiaries within his family trust. Mr Bourneville’s comments were incorrect. Ms Marshall sought to rely upon the statements to the Department (in Ms Marshall’s presence) as further evidence to support an arguable reasonable expectation. I do not formally allow that line of argument to be pursued given that the transcript is not formally in evidence. Had it been, it suffers the significant difficulty that the present claim is brought by Ms Marshall in her own right and is not brought by any person appointed to represent the interests of her children.
The fides of the trustees
[47] By reason of my earlier observations as to the Family Court’s conclusions as to Mr Bourneville’s bona fides, Ms Hart’s third submission – that the respondent trustees’ interest is tainted through Mr Bourneville’s deliberate attempt to put assets in which he had an interest out of her reach – must also fail.
The distinguishing of the Fisher commentary
[48] I have referred23 to the Fisher commentary on which Ms Marshall relied in seeking leave to appeal from the Court of Appeal.
[49] It is convenient to have reached this fourth ground of Ms Hart’s submissions last. If Ms Marshall’s case was not already legally untenable for the other reasons which I have discussed, the case law cited in the Fisher commentary presents an additional hurdle which Ms Hart set out to surmount.
[50] Ms Hart’s sole written submission in relation to the proposition that the authorities relied on in Fisher are distinguishable was contained in four lines which (stripped of references) read:
More detailed research into the cases cited by Fisher shows that they are distinguishable from the present case... The applicant’s claims include claims made directly against the trustees.
[51] The paucity of any developed grounds in Ms Hart’s written synopsis, and its late provision to Mr Carter led, at the commencement of the hearing yesterday, to an application on behalf of the respondents for an order summarily striking out Ms Marshall’s application for an order that the caveat not lapse. Although, having heard argument, I ruled against a summary dismissal of this present application, it was not for lack of sympathy with Mr Carter’s position. He submitted (correctly) that the synopsis filed by Ms Hart failed to provide any properly argued reasoning on many points on which Mr Carter needed to respond. In the course of the preliminary argument, Ms Hart was unable to articulate in any way the points of distinction which she suggested existed and even had to indicate that she had not brought copies of the two key cases to Court.
[52] As it was, when the substantive hearing commenced, Ms Hart spoke in some more detail than that in which she had provided in her synopsis. I took it that her submissions were to the effect that the other cases which she came to refer to indicate a route by which the hurdle for the applicant’s case presented by the Fisher propositions could be overcome.
[53] In the event, Ms Hart did not refer me to any subsequent authority in which either of the two key cases, Nuthall v Heslop and Miller v Stewart, referred to in the Fisher commentary had been doubted or disapproved.
[54] The editors of Fisher cite Nuthall for the proposition that a proprietary constructive trust will be unavailable if the assets in question are at the time of the litigation owned by a party other than the defendant, such as by a company. The judgment of Tipping J in Nuthall is to that effect. His Honour cited both Gillies v Keogh and Lankow v Rose. Having himself delivered one of the Court of Appeal judgments in the latter case, Tipping J must have been taken to have spoken carefully
when he said in Nuthall:24
De facto property relief by way of constructive trust can only ordered in respect of assets owned by the defendant at the date of the order. Tracing may be possible but no order can be made, as is obvious, in relation to an asset which the defendant no longer owns.
[55] The decision in Miller v Stewart is a more difficult source for the proposition for which it is cited in Fisher. The judgment of William Young J rested on a number of premises. It is not a straightforward source for the proposition that the transfer to a trust, rather than to a company, will block a proprietary constructive trust. But such would appear equally logical. That that is so is supported by the judgment of
this Court in Caughey v Calvert25 in which Master Faire, in relation to a trust to
which the relevant asset had been transferred, adopted the same passage from the judgment of Tipping J in Nuthall as I have just referred to. These are the authorities for the propositions put in the Fisher commentary.
[56] To overcome the Nuthall dicta, Ms Hart referred to a number of cases for the proposition that a form of tracing should be considered arguable so as to enable Ms Marshall to claim into the hands of the current registered proprietors. Such a course, I have already found, is debarred by the finding in the Family Court as to bona fides. I nevertheless briefly examine the authorities cited by Ms Hart to deal with this alternative approach.
[57] Ms Hart invoked both the concepts of knowing receipt and dishonest assistance. She cited the Privy Council decision in Royal Brunei Airlines Sdn Bhd v Tan26 in that regard. In that case, it was found that the defendant had acted dishonestly. A claim in personam lay against a dishonest recipient. That is as far as the point was taken. Ms Hart placed most particular reliance on Trustees Executors Ltd v Eden Holdings 2010 Ltd,27 a decision of the Court of Appeal. The case concerns a fraudster who defrauded Trustees Executors of money which he then applied towards the acquisition of equity in the property over which a caveat was then lodged. In the High Court, on a caveat lapsing application, there had been a
concession which the Court of Appeal recorded in this way:28
25 Caughey v Calvert HC Tauranga CP17/01, 2 May 2002.
26 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378.
27 Trustees Executors Ltd v Eden Holdings 2010 Ltd [2010] NZCA 626.
28 Trustees Executors Ltd v Eden Holdings 2010 Ltd [2010] NZCA 626 at [18].
In the High Court, counsel for Eden had conceded that in certain circumstances money that was shown to have been wrongly obtained could be traced. Counsel for Eden based that concession on the well known statement by Lord Browne-Wilkinson in the Westdeutsche case29 that stolen money could be traced in equity, and in those circumstances the proprietary interest enforced by equity arose under a constructive trust, rather than a resulting trust.
[58] The Court of Appeal then considered fresh evidence which had been before the Associate Judge. It then reviewed the facts in the light of that evidence before concluding:30
We find, therefore, that Trustees Executors has established that it is reasonably arguable that Mr Mayer/Champion obtained money by fraud from Trustees Executors and used those funds to purchase the Mt Eden property. The prerequisites for the creation of an institutional constructive trust, as identified by Eden in the High Court are satisfied.
We are conscious that the Associate Judge said in his judgment that Lord Browne-Wilkinson’s dictum in Westdeutsche cannot be applied in New Zealand to contracts induced by fraud. We accept that there is controversy about the ability to trace stolen money in equity. However, in the absence of any argument to this effect from Eden, whether in this Court or the High Court, we propose to do no more than satisfy ourselves that it is reasonably arguable that the requirements for a declaration that an institutional constructive trust exists are satisfied.
[59] These passages indicate that the Court borrowed from concepts relating to stolen funds and applied them on the particular facts of that case to monies of which Trustees Executors had been criminally defrauded. The Court acknowledged that even in relation to stolen funds the tracing concept is controversial. Ms Hart has pointed to no authority which takes such a controversial concept into the realm of what her client alleges are civil wrongs. On this additional ground, I would therefore find that the applicant has no arguable case.
The discretion
[60] The Court, in any event, has a residual discretion which is to be exercised with great care. Having weighed all the circumstances of this case, it is one of those
rare cases where, if I had not already found against the applicant in the way I have, I
30 Trustees Executors Ltd v Eden Holdings 2010 Ltd [2010] NZCA 626 at [32]–[33].
would have ordered as a matter of discretion that the caveat lapse. I would do so for a combination of three reasons.
(a) First, the credibility findings in the District Court, even if they were not found to amount to an issue estoppel, were findings reached after six days of trial in which both parties, but particularly Mr Bourneville, must have been cross-examined at length. The Judge made credibility findings, particularly in his finding since noted on appeal, that he had entered into the transactions bona fide. It would be an abuse of process to now put Mr Bourneville, some thirteen years after the trust’s 1999 purchase, through any similar process. It would be drawing a very long bow to suggest that a subsequent Court should reach a different decision on Mr Bourneville’s fides.
(b) Secondly, Ms Marshall through counsel chose to state to the highest Court in the land that she could not bring the very claim that she now seeks to suggest is arguable in this Court. She did so to establish a ground for pursuing on appeal relationship property claims against the first respondent. I do not disregard Ms Hart’s frank concession that she has come to look at the Fisher propositions in a different way following certain assumptions she reached. The Court’s concern when it comes to the discretion and matters of abuse of process is with how Ms Hart’s submission may have affected the other party. Had the Supreme Court, on the basis of Ms Hart’s submissions, reluctantly granted leave taking into account the lack of other remedy, Mr Bourneville would have faced a second substantive appeal on relationship property issues. There is a plainly abusive process involved when a party seeks such an outcome using one particular argument, only to put the exactly opposite argument in a later proceeding.
(c) The third factor is slightly different. Ms Marshall was for a period of years, a trustee of this family trust which she effectively now sues. She subsequently had to be removed against her will. She now sues
the current trustees. In the period she was trustee, there is no suggestion that she initiated any step towards the unbundling of the property which she now seeks. There are at least two capacities in which she could have come to this Court. She could have come to this Court as a trustee saying that from her personal knowledge there were matters of background relating to the acquisition of assets which suggested that the trust should not hold the asset. Alternatively, if she had felt embarrassed in her capacity as trustee, she could have approached the court in her capacity as beneficiary of the alleged constructive trust saying that the property should be returned to someone who would safely hold the property to which the constructive trust related. She would have been safe in the knowledge that while she initiated such proceedings as a beneficiary, the other trustee could do nothing unilaterally to dispose of the Symonds Street property. Ms Marshall’s signature as a trustee was required for any such transaction. But Ms Marshall herself took neither of those steps. Instead, in 2011 she placed a caveat on the title, asserting a beneficial interest said to have existed since the 1990s, and asks the Court to uphold her caveat against the trustees’ title while she then pursues a trust claim.
[61] Because of a combination of those three unusual features of Ms Marshall’s claim, I find this one of those rare cases where I would have had to exercise the discretion and to have ordered the caveat removed in any event.
Orders
[62] I order:
(a) The Court’s interim order of 19 July 2012 that a caveat not lapse is
hereby rescinded.
(b) Caveat no. 8690870.1 North Auckland Land District shall lapse forthwith.
(c) The applicant is to pay to the respondents the cost of this application on a 2B basis together with disbursements to be fixed by the Registrar. I certify the hearing at one day having regard to the hearing yesterday and today’s judgment. This order does not affect or detract from previous costs orders.
Addendum
[63] Having delivered the judgment, I heard from Ms Hart in relation to a stay. Ms Hart indicates that she will need to discuss the judgment with her client and to take instructions as to any appeal. She sought a stay of three weeks so that an application could be made to the Court of Appeal for an order of stay in that Court. I do not consider it appropriate, having regard to the clear view I have taken of matters for this Court to grant a lengthy stay in relation to a possible appeal. It is appropriate that any application of that nature for a stay be made to the Court of Appeal. Mr Carter does not wish to be heard on this matter, given an indication from me that I have in mind an order of a stay for a week.
[64] There is therefore the following supplementary order. [65] I order:
(a) The terms of the above judgment, save as to costs, are stayed for five working days from today’s date on condition that any application for an order of stay in relation to a filed appeal is filed in the Court of Appeal within five working days from today; but with leave to counsel to seek by memorandum an additional period of stay if reasonably required;
(b) If, within the said five working days, counsel for the applicant advises counsel for the respondents in writing that an appeal is not to be pursued, the file is to be referred back to me for an immediate rescission of the stay. In any event, the stay will lapse after five days
unless renewed by this Court or replaced by a stay in the Court of
Appeal.
(c) Leave is reserved to either counsel to request an urgent telephone conference if necessary.
Solicitors:
McWha Law, Barristers & Solicitors, PO Box 47 424, Ponsonby, Auckland 1144
Counsel: B P Carter, PO Box 1857, Shortland Street, Auckland
Parnell Law, PO Box 37748, Auckland 1151
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URL: http://www.nzlii.org/nz/cases/NZHC/2012/2547.html