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Sutherland v Lane [2020] NZHC 721 (8 April 2020)

Last Updated: 25 May 2020

JUDGMENT OF THOMAS J

Table of contents

Introduction [1]

The claim [3]

Background [9]

Mr Carson’s wills [11]
The Trust [13]
Memorandum of guidance [15]
The Estate [21]
The Children and Grandchildren’s claim [25]
Ms Sutherland [27]
The Property [33]
Other assistance [56]
Mr Carson’s illness [60]
Family Court costs award [62]
The Will [66]

SUTHERLAND v LANE [2020] NZHC 721 [8 April 2020]

Observations [72]

Plaintiff’s case [76]

Did Mr Carson give the Property to Ms Sutherland? [78]

Did Mr Carson hold the Property in trust for Ms Sutherland either under

an express oral trust or under a constructive trust? [90]

The law [90]
Analysis [99]
Equitable estoppel [128]
Result [143]
Costs [144]

Introduction

[1] Michelle Sutherland had a close relationship with her uncle by marriage, the late David Wayde Carson. He gave her financial and emotional support when her marriage broke up and purchased her family’s beach house in his own name. He died, leaving an estate of $17 million. He bequeathed Ms Sutherland $500,000, named her as a discretionary beneficiary under a trust that inherited his residuary estate, and instructed his trustees that she should receive at least $25,000 annually, trust assets permitting. He did not, however, leave the beach house to Ms Sutherland. She claims he purchased it on her behalf and it was always intended for her.

[2] Her claim is opposed by the defendants, who are the trustees and executors of Mr Carson’s estate (the Executors).

The claim

[3] Ms Sutherland says she has been in uninterrupted possession of the beach house at 139 McKellar Place, Whangamatā (the Property) from the time Mr Carson purchased it on her behalf. She has been solely responsible for the Property’s maintenance and payment of utilities. While Mr Carson might have paid the rates, he never once visited the Property or made any use of it for himself. He did not hold a key and had told Ms Sutherland that the Property was hers.

[4] Ms Sutherland claims that the Property was purchased for her by Mr Carson, who held it in trust for her either under an express oral trust or under a constructive trust. She seeks a declaration to that effect.
[5] Alternatively, Ms Sutherland claims that in the circumstances, Mr Carson gifted her the Property.

[6] The Executors oppose the claim. While they accept Mr Carson wanted Ms Sutherland to use the Property from time to time, they say he purchased the Property himself and intended to retain ownership of it. They note that Ms Sutherland did not live at the Property and was not in uninterrupted possession of it, and that Mr Carson acted consistently with ownership by paying the rates. Furthermore, he took no steps to establish a trust or transfer the Property to Ms Sutherland, and the circumstances did not give rise to a constructive trust. The Executors note that any gift must be perfected during the lifetime of the donor and no such gift was made.

[7] The Executors say that Mr Carson assisted Ms Sutherland by advancing funds to her during his lifetime, leaving her a significant bequest, making her a beneficiary of the trust which received his residuary estate and expressing the wish that it provide an annual income to her.

[8] As an affirmative defence, the Executors rely on s 25 of the Property Law Act 2007 to say that any trusts or dispositions are void or invalid.

Background

[9] Mr Carson died on 28 June 2015 leaving four children (the Children), now aged in their late 40s and early 50s, and six grandchildren (the Grandchildren).

[10] Mr Carson has adult stepchildren, Raymond and Ruth Kremmer.

Mr Carson’s wills

[11] In August 2010, Mr Carson made a will. He bequeathed $500,000 each to Ms Sutherland and another niece, and his residuary estate to his step-son Raymond.

[12] Mr Carson made a new will on 29 August 2014 (the Will). He bequeathed Ms Sutherland $500,000. He bequeathed Raymond a house in Nelson which had a
rateable value of $720,000 at 1 September 2015, and $500,000. After payment of his debts and expenses, he left the residuary estate to the Carson Family Trust (the Trust).

The Trust

[13] The Trust deed is dated 18 November 2014. The trustees are P&M Trustee (Carson) Ltd and Ms Sutherland (the Trustees). P&M Trustee (Carson) Ltd is a corporate trustee, two of the six directors being Anissa Bain and Robert Lane, partners in the law firm, Pitt & Moore, who are the Executors. The other directors are also partners in Pitt & Moore.

[14] The beneficiaries of the Trust are:

(a) Lincoln University;

(b) the children of Mr Carson (including stepchildren);

(c) the grandchildren of Mr Carson (including the children of the stepchildren);

(d) spouses and partners of the children;

(e) nephews and nieces of Mr Carson;

(f) trustees of any trust for a beneficiary;

(g) any charity nominated by the Trustees; and

(h) any other persons, trusts, or other entities as determined by the Trustees provided such beneficiary is in keeping with Mr Carson’s wish that preference be given for the trust fund to be used for the research and development of the Galloway breed of cattle.

Memorandum of guidance

[15] Mr Carson left a memorandum of guidance dated 20 October 2014 (the Memorandum) for the Trustees. Relevant provisions of the Memorandum are:

1.2 I have set up the Trust for the general purpose of ensuring that members of my family are able to benefit from the capital and income of the Trust from time to time. In addition it is my wish that for so long as possible the Trust assets be retained and used in the furtherance of research and development of the Galloway breed of cattle (“the Farm”).

2. Specific beneficiaries

2.1 It is my wish that provided there is sufficient income available after consideration of capital or other expenses required for the efficient operation of the Farm, then the Trust distributes per annum:

(a) The sum of $50,000.00 to my step-son Raymond; and

(b) The sum of $25,000.00 to my niece Michelle.

...

3. General principles regarding discretions

3.1 My general wishes are as follows:

(a) For so long as my trustees consider viable I would like the Farm to continue with an emphasis on research and development including collaboration and joint venture activities with Lincoln University or similar training and research facility

(b) Benefits should be made available for the purposes of education, health, general welfare, maintenance, well-being and general recreation needs of the beneficiaries.

(c) As much as possible distributions to beneficiaries should be sourced from the income of the Trust, although capital advances may be made by the Trust if, in your opinion, such capital advances will be used for proper or productive purposes.

...

4. Winding up

4.1 It is my preference that if the Farm is proving to be a useful research and development tool that consideration be given to gifting the entire

assets comprising the Farm to Lincoln University or similar training and research facility.

[16] Ms Bain acted for Mr Carson when he made the Will. By her affidavit, she explained that she had two particular concerns – first, that Mr Carson had made no provision for the Children and, secondly, that Raymond’s interest was substantially reduced from that provided for under the 2010 will. Ms Bain recorded her recollections of dealings in file notes dated 24 October 2014 and 23 March 2017.

[17] Ms Bain had regular conversations with Mr Carson about his estate, those conversations becoming more frequent around 2014 as Mr Carson’s illness progressed and he received treatment. She said she explained to him many times that he had a moral obligation towards the Children and the risk of claims after his death if he did not provide for them. Ms Bain said it was this reiteration of his moral obligation to the Children and the consequences of excluding them that led him to decide to make the Children discretionary beneficiaries under the Trust.

[18] Ms Bain also described Mr Carson’s thinking behind the provisions of the Trust and the Memorandum. She said Mr Carson expressed a desire to leave a legacy through enabling research and development with Galloway cattle, potentially in conjunction with Lincoln University.

[19] Ms Bain described Mr Carson having a close relationship with Raymond, who helped him cope with the loss of his second wife and who was apparently the only person who knew Mr Carson had won Lotto. She said Mr Carson spoke regularly to Ms Sutherland and he paid her rent and other basic living expenses.

[20] Although there was some suggestion that Mr Carson had other assets prior to his 2009 Lotto win of $16.7 million (property in the United States and $4 million from the sale of a business), there was no evidence to substantiate that. Indeed, the evidence was to the contrary. Ms Bain, despite efforts, was unable to locate any assets in the United States. Others spoke of Mr Carson’s tendency to fabricate. It is clear to me that Mr Carson’s wealth was derived from his Lotto win in 2009.

The Estate

[21] Mr Carson’s estate (the Estate) was valued at $17,301,460 as at 28 June 2015, the date of his death.¹ It was valued at $15,651,691 as at 26 November 2019. The reduction in value is attributable to the Executors having paid the bequests under the Will to Raymond and Ms Sutherland. In the case of Raymond, this includes the Nelson house.

[22] The Property was valued at $400,000 at the date of Mr Carson’s death and, as at 25 May 2019, had a market value of $585,000.

[23] The Estate includes three parcels of land in Pugh Road, Richmond, totalling approximately 41.8 ha (the farm properties). They are currently valued at $5,685,000.

[24] In the exercise of their powers to realise the assets, the Executors seek to sell the Property. It is intended that the farm properties will be transferred into the Trust in accordance with Mr Carson’s wishes.

The Children and Grandchildren’s claim

[25] Although discretionary beneficiaries under the Trust, the Will made no provision for either the Children or the Grandchildren. This resulted in their application under the Family Protection Act 1955 seeking an order that they be provided for out of the Estate in accordance with Mr Carson’s moral duty to them. That claim was decided by me on 11 December 2019.² For the reasons given in that decision, I made an award of $1.25 million to each of the Children but no award to the Grandchildren.

[26] The Children are interested parties in these proceedings but did not seek to be heard and abide the Court’s decision.

1. Evidence provided to the Court in the Children’s claim. See Carson v Lane [2019] NZHC 3259 at [18].

² Carson v Lane [2019] NZHC 3259.

Ms Sutherland

[27] Ms Sutherland met Mr Carson when she was at secondary school and he began his relationship with her aunt, Lynne, her mother’s sister. Ms Sutherland was around 16 years old when Mr Carson married her aunt in 1981. Her aunt had two children from her previous marriage, Raymond Kremmer and his sister. The families were close and visited one another regularly. Ms Sutherland described getting on really well with Mr Carson.

[28] Ms Sutherland was 47 years old and living in Wellington when Lynne died. She described staying in regular contact with Mr Carson, usually talking on the telephone at least once a week. Ms Sutherland was shocked when she discovered, after Mr Carson’s death, that he had four children. She thought he would have told her.

[29] As was his wont, Mr Carson did not always tell Ms Sutherland the truth. For example, he told her he had a classic car which was being restored by the local Whangamatā school. He had also told her that he owned a considerable amount of property, not only in New Zealand but also in the United States. None of this was true.

[30] Ms Sutherland began her relationship with her former husband, Daniel Lauder, in 1984. They had two children together. During 2008, Ms Sutherland and Mr Lauder began to experience relationship difficulties and they separated in 2009. Ms Sutherland felt betrayed by Mr Lauder’s behaviour. She confided in Mr Carson, who was very supportive of her, and their telephone calls became even more frequent.

[31] The separation proved difficult, Ms Sutherland struggling with issues for a number of years. Being in receipt of legal aid, she commenced relationship property proceedings in February 2009. However, the Legal Services Agency refused to extend legal aid to enable Ms Sutherland to obtain a freezing order over the relationship assets.

[32] After Ms Sutherland’s application to extend legal aid was declined, Mr Carson provided financial assistance to her. He paid her rent and, in 2010, entered into a formal fee funding arrangement with her lawyers. He continued to fund her legal fees from then until the end of 2012. This included the costs of Ms Sutherland obtaining a
parenting order, a protection order, and opposing an appeal of a Family Court decision in the relationship property proceedings. Mr Carson paid a total of $99,645.03 in respect of Ms Sutherland’s legal fees.

The Property

[33] Mr Lauder had purchased the Property in February 2002 using equity in the couple’s former family home as security. In 2005 it was transferred to Flashash Properties Limited (FAPL), a company set up by Mr Lauder in which he held 60 per cent of the shares and Ms Sutherland 40 per cent. Mr Lauder was the sole director. Ms Sutherland had not understood the significance of that until after the separation.

[34] Ms Sutherland’s family had used the Property regularly, going there for Christmas and school holidays. Ms Sutherland’s father used the Property more than they did and looked after it by tending the garden and undertaking general maintenance.

[35] In 2009, Mr Lauder changed the locks at the Property so Ms Sutherland could no longer access it. He then put the Property on the market. The mortgage was not being serviced and Ms Sutherland received letters from the bank threatening a mortgagee sale.

[36] Ms Sutherland discussed this with Mr Carson. She said he told her he wanted to help her “keep Whangamata” and that he did not want Mr Lauder to receive any part of it. Both Ms Sutherland and Mr Carson suspected that Mr Lauder was trying to purchase the Property by underhand means, including getting Ms Sutherland to agree to sell the Property for less than it was worth. Ms Sutherland said that, when Mr Carson heard about this, he was furious. Despite the statement of claim (which Ms Sutherland accepted she had approved) pleading that Mr Carson initially proposed lending Ms Sutherland the money to purchase the Property, Ms Sutherland said that Mr Carson offered to give her the money.³

³ In the statement of claim at paragraph 11(l), the sum of $345,000 was amended by leave to read

$340,000.

[37] Ms Sutherland said Mr Carson offered to buy the Property for her when he saw her anguish over her dispute with Mr Lauder and given he knew how much the Property meant to her. She said there were no strings attached and Mr Carson said it would be hers forever.

[38] In her affidavit, Ms Sutherland said that, following legal advice, it was decided it would be less complicated for Mr Carson to buy the Property in his own name. The solicitors were apparently concerned about potential legal complications if Ms Sutherland purchased the Property using money gifted to her by Mr Carson. There is no independent evidence to that effect. When she gave evidence, Ms Sutherland said she was scared of what Mr Lauder might do if he thought she had the money to buy the Property, and she feared for her safety. In her opinion, because Mr Carson knew how much the Property meant to her, he agreed it would be best for him to buy the Property for her but for the Property to be in his name.

[39] While Ms Sutherland’s fear of Mr Lauder was undoubtedly genuine and corroborated by the fact she obtained a protection order against him, the correspondence between the lawyers makes it clear that he would have known Mr Carson was the purchaser of the Property and he of course knew the relationship between Mr Carson and Ms Sutherland.

[40] Mr Buchanan acted for Ms Sutherland in her relationship property matters, including Mr Carson’s purchase of the Property. He initially advised Mr Carson that, rather than purchase the Property outright, he could purchase Mr Lauder’s shares in FAPL for $57,500. This, together with releasing Mr Lauder from his personal guarantee for the mortgage over the Property, would then give Mr Carson and Ms Sutherland control of the Property.

[41] Mr Buchanan had suggested at one stage that Mr Carson should take separate legal advice in connection with the purchase of the Property. There is no evidence he did so.
[42] In any event, in February 2010, Mr Carson made a formal written offer to purchase the Property for $340,000. By 30 March 2010, Mr Carson had deposited the whole of the purchase price into Mr Buchanan’s trust account.

[43] Ms Sutherland believes the final purchase price of $340,000 was under market value. That opinion is not supported by the comments of the real estate agents acting on the sale of the Property at the time. For example, in June 2009, there was an offer of $300,000 which did not proceed and there had been no attendees at a recent open home. The agents suggested a fixed price listing of $315,000. I am satisfied from the evidence that the price Mr Carson paid was (more than) a fair market price for the Property.

[44] The following extract from Mr Buchanan’s letter dated 30 March 2010 to Mr Lauder’s lawyers confirms the position:

Whangamata Property

Mr Carson has offered the sum of $340,000.00 to purchase the Whangamata property. Having now had an opportunity to read Mr Lauder’s latest affidavit we understand that he has decided to reject Mr Carson’s offer and as a result of your email dated 26 March 2010 we understand that Mr Lauder’s previous offer of $330,000.00 has now been withdrawn and he is insisting that he be able to retain the property himself based on his contention that the property is worth $320,000.00.

With respect, Mr Lauder’s position is difficult to fathom. Unfortunately, but as we all know, the available pool of assets in this case is relatively small and the Whangamata property is the single most significant asset. Having regard to the amount of debt faced by our respective clients, our client believes that it is vital that the amount received from out of the Whangamata property be maximised, as of course, the higher the selling price for Whangamata the more money there will be available for both our clients to share. In effect, Mr Carsons [sic] offer of $340,000.00 would, if accepted, put an additional

$20,000.00 on the table which would in effect put an additional $10,000.00 into your client’s pocket. In these circumstances, our client believes that Mr Lauder’s refusal to accept Mr Carson’s offer is unreasonable.

[45] For various reasons, the prospective sale of the Property came back before the Family Court. Mr Buchanan emailed Mr Carson on 6 September 2010 saying:

Michelle has instructed me to inform you that your offer to purchase the property has therefore been accepted.

[46] Eventually, in October 2010, the Property was sold to Mr Carson for $340,000. The sale enabled Ms Sutherland to receive her share of the equity in the Property of
$109,835.78.

[47] Ms Sutherland said:

[Mr Carson] left it to me to have the locks changed and he told me to keep the keys and he said the house was mine and that it would always be mine. After that, my children and I continued to go to McKellar Place at every possible opportunity. Dad was also able to go there again too and he resumed doing the lawns, gardens and odd jobs. ...

From time to time I invited [Mr Carson] to come up to Whangamata to stay with us for a holiday but sadly he showed no interest in doing that.

[Mr Carson] knew how much McKellar Place meant to me and my children and he’d wanted me to have it.

[48] Ms Sutherland said that obtaining the Property was a turning point for her that gave her confidence to keep going, knowing the Property was safe for her and her children.

[49] Ms Sutherland acknowledged that there was nothing in writing either between her and Mr Carson, or between her and her lawyers, or her lawyers and Mr Carson, which stated that Mr Carson was gifting the Property to her or that it was to be held on trust for her. She did not instruct Mr Buchanan to record what she said was the arrangement regarding the Property by way of a trust or deed of gift. There is no evidence Mr Buchanan suggested it. When this was put to Ms Sutherland, she reiterated that Mr Carson told her the Property would be hers forever and she trusted him implicitly.

[50] Ms Sutherland considered that she had not been sufficiently proactive and that she should have asked Mr Carson to transfer the Property into her name. She presumed this would be achieved under the Will.

[51] Ms Sutherland accepted she received a significant benefit in being able to use the Property as a holiday home. It is never rented out. She was there for two weeks over Christmas 2019/2020, together with her family and friends. She said she enjoyed the Property, pruned the trees and generally tidied up as she always did at that time of
year. When not at the Property, Ms Sutherland ensures it is regularly checked by her friends, including one who parks a car in the carport and mows the lawns and sprays the garden in return.

[52] Mr Carson paid the rates on the Property, dismissing any suggestion from Ms Sutherland that she should do so. She thought he did so as a way of supporting her. Ms Sutherland assumed Mr Carson also insured the Property but he did not, as he did not believe in insurance. Ms Sutherland paid the power bills.

[53] Ms Sutherland did not realise that Mr Carson had not ensured that she receive legal title to the Property on his death. She is, however, in no doubt that, had he been reminded, he would have done so, noting his unprompted offer to buy her a house in Wellington shortly before the diagnosis of his illness.

[54] Ms Sutherland said:

... the stress of losing Whangamata has been huge for me and for my children as, McKellar Place has been in our family for 18 years and means a huge amount to us.

[Mr Carson] did not buy McKellar Place for himself. He didn’t buy it to sell. He never used it, he had no intention to, and he did not even have a key to it. He also never offered it up for anyone else to stay there. He never once visited the [P]roperty. ...

[Mr Carson] never mentioned anything to me to suggest that there could be anyone else with any interest in McKellar Place apart from me and my children.

[55] Deferred maintenance at the Property is estimated to cost approximately
$25,500 and results in a $30,000 deduction in its value. Ms Sutherland explained the deferred maintenance was because significant illnesses within the family – her father, son and herself – had distracted her time and attention.

Other assistance

[56] Because Ms Sutherland and her children were living in rental accommodation following the separation in 2008, come 2009 Mr Carson suggested she should move to another property and said he would help by paying the rent. He did so by paying lump sums into Ms Sutherland’s bank account and asking her to advise him when the
account required topping up. Mr Carson paid Ms Sutherland’s rent of $450 per week for five years which, on my calculations, would have totalled $117,000.

[57] Mr Carson also bought a car for Ms Sutherland. Ms Sutherland said she never asked Mr Carson for any money but Mr Carson wanted to help her because he was kind, cared for her and had “more money than he knew what to do with”. She was aware of Mr Carson’s generosity to other people, for example he purchased a property and then allowed the vendors to remain living there rent free.

[58] Around 2013–2014, Ms Sutherland’s landlord decided to sell the house Ms Sutherland was renting. When Ms Sutherland informed Mr Carson of this, she said he told her to find a house to buy and he would pay for it. She found a house in Whitby but Mr Carson did not like it and told her to keep looking.

[59] Ms Sutherland said everything changed when Mr Carson was diagnosed with cancer. He became withdrawn and:

... suggested to me that we put the house hunting on hold for a while and that, meantime, I grab another rental property. ... [B]y then I was far more self- sufficient as I had a fulltime job so I didn’t ask [Mr Carson] to pay the rent because he had more than enough on his plate dealing with his illness.

Mr Carson’s illness

[60] Ms Sutherland described Mr Carson as going downhill very quickly. She visited him when she could and continued to talk to him on the telephone. During one of those discussions, Mr Carson asked Ms Sutherland to be a trustee of the Trust, saying he trusted her to do the right thing.

[61] Ms Sutherland did not raise the issue of buying a house with Mr Carson after his diagnosis. She said he seemed to derive great pleasure whenever she told him she had been at the Property and she assumed he had made appropriate arrangements with his lawyers “to ensure that they knew that McKellar Place was mine”. She said:

He told me that he had bought it for me and that it would be mine forever and I never doubted him. The [Mr Carson] I knew had always been very honourable and very well behaved and I knew him to be a man of his word.

Family Court costs award

[62] Following a Family Court re-hearing, Ms Sutherland was awarded almost all of the available relationship property, which unfortunately did not amount to a great deal. The Family Court awarded Ms Sutherland $31,884.80 in costs which the Legal Services Agency paid to Ms Sutherland in September 2013.⁴

[63] After deducting legal fees then due, Ms Sutherland paid $27,054.80 to Mr Carson. She said she did so, not because Mr Carson asked her to or expected her to, but because of what Mr Carson had done for her during the proceedings. She said:

I was just so grateful and I believed that I owed it all to [Mr Carson].

[64] Ms Sutherland then said:

In addition to paying almost all of my legal costs, [Mr Carson] had also purchased a car for me and he had helped me financially by paying my rent but, by far and away the most generous thing [Mr Carson] did, was to purchase the property at McKellar Place for me.

[65] Rather extraordinarily, in my assessment, when she gave evidence, Ms Sutherland said she did not think she would have paid the $27,000 to Mr Carson had he not purchased the Property for her, saying he did not need the money and that he had paid her legal fees with no strings attached. Her position did not waiver when it was put to her that she had received that money in respect of legal fees which had been incurred by Mr Carson. Significantly, in my assessment, she did not in her affidavit say that she paid Mr Carson that $27,000 as an acknowledgement of her interest in the Property.

The Will

[66] Ms Sutherland had no knowledge of the 2010 will but was aware of the (2014) Will. Mr Carson spoke to her about becoming a trustee and told her all of his property would be put into the Trust. Ms Sutherland was clearly very close to Mr Carson, who trusted her to carry out his wishes as a trustee of the Trust. In addition, he wanted an independent professional trustee.

⁴ Ms Sutherland’s lawyers obtained a certificate under the Legal Services Act 2011.

[67] Ms Sutherland believed the bequest of $500,000 in the Will was for her to buy a house in Wellington for herself and her children. She reasoned that she already owned the Property as Mr Carson had already bought it for her. However, Ms Sutherland had been left that same amount in the 2010 will. The 2010 will also left $500,000 to another niece and the residuary estate to Raymond.

[68] As at the date of the 2010 will (August 2010) Mr Carson was in the process of acquiring the Property. He had made his initial offer in January 2010 and increased it to $340,000 in March 2010. He eventually purchased the Property in October 2010.

[69] The purchase of the Property must have been at the forefront of Mr Carson’s mind at the time he executed his 2010 will. He had already made the offer, deposited the whole of the purchase price with Mr Buchanan and was waiting for the formalities to be completed. He could at that time therefore have bequeathed the Property to Ms Sutherland or at least made specific provision in respect of it.

[70] After Mr Carson’s death, Ms Sutherland wrote to the Executors saying:

As for the Whangamata property, it is very special to me. It used to be mine previously until a partnership breakdown. [Mr Carson] bought it, me and my children and my father have continued to use it for years. I wondered what he had done with it, he always said it was for me and the children, but I see he hasn’t made any special mention of this property. I am the only person that has keys to the property, apart from my Dad as well.

[71] The car Mr Carson had bought for Ms Sutherland was registered in his name. The Executors decided to transfer it to Ms Sutherland. They also offered Ms Sutherland the first option to purchase the Property.

Observations

[72] There is no doubt that Mr Carson and Ms Sutherland had a close relationship. Mr Carson provided Ms Sutherland with emotional and financial support, particularly through the time of her separation and associated legal proceedings. There was evidence that he became increasingly involved in her legal affairs and attended meetings with her and her legal advisers in Wellington. He was obviously upset at how he believed Ms Sutherland had been treated by Mr Lauder and, in particular, his
allegedly underhand dealings. It is fair to say that he was determined to help Ms Sutherland acquire (the use of) the Property.⁵ The fact he did so enabled Ms Sutherland’s share in the equity of the Property to be released. Furthermore, I am satisfied from the evidence that Mr Carson paid approximately $20,000 over the then-current market value of the Property, of which Ms Sutherland received a half share.⁶

[73] It is noteworthy that Mr Buchanan’s file notes at the time of Mr Carson’s acquisition of the Property make no mention of either a gift or a trust, nor the need for a subsequent transfer of the Property to Ms Sutherland. Furthermore, it might be thought that, had Ms Sutherland been so concerned about Mr Lauder not knowing she had any interest in the Property, it would have been put into a trust.

[74] Mr Carson acted consistently with his owning the Property. He paid the rates. He can be taken to have turned his mind to the legal ownership of the Property at the time or times Ms Sutherland offered to pay the rates on the Property. As Ms Sutherland herself acknowledged, payment of rates is an obligation of the owner of property. The fact Mr Carson declined to insure the Property because he did not believe in insurance is a strong indication that he saw risk and ownership of the Property remaining with him personally.

[75] At no time did Mr Carson take any steps to transfer legal ownership of the Property to Ms Sutherland. Nor did he establish a trust in respect of it.

Plaintiff’s case

[76] Mr Buchanan appeared for Ms Sutherland. His essential submission was that the Court should take a benevolent approach and ensure that Ms Sutherland received what he said Mr Carson had promised to her. In his submission, Ms Sutherland had acted to her detriment in continuing with the Family Court proceedings despite the significant emotional toll they were taking on her, and she did so only because of

5. In my assessment, Mr Buchanan somewhat over-egged the pudding in his submission that Mr Carson enjoyed and was excited by the legal proceedings.
6. The fact Ms Sutherland might have received less than the Family Court Judge envisaged, as Mr Buchanan contended, because of various costs which had to be deducted is neither here nor there in the context of this particular issue.

Mr Carson’s emotional and financial support. This enabled Mr Carson to purchase the Property. Mr Buchanan contended Ms Sutherland had been at the point of wanting to abandon the proceedings against Mr Lauder but she continued them on the basis Mr Carson had promised that the Property would be hers.

[77] Although not specifically pleaded, in Mr Buchanan’s submission, the facts best suit a finding of promissory estoppel.⁷

Did Mr Carson give the Property to Ms Sutherland?

[78] The short answer is no. In order to make a voluntary settlement of any type of property valid and effectual, the donor must do everything necessary to transfer the property to the donee so that the settlement of the property on the donee is binding.⁸

[79] What must be done in order to achieve this depends upon the nature of the property to be gifted. The gifting can be done either by an actual transfer of the property to the donee or by way of a trust. The essential point, however, is that there must be nothing which remains outstanding – the transfer must be “perfected” or, in the case of a trust, the trust must be “completely constituted”. A trust can be accomplished either by transferring the property to a trustee and declaring the trust on which the trustee is to hold it for the beneficiary, or by a donor’s declaration that he or she holds the property on trust for the donee.

[80] In the case of land, a transfer or trust (except a resulting, implied or constructive trust) must be in writing in order to comply with the requirements of the Property Law Act:

25 Writing required for certain dispositions of interests in land

(1) A disposition of any of the following must be in writing and signed by the person making the disposition:

(a) an existing interest in land acquired by taking possession of the land:

(b) an existing legal or equitable interest in land:

7. Mr Buchanan relied on r 5.31 of the High Court Rules 2016 and the statement of claim’s prayer for relief, seeking such further and/or other relief as the Court deems just and equitable.

⁸ Milroy v Lord [1862] EngR 951; (1862) 45 ER 1185 at 1189.

(c) an existing equitable interest in a mixed fund consisting partly of land and partly of other property.

(2) A trust must be created in writing and signed by the settlor if—

(a) it relates to land; and

(b) it is to take effect in the lifetime of the settlor.

(3) This section does not apply to a short-term lease.

(4) This section does not affect—

(a) the creation or operation of a resulting, implied, or constructive trust; or

(b) the making or operation of a will; or

(c) the disposition of any interest in land by operation of law.

[81] There are numerous cases where a failure to perfect a gift meant the Court was unable to validate it.⁹ For example, in Scoones v Galvin (in the days prior to E-dealing), an executed memorandum of transfer of land delivered to the solicitors acting for the testator and the nephew failed as a gift to the nephew because the certificate of title had to be delivered in order to complete the gift.

[82] The relatively recent Court of Appeal decision in Harvey v Beveridge is in many respects analogous.¹⁰ That case concerned the estate of Dr Byrd, who was the legal owner of a unit in Christchurch which had been occupied by Mr Beveridge rent-free for about four years prior to Dr Byrd’s death. There was evidence that Dr Byrd intended that the unit should belong to Mr Beveridge but it was not transferred to him during Dr Byrd’s lifetime and Dr Byrd’s will made no provision relating to the unit or Mr Beveridge. Dr Byrd’s will was made almost 10 years prior to Mr Beveridge’s occupation of the unit.

[83] Following Dr Byrd’s death, Mr Beveridge refused to vacate the unit, claiming he was the beneficiary of a constructive trust. Dr Byrd told Mr Beveridge on numerous occasions that the unit was his. Dr Byrd did not require Mr Beveridge to pay any rent or outgoings and refused any offers of payment Mr Beveridge made to him. Dr Byrd

⁹ Richards v Delbridge (1874) LR 18 Eq 11 and Scoones v Galvin [1934] NZGazLawRp 165; [1934] NZLR 1004 (CA).

¹⁰ Harvey v Beveridge [2014] NZCA 72.

did not at any stage inspect the unit or undertake duties expected of an owner or landlord. Mr Beveridge undertook and paid for some improvements. Following a serious accident, Dr Byrd was admitted into care and Mr Beveridge visited him daily, providing all of the help and support that Dr Byrd needed.

[84] Although Mr Beveridge’s primary claim was that there was a constructive trust in his favour in respect of the unit, the Court of Appeal made some useful observations on gifting in the context of the claim:

(a) The only evidence was that Dr Byrd intended to give Mr Beveridge the unit rather than hold it on trust for him. However, Dr Byrd took no steps to implement the gift by transferring legal ownership of the unit to Mr Beveridge. There was therefore no question of the Court perfecting an incomplete gift.¹¹

(b) An incomplete gift can be revoked by the donor at any time. Given there is no consideration, the issue of conscience is irrelevant and it is not dishonest for an intending donor to change their mind at any time before the gift is complete.

(c) An intention to make a gift is not an intention to create a trust. There was no evidence or suggestion of an express trust, particularly not one created in writing as required by the Property Law Act.

[85] Applying the law to the circumstances of this case, it is plain that Mr Carson did not gift the Property to Ms Sutherland. The Property at all times remained in Mr Carson’s name. There is no evidence of any attempt by him to transfer legal title to Ms Sutherland. There is therefore no question of the Court perfecting an incomplete gift.

[86] Mr Buchanan urged me to follow the approach in Pennington v Waine.¹² That case concerned the intending donor signing a share transfer form intending to gift

¹¹ Harvey v Beveridge, above n 10, at [31].

¹² Pennington v Waine [2002] EWCA Civ 227, [2002] 1 WLR 2075.

shares in a company to the intended donee. The form was not delivered to the intended donee or the company before the intending donor’s death. The intending donor died having executed a will in which she made specific gifts of the balance of her shareholding but made no mention of the shares in question. The English and Welsh Court of Appeal held that the intending donor had plainly intended to make an immediate gift of the shares, the intended donee was informed of it and had been made a director, which he could not have been without the shares having been transferred to him. The Court held that, in those circumstances, it would have been unconscionable had the intending donor recalled the gift and accordingly delivery of the share transfer certificate to the company or to the intended donee was not required for there to have been a valid equitable assignment of the shares by the intending donor to the intended donee. Writing for the Court, Arden LJ said:¹³

Accordingly the principle that, where a gift is imperfectly constituted, the court will not hold it to operate as a declaration of trust, does not prevent the court from construing it to be a trust if that interpretation is permissible as a matter of construction, which may be a benevolent construction. The same must apply to words of gift. An equity to perfect a gift would not be invoked by giving a benevolent construction to words of gift or, it follows, words which the donor used to communicate or give effect to his gift.

[87] She then said:

[64] ... a principle which animates the answer to the question whether an apparently incomplete gift is to be treated as completely constituted is that a donor will not be permitted to change his or her mind if it would be unconscionable, in the eyes of equity, vis-à-vis the donee to do so ...

[88] In his submission that Pennington v Waine assisted Ms Sutherland’s case, Mr Buchanan asked the Court to accept Ms Sutherland’s evidence that, had she asked him to, Mr Carson would have transferred the Property to her. On that basis, in Mr Buchanan’s submission, the Court could take a benevolent approach and uphold the claim. He submitted it would be unconscionable for the Executors to refuse to give effect to that intention.

[89] Pennington v Waine can be easily distinguished, however. The intending donor in that case had signed the share transfer form and counter-signed the intended donee’s signature consenting to act as a director, which he could only be if he held at least one

¹³ Pennington v Wayne, above n 12, at [61].

share. The Court of Appeal’s emphasis was on unconscionability, a prerequisite for equitable relief in these types of cases. I cannot see any form of unconscionability in this case. Although Mr Carson, by his words and actions, made it clear Ms Sutherland could use the Property whenever she wanted, he took no steps whatsoever to transfer the legal title into her name. As discussed later in this decision, any unconscionability was also more than adequately compensated by the provision he made for her in the Will and the Trust.

Did Mr Carson hold the Property in trust for Ms Sutherland either under an express oral trust or under a constructive trust?

The law

[90] A trust relating to land which is to take effect in the lifetime of the settlor must comply with the provisions of the Property Law Act, which are designed to prevent the disposition of interests in land without written evidence of the settlor’s intentions.¹⁴ However, the Property Law Act does not affect the creation or operation of a resulting, implied or constructive trust.¹⁵

[91] Constructive trusts are either institutional constructive trusts or remedial constructive trusts. An institutional constructive trust arises by operation of equity when the Court recognises the existence of the trust in a declaratory way. A remedial constructive trust is imposed by the Court as a remedy in circumstances where, before the order of the Court, no trust of any kind existed.¹⁶ Remedial constructive trusts are not relevant to the circumstances of the case.

[92] The learned authors of Equity and Trusts in New Zealand describe the more common examples of institutional constructive trusts as:¹⁷

(a) a fiduciary making an improper profit from his or her position;

¹⁴ Harvey v Beveridge, above n 10, at [33].

¹⁵ Property Law 2007, s 25(4)(a).

¹⁶ Fortex Group Ltd (in rec and liq) v MacIntosh [1998] 3 NZLR 171 (CA) at 172. See also Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] UKHL 12; [1996] AC 669 (HL) at 714-716.

¹⁷ Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Brookers NZ, Wellington, 2013) at 338.

(b) an intended transfer of property which is invalid because of defective formalities;

(c) a person making an unconscientious assertion of ownership to property to which another has contributed;

(d) an agreement to execute mutual wills;

(e) a vendor entering into a contract to sell land;

(f) property obtained by fraud; and

(g) property obtained by killing.

They note:¹⁸

The common factor in all of these scenarios would appear to be the unconscionability of the defendant in denying the plaintiff an equitable interest in the relevant property because of a previous understanding, whether subjectively agreed upon between the parties or more commonly deemed by the law to have been appropriate in the circumstances. It is the element of consent or intention (or lack of either of these, as the case may be) that triggers the institutional constructive trust which arises to reverse the defendant’s unconscionability.

[93] One common category of constructive trusts is where a contribution has been made to the acquisition, improvement or maintenance of property, or its value by a party other than the registered proprietor. In Almond v Read, the Court of Appeal acknowledged in a footnote that this type of trust commonly arises within the context of relationships but said, “there is no reason why it cannot extend beyond that if the central elements of the claim are made out”.¹⁹

[94] The leading case on this category of constructive trusts, Lankow v Rose,²⁰ explained that there are two requirements: that the plaintiff contributed in more than a minor way to the acquisition, preservation or enhancement of the defendant’s assets,

¹⁸ Equity and Trusts in New Zealand, above n 17, at 338.

¹⁹ Almond v Read [2019] NZCA 26 at [66], see footnote 49.

²⁰ Lankow v Rose [1995] 1 NZLR 277, (1994) 12 FRNZ 682 (CA).

whether directly or indirectly; and that in all the circumstances, the parties must be taken reasonably to have expected that the plaintiff would share in them as a result. The contributions must be more than those to a common household which are adequately compensated by the benefits the relationship itself confers and they must manifestly exceed the benefits. There must be a causal relationship between the contributions and the acquisition, preservation or enhancement of the asset.²¹

[95] Tipping J set out the elements a claimant needs to prove in order to establish that equity should regard as unconscionable a defendant’s denial of a claimant’s interest:²²

(a) contributions, direct or indirect to the property in question;

(b) the expectation of an interest therein;

(c) that such an expectation is a reasonable one; and

(d) that the defendant should reasonably expect to yield the claim and interest.

[96] A contribution is a payment or service. Further than that, however, the claimant must show the expectation of an interest, which must be a reasonable expectation, and the claimant must show that the defendant should reasonably expect to allow the claimant an interest. If those requirements are established, then the denial of the claimant’s interest will be unconscionable in equity and the Court will declare a constructive trust.²³ The basis for the finding of an institutional constructive trust is that it is unconscionable for a defendant to retain title to property because of the circumstances. The law then recognises that there is a trust in respect of the property. The purpose of a constructive trust is generally not to create an ongoing trust relationship, but to force the disgorging of money or property by the constructive trustee.²⁴

²¹ Lankow v Rose, above n 20, at 282; 686.

²² At 294; 700.

²³ Equity and Trusts in New Zealand, above n 17, at 343.

²⁴ Commonwealth Reserves v Chodar [2001] 2 NZLR 374 (HC) at [37].

[97] However, as Tipping J observed in Nuthall v Heslop,²⁵ the Court’s jurisdiction is not an exercise in general wealth distribution.²⁶

[98] The Court of Appeal in Almond v Read noted the concept of a “common intention” constructive trust was discussed in Harvey v Beveridge where the Court declined to find such a trust existed on the facts, preferring to leave the issue of constructive trusts arising by common intention for another day.²⁷ The Court of Appeal then said:²⁸

[71] It flows from the principles outlined in these cases that what is sometimes referred to as a “common intention constructive trust” simply describes one type of situation in which a reasonable expectation will be found to exist.

Analysis

[99] Although the statement of claim pleads the existence of an express oral trust, that was not the focus of the plaintiff’s case. While there can be no express trust given the requirements of s 25 of the Property Law Act, if an express trust fails for want of formalities, then it may be unconscionable for the donor to deny the equitable interest intended for the beneficiaries. Mere assertion of an intention is insufficient but rather:²⁹

It must be clear that the constructive trust is indeed giving effect to what was intended to be acted upon in the face of the parties denying that that was, in fact, the intention. For this reason, the courts have developed a rule that a constructive trust will not arise unless the transferor has done all that is necessary to be done and which is within his or her power to do in order to effect the transfer.

[100] As the Court of Appeal observed in Harvey v Beveridge, an intention to make a gift is not an intention to create a trust.³⁰ In the present case, there is simply not the evidence to establish an express trust.

²⁵ Nuthall v Heslop (1995) 13 FRNZ 518 (HC).

²⁶ At 521.

²⁷ See Harvey v Beveridge, above n 10, at [46].

²⁸ Almond v Read, above n 19, at [71].

²⁹ Equity and Trusts in New Zealand, above n 17, at 341.

³⁰ Harvey v Beveridge, above n 10, at [33].

[101] Ms Sutherland’s case, although not perhaps pleaded as such, falls within category (c) of those identified by the authors of Equity and Trusts in New Zealand – that is, a claim of an unconscionable assertion of ownership of property to which another has contributed. It was, in Mr Buchanan’s submission, a common intention constructive trust.

[102] In Harvey v Beveridge, Mr Beveridge’s claim was that there was a “common intention” constructive trust pursuant to which Dr Byrd was under legal obligations to hold the unit on trust for Mr Beveridge and to transfer legal ownership of it to Mr Beveridge either during Dr Byrd’s lifetime or on his death.

[103] The Court of Appeal concluded that Mr Beveridge had no defence to the executor’s claim for possession of the unit. As well as their observations on gifting discussed above, their decision rested on the absence of any significant contributions Mr Beveridge made to the unit and the fact that it was always open to Dr Byrd during his lifetime to resile from any intention to transfer legal ownership of the unit to Mr Beveridge.

[104] The Court of Appeal observed that, in the absence of any evidence of contribution or any other factor, there was to be no element of unconscionability sufficient to support the creation of a “common intention” constructive trust.³¹

[105] In Mr Buchanan’s submission, Harvey v Beveridge is readily distinguishable. He noted that Dr Byrd had purchased the unit long before Mr Beveridge lived in it. In contrast, he relied on the fact that Ms Sutherland was integral to Mr Carson’s purchase of the Property and said he could not have achieved it without her. He said she was therefore not a “volunteer” (a beneficiary who does not provide consideration for the benefit they seek to receive).³² While most beneficiaries of a trust are volunteers, if

³¹ Harvey v Beveridge, above n 10, at [46].

³² Equity and Trusts in New Zealand, above n 17, at 89.

such a trust is not perfectly or completely constituted, equity will not generally intervene to support the volunteer.³³

[106] Furthermore, Mr Buchanan emphasised Ms Sutherland’s longstanding connection with the Property.

[107] Mr Buchanan maintained there was evidence of Mr Carson’s unconscionability in contrast to the lack of it in the case of Dr Byrd. He referred to Ms Sutherland’s evidence that she believed the Property was hers and that she was sure Mr Carson would have put it in her name had she asked him to.

[108] Mr Buchanan contended that it was not possible to infer that Mr Carson had changed his mind. He referred to Ms Sutherland’s evidence that Mr Carson said the Property would belong to her forever. In his submission, the facts led to an inference that Mr Carson had forgotten about his ownership of the Property or that he must have assumed the Property would be transferred into the Trust and, as a trustee, Ms Sutherland would have had control of it.

[109] I am not persuaded by these submissions. Just as Dr Byrd could have changed his mind, so too was it always open for Mr Carson to resile from any intention there may have been to transfer legal ownership of the Property to Ms Sutherland. That is putting the case at its highest. There was no direct evidence of any such intention in any event.

[110] In Harvey v Beveridge, Mr Beveridge had contended that a common intention constructive trust did not involve establishing contributions and/or detriment and an element of “unconscionability” would suffice for equity to act. The argument in that case was that, while Dr Byrd could have resiled from his intention, his executor was not entitled to do so on his behalf. The Court of Appeal disposed of that argument by pointing out that Dr Byrd resiled from any intention by making no provision in his

³³ There are exceptions to this principle. One such exception is the invocation of equitable estoppel discussed below at [128]. In the case of an imperfect gift, a donnee may act to their detriment on the belief that they will receive the gift. While the donnee is not a volunteer as they have not provided consideration, the donor may nonetheless be estopped from withholding the gift. See Thomas v Thomas [1956] NZLR 785 (SC) at 794. For other exceptions, see Equity and Trusts in New Zealand, above n 17, at 90.

will to transfer legal ownership of the unit to Mr Beveridge (and that was in circumstances where Dr Byrd’s will was made years prior to Mr Beveridge’s occupation of the unit).³⁴ The only possible challenge would have required a claim under the Law Reform (Testamentary Promises) Act 1949.³⁵

[111] Again, just like Mr Beveridge, Ms Sutherland cannot show that any services to, or performance of work for, Mr Carson were sufficient for the purpose of establishing she made any contribution to the Property at the required level or that Mr Carson had promised to reward her by way of testamentary provision for such services or work.³⁶

[112] Mr Buchanan also relied on the case of Pascoe v Turner, where the plaintiff had become friendly with the defendant, a widow with a small amount of invested capital.³⁷ She moved into his home as his housekeeper and helped with his business. They subsequently lived together as husband and wife. They then moved into another house paid for by the plaintiff. Some years later, the plaintiff began another relationship and moved out, but told the defendant she had nothing to worry about and the house and contents were hers. She continued to live there and, with the plaintiff’s full knowledge and encouragement, spent a quarter of her modest capital on repairs, improvements and redecoration. The plaintiff then gave her notice to vacate the house. The defendant claimed that the plaintiff was estopped from denying that he held the house on trust for her.

[113] The English and Welsh Court of Appeal held there was nothing from the facts from which a constructive trust could be inferred but:³⁸

We take the view that the equity cannot here be satisfied without granting a remedy which assures to the defendant security of tenure, quiet enjoyment and freedom of action in respect of repairs and improvements without interference from the plaintiff. The history of the conduct of the plaintiff since 9 April 1976 in relation to these proceedings leads to an irresistible inference that he is determined to pursue his purpose of evicting her from the house by any legal means at his disposal with a ruthless disregard of the obligations binding on

³⁴ Harvey v Beveridge, above n 10, at [41].

³⁵ At [39].

³⁶ See Harvey v Beveridge, above n 10, at [39].

³⁷ Pascoe v Turner [1978] EWCA Civ 2; [1979] 2 All ER 945 (CA).

³⁸ At 951.

conscience. The court must grant a remedy effective to protect her against the future manifestations of his ruthlessness. ...

[114] Again, the focus of the Court was on unconscionability.

[115] Mr Buchanan emphasised the service which, in his submission, Ms Sutherland provided to assist Mr Carson in his acquisition of the Property. I consider the argument misplaced. Ms Sutherland assisted to the extent that she was the vendor and provided information to Mr Carson which he used in negotiations. He could, however, have simply made an offer on the open market and, as already discussed, he paid slightly over the market price in any event. Rather than Ms Sutherland assisting Mr Carson, Mr Carson assisted Ms Sutherland to keep the Property out of Mr Lauder’s hands, release her equity in the Property and provide the Property for her use.

[116] Mr Buchanan also relied on the payment Ms Sutherland made to Mr Carson when she received money from the Ministry of Justice in respect of a Family Court costs award. In his submission, had she not believed the Property to be hers, she would “in all likelihood” not have paid this amount to Mr Carson. While Ms Sutherland might have indicated in evidence that she would not necessarily have paid that money to Mr Carson, in my view that was said with the benefit of hindsight. There is insufficient evidence that the payment was made on the basis of it giving her a legal interest in the Property.

[117] I am not satisfied Ms Sutherland paid $27,054 to Mr Carson in the expectation of an interest in the Property and that, had she done so, the expectation would have been a reasonable one.³⁹ There is nothing to suggest she had any conversation to that effect with Mr Carson at the time. In the circumstances, the only reasonable inference is that the payment was made in recognition of Mr Carson’s payment of around
$100,000 of her legal costs. This is particularly so given a costs award is made in respect of the costs incurred by the successful party in legal proceedings.⁴⁰

[118] Ms Sutherland’s upkeep of the Property was minimal and consistent, in my assessment, with family arrangements whereby those with use of a property undertake

³⁹ Equity and Trusts in New Zealand, above n 17, at 343.

⁴⁰ High Court Rules 2016, r 14.2(1)(a).

basic maintenance such as mowing the lawns. The efforts undertaken by Ms Sutherland were consistent with the fact she could use the Property whenever she wanted as a holiday home.

[119] The situation is easily distinguishable from that in Pascoe v Turner. The Property is a holiday home, not Ms Sutherland’s main residence; and there is no evidence she has spent significant sums on capital improvements. Furthermore, the focus in Pascoe v Turner was on the defendant having altered her position with the acquiescence and encouragement of the plaintiff such that it was unconscionable for him to require her to vacate.⁴¹ There was no such change of position by Ms Sutherland.

[120] Of course, in the present case, Mr Carson did make testamentary provision for Ms Sutherland by his bequest to her of $500,000. Furthermore, he made ongoing provision for her by way of the Trust. There is therefore no question of unconscionability. By making that provision, Mr Carson resiled from any intention he might have had to transfer legal ownership of the Property to Ms Sutherland. This is particularly evident in this case, given the confluence of time when Mr Carson was in the process of attempting to purchase the Property and was making the 2010 will. Even though his offer to purchase the Property had not been accepted at the time he executed the will, he can be taken to have turned his mind to the provision he wanted to make in respect of Ms Sutherland.

[121] A will has been described as ambulatory. Subject to revocation, it makes a disposition of property to take effect on the death of the will-maker.⁴² It speaks from the time of the death of the testator.⁴³ It is presumed to apply to the assets the testator owned at the time of death.⁴⁴

[122] Mr Carson updated his will in August 2014. Ms Bain carefully advised him of his obligations towards the Children and, while he did not want to leave any assets

⁴¹ Pascoe v Turner, above n 37, at 951.

⁴² McCormack v Foley [1983] NZLR 57 (CA) at 69; Corbett v Newey [1998] Ch 57 (CA) at 65; Re Berger (Deceased) [1990] Ch 118 (CA) at 131–132; and Raymond Jennings and John Harper Jarman on Wills (8th ed, Sweet & Maxwell, London, 1986) at 26.

⁴³ Wills Act 2007, s 20(1); Nicky Richardson Nevill’s Law of Trusts, Wills and Administration (11th ed, LexisNexis, Wellington, 2013) at [14.1.2]; and Laws of New Zealand Wills (online ed) at [3].

⁴⁴ Nevill’s Law of Trusts, Wills and Administration, above n 43, at [14.1.2] and Glass v Anthony HC Christchurch CIV-2008-409-455, 9 July 2008.

directly to them, he made provision for them by way of the Trust. Ms Bain noted that Mr Carson’s view was that the Children and their needs would then be the problem of the trustees.

[123] I regard this evidence as important. It provides a compelling answer to the reason why Mr Carson structured his estate as he did. This is not simply the case of a man who overlooked making provision for Ms Sutherland in respect of the Property. He, knowing he was terminally ill, specifically turned his mind to his estate and made the decisions he did. Raymond Kremmer’s inheritance was reduced significantly from the 2010 will under which he was to receive the residuary estate. Mr Kremmer had a very close relationship with Mr Carson and was the only person who knew of Mr Carson’s Lotto win.

[124] In the Memorandum, Mr Carson recorded his wish that the assets of the Trust be used in the furtherance of research and development of the Galloway breed of cattle. Furthermore, that he wanted the research and development to continue as long as it was viable.

[125] Ms Sutherland acknowledged Mr Carson told her he was going to put his properties into the Trust. That conversation would have served as a reminder to both Mr Carson and Ms Sutherland that the Property was legally owned by Mr Carson. There is no evidence that either party raised the issue.

[126] Ms Bain’s file note of her conversations with Mr Carson when he was making the Will confirms he specifically addressed Ms Sutherland and his relationship with her. It is clear, therefore, that when he made the Will (which included the Trust and the Memorandum), he specifically considered Ms Sutherland’s position. She was in a better position than under the 2010 will because, as well as the $500,000 bequest, she was a beneficiary of the Trust, Mr Carson expressing his wish that she receive
$25,000 per year from it.

[127] For these reasons, I am satisfied there is no constructive trust in favour of Ms Sutherland in respect of the Property.

Equitable estoppel

[128] In Mr Buchanan’s submission, Mr Carson promised Ms Sutherland that, if she continued with her relationship property proceedings, then the Property would be hers forever. He suggested that Ms Sutherland continued with her proceedings in the Family Court against Mr Lauder on the basis of that promise and that it would be unconscionable for Mr Carson (by the Executors) to depart from it. In his submission, promissory estoppel was made out on that basis.

[129] Historically, there have been many different doctrines of estoppel, the three strands recognised in equity being estoppel by representation, promissory estoppel, and proprietary estoppel.⁴⁵ Arguably, the claim in this case would be better categorized as falling within the promise-based strand of proprietary estoppel⁴⁶ or estoppel by representation. In any event, the New Zealand courts now recognise a unified doctrine of equitable estoppel with its overall requirement of unconscionability.⁴⁷ As the learned authors of Equity and Trusts in New Zealand say:⁴⁸

The basic principle behind the modern doctrine of equitable estoppel can be simply stated: a party will not be permitted to deny an assumption, belief or expectation that it has allowed another to rely on where such a denial would be unconscionable.

[130] To establish equitable estoppel, a claimant must show:⁴⁹

(a) a belief or expectation on the part of the claimant that was created or encouraged by the words or conduct of the defendant;

(b) the belief or expectation has been reasonably relied on by the claimant;

⁴⁵ Equity and Trusts in New Zealand, above n 17, at 605.

46. Ben McFarlane The Law of Proprietary Estoppel (1st ed, Oxford University Press, United Kingdom, 2014) at 1.15 citing Thorner v Major [2009] UKHL 18, [2009] 1 WLR 776.

⁴⁷ Gold Star Insurance Co Ltd v Gaunt [1998] 3 NZLR 90 (CA) at 86.

⁴⁸ Equity and Trusts in New Zealand, above n 17, at 602.

49. At 613; Gold Star Insurance, above n 47, at 86 per Holland J; Gillies v Keogh [1989] NZCA 168; [1989] 2 NZLR 327; (1989) 5 FRNZ 490 (CA) (at 346; 508 per Richardson J).
    • (c) detriment will be suffered if the belief or expectation is departed from;⁵⁰ and

(d) it would be unconscionable for the defendant to depart from the belief or expectation.

[131] In Mr Buchanan’s submission, Ms Sutherland continued her Family Court proceedings despite the emotional toll they were taking on her in reasonable reliance on Mr Carson’s promise the Property would be hers and that resulted in detriment to her. He suggested that the purchase was for Mr Carson’s benefit because he was enjoying involvement in the drama of the legal proceedings and was determined to beat Mr Lauder. I cannot accept this submission and consider that it misconstrues both the evidence and the law.

[132] There was no evidence from Ms Sutherland that she continued with her Family Court proceedings against Mr Lauder only because of Mr Carson’s promise that, if she did so, the Property would be hers. Her evidence was that he purchased the Property for her because he knew how much it meant to her. She also said Mr Carson’s purchase of the Property was a turning point for her and gave her the confidence to keep going in her Family Court proceedings.

[133] If the facts are considered in light of estoppel by representation, the issue is whether Mr Carson’s conduct or words created an express or implied representation. The representation can be of a past or present fact, a future intention or a law. The assessment is objective, using the standard of the reasonable person in the position of the claimant⁵¹ and examines the circumstances in which the representation was made.⁵² In Wilson Parking, the Court of Appeal asked first, whether the representation was clear and unequivocal and, secondly, whether the

⁵⁰ While recent Court of Appeal cases describe this requirement as a claimant’s reasonable reliance to its detriment, this conflates requirements (b) and (c), perhaps reflecting the facts of the cases. See Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567 at [44] and Vervoort v Forrest [2016] 3 NZLR 807 [2016] NZCA 375 at [80].

⁵¹ Wilson Parking, above n 50, at [47]. See also Equity and Trusts in New Zealand, above n 17, at 624 citing Travel Agents Assn of NZ Inc v NCR (NZ) Ltd (1991) ANZ ConvR 553 (HC) at 555.

⁵² Wilson Parking, above n 50, at [47] and [49].

reliance was reasonable.⁵³ However, the authors of Equity and Trusts observe that “it is more accurate to say that what is required is for the representation to be sufficiently unequivocal to justify the other party’s reliance on it”.⁵⁴ The authors refer to the earlier Court of Appeal decision, Lim v Ward McCulloch Solicitors, which notes that “[i]f in objective terms the asserted representation was not sufficiently clear and unambiguous to have been read in that sense, it will not be held to have been reasonable for [the representee] to have so understood it”.⁵⁵ Lord Walker in the House of Lords has commented that whether a representation is sufficiently clear “is hugely dependent on context”.⁵⁶

[134] The authors of Equity and Trusts suggest the courts tend to consider the following factors:

(a) the nature of the relationship between the two parties;

(b) inadvertence leading to the belief that further protection is unnecessary; and

(c) whether the parties have pursued a common course of conduct on the basis of the belief or expectation.

[135] This approach by the authors in Equity and Trusts and in earlier Court of Appeal decisions is more flexible than the approach taken in Wilson Parking. It is also more in line with the modern approach to equitable estoppel which has moved away from strict criteria to overall unconscionable behaviour.⁵⁷ Nevertheless, both approaches lead to the same outcome in this case.

[136] The only evidence of what Mr Carson said to Ms Sutherland comes from Ms Sutherland’s recollection of their conversations. This included him telling her he

⁵³ Wilson Parking, above n 50, at [45]–[60] on “clearly and unequivocally expressed” and [61]–[67] on reasonable reliance. The Court of Appeal, in Vervoort v Forrest, affirmed this position, above n 50.

⁵⁴ Equity and Trusts in New Zealand, above n 17, at 625.

⁵⁵ Lim v Ward McCulloch Solicitors Nominees Ltd CA76/98, 25 March 1999, at [26].

⁵⁶ Thorner v Major, above n 46, at [56].

⁵⁷ Gold Star Insurance, above n 47, at 86.

wanted her to “keep Whangamata” and that the Property would be hers forever. There was no independent evidence of these statements. The relationship between the two was one of trust and support, Mr Carson having paid Ms Sutherland’s legal fees and rent, and having supported her throughout her separation. Ms Sutherland said she assumed Mr Carson would take the steps necessary to transfer the Property to her. There is no evidence to the effect that he was unaware further steps were required. He continued to act consistently with ownership. The parties’ conduct was certainly consistent with Ms Sutherland having unlimited and unrestricted use of the Property. While Ms Sutherland might have had the belief or expectation that Mr Carson would transfer the Property to her, I am not satisfied that Mr Carson’s words or conduct were sufficiently unequivocal to justify her reliance on her understanding of them.

[137] In any event, Ms Sutherland must show she will suffer a detriment if the belief or expectation is departed from.

[138] Any detriment must be one that Ms Sutherland would suffer if Mr Carson (by the Executors) is permitted to resile from the belief or expectation which has been relied on. Mere disappointment from an unfulfilled promise is not a sufficient detriment to raise an estoppel.⁵⁸ Detriment is either wasted time, effort or money (which can include stress, anxiety and inconvenience⁵⁹), or other opportunities to gain the benefit (or avoid the detriment) that were foregone in reliance on the belief or expectation.⁶⁰

[139] Any emotional distress must result from or be exacerbated by Mr Carson resiling or departing from the belief or expectation.⁶¹ Any emotional distress Ms Sutherland suffered in relation to the Family Court proceedings would have occurred independently of whether Mr Carson (by the Executors) resiled from any

⁵⁸ Equity and Trusts in New Zealand, above n 17, at 616 citing Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; 62 ALJR 110 (HCA) (“Waltons Stores”) at 404 and 116 per Mason CJ and Wilson J and at 423 and 1255 per Brennan J. See also Wilson Parking, above n 50, at [80]-

[86] and [116] where the Court of Appeal extensively discussed Walton Stores and adopted, in particular, the reasoning of High Court of Australia on unconscionability.

⁵⁹ Equity and Trusts in New Zealand, above n 17, at 617 citing Commonwealth Australia v Verwayen

(1990) 170 CLR 394 (HCA) at 448 per Deane J and 462 per Dawson J.

⁶⁰ Smyth v Wadland [2007] NZHC 658; (2007) 26 FRNZ 255 at [134] and Equity and Trusts in New Zealand, above n 17, at 616–617.

⁶¹ Verwayen, above n 59.

promise or representation Mr Carson might have made to transfer ownership of the Property to her at a later date and was not a consequence of Mr Carson resiling from them.

[140] Any reliance on the belief or expectation has been to Ms Sutherland’s benefit rather than detriment. She has had free use of a beach house for around 10 years, in return for which she has had to undertake minimal caretaking duties which would normally be associated with such use of a property. There is no evidence that she spent significant sums in repairing and maintaining the Property, let alone improving it.

[141] Finally, and in any event, it would not be unconscionable for Mr Carson by his Executors to depart from any such belief or expectation. As discussed above, any unconscionability is off-set by the provision of $500,000 Mr Carson made for Ms Sutherland in the Will and that she is a discretionary beneficiary of the Trust.

[142] This (unpleaded) claim in equitable estoppel is dismissed.

Result

[143] For the reasons given, the claim is dismissed.

Costs

[144] The parties confirm that there is no issue between them as to costs and no order of the Court is necessary in this regard.

Thomas J

Solicitors:

Buchanan Gray, Wellington for Plaintiff Wynn Williams, Christchurch for Defendants