AUTON v AUTON [2020] NZHC 940

AUTON v AUTON [2020] NZHC 940 [7 May 2020]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2020-409-000144[2020] NZHC 940BETWEEN ANDREW MYERS AUTONApplicantAND VALERIE BEATRICE AUTONRespondentHearing: 4 May 2020Appearances: P N Allan for ApplicantH A Evans and S B Henry for RespondentJudgment: 7 May 2020JUDGMENT OF ASSOCIATE JUDGE PAULSENThis judgment was delivered by me on 7 May 2020 at 4.00 pmpursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:The application[1] The applicant applies to sustain a caveat he lodged against a property at47 Aorangi Road, Christchurch (Aorangi Road). The respondent (Mrs Auton) is theregistered proprietor of Aorangi Road and the applicant is her son. The applicantlodged the caveat on the basis that on around 1 August 2015 there was a concludedoral agreement between him and Mrs Auton to transfer the property to him for valuableconsideration and there have been sufficient acts of part performance of the agreement.Alternatively, he asserts that Mrs Auton holds the property for him pursuant to aconstructive trust.[2] Mrs Auton opposes the application on the bases:(a) there was no concluded agreement for the transfer of the property;(b) there have been no acts of part performance; and(c) the property is not held upon a constructive trust for the applicant.[3] The application was heard under urgency as Aorangi Road has been sold withsettlement on 8 May 2020. Due to the COVID-19 pandemic restrictions, Mrs Auton'saffidavit was not sworn in accordance with r. 9.73 High Court Rules. I make an orderthat her affidavit of 16 April 2020 has been accepted for filing and may be used in thisproceeding under r 9.73(4) High Court Rules,1 the requirements of r 9.73(5) havingbeen satisfied.Background[4] Mrs Auton was the sole shareholder and director of Check Point Trailers Ltd(Check Point). Check Point acquired Aorangi Road in February 2002. Aorangi Roadcontains both a house and a cottage. The cottage was built by Mrs Auton's parentswho lived there until they both passed away.1 As amended by r. 17 High Court (COVID-19 Preparedness) Amendment Rules 2020.[5] In April 2007, Mrs Auton and her husband (the applicant's father, who I willrefer to as Mr Auton) purchased 14 Exeter Street, Merivale (Exeter Street) for$550,000 and undertook renovations to it.[6] In around early 2009, the applicant returned to New Zealand from the UnitedKingdom, where he had been living, with his then partner. Mr and Mrs Auton soldExeter Street to him. The sale price was $460,000. The applicant obtained a mortgagefor $360,000 and the balance of $100,000 was left owing to Mr and Mrs Auton undera deed of acknowledgment of debt and agreement to mortgage of 9 May 2009 (thedebt). The applicant became the registered owner of Exeter Street on 1 May 2009.[7] Exeter Street was badly damaged in the 4 September 2010 earthquake and thedwelling was rendered uninhabitable. Mrs Auton allowed the applicant and his partnerto move to Aorangi Road. For a time, the Earthquake Commission paid rent to CheckPoint. When that entitlement was exhausted no rent was paid and the applicant hasnever personally paid rent or outgoings in respect of the property.[8] The applicant's earthquake claim in respect of Exeter Street was settled. Hereceived payments from the Earthquake Commission and Tower Insurance whichexceeded the amount owing under his mortgage. He retained the balance withoutrepaying Mr and Mrs Auton the debt and he has not paid the debt since.[9] On 24 June 2014, Mr and Mrs Auton registered a caveat over Exeter Street toprotect repayment of the debt. Around this time, the applicant and Mr Auton agreedto develop Exeter Street by demolishing the existing dwelling, subdividing theproperty and building two townhouses. The applicant describes the arrangement inhis first affidavit in the very briefest of terms as follows:My father, who among other things is a property developer, approached mewith a proposal to tear down the damaged house on Exeter Street and in itsplace build 2 new townhouses. He would undertake the work on my land andin return I would share in the profits to the point where I might be able to keepone of the townhouses or alternatively I would at least have sufficient moneyto buy a better house.[10] Mrs Auton acknowledges an arrangement between the applicant and Mr Autonto develop Exeter Street but describes it in more detailed terms. She says that theapplicant engaged Lichfield Placements Ltd (LPL), a company owned by a familytrust and directed by Mr Auton, to finance and project-manage the development ofExeter Street. From the sale of units the applicant would receive $495,000(representing the land value of Exeter Street). The other proceeds of sale were to beused to cover the construction and development costs. It was intended the applicantand his partner would raise a mortgage to purchase the rear unit once completed.[11] The applicant and his partner separated on 14 February 2015. Followingseparation, they both continued to live at Aorangi Road. The applicant occupied thehouse and his former partner and child the cottage.[12] It is common ground that from around 2015 there were discussions about thepossibility of the applicant acquiring Aorangi Road. The applicant describes this inhis first affidavit as follows:As the project proceeded my father informed me that there would not besufficient profits to be made to allow me to have one of the townhouses. Itwas suggested instead that I could own Aorangi Road outright instead(mortgage and debt free).[13] Mrs Auton says that the applicant's break-up from his partner, his dependencyon prescription drugs and his inability or unwillingness to work meant that he couldnot raise a mortgage to buy the rear unit at Exeter Street. She says after takingaccounting advice there was a proposal for the sale of Aorangi Road to the applicantfor $500,000. The full purchase price was to be left owing upon mortgage to be repaidfrom the sale proceeds of Exeter Street. Documents were prepared for the acquisitionof Aorangi Road by the applicant, but he refused to sign them. The applicant says thiswas because his parents required him to acknowledge the debt when he was to receiveAorangi Road mortgage and debt free. When the applicant refused to sign thepaperwork, Mrs Auton regarded the proposal was abandoned.[14] On 31 March 2016, Aorangi Road was transferred by Check Point toMrs Auton and LPL registered a mortgage over Exeter Street to secure repayment ofthe development costs. To allow this, Mr and Mrs Auton withdrew and then re-lodgedtheir caveat. Check Point was removed from the Register of Companies on 8 July2016.[15] The development of Exeter Street continued, and the units sold in June 2017and January 2018. The applicant authorised payment of the sale proceeds to LPL asmortgagee. Mrs Auton says that the profit from the development was just $5,000before tax.[16] In March 2018, the applicant became violent towards his former partner andwas charged with property and firearms offences. Mrs Auton served a trespass noticerequiring the applicant to stay-off Aorangi Road. Mr Auton arranged for the applicantto live at Helanca Avenue, Woolston, which was a property owned by a familybusiness.[17] Before sentencing on the criminal charges, the applicant was admitted toHillmorton Hospital. He was not sentenced in the District Court until 26 April 2019and received supervision. He appealed and on 4 December 2019 was dischargedwithout conviction in the High Court. Clark J found that the seriousness of theapplicant's offending was mitigated by a recent diagnosis of Attention DeficitHyperactivity Disorder and conviction on the offences was likely to create a barrierupon his ability to travel. In arriving at this conclusion, the Judge relied upon evidencefrom Mr Auton that the applicant needed to travel overseas to market the products ofthe family business.[18] In December 2019, the applicant was removed from Helanca Avenue.Mr Auton found alternative accommodation for him at Sullivan Avenue, Woolston. Inrecent times, the applicant has attempted to return to Aorangi Road. He has beenremoved by the Police and is presently facing charges for trespass.[19] Mrs Auton put Aorangi Road on the market. On learning of this, the applicantlodged his caveat on 26 February 2020. On 5 March 2020, Mrs Auton entered into anagreement to sell Aorangi Road with settlement scheduled for 8 May 2020. Sheapplied to the Registrar-General of Land for the caveat to lapse and the applicant madethis application to sustain the caveat.[20] Consistent with what Mrs Auton says was agreed between the applicant andMr Auton for the development of Exeter Street, the sum of $338,578 is held byLayburn Hodgins in trust for the applicant. This represents the unimproved land valueof Exeter Street of $495,000 less the $100,000 debt owed to Mr and Mrs Auton andless a further $56,442 for living expenses paid on the applicant's behalf at his request.The applicant's position is that he does not want the money but wants Aorangi Road.Legal principles - caveats[21] Before the Court can sustain the applicant's caveat he must show a reasonablyarguable case to the interest in Aorangi Road he has claimed. An order for removal ofthe caveat will not be made unless it is clear the caveat cannot be maintained eitherbecause there was no valid ground for lodging it or because the ground upon which itwas lodged no longer applies.2 The Court also retains a discretion to remove a caveatif it is completely satisfied the removal will not prejudice the legitimate interests ofthe caveator.3[22] Applications of this kind are generally not suitable for finally resolving therights of the parties or resolving disputed questions of fact or deciding disputedquestions of law relating to the construction of contracts. Where there is a conflictbetween the affidavits the Court will generally prefer the evidence of the caveator.4However, the Court is not bound to accept uncritically statements on an affidavit thatare equivocal, lacking in precision, inconsistent with undisputed contemporarydocuments or other statements by the same deponent, or inherently improbable. 5The issues[23] Section 24(1) of the Property Law Act 2007 (the Act) provides:A contract for the disposition of land is not enforceable by action unless –(a) the contract is in writing or its terms are recorded in writing; and(b) the contract or written record is signed by the party against whom thecontract is sought to be enforced.2 Sims v Lowe [1988] 1 NZLR 656 (CA) at 659 – 660.3 Philpott v Noble Investments Ltd [2015] NZCA 342 at [26].4 Bethell v Rickard [2013] NZCA 68 at [22].5 Barrett v IBC International Ltd [1995] 3 NZLR 170 at 175 citing Eng Mee-Yong v Letchumanans/o Velayutham [1980] AC 331, 341.[24] Section 24 does not affect the operation of the law relating to partperformance.6[25] It is established an oral agreement for the sale and purchase of land, which isunenforceable by reason of s 24, may support a caveat if the purchaser may be entitledto specific performance of the agreement by virtue of the equitable doctrine of partperformance.7[26] Against that background, the issues arising in this case are the following:(a) whether on or about 1 August 2015 a concluded oral agreement wasmade between Mrs Auton and the applicant for the transfer of AorangiRoad to the applicant;(b) if that is so, whether the applicant can overcome the absence of anywriting by recourse to the doctrine of part performance; and(c) if not, does Mrs Auton hold the property upon a constructive trust forthe applicant.DiscussionWas there a concluded agreement?[27] The applicant must show an arguable case that all the essential terms of anagreement to transfer Aorangi Road to him were agreed. 8 The question whether therewas a concluded agreement is primarily one of fact. I am in no doubt there was noconcluded agreement. The applicant's arguments are too unsatisfactory andinsubstantial to sustain the caveat.96 Property Law Act 2007, s 26.7 Cribb v Austin Chalk Company Ltd HC Christchurch M150/02, 22 August 2002; Neil CampbellCampbell on Caveats (3rd ed, LexisNexis, Wellington, 2019) at 23.8 For the essential terms of a contract for the sale and purchase of land see Elizabeth Toomey NewZealand Land Law (3rd ed, Thomson Reuters, Wellington, 2017) at 1331-1337.9 Barrett v IBC International Ltd, above n 5, at 177.[28] The applicant's evidence is argumentative, contains hearsay and submission.He has produced only parts of correspondence without any explanation. His evidenceis plainly incomplete. His description of the arrangements concerning thedevelopment of Exeter Street and his acquiring Aorangi Road is both skeletal andconfused.[29] I have set out in [12] what the applicant says was agreed in relation to AorangiRoad. This does not come close to establishing a concluded agreement. He refers toa "suggestion" that he could own Aorangi Road. The discussion he refers to was withhis father, who had no interest in Aorangi Road. The applicant does not refer to anydiscussion of the consideration for the transfer of Aorangi Road or to when that wouldoccur. It is only in his reply affidavit that he states as part of the agreement he was totransfer Exeter Street to LPL.[30] The applicant has annexed to his reply affidavit incomplete client engagementletters from Layburn Hodgins dated 22 July 2015 and 31 March 2016. The letter of22 July 2015 confirms his instructions on four matters namely:1) You are selling your property at 14 Exeter Street to Lichfield PlacementsLimited.2) You are purchasing 47 Aorangi Road from Checkpoint Trailers Limited.3) Loan arrangements are to be made with Bank of New Zealand.4) The loan provided to you by Robert and Valerie will be restructured.[31] The letter of 31 March 2016, however, records instructions only in respect of:We have received your instructions to assist you with the purchase of 47Aorangi Street, Christchurch from Valerie Auton.[32] These letters show the applicant was not to receive Aorangi Road mortgageand debt free. As at 22 July 2015, the applicant was to raise a mortgage to acquireAorangi Road and the debt was to be restructured. The letters also show the parties'intentions changed over time. The letter of 22 July 2015 contemplates a compositetransaction involving Exeter Street, Aorangi Road and the restructuring of the debt.The letter of 31 March 2016 does not mention Exeter Street or the debt and refers onlyto the purchase of Aorangi Road. The letter of 31 March 2016 is not consistent withthe applicant's case that a concluded agreement was made on or about 1 August 2015.[33] Mr Allan referred to the alleged agreement as a land swap agreement. He setout terms of this agreement for which there is no evidential foundation. These includethat Aorangi Road would be transferred to the applicant when the Exeter Street unitswere sold (this contradicts the applicant's evidence), that the applicant was to treatAorangi Road as his own regardless of the legal ownership, that LPL could be requiredto pay a purchase price for Exeter Street and, that the parties would value "therespective transactions" to minimise their tax exposure. This highlights the lack ofclarity about the terms of the alleged agreement.[34] The applicant acknowledges he refused to sign documents to acquire AorangiRoad because Mrs Auton required him to acknowledge the debt. It does not appearthat the applicant thereafter asserted an entitlement to Aorangi Road until he lodgedhis caveat on 26 February 2020. That was almost two years after Mrs Auton requiredhim to move from the property.[35] In an email to Mrs Auton of 26 July 2018, the applicant asked her to againconsider allowing him to purchase the property. He wrote:I would still like to consider buying aorangi roadOnce I'm on acc I should be able to afford a mortgage Please consider thisAgain its an option thats more likely to keep me here, where if I get a dischargeI'm going back to England.[36] The applicant says this email concerned formalizing the agreement to buyAorangi Road. That is an untenable interpretation. It shows there was no concludedagreement. There was nothing for Mrs Auton to consider if there was a concludedagreement.[37] In an email of 5 September 2019, Mrs Auton sent the applicant a link to anadvertisement for a property she considered he might inspect. Contrary to his evidencethat he owns Aorangi Road, the applicant responded stating "I will never ever ownanything here again."[38] I am satisfied the proposal the applicant would purchase Aorangi Road wasabandoned and the development of Exeter Street continued broadly as Mr Auton andthe applicant had agreed. The development work, the registration by LPL of amortgage to secure development costs, the sale of the units and payment of saleproceeds to LPL were all consistent with that.[39] Mr Allan emphasised an email of 16 January 2019 from Mrs Auton's emailaccount to the applicant's criminal lawyer referring to a verbal agreement to swapExeter Street and Aorangi Road and a bank record of a payment of $250 by LPL to theapplicant on 16 January 2020 noted as being rent on Aorangi Road. Mr and Mrs Autonhave gone a very long way to support the applicant with his personal and mental healthissues. The email was provided to assist the applicant at sentencing on the criminalcharges. While one can justly be critical that its contents are misleading, it is noanswer to the fundamental difficulty that the applicant has failed to establish anarguable case for the existence of a concluded agreement to acquire Aorangi Road.The bank record was a payment to assist the applicant with his living expenses. It wasnot rent, and LPL had no reason to pay the applicant rent.Part performance[40] The leading cases in New Zealand on part performance are TA Dellaca Ltd vPDL Industries Ltd,10Mahoe Buildings Ltd v Fair Investments Ltd,11 and Fleming vBeevers.12 In Dellaca, Tipping J set out the essential elements of the doctrine whichwere slightly amended in Fleming v Beevers. I take the correct statement of thoseelements from the Court of Appeal's judgment in Nguyen v SM & T Homes Ltd asfollows:131. Is there a sufficient oral agreement such as would have been enforceablebut for the [Property Law Act]?10 TA Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 at [99] – [109] (HC).11 Mahoe Buildings Ltd v Fair Investments Ltd [1994] 1 NZLR 281 (CA).12 Fleming v Beevers [1994] 1 NZLR 385.13 Nguyen v SM & T Homes Ltd [2016] NZCA 581 at [32].2. Has there been part performance of that oral agreement by the doing ofsomething that:(a) clearly amounts to a step in the performance of a contractualobligation or the exercise of a contractual right under the oralcontract; and(b) when viewed independently of the oral contract was, on theprobabilities, done on the footing that a contract relating to theland, consistent with that alleged, was in existence?3. Do the circumstances in which that part performance took place make itunconscionable (fraudulent in equity) for the defendant to rely on the[Property Law Act]?[41] The doctrine of part performance is available only where there is a concludedand otherwise enforceable contract. It will not apply if the act of part performancepreceded that agreement, or where the parties are still negotiating, fail to agree on allessential terms or, the contract is void for some other reason. As I have found therewas no concluded agreement between the applicant and Mrs Auton the doctrine doesnot assist the applicant.14 Had that not been the case I would have found that theapplicant cannot rely on the doctrine of part performance.[42] Mr Allan submitted the act of part performance was payment of sale proceedsof Exeter Street to LPL. This was not a sufficient act of part performance because,under the second limb of the Dellaca test, it was not the performance of a contractualobligation or the exercise of a contractual right under the agreement the applicantalleges was made to transfer Aorangi Road to him mortgage and debt free. Thedisbursement of the sale proceeds was pursuant to the agreement reached between theapplicant and Mr Auton for the development of Exeter Street.[43] The third limb of the Dellaca test is not satisfied either. Whilst it has beenargued that the third limb is wrong in principle and superfluous,15 I consider it fulfilsan important function.16 Here, the applicant knew Mrs Auton would not transferAorangi Road to him on the terms he says were agreed. He took no steps to enforcethe agreement. The development of Exeter Street proceeded as the applicant and Mr14 TA Dellaca Ltd v PDL Industries Ltd, above n 10, at 109.15 Susy Frankel "The Uncertainty Doctrine of Part Performance" (2011) 42 VUWLR 37.16 Brabazib Properties Ltd v Nixon (1999) ANZ Conv R 378; Nguyen v SM & T Homes Ltd, aboven 13.Auton had agreed. There is nothing to suggest Mrs Auton understood, or could havebeen expected to understand, the applicant authorised the disbursement of the saleproceeds to LPL pursuant to the alleged agreement. She did not benefit personallyfrom the disbursement of the sale proceeds. It is not, in those circumstances,unconscionable that Mrs Auton rely on the statutory requirements in s 24 of the Act todefend an action on the agreement.Constructive trust[44] The applicant claims that Aorangi Road is held on a constructive trust for himin reliance upon the principles in Lankow v Rose.17 Mr Allan did not pursue anyargument that a constructive trust might arise on another basis.[45] A claimant asserting an interest in property in reliance upon Lankow v Rosemust establish four features:(a) that they made direct or indirect contributions to the property inquestion;(b) an expectation of an interest in the property;(c) that such expectation is a reasonable one; and(d) that the owner of the property can reasonably expect to yield to theclaimant an interest in the property.[46] Direct financial contributions as well as indirect contributions that assist in theacquisition, improvement or maintenance of property or its value will qualify.However, a claimant's contributions must be more than minor, causally related to theacquisition, preservation or enhancement of property, and manifestly exceed anybenefits that the claimant derives from the arrangement.1817 Lankow v Rose [1995] 1 NZLR 277 (CA).18 Wakenshaw v Wakenshaw [2017] NZCA 252, [2018] NZAR 532 at [25].[47] The applicant has no arguable case to an interest based on Lankow v Rosebecause he has made no contribution to the acquisition, maintenance or preservationof Aorangi Road. Mr Allan could not point to any qualifying contribution.Furthermore, I can see no circumstances from which an argument can be made thatthe applicant has a reasonable expectation to an interest in the property or thatMrs Auton can be expected to yield any interest to him.Result[48] The application is dismissed. I hereby order that Caveat 11696891.1 lodgedby the applicant against 47 Aorangi Road shall lapse.[49] I reserve costs because the applicant has applied for legal aid. If the parties areunable to agree on costs I will receive submissions by memoranda within 21 days fromthe respondent and from the applicant seven days thereafter. Memoranda are to be nolonger than five pages._______________________O G PaulsenAssociate JudgeSolicitors:Patient & Williams, ChristchurchYoung Hunter, Christchurch