TYERS AND TYERS V IAN LINDEN MCNAUGHT AND MARGARET BRIDGET MCNAUGHT HC HAM CIV-2010-419-1186

TYERS AND TYERS V IAN LINDEN MCNAUGHT AND MARGARET BRIDGET MCNAUGHT HC HAM CIV-2010-419-1186 14 December 2010IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY CIV-2010-419-1186BETWEEN DAVID WILLIAM TYERS AND CHRISTINE ANNE TYERS Appellants AND IAN LINDEN MCNAUGHT AND MARGARET BRIDGET MCNAUGHT Respondents Hearing: 1 December 2010 Counsel: T Braun for the Appellants G P Denholm for the Respondents Judgment: 14 December 2010JUDGMENT OF POTTER JIn accordance with r 11.5 High Court Rules I direct the Registrar to endorse this judgment with a delivery time of 3 p.m. on 14 December 2010. Solicitors: Harkness Henry, Private Bag 3077, Hamilton Copy to: G P Denholm, P O Box 5080, Wellesley Street, AucklandTable of Contents Introduction [1] Background [4] The original judgment [5] The judgment [10] Appellants' arguments [23] Respondents' arguments [25] Discussion [32] Result [52]Introduction[1] The appellants Mr and Mrs Tyers ("the Tyers") appeal against a judgment of Judge Everitt 1 ("the judgment") in which he struck out the appellants' statement of claim and application for summary judgment and gave judgment for the respondents, Mr and Mrs McNaught ("the McNaughts"). The appellants had sought a summary judgment order for recovery of a property at 470 State Highway 4, Mahoe, Taumarunui known as "Gwendolen Cottage" ("the property") which is occupied by Mr and Mrs McNaught. The McNaughts had responded by applying to strike out the statement of claim. [2] The McNaughts oppose the appeal and seek to uphold the judgment. They say they have a licence to occupy Gwendolen Cottage as determined by Judge Everitt in a previous judgment 2 ("the original judgment") which was not appealed. [3] The appellants allege that the licence to occupy is a bare licence, revocable at will and they revoked it by notice to quit given to the McNaughts on 24 June 2009. They say the Judge erred in fact and in law in finding in favour of the McNaughts in the judgment appealed.Background[4] The issues between the parties have a long history. An understanding of the background is necessary. It is helpfully summarised in the original judgment. I adopt the summary of Judge Everitt. In those proceedings the McNaughts were the plaintiffs. They sought to establish a constructive trust for ownership of the property. The Tyers, the defendants, sought a declaration of ownership of the property and counterclaimed for damages based on an alleged tenancy. Judge Everitt said in the introduction to his judgment:1 Tyers v McNaught DC Taumarunui CIV-2010-088-000050, 18 August 2010.2 McNaught v Tyers DC Taumarunui CIV-2006-068-000050, 20 May 2009.[1] The plaintiffs in this action seek to prove and enforce against the defendants a constructive trust arising from an arrangement or undertaking made in or about March, April and May 2003, whereby the defendants would purchase a small holding in Taumarunui known as "Gwendolen Cottage" for the sum of $70,000 and hold the property in trust for the plaintiffs until such time as the plaintiffs could find $70,000 to repay the purchase by the defendants. [2] The property concerned was owned at the material time by Miss Gwendolen Mary Glassey, an English woman who emigrated to New Zealand in 1945 and subsequently worked for many years at the Department of Social Welfare in Taumarunui as a senior social worker, namely from 1965 until her retirement in 1983. [3] The plaintiff, Margaret McNaught, met Miss Glassey in 1965 when Mrs McNaught was an honorary social worker working with Miss Glassey. Thereafter, until, Miss Glassey's death in 2003, they remained firm friends. [4] The property owned by Miss Glassey was informally called Gwendolen Cottage, and more formally known as "Main Highway South", Manunui, Taumarunui. The property consisted of 1.85 hectares and had on it an older style cottage and some sheds. It was a lifestyle block enjoyed for many years by Miss Glassey and her close friends. [5] From 1965 onwards the plaintiff Margaret McNaught and Miss Glassey became close and warm friends, Miss Glassey treating the plaintiffs as part of her family and Margaret McNaught as a daughter that she never had. It was not only a close personal friendship, but also a close professional relationship with the plaintiffs fostering something in the order of 60 youngsters between 1965 and 1983, including children they also adopted as their own. [6] After retirement Miss Glassey continued to live at Gwendolen Cottage and enjoy the rural lifestyle. As her years advanced she became less robust, requiring two hip replacements and a knee replacement. Throughout this period she was assisted by her friend Margaret McNaught. In September 1996 Miss Glassey appointed the plaintiffs as her attorneys under an enduring Power of Attorney and her attorneys for care and welfare, such powers being executed on 24 September 1996. In addition, in her will of that date Miss Glassey bequeathed the sum of $5,000 to the plaintiffs in acknowledgement of their services rendered to her and in anticipation of their acting as executors and trustees of her estate pursuant to the appointment in her will. [7] In early 2000 it became apparent that Miss Glassey was failing in health and, after being assaulted by an intruder in her home, she moved to the Ranui Rest Home at Taumarunui on 17 July 2002 but continued to visit her home at Gwendolen Cottage on a daily basis. [8] It was apparent that Miss Glassey had no income apart from her pension and unfortunately there were insufficient funds to pay the rest home fees to the extent that by March 2003 some $29,000 wasowing. Miss Glassey's mental capacity had also deteriorated to the extent that Doctor Thomas confirmed in May 2003 that Miss Glassey did not have the mental capacity to look after her own affairs. [9] Mrs Margaret McNaught, being aware of the debt situation, believed that the land at Gwendolen Cottage would have to be sold to pay off Miss Glassey's debts and consequently in early March 2003 arranged for a registered valuer, Mr Doyle, to carry out a current market valuation for sale purposes. [10] The plaintiffs had discussed from time to time the possibility of living in Gwendolen Cottage when Miss Glassey was no longer able to visit and it was also clear that Miss Glassey had, in her later years, hoped the plaintiffs would be able to purchase her property and live in it as their retirement home and had discussed this possibility with the plaintiffs and also her sister in England. [11] In March 2003, the plaintiffs however had no means of purchasing the property. Since 1995 the plaintiffs had suffered a series of setbacks with allegations made against them by three of their foster daughters of impropriety, leading to expensive trials in the District Court when the plaintiffs were represented by Mr Kevin Ryan QC. [12] Although the plaintiffs were acquitted it was a disaster personally for them and their family and they were more or less financially ruined by the cost of defending themselves. Miss Glassey, according to the plaintiffs, advanced them the sum of $12,000 to help pay Mr Ryan's fee. [13] The plaintiffs had known the defendants since at least 1990 and had become close friends, enjoying regular and frequent social occasions, home visits, barbecues and the like. During the friendship Mr and Mrs Tyers had become acquainted with the difficult financial position the plaintiffs were in and the allegations made by the three foster daughters. Mr Tyers, being a former Police Officer, assisted the plaintiff where he could to subsequently prepare a claim for compensation. The defendants also advanced a sum of money, totalling $10,000 to the plaintiffs to assist with the settlement of a tax debt. The plaintiffs repaid this debt of $10,000 and included a further payment of $1,000 to represent interest, which was subsequently returned. [14] In March and April 2003 the plaintiffs sought to source funds to purchase the Gwendolen Cottage property and held discussions with their friends Mr and Mrs Konini and Mrs McIsaac as to whether they could borrow the money required to purchase the Gwendolen Cottage from Miss Glassey. The figure of $70,000 was mentioned by Mr and Mrs Konini and subsequently Mr and Mrs Tyers became aware of these discussions and entered into discussions themselves with the plaintiffs concerning the purchase of Gwendolen Cottage and how they could assist the plaintiffs. The plaintiffs did not advertise the property for sale, nor did they list it with real estate agents. It was only their close circle of friends that were aware that the plaintiffs planned to sell the property on behalf of Miss Glasseyto pay off her rest home debt. The plaintiffs had obtained a valuation for sale purposes which noted a CV as at 1 July 2002 of $93,000 and a market value for sale as at 14 March 2003 of $87,000 which included chattels of $1,500. [15] The plaintiffs and defendants entered into discussions which eventuated in the property being sold to the defendants for the sum of $70,000 and it is this arrangement which is the crux of the dispute between the plaintiffs and the defendants. It is clear that the plaintiffs, the defendants, Mrs McIsaac and the Koninis were aware that in March 2003 Miss Glassey was deeply in debt and that the only way out was for her to sell the property, Gwendolen Cottage, to release sufficient funds to pay the rest home debt and service her future care at Ranui Rest Home. [16] I am satisfied that everyone understood that the McNaughts wanted to buy the property due to their close and long association with Miss Glassey who also desired that, if possible, the plaintiffs would live in her property Gwendolen Cottage. [17] The interested parties, perhaps apart from Miss Glassey at that time who was in failing health, understood that the plaintiffs did not have the money to purchase the property. Various discussions took place at social gatherings at the McNaughts' house and elsewhere to the effect that the McNaughts wanted to borrow the money from their friends if possible and, in particular, the Koninis made an offer to put up $70,000 as that is the figure they considered, on legal advice, was the value of the property. [18] As the discussions advanced, the defendants offered to buy the property if the price was kept at $70,000, the figure that the Koninis had mentioned as a loan.The original judgment[5] After setting out the background as above and summarising the respective cases of the parties, the Judge said: 3This action will succeed or fall on the facts. Credibility is also a determinative matter in ascertaining the facts. This Court has had the benefit of hearing the witnesses give their evidence and be cross-examined.[6] He then described the main issue as being whether the McNaughts had a proprietary interest in the property, that is whether the Tyers acted as constructive3 At [33].trustees for the McNaughts when the Tyers acquired the property in May 2003. In that context, he recorded the McNaughts' position: 4Mr Denholm, for the plaintiffs, agreed and submitted that there is one cause of action relied on by the plaintiffs and that is constructive trust. Mr Denholm confirmed no reliance was sought to be placed on any contractual agreement, proprietary estoppel, or any other cause of action. The plaintiffs' case stands or falls on the sole cause of action pleaded.[7] The Judge then discussed and analysed the evidence at some length. He said he preferred the evidence of the McNaughts of the arrangement or undertaking between the parties 5 and gave his reasons for that credibility finding. He made a number of relevant factual findings and concluded:6a) The McNaughts had proved, on the balance of probabilities, that the Tyers held the property upon a constructive trust for the benefit of the McNaughts; b) The McNaughts were not entitled to the relief sought because: i) No action was taken by the McNaughts to call for the transfer to them of the beneficial interest in the property within a reasonable time (determined by the Judge to be six months) as specified by the terms of the trust; and ii) The McNaughts came to the Court with unclean hands in breaching their clear fiduciary obligations to Miss Glassey in attempting to personally benefit, in the circumstances outlined. c) The Tyers' counterclaim for damages failed as there was no tenancy; d) The Tyers were entitled to a declaration that they were the outright owners of the property;4 At [35].5 At [52].6 At [91].e) The Tyers' ownership of the property was subject to a licence to occupy in favour of the McNaughts, the terms of which were as agreed in the arrangement and undertaking made in May 2003. [8] The Judge had previously referred to the arrangement and undertaking in May 2003. 7 He said: 85. The defendants would take the property under agreement for sale and purchase and hold it on behalf of the plaintiffs until such time as they could raise $70,000 and at that point upon payment of the $70,000 to the defendants they would transfer Gwendolen Cottage property to the plaintiffs. In the meantime, the plaintiffs were to live in the property rent free for as long as they wished provided they paid all outgoings and there were no costs to the defendants. This was not a joint venture arrangement whereby both parties could ultimately benefit. 6. If the plaintiffs could not raise $70,000 to repay the defendants within a reasonable time from May 2003 then title to the property would pass to the defendants absolutely. However, the plaintiff would continue to have the right to live in the property upon the same terms as previously.[9] The original judgment was not appealed. However, the Tyers followed up in June 2009 with a notice requiring the McNaughts to quit and deliver up possession of the property. In October 2009 they issued proceedings for recovery of land by way of summary judgment. That led to the judgment appealed.The judgment[10] Judge Everitt noted that the property now had an agreed value of $230,000 supported by a valuation. He referred to the previous litigation and the orders he made in the original judgment. He said: 9In its judgment of 20 May 2009, the relief sought by the McNaughts was refused; the Tyers were declared to be the outright owners of Gwendolen Cottage, subject to the McNaughts having the right to live in the property rent free for as long as they wished provided they paid all outgoings and there were no costs to the Tyers. The Court determined that the arrangement between the Tyers and the McNaughts was not a joint venture, a tenancy, or7 At [71].8 At 5 and 6 of [71].9 At [4].based on contract between the parties, but was a licence to occupy Gwendolen Cottage. The licence was not defined further by the Court other than in terms it found had been set by the parties.[11] The Judge detailed 10 the principles applicable to strike out applications. He said: 11This Court, having heard the earlier proceedings between the parties, has sufficient material before it to determine the issue on the strike out application. Disputed questions of fact have been resolved and no appeal has been filed by either party against the Court's decision dated 20 May 2009.[12] He noted that the Tyers' cause of action in the statement of claim was that the McNaughts' licence is a bare licence terminable at will, and that having given reasonable notice of termination the McNaughts had failed or refused to vacate Gwendolen Cottage and deliver up vacant possession and that there was no defence to that claim. [13] He continued: 12Based on the Court's findings in the earlier action, a question of law has arisen, namely the type of licence granted by the Tyers to the McNaughts and whether it is terminable at will. This question is capable of decision on the material before the Court, the Court also having heard extensive argument from counsel for both parties on 10 June 2010 in support and opposition of the various applications herein.[14] He summarised the relevant evidence as follows: 13[19] The parties did not discuss the nature of the transaction granting the McNaughts the right to live at Gwendolen Cottage. The evidence disclosed that the Tyers offered the McNaughts, their close friends, occupancy because they felt sorry for the McNaughts who had been through a difficult time in relation to litigation and needed somewhere to live pending the settlement of the purchase from the estate of Ms Glassey. The offer to grant occupancy was a gratuitous offer, not based in contract, and not a tenancy with rent being paid. The parties did not convey or intend there to be a conveyance of an interest to the McNaughts in Gwendolen Cottage. It was a friendly arrangement for the convenience of the McNaughts and, initially, was intended to be short-term pending the McNaughts arranging a loan for $70,000 to repay the Tyers.10 At [7].11 At [12].12 At [13].13 At [19] and [20].[20] However, the arrangement continued after the proposed purchase by the McNaughts did not eventuate and, as the Court found, and when title to the property of Gwendolen Cottage passed to the Tyers, the defendants continued to have the right to live in the property on the same terms they had previously arranged.[15] He continued: 14[22] In determining what type of licence was in effect granted to the McNaughts, the Court has reference to the actions of the parties at the material time, their stated intentions, and the terms expressed to govern the licence granted.[16] The Judge said he was satisfied the licence granted to the McNaughts was a licence with a defined term as to the duration of the licence: 15... namely residence in the property, rent free, for so long as they wished, provided they paid all outgoings and there were no costs to the Tyers.[17] He held this was clearly a grant of a licence not subject to tenancy or contract and was not a joint venture. No interest was conveyed to the McNaughts when the grant was created; it was personal to the McNaughts. [18] He continued:It is also good law that a bare licence is revocable at will unless the parties have expressly provided for the duration of the licence by specifying a termination date. The licence will expire in accordance with that provision ...[19] He concluded:16It is the Court's view that the licence enjoyed by the McNaughts is not a bare licence terminable at will, but is a licence with a term of defined duration and until that has expired or until the licensees are in breach of the licence for example for failing to pay outgoings, then the licence is not terminable at the will of the grantors, the Tyers.[20] The Judge then considered, as an alternative position on the basis of the material before the Court, that the McNaughts entered into a licence on a promise from the Tyers that after the Tyers took title the McNaughts were entitled to reside in14 At [22].15 At [23].16 At [27].Gwendolen Cottage rent free for so long as they wished provided they paid all outgoings and there were no costs to the Tyers. He considered that the promise by the Tyers to the McNaughts raised an equity in favour of the McNaughts and that the Tyers could not revoke that licence without breaching that promise. He held that such a promise is enforceable in equity. 17[21] In reaching that conclusion the Judge relied on the authority of Errington v Errington and Woods where Denning LJ said: 18Law and equity have been fused for nearly 80 years, and since 1948 it has been clear that as a result of the fusion, a licensor will not be permitted to eject a licensee in breach of a contract to allow him to remain ... nor in breach of a promise on which the licensee has acted, even though he gave no value for it.[22] Judge Everitt held that having determined that the licence granted by the Tyers to the McNaughts was not revocable at will, the action brought by the Tyers for recovery of the land had no prospect of success. 19 Accordingly he struck out the statement of claim and summary judgment application.Appellants' arguments[23] The appellants submit: a) The licence found by the Judge in the original judgment was a bare licence and therefore revocable at will; and/or b) There was no basis for an alternative argument of a licence supported by estoppel because: i) The McNaughts had expressly advised that they did not rely on proprietary estoppel in the course of the constructive trust17 At [29].18 Errington v Errington and Woods [1952] 1 KB 290 at 298.19 At [31].proceeding (this is a reference to the McNaughts' position recorded at [35] of the original judgment); 20 and ii) There was no pleading to support an estoppel argument. c) It was therefore not open to the Judge to find in the judgment appealed: i) A licence other than a bare licence; ii) An equitable element to the benefit of the McNaughts. d) A bare licence is revocable at will on notice. This is the "theme", Mr Braun said, of commentaries from a variety of texts referred to by the appellants in submissions, though counsel accepted that the authorities cited by the text writers in support of the general proposition do not state the proposition as precisely as do the commentaries. For example Land Law in New Zealand:21A bare licence is a privilege granted by one person to another to do something which would otherwise be unlawful, but unaccompanied by any circumstances which might give rise to a right in the licensee that the licence should not be revoked at any time. Such a situation will exist where there is no contract and no circumstances giving rise to an estoppel. In Moffat v Sheppard22 Isaacs J commented: The respondents cannot advance their case beyond that of a merely revocable licence unless they can establish a grant of the interest in the land, or an agreement for valuable consideration specifically enforceable, or conduct raising an equity in their favour. Putting it briefly, they must show grant, contract or estoppel.e) Because a bare licence is revocable at will, the Judge "started to go wrong" when he stated in the judgment: 23It is also good law that a bare licence is revocable at will unless the parties have expressly provided for the duration of the licence by20 Refer [6] above.21 George Hinde (ed) Land Law in New Zealand (looseleaf ed, LexisNexis) at [18.004].22 Moffatt v Sheppard (1909) 9 CLR 265 at 286.23 At [23].specifying a termination date. The licence will expire in accordance with that provision.f) The original judgment was not appealed because it did not hold that there was an equitable interest in favour of the McNaughts. It held only a bare licence in their favour. The finding in the original judgment was: 24The defendants ... are entitled to a declaration that they are now the outright owners of the disputed property, but subject to a licence to occupy in favour of the plaintiffs, the terms of which are as agreed in the arrangement and undertaking made in May 2003.A licence for a specific term, as the Judge found in the original judgment, was a finding open to him, but it could only be a bare licence which can be revoked at will. g) The Judge made a specific finding in the original judgment 25 that the McNaughts did not have "clean hands". Thus, he declined the constructive trust that he found established in their favour, on the balance of probabilities, in respect of the property. That taint extends to the proprietary interest that the Judge recognised in the judgment appealed. h) Proprietary estoppel was an equitable remedy "thrust upon" the McNaughts by the Judge. It was not specifically pleaded as required. The Judge did not turn his mind to the aspect of the taint in relation to this interest. [24] Mr Braun sought to distinguish on the facts, the authority of Errington relied on by the Judge in finding that the promise by the Tyers to the McNaughts raised an equity in favour of the McNaughts. 26 He argued that the equitable interest found in24 At [92].25 At [90].26 Refer [20] and [21] above.Errington arose at the expiration of the mortgage and gave rise to a proprietary interest in the mortgagors by estoppel. He submitted the situation in Errington is similar to the situation that would have applied had the constructive trust been upheld by the Judge. Had it been, the McNaughts would have been able to settle the purchase within a period found by the Judge to be reasonable, and that situation would have given rise to a proprietary interest by estoppel. However, he submitted, once the constructive trust was found to have failed there was no equitable interest that could be claimed by the McNaughts, a situation quite different from that inErrington.Respondents' arguments[25] Mr Denholm emphasised that the McNaughts' claim in the first District Court proceeding was in equity, and that the Judge found in their favour a constructive trust for ownership of the property established on the evidence. However, he declined to allow them to take advantage of the constructive trust because they had breached their fiduciary obligations to Miss Glassey by selling the property to the Tyers at an under value. [26] The Judge therefore made a declaration that the Tyers were the owners of the property. But he held that their ownership was subject to a licence to occupy in favour of the McNaughts, on the terms agreed in May 2003. Those terms had been determined by the Judge in the original judgment. 27[27] Mr Denholm said that in the original judgment the Judge upheld the licence in favour of the McNaughts in equity. He then carried those findings from the original judgment to the judgment appealed when he said:28The Court determined that the arrangement between the Tyers and the McNaughts was not a joint venture, a tenancy, or based on contract between the parties, but was a licence to occupy Gwendolen Cottage. The licence was not defined further by the Court other than in terms it found had been set by the parties.27 Refer [8] above.28 At [4].[28] Counsel noted that the Judge said in the judgment 29 that the question of law that had arisen, namely the type of licence granted by the Tyers to the McNaughts, was capable of decision on the material before the Court and that in determining what type of licence was granted to the McNaughts the Court had reference to the actions of the parties at the material time, their stated intentions, and the terms expressed to govern the licence granted. 30[29] Importantly, Mr Denholm said, the Judge concluded 31 that the licence wasnot a bare licence terminable at will but a licence with a term of defined duration and until expiration of that term or breach by the licensees the licence was not terminable at the will of the grantors, the Tyers. [30] Mr Denholm submitted that having not appealed the original judgment the Tyers cannot now complain about its findings. He suggested that the Tyers have tried to appeal in another guise, by bringing a summary judgment application based on their contention that only a bare licence was granted in favour of the McNaughts. He said this is simply a repetition of the stance the Tyers have adopted throughout, as recorded by the Judge in the original judgment: 32The Tyers submit that the licence to occupy described by the Court in its judgment, can only be a bare licence which is revocable at will.[31] He referred to the credibility findings in the original judgment 33 which were adverse to the Tyers. He submitted that the findings of the Judge were constructed in equity, as the case in the original proceeding and at the original hearing was constructed in equity. The Judge found an "arrangement" agreed by the parties such that the licence granted was not a bare licence. He further submitted that the bare licence revocable at will does not fit the facts or the evidence.29 At [13].30 At [22].31 At [27].32 At [13].33 Particularly at [33] and [54]-[56].Discussion[32] The starting point must be the Judge's conclusion that the licence enjoyed by the McNaughts was not a bare licence, but on the basis of his factual findings, a licence coupled with an occupational term defined by their lifetimes and therefore not terminable at will by the Tyers. 34[33] It seems to me that a licence granted in such circumstances will raise an equitable estoppel against the grantors if they should seek to revoke the licence in breach of the terms on which it was granted. [34] That was the effect of the judgment in Errington.35 In that case a father, wishing to provide a home for his son who had recently married, purchased a house in his own name with the aid of a mortgage loan. He promised that if his son and daughter-in-law continued in occupation of the house and paid all the instalments on the mortgage loan, he would then transfer the house to them absolutely. The son and his wife entered into occupation and began to make repayments of the loan to the building society. The father later died, leaving all his property (including the house) to his widow. Shortly after the father's death, the son left his wife and went to live with his widowed mother. The daughter-in-law continued to occupy the house and to make the appropriate repayments to the building society. The mother brought an action for recovery of possession against the daughter-in-law, alleging that the daughter-in-law had a mere revocable licence to occupy the house. The Court of Appeal unanimously rejected the claim for possession and declined to eject the daughter-in-law. [35] Denning LJ said: 36... although the couple had exclusive possession of the house, there was clearly no relationship of landlord and tenant. They were not tenants at will but licensees. They had a mere personal privilege to remain there, with no right to assign or sublet. They were, however, not bare licensees. They were licensees with a contractual right to remain. As such they have no right of law to remain, but only in equity, and equitable rights now prevail. I34 At [27] of the judgment.35 Errington v Errington and Woods [1952] 1 KB 290.36 At 298-299.confess, however, that it has taken the Court some time to reach this position. At common law a licence was always revocable at will, not withstanding a contract to the contrary: Wood v Leadbitter37 ... The rule has, however, been altered owing to the interposition of equity ... A licensor will not be permitted to eject a licensee in breach of a contract to allow him to remain ... nor in breach of a promise on which the licensee has acted, even though he gave no value for it. (emphasis added)[36] In Errington the duration of the licence was defined by the period during which the couple continued to pay the mortgage instalments. They were not bound to pay the instalments but for so long as they did, they were licensees who enjoyed "a permissive occupancy short of a tenancy, but with a contractual right, or at any rate, an equitable right to remain so long as they paid the instalments". 38[37] The Court of Appeal upheld the couples' licence to occupy, independently of their right to receive the transfer of the property if the mortgage was paid off. The Court recognised that event might not happen. Somervell LJ referred to potential legal difficulties in relation to the conveyance but he saw "... no legal obstacle to holding that as licensees they are entitled to retain exclusive possession so long as the instalments are paid". 39[38] Thus, the basis upon which Mr Braun seeks to distinguish Errington on the facts is not valid. 40 In both Errington and this case the Courts were concerned with a licence to occupy, not a proprietary interest. In both cases the equity was held to protect the right to remain in possession based on the promise of the grantor. [39] It is clear that the right or interest in issue here is a possessory interest, a licence to occupy. It is therefore irrelevant that the McNaughts advised the Court in relation to the constructive trust claim that they did not rely on proprietary estoppel but only on the constructive trust to support their claim to ownership of the property. 41 The issues in the first District Court proceeding were quite different, as Judge Everitt identified. 4237 Wood v Leadbitter (1845) 13 M.&W. 838.38 At 296.39 At 294.40 Refer [24] above41 At [35] of the original judgment.42 At [34] of the judgment.[40] Similarly, the consideration that the McNaughts did not have "clean hands", which was a contributing factor (but not the only factor) in the Judge's decision not to grant them equitable relief in relation to ownership of the property, is not a factor relevant to the licence to occupy. The Judge found the McNaughts sold to the Tyers at an undervalue in breach of their fiduciary obligations to Ms Glassey. He said: 43The impropriety must be direct and immediately related to the equity relied on. In this case, the constructive trust could never have arisen, on the agreed terms, without a breach of the plaintiffs' fiduciary obligations to Ms Glassey.[41] The impropriety with which the Judge was concerned related to the McNaughts' claim in equity to ownership of the property, a proprietary interest. It does not relate to, or affect, the licence to occupy granted to them by the Tyers which, the Judge found on the facts, was to continue whether or not they completed the purchase of the property. [42] Finally, I do not consider there is merit in the appellants' complaint that estoppel was not pleaded by the McNaughts. All the relevant evidence was before the District Court, including evidence of the actions of the parties at the material time, their stated intentions, and the terms expressed to govern the licence granted. The Judge's finding that the Tyers had granted to the McNaughts a licence to occupy on terms, flowed from his findings that the constructive trust was proven (though he declined relief) but the tenancy claimed by the Tyers was not. [43] A not dissimilar situation was considered in Gibb v MacDonell.44 In that case a de facto relationship had broken up. The male partner, Mr Gibb, brought claims based on: a) Implied trust; b) Constructive trust; c) Proprietary estoppel.43 At [89] of the original judgment.44 Gibb v MacDonell [1992] 3 NZLR 475 (HC).[44] The Court found that these claims were not made out because the evidence was that Mr Gibb had accepted he would not acquire a proprietary interest in the property in issue. The Court nevertheless found that he had a reasonable expectation of a possessory interest in the land, capable of allowing equitable relief. Anderson J said, referring to Gillies v Keogh,45 that promissory estoppel may be invoked even if the facts of a case do not go so far as to establish an equitable interest in the land itself. 46[45] The three elements for the test to establish an estoppel 47 were all present here. Richardson J said in Gillies: 48... the three elements, encouragement (of a belief or expectation), reliance and detriment have to be considered in the light of the actual relationship of the parties, the way they live their lives.[46] In the judgment Judge Everitt found that an undertaking and arrangement had been arrived at in or about April and May 2003 by the McNaughts and the Tyers for occupation of the property on the terms set out at [71] of the original judgment.49That finding satisfied the element of encouragement of a belief or expectation. [47] The Judge found that: 50... the McNaughts, through their close friendship with the Tyers, were entitled to repose and did repose trust and confidence in the Tyers that they would honour the arrangement and undertaking.That finding satisfied the element of reliance. [48] The Judge further found: 51The McNaughts had given up their previous accommodation and moved to live in Gwendolen Cottage and had declined an offer of a loan from the Koninis of $70,000 and had concluded the undertaking and arrangement with their close friends, the Tyers, in whom they could repose absolute trust with no strings attached.45 Gillies v Keogh [1989] 2 NZLR 327.46 At 479.47 Attorney-General of Hong Kong v Humphreys Estate (Queen's Gardens Limited) [1987] AC 114.48 At 347.49 Refer [8] above.50 At [73] of the original judgment.51 At [74] of the original judgment.[49] That finding satisfied the element of detriment. The McNaughts acted to their detriment in declining other options available to them and preferring the option offered by the Tyers in reliance on the trust they imposed in them. [50] In this case where the Judge heard all the evidence and made relevant credibility and factual findings based on the evidence, it was appropriate and entirely logical that he should determine the full nature and extent of the relationship between the parties in respect of the property, including the licence to occupy. [51] I conclude for the reasons given, that the Judge was correct to hold that the Tyers' action for recovery of the land had no prospects of success.Result[52] The appeal is dismissed. [53] I note Judge Everitt declined to award costs to either party in both proceedings in the District Court. However, I see no reason on this appeal why costs should not follow the event. Costs are awarded to the McNaughts on a 2B basis together with the usual disbursements.