VERVOORT v FORREST [2016] NZCA 375

VERVOORT v FORREST [2016] NZCA 375 [4 August 2016]IN THE COURT OF APPEAL OF NEW ZEALANDCA272/2015[2016] NZCA 375BETWEEN EMILIE PETRONELLA CORADINAVERVOORTAppellantAND RUSSELL FORREST, WILLIAMDUFFY AND RAYMOND DENNISSPEARS AS TRUSTEES OF THEWILLIAM DUFFY FAMILY TRUSTFirst RespondentsWILLIAM DUFFYSecond RespondentHearing: 13 April 2016Court: French, Asher and Williams JJCounsel: P T Finnigan for AppellantNo appearance for RespondentsJudgment: 4 August 2016 at 4.00 pmJUDGMENT OF THE COURTA The appeal is dismissed.B There is no order for costs.____________________________________________________________________REASONS OF THE COURT(Given by Asher J)Introduction[1] This appeal arises out of a 12-year relationship between the appellant,Emilie Vervoort, and the second respondent, William Duffy. It follows the deliveryof a judgment by Ellis J on 23 April 2015.1 Ellis J rejected a number ofMs Vervoort's claims to assets held in Mr Duffy's family trust, leaving only a smallnumber of assets as relationship property. Ms Vervoort has appealed that decision.[2] It is a feature of this appeal that Mr Duffy, who had unsuccessfully protested jurisdiction,2 took no steps to defend the claims in the final hearing in the High Courtor in this appeal. The other first respondents, Russell Forrest and Raymond Spears,the former and present trustees of the William Duffy Family Trust, also took nosteps, although the former swore an affidavit for Ms Vervoort.[3] There were four key arguments presented to us on this appeal. First, it wassubmitted that Mr Duffy's trust, which owned a very considerable number of assets,was a sham "from inception" or became a sham. The second submission was thatthe Judge's determination Ms Vervoort did not have an interest as a constructivetrustee in the property of the trust was wrong. The third was that Mr Duffy by hisactions created an estoppel, precluding the trust from denying Ms Vervoort aninterest in certain assets. The fourth was that, if any of Ms Vervoort's argumentswere established, orders should be made in relation to property.Background[4] The William Duffy Family Trust (the Trust) was formed on 1 August 1994 by Mr Duffy as settlor, well before any relationship with Ms Vervoort began. We will refer to the details of the Trust in due course. The original trustees were Mr Duffy and Mr Forrest.[5] There are no current financial statements of the Trust that have been brought to our attention. However, accounts had been prepared in the past. The Trust has owned, and presumably continues to own, significant assets in New Zealand and Fiji.1 Vervoort v Spears [2015] NZHC 808, [2015] NZFLR 525 [High Court decision].2 Vervoort v Forrest [2013] NZHC 590.[6] Mr Duffy, or the Trust, also has or had other assets including shares in acontainer business, United Container Services Ltd, shares in a property company,Curries Proprietary Ltd, and shares in other companies including Riverhead PubCruises Ltd, Moduco Ltd and Kings Klamps IP Development Ltd. None of thesecompanies or their shareholding have featured in detailed submissions in this appeal.[7] When Mr Duffy and Ms Vervoort commenced their relationship in April 1999they both had non-dependent children and their own sources of income and assets. Itwould seem they commenced living together in about June 1999. From an earlystage in their relationship Mr Duffy, who through his Trust had access to significantfinancial resources, provided the funding for their lifestyle. Ms Vervoort was not inpaid employment. In about February 2000 the Trust purchased a lifestyle block inCoatesville, Auckland. It appears to have been the intention of Mr Duffy that thiswould be his family home with Ms Vervoort. They lived there for a period with twoof her sons and one of his.[8] Ms Vervoort says she helped Mr Duffy find the Coatesville property. Therewas a cottage on it and she helped to redecorate and refurbish it. She chose the tiles,colour schemes and furniture and established a garden. She maintained the cottageby cleaning it regularly. She also maintained the house and garden, the swimmingand spa pools and cared for the animals. She mowed the lawns, fixed the fences andsprayed the gorse.[9] Mr Duffy did some work around the property but was inhibited by a severeknee problem. In the years that followed Mr Duffy at times referred to Ms Vervoortas his spouse or acknowledged a de facto relationship. Together they went onnumerous overseas trips.[10] However, through the 2000s the relationship appears to have been fraught.There was legal correspondence between Ms Vervoort and Mr Duffy and assaultcomplaints. In 2006 a temporary protection order was made. There were incidentsof excessive drinking and violence and the parties had counselling. In early 2008 theTrust purchased an apartment at Marina Point in Denarau, Fiji. They remainedpartners and began to spend more and more time in Fiji. They both obtained Fijian residency.[11] Ms Vervoort separated from Mr Duffy in January 2010. She commencedproceedings in the Family Court at Auckland seeking maintenance and relationshipproperty orders. There appears to have been a period of reconciliation during thatyear when Mr Duffy allegedly promised various things to her, including that hewould marry her and that she would receive a "fair" settlement in relation torelationship property issues if she went back to Fiji to live with him.[12] Throughout 2010 Mr Duffy had protested the jurisdiction of the Family Courtto hear the proceedings, claiming to be domiciled in Fiji. The Family Courtproceedings were in due course dismissed for want of prosecution inNovember 2010. Ellis J recorded her understanding that Ms Vervoort did not pursuethe claims because of the parties' reconciliation and the signing of an agreementbetween her and Mr Duffy.3 On 17 November 2010 Ms Vervoort and Mr Duffyentered into a formal deed of mutual settlement under which Ms Vervoort was toreceive the proceeds of the sale of a property at Orewa and $20,000 (the firstagreement). It appears some payments were made under this agreement.[13] On 6 April 2011 Ms Vervoort and Mr Duffy entered into a further agreemententitled "deed of release" (the second agreement), which was said to supersede thefirst agreement.[14] Under the second agreement Mr Duffy paid Ms Vervoort $327,002.17, whichconstituted the proceeds of the sale of a property at Orewa. This was expressed to bein full and final payment of "her claim against Duffy in respect to her allegations thatshe has some rights for continuing maintenance or rights to the property owned byDuffy or his trust". The deed also contained a covenant by Ms Vervoort that shewould not bring any further such claim or claims against Mr Duffy. The deedrecorded an acknowledgement by Ms Vervoort that she had received and understoodlegal advice on the matters in the agreement.3 High Court decision, above n 1, at [9].[15] The relationship did not heal and the parties again separated. It finally endedin July 2011. Ms Vervoort filed further proceedings in the Family Court atAuckland. It appears some proceedings were also commenced in Fiji. As well as theFamily Court proceedings, Ms Vervoort issued proceedings in the High Court atAuckland seeking relief in relation to the Trust.[16] The trustees then applied to have the claims against the Trust dismissed because the second agreement was a complete answer to the claims, and because the second agreement was entered into in Fiji where there were proceedings thatprovided the proper vehicle for determining the dispute. It was also asserted that theproperty alleged to be relationship property was not held by Mr Duffy personally butby his Trust. This application was dismissed by Associate Judge Sargisson, whofound that New Zealand was the appropriate forum.4 The Judge found Ms Vervoortdid not have a seriously arguable case based on a constructive trust, but that it wasseriously arguable the Trust was a sham. If the Trust was a sham, the property heldin the Trust could be relationship property. The judgment recorded it was concededby Mr Duffy's counsel at the hearing that it was at least arguable the secondagreement was voidable for duress.5[17] In January 2014 Ms Vervoort successfully applied to transfer the Family Court proceedings to the High Court.6 On 5 March 2014 the transferredFamily Court proceedings were consolidated with the High Court proceedings. Thisconsolidated proceeding was heard and determined by Ellis J.[18] In both the High Court proceedings and the Court of Appeal, Mr Forrestentered no appearance. Through his counsel he filed a memorandum advising hewould abide the decision of the Court, on the basis that if any judgment was enteredagainst him it would be limited to the assets of the Trust. Mr Duffy has filed nodocuments in this Court.4 Vervoort v Forrest, above n 2.5 At [45].6 Vervoort v Duffy [2014] NZFC 485.The High Court judgment[19] In the High Court Ellis J held the first and second agreements could beregarded as unconscionable or entered into under undue influence or duress. Eachwas therefore prima facie voidable.7 Ellis J did not regard Ms Vervoort's acceptanceof the monies owed under those agreements to be an affirmation of them, as theundue influence continued to be exercised.8 She concluded that Ms Vervoort was notbarred by the agreements from bringing her claims. Needless to say, Ms Vervoorthas not challenged this finding on appeal.[20] Ellis J proceeded to consider the merits of the claims under the Property(Relationships) Act 1976 (the Act) and the claims against the Trust, and after a fullanalysis determined the Trust was not a sham.9 She considered the alternativesubmission that Mr Duffy held half of his personal assets and half of the Trust'sassets on constructive trust for the benefit of Ms Vervoort and rejected that argument.She concluded it would not be reasonable to expect the trustees to yield toMs Vervoort an interest in the Trust property having not discussed her interest in theproperty at all, or to do so on the basis of any representation made by Mr Duffy inhis personal capacity.10 With the Trust intact, there were only small items ofproperty owned personally by Mr Duffy that might be considered to be relationshipproperty.[21] Ellis J noted that, accepting there was relationship property, the moneyMs Vervoort had undisputedly received under the second agreement (approximately$327,000) dwarfed the value of her half-share in these lesser assets. Indeed, if sheavoided the two agreements she faced the prospect of being found to owe Mr Duffymoney.11 Ellis J also questioned whether some of the more substantial Trust propertycould be relationship property even if the Trust was set aside. It could be traced backto pre-relationship property and might remain separate. The Judge considered itunnecessary to carry out the exercise of determining the value of the relationshipproperty, noting in addition that any claims regarding Fijian immovables would have7 High Court decision, above n 1, at [49].8 At [50].9 At [67].10 At [82] and [91].11 At [96].to proceed in Fiji.12 She also refused to make any maintenance orders, given the monies Ms Vervoort had received.13[22] Ellis J ended her judgment with the invitation that if Ms Vervoort wished to avoid the agreements and pursue her claim to the small number of assets that wereaccepted in the judgment as relationship property and her claim for maintenance, shewas to advise the Court by way of memorandum so the appropriate orders could bemade.14 In all other respects her claims were dismissed. Ms Vervoort then lodgedthis appeal.[23] It is necessary therefore to determine whether Ellis J was correct in herdecision rejecting the sham, constructive trust and estoppel arguments.First argument — there was no trust, and the trust documents were a sham[24] It was Mr Finnigan's argument that the Trust was a sham and that as aconsequence some of the property owned by the Trust fell within the classification ofrelationship property under the Act.[25] A sham trust arises where the trust structure that was set up was not intended by the parties who set it up to create the rights and obligations of a trust. It wasstated by the majority of the Supreme Court in Ben Nevis Forestry Ventures Ltd vCommissioner of Inland Revenue:15In essence, a sham is a pretence. A document will be a sham when itdoes not evidence the true common intention of the parties. They eitherintend to create different rights and obligations from those evidenced by thedocument or they do not intend to create any rights or obligations, whetherof the kind evidenced by the document or at all. A document whichoriginally records the true common intention of the parties may become asham if the parties later agree to change their arrangement but leave theoriginal document standing and continue to represent it as an accuratereflection of their arrangement.12 High Court decision, above n 1, at [98].13 At [99].14 At [102].15 Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115, [2009]2 NZLR 289 at [33].[26] This approach was recently adopted by the Supreme Court inClayton v Clayton [Vaughan Road Property Trust].16 The intention to createdifferent rights and obligations must be held subjectively by those creating thetrust.17 For the Trust to be a sham, it must be shown that when Mr Duffy settled theTrust in 1994 he had no intention of setting up an operating trust.The Trust at its inception[27] The Trust deed has the following key features:(a) Mr Duffy was the settlor.(b) The named trustees were Messrs Forrest and Duffy.(c) The final beneficiaries were Mr Duffy and his son Edward Duffy.(d) The discretionary beneficiaries included the final beneficiaries and Mr Duffy's father, Henry Duffy, any children of the stated children, and any wife, husband, widow or widower of any of those persons.(e) Mr Duffy had the power to appoint new trustees, but at no time could he appoint himself the sole trustee.(f) Mr Duffy did not have the power to change beneficiaries, although the trustees could nominate any additional beneficiaries.[28] Ellis J found there was no real evidence to suggest Mr Duffy did not have anintention to create a valid trust in 1994.18 We respectfully agree. While, as we shallset out, Mr Duffy appears to have exercised de facto control of the Trust, at theoutset he ensured a co-trustee was appointed, Trust accounts were prepared,properties were purchased in the name of the Trust, and by and large the formalitiesof a trust structure were put in place and retained. There was nothing to indicate a16 Clayton v Clayton [Vaughan Road Property Trust] [2016] NZSC 29, [2016] 1 NZLR 551 at [113].17 Clayton v Clayton [2015] NZCA 30, [2015] 3 NZLR 293 at [66]; Clayton v Clayton [Vaughan Road Property Trust], above n 16, at [128].18 High Court decision, above n 1, at [60].lack of intention to create a real trust, although we have no doubt Mr Duffy intended to control it. At the present stage New Zealand law does not recognise that the de facto control of a trust by a single trustee, who is also a beneficiary, creates a sham even if the other trustees are clearly not involved.19The Trust after inception[29] It was observed by the Court of Appeal in Official Assignee v Wilson thatonce a trust has been validly created and the beneficiaries have an interest, thatcannot be easily undone: "[u]nless the later appearance of a sham can be traced backto the creation of the trust, the trust remains valid".20 The Court went on to say thatwhile the originally valid trust would remain, there could be later sham transactionsthat would be invalid.21[30] As already noted, it was said in Ben Nevis Forestry Ventures Ltd vCommissioner of Inland Revenue that:22A document which originally records the true common intention of the parties may become a sham if the parties later agree to change their arrangement but leave the original document standing and continue torepresent it as an accurate reflection of their arrangement.[31] Mr Finnigan submitted that if the Trust was not a sham from its inception, theconcept of an "emerging sham" should be accepted and applied to the Trust. Hepointed out that Mr Duffy did not take any particular steps to disprove the allegationof a sham and adopted a blocking approach to a proper consideration of the issues,including failing to meet his obligations on discovery and protesting jurisdiction.Mr Finnigan submitted this supported the inference of a sham.[32] In support of that submission, Mr Finnigan referred to a situation where alaunch "Slainje" was purchased. The boat was first placed into the name of Mr Forrest as trustee, without informing Mr Forrest of the purchase. Then when it came to importing the boat into Fiji and avoiding import duties, Mr Duffy removed19 Official Assignee v Wilson [2007] NZCA 122, [2008] 3 NZLR 45 at [70]; see also the Court ofAppeal and Supreme Court's approach to sham trusts in Clayton v Clayton [Vaughan RoadProperty Trust], above n 16, at [110]–[116] and Clayton v Clayton, above n 17, at [57]–[70].20 Official Assignee v Wilson, above n 19, at [57].21 At [57].22 Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue, above n 15, at [33].Mr Forrest as the owner and placed the boat in the name of his son Edward. In anaffidavit he filed in the High Court of Lautoka, Fiji, seeking an interim injunction toprevent Ms Vervoort removing chattels and personal effects, Mr Duffy asserted thatthe chattels belonged to him personally, whereas they belonged to the Trust. In astatement of claim in the Fiji proceedings, Mr Duffy asserted his apartment inMarina Point and the launch belonged to him, whereas they were shown in theaccounts as Trust property. Mr Finnigan asserted these actions showed a subjectiveintention that the assets belonged to him and not the Trust.[33] The first trustee, Mr Forrest, has filed an affidavit deposing that, while he wasaware he was appointed a trustee, he had little knowledge of the Trust finances.Although on occasions at the early stages of the Trust's existence he did carry outsome tasks, in later years he was never consulted or asked to approve paymentsmade by cheque by the Trust. He never met the Trust's accountant Ms Nye. He doesnot seem to have been aware of the Trust's major purchases. Following the filing ofcourt proceedings, he resigned on 25 November 2010 and was replaced as a trusteeby Mr Spears.[34] Ellis J found that at times Mr Duffy may have used his name and the Trust'sname interchangeably.23 For example, when a property in Orewa was purchased in2007 the named purchaser was Mr Duffy personally, but the registered proprietorbecame the trustees, and the purchase was funded by the Trust.[35] Mr Finnigan pointed to the fact that when Mr Forrest resigned in 2010 and was replaced by Mr Spears, Mr Duffy took an irrevocable power of attorney dated 6 December 2010 from Mr Spears. That authorised Mr Duffy to execute alldocuments on Mr Spears' behalf for the purposes of the Trust, and Mr Duffy wasgiven wide powers to do all things necessary to deal with Trust property byMr Spears.[36] It may be a situation could arise when an originally valid trust becomes asham because there has been a deliberate change in the trust arrangement so that itno longer has any of the characteristics of a trust, and the use of the trust name has23 High Court decision, above n 1, at [56].become a deliberate pretence of a trust arrangement. However, there are conceptualdifficulties with this, summarised by Jessica Palmer in her article "Dealing with theEmerging Popularity of Sham Trusts", and we do not need to determine the questionin this appeal.24 The facts relied on by Mr Finnigan do not show such a deliberatepretence being created or developing. Mr Duffy undoubtedly exercised de factocontrol of the Trust, and at times was at the very least careless as to how hedescribed items and acted, revealing the fact that he effectively controlled all theTrust assets. This did not show any deliberate creation of a deception. To thecontrary, the Trust in fact did continue to own all the assets and show the features ofa trust. The transaction with the launch may have involved a fiction, but the fictionwas that Mr Duffy's son Edward was shown to own it rather than the Trust. The trueposition appears to have been that the Trust still owned it.[37] We do not consider that there arises any so-called "illusory trust" or "alterego trust", terms that have been used in some cases.25 As this Court stated in itsdecision in Clayton v Clayton "[t]here is either a valid trust or there is not".26 Thereis no room for an illusory trust, unless the phrase is treated as meaning no trust atall.27 There is either a trust or there is not, and there can be no half-way house,where there is a trust but it is not to be regarded as like other trusts because of theextent of the control of a single trustee.28 Clayton v Clayton [Vaughan RoadProperty Trust] shows a remedy can be available if the trustee's powers to appointare so extensive they can be treated as relationship property.29[38] We conclude Ellis J was correct when she rejected the argument that the Trust was or became a sham.[39] Mr Finnigan did not seek to apply the reasoning of the Supreme Court inClayton v Clayton [Vaughan Road Property Trust], that where a trustee had an24 Jessica Palmer "Dealing with the Emerging Popularity of Sham Trusts" [2007] NZ L Rev 81at 106–110.25 See the discussion in Official Assignee v Wilson, above n 19, at [63]–[64]; and Clayton v Clayton, above n 17, at [71]–[85].26 Clayton v Clayton, above n 17, at [85].27 Clayton v Clayton [Vaughan Road Property Trust], above n 16, at [123].28 Palmer, above n 24, at 111.29 Clayton v Clayton [Vaughan Road Property Trust], above n 16, at [98]; and Clayton v Clayton, above n 17, at [116].unfettered ability under the provisions of the trust to apply the trust capital andincome to his or herself to the exclusion of other beneficiaries, this would berelationship property. We note there are significant differences between this trustdeed and the deed in Clayton v Clayton. The trust deed here, unlike that in Clayton vClayton, was created long before the parties' relationship began. It did not provide away for Mr Duffy to act without the fetter of fiduciary duties. Alone, he did not havean effective general power of appointment. There was a second trustee and, althoughMr Duffy as settlor could choose the identity of trustees, Mr Duffy was prohibited bythe trust deed from making himself the sole trustee. He could not appoint andremove discretionary beneficiaries, although the trustees could nominate anyadditional beneficiaries. The fact Mr Forrest, in breach of his obligations as atrustee, left the management of the Trust to Mr Duffy did not make the Trust expire.However, it could give rise to other remedies, such as a claim for breach of trust ornegligence (which were not argued), and a claim based on constructive trust, whichwas argued and to which we now turn.[40] If the argument that the trust was a sham had succeeded we likely would have remitted the case back to the High Court to allow a full property analysis. However, it has not succeeded.Constructive trust[41] In the High Court both Associate Judge Sargisson30 and Ellis J rejectedMs Vervoort's claim that the trustees of the Trust had created a beneficial interest onLankow v Rose principles over the Trust assets in Ms Vervoort's favour.31 Ellis Jheld that:32 any determination that it would be unconscionable for the trustees not to yield Ms Vervoort an interest in property held by the trust would squarely violate orthodox trust principles of unanimity and non-delegation .30 Vervoort v Forrest, above n 2.31 Lankow v Rose [1995] 1 NZLR 277 (CA).32 High Court decision, above n 1, at [81].[42] Ellis J distinguished the Court of Appeal's decision in Murrell v Hamilton,33on the basis there was clear evidence in that case that the independent trustee had"abjured his responsibility" to the other trustee, whereas in Ms Vervoort's case,rather than there being a decision to defer in relation to a particular acquisition, therewas a complete abstention from all decision-making by the other trustee.34Mr Finnigan argues this conclusion was wrong, and that Mr Duffy holds half of hispersonal assets and half of the Trust assets on a constructive trust for the benefit ofMs Vervoort.Constructive trust principles[43] Prior to the 2002 amendments to the Act that extended its provisions tode facto relationships, the New Zealand courts developed the proposition that theunconscionable assertion of ownership by one partner in a relationship to property towhich the other partner had contributed could be treated as giving rise to aconstructive trust.35 Cooke J, in an early decision developing the concept, observedin Hayward v Giordani:36The law of unjust enrichment — and the principles of equity more generally— cannot have ceased growing at some climatic date in England, any morethan tort law stopped before Donoghue v Stevenson.[44] Richardson J in his short judgment in the same case noted:37There is considerable force in the argument that given the realities of contemporary family life the property interests of parties who have been cohabiting together outside of marriage should not turn on an elusive and often vain search for indications of a common intention in relation to the property; and that there should be room in the evolution of equitable principles for the imposition of a constructive trust to reflect the direct and indirect contributions of the parties to the property which they have when they cease to live together.33 Murrell v Hamilton [2014] NZCA 377.34 High Court decision, above n 1, at [79]–[80].35 Hayward v Giordani [1983] NZLR 140 (CA); Gillies v Keogh [1989] 2 NZLR 327 (CA);Phillips v Phillips [1993] 3 NZLR 159 (CA); Lankow v Rose, above n 31; Pasi v Kamana [1986] 1 NZLR 603 (CA); and Oliver v Bradley [1987] 1 NZLR 586 (CA). In Fortex Group Ltd (inrec and liq) v MacIntosh [1998] 3 NZLR 171 (CA) at 172 the Court of Appeal explained thatthere were two types of constructive trusts: institutional and remedial. The constructive trust ina de facto relationship context generally fell into the category of institutional constructive trust:at 178.36 Hayward v Giordani, above n 35, at 148.37 At 149.[45] The constructive trust in de facto relationship claims was developed alongthese lines, and the specific requirements were ultimately set out in the Court ofAppeal decision of Lankow v Rose, where Hardie Boys J stated:38It is however important that whatever the legal rubric there should be clear criteria for the imposition of constructive trusts in the area of de facto relationships. These will necessarily involve a value judgment, but there isnothing unusual about that.The essential requirements I see to be twofold: that the plaintiff contributed in more than a minor way to the acquisition, preservation, or enhancement ofthe defendant's assets, 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.[46] Tipping J summarised the four key features as follows:39Before discussing further the question of contributions, I summarise what the de facto claimant must show:1. Contributions, direct or indirect, to the property in question.2. The expectation of an interest therein.3. That such expectation is a reasonable one.4. That the defendant should reasonably expect to yield the claimant an interest.[47] It is clear the contributions need not be money and can be other services, and that there has to be a causal relationship between the contributions and theacquisition, preservation or enhancement of the owner partner's assets. A claim to aconstructive trust is a proprietary claim and the contributions have to be made toassets, but not necessarily particular assets. The contribution can be entirely indirect,for instance, a contribution to groceries by one partner while the other partner paysthe mortgage.40 The claimant has to show a reasonable expectation of an interest inthe assets. This was a significant development in contrast to the continued positionin England, where the proprietary basis of a constructive trust has been seen asrequiring, first, a common intention that one partner have a beneficial interest, and,more prohibitively, a value contribution to the specific property itself.4138 Lankow v Rose, above n 31, at 282.39 At 294.40 At 295. See also Nuthall v Heslop (1995) 13 FRNZ 518 (HC) at 521.41 Lloyds Bank v Rosset [1991] 1 AC 107 (HL) at 132–133; and see the criticism contained in[48] Lankow v Rose and the other decisions that developed the constructive trust in this area do not discuss a situation where the home or other asset that was the subject of the constructive trust was itself owned by an express family trust. That issue has arisen on occasions in New Zealand over the last 15 years, as family homes are owned with increasing frequency by a family trust, which may be immune from direct attack under the Act. Where one partner has de facto control of the trust andLankow v Rose contributions and expectations have arisen the non-controlling partner may be forced to claim against the trust itself if any share of the assets is to be obtained.[49] In Re The Motorola New Zealand Superannuation Fund (which was not a de facto relationship case) McGechan J did not accept there was an absolute rule or principle under which rights and obligations under an express trust can never be subjected to a constructive trust.42 He observed:43Equity operates on conscience. Traditionally, equity operated to mitigate the rigour of absolute rights and obligations at common law. At least equally, equity should operate to mitigate the rigour of any absolute rights and obligations arising under equitable creations such as express trusts, and where necessary, as may be so in the absence of other applicable equitable doctrines, by the imposition of a constructive trust. More usually perhaps, other equitable rules will suffice, but there is no reason to exclude in principle the constructive trust tool.[50] He thought such a situation would not often arise and that it would takesomething exceptional before the trustee acted "unconscionably" in following thetrust.44 He then proceeded to analyse whether in that case the conscience of the trustees obliged them to depart from the terms of the express trust, and held it did not.45[51] This issue of a constructive trust claim against an express trust has arisen in a number of High Court decisions, where it has been accepted that, in a family context, there could be a constructive trust arising in relation to property owned by an express trust.Alistair Hudson Equity and Trusts (8th ed, Routledge, Oxford and New York, 2015) at 794.42 Re Motorola New Zealand Superannuation Fund [2001] 3 NZLR 50 (HC).43 At [63].44 At [65].45 At [76].[52] In Prime v Hardie, decided in 2002, Ms Prime asserted a constructive trustinterest in the family home based on contributions she had made during the course ofthe relationship.46 The home was owned by Mr Hardie's family trust. Salmon Jfound the trust was effectively Mr Hardie's "alter ego" and that the other trustee (acompany) left matters to him.47 He could see no reason why a constructive trustshould not be imposed upon a property owned by a trust in those circumstances.[53] In Glass v Hughey there was a de facto relationship and Ms Glass had madecontributions to Mr Hughey's business, enhancing his assets.48 Ms Glass had areasonable expectation of an equitable interest. The contributions were made to acompany, but by the date of separation the company had been sold to the trust.Priestley J held an interest arose directly against the company, but could also betraced to the trust, observing that the trust should be regarded as a sham or moreparticularly the husband's "alter ego".49[54] In C v C a married couple farmed a property owned by the trustees of a trustsettled by the husband's grandfather.50 Following separation the wife successfullyclaimed an interest in the farm. The trustees had left the management of the affairsof the farm entirely to the husband and promised him he would have the farm. Heand his wife did work on developing the farm. A constructive trust was found tohave arisen between the husband and the trustees. The increased value of thehusband's separate interest in the farm under the constructive trust was treated asproperty under the Act.51[55] In Marshall v Bourneville, a decision of this Court, the appeal concerned acaveat lodged in relation to an intended constructive trust claim.52 The Courtallowed the appeal and ordered that the caveat not lapse. The Court noted there wasno case in which a New Zealand court had declined to grant relief against assets46 Prime v Hardie [2003] NZFLR 481 (HC).47 At [30].48 Glass v Hughey [2003] NZFLR 865 (HC).49 At [89].50 C v C [2012] NZHC 3159, [2013] NZFLR 534.51 At [69].52 Marshall v Bourneville [2013] NZCA 271, [2013] 3 NZLR 766.owned by a trust in which an expectation of an interest had been demonstrated.53The Court in that case reviewed all the relevant New Zealand cases and stated:54Like the High Court Judges in these cases, we see no reason why, in a proper case, relief by way of a constructive trust should not be ordered against trust property. It seems to us that such an outcome might reasonably be available to Ms Marshall. On her case, an expectation of an interest in the Symonds Street property arose when it was acquired by Mr Bourneville. We see no reason why that expectation should not survive the transfer of the property to the trustees. Mr Bourneville, as settlor and trustee, obviously would have had knowledge of the circumstances giving rise to the expectation. In such circumstances, Ms Marshall could well be able to establish that a trust was impressed on the property and the trustees should reasonably expect to yield to her an interest in the property.[56] The most recent Court of Appeal decision is Murrell v Hamilton. In that caseit was said:55We see no reason in principle why a constructive trust claim should notsucceed in respect of a property owned by a trust. Such a claim succeeded inPrime v Hardie.[57] In Murrell there were two trustees, Mr Hamilton and a co-trustee Mr Mirkin. Mr Mirkin was a partner in a firm of solicitors. However, Mr Mirkin had at therelevant time ceased to have any active involvement in the trust and knew little of itsactivities.56 In doing so Mr Mirkin had essentially abjured his trustee responsibilitiesin favour of Mr Hamilton.57 He had allowed Mr Hamilton to bind the trustees tocontracts, and so Mr Hamilton's actions were treated as the actions of both trustees,at least in relation to contract counter-parties. The Court of Appeal held, taking adifferent view of the facts from that of Panckhurst J:58In that unusual factual situation, we consider it would be unconscionable forthe trustees to deny Ms Murrell's claim based on the expectation stimulatedby Mr Hamilton on behalf of the Trust.[58] The Court went on to hold:[30] We emphasise that allowing Ms Murrell's claim does not alienateTrust property, that is it does not take away from the beneficiaries of the53 At [34].54 At [39].55 Murrell v Hamilton, above n 33, at [22].56 At [18].57 At [27].58 At [28].Trust something to which they are entitled. Rather, it means a part of thevalue of the Trust's property which should not accrue to the Trust does notaccrue to it. Allowing Ms Murrell's claim averts the unjust enrichmentwhich would otherwise result to the Trust — essentially the Trust getting$37,500 for nothing — a windfall.[59] The High Court in Judd v Hawke's Bay Trustee Company Ltd followedMurrell v Hamilton.59 A wife sued the trustees of her husband's trust for a 40 percent share of the property they occupied during their marriage on a Lankow v Rosebasis. Williams J considered each of the Lankow v Rose factors in turn, and some ofthe cases cited above. The corporate trustee was a far more "hands on" trustee thanthat in Murrell v Hamilton, but had left all matters of maintenance and upkeep of thehouse entirely to the husband trustee and had delegated the trust's decision-makingin that area.60 Williams J therefore allowed the claim, having found the claimant wasentitled to expect a modest share in the house and that it was reasonable for the thehusband to yield such a share.61[60] Mr Finnigan invites us to follow the Murrell v Hamilton reasoning and to find a constructive trust in Ms Vervoort's favour.[61] Because Mr Duffy has not appeared at this hearing we have not had thebenefit of submissions challenging the constructive trust claim. However, it isnecessary to consider two objections that can be raised to a finding there is aconstructive trust on an express trust. The first is, as Ellis J commented, that there isno unanimity of trustees, given the lack of involvement of Mr Forrest and thenMr Spears, and the prohibition on trustee delegation. Ellis J did not feel able to findunanimity of trustees sufficient to make it equitable the Trust was obliged toMs Vervoort. She stated:62To do so would be to conflate the evidence that the trust is the alter ego of Mr Duffy with evidence that there was unanimity between trustees. That equation is untenable. In my view, any determination that it would be unconscionable for the trustees not to yield Ms Vervoort an interest in property held by the trust would squarely violate orthodox trust principles of unanimity and non-delegation, the importance of which have been reiterated on numerous occasions by the Court of Appeal.59 Judd v Hawke's Bay Trustee Company Ltd [2014] NZHC 3298.60 At [9] and [71].61 At [70].62 High Court decision, above n 1, at [81] (footnote omitted).[62] We are respectfully unable to agree with this reasoning. The Judge was quite right in acknowledging the traditional trust principles of unanimity andnon-delegation,63 but those principles must bend to the practical realities when onetrustee is in absolute control of all trust activities and the other trustees haveeffectively abdicated their trustee responsibilities. Any other conclusion would meansettlors, who appointed themselves as trustees, would be able to take advantage oftheir own wrong in failing to ensure the trust is properly administered by all trustees.The trust would get a windfall, not available but for the use of the trust format.[63] While traditional trust principles require unanimity and non-delegation, theCourt's approach to trusts must, as the recent cases show, meet the reality of howproperty is owned in New Zealand. In 2013 there were estimated to be between300,000–500,000 private trusts in New Zealand.64 It seems likely a good portion ofNew Zealand's real estate is now held in discretionary family trusts of the same typeas the trust created in this case.[64] Prime v Hardie, Glass v Hughey, Marshall v Bourneville and nowMurrell v Hamilton can be seen as the application of established Lankow v Roseprinciples to this reality.65 In a case like this, where one relationship partner is incontrol of the trust, under the present state of New Zealand law there is a valid trust.However, that controlling partner cannot avoid equitable constructive trustobligations by relying on the prohibition on delegation and the lack of consent fromthe other trustee, whom that controlling partner has deliberately isolated from trusteefunctions. To allow that would be to allow a trust principle to operate as a weaponfor inequity. The deliberate exclusion of other trustees from a role in managing thetrust cannot be invoked to create an injustice.[65] It was stated in Lankow v Rose that in equity the conscience of the legalowner is required to acknowledge the other party's beneficial interest in the63 See criticism of Murrell v Hamilton on this point in Ah Song Sunwoo and Brent O'Callahan "Murrell v Hamilton [2014] NZCA 377" [2015] NZLJ 15 at 17; and Andrew Steel "Theremedial constructive trust — a fresh way to claim against trusts in a personal relationshipcontext" (2014) 16 BCB 91 at 92.64 Law Commission Review of the Law of Trusts: A Trusts Act for New Zealand (NZLC R130, 2013) at 6.65 Prime v Hardie, above n 46; Glass v Hughey, above n 48; Marshall v Bourneville, above n 52; and Murrell v Hamilton, above n 33; and Lankow v Rose, above n 31.property.66 In this case not only is the conscience of Mr Duffy affected but in a different sense so is the conscience of the other trustee, Mr Forrest, and then Mr Spears, who both gave Mr Duffy carte blanche to do as he wished with the assets of the trust. While they have no knowledge of the situation arising that puts claimson the Trust, the consciences of Messrs Forrest and Spears are "activated" by theirpractical surrender of their trustee role to Mr Duffy.[66] The other main objection to imposing a constructive trust on an express trustrelates to the property rights at the heart of the trust concept. The concept of aconstructive trust being created by trustees over the assets of an express trust hasbeen roundly criticised in New Zealand.67 Traditional trust principles provide thatthe trustee holds the property on behalf of the beneficiaries and so require trustees tonot yield trust property to third parties. It can be argued that creation of aconstructive trust over express trust assets involves a trustee unilaterallyredistributing the property rights at the expense of existing beneficiaries. It has beensaid:68All of the beneficiaries acting together could have authorised the granting of a beneficial interest to the claimant, but their rights and expectations are notconsidered in any of the cases.[67] However, as was pointed out in Murrell v Hamilton,69 in a successfulLankow v Rose constructive trust claim there will have been contributions to assets of the trust by the claimant, and the trust assets will reflect the value of the contributions. Thus, existing beneficiaries are not being deprived of assets or increases in the value of assets that they would have otherwise enjoyed.[68] The alternative of allowing the trustees to take advantage of trust principles to deny those who have enriched the trust is not acceptable. As was observed inHayward v Giordani the function of the courts must be to "develop common law and equity so as to reflect the reasonable dictates of social facts, not to frustrate them".7066 Lankow v Rose, above n 31, at 294.67 We have had the benefit of reading a forthcoming article of Professor Charles Rickett:"Instrumentalism in the Law of Trusts: the Disturbing Case of the Constructive Trust Upon anExpress Trust" (2016) 47(3) VUWLR (forthcoming).68 Family Property (online looseleaf ed, Thomson Reuters) at [TU12.02(2)(c)].69 Murrell v Hamilton, above n 33, at [30].70 Hayward v Giordani, above n 35, at 148.Although remedies against the trustees could be an alternative means of redress, as it has transpired the constructive trust has developed as the primary mechanism of protection. At this stage unjust enrichment concepts have not been developed as an alternative route for partners who are deprived of their contributions to assets in this way. The New Zealand courts had the option of going down that route but have chosen to develop the constructive trust to compensate Lankow v Rose type claimants. In effect, the Lankow v Rose constructive trust prevents an unjust enrichment from occurring. A Lankow v Rose claimant's position is entirelydifferent from that of a contractor. A contractor has a contract and correspondingcontractual remedies and the relationship of trust does not arise.[69] Although there may also be conceptual objections to allowing a trustee to bind the trust with the effect of giving third parties expectations over property held for beneficiaries, in a Lankow v Rose constructive trust there will be contributions to trust property. Those contributions can be expected to be reflected in increases to thevalue of trust assets or the preservation of value that would otherwise decrease.Equity would not intervene if the effect of recognising a constructive trust would beto reduce the corpus of trust property. It is only the increase or preservation of valuecorresponding to contributions from the claimant that are to be compensated.[70] It is acknowledging the reality of the New Zealand trust landscape as it hasdeveloped that has justified the recognition of the constructive trust beneficiary'sclaim. It is a further reality of that landscape that the trustees of family discretionarytrusts are more often than not the beneficiaries of those trusts and in control ofthem.71 It is common in many trusts in New Zealand "for the settlor to retain someextent of control or to vest that control in someone other than the trustee".72 Theeffect is that the reality of a trustee's ability to give a third party expectations (inreturn for that third party's contributions) over trust property, which that trustee dealswith as if their own, must be recognised. There is no misappropriation of property inthat the beneficiaries of the express trust have no claim in conscience to the increasesin value resulting from the contributions. Beneficiaries cannot expect trustees to71 The earlier cases that have found a constructive trust to exist over an express trust have all involved trustees who were also discretionary beneficiaries, as noted in Family Property, above n 68, at [TU12.02(2)(c)].72 Jessica Palmer "Controlling the Trust" (2011) 12 Otago LR 473 at 477–478.retain for them an unearned benefit, extracted by expectations engendered by thetrustees. The express trust beneficiaries should reasonably expect to yield the thirdparties an interest.[71] We see recognising the trustees' ability to hold trust property on behalf of athird party in particular circumstances as a natural application of the Lankow v Roseprinciples. As noted, those principles go further than the comparable Englishconstructive trust cases. They already partly eschew a traditional property rightsanalysis as a partner's contribution creates a right against the defendant's propertygenerally, rather than by way of specific proprietary right. A constructive trust overassets held by a trustee, over which he or she has effective control, can be created bythe Lankow v Rose factors.[72] We proceed therefore on the basis there is no bar to Ms Vervoort'sconstructive trust claim. To this extent we disagree with Ellis J.Is a constructive trust claim made out?[73] Mr Finnigan in his submissions did not place a possible figure on Ms Vervoort's claim, but rather listed the property and Trust property that hesubmitted was relationship property. He proposed that, should his arguments succeed, the case should be remitted back to the High Court for a property relationship analysis.[74] We have already summarised the evidence concerning Ms Vervoort'scontributions. Her assertions as to what she did lack detail. There was her assistance in finding the Coatesville property, her assistance in redecorating and refurbishing it, and general maintenance work. No attempt was made in her evidence to show any increase in the value of Trust assets or the extent of it. Recognising we are sitting on appeal, we consider it clear that her work and help did not constitute any great contribution to the value of the assets in question. It is clear Ms Vervoort had the benefit of living in houses or apartments owned by the Trust throughout much of the period of their relationship, and enjoyed extensive travel. She was not in a position to put money into Trust properties, and her other contributions were limited. Mr Duffy was at least partially retired and there is noindication her support of him (such as it was in their fraught relationship) assisted him in building or maintaining his assets.[75] We have accepted a constructive trust can arise in this case, and that applying the Lankow v Rose criteria a claim against the Trust was theoretically possible. However, the work Ms Vervoort did, in our assessment, was of a cosmetic nature.There is nothing to show contributions that significantly added value. We are left inno doubt that any entitlement under a constructive trust in Ms Vervoort's favourwould be less, and in all likelihood significantly less, than the settlement of$327,002.17 she has already received. We do not consider that at a further HighCourt hearing there would be any chance of a different view being reached. We haveall the evidence before us. For that reason, her constructive trust claim must fail.[76] Mr Finnigan also submitted Ms Vervoort's evidence she went to Fiji to live with Mr Duffy at his property at Marina Point on the promise of a fair settlement andthat there would be no violence meant the trustees should reasonably expect to yieldMs Vervoort an interest in the property. There was also evidence she returned to himin March and April 2010 and abandoned her Family Court proceedings in Aucklandon the basis of similar assurances.[77] We are unable to see how such loose statements by Mr Duffy, which did not lead to any direct or indirect contribution to property by Ms Vervoort, could have given rise to a constructive trust. Lankow v Rose trusts do not arise from generalpromises. They arise in relation to contributions to assets and expectations createdduring that process.Estoppel[78] As far as the promissory estoppel claim is concerned, the relevant promises allegedly made by Mr Duffy in April 2010 include that, in return for Ms Vervoort discontinuing her (2010) proceedings against him:(a) he would marry her by May 2011;(b) he would provide her with a property settlement that would be fair and satisfy her rights under the Act. That is said to include an equal share in the Marina Point property and its chattels;(c) he would provide her with proper maintenance if they separated; and(d) he would cease his misconduct (verbal and physical abuse) towards her.[79] Ms Vervoort says that, in reliance on these representations, she moved to Fiji to live with Mr Duffy and instructed her New Zealand solicitor to discontinue the original Family Court proceedings.[80] The elements required to establish promissory estoppel have been recentlysummarised by this Court in Wilson Parking New Zealand Ltd v Fanshawe 136Ltd.73 In the context of this case it must be shown that:(a) a belief or expectation by Ms Vervoort has been created or encouraged by words or conduct of Mr Duffy;(b) to the extent an express representation is relied upon, it is clear and unequivocal;(c) Ms Vervoort reasonably relied to her detriment on the representation; and(d) it would be unconscionable for Mr Duffy to depart from the belief or expectation.[81] We do not think promissory estoppel is established, largely for the samereasons as those set out by Ellis J.74 The alleged representations are equivocal. Thewords "fair" and "proper" are vague. They must be interpreted against the73 Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567 at [44].74 High Court decision, above n 1, at [88]–[91].background that Ms Vervoort does not appear to have had any significant claimsunder the Act. There is not enough evidence to show that Mr Duffy's conduct couldbe fairly categorised as unconscionable. It is very difficult to see how moving to Fijicould be said to be a relevant detriment to Ms Vervoort. Indeed, the indications arethat this is something she wanted to do.[82] As Ellis J commented, the most fundamental problem is that the vast majority of the relevant assets are owned by Mr Duffy's Trust.75 While we have found that aconstructive trust could notionally arise in relation to those Trust assets, theseparticular representations appear to have been entirely personal to Mr Duffy andabout things he would do in his personal capacity.[83] In our assessment, Ellis J was correct in her rejection of the estoppel claim.Division of relationship property[84] The value of the only small items of relationship property owned personallyby Mr Duffy will be limited. These appear to include a jetski, two kayaks, amotorcycle, a BMW motor vehicle and a Pajero motor vehicle. There may be anargument these items were acquired out of separate property or from assets derivedfrom the Trust.[85] The quality of the proof of these assets being relationship property is poor.What is clear is that the money Ms Vervoort indisputably received, as the Judge said,"dwarfs the value of these assets combined (and halved)".76 Indeed, if Ms Vervoortchooses to exercise her option to avoid the first and second agreements, she faces theprospect of being found to owe Mr Duffy money. The Judge decided there would beno purpose in engaging in the complicated hypothetical exercise that would benecessary to determine the value of these relationship property items. We can seewhy she did so, and uphold her decision.75 At [91].76 At [96].[86] It remains open to Ms Vervoort in terms of Ellis J's judgment to make a claimin relation to the small number of assets and to pursue her claim for maintenance inthe High Court.77Result[87] The appeal is dismissed.[88] As the first and second respondents took no steps in the appeal there is no order for costs.Solicitors:East Auckland Law, Auckland for AppellantMcHardy Parbery, Auckland for First Respondents77 At [102].