SMITH v ENDEAN [2022] NZHC 1246

SMITH v ENDEAN [2022] NZHC 1246 [9 June 2022]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2021-404-002210[2022] NZHC 1246BETWEEN JOCELYN LOUIS SMITHApplicantAND WILLIAM ARTHUR ENDEAN as executorof the estate of George Clifford SmithRespondentHearing: 8 March 2022Appearances: P Amaranathan for the ApplicnatW Andrews for the RespondentJudgment: 9 June 2022JUDGMENT OF ASSOCIATE JUDGE GARDINERThis judgment was delivered by me on 9 June 2022 at 11.30 a.m.pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate.......................................Solicitors:Dawsons, AucklandRice Craig, AucklandW Andrews, AucklandIntroduction[1] Jocelyn Smith and her late husband, George Smith, lived in their family homeat The Glebe, Cockle Bay, Auckland for 45 years.[2] Mrs Smith and the executor of Mr Smith's estate, William Endean, each owna half share of the home as tenants in common in equal shares. In his will, Mr Smithspecified that his residual estate, which includes his half share in the Glebe property,is to be transferred into a separate trust he established for the ultimate benefit of hisgrandchildren.[3] As the time for any claim against Mr Smith's estate has passed, Mr Endeanintends to sell the house and transfer Mr Smith's half share of the net proceeds to histrust, according to Mr Smith's will. Mrs Smith does not agree to the sale, soMr Endean intends to apply to the Court for an order under the Property Law Act 2007.[4] Mrs Smith objects to the sale of the house because she wishes to continue tolive there. She claims to have a life interest in the property, either as a discretionarybeneficiary of Mr Smith's trust, or under a constructive trust.[5] Mrs Smith lodged a caveat against the title of the property to protect herinterests. Mr Endean applied for the caveat to lapse. Mrs Smith now applies to theCourt for an order that the caveat not lapse. Mr Endean opposes the application.Factual backgroundMr and Mrs Smith's relationship[6] Mr and Mrs Smith began living together in a de facto relationship in 1959.They were married from 1981 until Mr Smith died on 9 August 2019. Mrs Smith is83 years old. Mr Smith was 90 when he died.[7] When Mr Smith and Mrs Smith met, they had no significant assets. Theyinitially cleaned offices together. They saved their money and bought a business in1965 — a meat transport company. They both worked full-time in the business.[8] They bought a house in Mt Wellington together in 1965. Then, in 1976, theybought the Glebe property as their family home. They owned the property jointly.They had five children and raised them there.[9] Mrs Smith says that she and Mr Smith each drew a roughly equal income fromtheir business.1 She says that her share was deposited into a joint bank account andwas used to pay for all household, family and property expenses. This includedmortgage repayments for the Glebe property until the mortgage was repaid around10 years ago. She says that Mr Smith operated a separate account into which hisincome from the business went and which he used as he wished.Their separation[10] Mr Smith and Mrs Smith's relationship became difficult in its later years. In2014, they each instructed lawyers: Mr Flavell for Mr Smith, and Mr Wiltshire forMrs Smith, who began corresponding about a relationship property and separationagreement. Mr Smith and Mrs Smith continued living together at The Glebe.[11] In October 2014, Mr Smith, by his solicitor, gave notice requiring theirinterests in the home to be changed from joint tenancy to a tenancy in common inequal shares. Mrs Smith's solicitor replied advising that the change was agreed,without prejudice to any rights Mrs Smith might have under relationship property orother legislation, or at law.2[12] In October 2016, Mr Smith settled a trust, the Fazakerly Trust (the Trust).He appointed his daughter Susan and son in law Asbjorn Widvey as co-trustees.Mrs Smith was identified as a discretionary beneficiary. Their 11 grandchildren werelisted as final beneficiaries.[13] In 2018, Mr Smith reviewed the Trust Deed with his solicitor Mr Flavell andprepared a Memorandum of Guidance for the trustees. I return to this later.1 Affidavit of Jocelyn Lois Smith sworn 10 December 2021 at [7].2 Annexures H and I to the affidavit of Jocelyn Lois Smith sworn 10 December 2021.[14] In May 2019, Mrs Smith moved out of the Glebe house and into a rentalproperty. At around the same time, Mr Smith moved in with the Widveys forapproximately six weeks.[15] Mr Smith instructed Mr Endean to finalise the division of their relationshipproperty. Mr Endean wrote to Mr Wiltshire on 23 May 2019 about the division ofchattels.[16] Mr Wiltshire replied on 11 June 2019, attaching a Separation and RelationshipProperty Agreement (the Agreement) which had been drafted in anticipation ofsettlement with an accurate chattel list. Mrs Smith objects to this letter being admittedas evidence because it is marked "without prejudice". I consider this objectionjustified in terms of the contents of the letter. However, it is in the interests of justicethat the Court considers the draft Agreement, not as evidence of their agreement butas evidence of their "reasonable expectations."3[17] Mr Smith returned the signed Agreement in duplicate to Mr Flavell on 19 June2019. It was sent to Mrs Smith's solicitors for her to sign that day. The Agreementidentified the separate property of the parties and stated that Mrs Smith agreed she wasnot a beneficiary of the Trust, and that she had no claim against the Trust.[18] Mrs Smith attended an appointment with her solicitors on 20 June 2019 butdecided not to sign the Agreement. She says she never wanted to sell the home, butfor a period she felt she had no choice. She says that when it came time to sign theAgreement, she was feeling emotional and could not bring herself to sign it.[19] Mr Endean was not informed that Mrs Smith had decided not to sign theAgreement.[20] In the period following the Agreement being signed by Mr Smith on 19 June2019 and forwarded to Mrs Smith's solicitors, Mr Smith became very ill. He washospitalised on 23 June 2019.3 Evidence Act 2006, s 57(3)(d).Mr Smith makes his final will and changes the Trust[21] On 19 July 2019, Mr Smith was discharged from hospital. He went to staywith Mrs Smith.[22] Mr Smith met with Mr Endean. Mr Endean deposes that by this time Mr Smithhad fallen out with the Widveys. He no longer wished to live with them, or for themto be executors of his estate or trustees of his Trust. Further, he only wanted hisgrandchildren to benefit from his estate and Trust. Mr Endean offered to stand in asan independent trustee, and Mr Smith accepted that offer. Mr Smith signed anenduring power of attorney and gave Mr Endean instructions to update his will.[23] Mr Smith was readmitted to hospital on 21 July 2019. On 24 July 2019, hemet with Mr Endean to amend the Trust Deed to remove the Widveys as trustees.Mr Endean was made sole trustee of the Trust.[24] Mrs Smith moved back into The Glebe on 24 July 2019.[25] On 2 August 2019, Mr Endean and Mr Smith met again. Mr Smith executedhis will by which he left his entire estate to the Trust.[26] On 6 August 2021, Mr Endean prepared a codicil based on a telephoneconversation with Mr Smith arranged by one of his daughters Jenny Strong, in whichMr Smith said he wanted his interest in the Glebe property go to his wife in return forher paying a sum of money. When Mr Endean met with Mr Smith later that day toexecute the codicil, he considered that Mr Smith lacked testamentary capacity, so hedid not have him execute it.[27] Mr Smith died on 9 August 2019.After Mr Smith's death[28] Mrs Smith brought proceedings concerning Mr Smith's will. She sought ordersthat an order nisi not be made absolute; and an order directing the executor to file anapplication for probate in solemn form. Venning J granted probate in September 2020,holding that there was no evidence that Mr Smith was under undue influence or lackedtestamentary capacity when he made his will on 2 August 2019.4 He found that thecorrect procedure for Mrs Smith to advance her argument that the codicil documentwas a valid will was by an application under s 14 of the Wills Act 2007.[29] Mrs Smith did not pursue a claim against the estate under the Wills Act tovalidate the codicil, or (at that time) under the Family Protection Act 1955, theProperty (Relationships) Act 1976 or in equity. She says she did not wish to depriveher grandchildren of receiving the ultimate benefit of Mr Smith's estate's/the Trust'shalf share of the Glebe property. She says that she thought her status as solediscretionary beneficiary of the Trust would enable her to continue to live at theproperty.[30] After 12 months, when the limitation period under the Family Protection Actand Property (Relationships) Act had passed, Mr Endean informed Mrs Smith, via herlawyers, that if she did not agree to purchase the estate's share of the Glebe propertyor to sell it, he would apply to the Court for a sale order.[31] On 16 August 2021, Mrs Smith's solicitor wrote to Mr Endean via his counsel,requesting that as the sole discretionary beneficiary of the Trust, Mrs Smith be givena life interest in the Glebe property. On 13 September 2021, Mr Endean declined.[32] On 23 September 2021, Mrs Smith lodged the caveat to protect her interests.[33] On 15 October 2021, Mr Endean, acting as personal representative forMr Smith as settlor, removed Mrs Smith as discretionary beneficiary of the Trust andappointed their 11 grandchildren in her place.[34] On 5 November 2021, Mrs Smith filed:(a) a claim under the Family Protection Act, seeking a life interest inMr Smith's estate's half share of the Glebe property (or such other reliefthe Court considers just); and4 Endean v Smith [2020] NZHC 2365.(b) with her grandson, Quintin Smith, a claim under the Trusts Act 2019,seeking removal of Mr Endean as trustee of the Trust and a review ofher removal as discretionary beneficiary.[35] None of the Smiths' grandchildren, all of whom were served with theapplication that the caveat not lapse, oppose Mrs Smith's application. Seven of thenine adult grandchildren, through emails or affidavits, express their support forMrs Smith remaining in the property for long as she wishes.Legal principles[36] An application to sustain a caveat is determined on summary basis in whichthe Court has regard to the following principles:5(a) The applicant caveator bears the onus of demonstrating that they havean interest in the land sufficient to support a caveat. However, theyneed not establish that definitively. It is enough if they present areasonably arguable case.(b) An order for a caveat's lapse will only be made if it is patently clear itcannot be maintained — either because there was no valid ground forlodging it in the first place or, alternatively, that such ground has nowceased to exist.(c) The process by which these applications are determined is ill-suited toresolving disputed questions of fact. A conflict between affidavits willgenerally be resolved in the caveator's favour.6 However, the Court isnot bound to accept uncritically statements in an affidavit that areequivocal, lacking in precision, inconsistent with undisputed5 Botany Land Development Ltd v Auckland Council [2014] NZCA 61, (2014) 14 NZCPR 813. Seealso Philpott v Noble Investments Ltd [2015] NZCA 342.6 Bethell v Rickard [2013] NZCA 68 at [22]. See also Macrae v Rapana HC Auckland M633/94, 17June 1994.contemporary documents or other statements by the same deponent, orinherently improbable.7(d) Where the applicant has discharged its burden, the Court retains aresidual discretion to remove the caveat. The Court will exercise thisdiscretion cautiously and must be satisfied removal would not prejudicethe caveator's legitimate interest.8The caveat[37] In her caveat Mrs Smith claims to have an interest in Mr Smith's estate's halfshare of the property:(a) to protect her interest as sole discretionary beneficiary of the Trust,which is in turn the sole beneficiary of the estate of Mr Smith; and/or(b) under a constructive trust arising from it being unconscionable to sellthe property because she contributed to its purchase and has resided init for 40 years; and/or(c) under a resulting trust arising out of her contributions to the purchaseof the property, her having resided in it for 40 years, and having areasonable expectation of taking a life interest in the whole property.[38] The notice of originating application seeking an order that the caveat not lapsealso relies on the proceedings Mrs Smith has filed under the Trusts Act and the FamilyProtection Act.[39] At the hearing, Ms Amaranathan for Mrs Smith conceded that even ifMrs Smith was a discretionary beneficiary of the Trust, this does not establish abeneficial interest in the land capable of supporting a caveat. That is correct. Adiscretionary beneficiary's interest in a trust is no more than an expectation or hope7 Molyneux v IBC International Ltd [1995] 3 NZLR 170 (CA) at 175, citing Eng Mee Yong vLetchumanan s/o Velayutham [1980] AC 331 (PC) at 341; Xie v 126 Waimumu Ltd [2020] NZHC1109 at [8].8 Pacific Homes Limited (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.that the trustee's discretion may be exercised in the beneficiary's favour.9 Adiscretionary beneficiary has no interest, legal or equitable, in the assets of the trust,until a distribution is made to them (and then their interest does not extend beyond thedistribution).10[40] Ms Amaranathan also accepted that Mrs Smith's claim under the FamilyProtection Act to a life interest in the estate's half share in the property is not capableof supporting a caveat. However, she submitted that it is relevant to why, togetherwith her age, health, the COVID-19 pandemic and her grandchildren's interests,Mrs Smith has not yet filed a constructive trust claim. The same is the case with herclaim under the Trusts Act.[41] Thus, the only possible basis for sustaining the caveat, consistent with thewording of the caveat, is under a constructive or resulting trust. While the caveatreferred to both in the alternative, Ms Amaranathan advanced Mrs Smith's claim basedon a constructive trust only. Specifically, the category of constructive trust arising outof the unconscientious assertion of ownership in property to which another hascontributed, recognised by the Court of Appeal in the leading decision of Lankow vRose.11[42] Ms Andrews for Mr Endean submitted, in effect, that the caveat was defectivein that it sought to protect Mrs Smith's interest as beneficiary of the Trust and not asbeneficiary under a constructive trust.[43] Undoubtedly, the caveat muddles the claim to an interest as a discretionarybeneficiary of the Trust with the claim to an interest as beneficiary of a constructivetrust and/or a resulting trust. Despite that, I find that the caveat gives adequate noticeof Mrs Smith's claimed interest as beneficiary of a constructive trust. It refersspecifically to a constructive trust and contributions Mrs Smith made to the property.I consider the application on that basis.9 Hunt v Muollo [2003] 2 NZLR 322 (CA) at [11].10 At [11].11 Lankow v Rose (1994) 12 FRNZ 682 (CA) at 699.Issues[44] The issues that arise out of this application are:(a) Is Mrs Smith's claim to a constructive trust in Mr Smith's estate's halfshare of the Glebe property excluded by the Property (Relationships)Act?(b) If not, does Mrs Smith arguably have an interest in Mr Smith's estate'shalf share of the property arising out of a constructive trust? Thatinvolves these questions:12(i) Has Mrs Smith made direct or indirect contributions toMr Smith's share of the property which enhanced or maintainedits value?(ii) Did she have an expectation of an interest in his share of theproperty and is the expectation reasonable?(iii) Should Mr Smith reasonably expect to yield an interest toMrs Smith?(c) If yes, should the Court nevertheless exercise its residual discretion todischarge the caveat.Is Mrs Smith's claim to a constructive trust excluded by the Property(Relationships) Act 1976?[45] Notwithstanding their apparent separation in Mr Smith's final years, there isno dispute that Mrs Smith and Mr Smith were married at all relevant times. It mustbe acknowledged that, as a married couple, Mrs Smith's claim would seem to becovered by the Property (Relationships) Act. The Act concerns the division ofproperty belonging to married couples upon their separation or either spouse's death.13Importantly, s 4 states that the Act is a code, such that:12 Lankow v Rose, above n 11, at 699.13 Property (Relationships) Act 1976, s 1C.(1) This Act applies instead of the rules and presumptions of the common lawand of equity to the extent that they apply—(a) to transactions between spouses or partners in respect of property;and(b) in cases for which this Act provides, to transactions—(i) between both spouses or partners and third persons; and(ii) between either spouse or partner and third persons.(2) Subsection (1) does not apply where this Act expressly provides to thecontrary (such as in subsection (5)).(3) Without limiting the generality of subsection (1),—(a) the presumption of advancement does not apply between husbandand wife:(b) the presumption of resulting trust does not apply between spouses,civil union partners, or de facto partners:(c) the presumption that the use of a wife's income by her husbandwith her consent during the marriage is a gift does not apply betweenhusband and wife.(4) Where, in proceedings that are not proceedings under this Act, anyquestion relating to relationship property arises between spouses or partners,or between either or both of them and any other person, the question must bedecided as if it had been raised in proceedings under this Act. [46] The Act defines "property" broadly to include real property, personal property,any estate or interest in real or personal property, any debt or thing in action, and anyother right or interest.14 Relevantly, s 8 gives the meaning of "relationship property"as consisting of the family home whenever acquired, the family chattels wheneveracquired, and all property owned jointly or in common in equal shares by the marriedcouple or by the partners.15 As this Court has previously confirmed, the purpose of s4 is to ensure that, subject to limited exceptions specified by statute, only one set ofrules applies to property claims between spouses — the rules outlined by the Act.1614 Section 2.15 Section 8(1)(a)–(c).16 Huang v Chung [2015] NZHC 686 at [31], and see Associate Judge Bell's full discussion on whythe applicant could not establish an interest in property pursuant to a constructive trust in that caseat [27]–[39].[47] In this case, Mr Smith and Mrs Smith purchased the Glebe property as theirfamily home. They both owned the property, first as joint owners and subsequently astenants in common with equal shares. The Glebe therefore is relationship propertyand any claim in respect of it should from all appearances be dealt with under the Actrather than equitable principles. As such, the caveat based on Mrs Smith's interest inthe property under a constructive trust cannot be sustained. Viewing her claim withinthe framework of the Property (Relationships) Act, the contributions she asserts shemade to the property — set out later in this judgment — are considered transactionsbetween spouses in respect of property under s 4(1).[48] On this basis, the caveat must lapse. However, in case I am wrong, andMrs Smith is not in fact precluded from advancing a claim to a constructive trust bythe Act, I consider her claim under equity below.Does Mrs Smith have an arguable interest in Mr Smith's estate's half share of theproperty arising out of a constructive trust?[49] I will now analyse Mrs Smith's claim according to the criteria enunciated bythe Court of Appeal in Lankow v Rose.Has Mrs Smith made direct or indirect contributions to Mr Smith's share of theproperty which enhanced or maintained its value?[50] In terms of the kind of contributions that are relevant, the Court of Appeal hasgiven the following guidance.[51] Any payment or service by the claimant qualifies as a contribution if it, byitself, assists in the acquisition, improvement, or maintenance of the property or itsvalue, or its provision helps the other party acquire, improve or maintain the propertyor its value.17[52] Further, contributions to a common household that are adequatelycompensated by the benefits the relationship itself confers are not the kind ofcontributions that give rise to a constructive trust. The claimant must have contributed17 Lankow v Rose, above n 11, at 683.to the acquisition, preservation or enhancement of the property in a more than minorway.18[53] The contributions need not be in money; they may be in services or in any otherrespect. However, there must be a causal relationship between the contributions andthe acquisition, improvement or maintenance of the defendant's assets. As a claim toa constructive trust is a claim to an interest in property, the contributions must be toassets — not necessarily particular assets, but certainly to the defendant's assets ingeneral.19[54] These principles underscore the difficulty involved in applying the Lankow vRose constructive trust framework to this case. The courts developed this concept todeal with the situation where a partner in a de facto relationship had contributed to thevalue of property owned by the other partner over the course of their relationship andit would be unconscionable for that partner not to yield an interest to the contributingpartner proportionate to their contribution.20 Since 2002, when the Property(Relationships) Act was extended to apply to de facto relationships, it is not necessaryfor partners to resort to a constructive trust to have their interests recognised. Thecontributions of spouses and de facto couples to property during the course of theirrelationship are considered under the Act.[55] Here, as discussed above, Mrs Smith and Mr Smith owned the Glebe propertyjointly as a de facto and then a married couple for most of the time they lived in it. Itwas their relationship property and they were joint legal owners. During this time,any contributions Mrs Smith made to the preservation or enhancement of the propertywere not contributions to Mr Smith's asset(s) that might give rise to a constructive trustin her favour in those assets proportionate to her contribution. They werecontributions to their jointly owned relationship property.[56] If there is any scope for application of constructive trust principles, it can onlybe from 2014, when Mrs Smith and Mr Smith could be said to have separated and they18 Lankow v Rose, above n 11, at 282.19 At 686.20 Vervoot v Forrest [2016] NZCA 375 at [43].divided the legal ownership of the Glebe property between them. As Mrs Smith islegal owner of a half share of the property, the question is whether a constructive trustarises in her favour over Mr Smith's half share because of her disproportionatelyhigher contributions to the maintenance or enhancement of the property from thatpoint.[57] Mrs Smith's evidence concerning the contributions she made towards theproperty relate to the entire period she and Mr Smith lived there.[58] In her first affidavit she states that:I have contributed significantly to The Glebe. I worked in our family businessthroughout my working life. I have always paid for all of the utilities. [MrSmith] would usually contribute a half share towards the rates and insurancebut he did not contribute a half share to the utilities. I pay the rates, insuranceand utilities for the whole property now.[59] Mrs Smith expands on her contributions in her second affidavit, saying that:21When we purchased The Glebe we had a mortgage. I made all of the mortgageand interest repayments (even when interest rates were in the double digits)from "my share" of our money and the mortgage was paid off, more than 10years ago now.I raised our five children at 5 The Glebe. I continued to work full timethroughout my working life as well as running the household. continued topay for all of the family's needs from "my share" of our money, which hadgone into the joint bank account, while [Mr Smith] used his own funds as hewished..I paid for all of the outgoings on the house throughout our 60 year relationship,except for a short period between about 2016 to 2018 when [Mr Smith]contributed, most of the time, to a half share of the rates and insurance. Henever paid for utilities.To summarise, throughout our 60 years together and throughout our 43 yearstogether at The Glebe (until 2019), I paid for:a) All of the electricity costs;b) All of the water charges.c) All of the landline telephone charges.21 Affidavit of Jocelyn Lois Smith sworn 10 December 2021 at [8]–[9], [15]–[18] and [20].d) Any maintenance or improvement costs to the property;e) Mortgage repayments and interest until the mortgage was repaid.f) Groceries.Until around 2014 I paid for:g) Health insurance for both of us;h) Sky TV;i) [Mr Smith's] boat moorings. I annex copies of some of those receipts,marked C.[Mr Smith] did not do any housework, cooking, gardening or lawn mowing.If we needed tradespeople, I organised for them to come and paid them.In summary, as well as working full time, around the house I did:j) All of the cleaning;k) All of the cooking;l) All of the gardening;m) Organising any tradespeople;n) Everything to do with the children;o) All of the household (and company) payments.[60] Mrs Smith says that after they sold the business in 2011, she continued to payall their household expenses from her superannuation and interest from her savings.Mr Smith paid his superannuation into their joint account from May 2012 to March2014 to help to cover these expenses. In 2014, when their lawyers begancorresponding about their separation, she says that Mr Smith stopped contributing hissuperannuation into the joint account. She says that she changed their joint bankaccount into her name and continued to pay most property outgoings from thataccount.22 She has provided four bank statements from March to May 2014 whichrecord payments for utilities, insurance and rates. Mrs Smith says that she andMr Smith continued living together at the property and she continued to cook mealsfor Mr Smith and do the housework.22 Affidavit of Jocelyn Lois Smith sworn 10 December 2021 at [31].[61] She states that from 2014 Mr Smith only gave her money to pay for householdexpenses occasionally.23 Mr Smith paid half of the rates and insurance between 2016and 2018 and his estate contributed that half share until approximately September2021. She says otherwise Mr Smith paid nothing towards household expenses or theupkeep of the house.[62] Her evidence is somewhat corroborated by her grandson, Brandon Ransfield,who deposes that "she paid all of the bills". Another grandson, Quintin Smith, hasgiven evidence that Mrs Smith "was still paying all of the bills for the house" after sheand Mr Smith are said to have separated in 2014.[63] Mr Endean submits that in paying most of the utilities and for most of thechattels, Mrs Smith did not preserve or enhance the value of Mr Smith's half share ofthe property in a way that manifestly exceeded the benefit she sustained. It is correctthat the payment of utilities, insurance and rates do not qualify, as they do not maintainor enhance the value of the property, directly or indirectly.[64] Mrs Smith's evidence of her contributions towards the property's maintenanceor improvement is unspecific and unsupported by evidence such as bank statementsor receipts. However, for the purposes of this application, I accept her affidavitevidence that from the time of their separation in 2014 she continued to make allpayments towards the maintenance of the property (Mr Smith only paying half of therates and insurance for part of that time) and to work on the property herself. On thatbasis, and by a thin margin, I find that she has established an arguable case that shemade more than a minor contribution to the maintenance of the value of the wholeproperty, including Mr Smith's half share.Did Mrs Smith have an expectation of an interest in Mr Smith's half share of theproperty, and was that expectation reasonable?[65] Ms Amaranathan submits that Mrs Smith's contributions to the property over60 years mean it is reasonable for her to expect to have a beneficial interest in the23 Affidavit of Jocelyn Lois Smith sworn 10 December 2021 at [32].estate's half share of the home. She contributed more than a half share towards theproperty, and she is certain that Mr Smith wanted her to stay in her home.[66] Ms Andrews submits that Mrs Smith cannot possibly say that she expected aninterest in Mr Smith's half share in light of the separation in 2014 and transfer ofownership from a joint tenancy to tenancy in common in equal share. She submitsthat Mrs Smith understood from the time the ownership structure changed to preparefor the division of their relationship property that she would not benefit fromMr Smith's interest in the property.[67] I am not persuaded that Mrs Smith has a credible case that she had anexpectation of an interest in Mr Smith's half share of the property; or that if she did,such an expectation was reasonable.[68] First, Mrs Smith's evidence falls short of asserting that she expected Mr Smithto yield an interest in his share of the property to her when they were living togetherin the property and she was contributing towards it. Rather, Mrs Smith asserts that shenow believes that Mr Smith would have wanted her to stay in the property for as longas she wished as a discretionary beneficiary of his family trust.[69] In her first affidavit Mrs Smith states:I acknowledge that [Mr Smith] wanted to leave his estate for the ultimatebenefit of our grandchildren and understand that he wanted to do thatI believe [Mr Smith]'s intentions were that our grandchildren be the finalbeneficiaries of his Trust, but that I be the sole discretionary beneficiary.In this way, my needs would be taken care of by his estate and Trust. I donot believe [Mr Smith] would want me to be forced out of our home againstmy wishes. I understand my grandchildren do not want that either.[70] In her third affidavit she states:I am absolutely clear that [Mr Smith] would have wanted me to stay in the Glebefor as long as I wished (especially when 7 of our 11 grandchildren want that as well).In all my conversations with [Mr Smith], although he said he wanted the grandchildrento have his money, he never once mentioned to me that he wanted them to have thehouse.I do have a reasonable expectation of remaining at The Glebe. I am sure that is what[Mr Smith] would have wanted. It has been my home for 45 years, I contributed to itthrough 60 years of effort. I raised my children in it. I agreed to a tenancy in commononly because I had no choice and on the basis I was reserving my rightsI believe that [Mr Smith] did want me to remain as discretionary beneficiary becausewhen he reviewed the trust in 2018 he did not remove me as discretionary beneficiary,or appoint the grandchildren as discretionary beneficiariesI firmly believe that [Mr Smith] would have wanted me to be able to remain in TheGlebe. My contributions to The Glebe were considerable, were significantly morethan [Mr Smith]'s contributions and were effectively made over a period of 60 years,during most of which time I lived frugally from our joint account paying for all of theproperty and family expenses and many of [Mr Smith]'s expenses as well.[71] It is not enough for Mrs Smith to now "believe" that Mr Smith wanted her toremain in the property for as long as she wished. To establish a beneficial interest inMr Smith's share of the property she must have reasonably expected when they wereliving together, and she was contributing to the maintenance and improvement of theproperty, that she would have an interest in his share.[72] Second, even if Mrs Smith did expect Mr Smith to yield an interest in his shareof the Glebe property to her, this expectation was not reasonable. Such an expectationruns counter to the reality of what was happening between them at the time, recordedin the correspondence between their lawyers from 2014 concerning their separationand division of their relationship property.[73] As noted, this correspondence began with the letter from Mr Smith's solicitorin October 2014 requiring that they change the ownership of the Glebe home fromjoint ownership to interests as tenants in common in equal shares. By return, andwithout prejudice to her legal rights, Mrs Smith agreed.[74] Then, on 8 July 2015, Mr Flavell wrote to Mrs Smith stating that he understoodfrom Mr Smith that she and Mr Smith had agreed to separate and divide theirrelationship property. He stated that the property that required division was The Glebeand the contents of the house; and that Mr and Mrs Smith had agreed that the housewould be sold by auction.[75] Mr Wiltshire responded on 27 September 2016, stating that Mrs Smith agreedthat the Glebe property was to be sold and the net sale proceeds divided equally. Healso stated that Mrs Smith had confirmed that their finances had been separate forsome time.[76] Mr Flavell responded on 15 November 2016, confirming that Mr Smith agreedto the listing and marketing of the Glebe property with the net proceeds to be dividedequally; and the division of the contents of the house in equal shares.[77] In a letter dated 16 May 2017, Mr Flavell said that he had not received aresponse to his letter of 14 February 2017 and that the position stated in his letter of15 November 2016 remained the agreed position between Mr Smith and Mrs Smith.[78] It appears that negotiations then became complicated by disagreementsbetween Mr Smith and Mrs Smith on the division of chattels and who was to sell theproperty.24[79] Eventually, on 19 June 2019, Mr Smith signed the separation agreementMr Flavell had prepared. The Agreement provided that the Glebe property would besold by auction with the net proceeds divided equally between Mrs Smith andMr Smith.25 It also provided that the parties had agreed to the division of the chattelsand they each had their chattels in their possession. Further, Mrs Smith acknowledgedthat she was not a beneficiary of the Fazakerly Trust and she made no claims over theTrust funds, the Trust having been settled by Mr Smith from his separate property.26[80] The Agreement was couriered to Mrs Smith's solicitors. Mrs Smith's evidenceis that she met with her solicitors to sign the Agreement on 4 August 2019 but wasfeeling emotional and could not bring herself to do so.24 Affidavit of Kelly Flavell sworn 27 January 2022 at [6]. See the letters annexed dated 20 October2017 and 19 December 2018, as well as the letters dated 29 June 2018, 11 July 2018, 16 October2018, 7 November 2018, 16 November 2018 and 21 December 2018 concerning division of thechattels and arrangements for sale of the property.25 The Agreement, cl 3 (Affidavit of Kelly Flavell sworn 27 January 2022, annexure L).26 Clause 8.[81] Based on the chain of open correspondence described above, there was noreasonable basis for Mrs Smith to expect Mr Smith to yield any of his half share of theproperty to her. There is no mention in these letters of Mr Smith granting Mrs Smitha life interest in the property or allowing her to continue to live there. That would bedirectly contrary to the position stated by Mr Flavell on his behalf: that the propertywould be sold, and the proceeds divided equally between them. Mr Wiltshire forMrs Smith did not object to the position stated by Mr Flavell and expressly agreed thatthe property would be sold, and the proceeds shared equally. He did not raise the ideaof a life interest for Mrs Smith.[82] Further, Mr Smith signed the Agreement that reflected this agreed position andthat agreement was provided to Mrs Smith, through her solicitors, to sign. Mrs Smithcould not possibly have expected Mr Smith to give her a life interest in the Glebeproperty when the agreement he had signed made no provision for one and explicitlyenvisaged the property being sold at auction (and the net proceeds being dividedequally between them). It does not matter that she did not sign it. The focus is not onwhether Mr Smith and Mrs Smith reached a binding agreement to that effect, butwhether Mrs Smith could reasonably have expected to have an interest in Mr Smith'shalf share of the property. The draft agreement, signed by Mr Smith, precludes suchan expectation.[83] The first time the idea of Mrs Smith having a life interest in Mr Smith's shareof the property appears in the evidence is after Mr Smith's death, at the suggestion ofMrs Smith's solicitors. Counsel for Mr Smith's estate had informed them that as thetime for challenging the will had expired, Mr Endean wanted to proceed with theadministration and winding up of the estate. In response, Mrs Smith's solicitorsproposed that Mrs Smith be granted a life interest in the property (or another propertypurchased is substituted for the Glebe property once Mrs Smith was ready and able tomove) consistent with her status as a discretionary beneficiary. When that was refused,Mrs Smith's solicitors advanced the claim that Mr Smith, as settlor of the Trust,intended the Trust property to be used to care for Mrs Smith as the sole discretionarybeneficiary until vesting date. As such, she should be granted a life interest in theproperty (or alternative property) and the Trust property should only be used duringher lifetime for her benefit.[84] This correspondence suggests that the catalyst for Mrs Smith's caveat wasMr Endean's refusal to grant Mrs Smith a life interest in the property as beneficiary ofMr Smith's family trust, and Mr Endean's subsequent removal of her as discretionarybeneficiary. Mrs Smith's evidence is that she was not aware that she was adiscretionary beneficiary of Mr Smith's trust until after his death. This reinforces thatshe could not reasonably have expected to have a life interest in Mr Smith's assets,including his half share of the Glebe property, as a discretionary beneficiary of histrust during the time they lived together and she was contributing to the property.[85] For the above reasons, I am not persuaded that Mrs Smith has a reasonableargument that she expected, or had reason to expect, that she had an interest inMr Smith's half share of the home at The Glebe. There is no evidence to support suchan expectation. Rather, all the evidence points to she and Mr Smith having agreed thatthe property would be sold, and the net proceeds divided equally between them(without Mrs Smith having any claim on Mr Smith's share of the proceeds).[86] As I have found against Mrs Smith on the second requirement for aconstructive trust, it is not necessary to consider the final issue of whether Mr Smithshould reasonably yield an interest.Conclusion[87] On the basis that Mrs Smith's claim to a constructive trust in the Glebe propertyis excluded by the Property (Relationships) Act, I find that the caveat must lapse.[88] If I am wrong about that, Mrs Smith's application fails because her claim to areasonable expectation of an interest in Mr Smith's half share of the property isuntenable.Result[89] I order that Mrs Smith's application that Caveat 12224365.1 lodged againstCertificate of Title NA10B/35 (South Auckland Registry) Lot 3 Deposited Plan 47236is dismissed.[90] My tentative view is that as Mr Endean is the successful party he is entitled tocosts. Further, that costs on a 2B basis are suitable, plus reasonable disbursements. Ifthe parties are unable to agree a costs order, they may file submissions of not morethan three pages, and I will decide costs on the papers._____________________Associate Judge Gardiner