GEDDES V JOHNSON HC TAU CIV-2010-470-000747

GEDDES V JOHNSON HC TAU CIV-2010-470-000747 15 July 2011IN THE HIGH COURT OF NEW ZEALANDTAURANGA REGISTRYCIV-2010-470-000747BETWEEN LORNA MARY GEDDESPlaintiffAND WAYNE ARTHUR JOHNSONDefendantHearing: 13 and 14 July 2011Appearances: L Bush and O Moorcroft for PlaintiffM Chambers for DefendantJudgment: 15 July 2011ORAL JUDGMENT OF CHISHOLM[1] In this proceeding the plaintiff, Ms Geddes, seeks an order for the sale of a property at 49 Coppelia Avenue, Omokoroa, the yacht Acrux and various motor vehicles. A division of proceeds is also sought. In addition, Mrs Geddes seeks occupation rental in relation to Coppelia Avenue, which has been occupied by the defendant, Mr Johnson, since she vacated. Mrs Geddes also seeks a return of chattels, injunctive relief and damages. Eight causes of action are pleaded.[2] Initially Mr Johnson protested jurisdiction on the basis that there had been a de facto relationship between Mrs Geddes and himself from 1998 to 2008 and the Family Court had sole jurisdiction. For reasons that are of no immediate relevance, the protest foundered and was dismissed.[3] In due course Mr Johnson filed a statement of defence. In general terms the financial transactions that lie at the centre of this litigation are admitted by Mr Johnson. But he pleads that there was a de facto relationship and that the Property (Relationships) Act 1976 governs any division of assets.[4] Timetable orders were made by Associate Judge Doogue on 17 June 2011. Those orders were breached by Mr Johnson. At the beginning of the hearing Mr Chambers explained that the timetable order had been breached and Mr Johnson would not be giving evidence because of deficiencies in Mr Johnson's memory andrecall. A medical report was attached to Mr Chambers' memorandum.[5] The end result was that the plaintiff gave evidence and was extensively cross- examined by Mr Chambers. In addition a mass of documentary evidence running into something over 1200 pages was produced. The evidence of a registered valuer as to the value of the Coppelia Avenue property was admitted by consent. The defendant did not give or call any evidence.Background[6] Mrs Geddes and Mr Johnson met in either late 1998 or early 1999. Nothing turns on the precise timing. Mrs Geddes is trained in therapeutic and sports massage. Mr Johnson had earlier suffered a back injury and Mrs Geddes began treating him. They became friends. At that time both Mrs Geddes and Mr Johnson owned their own homes.[7] Towards the end of 2001 they decided that Omokoroa seemed to be a desirable place to live. Mr Johnson suggested to Mrs Geddes that they should sell their properties, buy a property together at Omokoroa, and get married. Mrs Geddes'evidence was to the effect that there was no romantic involvement but she said to Mr Johnson she would see how things turned out. In due course it was agreed that they would sell their houses and buy a house at Omokoroa.[8] According to Mrs Geddes' uncontradicted evidence:23. After much discussion with Wayne [Johnson] on the subject, it was agreed if the house purchase was successful, the house would be used as follows ...:(i) Wayne would live there, and would occupy the basement flat;(ii) My 2 children and I would live there, and we would occupy the upstairs floor;(iii) We would each pay our own phone and power bills'(iv) I would continue to act in my capacity as Accident Compensation Corporation funded caregiver to Wayne[9] It was agreed that each party would contribute at least $100,000 from the sale of their house towards the purchase of a house in Omokoroa. It was intended that finance would be arranged through ANZ because Mr Johnson had a connection with that bank. It was anticipated that Mr Johnson's and Mrs Geddes' combined incomes would be sufficient to support the necessary loan.[10] In mid January 2002, before a suitable home in Omokoroa had been located, Mr Johnson purchased a boat Kaskara for $65,000. Finance from ANZ was secured over his house. He told Mrs Geddes' that he would still have enough money to contribute his share of the house purchase once a house was located.[11] Soon after this the parties found the house at 49 Coppelia Avenue and entered into a contract to purchase it for $315,000. The purchase was duly settled on 5 April 2002 and Mr Johnson and Mrs Geddes were registered as proprietors as tenants in common in equal shares. From the sale of her house Mrs Geddes injected (in round figures) $124,000 towards the purchase. There was a delay before Mr Johnson'shouse sold and, without going into detail, the end result was that he contributed only $20,000 towards the purchase. At that stage there was an ANZ mortgage of a little over $200,000 secured over the property.[12] Mrs Geddes said that she was beginning to regret the arrangement even before they moved into Coppelia Avenue. However, she was unable to get out of the sale of her own house, and the arrangement proceeded. She said that once they moved into Coppelia Avenue she and Mr Johnson slept in separate rooms and there was no sexual relationship. Her evidence was that this continued to be the case throughout the period that she lived at Coppelia Avenue.[13] From Mrs Geddes' point of view things went from bad to worse. Mr Johnsonbought motor vehicles and in 2003 purchased the yacht Acrux for $145,000. By and large, all these items had to be financed and it is apparent from the evidence that this imposed considerable financial pressure. High interest rates led to these debts beingrefinanced through ANZ and secured over Coppelia Avenue. Mrs Geddes said that she reluctantly went along with these arrangements because she felt trapped and feared that she would lose her house if she lost control of the situation. Consequently, she paid her share of the ANZ instalments even though some of the indebtedness related to assets that she did not own. At one stage the indebtedness to the bank secured over the property was as high as $360,000. It was reduced by $70,000 when Kaskara was sold.[14] Towards the end of 2005 Mr Johnson suffered a heart attack which was followed by further ill health. The situation was exacerbated by his drinking. Mrs Geddes continued to act as his caregiver under ACC, and to meet her share of the outgoings.[15] I pause to mention that in 2007 Work and Income New Zealand beganinvestigating Mrs Geddes' benefit situation. Although she had been receiving someincome from her role as Mr Johnson's ACC caregiver and from other sources, she continued to draw a benefit. This investigation took around eight months. By letter of 8 February 2008 Mrs Geddes was informed that the investigation had been completed and that, having regard to her income, she had been overpaid approximately $2000. It was implicit in the letter that the Department was satisfied that no de facto relationship existed.[16] In May 2008 there was a big argument and Mrs Geddes moved out. However, Mr Johnson was about to have a major back operation and Mrs Geddes agreed to go back and care for him during the period leading up to and after the operation.[17] On 18 June 2008 Mrs Geddes prepared a handwritten agreement. Despite Mr Johnson's denial that he signed the agreement I am perfectly satisfied that he did so. Mrs Geddes said that over the years she had been endeavouring to formalise the arrangements between them but Mr Johnson had refused to engage on that topic. It was only because of the situation prevailing at this time that she was able to persuade Mr Johnson to talk about the matter and sign a document.[18] The agreement dated 18 June 2008 purports to be an agreement between the"half share" owners of 49 Coppelia Avenue, Omokoroa. After covering the living arrangements the agreement covered what was to happen when the property was sold. It said:When the Property is SoldThe short fall on whatever ½ share be made up as equal ½ shares.The amount transferred from another finance company to the morgage (sic) by Mr Johnson in 2004 be cleared by Mr Johnson plus the increased of amount Mrs Geddes had to pay be reemburce (sic) to her.There was also a separate page in which Mrs Geddes had written "put down how you want it or change what I have or add to it", which was followed by Mr Johnson'shandwritten description of what should happen if either "partner" died. This additional page was also signed by both parties.[19] Corroboration that this agreement had been entered into emerged after proceedings were issued. A letter from Mrs Geddes to her then solicitor asking him to get the agreement "typed out into legal terms" was located on the solicitor's file. Because Mrs Geddes had heard nothing further from her former solicitor she assumed that he had not implemented her instructions. However, the file revealed that he had in fact sent a draft document to Mrs Geddes. She did not receive it and now believes that it was intercepted and destroyed by Mr Johnson.[20] Mrs Geddes said that as time went by Mr Johnson became more controlling and intimidating. He was still drinking to excess. After an incident on 10 October 2008 she moved out and went to the police. At that time most her belongings and the belongings of her deceased mother (who had been renting the flat in the basement for a time) remained at the property. Although Mrs Geddes went back to the property on a number of occasions she was unable to recover most of the items. A list of those items runs into eight pages.Issues[21] Given the pleadings and the way the hearing developed the issues to be determined are relatively narrow.(a) Whether there was a de facto relationship;(b) The implications of the financial transactions;(c) Issues concerning the furniture belonging to Mrs Geddes and her mother; and(d) The orders that should be made.Was there a de facto relationship?[22] This is, of course, a critical issue. The expression "de facto relationship" isdefined by s 2(d) of the Property Relationships Act:2D Meaning of de facto relationship(1) For the purposes of this Act, a de facto relationship is a relationship between 2 persons (whether a man and a woman, or a man and a man, or a woman and a woman)—(a) who are both aged 18 years or older; and(b) who live together as a couple; and(c) who are not married to[[, or in a civil union with, one another.(2) In determining whether 2 persons live together as a couple, all the circumstances of the relationship are to be taken into account, including any of the following matters that are relevant in a particular case:(a) the duration of the relationship:(b) the nature and extent of common residence:(c) whether or not a sexual relationship exists:(d) the degree of financial dependence or interdependence, and any arrangements for financial support, between the parties:(e) the ownership, use, and acquisition of property:(f) the degree of mutual commitment to a shared life:(g) the care and support of children:(h) the performance of household duties:(i) the reputation and public aspects of the relationship.(3) In determining whether 2 persons live together as a couple,—(a) no finding in respect of any of the matters stated in subsection (2), or in respect of any combination of them, is to be regarded as necessary; and(b) a Court is entitled to have regard to such matters, and to attach such weight to any matter, as may seem appropriate to the Court in the circumstances of the case....I will apply that definition when determining whether there was a de facto relationship in this case.[23] The only evidence comes from Mrs Geddes, coupled with the documentary evidence. She denied that there had ever been a sexual or de facto relationship. She said that they always slept in separate bedrooms and kept their financial affairs separate as far as possible. She said that she was only Mr Johnson's "partner" in a business sense with reference to the house property. Although Mr Johnson had proposed marriage she had rejected his proposal, and they were never engaged. At least on her part there was no romantic attachment and "I didn't allow Wayne to approach into my personal space".[24] During cross-examination Mr Chambers carefully explored the de facto relationship issue. Despite his close questioning Mrs Geddes was stout in her denial.She explained what she meant by the term "partner" in the agreement of 18 June2008 and why she had written that word on the two hospital forms. She also reiterated that she and Mr Johnson kept their financial affairs separate as far as possible and that there was only some "intermingling" of their financial affairs because she was locked into the situation and was trying to protect her asset.[25] I accept Mrs Geddes' evidence. It is also worth noting that her evidence isconsistent with the WINZ letter of 8 February 2008. It was suggested by Mr Chambers during cross-examination that the WINZ letter did not state that there was no de facto relationship. However, as I have already mentioned, it can be safely inferred that the WINZ investigation had been thorough and that it had closed. If there had been a finding that there was a de facto relationship there would obviously have been further action from WINZ.[26] I therefore find that there was not at any stage a de facto relationship between Mrs Geddes and Mr Johnson.[27] Before leaving this topic I should mention one other matter that emerged during cross-examination. Mr Chambers put it to Mrs Geddes that WINZ had reopened the enquiry about whether there was a de facto relationship. I established from Mrs Geddes that the reopening of that enquiry appears to have been directly or indirectly prompted by Mr Johnson within the last few months. Given that this proceeding was pending that was a cynical and unjustified action on his part. I hope this decision will put an end to that matter.Implications of financial transactions[28] At my request counsel for Mrs Geddes prepared a financial analysis of the contributions towards the purchase of 49 Coppelia Avenue and the three separate loans that were subsequently secured over the house. The purpose of the calculations was to determine the financial inequality that arose from the purchase of the house and subsequent events. I am grateful to Mr Bush and Mr Moorcroft for their assistance.[29] Without going into detail, the end result was that there was an inequality of $158,883 made up as follows:Extra mortgage repayments due to unequal amountsput in during purchase of 49 Coppelia83.928.47Loan payments by Geddes to 93 account 2,990.00Loan payments by Geddes to 96 account 5,000.00½ payments toward Acrux (after amalgamation of 94account)28,791.87½ balance of loan 38,173.00158.883.34Although Mr Chambers attempted to challenge the methodology, he was forced concede that the individual calculations leading to those figures were supported by the evidence. Given the circumstances this was a realistic and responsible concession and he could not have done anything else.[30] Thus, I am satisfied that Mrs Geddes' contributions to Coppelia Avenue were far in excess of Mr Johnsons', and that the imbalance grew as Mr Johnson unilaterally purchased items and then prevailed upon Mrs Geddes to allow indebtedness to be secured over the house. It is true that Mrs Geddes was extraordinarily gullible. But I accept her evidence that she believed that she was locked in and had no option other than to allow the refinancing over the house on several occasions. Once that occurred the only way she could protect her interest was by meeting her half share of the payments.[31] Notwithstanding Mr Chambers' attempt to launch an estoppels argument I amsatisfied that there is not the slightest possibility of an estoppel being invoked against Mrs Geddes.[32] Turning to the issue of occupational rental, it is now common ground that Mrs Geddes is entitled to $25,000 for the period that Mr Johnson has occupied the property following vacation by Mrs Geddes. Although the plaintiff argued that a claim of around $32,000 would be justified it became clear that that could not be supported by the evidence and Mr Bush ultimately conceded that the appropriate figure was $25,000.[33] The occupational rental needs to be added to the figure of $158,883 mentioned earlier. This increases the imbalance to $183,883.[34] Now I consider the legal implications of those transactions. It is common ground that the Coppelia Avenue property and Acrux need to be sold. Coppelia Avenue has been valued at $525,000. The ANZ mortgage over that property currently stands at $247,223 which means that on the basis of that valuation there is an equity of $277,777, a half share of which would be $138,888. There is no information as to the likely sale price of Acrux.[35] Under s 339 of the Property Law Act 2007 the Court has power to order a division of property. Section 339(1) provides:339 Court may order division of property(1) A court may make, in respect of property owned by co-owners, an order—(a) for the sale of the property and the division of the proceeds among the co-owners; or(b) for the division of the property in kind among the co- owners; or(c) requiring 1 or more co-owners to purchase the share in the property of 1 or more other co-owners at a fair and reasonable price.Given that the property at Coppelia Avenue is co-owned, Mrs Geddes is entitled to make application under s 341(1)(a) and the Court has the necessary jurisdiction to entertain the application and make orders for sale and division.[36] When considering whether to make orders under s 339(1) the Court must have regard to the matters listed in s 342, namely:342 Relevant considerationsA court considering whether to make an order under section 339(1) (and any related order under section 339(4)) must have regard to the following:(a) the extent of the share in the property of any co-owner by whom, or in respect of whose estate or interest, the application for the order is made:(b) the nature and location of the property:(c) the number of other co-owners and the extent of their shares:(d) the hardship that would be caused to the applicant by the refusal of the order, in comparison with the hardship that would be caused to any other person by the making of the order:(e) the value of any contribution made by any co-owner to the cost of improvements to, or the maintenance of, the property:(f) any other matters the court considers relevant.When determining the orders that should be made in this case I take those matters into account.[37] An additional power that is available under s 343 is also relevant:343 Further powers of courtA further order referred to in section 339(4) is an order that is made in addition to an order under section 339(1) and that does all or any of the following:(a) requires the payment of compensation by 1 or more co-owners of the property to 1 or more other co-owners:...Given the significant financial imbalance between Mr Johnson and Mrs Geddes I am satisfied that this is an appropriate case for this additional power to be utilised. If the property sells for something near to the valuation figure, the compensation necessary to restore the balance between the two parties would absorb the whole of Mr Johnson's half share and there will still be a shortfall of around $50,000.[38] Now I turn to the vessel Acrux. Section 339 of the Property Law Act does not apply to this vessel because Mrs Geddes is not a co-owner. Nevertheless, I am satisfied that the evidence supports the conclusion that Mr Johnson holds the vessel and its sale proceeds on a constructive trust for Mrs Geddes to the extent that the house does not meet the whole of the amount that is due to her by Mr Johnson.[39] Applying Gillies v Keogh [1989] 2 NZLR 327 (CA)1 Mr Johnson was only able to retain Acrux by refinancing the debt incurred on its purchase over 49 Coppelia Avenue. Mrs Geddes was a half owner of the property and she effectively assumed responsibility for, and met, a share of the purchase price of the boat. However, it was always registered in Mr Johnson's sole name and he was thereby enriched at the expense of Mrs Geddes. In all the circumstances it would be unjust if Mrs Geddes was not fully compensated from the sale proceeds of the boat for the expenditure that she incurred in relation to that boat on behalf of Mr Johnson.[40] Finally, I briefly mention the issue of motor vehicles. While a considerable number of vehicles appear to have been purchased and sold by Mr Johnson over the years, it seems that there is now only one vehicle remaining with Mr Johnson. That is an Isuzu Bighorn motor vehicle which I am told is worth around $1000. I am not prepared to make any orders in relation to that vehicle.The furniture of the plaintiff and her mother[41] The only evidence that I have is that the furniture listed in the statement ofclaim and repeated in Mrs Geddes' brief belongs to her and her mother's estate, that it was left at Coppelia Avenue, and that Mr Johnson refuses to release it. Under those circumstances it is appropriate to make orders for its immediate return and to prevent its disposal or indeed any interference with it in the meantime.[42] Although damages have been sought this is not an appropriate case for damages and I am not prepared to make any award of that nature.Orders[43] For the reasons already given, I will now make the following orders:[44] First, orders relating to 49 Coppelia Avenue, Omokoroa:1 Gillies v Keogh [1989] 2 NZLR 327 (CA)(a) That property is to be sold as soon as possible at the best price reasonably attainable.(b) Upon sale, and after all expenses of sale have been met and the ANZ mortgage has been repaid, the plaintiff is to receive:(i) Half the balance of the proceeds then remaining;(ii) Plus $183,883;(iii) Plus rental at $63.57 per day for each day that the defendant has remained in occupation of the property beyond 14 July 2011.(c) Beyond that any surplus is to be shared equally between the plaintiff and defendant.[45] In relation to the vessel Acrux, there will be the following orders:(a) That vessel is also to be sold as soon as possible at the best price reasonably attainable.(b) Any sale must be transacted through Tauranga Boat Sales or such other marine broker as may be agreed between the parties in writing. In other words, the defendant is not to unilaterally transact any sale.(c) The proceeds of sale are to be received by the broker, and after the expenses of sale have been met, the broker is to pay to Mrs Geddes such amount (if any) as may be required to reimburse her for the sums referred to in [44](b)(ii) and (iii) that have not already been reimbursed from the sale of Coppelia Avenue.(d) Beyond that the net proceeds of sale will belong to the defendant.(e) In the event that the vessel sells before the house;(i) The plaintiff will receive such of the net sale proceeds of the boat as are necessary to meet the amounts referred to in [44](b)(ii) and (iii), and the balance is to be paid to the defendant. In that case the plaintiff will not be entitled to receive anything on the sale of the house beyond her half share of the net sale proceeds.(ii) On the other hand, if the net sale proceeds of the boat are insufficient to meet the amounts referred to in [44](b)(ii) and (iii) in full the shortfall will be made up from the sale proceeds of the house.[46] Mr Bush indicated that the plaintiff would like to have a registerable security over the boat under the Personal Property Securities Act 1999. While I was sympathetic to that request it seemed to me that without the defendant's signature itwould not be possible to obtain a security that could be registered or that that would be enforceable against third parties: see s 36(1)(b). Under those circumstances Mr Bush indicated that he would seek a charge over the boat. Once these orders have been sealed the plaintiff will be entitled to a charging order without leave pursuant to Rule 17.42 of the High Court Rules.[47] In relation to the furniture:(a) The furniture referred to at paragraph 23 of the statement of claim is to be immediately returned to the plaintiff.(b) In the meantime the defendant is to preserve that furniture in good order and condition and is not to dispose of it.[48] The plaintiff is entitled to costs against the defendant on the 2B scale.[49] Leave is reserved to either party to apply further should the need arise.Solicitors:Bush Forbes, P O Box 536, TaurangaGallie Miles, P O Box 170, Te Awamutu