RENNIE V HAMILTON, CA CA157/04

RENNIE V HAMILTON, CA CA157/04 10 August 2005IN THE COURT OF APPEAL OF NEW ZEALAND CA157/04BETWEEN NORMA ELIZABETH RENNIE Appellant AND HUGH HAMILTON, BEING THE TRUSTEE AND EXECUTOR OF KIM ASHTON WILLIAMS Respondent UNDER the Law Reform (Testamentary Promises) Act 1949 BETWEEN NORMA ELIZABETH RENNIE Appellant AND HUGH HAMILTON, BEING THE TRUSTEE AND EXECUTOR OF THE ESTATE OF KIM ASHTON WILLIAMS Respondent Hearing: 4 August 2005 Court: Anderson P, William Young and Robertson JJ Counsel: B A Gibson for Appellant J C Corry for Respondent Judgment: 10 August 2005JUDGMENT OF THE COURT A The appeal is dismissed. B No costs are awarded. ____________________________________________________________________ REASONS(Given by Robertson J)Introduction[1] This is an appeal against a decision of Gendall J delivered in the High Court at Wellington on 30 September 2003. The appellant had sought an award relating to the business of a brothel and the fee simple of the premises in which the business was conducted. The Judge made an award of $70,000 in favour of the appellant pursuant to the provisions of the Law Reform (Testamentary Promises) Act 1949 but refused relief on the basis of any form of trust. That award related only to the business and not to the premises. The appeal focuses on that issue. [2] An appeal was filed by the appellant on 24 October 2003. Security for costs on the appeal were fixed, but not paid. Consequently, on 26 November 2003, the appeal was deemed to be abandoned. [3] An application was subsequently made for special leave to appeal to the Court of Appeal. At a hearing on 2 July 2004, an order was made by Ellen France J that the appellant could bring a fresh appeal within 28 days. She waived security for costs. [4] A general appeal upon the grounds that the original judgment was wrong in fact and law was filed within the requisite period. [5] Early in the hearing in this Court, counsel were questioned about the issue of equity being called in aid for the enforcement of a promise which had its genesis in illegal activity. Throughout the period in question, as candidly described by various witnesses, the appellant was engaged in activities which would have been contrary to provisions of s 147 of the Crimes Act 1961 (as they then existed). [6] There was dialogue about possible consequences in such a claim. Counsel had their attention drawn to the note in the Law Quarterly Review Vol 9 (1893) at 197 on the Highwayman's Case (Everet v Williams).[7] Mr Gibson, who had not been counsel in the Court below, indicated that he was aware that this point could arise. Mr Corry advised that the matter had been briefly discussed in the Court below but had not been pursued. [8] Everet v Williams, decided in 1725, concerned an oral partnership to share the spoils of highway robbery. When Mr Williams would not account for his half to Mr Everet, the latter brought an action in equity for account. The Court refused the relief sought, instead fining both counsel £50 for indignity to the Court. As well, the two solicitors were fined £50 each and bought into custody until the fines were paid. Plaintiff's counsel was required to pay the defendant "such costs as the Deputy shall tax." This case is demonstrative of a general principle that equity will not be used to help further an illegal or immoral purpose. [9] In this case, Ms Rennie claimed a trust over property which was used for activities which, at the time, contravened the criminal law. It is clear that giving effect to such a trust would breach this general principle. [10] We note that it is contended in a contemporary text that the provisions of the Illegal Contracts Act 1970 should apply by analogy, according to the maxim that equity follows the law, to non-contractual trusts such as this one (See Andrew S Butler (ed) Equity and Trusts in New Zealand (Brookers, Wellington, 2003 at 35.3.6). Such an approach, it is argued, would harmonise the treatment of non- contractual and contract-based equitable actions, overcome the current "arbitrary and unjust" response of equity to illegality, and accord with the High Court of Australia's approach to this question in Nelson v Nelson (1985) 184 CLR 538. [11] As we have concluded that the appeal in respect of the refusal to find any of the various forms of trust raised is unsustainable, illegality does not require further consideration. [12] Inasmuch as illegality has not been raised with regard to the statutory relief under the Law Reform (Testamentary Promises) Act 1949, we are content to leave the issue for an occasion on which the point is in contention.The factual circumstances[13] The appellant, Ms Rennie, met the deceased, Mr Williams, in 1983 when he hired her as a receptionist at one of his "massage parlours". During 1983 and 1984 the relationship between the two progressed from an employment relationship into a more intimate one. In late 1984, it flourished into a de facto relationship when the appellant, with her young daughter by a previous relationship, moved into Mr Williams' house in Pauahatanui. [14] During this time, Mr Williams prospered financially. He invested successfully in property and profited from his numerous businesses. The appellant no longer required the receptionist job but did go on to the Domestic Purposes Benefit. Mr Williams was generous with his money. He paid for an overseas holiday and for expensive boarding school fees for the appellant's daughter. At times the relationship was nonetheless tempestuous and violent. [15] In 1989 the appellant and Mr Williams parted company. The appellant and her daughter moved out of the Pauahatanui house and into a flat in Karori. Mr Williams began a de facto relationship with another woman shortly thereafter, which continued until he died in December 2000, though during this time the appellant and Mr Williams remained friends and occasional sexual partners. [16] In October 1990, Mr Williams purchased a building in Wellington for the purpose of setting up another "massage parlour", later to be called "CJ's". Mr Williams paid for substantial renovations in order to equip the building with the bedrooms, spa and sauna rooms necessary for such a business. The purchase and renovations were encouraged by the appellant who wanted to return to work. [17] Ms Rennie was initially employed as the manager of the business, but was dismissed for cannabis use within a fortnight of the business opening. She was re- employed five months' later, and continued as manager, on and off, until Mr Williams' death. The appellant had relative freedom to run the business operations of CJ's. Mr Williams' role was on the accounting side, including meetingmortgage interest, rates, insurance payments and generally trying to make a profit out of the investment. [18] The terms of the appellant's employment were somewhat informal. Initially she was not paid a salary, but was able to cover her rent and living expenses out of the cash takings of the business. Later, from about 1993 on, a salary was paid, the amount of which varied from time to time, though it appears that in addition the appellant continued to remove cash from the takings without objection from Mr Williams. [19] Ms Rennie's evidence was that, on occasion, she offered to lease the business from Mr Williams and that rent in the vicinity of $2,000-$3,000 per week was discussed, though a lease never eventuated. She asserted that Mr Williams said to her that "CJ's would always be mine and that he would look after me". [20] From about 1998 Mr Williams' health deteriorated. He died in December 2000 leaving an estate in the vicinity of $2,800,000. [21] Ms Rennie advanced claims under the Law Reform (Testamentary Promises) Act 1949 and on the basis of various trust scenarios, all focused on CJ's. She alleged that Mr Williams promised to provide for her after his death through CJ's, and that this promise constitutes a testamentary promise under the Law Reform Testamentary Promises Act 1949. Further, she argued that, through her contributions to the business and property, she acquired a beneficial interest in the same, and that she was entitled to the remedy of a trust.The High Court decision[22] Gendall J described, at [30], the elements of a testamentary promises claim as follows:1. that services were rendered or were performed for the deceased in his lifetime;2. an express or implied promise by the deceased to reward the complainant for such services or work by making some testamentary provision for the complainant was made; 3. that there is a nexus between the services rendered and the promise made.There is no challenge to this articulation as being the correct legal position. [23] The Judge was satisfied that, over the period 1990 to 2000, Mr Williams represented or promised to the appellant, either expressly or impliedly, that the business or operation of CJ's would be hers. However, His Honour did not accept at [35]:that the promise was to the effect that the realty or building owned by [Mr Williams] and in which the business was located would be the subject of any testamentary provision so as to become hers. Nor do I accept that the evidence establishes that [the appellant] believed or understood the promise in that way as it related to "CJ's".[24] In addition, Gendall J considered it "abundantly clear that no trust, constructive or implied, can arise in favour of the [appellant]". His Honour, at [55], found that there were no contributions made by the appellant when the property was acquired or improved, nor were there any earlier contributions to Mr Williams' properties or businesses at the time of co-habitation. The property and business were entirely paid for by Mr Williams. [25] Furthermore, while the appellant provided services of around ten years, she was also an employee, and was well rewarded in that capacity in the form of cash as well as in access to the funds of the business if required in order to pay rent and living expenses. [26] Gendall J considered, at [76], that $70,000 was "a fair award to be made to achieve performance of the testamentary promise" but refused any relief.Testamentary promise claim[27] Before us, there was no challenge to Gendall J's finding that a promise had been established and that an award was appropriate to remunerate Ms Rennie because of a failure to make proper testamentary provision. [28] The proper approach in such a situation was encapsulated by Sir Robin Cooke (as he then was) delivering the judgment of the Privy Council in Re Welch[1990] 3 NZLR 1 when he said at 6:So it is plain, considering s 3(1) as a whole, that whenever a claim to relief is made out under it the criterion as to the relief to be granted is reasonableness. That is always the result at which the Court is to aim, no matter whether the award is of money or of specific property. If the deceased promised a certain sum or a certain property, that is a relevant consideration but not necessarily decisive where there have been meritorious services and considerable sacrifice on the part of a claimant and the property promised has been a central feature in the services or the life of the claimant, the natural order under the Act may be one vesting the property in the claimant, provided that this does no injustice to any others with meritorious claims against the estate. Jones v Public Trustee (1962) NZLR 363 was such a case. On the other hand, despite a promise of a specific property, either the limited value of the claimant's services by comparison to other circumstances of the case may result in a lesser or different award, as inPublic Trustee v Bick [1973] 1 NZLR 301 and Re Townley [1982] 2 NZLR 87.[29] Mr Gibson's first submission before us was that Gendall J was in error when he determined that the promise which had been made did not include the land and buildings from which the business of CJ's operated. [30] In our judgment, counsel faced an insurmountable hurdle with regard to this contention. There was, in the High Court, scant evidence about the exact promise which was relied upon, and certainly it could not be contended that it was not open to the Judge to conclude that the promise was restricted to the business alone. [31] The fact that, for almost a decade, the arrangement between these parties was that a rental payment was made to the deceased and thereafter the appellant virtuallyran the business and kept what she made, is inconsistent with the approach that there was a promise that the freehold was to be hers as well. [32] The Judge heard and saw these witnesses who clearly made strong impressions upon him. Furthermore, whatever the trial Judge found as to the exact nature of the promise, that is only one factor to be considered in an assessment of a reasonable provision for a failure to translate the promise into testamentary provision. [33] It is clear that once the business was started and the appellant was managing it, she was in fact providing minimal service to the deceased and in the latter part was being paid proper remuneration. It is uncontroverted that the lifestyle of the deceased became more isolated as time went on and the appellant became increasingly excluded from his sphere. [34] It may well be that there were some continuing sexual connections and some ongoing talking (perhaps about business matters) but it was clearly a case where the deceased was wanting to keep the appellant at a distance as evidenced by the fact that, in the latter period, virtually all communication was by way of fax. By this time he was also in a de facto relationship with another woman. [35] Mr Gibson placed particular emphasis on the fact that Gendall J had found that there was a promise, not only to provide the business but that the deceased would "look after her". [36] None of that detracts from the fact that any relief granted must be reasonable. Put at its highest (for whatever reason) the services which Ms Rennie was able to provide were severely circumscribed and curtailed. [37] We accordingly are of the view that there is no basis upon which it could be contended that this Court could interfere an appeal in the Judge's assessment of a reasonable sum to compensate for the absence of testamentary provision.Implied or constructive trust[38] As noted earlier, we are of the clear view that the appellant's contention that the circumstances disclose an implied or constructive trust are without merit and that the Judge properly dismissed it. [39] Before us argument was focused solely on the imposition of an institutional constructive trust. In Lankow v Rose [1995] 1 NZLR 277 (CA) at 294 Tipping J (McKay J concurring) summarised four elements that a claimant must establish to justify the imposition of such a trust:1. Contributions, direct or indirect, to the property in question. 2. The expectation of an interest therein. 3. That such expectation was a reasonable one. 4. That the defendant should reasonably expect to yield the claimant an interest.[40] When these elements are established, equity intervenes to ensure that the conscience of the legal owner acknowledges the other party's beneficial interest in the property by treating the defendant as a constructive trustee of the legal estate to the extent of the claimant's assessed interest: see Lankow v Rose at 294. [41] An institutional constructive trust "is one which arises by operation of the principles of equity and whose existence the Court simply recognises in a declaratory way": see Fortex Group Ltd (In Receivership and Liquidation) v MacIntosh [1998] 3 NZLR 171 (CA) at 172. [42] The appellant's submission is that Ms Rennie made indirect, but significant contributions to the property in assisting to transform the building from an empty shell into partitioned and furnished rooms. [43] Like the High Court Judge, we do not find this submission persuasive. The appellant's evidence is that she directed the builder on how to complete the renovations and that the work done was based on her advice. Gendall J found that the property was purchased and the renovations funded entirely by Mr Williams.Providing advice or recommendations as to how to furnish or partition a building does not, in our judgment, amount to making indirect contributions to the property, and does not give rise to an expectation therein. During this period Ms Rennie was either on a salary or had access to finances which adequately covered any contribution she was making. [44] Furthermore, the services provided by the appellant during the 10 years in which she was an employee do not amount to an indirect contribution to the property. Ms Rennie was rewarded in her capacity as an employee at the time either under or over the counter. The law does not enable employees to obtain an interest in the property of their employer simply by performing their employment duties. [45] Even if Ms Rennie had expected an interest in the building, we agree with Gendall J that such expectation was unreasonable in the circumstances, and the deceased could not reasonably be expected to yield the appellant such an interest. [46] This was basically a case of the remunerated provision of services in an employment context. It cannot be said that the circumstances give rise to an interest which the Court should recognise by the declaration of any form of trust.Conclusion[47] It follows that the appeal must be dismissed. [48] Ms Rennie is legally aided and, in all the circumstances, it is not appropriate to make any order as to costs.Solicitors: B A Gibson, Wellington, for Appellant Foot Law, Wellington, for Respondent