PAUL v PAUL CA621/2013 AND CA25/2014 [2014] NZCA 549

PAUL v PAUL CA621/2013 AND CA25/2014 [2014] NZCA 549 [17 November 2014]IN THE COURT OF APPEAL OF NEW ZEALANDCA621/2013CA25/2014[2014] NZCA 549BETWEEN ROBERTA LORRAINE PAULAppellantAND CORENE GEORGINA PAULRespondentHearing: 20 October 2014Court: Miller, Heath and Dobson JJCounsel: T M Braun and N J Edwards for AppellantF C K Wood for RespondentJudgment: 17 November 2014 at 11.30 amJUDGMENT OF THE COURTA The appeal (in CA621/2013) against the High Court's judgment of16 August 2013 is allowed. The order dismissing the application that a caveat not lapse is set aside. In substitution, an order is made that caveat 9324433.1 lodged against the property at 27 Old Quarry Road, Rotorua, more particularly described in Certificate of Title SA6D/347, not lapse.B The appeal (in CA25/2014) against the High Court's judgment of 4 December 2013 is dismissed.C The orders for costs made in the High Court are set aside. In substitution, there is no order as to costs on either application in that Court.D No order as to costs in this Court.____________________________________________________________________REASONS OF THE COURT(Given by Heath J)The appeal[1] Mrs Corene Paul (Mrs Paul) and her daughter, Ms Roberta Paul (Roberta), have become embroiled in litigation about whether Roberta has a proprietary interest in a property owned by her mother at 27 Old Quarry Road, Rotorua. Roberta has claimed an interest in the property on two distinct grounds. One is under an oral agreement for sale and purchase (entered into in May or June 2005) of which Roberta claims there has been partial performance. The other is said to arise out of an unregistered mortgage to protect a loan made by Roberta to her mother in 1996.[2] On 27 February 2013, following a breakdown in family relations earlier in that year, Roberta lodged a caveat against the Old Quarry Road property to protect the interest asserted under the oral agreement for sale and purchase. An application was made on 31 May 2013 to sustain that caveat.1 In a judgment delivered on 16 August 2013, in the High Court at Rotorua, Associate Judge Christiansen dismissed that application and ordered Roberta to pay costs to her mother.2[3] On 20 August 2013, a few days after the Associate Judge's decision had been handed down, Roberta lodged a second caveat.3 This caveat purported to protect the interest claimed under the alleged unregistered mortgage. On 25 September 2013, Roberta applied for an order that the second caveat not lapse.4 That application was also heard by Associate Judge Christiansen. In a judgment given on 4 December 2013, he dismissed the application, with costs in favour of Mrs Paul.5[4] Although the two caveats were lodged on 27 February and 20 August 2013 respectively, substantive proceedings to claim the interests alleged were not filed in the Rotorua District Court until 29 January 2014. Unless a priority hearing is1 The application was made under s 145A of the Land Transfer Act 1952.2 Paul v Paul [2013] NZHC 2076.3 As this caveat sought to protect an interest in land that was not claimed in the first it was not necessary for Roberta to obtain an order from the High Court to allow a second caveat to be lodged: Land Transfer Act, s 148(1).4 Under s 145A Land Transfer Act.5 Paul v Paul [2013] NZHC 3231.granted on grounds relating to Mrs Paul's current health,6 no hearing is likely until around mid 2015.[5] Roberta appeals against each decision. On 3 February 2014, White J directed that the two appeals be heard together.Legal principles[6] The Land Transfer Act 1952 provides three mechanisms by which the validity of a caveat may be tested before any substantive inquiry is undertaken into the merits of the underlying claim.7 Such applications are determined on the basis of affidavit evidence without cross-examination. The Court's function is to decide whether a reasonably arguable case to support a relevant proprietary interest has been established. The summary nature of the procedure "is wholly unsuitable for the determination of disputed questions of fact".8 That said, in assessing the strength of a claim, a court need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements made by the same deponent, or is inherently improbable.9[7] Roberta bore the onus of persuading the High Court that she had a reasonably arguable case to support each of her claims for a proprietary interest in the land.10That burden is cast onto a caveator because it is the party seeking to "clog" or fetteran existing property right.11[8] In broad terms, both of the applications were determined against Roberta on the grounds that the factual narrative on which she based her claims was inherently6 Counsel indicated at the hearing that they proposed to cooperate to advance an application for priority on what seem to us (from what we were told) to be justifiable grounds.7 Land Transfer Act, ss 143, 145 and 145A.8 Sims v Lowe [1988] 1 NZLR 656 (CA) at 659–660 per Somers and Gallen JJ, with whom Bisson J agreed.9 Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341. See also, in relation to the analogous summary judgment procedure, Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA) at 86 and Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].10 Sims v Lowe, above n 8, at 660.11 Raiser Developments Ltd v Trefoil Properties Ltd [2008] NZCA 73, (2008) 9 NZCPR 161 at [34]. See also Paugra Holdings Ltd (in liq) v Harvestfield Holdings Ltd [2014] NZCA 164, (2014) 15 NZCPR 227 at [34].improbable.12 The issue, on each of the appeals, is whether the Associate Judge erred in dismissing the applications on that basis.The basis for the first caveat[9] Mrs Paul is the registered proprietor of the property at 27 Old Quarry Road, Rotorua. Roberta occupied the property between 2001 and 2005. Roberta'sdaughter currently lives there.[10] Roberta alleges that she and her mother entered into an oral agreement for sale and purchase of the property at some time in May or June 2005. Under that agreement, Roberta says that she was:(a) to purchase the property for a sum of $95,000;(b) to pay a deposit of $30,000, in instalments as and when she was able;(c) to pay the balance of the purchase price up to three years after Mrs Paul's death;(d) to take title to the property on her mother's death; and(e) to pay $200 per week towards the mortgage. The mortgage was to be repaid in full by Mrs Paul's personal representatives on her death.The proceeds of sale were to be divided equally among Mrs Paul's five children,including Roberta.[11] Mrs Paul denies that an agreement on those terms was entered into. While she accepts that a different arrangement was reached (whereby Roberta might havean "option" to purchase the property after her death), she deposes that arrangement was entered into following a meeting at the office of her solicitor, Mr Peter Lewis, in November 2005. That was, of course, some five or six months after the time at which Roberta contends an agreement was made.12 For more detail, see [18] and [19] below.[12] After reviewing Roberta's affidavit, Mr Lewis deposed that Mrs Paul had not instructed him that she and Roberta had agreed that Roberta could buy the OldQuarry Road property. He stated that, if he had been so instructed, he "would have advised [Mrs Paul] to have a formal document prepared recording that arrangement".[13] Mr Lewis gave evidence of what he believed occurred at the November 2005 meeting. He said that he had been instructed by Mrs Paul to provide an option to Roberta to purchase the property for $106,000 less any sums which Roberta waspaying to Mrs Paul by way of "deposit". This option was to be recorded in MrsPaul's will and was to be exercisable upon her death.[14] Mr Lewis did prepare a will to reflect those instructions. By that time, Roberta had paid a sum of $12,000 on account of the ultimate purchase price. The payment of that amount was specifically mentioned in the will.[15] Mr Lewis deposed that he advised Mrs Paul that if she changed her mind about leaving an option to purchase for Roberta upon her death, the money paid as a deposit would need to be refunded. Further, he said that he made it clear to Mrs Paul that the option only arose on her death. That meant that if Roberta elected not to exercise the option, any "deposit" payments would be refundable at that time. The way in which that evidence is expressed is important. Mr Lewis does not suggest either that he gave the same information to Roberta or that she was present when he gave that advice to Mrs Paul. The possibility that Roberta left that meeting believing that an earlier agreement enabling her to buy the property on the terms she advances remained in existence is not inherently inconsistent with Mr Lewis' evidence.[16] In November 2012, Mrs Paul approached Mr Lewis to update her will. At that stage, Mrs Paul advised Mr Lewis that Roberta had paid the sum of $23,500 on account of the purchase price. While different from Roberta's evidence that, at thetime of the breakdown in family relations in February 2013, she had paid a sum of $27,500, a payment of either sum was not insubstantial.[17] Mrs Paul's position is that the arrangement whereby Roberta was to have an option to acquire her property was based on the following terms:(a) The purchase price was $106,000.(b) An unspecified amount was to be paid by way of deposit in lump sums, with whatever was paid being deducted from the purchase price.(c) Any moneys paid to Roberta would be repaid if she did not exercise the option to purchase.(d) The balance of the purchase price was to be paid up to three yearsafter Mrs Paul's death.(e) Roberta would continue to pay a sum of $200 per week, as rent.(f) Roberta was to keep the property in good repair.Mrs Paul's evidence also suggests that she expected, as an integral part of the arrangement, Roberta to look after her as she aged.The Associate Judge's decision[18] While the Associate Judge accepted that "Roberta believes she had an arrangement to purchase the property", he expressed "concerns about the soundness of her reasons for that belief".13 Placing primary reliance on what occurred at the meeting at which Mr Lewis attended in November 2005, the Judge pointed toconflicts between Roberta's account of what occurred at that meeting and that provided by Mr Lewis. He observed that there was "no reply evidence from other persons present which challenges [Mrs Paul's] account".14[19] In acknowledging the force of a submission from counsel for Mrs Paul that"the apparent reason for not transferring the property to Roberta [during Mrs Paul's]lifetime [did] not make sense,15 Judge Christiansen observed:13 Paul v Paul, above n 2, at [28].14 At [34].15 At [35](a) There appeared to be no consideration for the property being sold to Roberta at a figure which was significantly under value;16(b) No change in ownership rights appeared on rates, insurance and mortgage records;17 and(c) Roberta's occupation of the property for some time was not inconsistent with her mother's evidence that any agreement was"limited to an option to purchase on her death".18[20] The Associate Judge concluded his discussion about the alleged oral agreement to purchase by saying:[40] More acceptable is [Mrs Paul's] account that what was agreed upon was an option to purchase that was exercisable on her death, as was confirmed in writing by her Will. Roberta's occupation was conditionalupon rent being paid and her being required to keep and maintain the property in a clean and tidy condition and to attend to incidental repairs as required. Although Roberta spent significant sums on guttering and on repairs to the house gas heating system it appears unchallenged those were required to remedy damage caused by the occupants.Analysis[21] We do not propose to undertake a full review of the relevant evidence. Thequestion for us is whether we are satisfied that the Judge erred in rejecting Roberta'sversion of events as insufficiently plausible.19 As we have concluded that the caveat ought to have been sustained, it is better that we keep our comments on the merits to a minimum, pending trial in the District Court.[22] Although the terms on which Roberta and her mother say an arrangement was entered into differ, there are some areas of similarity. In particular:(a) A purchase price had been agreed.16 At [36].17 At [37].18 At [38].19 Relevant appellate principles are set out in Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.(b) A deposit of some type was to be paid in instalments, as and when Roberta was able.(c) The balance of the purchase price was to be paid up to three yearsafter Mrs Paul's death.(d) A sum of $200 per week was to be paid by Roberta to her mother.[23] In the absence of anything to suggest that Roberta left Mr Lewis' officeunderstanding that her mother had the right to renege on the arrangement,20 weconsider that Roberta's evidence is a sufficient foundation to establish a reasonably arguable case that, as at 15 November 2005 (at the latest), Roberta and her mother had entered into a binding legal arrangement whereby Roberta was able to acquireher mother's property upon her death. The partial performance required to give effect to the alleged oral argument can be found in the payment of a not insubstantial deposit, one (on the evidence) of either $27,500 or $23,500.21[24] In our view, the Associate Judge erred in his approach to determining whether there was a reasonably arguable case. The Judge's description of Mrs Paul's account of what was agreed as "more acceptable" suggests that he weighed up competingevidence in a manner more akin to a trial determination than one reflecting a summary decision whether to sustain a caveat.22 We are satisfied that the evidence led to support an arrangement of the type Roberta asserts was not so inherentlyimplausible as to justify summary dismissal of Roberta's application that the caveatnot lapse.[25] In those circumstances, it is unnecessary for us to consider the alternative bases on which the first caveat was said to be sustainable.20 See para [15] above.21 Property Law Act 2007, s 26; see also TA Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 (CA) and Fleming v Beevers [1994] 1 NZLR 385 (CA).22 Paul v Paul [2013] NZHC 2076 at [40], set out above at [20] above.The second caveat[26] During the course of the hearing, we expressed a view that the Judge was probably right to find that the evidence to support the interest claimed in the second caveat lacked a plausible narrative.[27] Mr Braun, for Roberta, advised us that the second caveat had been lodged toprotect Roberta's interests while her appeal against Judge Christiansen's decision onthe first application was determined. Having taken further instructions, Mr Braun indicated that he did not pursue the separate appeal in respect of the second caveat. That will be dismissed.[28] We have concerns about Roberta's actions in lodging a second caveat. It has all the hallmarks of an attempt to put inappropriate pressure on her mother, in the context of a contested property claim. Roberta's position would have been maintained adequately through her appeal against Judge Christiansen's firstjudgment.Costs[29] In the High Court, Associate Judge Christiansen awarded costs on a 2B basis plus disbursements in favour of Mrs Paul on each application. On appeal, Roberta has succeeded in relation to the first judgment but not in relation to the second.[30] In those circumstances, the costs order on the first judgment given by Judge Christiansen shall be reversed. The effect of that is that neither party is able to recover costs against the other. That being so, there will be no order as to costs on either application in the High Court.[31] In this Court, each party has succeeded in relation to one of the two appeals. For that reason, we make no order as to costs in this Court on either appeal.Result[32] Roberta's appeal against the High Court's judgment of 16 August 2013 isallowed. The order dismissing the application is set aside. In substitution, we makean order that caveat 9324433.1 lodged by Roberta against Mrs Paul's property at27 Old Quarry Road, Rotorua, more particularly described in Certificate of Title SA6D/347, not lapse.[33] Roberta's appeal against the High Court's judgment of 4 December 2013 isformally dismissed.[34] The orders for costs made in the High Court are set aside. In substitution, no order as to costs is made on either application to that Court.[35] In this Court, costs shall lie where they fall.Solicitors:Whitfield Braun, Hamilton for AppellantDavys Burton, Rotorua for Respondent