REID v CASTLETON-REID [2019] NZCA 372

REID v CASTLETON-REID [2019] NZCA 372 [20 August 2019]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA266/2018[2019] NZCA 372BETWEEN ROSS RONAYNE REIDAppellantAND BARRY ROSS LAURENCE CASTLETON-REIDRespondentHearing: 2 July 2019Court: Courtney, Venning and Dunningham JJCounsel: S L Abdale for AppellantM J Matthew for RespondentJudgment: 20 August 2019 at 10 amReissued: 24 September 2019Effective dateof Judgment: 20 August 2019JUDGMENT OF THE COURTA The appeal is allowed and the judgment and costs order inMr Castleton-Reid's favour is set aside.B The case is remitted to the High Court for a hearing to determinethe parties' respective interests in the balance of the money fromthe Trading Account and for determination of Mr Castleton-Reid'saffirmative defences.C The respondent is to pay costs for a standard appeal on a Band A basiswith usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Venning J)[1] The appellant, Ross Ronayne Reid, and the respondent, Barry Ross LaurenceCastleton-Reid, are father and son.[2] In 2009 Mr Reid deposited $1,700,000 into a share trading account inMr Castleton-Reid's name. Mr Reid then traded the account until May 2010 whenMr Castleton-Reid closed it and terminated his access to it.[3] Mr Reid brought proceedings in the High Court seeking to recover the moneyfrom the share trading account.[4] In a judgment delivered on 24 April 2018 Gordon J dismissed his claim.1The Judge held that Mr Reid had gifted the $1,700,000 to Mr Castleton-Reid.Background[5] Mr Reid is now 97 years old. He has had mixed success in his financialendeavours over the course of his life. He and his brother Emslie establisheda successful building business, Reidbuilt Homes Ltd, which they sold to Fletchers in1984 for $1 million.[6] Mr Reid's business ventures since then have not been as successful.More recently he has been bankrupted twice, in August 1999 and May 2003. He saysthat he now has no assets. His sole income is his superannuation and he has twosubstantial debts: the balance of a Customs fine of approximately $25,000 and a creditcard debt.[7] Following the sale of the building business Mr Reid and his brother establisheda family trust, the Hallmark Trust in 1986. The beneficiaries were the brothers' wives,1 Reid v Castleton-Reid [2018] NZHC 782.children and grandchildren. Mr Reid was neither a trustee nor a beneficiary ofthe Hallmark Trust.[8] In June 2007 a capital distribution of $1,806,039 was made to Mr Reid's wife,Esme, from the Trust.2 The money ultimately found its way into a succession of jointaccounts in Mr and Mrs Reid's names. Mr and Mrs Reid spent the money jointly andin ways for the benefit of each of them. At the time of Mrs Reid's death on22 November 2018, there was $1,750,000 on term deposit with Kiwibank in their jointnames. On Mrs Reid's death, the money in the account became Mr Reid's by right ofsurvivorship. None of it formed part of Mrs Reid's estate.3[9] At the time of Mrs Reid's death, she and Mr Reid lived in a property at 47Verbena Road, Birkdale, known as "the Castle". The Castle was held in Mrs Reid'sname.[10] Mr Castleton-Reid was the principal beneficiary under his mother's,Mrs Reid's, will and codicil. Mr Reid was named as executor of her will, but was nota beneficiary. Mr Castleton-Reid's sister, Dee-Ann Castleton-Reid, received furniture,books, jewellery and other chattels, as well as the right to live in the Castle withMr Castleton-Reid. In the event Dee-Ann did not wish to live in the Castle, it was tobe conveyed to Mr Castleton-Reid.[11] Mr Castleton-Reid was also left another property at 21/55 Verbena Road andtwo vehicles, (one a classic car), a bequest of $50,000, and the residue of Mrs Reid'sestate. The residue comprised shares in Air New Zealand (Air NZ) and AucklandAirport.[12] Dee-Ann did not wish to live in the Castle as she had her own home. After MrsReid's death, Mr Reid remained in the property and asked Mr Castleton-Reid and hiswife Lisa to come and live with him in it.2 At [59].3 At [66].[13] While they were living together in the Castle, Mr Reid and his son hada conversation in March 2009 which gave rise to these proceedings. We return to theirdiffering accounts of the conversation shortly.[14] Following the conversation, on 12 March 2009, Mr Castleton-Reid went toCraigs Investment Partners Limited (Craigs) in Takapuna to open a share tradingaccount with them (the Trading Account). He opened the Trading Account in his namebut signed the necessary documentation to give his father management rights.Those rights enabled Mr Reid to carry out share trading through the Trading Account.Mr Castleton-Reid and his father went back to Craigs on 17 March 2009 to signanother document which made it clear that Mr Castleton-Reid would not be relying onCraigs for advice. This was primarily because of Mr Reid's proposed investmentstrategy.[15] On 2 April 2009, Mr Reid transferred $1,700,000 into the Trading Account inMr Castleton-Reid's name. The source of the funds was the term deposit of$1,750,000 with Kiwibank which had been held in the joint names of Mr Reid andMrs Reid at the date of her death. As noted, it was Mr Reid's money.[16] Mr Reid then subsequently proceeded to buy and sell shares throughthe Trading Account. Mr Reid's evidence was that profits of around $1,135,000 weredirected back into the Trading Account. Mr Castleton-Reid accepts a profit was madebut disputes the amount claimed by his father.[17] Probate of Mrs Reid's will was not granted to Mr Reid until 30 June 2009.[18] Shortly after, on 8 July 2009, Mr Reid sold the Air NZ and Auckland Airportshares held in Mrs Reid's name, and transferred the proceeds of sale of $477,267.34into the Trading Account.[19] On 25 September 2009, Mr Reid transferred $800,000 out of the TradingAccount into Mr Castleton-Reid's ASB cheque account. The purpose as agreed withMr Castleton-Reid was to enable Mr Castleton-Reid to make a payment of that samesum to his sister, Dee-Ann, who was dissatisfied with what she had received underthe terms of her mother's will. Mr Castleton-Reid then made that payment toDee-Ann.[20] While he was operating the Trading Account, Mr Reid also withdrew a numberof amounts totalling approximately $578,667 for his own use. He used the money topurchase two apartments in an apartment block in Townsville, Queensland. Mr Reidalso transferred $333,914 to Mr Castleton-Reid's personal account to enable him tocomplete the purchase of an apartment in the 'Eclipse' development in Vincent Street,Auckland. Mr Castleton-Reid had committed to that purchase prior to his mother'sdeath.[21] On or about 5 May 2010, Mr Castleton-Reid directed Craigs to sellapproximately half the shares. He transferred the proceeds of $781,224 intoan account with his solicitors. On 10 May, the balance of the shares were sold andthe proceeds, namely $775,832, were also put into his solicitor's account. Mr Reid'saccess to the Trading Account ceased at that time.[22] Apparently, the catalyst for Mr Castleton-Reid closing the account andterminating Mr Reid's access was his discovery, in late April 2010, that a mortgagehad been registered against the title to the Castle to support a bond issued in favour ofMr Reid. Mr and Mrs Reid had themselves also previously agreed to buy twoapartments in the 'Eclipse' development. After Ms Reid's death, Mr Reid variedthe agreements and arranged for a bond to cover the deposits from New Zealand HomeBonds Ltd (Home Bonds). Home Bonds registered a mortgage against the title tothe Castle before it was transferred to Mr Castleton-Reid. Mr Reid then defaulted onthe purchase of the apartments. The vendor cancelled one of the agreements andinitiated proceedings against Mr Reid in relation to the other.Ultimately, Mr Castleton-Reid resolved the issue by purchasing the apartment for$358,338.40 which included penalty interest of $39,843.80.[23] Mr Castleton-Reid took the view his father had been dealing with the propertyfrom his mother's estate (which Mr Castleton-Reid was entitled to as beneficiary), asif it was own. He had taken dividends earned in the shareholding account and hadused the Castle as security for his personal debts when he was only registered onthe title as an executor. For those reasons he says he lost trust in his father and closedthe Trading Account.Proceedings[24] Mr Reid subsequently issued proceedings alleging breach of fiduciary duty,and breach of trust. He also pursued a claim for restitution. Mr Castleton-Reid'sresponse was that Mr Reid had gifted the $1,700,000 to him.The March 2009 discussion[25] We record the parties' respective positions as to the agreement which led toMr Reid depositing $1,700,000 in Mr Castleton-Reid's name from the summary inthe judgment.[26] Mr Reid said when they were living together in the Castle, he made a proposalto his son in the following terms. Mr Reid would purchase shares with most of hiscash assets and put those in Mr Castleton-Reid's name as nominal owner to facilitatethe signing of share transfers during Mr Reid's long absences in Australia. The shares,share proceeds and any profits were to be held by Mr Castleton-Reid on behalf ofMr Reid.[27] In recognition of this service, Mr Reid promised Mr Castleton-Reid upon hisdeath that, as the shares and proceeds of the Trading Account would already be inMr Castleton-Reid's name, they would become his. Mr Reid says his son agreed toparticipate in the arrangement and undertook to act as his nominee.[28] Mr Castleton-Reid, on the other hand, described the discussion with his fatherin March 2009 differently. He says his father called him into his bedroom upstairs andtold him that he had an "inheritance". Mr Reid indicated it was a large amount ofmoney and that he had a proposal for his son. Mr Reid said he would like to putMr Castleton-Reid's inheritance into shares and he would manage it for his son.Mr Reid intimated the purpose of the fund would be to obtain medium to longer termdividends. Mr Reid said he would only sell to prevent market losses.[29] Mr Castleton-Reid said that Mr Reid said to him, "All I ask is that you let meborrow some money to buy an apartment in Australia". Mr Reid explained that hewanted to buy two apartments, one to live in, and one to rent out. He said he couldget a mortgage on the second one and the rent would cover it. Mr Reid also asked hisson if he could use some of the money for his personal bills. Mr Castleton-Reid said,from memory, the figure stated was $2,000–$3,000 and he agreed to this.Mr Castleton-Reid said that at the time he had no idea what his mother's will said orwhat his father's own personal financial situation was.[30] Mr Castleton-Reid says that when he spoke to his wife immediately afterthe conversation she queried his decision. He told her he thought his father was boredand share trading would give him something to become involved in. As neither he norhis wife had any need for the money at the time, they both just accepted the situation.Credibility findings[31] Gordon J preferred the evidence of Mr Castleton-Reid to that of Mr Reid.Mr Reid was not able to satisfy her he had made an agreement with Mr Castleton-Reidthat he would purchase shares in Mr Castleton-Reid's name as nominee, nor was therean agreement that Mr Castleton-Reid would hold the shares and profits from Mr Reid'sshare trading as Mr Reid's nominee.[32] The Judge held that Mr Reid had gifted the $1,700,000 to Mr Castleton-Reid.That finding effectively disposed of each of Mr Reid's causes of action.Issues[33] The principal issue on the appeal is whether the Judge was wrong in law andfact in determining that Mr Reid had gifted the $1,700,000 to Mr Castleton-Reid.[34] The focus of the case before Gordon J was on the contest between Mr Reid'sargument that he and Mr Castleton-Reid had made an agreement wherebyMr Castleton-Reid would hold the money in the Craigs' account as "nominee" orwhether, as Mr Castleton-Reid claimed, Mr Reid had gifted the $1,700,000 to him.[35] We accept the advantage Gordon J had in seeing and assessing the witnesses.The Judge was entitled to make the adverse credibility findings she made againstMr Reid. The real issue, however, is not whether Mr Reid could establish the partieshad made some sort of nominee agreement, but rather whether Mr Castleton-Reid'sevidence, in the context of the surrounding background facts, disclosed a sufficientexpression of intention by Mr Reid to gift $1,700,000 of his money to his son atthe time he paid the money into the Trading Account in his name. Absent a gift orapplication of the presumption of advancement Mr Castleton-Reid would have heldthe money on resulting trust for Mr Reid.Resulting trust[36] The source of the funds, the $1,700,000 that was paid into the Trading Accountin Mr Castleton-Reid's name was the joint account held by Mr Reid and his wife withKiwibank. As Gordon J held, on Mrs Reid's death her interest in the money passed toMr Reid by survivorship.[37] The starting point then is that a resulting trust would arise in Mr Reid's favourin relation to the money he transferred into the Trading Account in MrCastleton-Reid's name. In the absence of a contrary intention, equity presumes that aparty who has paid for property intends to retain beneficial ownership in that property.As Eyre CB said in Dyer v Dyer:4The clear result of all the cases, without a single exception, is, that the trust ofa legal estate whether taken in the names of the purchasers and othersjointly, or in the names of others without that of the purchaser; whether in onename or several; whether jointly or successive, results to the man whoadvances the purchase-money. This is a general proposition supported by allthe cases, and there is nothing to contradict it It is the established doctrineof a Court of equity, that this resulting trust may be rebutted by circumstancesin evidence.(Emphasis original.)[38] The presumption of a resulting trust can be displaced by evidence of a contraryintention, such as evidence of a gift, or by the counter presumption of advancement.4 Dyer v Dyer (1788) 2 Cox Eq Cas 92, 30 ER 4 (ExCh) at 43.[39] In determining whether the resulting trust is defeated by a gift,the circumstances surrounding the transaction will be important. In Fowkes v PascoeMellish LJ discussed circumstances which would require the Court to considerthe surrounding facts:5Now, the presumption must, beyond all question, bear very different weightin different cases. In some cases it would be very strong indeed. If, forinstance, a man invested a sum of stock in the name of himself and hissolicitor, the inference would be very strong indeed that it was intended solelyfor the purpose of a trust, and the Court would require very strong evidenceon the part of the solicitor to prove that it was intended as a gift; and certainlyhis own evidence would not be sufficient. On the other hand, a man may makean investment of stock in the name of himself and some other person, althoughnot a child or wife, yet in such a position to him as to make it extremelyprobable that the investment was intended as a gift. In such a case, althoughthe rule of law, if there was no evidence at all, would compel the Court to saythat the presumption of trust must prevail, even if the Court might not believethe fact was in accordance with the presumption, yet, if there is evidence torebut this presumption, then, in my opinion the Court must go into the actualfacts.[40] An example of the application of the principles in the New Zealand context isHall v Guardian, Trust & Executors Co of New Zealand Ltd.6 Mr Hall purchasedproperties in his son's name. The son lived in one (rent free). The father collectedthe rent in the others and accounted for the tax on the rental income. The Court ofAppeal held that, at least until the son later signed a document which acknowledgedhe held the properties on trust for his father, the presumption of advancement applied,and the father had made a gift of the properties to the son.[41] A further example dealing specifically with investment accounts is InRe Muller.7 A testatrix had deposited money with a company for investment, someeight years prior to her death. She opened two accounts in the names of a niece andnephew. They were both children living with their parents. They had no knowledgeof the deposits. The testatrix used the interest earned on the deposits for her ownpurposes. There was no evidence of any intention to benefit the children.8Northcroft J held that there was a presumption of a resulting trust in favour of the5 Fowkes v Pascoe (1875) LR 10 Ch App 343 (Ch) at 352–353.6 Hall v Guardian, Trust & Executors Co of New Zealand Ltd [1938] NZLR 922 (CA) at 948 and953.7 In Re Muller [1953] NZLR 879 (SC).8 At 882.deceased, and that there was no evidence to rebut that presumption.9 The companyheld the money for the personal representatives of the deceased. In the course of thedecision Northcroft J recognised that even a transfer to the transferor's own child maynot avoid a resulting trust if other factors negatived an intention to benefit the child.10Was the $1,700,000 a gift?[42] Ms Matthew submitted that Mr Castleton-Reid did not need to rely onthe presumption of advancement as there was no nominee agreement and the evidenceof gift in this case was overwhelming.[43] A gift inter vivos is a gratuitous transfer of property of any kind to another bya living donor, not making it in contemplation of, and conditionally upon, the donor'sdeath. It is a voluntary transfer from the owner to another made with the intention thatthe subject matter is not to revert to the donor.11[44] The three essential elements of a valid inter vivos gift of chattels (such asmoney) are:12(a) an expression of intention by the donor to make the gift;(b) the assent of the donee to the gift; and(c) actual or constructive delivery of the chattel to the donee.[45] The last requirement, the actual constructive delivery of the chattel, (the moneyin this case), is not in issue given Mr Reid transferred the $1,700,000 to an account inMr Castleton-Reid's name.[46] Ms Abdale questioned whether Mr Castleton-Reid had assented to the gift.She referred to a family meeting on 12 December 2010 which was held in an attempt9 At 883.10 At 882.11 Tim Blennerhassett Laws of New Zealand Gifts (online ed) at [1].12 Williams v Williams [1956] NZLR 970 (SC) at 972; N v N [Relationship Property: loan] [2010]NZFLR 161 (HC) at [44]; and Stockco Ltd v Gibson [2012] NZCA 330, (2012) NZCLC 98-010 at[121].to resolve the dispute that had arisen between father and son and also to addressDee-Ann's concerns about the lack of provision for her in her mother's will.[47] The record of the meeting is entirely consistent with it being an attempt toresolve the issues then dividing the family. The concessions made in the proposals toresolve the family issues were not an admission of gifting by Mr Reid, and nor werethey admissions by Mr Castleton-Reid that the money was not a gift. The familymeeting in December 2010 is of limited assistance in determining the intent ofthe parties at the time of the transaction said to confirm the gift.[48] Ms Abdale also submitted that Mr Castleton-Reid's grant of authority toMr Reid to operate the share account and to carry out trades was inconsistent with his"assent" to receiving the money as a gift. We agree that the authority is a relevantconsideration when determining the parties' intention in relation to the transaction butdo not see it as necessarily negating Mr Castleton-Reid's assent to receipt of the gift,if the $1,700,000 was otherwise intended by Mr Reid to be a gift.[49] This aspect of the appeal turns on whether there was a sufficient expression ofintention by Mr Reid to make the deposit of $1,700,000 into the Trading Account inMr Castleton-Reid's name a gift. It is necessary to examine the evidence relied on bythe Judge to find a gift. As we accept the Judge was entitled to prefer the evidence ofMr Castleton-Reid to that of Mr Reid, we focus on Mr Castleton-Reid's evidence todetermine whether, in the absence of Mr Reid's evidence about the meeting,Mr Castleton-Reid's evidence and the known surrounding circumstances supportthe conclusion that Mr Reid intended to gift the $1,700,000 to his son.[50] The rules of evidence relating to declarations against interest apply.13 Acts ordeclarations by the donor subsequent to the transfer unless so connected so as to bereasonably contemporaneous, are not admissible in favour of the donor to rebutthe presumption.1413 Warren v Gurney [1944] 2 All ER 472 (CA); and Hall v Guardian, Trust & Executors Co of NewZealand Ltd, above n 6, at 948.14 N v N [Relationship Property: loan], above n 12, at [47].[51] Mr Castleton-Reid's evidence about the March discussion in which he says hisfather agreed to gift him an indeterminate amount of money (which later turned out tobe $1,700,000), was as follows. First, in an affidavit sworn in support of an applicationfor security for costs dated 19 February 2016 he said:3. My mother, Esme Castleton-Reid ("my mother"), passed away on22 November 2008, leaving behind her husband, my father,Ross Ronayne Reid ("my father"), and his children,Dee-Ann Castleton-Reid ("Dee-Ann") and I.4. Shortly after her death my father turned up at my home and asked ifmy wife and I would move up to "the Castle" with him (This wasa "castle" at 47 Verbena [Road], Birkdale, Auckland which he hadlived in with my mother until her death). He indicated he was lonely.Although we weren't keen on moving, because my wife, Lisa waspregnant with our second child, he persuaded us to move in with him.In early 2009 we moved into "the Castle" with my father.5. Not long after we have moved in, my father called me into hisbedroom upstairs. He told me I had an "inheritance", he indicated itwas a large amount of money, and that he had a proposal for me.He said he'd like me to put my inheritance into shares and he wouldmanage it for me. He intimated that the purpose of my fund would beto obtain medium to longer term dividends. He did mention that hewould only sell to prevent market loss. He said "all I ask is that youlet me borrow some money to buy an apartment in Australia".He added he wanted to buy two apartments, one to live in and one torent out. He said he could get a mortgage on the second one and thatthe rent would cover it. He also asked me if he could use some ofthe funds for his personal bills – from memory, the figure stated was$2000-$3000. I agreed to this. I had no idea at this point in time whatmy mother's Will said, or what his own personal financial situationwas.6. I went down to Lisa who was in the bedroom downstairs. I told herabout my inheritance, and what my father had proposed. Lisa askedwhy we would put our money into shares. I told her that "I think Dadis bored and it would give him something to get involved in."Since she, nor I had any need for money at the time, we both justaccepted the situation.7. Later on that day I approached Lisa again and told her aboutthe apartments in Australia he would be purchasing. She agreed it wasa good idea and since, in my father's words, 'it would all come backto us anyway' there was no great drama.[52] Mr Reid's evidence in his brief of evidence as it related to the March meetingat the Castle was:39. In and around the end of March 2009, before probate was granted, andbefore my term investment with Kiwibank matured, I proposedthe following agreement with Barry, the terms of which were asfollows:(i) I would purchase shares with most of my cash assets and putthese shares in Barry's name, as nominal owner.(ii) These shares and share proceeds and profits were to be heldby Barry on my behalf.(iii) A share trading account with Craigs Investment Partnerswould be opened through which I would trade the shares andhave access to the share trading account.(iv) In recognition for this service, I promised Barry that upon mydeath, as the shares and proceeds of the share trading accountwere already in his name, they would become his.40. The motivation for this agreement was my worry about gift duty andthe possible re-introduction of death duties, and not wanting to burdenthe beneficiaries of my will with taxes. Barry agreed withthe proposed agreement and undertook to act for me as my nominee.[53] Mr Castleton-Reid responded in his brief of evidence dated 26 October 2017:42. 39 – My father did not propose any sort of "agreement" with me asalleged here. He told me that the money was mine, and that he wouldmanage the shareholding account for me. I note that here he hasforgotten to mention his recent change of story – that he allegedlyoriginally told me that half would be mine.43. 40 – My father's claim to be worried about tax makes no sense.He claims that he gave $800000 to Dee Ann and $376,000 to me, andgift duty would be payable on these amounts if they were intended asa gift.[54] In the course of his cross-examination by Ms Abdale, Mr Castleton-Reidconfirmed that the specific sum was not discussed at the March meeting and that hewas unaware of the amount he said had been gifted to him.[55] Taking Mr Castleton-Reid's evidence on its own and putting to one sideMr Reid's evidence about a nominee agreement, the evidence concerning Mr Reid'sintention to gift the $1,700,000 is, rather than overwhelming as Mr Matthewsubmitted, ambiguous at best. A number of factors tell against the $1,700,000 being agift.[56] There is no mention of it being a gift. Mr Castleton-Reid does not suggest hisfather said he was going to gift the $1,700,000 to him. Rather, at its highest, he refersto an inheritance. An inheritance is something that Mr Castleton-Reid could expect toreceive in due course, on Mr Reid's death. An inheritance is not an inter vivos gift.[57] Mr Castleton-Reid's evidence of the conversation and the wording he attributesto Mr Reid to establish the gift ("an inheritance", "my inheritance") is more consistentwith Mr Reid speaking of property (the $1,700,000), beneficially owned by Mr Reid,which ultimately would become Mr Castleton-Reid's inheritance, that is on the deathof Mr Reid, rather than a present intention to gift the money.[58] Another explanation for the reference to inheritance might be that Mr Reidbelieved at least half (or more) of the funds from the joint account wereMr Castleton-Reid's inheritance as belonging to Mrs Reid's estate. It seems that forsome time Mr Reid believed that the funds in the joint Kiwibank account were at leastpartly his wife's and that he held one half for her estate. We acknowledge thatMr Reid's evidence about this was somewhat contradictory during the hearing and wasalso inconsistent with his subsequent "acknowledgement" it was all estate money. Butthe fact remains, it was not estate money, it was Mr Reid's own money.[59] There is a related point. When a donor intends to make a gift, they intend topart with property that he or she believes belongs to them. If Mr Reid believedthe money did belong to Mrs Reid's estate, and not to him, then he could not haveintended to gift it to Mr Castleton-Reid.[60] The contemporaneous documentation does not support a finding thatthe $1,700,000 was a gift. The opening of the Trading Account in Mr Castleton-Reid'sname is not sufficient. It says nothing about the parties' intention. The unrestrictedauthority given to Mr Reid to trade shares, to withdraw moneys from the TradingAccount and also Mr Lock's evidence of his dealings with Mr Reid regardingthe Trading Account's establishment are consistent with Mr Reid retaining control ofthe funds. Mr Reid controlled all the investments through the Trading Account.He instructed Craigs to use the $1,700,000 to purchase Australian Macquarie shares.That was against Mr Lock's advice. Mr Castleton-Reid permitted his father solecontrol over the investments and withdrawals from the Trading Account. He neverinvolved himself with decisions regarding the investments. Mr Castleton-Reid's onlyactions in relation to the Trading Account were to open it, and then, in May 2010, toclose it.[61] Mr Castleton-Reid's suggestion that he agreed to allow his father to tradethrough the Trading Account because his father might otherwise be bored is difficultto understand. His acknowledgement he was not relying on Craigs' advice and waspermitting his father to solely control the share trading is also at odds with his ownnote on the account authorisation form that he was a conservative investor.A conservative investor dealing with his own money would be unlikely to haveallowed Mr Reid to trade against the broker's advice, particularly asMr Castleton-Reid would have been aware of Mr Reid's recent bankruptcies.[62] A related point is that Mr Castleton-Reid did not know what the amount ofthe gift was. Mr Castleton-Reid never asked how much Mr Reid was giving him.The amount was not discussed. Again, surely if Mr Castleton-Reid was receiving agift as he says, he would have been interested to know the amount.[63] Next, no satisfactory explanation has been advanced why Mr Reid would gifthis son all his assets. The $1,700,000 represented the only money available toMr Reid. He was not a beneficiary under his wife's will. He had signedan acknowledgement on 1 April 2009 that he would not pursue a claim against herestate. Why would he gift his son $1,700,000 and at the same time ask to borrowmoney from his son to buy two apartments and, more curiously, to pay his outstandingaccounts? It simply does not make any sense.[64] Mr Castleton-Reid's personal circumstances were such that he did not needthe money. The property at 21/55 Verbena Road had a rating valuation of $1,040,000.The Castle had a valuation of $1,775,000. Mr Castleton-Reid also received a classiccar under the will and the shares in Air NZ and Auckland Airport valued at over$477,000, quite apart from his own assets. Mr Castleton-Reid also owned had his ownhome and a rental property his mother had given him before she died.[65] Next, Mr Castleton-Reid received copies of the statements for the TradingAccount which disclosed that Mr Reid had withdrawn approximately $578,667 fromthe account between April 2009 until May 2010. The moneys withdrawn were ofvarious different amounts:Particulars Date Currency Amount12/05/09 NZD $1,000.0019/05/09 AUSD $20,000.0010/06/09 NZD $6,000.0010/06/09 AUSD $10,000.0017/07/09 AUSD $110,714.3621/08/09 NZD $1,000.0024/08/09 AUSD $1,400.0002/09/09 AUSD $210,909.2325/09/09 AUSD $20,000.0029/09/09 NZD $1,000.0005/10/09 AUSD $20,000.0027/10/09 NZD $10,000.0002/11/09 AUSD $2,958.8223/11/09 AUSD $2,989.4018/12/90 NZD $20,387.2602/03/10 NZD $3,194.1105/03/10 NZD $26,722.6419/03/10 AUSD $1,599.9426/04/10 AUSD $6,120.00TOTALTOTALAUSDNZD$406,691.75$69,304.0115TOTAL NZD $578,667[66] Mr Castleton-Reid apparently took no issue with the substantial deductionsfrom the account that Mr Reid had applied to his own purposes. His answer tothe Judge's question about this issue, that he thought the withdrawals were consistentwith his father's proposal he would buy two apartments and pay normal expenses isunconvincing. The accounts disclose that Mr Reid's withdrawals were irregular inamount but regular over time.[67] When challenged during cross-examination why if, as he said the funds werehis, he would expect Mr Reid to seek his permission to withdraw large amounts inexcess of $100,000 he said:A. When we originally came up with the idea of setting up the share tradingaccount, that was the understanding that I had no problem with taking15 We note that this figure was accepted by both counsel, so we have not amended it, but by ourcalculation the total contains an extra NZD1,000.some money out to get an apartment and his normal day-to-day expenses,things like that. So that was basically derived from that.[68] As noted, Mr Reid withdrew funds from the Trading Account on severaloccasions without Mr Castleton-Reid taking any objection.[69] Against that, there are some factors that support the finding the $1,700,000 wasgifted. A substantial sum was withdrawn from the Trading Account to enableMr Castleton-Reid to settle the purchase of the first Eclipse apartment. But that is notinconsistent with an intention that, on Mr Reid's death, the investments and proceedsin the account would form part of Mr Castleton-Reid's inheritance in any event. Nor isit inconsistent with Mr Reid retaining the beneficial ownership of the funds andmaking a specific gift from that amount for Mr Castleton-Reid's benefit. After all, itwas Mr Reid, not Mr Castleton-Reid, who authorised the payment as the operator ofthe account.[70] Mr Reid also paid the proceeds of the Air NZ and Auckland Airport shares(which he knew to be Mr Castleton-Reid's entitlement) into the Trading Account.However, again, that is not inconsistent with an intention that, ultimately, (on hisdeath), the money in the account would all be Mr Castleton-Reid's anyway.[71] Ms Matthew made the point that despite the numerous email exchangesbetween the parties Mr Reid had never asserted in writing there was an agreement thatMr Castleton-Reid would hold the funds on trust for him. Mr Reid never referred toa nominee agreement.[72] She also referred to a discussion via email between Mr Reid toMr Castleton-Reid after the Trading Account had been closed. She says in thatdiscussion Mr Reid assured Mr Castleton-Reid the money was his inheritance fromhis mother's estate and expressly admitted to having told Mr Castleton-Reid that themoney was his.[73] We do not agree the emails referred to are as conclusive as suggested.Mr Reid's email was in response to an email from Mr Castleton-Reid on 3 May 2010in which he said:Dad, I think we will not get anywhere if you are not going to admit what youoriginally said.You said, to me and then to Lisa – the money is yours, I will manage it foryou, you can use it as you see fit (or as Lisa told me "use it as you please").I interpreted this as the money is mine and should I ever, for good reason, needto draw from it I could do so. You also said you would use it for your ownexpenses which was completely reasonable. Did you or did you not say thisto Lisa and I.[74] Mr Reid replied the next day:Subject: What i said.BarryYou've asked me to confirm what you now say you both understood me tohave said at the time of setting up the share trading.When I converted the entire estate assets into M.A.P. shareholding in yourname it was on the clear understanding that I manage the account.Yes, I did say that they would be yours, or are to be yours, or words to thateffect to both of you.No, I did not say when this was to be – there was still too much to be done atthe time. I had yet to negotiate probate.(Emphasis original.)[75] The references to "would be yours" or "are to be yours" are future focused andnot consistent with an immediate gift.[76] Mr Castleton-Reid also relies on the evidence of the acknowledgements of debtMr Reid signed to support his case that Mr Reid gifted the money to him.However, both Dee-Ann and Mr Reid executed such documents. There was no basisfor Dee-Ann to have signed such a document regarding the $800,000 settlement shereceived unless it was for the purposes that Mr Reid said, namely to addressMr Castleton-Reid's taxation concerns. Mr Castleton-Reid accepted as much incross-examination. He accepted the deed of acknowledgement of debt with Dee-Annwas to "ameliorate the taxation liability".[77] In summary, while we agree with the Judge that Mr Reid's evidence does notsupport a finding of an express agreement Mr Castleton-Reid would hold the funds asMr Reid's nominee, we do not accept that the evidence supported the finding Mr Reidintended to make a present gift of the $1,700,000 to Mr Castleton-Reid. Subject tothe presumption of advancement, a resulting trust in Mr Reid's favour would arise inrelation to the money as it was his originally.Does the presumption of advancement apply?[78] Ms Matthew submitted that if Mr Castleton-Reid had to rely on it,the presumption of advancement applied and had not been displaced in this case.[79] The presumption of advancement was originally limited to a father's provisionfor his children.16 The presumption was extended to provision made by a mother andnow extends to provision made by anyone in loco parentis. It has been applied bythis Court in New Zealand.17 However, in a number of other jurisdictionsthe presumption has recently been rejected or abolished, at least in part.[80] In Canada the presumption of advancement has been abolished in relation toadult children, whether the adult children are dependent or not.18 In Pecore v Pecorethe Supreme Court of Canada held that the presumption of advancement was limitedin its application to gratuitous transfers made by parents to minor children. The Courtheld that, given the principal justification for the presumption of advance is parentalobligation to support dependent children, the presumption does not apply in respect ofindependent adult children.19 Further, since it is common for aging parents to transferassets into joint accounts with their adult children in order to have the child assist themin managing their financial affairs, there should be a rebuttable presumption the adultchild is holding the property in trust for the aging parent to facilitate the free andefficient management of that parent's affairs.20 The presumption should also not beapplicable to dependent adult children because it is impossible to list the wide varietyof circumstances that would make someone dependent for the purpose of applying16 Dyer v Dyer, above n 4.17 Hall v Guardian, Trust & Executors Co of New Zealand Ltd, above n 6.18 Pecore v Pecore 2007 SCC 17, [2007] 1 SCR 795.19 At [36].20 At [36].the presumption.21 Rather, evidence as to the degree of dependency of an adulttransferee may provide strong evidence to rebut the presumption of a resulting trust.22[81] In Dullow v Dullow the Court of Appeal of NSW noted that the obligationbasis for the presumption of advancement has been challenged and at times it has beensaid to be more properly based upon the mere relationship between the parties.23 HopeJ noted:24Whatever the correct principle is, it might be thought that any obligation toadvance and any relationship, and the nature of that relationship, ought moreproperly to be matters of evidence to be taken into account, along with allother relevant evidence, to determine what the intention of the personarranging the transaction was, and not something which gives rise toa presumption.[82] However, while observing that reform seemed overdue, the Court consideredit was a matter for the legislature other than the Courts.25[83] In the United Kingdom the House of Lords discussed the presumption and howit relates to the contrary presumption of resulting trust in the 21st century in Stackv Dowden.26 Baroness Hale there said:[60] The presumption of resulting trust is not a rule of law. According toLord Diplock in Pettitt v Pettitt [1969] 2 All ER 385 at 424, [1970] AC 777 at823, the equitable presumptions of intention are 'no more than a consensus ofjudicial opinion disclosed by reported cases as to the most likely inference offact to be drawn in the absence of any evidence to the contrary'. Equity, beingconcerned with commercial realities, presumed against gifts and otherwindfalls (such as survivorship). But even equity was prepared to presumea gift where the recipient was the provider's wife or child. These days,the importance to be attached to who paid for what in a domestic context maybe very different from its importance in other contexts or long ago. As Grayand Gray Elements of Land Law (4th edn, 2005) point out (p 864 (para 10.21)):'In recent decades a new pragmatism has become apparent inthe law of trusts. English courts have eventually conceded thatthe classical theory of resulting trusts, with its fixation onintentions presumed to have been formulated contemporaneouslywith the acquisition of title, has substantially broken down . . .Simultaneously the balance of emphasis in the law of trusts has21 At [40].22 At [41].23 Dullow v Dullow (1985) 3 NSWLR 531 (NSWCA).24 At 536.25 At 536, referring to Calverley v Green (1984) 59 ALJR 111 at 112–113 and 120.26 Stack v Dowden [2007] 2 WLR 831 (HL).transferred from crude factors of money contribution (which arepre-eminent in the resulting trust) towards more subtle factors ofintentional bargain (which are the foundational premise ofthe constructive trust) . . . But the undoubted consequence is thatthe doctrine of resulting trust has conceded much of its field ofapplication to the constructive trust, which is nowadays fastbecoming the primary phenomenon in the area of implied trusts.'There is no need for me to rehearse all the developments in the case law sincePettitt v Pettitt and Gissing v Gissing, discussed over more than 70 pagesfollowing the quoted passage, by Chadwick LJ in Oxley v Hiscock [2004]EWCA Civ 546, [2004] 3 All ER 703, [2005] Fam 211, and most importantlyby my noble and learned friend, Lord Walker in his opinion, which makegood that proposition. The law has indeed moved on in response to changingsocial and economic conditions. The search is to ascertain the parties' sharedintentions, actual, inferred or imputed, with respect to the property in the lightof their whole course of conduct in relation to it.[84] In New Zealand, the presumption has been abolished, at least as it operatesbetween spouses, by s 4 of the Property (Relationships) Act 1976.[85] It is difficult to see any rationale for the operation of the presumption ofadvancement where an adult child is well established in life, as Mr Castleton-Reid wasin March 2009. The presumption is based on the concept of a parental obligation tosupport children. How could Mr Reid have an obligation, at his age (in his late 80'sat the time) to apply the entirety of his assets to his 42 year old son, who owned severalproperties and described himself in the Craig's authority as of independent means?[86] The presumption of advancement is just that, a presumption as to the mostlikely inference of fact in the absence of evidence to the contrary. Given the facts ofthis case discussed above, we consider the contrary evidence, particularly ofMr Castleton-Reid's personal financial position, and Mr Reid's age and personalfinancial position, count strongly against a presumption that Mr Reid intended to giftthe $1,700,000 to Mr Castleton-Reid outright.Summary[87] In our judgment the evidence before the Court is insufficient to supportthe finding Mr Reid intended to gift $1,700,000 to Mr Castleton-Reid. Mr Reid didnot intend to immediately vest the $1,700,000 to the benefit of Mr Castleton-Reid.Taken overall the evidence does not support the application of the presumption ofadvancement either.[88] Rather, the evidence supports a conclusion that, at most, Mr Reid may haveintended Mr Castleton-Reid to inherit the balance of the money in the Trading Accounton his death.[89] In Dullow v Dullow a mother had provided the funds to purchase variousproperties in the names of her two sons.27 Hope JA observed that the mother'sevidence was confused and that different parts of it could be used to support almostevery variety of the possible legal situations that could arise in such a case.28Nevertheless, he was satisfied that whatever the plaintiff's intention was as tothe position during her life, she intended her sons should have the beneficial interestin the properties after her death, not by reason of any will she might make, but by thereason of her intention at the time she purchased the properties.29[90] The case has some similarities to the present. While the evidence is confused,it does not support the conclusion that Mr Reid intended to make an absoluteinter vivos gift of the $1,700,000 to Mr Castleton-Reid. Nor do the circumstances ofthe case support the application of the presumption of advancement. It may well bethat Mr Reid intended that on his death, Mr Castleton-Reid would inherit the$1,700,000 (or the then proceeds of the Trading Account), however, with oneexception, the money was Mr Reid's and Mr Castleton-Reid held the moneys in theTrading Account on trust for his father.[91] The exception is the proceeds of the sales of the Auckland Airport and Air NZshares. They were Mr Castleton-Reid's property.[92] There is a further complicating factor. It is not clear from the current evidencehow the $800,000 transferred to Mr Castleton-Reid's account to resolve Dee-Ann'sclaim is to be allocated between the parties. There is also the additional withdrawal27 Dullow v Dullow, above n 23.28 At 537.29 At 541.of the $333,914 that Mr Castleton-Reid applied to the purchase of the Eclipseapartment.[93] There will need to be a further hearing to determine the share in whichthe proceeds of $1,557,056 (and interest thereon) from the Trading Account are heldbetween the parties.30Result[94] The appeal is allowed and the judgment and costs order in Mr Castleton-Reid'sfavour is set aside.[95] The case is remitted to the High Court for a hearing to determine the parties'respective interests in the balance of the money from the Trading Account and fordetermination of Mr Castleton-Reid's affirmative defences.[96] The respondent is to pay costs for a standard appeal on a Band A basis withusual disbursements.Solicitors:Clive Gardner Law, Mt Maunganui for AppellantRennie Cox, Auckland for Respondent30 $1,557,056 being the total of the two sums Mr Castleton-Reid deposited to his solicitor's trustaccount when he closed the Trading Account.