[1] This appeal from the High Court is brought by the executors and trustees of the estate of the late Ms Angela D’Audney who died before the substantive hearing commenced on 13 May 2002. Ms D’Audney’s testimony had been taken in advance of that hearing, in August and November 2001, because of the advanced stage of her terminal illness. The judgment under appeal was given in proceedings brought in the lifetime of Ms D’Audney by her former de facto partner, Mr Webster. The parties had lived together from 1985 until March 1999. During that period improvements were carried out to Ms D’Audney’s residence, in which the couple lived, at 10 Sage Road, Kohimarama and Ms D’Audney acquired some flats as investments.
[2] The first acquired flats, two residential units located in The Drive, Epsom, (“the Epsom flats”) were bought in early 1991. In about August or September 1994 Ms D’Audney bought some units in Leonard Road, Mt Wellington (“the Mt Wellington flats”). In 1999, some months after the de facto relationship had ended, Ms D’Audney sold the Mt Wellington flats and applied the proceeds towards the purchase of four units situated in Wheturangi Road, Green Lane (“the Green Lane flats”).
[3] In October 2000 Mr Webster brought proceedings in the High Court at Auckland, seeking declarations of interest, accounts, sale and similar relief in relation to the Sage Road residence, the Epsom flats and the Green Lane flats. He alleged that Ms D’Audney held the flats in trust for him and herself by virtue of an agreement, entered into orally in early 1991, that they should carry on business together in partnership as property owners and developers. Alternatively, he claimed an interest in the flats on the basis that he had made contributions to them pursuant to an express or implied agreement that he would thereby acquire an interest in them. In respect of the Sage Road residence he claimed on the basis of a constructive trust founded on the incidents of the de facto relationship.
[4] A fourth cause of action sought judgment in the sum of $33,000, said to have been funds withdrawn unconscionably from his bank account by Ms D’Audney, relying on documents which she induced him to sign when his mental and physical health was severely impaired.
[5] Ms D’Audney counterclaimed against Mr Webster for $57,822, being the balance of an aggregate of $90,822 advanced to him by her and the $33,000 credited to him as partial repayment.
[6] The evidence showed that at the time the de facto relationship began in 1985, Ms D’Audney was aged 41 and Mr Webster was 28. He was a builder and property developer who owned investment properties at Ladies Mile, Ellerslie, Edenvale Road, Mt Eden and Balmoral Road. These provided revenue from rentals but they were consistently mortgaged to such levels that his net income was minimal. He had been occupying one of his flats at the time the parties began living together at Ms D’Audney’s residence and their cohabitation allowed him to let his former dwelling. The basis upon which the parties began living together was that he would pay $150 per week towards household expenses. But fairly early in the relationship he could not manage that sum and Ms D’Audney reduced it to $75 per week. Even that proved too much of a burden for Mr Webster and eventually he lived at Sage Road without significantly contributing in money to the household expenses. He did, however, carry out repairs and maintenance on the property, as well as routine domestic chores.
[7] Ms D’Audney, who earned a relatively high income and who appears to have been a punctilious manager of her financial affairs, treated Mr Webster with generosity. They took an annual holiday which, with one exception, was paid for by her. The Judge found that throughout the relationship she provided financial assistance to him on a fairly regular basis, including lending him money to meet his mortgage and other outgoings and paying for his medical insurance. Although generous, it was her habit, as the Judge noted, to keep a reasonably close eye on the indebtedness between herself and Mr Webster throughout the relationship. Major advances, such as those she made to bridge Mr Webster’s debt pending refinancing of his property, seem to have been referred to by the parties as “big ticket items”. Lesser advances of a more routine or recurrent nature were considered to be advances “on the tab”. Although sometimes the “tab” advances might be forgiven or written off by her, Ms D’Audney kept an account in a way which has an evidential relevance in relation to the question of equities.
[8] Moreover, as the Judge found:

Throughout the relationship each of the parties remained solely responsible for the cash outgoings on their respective investment properties and they kept their personal income and outgoings separated by maintaining separate bank accounts.

[9] He was:

satisfied that [Ms D’Audney], from the very outset, had a clear view of the financial realities and she expected that the lines, having been set, were to be adhered to. She appears to have been quite generous in her financial dealings with the plaintiff, but in the final analysis she expected that there would, at all times, be an accounting between them. After the parting she was clearly appalled that [Mr Webster’s] action in making the claims he did. She had thought financial matters between them were resolved.

The claim on Sage Road

[10] Mr Webster’s claim against the Sage Road property was founded on contributions to it, direct or indirect, in the form of his repairs, maintenance and the labour and administration involved in development and improvement. They were not insignificant and ought not be depreciated, but they were provided during a period when Mr Webster had ceased his building occupation and when he had ample time on his hands, so that he did not lose other income through carrying out the work. Ms D’Audney met the cost of all materials. All the time Mr Webster was living with Ms D’Audney without contributing to living expenses beyond a minimal level. That accommodation allowed him to use funds to meet his own property commitments and increase or manage his equity in them. The Judge considered it inequitable for Mr Webster to receive a benefit in relation to his own assets and at the same time have it recognised that he had made contributions towards Ms D’Audney’s property. He found that the services provided by Mr Webster in relation to Sage Road did not amount, directly or indirectly, to a contribution to that property. They were, rather, a contribution to the relationship made in accordance with an agreement between the parties at the outset which was concerned only with the issue of Mr Webster’s own living expenses.
[11] We note that the Judge’s findings on that head of claim are not subject to appeal. Their relevance for present purposes lies in the Judge’s identification of the nature of the relationship and conduct between the parties. These have some significance in relation to issues which have been raised on the appeal.

Claim to Ms D’Audney’s flats

[12] Facts upon which Mr Webster advanced his claim to an interest in Ms D’Audney’s flats included advising her to undertake that form of investment, finding and/or advising on suitable properties for that purpose, administering the tenancies and collecting rents. At one point in his judgment Laurenson J quantified the relative value of such work at $19,360. It is, however, common ground between the parties that such figure reflects an arithmetical error. The correct amount should be $26,988, and the Judge himself uses that figure at a later point in his reasons. Mr Webster also carried out some maintenance work on the flats, and the Judge was prepared to give credit for that.
[13] The Judge rejected Mr Webster’s claim that the parties had agreed to undertake the flat investment as a partnership whereby Ms D’Audney would subscribe the capital and Mr Webster would provide the expertise and administrative input.
[14] The alternative basis for the claim is, broadly, inequity. The Judge approached the matter on the basis whether Mr Webster contributed directly or indirectly to the flats, whether he had expected an interest in them, whether such expectation was reasonable, whether it was reasonable that Ms D’Audney should expect to yield an interest to him and how that interest, if any, should be qualified. This reflected the principles stated by Tipping J in this Court’s decision in Lankow v Rose [1995] NZFLR 1, and Laurenson J noted that before him the parties were in agreement with that approach.
[15] Laurenson J found that Mr Webster’s work in respect of the flats should be regarded as indirect contribution to them for the reasons which he noted as follows:

[a] I am satisfied the obligation due by the plaintiff to the defendant in accordance with the agreement as to his living costs, was met adequately by the services rendered in and around the home at Sage Rd.

[b] My impression is that the management and other services provided by the plaintiff to the two properties was a continuing and time-consuming matter. The plaintiff was able to bring to it some ten years’ experience as both a property manager and builder.

[c] Clearly, if he had not been involved the defendant would have had to engage someone else to do this work. On the basis of the figures supplied by Mr Bettencor I have assessed the value of the work at say $19,360 without any allowance for the plaintiff’s labour on repairs and maintenance. The extent to which such work was done, and how well it was done, is again disputed by the defendant. I am nevertheless satisfied on the evidence it was not insubstantial.

[d] The net effect of the plaintiff’s services was that the defendant was able to conserve her funds and thereby increase her equity in both properties.

[16] Next, he concluded that Mr Webster had an expectation of an interest in the properties “...albeit not entirely clear, nor specifically addressed by the parties”. He found that such expectation was reasonable because Mr Webster was contributing professional skills which could be clearly defined as having had a financial benefit to Ms D’Audney and which continued for some seven and a half years. The fact that he was not sharing an interest in his investments was not, in the Judge’s mind, necessarily inconsistent with his expectation that he was to share in hers because:

He was to be directly involved in a meaningful and cost-saving manner. She had no such involvement with his. Her involvement with his was significant in the sense that she advanced him money to meet his liabilities, but it was not an ongoing involvement as was his.

[17] On the question whether Ms D’Audney should expect to yield an interest to Mr Webster, the Judge found it reasonable that she should. His reasons for so concluding are not expressly articulated, but inferentially he based his conclusion on the fact that Mr Webster had made an identifiable contribution to the properties.
[18] Laurenson J then examined the question of relief. When the relationship ended in April 1999 the Epsom flats had a value of $590,000 but were subject to encumbrances. The Leonard Road flats, sold later in 1999, produced a net sum of $155,173.60. The Judge saw Mr Webster’s interest as assessable in relation to the equity in the Epsom Flats at April 1999, and the net sum produced on the sale of the Leonard Road properties. Quantification of the interest was informed by the recognition in Lankow v Rose that in the case of a de facto union a claimant starts presumptively from nothing. The Judge cited from that case, including the observation at p20 that:

In the end the Court must assess as closely as reasonably possible what weight the claimant’s contributions have had against the contributions of the defendant in the acquisition, improvement or maintenance of the property or its value.

[19] Laurenson J concluded that Mr Webster’s interest should be assessed at 25 per cent, recording that:

In fixing this formula I have paid regard to-

[a] My rough estimate of the commercial cost of the management services provided by the plaintiff over the period;

[b] The fact that in addition he provided labour from time to time in respect of the maintenance and repair of the two properties;

[c] My rough calculation of the net cost to the defendant over the period from purchase in 1991 until the end of the relationship in 1999;

[d] The fact that the defendant provided security over her own home for at least part of that period and during the whole of the period has been the person legally at risk in respect of both investments.

[20] The Judge made consequential orders suspending payment for one month, with leave reserved to apply for an extension, and for interest from 1 April 1999 at the rate then presently chargeable on Mr Webster’s current account with the Auckland Savings Bank.

Other orders

[21] Laurenson J then found against Mr Webster on his claim for $33,000, holding that he was satisfied that at the time Ms D’Audney transferred the funds to her own account she was in fact owed them by Mr Webster, and that she had not acted unconscionably nor exerted undue influence in connection with them.
[22] As to Ms D’Audney’s counterclaim for $57,822, he found this not proved, the evidence in respect of the state of accounts being too deficient to render it possible to achieve a proper accounting exercise, beyond the conclusion as to the $33,000.
[23] Costs were awarded to Mr Webster on a 2B basis.

Grounds of appeal

[24] Mr Hawk’s submissions examined the factual circumstances in some detail, but the underlying arguments may be expressed as follows:

(1) It was not reasonable for Ms D’Audney to be expected to yield an interest in the flats because, amongst other things, she had contributed in a significant and ongoing way to Mr Webster’s properties without the parties ever envisaging she would thereby acquire a personal interest in them.

(2) If she ought yield an interest, then it should be only in respect of the increase in their value, with the initial equity and subsequent reductions of principal being excluded. This would be consistent with Mr Webster’s actual claim, based on the alleged partnership, for a share of profit. A 25 per cent share of increased value would amount to $101,250 rather than the sum of $128,776 produced by the High Court’s formula.

(3) If an interest ought be yielded it should be considerably less than 25 per cent.

Respondent’s grounds

[25] In his similarly detailed and careful submissions, Mr Gay argued that the appellant seeks to challenge the weight given by Laurenson J to his findings of fact and that an appellate Court ought not lightly interfere with a trial Judge’s conclusion of fact when they are not plainly unsound. The Judge had examined and dismissed the appellant’s first point, and had had the opportunity to assess the evidence of the witnesses, which an appellate Court does not have. An appeal is not a retrial of the facts and the Judge at first instance is better able to form a complete view of the events in issue. The deference due to the trial Judge’s assessment of fact is increased when, as here, credibility findings had to be made. In this case the Judge’s conclusions as to the making of contribution, expectation by Mr Webster and the reasonableness of it, reasonableness of yielding an interest, and the quantification of interest, were all justified by the facts as found.
[26] Concerning the question of allowance for principal repayments, Mr Gay argued that this had been brought into account. The Judge expressly said that he had taken account of the net cost to Ms D’Audney and he was aware she had reduced principal. His method of calculation must have taken net cost into account. He found the total costs input by her to have been $37,752.
[27] In addition to the reasons given by the Judge, the result could be supported, in Mr Gay’s submission, by other matters. These included the arithmetical error, previously mentioned in this judgment, although this seems to have been corrected by the Judge, as we mentioned earlier. Also, according to Mr Gay, the Judge misinterpreted a schedule indicating an account between the parties in relation to advances. He submitted that this showed that there was a balance due to Mr Webster, not by him, of $39,359.50, with the result that far from being indebted to Ms D’Audney in the sum of $6,359 he was in fact owed by her the sum of $72,359.50.
[28] Mr Hawk countered that last mentioned proposition with the submission that the Judge had not found as a fact that $39,359.50 was owed to Mr Webster and it cannot therefore be regarded as a contribution.

Discussion

[29] First, we consider the matter of an alleged credit of $72,359.50. The schedule relied on in support of the respondent’s assertion is far from a reliable foundation for that contention, as the Judge himself concluded. There was some evidential basis for regarding some payments for which Mr Webster claimed credit as simply his accounting for rents collected by him; or that they were repayments by him of a loan Ms D’Audney had made to him. The Judge also found that a payment of $54,232.73 was a loan repayment and in that case ought not, of course, be treated as an advance to Ms D’Audney. The particular sum had been deducted by solicitors from the proceeds of a refinancing by Mr Webster. There would be no reason for this to be done as an advance by Mr Webster and there was nothing to suggest Ms D’Audney needed to borrow from him. Quite the reverse was the habitual situation. It is plain to us why the Judge was not prepared to contemplate that Mr Webster was a substantial cash creditor of Ms D’Audney at the end of the relationship and we are not prepared to gainsay him on that issue.
[30] As to the question of contributions to the flats, we have no basis for differing from the Judge’s finding that its equivalent value in cash was in the order of $27,000, together with a “not insubstantial” amount of labour for repairs and maintenance.
[31] We do have difficulty however with the Judge’s conclusion about the expectation of an interest by Mr Webster and the reasonableness of Ms D’Audney’s yielding an interest. This is because the parties plainly lived together on a declared and understood basis that their private property would remain independent. The attention to keeping accounts between them, the absence of any suggestion that Ms D’Audney could possibly have any interests in Mr Webster’s investments, notwithstanding her generous advances and the lending of her creditworthy name to him in order to save him financial embarrassment, the disdain she clearly had for his attempt to claim an interest in her assets, all conform with an actual expectation that what was his would remain his, and what was hers would remain hers. Although such an actual expectation does not necessarily exclude equitable recognition of an objectively reasonable expectation, it does in a case such as the present tend to colour the way in which the equity should be satisfied. The contributions were made in a context of cash accounting in the daily lives of the parties; and there is no suggestion that the contributions preserved or enhanced the value of the properties in a way which would not have occurred without them. Ms D’Audney was well placed to pay for professional management. Certain observations made by her in the trial suggest a sense of sufferance rather than relief over Mr Webster’s contributions from time to time. The question of reasonable expectation, reasonable yielding of interest, and quantification of that interest are more logically and justly related to a restitutionary evaluation than to a proprietary interest in the property.
[32] We are not unmindful of Mr Gay’s submissions concerning due deference to a trial Judge’s factual findings and discretionary evaluations. But in this case the Judge’s articulated reasons for fixing Mr Webster’s interest at 25 per cent of net value have been stated in a way which allows this Court to assess the aptness of the conclusion. If on a broad view it could not be regarded as wrong this Court could not properly displace it with its own view. With respect however to the learned trial Judge, 25 per cent of net equity, amounting to an interest worth almost $129,000, in satisfaction of contributions and having a value of about $27,000 made in the circumstances of the particular relationship, goes far beyond the demands of equity in this case. The circumstances could indicate relief more apt for a quantum meruit, but we are prepared to approach the nature of relief, as distinguished from its quantification, in a broader way not only in deference to the trial Judge, but also because of the period of time over which the contribution, previously unrequited, had been made.
[33] In our view, the assessment of 25 per cent cannot stand. It is at least twice as high as equity could possibly require. Accordingly we allow the appeal by substituting 12.5 per cent for the 25 per cent interest in net value for the flat properties and proceeds as determined by the High Court, with all other orders to remain the same.
[34] The appellant shall have costs in this Court in the sum of $5,000 together with disbursements including the reasonable travelling and accommodation costs of counsel.

Solicitors:
Jackson Russell, Auckland for Appellants
Nola Dangen & Associates, Auckland for Respondent

NZLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.nzlii.org/nz/cases/NZCA/2003/95.html