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Marshall v Bourneville [2013] NZCA 271; [2013] 3 NZLR 766; (2013) 3 NZTR 23-007; [2014] NZFLR 265; (2013) 29 FRNZ 351 (1 July 2013)

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA676/2012 [2013] NZCA 271



BETWEEN
CHRISTINE JILL MARSHALL
Appellant
AND
MICHAEL VICTOR BOURNEVILLE First Respondent
MARK GRAHAM BLEWDEN Second Respondent


Hearing:
20 May 2013
Court:
Arnold, Harrison and Rodney Hansen JJ
Counsel:
A Hart for Appellant
B P C Carter for Respondents
Judgment:
1 July 2013 at 11 am




JUDGMENT OF THE COURT


A The appeal is allowed.

B We make an order that Caveat No 8690870.1, North Auckland Land

District, shall not lapse, subject to the appellant filing proceedings within

30 days to enforce her claim for an interest in the property and to pursue the claim expeditiously.

C The respondents must pay the appellant costs on a standard band A

basis together with usual and reasonable disbursements.


REASONS OF THE COURT

(Given by Rodney Hansen J)




MARSHALL V BOURNEVILLE CA676/2012 [2013] NZCA 280 [1 July 2013]

Introduction

[1] The respondents, owners of a residential property at Symonds Street, Royal Oak in Auckland, applied to the High Court to remove a caveat registered by the appellant, Ms Marshall. She had registered the caveat to protect an equitable interest in the property which she claims to have by way of a constructive trust. The property had been purchased with the proceeds of sale of a property which Ms Marshall and the first respondent, Mr Bourneville, had jointly owned while living in a de facto relationship.

[2] On the application of Ms Marshall that the caveat not lapse, Associate Judge Osborne made an order that the caveat lapse.1 Ms Marshall appeals against his decision. This Court has made an interim order that the caveat not lapse pending the determination of the appeal.2

[3] Ms Hart made a very late application (the day before the hearing) for leave to adduce further evidence. We declined the application. While the evidence has relevance to the underlying claim, it has not been necessary for us to refer to it in order to determine the appeal. We have also disregarded the further submissions and supporting materials filed without leave or invitation by Ms Hart after the appeal was heard.

Factual background

[4] Mr Bourneville and Ms Marshall began living in a de facto relationship in February 1996. When the relationship began they each owned a property. Ms Marshall owned a house in Glen Eden. Mr Bourneville owned a house in Wood Bay. Ms Marshall sold her house and moved in with Mr Bourneville.

[5] The parties then purchased three sections at Matarangi on the Coromandel Peninsular. The purchase price was $176,500. Ms Marshall contributed $85,000 to the purchase, being the proceeds from the sale of her house. Mr Bourneville

contributed the balance. They built houses on each of the three sections. In


1 Marshall v Bourneville [2012] NZHC 2547.

2 Marshall v Bourneville CA676/2012, 25 October 2012.

September 1997, they sold one of the houses, at 111 Ake Ake Avenue, to Mr Trevor Murray, a friend who had helped Mr Bourneville with the building work. They moved into the house at 113 Ake Ake Avenue. The third house, at Corokia Place was, on 5 December 1997, transferred into Mr Bourneville’s sole name and let as a holiday home.

[6] In 1999 the Corokia Place property was used as security to raise $160,000 to put towards the purchase of a property at Seabrook Avenue, New Lynn. Soon afterwards, Mr Bourneville sold the Corokia Place property for $285,000 and used the proceeds to purchase the property at Symonds Street for the same price. Effectively there was a swap. On 1 November 1999, Mr Bourneville established a family trust and transferred the Symonds Street property to the trust.

[7] In January 2000, the parties separated. In July 2000, they sold the remaining Matarangi property, at 113 Ake Ake Avenue, and divided the proceeds equally. A couple of months later, in September 2000, they reconciled and, in February 2001, they married. Ms Marshall became a trustee of the family trust and the Seabrook Avenue property was also transferred to the trust with the purchase price left owing as a debt back to Mr Bourneville. Soon afterwards, in October 2002, the Seabrook Avenue property was sold.

[8] At some point – the date is not disclosed in the material placed before us – Ms Marshall advanced $60,000 to the family trust. We understand this comprised most of her share of the proceeds of sale of 113 Ake Ake Avenue. In the course of the marriage she forgave all but $6,000 of the debt.

[9] In February 2005, the parties separated and have remained apart.

Previous court proceedings

[10] Ms Marshall applied to the Family Court for orders under the Property (Relationships) Act 1976 (the Act). She sought an order setting aside the transfer to the family trust of the Symonds Street and Seabrook Avenue properties, relying on ss 44 and 44C of the Act. A disposition may be set aside under s 44 if made in order to defeat the claim or rights of another. Section 44C allows the Court to order

compensation if there has been a disposition of relationship property to a trust which has the effect of defeating the claim or rights of one of the spouses.

[11] Judge de Jong found there was valuable consideration for the transfer of the Symonds Street property to the trust.3 He found that it was the parties’ intention that the Corokia Place property be regarded as the husband’s separate property at a time when they were living in a de facto relationship. These were, said the Judge, bona fide transactions. He found the setting up of the family trust and its purchase of the Symonds Street property as straightforward and consistent with Mr Bourneville

managing what he regarded as his separate property by making provision for his

children’s future.

[12] Judge de Jong found the Seabrook Avenue property was intended to be

Mr Bourneville’s separate property. It was financed by way of a mortgage of

$135,000 with the remainder of the purchase price of $170,000 met by $10,000 from Mr Bourneville’s separate funds and $25,000 borrowed against the security of the Corokia Place property.

[13] Significantly, however, the Judge determined that the de facto relationship of the parties ended in January 2000. Accordingly, the parties’ property rights at that time would need to be considered by reference to the law as it stood before the Act applied to de facto relationships.

[14] Judge de Jong found there was no evidence to suggest the transfer of the Seabrook Avenue property to the family trust was made with intent to defeat Ms Marshall’s claim or rights in terms of s 44 and that the property was not relationship property for the purposes of s 44C.

[15] The Judge also responded to a submission that the advance of $60,000 made by Ms Marshall to the trust was a disposition in terms of s 44C. He pointed out that that could be so only if the $60,000 was relationship property. It was not. It was

Ms Marshall’s separate property following the equal division of property following



3 Bourneville v Bourneville FC Auckland FAM-2005-004-807, 20 April 2007.

the termination of the de facto relationship. He accepted that the balance of the advance still owing, $6,000, was Ms Marshall’s separate debt.

[16] Judge de Jong’s decision was upheld by Wild J on appeal to the High Court.4

Wild J observed that, having regard to the Judge’s finding that the de facto relationship of the parties came to an end in 2000, Ms Marshall’s only remedy would be to resort to the common law utilising the principles established in Gillies v Keogh5 and similar cases.6 He commented that Ms Marshall’s dissatisfaction must be traced back to her transfer of her half interest in the Corokia Place property. He added:7

Unless she can challenge that transfer, and have it disregarded for the purposes of her property rights as against the husband, then I do not think she can obtain any relief.

[17] Wild J having refused leave to appeal, Ms Marshall applied for special leave to appeal to this Court.8 She asked the Court to consider, as a question of law, whether s 4C(2) of the Act, which provides that the Act does not apply to de facto relationships that ended before 1 February 2002, applied in the circumstances. Ms Hart argued that the relationship had not “ended” in January 2000 because it subsequently resumed and blossomed into marriage.

[18] This Court held that an appeal on this basis could not succeed having regard to Judge de Jong’s finding of fact that the initial de facto relationship ended in January 2000 and a new relationship started in September 2000.9 The Court expressed “considerable sympathy” with Ms Marshall’s position, observing that there appeared to be an issue about whether the contribution she made to the purchase of Corokia Place during the period of the initial de facto relationship had

been sufficiently recognised.10 It suggested that counsel consider whether the





4 Bourneville v Bourneville HC Auckland CIV-2007-404-2656, 24 April 2008.

5 Gillies v Keogh [1989] NZCA 168; [1989] 2 NZLR 327 (CA).

6 At [41].

7 At [43].

8 Bourneville v Bourneville [2008] NZCA 520, [2009] NZFLR 69.

9 At [19].

10 At [18].

injustice that Ms Marshall felt about the property division could be remedied through some mechanism other than the Act, in particular a claim in equity.11

[19] Undaunted, and because there is a jurisdictional bar preventing the decision of this Court from being further appealed, Ms Marshall applied for leave to appeal directly from the High Court to the Supreme Court. The Court held that she had been unable to show the requisite extremely compelling circumstances.12 The Court said that, even if the point of law sought to be raised were arguable, Ms Marshall would still face formidable factual difficulties both because there appeared to have

been a settlement of affairs between the parties after they first separated and because Ms Marshall’s claim under ss 44 or 44C of the Act seemed inconsistent with her act of transferring a predecessor property into Mr Bourneville’s name.13

The caveat proceeding

[20] The interest claimed by Ms Marshall in the Symonds Street property was stated in the caveat to be pursuant to an implied or constructive trust. Before Associate Judge Osborne, Ms Hart abandoned a claim to an equitable interest based on an implied trust. The application is pursued on the basis of constructive trust

principles laid down in cases such as Gillies v Keogh14 and Lankow v Rose.15

[21] Ms Marshall’s case before Associate Judge Osborne for the existence of an

interest by way of constructive trust was based on the following propositions:

(a) The transfer of Ms Marshall’s share of the Corokia Place property had been for no consideration. Equity therefore presumes that the intention was that the transferor would retain beneficial ownership.

(b) Ms Marshall had reasonable expectations of a fee simple interest in the Symonds Street property.




11 At [22].

12 Bourneville v Bourneville [2009] NZSC 19.

13 At [2].

14 Gillies v Keogh, above n 5.

15 Lankow v Rose [1995] 1 NZLR 277 (CA).

(c) The bona fides of the trustees were tainted by Mr Bourneville’s conduct in disposing of Symonds Street in order to defeat Ms Marshall’s interest.

(d) The transfer to the trustees was not fatal to a constructive trust claim, notwithstanding dicta to the contrary in cases such as Nuthall v Heslop.16

[22] Associate Judge Osborne regarded the transfer of Ms Marshall’s interest in the Corokia Place property as irrelevant on the basis that, as he would find, the subsequent transfer of the Symonds Street property to the trustees eliminated the possibility of a proprietary constructive trust claim.17 He rejected the proposition that Ms Marshall could show a reasonable expectation of an interest in the Symonds Street property. He said a claim of unconscionability is not reasonably arguable

given the findings of the Family Court that the transactions in question were bona fide. He said an issue estoppel precludes Ms Marshall from contending otherwise.18

[23] Ms Marshall relied on her forgiveness of most of the advance she made to the family trust. The Judge said her actions were “ultimately irrelevant” when the trustees had been found to have acquired the property bona fide.19 Further, he said that, having married Mr Bourneville and become a trustee and a discretionary beneficiary, a gift back to the trust was entirely understandable.20

[24] Associate Judge Osborne discussed21 the authorities cited in Fisher on Matrimonial and Relationship Property22 in support of the proposition that relief by way of a constructive trust is not available in respect of assets no longer owned by

the defendant, or owned by a trust. He commented that Tipping J, as one of the





16 Nuthall v Heslop [1995] NZFLR 755 (HC) and Miller v Stewart [2000] NZFLR 433 (HC).

17 At [36].

18 At [41].

19 At [44].

20 At [45].

21 At [48]–[55].

22 RL Fisher (ed) Fisher on Matrimonial and Relationship Property (looseleaf ed, LexisNexis)

at [4.33].

Judges in Lankow v Rose23 must be taken to have spoken carefully when he said in

Nuthall v Heslop:24

De facto property relief by way of constructive trust can only be ordered in respect of assets owned by the defendant at the date of the order. Tracing may be possible but no order can be made, as is obvious, in relation to an asset which the defendant no longer owns.

[25] The Associate Judge considered25 a submission from Ms Hart that some form of tracing may be available so as to enable Ms Marshall to mount a claim against the current registered proprietors. He said such a course is debarred by the finding in the Family Court as to bona fides. The bases for tracing that may arguably be available

– knowing receipt and dishonest assistance26 and the use of stolen money27 – were

unavailable and the Judge said he had not been referred to any authority which took the tracing concept into the realm of civil wrong.

[26] Associate Judge Osborne went on to say28 that, even if he had not found there was no arguable case for the interest claimed by Ms Marshall, he would have ordered as a matter of discretion that the caveat lapse. He said he would have done so for a combination of three reasons:

(a) Even if the factual findings of the Family Court did not found an issue estoppel, the Judge made credibility findings that Mr Bourneville had entered into the transactions bona fide. It would be an abuse of process, 13 years after the trust’s purchase of the Symonds Street property, to put Mr Bourneville through a similar process. He said it would be “drawing a very long bow” to suggest that a Court should reach a different decision on Mr Bourneville’s fides.

(b) When pursuing Ms Marshall’s application for leave to appeal to the

Supreme Court, Ms Hart had argued that a remedy based on a constructive trust was not available to Ms Marshall and the perceived

23 Lankow v Rose, above n 15.

24 Nuthall v Heslop, above n 16, at 757.

25 At [56]–[59].

26 Royal Brunei Airlines Sdn Bhd v Tan [1995] UKPC 4; [1995] 2 AC 378 (PC).

27 Trustees Executors Ltd v Eden Holdings 2010 Ltd [2010] NZCA 626.

28 At [60].

injustice could not be remedied in equity. He saw it as plainly abusive for a party to advance a particular argument for the purpose of one proceeding, only to put the opposite argument in a later proceeding.

(c) Ms Marshall was for a period of years a trustee of the family trust which she effectively now sues. During that period she could have taken steps to protect her position.

Discussion

[27] A constructive trust over assets will be imposed to give effect to the reasonable expectation of parties to a de facto relationship where the claimant has contributed in more than a minor way to the acquisition, preservation or enhancement of the property of the other but the parties had no actual common intention as to how the property was to be shared.29 In Lankow v Rose Tipping J said

that in order to establish a claim, a party must show:30

(a) Contributions, direct or indirect, to the property in question. (b) The expectation of an interest in the property.

(c) That such expectation is a reasonable one.

(d) That the defendant should reasonably expect to yield the claimant an interest.

[28] In our view, contrary to that of Associate Judge Osborne, there is an available basis for Ms Marshall to claim that she made qualifying contributions and has a reasonably-based expectation of an interest. We do not think the factual findings of the Family Court are an impediment to her establishing those elements of a claim.

[29] Because of his finding that the parties’ relationship ended in January 2000, it

was not necessary for Judge de Jong to determine the status of property owned by


29 Gillies v Keogh, above n 5 and Lankow v Rose, above n 15.

30 Lankow v Rose, at 294.

the parties prior to January 2000 and he did not seek to do so. He said that the evidence was consistent with an intention that, following its transfer, the Corokia Place property be regarded as the husband’s “separate property” and that the sale of Corokia Place, the purchase of Symonds Street and the later transfer to the family trust were supported by valuations and “were bona fide transactions”.31 He described the husband’s evidence in relation to establishing the family trust and purchasing Symonds Street as “straightforward and consistent with managing what he regarded as separate property by making provision for his own children’s future”.32

[30] These observations were unnecessary for Judge de Jong’s findings. Indeed, we cannot see how a claim to set aside the transfer of Symonds Street to the trust under s 44 or s 44C could have been entertained by the Family Court at all. The parties were not married. The Act did not apply to the de facto relationship. The transfer could not have had the purpose or effect of defeating Ms Marshall’s rights under the Act.

[31] A Court considering a claim by Ms Marshall under a constructive trust would have to explore very different legal and factual questions to those addressed by Judge de Jong. One is why the parties would transfer the Corokia Place property into Mr Bourneville’s sole name on the basis that Ms Marshall abandoned any claim to an interest in it. Another is whether the sharing of the proceeds of sale of the property at 113 Ake Ake Avenue should be regarded as a final settlement. A third is as to the circumstances in which Ms Marshall forgave the trust’s debt to her.

[32] Depending on the answers to these questions and other circumstances, there appears to be a reasonably arguable case33 that Ms Marshall could establish the requisite reasonable expectation of an interest in the trust property. The parties appear to have made approximately equal capital contributions at the commencement

of their de facto relationship. By their joint endeavours, they accumulated



31 Bourneville v Bourneville, above n 3, at [28]–[29].

32 At [30].

  1. As has to be shown by the caveator: Castle Hill Run Ltd v NZI Finance Ltd [1985] 2 NZLR 104 (CA).

substantial assets.34 Yet, by reason of the series of transactions beginning with the transfer to Mr Bourneville of Ms Marshall’s interest in Corokia Place, the lion’s share of the parties’ wealth ended up in the trust. It seems unlikely that this outcome represented the reasonable expectations of the parties.

[33] The question then is whether, as Associate Judge Osborne found, the transfer to the trust provides an additional and insuperable barrier to Ms Marshall’s claim. We set out in full the passage he relied on for this view from the judgment of Tipping J in Nuthall v Heslop:35

De facto property relief by way of constructive trust can only be ordered in respect of assets owned by the defendant at the date of the order. Tracing may be possible but no order can be made, as is obvious, in relation to an asset which the defendant no longer owns. The basis of the jurisdiction now invoked is that upon the establishment of the necessary criteria, the defendant is required to hold assets in his name on trust as to the assessed share for the plaintiff.

The jurisdiction is not an exercise in general wealth distribution. Nor is it a jurisdiction to award a plaintiff compensation for her disappointment or financial loss upon an intended permanent relationship coming to an end. The starting point must be to identify what assets the defendant owns. Only when that has been established can the Court consider what contribution the plaintiff has made, whether directly or indirectly, to those assets.

[34] Nuthall v Heslop was followed in Caughey v Calvert36 in which Master Faire described as an “obvious problem”, a claim against a trust property based on a constructive trust.37 There is, however, no case in which a court in New Zealand has declined to grant relief against assets owned by a trust in which an expectation of an interest had been demonstrated.

[35] Fisher on Matrimonial and Relationship Property38 states that relief by way of a constructive trust is not available in respect of assets owned by a trust, citing Miller v Stewart.39 In that case William Young J rejected a claim based on a constructive trust to an interest in trust properties. He said the claimant (Ms Miller)

had an expectation that properties would be placed in her name but not an

34 $500,000, we were told by Ms Hart.

35 Nuthall v Heslop, above n 16.

36 Caughey v Calvert HC Tauranga CP17/01, 2 May 2002.

37 At [25].

38 Fisher on Matrimonial and Relationship Property, above n 22, at [4.33].

39 Miller v Stewart, above n 16.

expectation of an interest in the properties that were actually acquired.40 If she did have such an expectation, he said it would not have been a reasonable one.41 He said this was partly because of the very limited contribution she had made to trust assets. Another was that one of the purposes of the trust was to insulate the properties from

any claim by her. Significantly, however, William Young J seems to have accepted that Ms Miller could have maintained a claim against trust properties had she been able to establish an expectation of an interest and that such expectation was reasonable.

[36] Other High Court decisions have granted relief by way of a constructive trust over assets owned by a trust. In Prime v Hardie,42 Salmon J upheld a claim to an interest in a trust property. The property had been used as the family home. The Judge accepted that the plaintiff had an expectation of an interest in the family home and that, despite the fact that it was owned by a trust, that expectation was a reasonable one.43 He distinguished Miller v Stewart44 on the basis that contributions in that case had been to the claimant’s partner rather than to trust properties.

[37] In Rea v Rea45 a Full Court of the High Court upheld the claim of a wife against her former husband’s parents for contributions made by her and her ex-husband to a farm owned by the parents. Her ex-husband’s mother’s interest was held in trust. While not expressly adverted to in the judgment, it is implicit that the claim to an interest in the trust property was upheld.

[38] In Clark v Clark,46 Asher J cited Prime v Hardie47 in upholding a claim based on a constructive trust to a farm property held by a family trust. The claimant had farmed the property and made significant contributions over a lengthy period.

[39] Like the High Court Judges in these cases, we see no reason why, in a proper case, relief by way of a constructive trust should not be ordered against trust

40 At [85].

41 At [86].

42 Prime v Hardie [2003] NZFLR 481 (HC).

43 At [33].

44 Miller v Stewart, above n 16.

45 Rea v Rea (2004) 23 FRNZ 449 (HC).

46 Clark v Clark [2012] NZHC 3159 at [69].

47 Prime v Hardie, above n 42.

property. It seems to us that such an outcome might reasonably be available to Ms Marshall. On her case, an expectation of an interest in the Symonds Street property arose when it was acquired by Mr Bourneville. We see no reason why that expectation should not survive the transfer of the property to the trustees. Mr Bourneville, as settlor and trustee, obviously would have had knowledge of the circumstances giving rise to the expectation. In such circumstances, Ms Marshall could well be able to establish that a trust was impressed on the property and the trustees should reasonably expect to yield to her an interest in the property. Depending on the circumstances in which the later advance to the trust was made and forgiven, such expectation may be reinforced by later events.

[40] For these reasons, we consider that Ms Marshall has discharged the burden of establishing that she has a reasonably arguable case for the claimed interest in the property.

Discretion

[41] Once the onus is satisfied, the balance of convenience is normally in favour of leaving the caveat in existence until the proceedings to enforce the interest claimed are tried.48 The Court, however, has a discretion to make an order removing

the caveat, although it will be exercised cautiously.49

[42] As earlier mentioned,50 Associate Judge Osborne said that even if he had found there to be an arguable case, he would have exercised his discretion to order that the caveat lapse. We are not persuaded that there are factors which would justify such a course.

[43] The Associate Judge was influenced by the findings of the Family Court that Mr Bourneville had entered into the transactions bona fide. He thought it would be an abuse of process to subject Mr Bourneville to what he described as a similar

process.




48 Castle Hill Run Ltd v NZI Finance Ltd, above n 33, at 106.

49 Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.

50 At [26] above.

[44] As we have said, the legal and factual issues that will arise in a claim for constructive trust are materially different from those that were considered in the Family Court. The question of whether Mr Bourneville acted in good faith is not of central importance. While it is regrettable that a further substantive hearing may be required, that is the unfortunate consequence of the decision to bring a claim under the Act, leaving unresolved the property issues arising out of the de facto relationship.

[45] It is regrettable also that, in order to maintain Ms Marshall’s caveat, Ms Hart was obliged to resile from an argument she put to the Supreme Court. However, that should not deny her client an available remedy.

[46] We do not think that Ms Marshall’s failure to seek relief during the period when she was a trustee with the family trust should count against her. In our view, it would not be realistic to expect Ms Marshall to have taken such steps while the marriage subsisted and she had no reason to think that she may have lost her right to claim a beneficial interest in property owned by the trust.

[47] It is, however, imperative that Ms Marshall’s claim is disposed of expeditiously and the caveat remain no longer than is necessary to protect Ms Marshall’s interests. Following the unnecessarily protracted proceedings under the Act, there have been unacceptable delays in initiating proceedings to establish a constructive trust. In order to ensure that the remaining issues are promptly determined, we propose to make the order that the caveat not lapse subject to a condition requiring Ms Marshall to bring proceedings to establish her claimed right to an interest in the property within 30 days and to pursue the proceeding expeditiously to a final determination. The respondents will have the right to apply to remove the caveat if that condition is not fulfilled.

Result

[48] The appeal is allowed. We make an order that Caveat No 8690870.1, North Auckland Land District, shall not lapse, subject to the appellant forthwith filing proceedings to enforce her claim for an interest in the property and to pursue the claim expeditiously.

[49] While Ms Marshall’s failure in the High Court owes something to the way her arguments were presented there, we are nevertheless satisfied that costs should follow the event. Accordingly, we order Mr Bourneville and Mr Blewden to pay Ms Marshall one set of costs on a standard band A basis together with usual and reasonable disbursements.


Solicitors:

Parnell Law, Auckland for Appellant

McWha Law, Auckland for Respondents


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