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Last Updated: 29 January 2018
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IN THE COURT OF APPEAL OF NEW ZEALAND
CA676/2012 [2013] NZCA 271
BETWEEN
|
CHRISTINE JILL MARSHALL
Appellant
|
AND
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MICHAEL VICTOR BOURNEVILLE First Respondent
MARK GRAHAM BLEWDEN Second Respondent
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Hearing:
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20 May 2013
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Court:
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Arnold, Harrison and Rodney Hansen JJ
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Counsel:
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A Hart for Appellant
B P C Carter for Respondents
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Judgment:
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1 July 2013 at 11 am
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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].
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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