Wakenshaw v Wakenshaw [2017] NZCA 252 (14 June 2017)

Last Updated: 21 June 2017

IN THE COURT OF APPEAL OF NEW ZEALAND
CA229/2016 [2017] NZCA 252
BETWEEN	JANTHINA WAKENSHAW Appellant
AND	DONALD FYFE WAKENSHAW Respondent

Hearing:	4 May 2017
Court:	Miller, Gilbert and Katz JJ
Counsel:	P F Chambers for Appellant S C Dench for Respondent
Judgment:	14 June 2017 at 3.00 pm

JUDGMENT OF THE COURT

A The appeal is dismissed.

2. The appellant must pay costs to the respondent for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Katz J)

Introduction

[1] Some months before her death in May 2015, Mary Wakenshaw gifted a property she owned at Bethell’s Beach (the Property) to her son, Donald Wakenshaw. Following Mary’s death, her daughter-in-law Janthina Wakenshaw (Jan) lodged a caveat against the title to the Property. Jan is the widow of Mary’s other son, Norman Wakenshaw. The caveat records that Jan claims an interest:

As beneficiary under an implied or constructive trust and [Donald Wakenshaw], the registered proprietor, is the trustee.

[2] Jan subsequently filed an originating application for an order that her caveat not lapse.^[1] Associate Judge Doogue dismissed her application.^[2] Jan now appeals that decision. In her notice of appeal she alleges a number of specific errors on the part of the Judge. At heart, however, the issue on appeal is simply whether the Judge erred in concluding that Jan had not established a reasonably arguable case that she has a caveatable interest in the Property.

Factual background

[3] Mary Wakenshaw had three children: Donald, Norman and Delwyn. Donald has no children. Norman and Jan have two daughters, both of whom are now teenagers. Delwyn has one son.
[4] Mary and her husband acquired the Property in 1972. Their marriage ended in 1981. A number of years later, in 1990, the Property was transferred into Mary’s sole name. Donald’s evidence is that no money changed hands. Rather, he says that his father received a property of similar value in Whangamata in exchange. Jan’s evidence, on the other hand, is that Donald and Norman provided financial assistance to enable Mary to acquire her husband’s interest in the Property. She further says that, in consideration for Donald and Norman’s assistance to purchase their father’s half share in the Property, Mary acknowledged that she would hold the entire Property on trust for Donald and Norman. Donald denies knowledge of any such trust and says that it was always clear that the Property was his mother’s, to do with as she wished.
[5] The parties differ as to how and when the Property was developed. Donald’s evidence is that from about 1982 onwards he and Norman started work on the Property. First, they put in a driveway and drainage. During 1983 they built a garage and placed a pre-fabricated shed on the Property.
[6] In 1985 Norman married Jan. Both sons were living with Mary in the family home in Glendene at the time, and Jan moved in with them. Donald’s evidence is that shortly afterwards, in 1986, he moved onto the Property. He lived in a caravan and garage, which he converted into a living area. He continued to work on completing the conversion of the pre-fabricated shed into a house. The brothers shared the costs of this work (about $15,000 each) but Donald says he undertook most of the labour as he was living on site, while Norman was living and working fulltime in town. In 1990, when the shed conversion was nearly complete, Donald says that Norman and Jan joined him on the Property.
[7] Donald says that he lived on the Property, in the garage or in a caravan, until about 2003. He then moved to the South Island but returned to the Property during winter, as he found the South Island winters too cold.
[8] Jan’s evidence, on the other hand, is that:

Norman and I, after our marriage, lived with Mary for a couple of years at the Glendene family home. We started building a home for ourselves on the Property in or around 1987 ... and gradually extended and improved the house and the section with our own earnings during the marriage, in order to house ourselves and our two daughters ...

[9] Jan does not dispute that Donald lived at the Property periodically, but says that she and Norman paid the outgoings on the Property, including the rates. Donald, on the other hand, says that Mary paid the rates until 1996 and he has paid them since then. Donald also claims that most of the subsequent capital improvements to the Property (including a transformer, an underground electrical connection, a septic tank and a new toilet system) were paid for by Mary. He acknowledges, however, that he and Norman funded the addition of a bedroom to the garage in 2013. He says that he provided most of the labour for this, as Norman was too ill at the time to help much. Norman, he says, met three quarters of the costs of the work ($6,000). Donald also acknowledges that Jan has recently painted the inside and outside of the house.
[10] It is common ground that neither brother ever paid any rent to Mary in respect of their occupation of the Property.
[11] Norman died, after a long illness, on 11 May 2014. Prior to his death, Jan says, he had commenced efforts to arrange for the transfer of title for the Property into his and Donald’s names as tenants in common, so that the legal title reflected their beneficial ownership. This was never completed, however.
[12] Mary’s original will of 7 January 1985 left the Property to Donald and Norman. On 28 August 2014, several months after Norman’s death, Mary executed a new will. She directed that the residue of her estate be divided into three equal shares: one share payable to Donald, one share payable to Delwyn and her son, and the final share payable to Norman and Jan’s two daughters.
[13] Several weeks later, on 22 September 2014, Mary gifted the Property to Donald and the title was transferred into his name. Jan was not aware of this at the time, but says that when Mary was dying of cancer she told Jan that she had made arrangements whereby the interests of Jan and her two daughters would be looked after by Donald. Jan claims that Mary repeatedly stated that, even after her death, Jan and her daughters would never have to move from their home and that Donald “would transfer our share to us if we wanted”.
[14] Eleanor Hall, a solicitor of some 33 years’ standing, prepared Mary’s 2014 will. She also acted for both Mary and Donald in relation to the transfer of the Property to Donald, having obtained a waiver of independent legal advice from both of them in relation to the transaction.
[15] Ms Hall has sworn an affidavit, supported by her contemporaneous file notes. She deposes that Mary told her that she wished to transfer the Property to Donald because of all the love and support he had shown, especially since he had moved back up to Auckland to help look after Norman when he was ill. Mary informed Ms Hall that she wanted Donald to have the Property now that Norman had died. Ms Hall specifically asked Mary about what she understood Jan’s expectations to be regarding the Property. Mary told Ms Hall that Jan’s expectations “would not be a problem” because Jan and the girls could still stay on in the Property, as Donald had a good heart and would let her stay there with the girls. Mary also told Ms Hall that Jan knew that she (Mary) had been very good to her over the years and had helped out Norman and Jan many times with money. Further, Jan had lived in the Property for more than 20 years, rent-free.
[16] Ms Hall says that she had no doubts about Mary’s mental capacity or what she wanted. Nor did she sense any pressure from Donald. She saw Mary on four separate occasions and had no concerns at any time that she was not acting of her own free will.
[17] Mary died on 21 May 2015. At the time of her death her estate primarily comprised the family home in Glendene and some savings.
[18] After the Property was transferred to him, Donald made a new will. He bequeathed the Property to his two nieces, Norman and Jan’s daughters. He has also (to date at least) continued to allow Jan and her daughters to live on the Property.
[19] On 5 November 2015, Jan lodged her caveat. She says that her decision was prompted by Donald telling her that he was planning to sell both the Glendene property and also the Bethell’s Beach Property. Although 18 months have elapsed since her caveat was lodged, Jan has not yet issued proceedings or taken any steps to substantiate or seek to enforce any claims she may have in relation to the Property.

The High Court judgment

[20] Associate Judge Doogue noted that in order to sustain the caveat, Jan was required to show that there was an arguable case that an implied trust exists on one of the two bases she had identified, namely that she had an equitable interest in the Property on the basis that:^[3]

• (a) Norman had provided funds for the acquisition of the Property; or
• (b) Jan and Norman had provided funds for the Property’s upkeep or maintenance.

[21] The Judge was not satisfied that it was reasonably arguable that an implied trust arose as a result of Norman’s alleged contributions to the purchase price. He noted that there was a significant factual dispute regarding whether such contributions were made at all. Accordingly, in order to show a reasonably arguable case, it was necessary for Jan to explain to the Court the basis of the claim that she intends to make at trial:^[4]

... That explanation should be accompanied by at least an outline of the evidence which the applicant intends to put forward in support of the claim. If the applicant were to present her case at trial on the basis of unsupported and furthermore, disputed, assertions about the payment of significant sums of money, without putting forward any corroborating material, then there is a high likelihood that she would fail.

[22] The Judge expressed concern at the lack of detail provided by Jan about the alleged arrangement. In particular, the amount of money involved was not stated, the date when the arrangement was entered into was not even approximately stated, and the source of the money that Norman allegedly provided was not identified. The Judge observed that:

[22] The absence of any evidence seems particularly unusual in this context given that, if the applicant’s account of events is correct, a significant sum of money must have changed hands. It seems very unusual that there should be absolutely no record of such a transaction.

[23] Even if these deficiencies could be addressed, the Judge’s view was that Jan would face difficulties because she did not assert that she herself was the beneficiary of any implied trust that might have come into existence. Rather, she asserted that her late husband Norman was the beneficiary. Jan, however, has not sought letters of administration on behalf of Norman (who died intestate).
[24] The Judge then turned to consider whether it was reasonably arguable that an implied trust in Jan’s favour could have arisen as a result of contributions by her and Norman to the Property. He noted, in particular, Jan’s claim that she and Norman had paid all outgoings relating to the property over the years, including rates and various improvements to the property.
[25] In this context the Judge referred to the principles established in cases such as Lankow v Rose.^[5] In particular, those cases have established that it is necessary for a person who makes such a claim to establish that more than a minor contribution was made to the acquisition, preservation or enhancement of the defendant’s assets, whether directly or indirectly; and that in all the circumstances both parties must be taken reasonably to have expected that the claimant would share in the assets as a result. While the contributions do not need to be monetary in nature, there must be a causal relationship between the contributions and the acquisition, preservation or enhancement of the defendant’s assets; and the contributions that are made must manifestly exceed any benefits that the claimant derives from the arrangement.^[6]
[26] The Judge noted that there was a factual dispute about whether or not Jan and Norman had paid rates on the Property, as Jan claimed. As noted above, Donald’s evidence is that Mary paid the rates on the Property until 1996 and that he has paid the rates since then. The Judge observed that:

[30] Given this factual dispute it would normally be expected that the applicant would provide at least documentation to support her claim. The only evidence which has been produced in support of the applicant’s claim is a number of invoices which clearly relate to daily expenses or repairs and maintenance work. ... in the absence of any further documentation on this point, it would seem that the applicant’s claims in this respect suffer from the same evidential defects identified above in relation to the claimed contributions to the purchase price.

[27] The Judge noted that there was “little doubt” that Jan and Norman did actually make some payments in regard to the Property. However, some of these would have been running costs that any person occupying the property rent-free might be reasonably expected to make. Such payments could not therefore be regarded as giving rise to a reasonable expectation that they would result in a proprietary interest in the property. Given their rent-free occupation of the Property for over 20 years, “it could not be said that the contributions made by the applicant and Norman manifestly exceeded the benefit that they derived from the arrangement”.^[7]
[28] Finally, the Judge observed that even if he was wrong in his conclusions in respect of the implied trusts asserted by Jan, the fact that the Property is now owned by Donald (not Mary) gives rise to further difficulties:^[8]

... it is far from clear that the existence of those trusts could now bind the respondent. This is a complex area of law incorporating concepts of fraud, equity and indefeasibility.

Does Jan have a reasonably arguable case that she has a caveatable interest in the Property?

[29] Mr Chambers submitted that the Judge erred in concluding that Jan’s claim that she has a caveatable interest in the property is not reasonably arguable.

Does Jan have a caveatable interest in her capacity as Norman’s next of kin?

[30] Jan’s originating application and her supporting affidavit elaborate further on the terms of the alleged trust. For example, Jan says in her affidavit that:

Since the time Norman and Donald assisted Mary with her purchase of their father’s share of the Property in 1990, it had been acknowledged by Mary and the extended Wakenshaw family that, in consideration for their assistance, Mary would hold legal title to the Property, but the beneficial owners of the Property were Donald and Norman.

[31] As the Judge noted, there are serious deficiencies in Jan’s evidence regarding Norman and Donald’s alleged financial contribution to Mary’s purchase of their father’s share of the property. Even putting those issues to one side, however, Jan faces the difficulty that in her caveat she claims that she is the beneficiary under an implied or constructive trust. In her originating application and supporting evidence, however, Jan asserts that her late husband Norman was the beneficiary of the relevant trust, not her.
[32] Mr Chambers attempted to bridge the gap by arguing that Norman’s beneficial interest in the Property passed to Jan on his death. Jan’s evidence is also framed in that way. In particular, she asserts a claim “by virtue of [her] survivorship” as Norman’s next of kin “pursuant to what [she] understands the laws of intestacy say”. However, any argument that Jan has somehow “inherited” Norman’s beneficial interest in the Property faces the insurmountable obstacle that Jan has never sought letters of administration in respect of Norman’s estate. Nor has any other person. The next of kin of a person who dies intestate has no caveatable interest in the deceased’s land until the estate has been fully administered.^[9]
[33] Associate Judge Doogue considered this issue, concluding that:^[10]

[25] Even though I was not requested to do so, I gave consideration to adjourning this matter so that any necessary application for the grant of letters of administration could be made, thus supplying the deficiency identified above. However, given that these proceedings concern a caveat which is providing a block on the title of the land owned by the respondent, I do not consider, taking a balanced view of matters, that it is reasonable to further delay consideration of the matter in order to give time for such an application to be made. There is also concern that the applicant may not have a proper appreciation of the grounds that she would need to make out in order to justify the continuation of the caveat. The references noted above to claims under the Family Protection Act 1955 and the Law Reform (Testamentary Promises) Act 1949 do not engender confidence in this area.

[34] We note that over a year has now passed since his Honour’s judgment was delivered. No efforts appear to have been made by Jan in the intervening period to seek letters of administration in respect of Norman’s estate. As a result, Jan currently has no standing to seek a caveat either as the administrator of Norman’s estate or as a prospective beneficiary of his (intestate) estate.

Does Jan have a direct caveatable interest in her own right?

[35] Mr Chambers submitted, in the alternative, that Jan has a reasonably arguable claim to a caveatable interest in the Property in her own right. In particular, he argued that her personal contributions to the Property have given rise to a constructive trust in her favour.
[36] We have set out the Judge’s summary of the relevant legal principles from Lankow v Rose, which we adopt, at [26] above.
[37] Jan’s evidence regarding her contributions to the Property is unsatisfactory. It is vague and lacks detail. Almost no supporting documentation has been provided. This may, in part, reflect that Jan’s primary argument was that an express trust arose, in Norman and Donald’s favour, due to their having provided financial assistance to their mother to purchase their father’s interest in the Property. Jan’s affidavit evidence is accordingly not squarely directed to her alternative argument that a constructive trust has arisen in her favour due to her own contributions to the Property. It appears that this particular argument only developed later. Given the wide-ranging and diffuse nature of Jan’s evidence, however, there is at least some material before the Court that bears on this issue. Further, aspects of Donald’s evidence are also relevant to the issue of Jan’s contributions.
[38] Jan gives little or no evidence regarding how much money she and Norman put into the development of the Property. Donald’s evidence is that he and Norman jointly funded the development of the residential dwelling on the Property at a cost of $15,000 each. We note that this would have been a not insignificant sum in 1986. Jan deposes, in fairly general terms, that the source of the funds that Norman contributed towards the development of the Property was from the couple’s “own earnings”.
[39] As we have noted above, a bedroom was added to the garage on the Property in 2013. Donald deposes that Norman provided the majority of the funding ($6,000) for this. Again, based on Jan’s evidence, this contribution would presumably have been sourced from matrimonial income.
[40] Jan also gives evidence of her and Norman having undertaken other improvements, and undertaking maintenance and repair work on the Property over the years. The precise scope of these works is in dispute. Further, although it is accepted that Norman and Jan have paid some outgoings on the Property, including such things as electricity, water, gardening and so on, it is disputed that they paid any rates or insurance.
[41] In our view, it is reasonably arguable that Norman and Jan jointly made a reasonably significant financial contribution towards the development of a dwellinghouse on the Property. There would likely be a real issue at trial, however, as to whether Jan’s contributions manifestly exceeded the benefits she has derived (namely rent-free occupation of the Property for over 20 years) in terms of the principles set out in Lankow v Rose.^[11]
[42] Further, and perhaps more significantly, Jan has not discharged the burden on her of satisfying us that it is reasonably arguable that she and Mary both expected that Jan would share in the Property as a result of Jan’s contributions to the acquisition, preservation or enhancement of it.
[43] Jan’s own evidence on this issue is sparse. The main thrust of her evidence is that her expectations of an interest in the Property arose out of Norman’s initial financial contribution to the purchase price of his father’s share in the Property, rather than any direct contribution she may have made herself. Indeed, on Jan’s evidence, at the time of her and Norman’s subsequent contributions to the Property, Norman was already the joint beneficial owner.
[44] As for Mary, it is quite clear from Ms Hall’s evidence that she had no expectation or understanding that Jan had acquired an equitable interest in the Property, arising out of her own contributions or otherwise. Further, even if the “reasonable expectations” obstacle could be overcome, this would at best render it arguable that Jan had an equitable interest in the Property when Mary was the registered proprietor. Mary is no longer the registered proprietor, however, having gifted the Property to Donald in 2014. Donald, as the current registered proprietor, is the defendant to these proceedings. Pursuant to s 137(2)(c) of the Land Transfer Act 1952, Jan was required in her caveat to provide information as to how the interest she claimed is derived from the current registered proprietor, Donald. The caveat itself provides no guidance on this issue and counsel’s submissions provided little further illumination.
[45] Where a transferee receives property with notice that it is trust property (actual or constructive), the transferee is liable as constructive trustee to account for the property.^[12] Ms Hall’s evidence, however, is that Mary expressly denied to her that Jan had any interest or expectation regarding the Property. Mary told Ms Hall that she believed that Donald would look after Jan and her daughters, including by allowing them to continue living at the Property, but this was simply “because he has a good heart”. Mary elected not to elevate this to the status of a legal obligation. As for Donald, he strenuously denies any knowledge of a constructive trust in favour of Jan. There is certainly no suggestion that either Ms Hall or Mary gave him notice that the Property was being transferred to him subject to a constructive trust in favour of Jan.
[46] In our view it is not reasonably arguable on the evidence before us that Donald received the Property with notice that it was subject to a constructive trust in Jan’s favour. Accordingly, although Jan may have a possible claim for breach of trust against Mary’s estate, she has not satisfied us that she can maintain a caveat against the current registered proprietor of the Property, Donald.
[47] Finally, Mr Chambers submitted that Jan has a reasonably arguable caveatable interest on the basis of prospective claims that she or her daughters may have under the Law Reform (Testamentary Promises) Act 1949 or the Family Protection Act 1955. During the course of oral argument, however, Mr Chambers appeared to accept that prospective claims of this nature could not found a caveatable interest in property. The law is clear that a mere right to apply to the Court for an order vesting property in an applicant does not in itself give rise to a caveatable interest.^[13] Further, we note that the caveat itself does not assert an interest in the Property on behalf of Jan’s daughters.
[48] For the reasons outlined, we consider that Associate Judge Doogue was correct to dismiss the originating application for an order that the caveat not lapse.

Result

[49] The appeal is dismissed.
[50] The appellant must pay costs to the respondent for a standard appeal on a band A basis and usual disbursements.

Solicitors:
Henley-Smith Law, Auckland for Appellant
Penney Patel Law, Auckland for Respondent

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^[1] Pursuant to s 145A of the Land Transfer Act 1952.

^[2] Wakenshaw v Wakenshaw [2016] NZHC 773 at [54].

^[3] Wakenshaw v Wakenshaw, above n 2, at [19].

^[4] At [20].

^[5] Lankow v Rose [1995] 1 NZLR 277 (CA).

^[6] Lankow v Rose, above n 5, at 282 per Hardie Boys J. This reasoning has been referred to on numerous occasions, including in Vervoot v Forrest [2016] NZCA 375, [2016] 3 NZLR 807 at [45]–[47]; Watson v Taylor [2002] NZFLR 59 (HC) at [41]–[46]; Glass v Hughey [2003] NZFLR 865 (HC) at [38]–[43]; Harvey v Beveridge [2013] NZHC 1718, [2013] NZAR 1364 at [9]–[13]; Marshall v Bourneville [2013] NZCA 271, [2013] 3 NZLR 766 at [27]; Hunt v Ogle [2003] NZFLR 1025 (HC) at [23]–[24]; and Stubbs v Holmes [1999] NZFLR 780 (HC) at 787. See also Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at [13.2.4].

^[7] Wakenshaw v Wakenshaw, above n 2, at [31].

^[8] At [32].

^[9] Re Savage’s Caveat [1956] NZLR 118 (SC) at 120–121. The same principle applies to a residuary beneficiary under the will of a deceased person, see for example Guardian Trust and Executors Co of New Zealand Ltd v Hall [1938] NZLR 1020 (CA) at 1026 and Holt v Anchorage Management Ltd [1987] NZCA 5; [1987] 1 NZLR 108 (CA) at 114 per McMullin J and 117 per Somers J.

^[10] Wakenshaw v Wakenshaw, above n 2.

^[11] Lankow v Rose, above n 5, at 282 per Hardie Boys J.

^[12] Smith v Hugh Watt Society Inc [2004] 1 NZLR 537 (HC).

^[13] See Jurkovich v Fortune HC Auckland M303/97, 25 August 1987 at 13–14 and Bell v Nathan HC Auckland M651/87, 15 September 1987 at 12–14. See further Neil Campbell Campbell on Caveats (2nd ed, LexisNexis, Wellington, 2016) at [10.010(e)-(g)]; and Shannon Lindsay Caveats Against Dealings in Australia and New Zealand (The Federation Press, New South Wales, 1995) at 94.