Siddiqui v Siddiqui [2022] NZCA 324 (19 July 2022)

Last Updated: 26 July 2022

IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA

CA376/2021 [2022] NZCA 324

	BETWEEN	ASHISH SIDDIQUI AND YASHIKA SIDDIQUI Appellants
	AND	AMIN AZHAR SIDDIQUI AND USHA AMIN SIDDIQUI Respondents

Hearing:	23 March 2022
Court:	Kós P, Woolford and Dunningham JJ
Counsel:	G D Stringer for Appellants J S Cooper QC and B D Huntley for Respondents
Judgment:	19 July 2022 at 10 am

JUDGMENT OF THE COURT

1. The appeal is dismissed.
2. The cross-appeal is allowed in part.

100. The appellants must pay costs to the respondents for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Kós P)

• [1] The Siddiquis — parents Amin and Usha, son Ashish and daughter Supriya — immigrated to New Zealand in 1991.^[1] The parents did well enough; the son did better. By 2006 the parents were still renting; the son had his own house. That year a family arrangement enabled the parents to at last acquire a house.
• [2] The house was acquired by the son in May 2006 for $249,000.^[2] The house was fully funded by mortgage finance, which the son organised through the realtor and a bank. The son provided collateral security to enable the lending ratio requirements to work. The son told the father that the father’s name was on the title; in fact, the house was registered in the names of the son and his wife. The parents paid the mortgage (via the son) and all other outgoings: ground rates, water rates and insurance. They also maintained the property.
• [3] The parents said they believed the house was theirs, and that they were surprised and disappointed in 2008 to find their names were not on the title. That discovery propelled the dispute that led eventually to this litigation, in which the parents sued the son and his wife.
• [4] Quite what the son believed is not exactly clear. His accounts were inconsistent and he made a very poor witness. But it may perhaps be noted that on the day the parents moved into the house, they were greeted by a letter from the son. It began:

My darling Mum + Dad
Congratulations!!
Welcome to your new home. ...

• [5] Davison J rightly preferred the parents’ evidence over the son’s.^[3] If the son’s understanding was unclear, we at least know what he claimed. It was that the parents were mere licensees, and that the money paid to him (the parents believed, for the mortgage) was rent. That contention, he now accepts on appeal, is quite untenable.
• [6] The Judge rejected the son’s account.^[4] He held that the house was held by the son and his wife on an institutional constructive trust — in effect, a common intention constructive trust — for the parents.^[5] He rejected an alternative argument for the son that any constructive trust should be set upon reasonable expectations (and contributions) so that he would get a 13 per cent interest in the equity.^[6] But the Judge allowed certain adjustments for contribution.^[7]
• [7] The son and his wife appeal, saying the constructive trust should have been based on reasonable expectations, as they had claimed. They also appeal over the adjustments, seeking a “guarantee fee” (for their contribution to the purchase in providing collateral) and compound interest on other adjustments allowed by the Judge. Finally, they appeal the award of costs made by the Judge.
• [8] The parents cross-appeal over the adjustments, focused on the extent of the adjustment allowed by the Judge for expenditure by the son on a new bathroom at the house, and for interest.
• [9] So, the issues for us are three:

(a) What form of a constructive trust should have been found?

(b) What adjustments should have been made?

(c) What costs should be paid below?

• [10] We will describe the judgment, and the arguments made against it, as we address each issue. However, to the extent the son and his wife’s arguments dispute the credibility assessments made by the trial Judge, this Court will be very wary of contradicting the view of an experienced Judge who had the benefit of seeing and hearing the witnesses himself, a benefit we have not had.^[8]

What form of a constructive trust should have been found?

• [11] Seven substantial findings of fact underpinned the Judge’s conclusion that the house was held by the son and his wife for the parents on an institutional constructive trust.^[9]
• [12] First, conditions in the purchase agreement providing for the purchase in the son’s name “or nominee”, and settlement being subject to the purchaser(s) obtaining finance to complete, were inconsistent with the son’s evidence that he had entered the agreement to purchase the house as an investment for himself and his wife. There was no need for the son to include the finance condition; he and his wife had arranged bank mortgage finance that would have enabled them to make an unconditional offer, at a lower price for the property.^[10] As the Judge put it:^[11]

The fact that the defendants made no attempt to exploit their ability to make an unconditional offer is in my view another indication that [the son] entered into the agreement to purchase [the house] on behalf of his parents, and as a means of assisting them to purchase the property.

• [13] Secondly, the Judge found the son had asked the father how much the parents could afford for mortgage payments, and the father told him they could manage $400 per week. That was a significant increase over the rent of $295 they had been paying previously. The parents’ willingness to pay that increased sum was consistent with an understanding it was advantageous to do so because they would be servicing the mortgage.^[12]
• [14] Thirdly, on the other hand, the $400 per week the parents were paying in relation to the house was inconsistent with the payment being rent: the market rent of the house at the time was around $300 per week, and did not reach $400 per week until 2014.^[13]
• [15] Fourthly, the Judge preferred the father’s evidence as to his conversations with the son about the arrangements they had made to apply for finance in order to purchase the property. He expressly rejected the son’s evidence that the son had explained to the father that he and his wife would buy the property themselves as an investment and rent it to them for as long as they wished. The Judge found the son and his wife dealt with the parents “on the basis that it was the [parents] who were in substance buying the house and who would be the owners”.^[14] The Judge found that neither the son nor his wife ever told the parents that they were not to be the owners and that they would be renting the property only.^[15]
• [16] Fifthly, the structuring of the borrowings from the bank (and provision of collateral security to meet the bank loan security ratio) was done to ensure that the parents would pay the whole of the mortgage costs and also all outgoings on the house. The parents were to be responsible for servicing the total sum required to purchase the property.^[16] In fact, the parents then arranged the house insurance and paid the premium, the ground rates and the water rates.^[17]
• [17] Sixthly, the Judge found the son had told the father that the father’s name was on the title and that he would give him a copy of the documents (which he never did in fact). That representation was indicative of a collective intent that the parents be owners of the property. As the Judge noted, throughout the entire process commencing with their search for a suitable house to buy and the arranging of finance to pay for it, the parents relied entirely on the son and trusted him and his wife to be acting in their best interest.^[18] The Judge found that by reason of the explanations and instructions given to them principally by the son but also with his wife’s concurrence, the parents “reasonably understood that [the son] had arranged the financing of the purchase so that they were the owners of the property”.^[19]
• [18] Seventhly, when the parents confronted the son and his wife in 2008, after their daughter had discovered that the son and wife were the recorded owners of the house, the son “accepted that his parents were the beneficial owners of the property, and he offered to sign anything necessary to confirm the position”.^[20]
• [19] What then did these factual findings mean as a matter of law?
• [20] The Judge found that the parents had a “justifiable and entirely reasonable expectation that they had an interest in the property as its beneficial owners”.^[21] The parents had proven on the balance of probabilities that at the time the house was purchased:^[22]

... it was expressly agreed between them and [the son and his wife] that the basis on which [the son and his wife] would purchase and become the registered owners of the [property] was that they would hold it on behalf of and on trust for the [parents].

The Judge also found that the son and his wife’s refusal to recognise the parents’ interest in the house as beneficial owners was unconscionable and that the parents had established that they held the property pursuant to an institutional constructive trust for and on behalf of the plaintiffs.^[23]

• [21] The Judge reached that conclusion referencing the decisions of this Court in Lankow v Rose and Gormack v Scott.^[24] He noted that the purpose of such a constructive trust generally is not to create an ongoing trust relationship but to force the disgorgement of property by constructive trustees, with the trust being “a means to an end”.^[25]

Appeal

• [22] Mr Stringer sensibly accepted that the imposition of a constructive trust here was inevitable. His submissions focused on what sort. He contended for a reasonable expectations trust, which would preserve a proportion of the equity for the son and his wife.
• [23] Mr Stringer submitted that the arrangements between the parties as to the shares in which they beneficially owned the property were uncertain, and that the imposition of a common intention constructive trust was wrong. Rather, a reasonable expectations trust was appropriate, whereby the remedy would be proportionate to reasonable expectations based on contribution. The alternative would cause significant detriment to the son and his wife. Mr Stringer pointed to certain inconsistencies in the father’s evidence and submitted it should not have been preferred to that of the son and his wife. He put particular stress on the fact that the parents ceased paying mortgage contributions from April 2015. This, it was said, was inconsistent conduct from a party alleging that the property was theirs. From then on, the son and his wife made the mortgage payments without contribution from the parents.

Discussion

• [24] We are entirely unpersuaded by these submissions, which fail on the facts. We have set the Judge’s essential analysis out at [12]–[18] above. It is a powerful analysis of the evidence, entirely fair in our view, and wholly inconsistent with the argument now being advanced by the son and his wife.
• [25] We will not refer to a number of specific points of factual contest made on the son and his wife’s behalf, because they do not warrant discussion. The argument centring on non-payment of the mortgage from April 2015 is notionally their best, and only, point. But it is explained by the dispute that had arisen as a consequence of the son and his wife’s unconscionable denial of the parents’ ownership interest. To grant them a proportionate interest in equity would be to reward their own wrong, and to fail to do equity. The better response was the Judge’s, which was to require the parents, as now‑confirmed owners, to reimburse the mortgage payments made on their behalf.^[26]
• [26] We are satisfied that the circumstances here — as set out at [12]–[18] above — meet the criteria for imposition of constructive trust identified in Lankow v Rose, as further explained in Gormack v Scott.^[27] It is unnecessary to enlarge on that conclusion.

What adjustments should have been made?

• [27] A defaulting fiduciary whose actions nonetheless contribute to an improvement in the trust property may be compensated, at equity’s discretion.^[28] In this case, certain such adjustments were made in favour of the son and his wife. Mr Stringer’s argument focused on two matters: (1) a “guarantee fee” claimed by the son and his wife (but disallowed by the Judge); and (2) interest on other adjustments allowed.
• [28] By leave, unopposed, we permitted the parents to amend their notice of cross‑appeal slightly at the hearing. The cross-appeal focuses on two matters: (1) the extent of the adjustment allowed by the Judge for expenditure by the son on a new bathroom at the house; and (2) interest.
• [29] We will address matters in this order: the claimed guarantee fee, the bathroom expenditure, and then interest (on which subject both sides are unhappy).

Guarantee fee (appeal)

• [30] The son and his wife claim they should receive a credit for the security value of the equity they provided by way of collateral over their own home in the original purchase price. They say a proper fee, based on the evidence of a Mr Bhika, an accountant, would be $92,000. The parents could not obtain finance in their own names, they were paying rent elsewhere and the son and his wife took on the mortgage liability as well as providing collateral. In this was a commercial risk; the $800 paid per fortnight by the parents might not have been sufficient to meet payments if interest rates had risen.
• [31] We think however that the Judge was correct in his conclusion that the provision of collateral security was more likely than not a gift by the son made without any expectation or benefit, and out of love and affection for his parents, as indicated by the letter quoted at [4] above.^[29] It is not suggested such a fee was discussed and agreed, and we consider that would have been necessary in this familial context to displace the primary presumption of a gift. Nor was it evident that providing collateral represented a cost to the son/wife, for which they should be recompensed as a matter of remedial discretion. They acquired other properties, and the son did not say in his evidence that the provision of collateral cost them any particular opportunity. He merely said that there was a “cost to us in doing this” and a fee would be “appropriate”. Mr Bhika’s evidence based the suggested fee on commercial value, not cost incurred as a result of displaced opportunity.

Bathroom expenditure (cross-appeal)

• [32] In the High Court, the son and his wife claimed they met the costs of bathroom renovations totalling approximately $20,000. They sought an adjustment to the amount payable to the parents to recognise these costs. The parents argued the amount should only be adjusted by $3,466.
• [33] The Judge found there was no evidence to show that the parents reimbursed the son for any of the bathroom refurbishment costs. He was satisfied the son and his wife had proved that they did pay for various bathroom-related expenses totalling approximately $20,000. But the Judge also considered there had been some double counting of labour costs, and so held the sum of $18,500 was more appropriate.^[30]
• [34] The parents cross-appeal on the basis that finding cannot be sustained by the evidence. They say the evidence does not show that the son and his wife actually made the payments (or reimbursed them for those payments), or that the payments related to bathroom renovations at all. Further, in some instances, the evidence demonstrates that they, and not the son and his wife, had made the payments. The parents claim that the more appropriate sum is $6,001, or $4,501, after adjusting for an insurance payment of $1,500 made by the son allegedly to reimburse them for the bathroom renovations.
• [35] The burden of proof lay of course on the son and his wife to make out the adjustment by proving on the balance of probabilities that they paid for $18,500 worth of bathroom renovations (either by themselves or by reimbursing the parents). We approach this sub-issue by asking whether that standard of proof was met by the son and his wife. In particular, given the unsatisfactory nature of the son’s evidence, and the direct conflict of evidence between him and his father, we consider some adequate documentary foundation would be needed for the son to meet the required standard.
• [36] The parents accept the son and his wife paid $6,001.21. We have reviewed the evidence and conclude the concession is sound. It is unnecessary to engage in a detailed examination here of that expenditure, which was on various shower and bathroom fittings, being items 4, 5, 9 to 11, 13, 16 and 20 in a schedule (Table 3) annexed to Ms Cooper QC and Ms Huntley’s submissions.
• [37] The schedule includes evidence of quotes with no accompanying invoices (items 1, 3 and 15), as well as other invoices that are apparently unrelated to the bathroom renovations (items 2, 17 and 18). We exclude these.
• [38] As to the balance, there is a conflict of oral evidence, and no documentary evidence to support the assertion of reimbursement. In an affidavit the son refers to an email his wife sent the father concerning outstanding amounts she claimed were owed. It refers to bathroom repairs totalling $15,000. In another, later email on 3 December 2015, the son and his wife claim bathroom repairs of $20,000. The difference does not appear to have been explained by them. The son claimed to have paid for items with his credit card, but bank records did not sustain that claim beyond the items identified at [36] above and conceded by the parents. In response to that discrepancy, the son then said under cross-examination that he had paid for some items in cash. More detailed emails from him to the father, supporting his claims, were said to be unavailable as he no longer had access to that email account.
• [39] We acknowledge the evidence of the father was not entirely satisfactory either. A great deal of casualness seems to have accompanied the bathroom renovation exercise. He had not disputed the emailed claims for $15,000, and then $20,000, referred to above, because he did not want to jeopardise transfer of the property. On the other hand, he accepted in evidence that the son had contributed to the labour costs. That contribution must fall beyond the items conceded and noted at [36]. The only documentary evidence of any use is a handwritten note by the father in 2010 showing a split of labour costs of $3,959 to the son and $2,931 to[31]he father.³¹ In the absence of better evidence, we adopt that sum as the son’s contribution to labour, and we add it to the sum in [36].
• [40] We can understand why the Judge approached the matter in the way he did, standing above the detail and, at the end of an already lengthy judgment, addressing the bathroom renovations in four concise paragraphs. Before us the issue assumed greater relative importance, and we have been compelled to delve into detail. Ultimately, given the unsatisfactory nature of the oral evidence on both sides on this issue, we adhere to the documentary record and put the son and his wife, as claimants, to proof. That default forensic approach, which is the only one available to us, results in a reduction in the sum payable to the parents to that identified at [36] and [39] above, but subject to the unchallenged $1,500 reimbursement noted at [34].
• [41] It follows the adjustment for bathroom expenditure is reduced from $18,500 to $8,460.

Interest (appeal and cross-appeal)

• [42] Mr Stringer submits that compound interest should be payable on the payments made by the son and his wife towards the mortgage after cessation of payments by the parents in April 2015. The Judge rejected that approach, ordering simple interest.^[32] Mr Stringer submitted that compound interest was appropriate as the parents had benefitted by being able to save their incomes, putting them in a better financial position overall when it came time to obtain finance when taking over liability for the remaining mortgage.
• [43] For the parents, Ms Huntley submits the Judge erred in not allowing interest on mortgage overpayments they had made, and on an increase in the net mortgage sum payable as a result of a restructuring effected by the son. She also submits the Judge erred in not applying s 12 of the Interest on Money Claims Act 2016 to interest payable by the parents on the mortgage payments made by the son after the dispute flared up and the parents stopped paying.
• [44] All parties proceeded on the basis that the following adjustments were effectively separate orders for payment, each potentially attracting an interest order also. We follow that approach here. Furthermore, as the adjustments have differently‑dated internal components, they should not just be netted off to produce a single sum payable. With that introduction, the adjustments are four. The first two are credits to the son and his wife, and the third and fourth are debits:

(a) Mortgage payments made by the son for six years, from 6 April 2015 to 30 April 2021. These total $91,188.

(b) The bathroom expenditure by the son and his wife, totalling $8,460. We give that a nominal single date of 1 May 2010.

(c) Overpayments of mortgage made by the parents prior to April 2015. This occurred because the parents paid $800 per fortnight, but the actual mortgage payments then made by the son were less — substantially so as from June 2011. The total overpayments come to $25,879.

(d) A small extra sum reflecting an increase in mortgage principal as a consequence of a restructuring undertaken by the son in May 2011. The increase (which arose when the amounts were reconsolidated in June 2015) was $1,627.

• [45] We accept that items (a)–(c) should attract interest calculated in accordance with ss 10, 12 and 13 of the Interest on Money Claims Act, using the statutory calculator. We do not consider the exceptions in ss 18 and 24 apply here. Nor is compound interest either permissible or appropriate. Broadly, therefore, we agree with Tables 1 and 2 in Ms Cooper and Ms Huntley’s submissions.
• [46] Item (d) should have been deducted from the principal the parents were required to pay the son and his wife when they settled on 1 December 2021. It should now simply be netted off the final total adjustment, but without interest in its own right (the amount being de minimis).
• [47] The interest payable in respect of items (a)–(c) will readily be calculable. If there is dispute (and there should not be) or if consequential orders are required (and they should not be), that may be resolved in the Court of original jurisdiction.

What costs should be paid below?

• [48] Mr Stringer submitted the Judge was wrong to award the parents costs on a 2B basis. He submits that because the parents had failed in certain allegations (principally on mortgage repayments, bathroom repair reimbursement and a Land Transfer Act fraud claim), costs should lie where they fall or be reduced.
• [49] We do not accept that submission. The parents had not disputed that an adjustment ought to be made — if they succeeded in their primary claim — for mortgage payments by the son after April 2015. By an overwhelming proportion, the parents succeeded in their claim. That was the “event” that costs follow. The respects in which the parents did not succeed are simply too minor to require costs reduction under r 14.7(d) of the High Court Rules 2016.

Result

• [50] The appeal is dismissed.
• [51] The cross-appeal is allowed in part.
• [52] The appellants must pay costs to the respondents for a standard appeal on a band A basis and usual disbursements.

Solicitors:
Inder Lynch, Auckland for Appellants
Heimsath Alexander, Auckland for Respondents

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^[1] In this judgment, for ease of understanding we generally refer to the appellants as “the son” or “the son and his wife”, and to the respondents as “the parents”.

^[2] The purchaser was the son “&/or nominee”.

^[3] Siddiqui v Siddiqui [2021] NZHC 1234, (2021) 22 NZCPR 342 [Judgment appealed] at [121].

^[4] At [121].

^[5] At [139].

^[6] At [167]–[168].

^[7] At [163].

^[8] Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [5].

^[9] Judgment appealed, above n 3, at [139].

^[10] At [115]–[117].

^[11] At [117].

^[12] At [118].

^[13] At [128].

^[14] At [121].

^[15] At [121].

^[16] At [123].

^[17] At [129].

^[18] At [125].

^[19] At [126].

^[20] At [134].

^[21] At [137].

^[22] At [131].

^[23] At [139].

^[24] At [108]–[109], citing Lankow v Rose [1995] 1 NZLR 277 (CA); and Gormack v Scott [1995] NZFLR 289 (CA).

^[25] At [110], citing Commonwealth Reserves I v Chodar [2001] 2 NZLR 374 (HC) at 382; and Almond v Reid [2019] NZCA 26, (2019) 5 NZTR 29-036 at [70].

^[26] At [145] and [163(a)].

^[27] Lankow v Rose, above n 24; and Gormack v Scott, above n 24.

^[28] Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433 at [138]–[139].

^[29] Judgment appealed, above n 3, at [156]. See also at [27].

^[30] At [161].

^[31] This appears to relate to item 21 in the schedule (Table 3) annexed to Ms Cooper and Ms Huntley’s submissions, being a quote (not invoice) from a contractor for labour to renovate the bathroom, totalling $6,289.

^[32] Judgment appealed, above n 3, at [146].