Terry v McLellan [2012] NZHC 2205; [2012] NZAR 935 (29 August 2012)

Last Updated: 22 September 2012

IN THE HIGH COURT OF NEW ZEALAND GREYMOUTH REGISTRY

CIV-2012-418-000062 [2012] NZHC 2205

BETWEEN ROBERT FRANK TERRY Appellant

AND ROSALIND MEGAN MCLELLAN Respondent

Hearing: 27 August 2012

(Heard at Christchurch)

Appearances: Appellant in Person

G M Brodie for Respondent

Judgment: 29 August 2012

_{JUDGMENT OF WILLIAMS J}

Introduction

[1] The appellant, Robert Terry, appeals against decisions of Judge Moran in the District Court dated 23 January 2012 and 30 March 2012. Mr Terry (I will call him Robert to distinguish him from his late brother, Brian Terry) claimed either a half- share or a life interest in a small rural property near Reefton, land in which his brother, Brian Terry, was the registered proprietor. Judge Moran dismissed those claims but found Robert to be the beneficiary of a constructive trust in his favour. That trust was valued at $12,000. This was a rough-and-ready calculation of the contribution Robert had made to the erection of a dwellinghouse on the land.

[2] Brian has since passed away leaving no will. In accordance with the

Administration Act, the estate is administered by its sole beneficiary, Brian’s

_{daughter, Rosalind McLellan.}

TERRY V MCLELLAN HC GRY CIV-2012-418-000062 [29 August 2012]

[3] Rosalind wants to sell the property. Indeed, I understand there is an agreement for sale and purchase currently on foot and due to settle on 31 August

2012. Rosalind applied to the District Court in 2009 for an order for possession. Robert resisted the application and maintains his position that he is entitled to a half- share in the property or a life interest. Robert remains resident in the house he helped to build.

[4] I digress briefly to record that Robert appeared for himself at trial. The Judge’s notes of evidence demonstrate that the Judge carefully, indeed painstakingly, worked through with Robert the nature of his case. The judgment is to be commended in terms of its success in giving shape and structure to a defence that possessed few of those qualities.

The facts

[5] The facts are fully and carefully set out by Judge Moran in his two judgments. It is sufficient for my purposes to set them out in summary form only. Brian and his then wife, Janet, owned and farmed two blocks of land at Harwoods Road, Reefton. The marriage ended in 1989 and the land was eventually divided equally between Brian and Janet. Brian and Robert owned another block close to Brian and Janet’s former land. It comprised 32.5 ha. The three blocks were originally farmed together as a single dairying operation.

[6] There was a fourth much smaller block at the corner of Soldiers Big River Road and Harwoods Road. It was triangular in shape, 5,970 m² in size, and owned by Landcorp. Brian leased it and this was integrated into the overall dairy farm. In this judgment I will refer to this land as the “triangle land”. The lease contained an option to purchase in favour of Brian and Janet.

[7] In 1993, Brian and Terry got into a conflict with Buller District Council over their failure to pay rates on the farm. In 1998 that part of the farm that had been allocated to Brian following the end of his marriage to Janet, and the 32.5 ha block owned jointly by Brian and Robert, were sold by the District Council to meet rates arrears.

[8] The triangle land remained – Brian only held a leasehold interest in that land when the District Council moved to sell the surrounding land. On 18 April 2006, Brian exercised his option and purchased it.

[9] Robert says that when he and Brian were in jail together in 1998 they agreed that they would build a house on the triangle land and live out their days there together. There is no denying that Brian and Robert had been close for a long time.

The judgment

[10] Judge Moran rejected this argument in contract. He said the terms of any such agreement were too vague. There was no certainty around when the house would be built, how much it would cost, what Robert’s contribution should be, the nature of the right to vest in Robert as a result, or what would happen if Brian died first.

[11] Secondly, the Judge doubted any such agreement in light of the fact that Brian did not own the land in 1998 (he did not buy it until 2006) and he shared the lessee’s option to purchase with his ex-wife, meaning he could not make commitments alone anyway.

[12] When Brian did buy the triangle land, he bought it in his own name, leaving

Robert off the title. The Judge contrasted that with the much earlier purchase of the

32.5 ha block where the brothers had made the purchase jointly. Thus Brian’s sole purchase of the triangle land was inconsistent with the brothers’ past conduct when buying land in which they intended to share rights. Finally, the Judge pointed to the fact that as late as 2005, Brian and Terry were engaged in a dispute with others to maintain occupation of their late father’s house in Dick Street and were showing no interest in building on the triangle land.

[13] On these bases the Judge rejected any argument that Robert had an equitable interest in the land. That did not end matters, however. The Judge considered that it was still necessary to consider whether Robert had made sufficient contributions to

the erection of the dwelling on the site in 2008 to create a right by way of constructive trust in the house.

[14] In his final judgment dated 30 March 2012, Judge Moran found that Robert had indeed made sufficient contribution to create a constructive trust in his favour. The Judge found that Robert had made financial contributions of the order of $7,000 to building materials and expenses, that he was actively involved in obtaining regulatory consents, and that he physically assisted his brother in the construction process. The Judge assessed the value of Robert’s overall contribution (monetary and otherwise) at $12,000. The house was valued at the relevant time at $30,000 meaning the learned Judge assessed Robert’s contribution to the overall value of the house at 40 per cent.

[15] The Judge therefore found that Rosalind was entitled to exclusive possession upon payment of $12,000 to Robert, such payment to discharge Rosalind’s obligation as constructive trustee in favour of Robert.

My view

[16] The Judge cannot be faulted for his careful assessment of Robert’s rights as the beneficiary of a constructive trust arising from his contribution to the dwelling. There is one area of the appeal, however, where Robert’s argument warrants careful reassessment. Was there a prison-cell agreement between Brian and Robert in 1998 and if so, were rights in equity created?

[17] The Judge essentially disbelieved Robert on that score. Brian, he said, did not have enough of an interest in the land in 1998 to make the promise alleged, the brothers’ subsequent actions were inconsistent with such a promise and Robert’s rendition of the promise itself kept oscillating between a half share and a life interest. Before me, Robert relied heavily on the circumstances surrounding a settlement of unrelated issues between Robert and Brian on one hand and the Buller District Council on the other. He said those circumstances corroborated his story. The settlement is dated 12 May 2006. It occurred less than a month after Brian had become registered proprietor of the triangle land. It related to the way in which the

Council had gone about selling the rest of the farm to meet rating arrears and to the Terrys’ ongoing obligation to pay rates on the triangle land. The agreement was facilitated by a professional mediator – Mr Nigel Dunlop. Among other things, it included first, an apology to Brian and Robert for the way the Council had acted in the past over the rating arrears issue on the wider farm and second, a settlement of the issue of rates arrears and penalties on the triangle land remaining. On the latter point, the terms of the agreement are recorded as follows:

The Terrys jointly and severally agree to immediately pay all outstanding rates (but excluding penalty rates) on the property at the corner of Soldiers Road (sic) and Harwoods Road, Reefton, of which the Terrys are equitable owners, from July 2002 to the present day, and thereafter pay rates as they fall due.

(emphasis added)

[18] This agreement is hand-written and initialled by seven people, including Brian and Robert, who initial as “BT” and “RT”. I have checked these initials against another part of this agreement containing Brian and Robert’s full signatures and they seem to match. Mr Brodie accepted that the agreement was genuine.

[19] Two matters of significance should be noted immediately:

(a) First, there is no doubt that the land referred to is the triangle land.

All other surrounding lands had already been sold by 2006; and

(b) Second, this agreement was made before the house was built in 2008. [20] As Mr Brodie properly argued before me, this agreement is entirely collateral

to any arrangements the brothers might have had in relation to the triangle land. It is not focussed on articulating how Brian and Robert saw their rights in the land. It relates to Brian and Robert’s failure to pay rates on it. That is true but it is perhaps significant because it is an unguarded statement about their respective perceptions about the interests the other held in the land. Mr Brodie argued that it does not get matters very far because the agreement does not articulate what being “equitable owners” might mean in any practical way. Of course he is right in that too, but

equitable ownership is still a very powerful concept in mounting a defence to an action in tort for possession.

[21] The Judge only addresses this document squarely in the context of his constructive trust analysis – that is after he had rejected Robert’s claim to a direct interest in the land. Applying Lankow v Rose,[1] Cossey v Bach,[2] and O’Connell v Muharemi,[3] the Judge found that the intention expressed by Brian in the document

_{“was not pertinent to the circumstance of Brian’s untimely death”.}[4] _{That may well}

be so, but in my view this document is not relevant to the existence of a constructive trust. Rather, it is relevant to whether Brian agreed orally with Robert in 1998 that Brian would acquire the triangle land on trust for them both with either a part interest in the freehold to Robert or a life interest to him.[5] It is in short, significant evidence in support of Brian having acquired the land on trust for both of them. My reasons are as follows:

(a) In it, Brian agrees expressly that Robert is an equitable owner of the triangle land;

(b) Brian agrees very shortly after he has completed the purchase;

(c) Because Brian had the option to purchase (Janet was by now out of the picture) only Brian could buy. That explains why the brothers did not buy jointly as with the 32.5 ha block;

(d) It also explains why Robert would make the extensive contributions to the house building that the Judge accepted he had.

[22] This is an action by Rosalind for possession. She must establish on the balance of probabilities that she has a title relatively better than that of Robert.[6] I do not, for the reasons given, consider that she can. On the contrary, there is a substantial argument that Robert also has a possessory right. It does not matter whether Robert’s interest is a life interest or a share in the freehold. Either is sufficient.

[23] The appeal must be allowed.

[24] I have not been provided with a copy of the sale and purchase agreement currently in place. I do not know whether it has conditions protecting the purchaser in the event that this appeal is successful. As matters stand, Rosalind cannot give vacant possession on settlement date. She will need an order for sale. It will be in the context of any dispute in respect of that application that the Court will need to resolve whether Robert has a life interest or an equitable interest in the freehold.

[25] I am aware that a potential effect of this judgment is to leave parties with competing equities – an equitable right in Robert and another in the purchaser of the land. Having been given no details about the latter, I am not able to make any further comment, except to say that Rosalind took a risk in proceeding with the sale in the face of this appeal.

[26] I do not consider this to be a case where a costs order is appropriate.

J Williams J

Solicitors:

Mr R F Terry (self-represented) C/- Reefton Post Office, Reefton

Mr G Brodie, Endeavour Chambers, PO Box 130121, Christchurch

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[1] _{Lankow v Rose [1995] 1 NZLR 277.}

[2] _{Cossey v Bach [1992] 3 NZLR 612.}
[3] _{O’Connell v Muharemi HC Auckland CP 546-SD01, 24 October 2003.}
[4] _{At [14].}

[5] According to the Land Transfer Act 1952, s 128(2) a trust inconsistent with the Register may be “declared by any deed or instrument”. In my view, the 2006 document can be regarded as such an instrument. “Instrument” is defined in s 2 of the Land Transfer Act 1952 to mean “any

printed or written document, map, or plan relating to the transfer of or other dealing with land, or

evidencing title to land.”

[6] Hinde McMorland and Sim Land Law in New Zealand (LexisNexis, Wellington, 2003) at 7.003.