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High Court of New Zealand Decisions |
Last Updated: 3 May 2018
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IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
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CIV-2017-409-709 [2018] NZHC 639
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B H Frampton and C Mo for Respondent
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JUDGMENT OF NICHOLAS DAVIDSON J
[1] This case concerns two brothers who grew up in Singapore. Kamarudin Mamat (“Din”) moved to Christchurch in the 1990s and remains there, Abu Bin Mamat (“Abu”) remained in Singapore.
[2] In 1996, Din and Abu signed an agreement for the sale and purchase of a residential property at 6 Wadhurst Place, Christchurch (“the property”), registered in their joint names. In 2017, Abu registered a transfer of his joint interest to himself, severing the joint tenancy, so they are now tenants in common in equal shares.
MAMAT v MAMAT [2018] NZHC 639 [11 April 2018]
[3] Until the hearing in this Court on 7 March 2018, Abu maintained that he was entitled to be registered as a three-quarter share owner and lodged a caveat to that effect. The caveat was later withdrawn and he now says he is entitled to a legal and equitable one-half interest in the property.
[4] Din has lived in the property since 1996 and has made his life in Christchurch. He seeks a declaration that he should have the entire equitable interest and Abu should have none. He says that he did not understand the significance of Abu being named as purchaser in the agreement for sale and purchase, or registered on the title. He pleads:
At all material times, the applicant (Din) believed that his brother had no beneficial interest in the property as an owner and was simply participating in the purchase because of his experience in such matters and to assist the applicant. (Din)
[5] The proceedings are brought as an originating application under the Declaratory Judgments Act 1908. Given the disputed questions of fact, the proceeding would have been better mounted as an orthodox civil proceeding. For the sake of the parties, who need resolution, the Court proceeds on the case as pleaded, as the evidence that has been given, while light on detail, is sufficient to dispose of the case. The dispute has extended to engage other members of this family living in Singapore, at least two of whom travelled to New Zealand for this hearing, including their mother, Hajah Sapiah Bte Abdullah (“Hajah Sapiah”).
The competing positions
[6] The competing positions are therefore that of Abu who says he has a one-half legal and equitable interest in the property, and Din who says he has the entire equitable interest. Din says his interest is derived either pursuant to an institutional constructive trust, or a resulting trust.
B. EVIDENTIAL AND LEGAL ISSUES
[7] There is a fundamental dispute as to how and why the property was purchased, and for whom. The dispute extends to the form of the agreement for sale and purchase, the source of funding for the purchase, and the intent of Din and Abu and their parents
as to ownership. The wishes and participation of their late father, and their mother Hajah Sapiah, are evidential issues.
[8] What is not in dispute is that the agreement for sale and purchase was signed by Din and Abu on 22 November 1996 for the purchase price of $153,500. The agreement bears the purchasers’ names, Abu and Din, is signed by both, but there are interpolations, not initialled, “Abu Mamat – as to a three-quarter share and Kamarudin Mamat – as to a one-quarter share”.
[9] For reasons explained further in this judgment, I find that the reference to “three-quarter” and “one-quarter” was added later, on the initiative of Abu, and without Din’s agreement.
[10] There was “equity” of some $39,000 put into the purchase in two tranches; the first of $10,000, and, closer to settlement, $29,000. Abu says all this was his money, although the $10,000 may have come from their late father. The source of the
$29,000 is very much in dispute. A Bank of New Zealand (“BNZ”) loan made up the balance of the purchase price secured by a memorandum of mortgage executed on 20 December 1996 with the signatures of Abu and Din witnessed by Mr Sherry. Din signed for Abu under a power of attorney. The mortgage advance is recorded in the trust account of Harmans Lawyers on 20 December 1996.
[11] In or about April 1998, Abu instructed Mr Sherry of Harmans Lawyers, who acted on the purchase, to prepare a transfer to record a three-quarter ownership in Abu’s favour, but Din refused to be part of that.
[12] Some years have now passed and Din remains in the property. He has worked as a builder in Christchurch. Rooms have been rented out over the years and with those rents and further inputs from Din, the mortgage has been paid off, so there is now a freehold property of uncertain, but real, value. Din has carried out work on the property. Today, the property is mortgage-free, and the brothers are registered as tenants in common in equal shares.
[13] Written and oral evidence was given by Din, Abu and Hajah Sapiah, with an affidavit of Mr Sherry, a partner at Harmans Lawyers, when the property was purchased. He was not called for cross-examination.
Affidavit evidence: Din
[14] Din swore an affidavit in support of his application on 8 September 2017. He came to New Zealand at the age of 27 for a holiday, and decided to move here permanently. He says the purchase was funded by a gift from his mother, Hajah Sapiah, together with some of his savings, and a mortgage from BNZ. He says Abu made no financial contribution.
[15] Din does not know why the property was purchased in joint names, given that Abu made no financial contribution and the property was intended for him (Din). He believes that Abu is simply seeking to profit by claiming a financial interest in the property when he knows he has none.
[16] Din says the idea of buying a property arose after their mother visited New Zealand and said she had money from their late father’s estate. She and their late father wanted to help Din get established in New Zealand, and to give him money as a down-payment to buy a house. He says that Hajah Sapiah effectively chose the property for him. The property needed work, but he could do that as he had building qualifications.
[17] Din understood that his mother arranged to transfer $29,000 from her bank account to a bank account held by Abu, who would make the practical arrangements to transfer the money to New Zealand as she cannot do such things. She signs by making a thumbprint. Din had no experience with property transactions and he says Abu was asked by their mother to help him with the purchase.
[18] Abu arranged for $29,000 to be sent by telegraphic transfer from Singapore on 19 December 1996 and paid into an account in their joint names. Abu was the applicant in respect of the transfers and the “beneficiary” was described in the names of Din and Abu.
[19] The BNZ loan agreement recorded the borrowers as Din and Abu. Din signed for himself and as Abu’s attorney. An Enduring Power of Attorney in favour of Din was executed on 25 November 1996 by which Abu appointed Din to act on his behalf in signing mortgage and loan documents necessary to complete the purchase. The mortgage dated 20 November 1996 was executed by Din and Abu, Din signing as Abu’s attorney, at which time Abu was back in Singapore.
[20] Mr Sherry was instructed to act on the purchase. The loan was for $116,800, and given the $29,000 transfer, Din says he thinks $10,000 had already been “paid” by him as a deposit.
[21] Din says that he has found a diary note of 26 November 1996 made by Mr Malham, mortgage broker, which referred to Abu contributing $30,000 and to Din contributing $10,000 (three-quarter:one-quarter). There is no reference as to who told Mr Malham this. Abu’s “contribution” Din says came from their mother and the bank loan was to be paid solely by Din using rents.
[22] Din says the issue of ownership was otherwise first raised in 1997, in New Zealand, when a discussion took place at Abu’s initiative as to how much the house might be worth.
[23] In April 1998, Abu instructed Mr Sherry to prepare a transfer to record ownership as to three-quarters in Abu’s favour and one-quarter in Din’s favour. Harmans wrote to BNZ on 28 April 1998 regarding the transfer intended to give effect to that change. Din says he did not understand this, or agree with what was proposed. He says that the money from Singapore put into the purchase comprised two gifts from his mother (the $10,000 and the $29,000). He was the only one paying the mortgage. He went to see a solicitor in Riccarton, whose name he cannot remember, and she told him not to sign the transfer.
[24] In June 1998, BNZ wrote to Abu, referring to a fax from him seeking to limit Din’s ability to withdraw from an account. The bank said Din had equal rights to operate the account.
[25] Over the past 20 odd years, Din has rented out rooms and paid all outgoings in respect of the property, including the mortgage, and this is not contested. Nor is it contested that he has done a lot of work on the property including insulation and installing underfloor heating. Abu has paid nothing towards outgoings and had done nothing to the property, and has never lived at the property.
[26] In 2016, Din renounced his Singapore citizenship and transferred money from Singapore to New Zealand. He made payments in respect of the BNZ loan, of
$1,886.34 and $16,978, and the mortgage debt was repaid in full.
[27] Din says Abu spoke to their mother and him about the property and said the money transferred from Singapore for the purchase had come from him, and while he did not want to be repaid, he wanted ownership to be weighted in his favour, and for the property to be sold. Hajah Sapiah offered to pay him an amount equivalent to the payment that she had made to Din, but Abu said that that was not enough. Din now does not want anything to do with Abu as the trust between them has gone.
[28] In December 2016, Abu came to New Zealand ostensibly to talk with Din, but Din did not hear from him. However, he heard from Saunders & Co., solicitors, on 13 April 2017, who asserted that Abu had paid the $10,000 deposit, and the later
$29,000, and the ownership recorded on the title needed to be corrected to show that he was a three-quarter share owner. He wanted Din to pay $300 per week rent in respect of “his” (Abu’s) three-quarter share of the property.
[29] Din’s response was to assert that he should have the entire interest in the property or he would commence proceedings.
[30] Their mother made a declaration on 7 June 2017 setting out her recollection of events. She referred to withdrawing money from her bank account after she returned to Singapore in 1996, and giving it to Abu with instructions that it was to be used as down-payment for the property, and an unconditional gift to Din.
[31] Saunders & Co. responded on 12 July 2017 for Abu, refuting these contentions, and said the money sent from Singapore for the purchase came from Abu’s personal funds. He was a purchaser in his own right and would not transfer his interest to Din.
Oral evidence - Din
[32] The oral evidence is separately considered as it is in substantial part the basis for the credibility findings which help determine this judgment. Din says he knew little about the agreement for sale and purchase and described himself as having a “secondary role in this whole thing here”, and that Abu was “running the show for us”. He denied any discussion about three-quarter:one-quarter shares, and said that Abu’s job was “...to just help me out”. He said his “Mum” said that after their father had died, she wanted to help Din out to have a house because his siblings had houses, and so he could “settle down”. He explained that his mother wanted to help him out with a deposit, and once that was sorted out, he would take over the mortgage. Abu’s job was to help organise this, because Din said “I haven’t got a clue about buying a house”.
[33] Din does not know why Abu was shown as a purchaser on the title. He said he went with his mother and the agent to three houses, and his mother picked 6 Wadhurst Place. The property agent was Ms Chong. His recollection of the banking arrangements was limited. He says he never saw a man named “Martin” from the BNZ or elsewhere with Abu.
[34] The agreement for sale and purchase was dated 22 November 1996 and a BNZ file note of 26 November 1996 refers to Din being employed as a builder with residency in New Zealand. It says a deposit would be contributed, $30,000 from Abu and $10,000 from Din. He said “All these figures I was not involved. Everything is as arranged by my brother”.
[35] To the Court he said the deposit would have come from his “Mum”, but he does not know how much. He did not have any money at the time. He said he was not ready to buy a house and that all the money came from his “Mum”. Faced with the file note with reference to $30,000 from Abu and $10,000 from Din, he said “I must’ve said it but I don’t remember”.
[36] Mr Frampton cross-examined Din about signing a loan agreement for himself and as attorney for Abu and he said he thinks “Abu gave me instructions to sign it”. He said he did not really understand the papers associated with the purchase and was simply happy to have a house.
[37] Din said he did not see reference to the three-quarter:one-quarter share until Abu went to the bank with him and asked some questions about wanting to sell the property, soon after they had bought the house. He says that when he asked Abu why he wanted to sell the house, it was really the end of their communications.
[38] Mr Sherry wrote to BNZ on 23 April 1998 referring to “A and K Mamat” and saying that they were clients who were registered proprietors of the property, and had been advised by “our client” (Abu) that the title in joint names should have been tenants in common in unequal shares. Din said he did not speak to Mr Sherry about that at the time, and says he understands that instruction to have come from Abu.
[39] On 5 August 1998, Mr Sherry wrote to Abu to say that he had received a call from Din who was in Singapore, who told him that the family had offered to buy Abu’s share in the property. Din said about $20,000 was “tied up”. Mr Sherry made the suggestion that it may be advisable for him to accept this offer. Din said that the family were all in Singapore, and because Abu said the deposit was his and he wanted to pay back their mother “Mum wanted to pay him back but he refused and he wants a bigger share which we just don’t understand what the heck was going on”. Abu said he wanted market value but Din said “we can’t afford it ...”. He repeated that Abu was told the money had been intended as a gift to Din. He said the money for the purchase came from his father’s estate, and it had come through Abu but was “family money”.
[40] He acknowledged to Mr Frampton that in August 1998 he did not know whether Abu had put in money of his own or not. Din told the Court that if Abu wanted to put money into the house purchase, it was not his right to do so in the first place.
[41] Din acknowledged that he had asked Abu to transfer $29,000 to him urgently as he thought the vendor would back out. Because he could not say where the money
came from, he fell back on his explanation that his mother helped him out financially with a deposit, but his mother did not know how to do so, and Abu was left to effect that. The fact that Abu’s name was on the title should be regarded as a result of Din being “stupid” or “naive” and “trustworthy that he will basically will look after me ...”.
[42] He said the first time he knew that Abu claimed that the $29,000 was his money, not from their parents, was in Singapore, when four family members met, and ownership was discussed.
Affidavit evidence: Abu
[43] Abu says that their father, Mamat Bin Ahamad had spoken of his concerns for Din’s welfare. Din had gone to New Zealand but had no steady income to sustain himself. He said that his father asked him to help Din to get a stable job and a place to live. He says that a week later his father gave him $10,000 in an envelope with the comment “Here is $10,000. I want you to help me instead.” He took it the $10,000 was not to buy a house for Din, but for “expenses” that Abu might incur in helping Din. Their father died on 9 April 1996.
[44] That year, he says their mother asked him to join her on a trip to Australia for a wedding and then to New Zealand, but he refused to travel because he says he and Din did not have a close relationship. He changed his mind when their younger sister joined them so there was a family trip to New Zealand. He says that their mother told him that Din was having a hard life and needed a house in Christchurch. The $10,000 given him by their father would not buy a house, and he knew little about New Zealand property.
[45] He says he told his mother he did not want to be involved, and that his mother did not know why their father had given him $10,000, when he had said he could not help Din. He says that his mother said he should help and he felt compelled to do so given their father’s request so “began to plan the purchase of a property”. He said he spoke to Din about the idea of buying a house which he could live in and manage, but that the property was not to be his. He says that Din said he understood this.
[46] The “idea” or “plan” was that Din would live in one room free of rent, and rent out the other two rooms as a source of money for repayment of a home loan and “I [Abu] would borrow from the Bank”. Abu would be the sole borrower. Din would arrange for the property agent and lawyer, and was to instruct the lawyer to prepare an agreement to include the offer of a one-quarter share to him upon sale of the property, for his efforts in managing it. He says that Din agreed, and after a property was found, Abu negotiated the sale with the owners.
[47] When he saw that the agreement for sale and purchase was in both their names as purchasers, he asked the reason for that, and where a three-quarter:one-quarter share was provided for, but “Din did not respond”. Abu says that he refused to sign the sale and purchase agreement unless he was shown as the sole purchaser, and a separate agreement detailing the “rental arrangements” was concluded. A meeting was held at which the agent, Ms Chong, Mr Sherry and another person were told by Abu that he was the sole purchaser and that Din was to arrange the purchase using a limited Power of Attorney on his behalf.
[48] He says Mr Sherry then handwrote the three-quarter:one-quarter shares into the sale and purchase agreement, and that given the vendors’ wish to sell the property as soon as possible, the signing process was a mere formality to expedite the sale, and the “proper documents” would be sorted out later.
[49] Abu says he felt apprehensive, but signed the sale and purchase agreement and hoped the lawyer knew what he was doing. He says after signing “I paid over the
$10,000 for the deposit payable under the agreement”. He then went back to Singapore.
[50] He was then called by Din who said that $29,000 had to be sent urgently to complete the purchase. He sent funds which he said came “from my own resources”. He acknowledges the $10,000 provided by their father was used for the purchase, although part of that was taken up with expenses, but he says he contributed significantly more than $29,000 to the total transaction. The loan agreement and the mortgage were signed on his behalf by Din.
[51] He says he kept thinking about the “signing incident” and contacted Mr Sherry about a separate agreement between him and Din, and the “offer” of a quarter share for Din, but he “did not understand” Mr Sherry’s explanation at all.
[52] In 1997, he met the tenants in Christchurch, and enquired about the property’s valuation. He was told the estimated market value but Din “did not want to reveal to me the actual amount”.
[53] In April 1998, he came to Christchurch and spoke with Mr Sherry and was “puzzled with the legal terms used in that conversation”, especially the transfer of shares between the owners. He thought Mr Sherry did not wish to discuss ownership. In May 1998, he asked Mr Sherry to replace the Power of Attorney in favour of Din with Mr O’Donnell, who was a student tenant at the property.
[54] There followed correspondence, including a letter of 5 August 1998 from Abu which responded to a letter from Harman & Co., of that date. Din had told Harmans that the family had offered to buy Abu’s share in the property from him, and Mr Sherry wrote “He also said that he thought you had about $20,000 worth of money tied up in this property”. Mr Sherry said it may well be advisable for Abu to accept this offer, but “the suggestion of a $20,000 interest was incorrect as the deposit alone was about
$40,000”. He said that the proportions he instructed before concluding the purchase in the presence of Din, Ms Chong, Steve Maughan and Mr Sherry was three-quarter:one-quarter, but that had not appeared on the agreement (nor on the title).
[55] He says in early 2017 he went to the BNZ in Riccarton, Christchurch and found that the loan had “matured”. He had not received any information about the loan or its repayment since 5 May 1999.
Oral evidence: Abu
[56] In oral evidence, Abu said that after their father died, he looked after the family property in Singapore, deducting costs and paying the rest to his mother before his sister took over. He says he got nothing out of that.
[57] Mr Moran, for Din, asked him about his evidence that he came up with a “plan” to buy the Christchurch property, which he called “my idea to purchase a house”. He says he told Din that he was not buying the property for him. He said the plan was that Din could stay in one room free of rent if he rented the other rooms out to repay the loan and he (Abu) would apply as “sole borrower” for a loan. Din would arrange for the property agent and lawyer to complete the purchase. Din was to instruct his lawyer to prepare an agreement to include the offer of a one-quarter share to Din upon a sale of the property for his efforts in managing it. He said that Din understood this, and agreed to this “plan”.
[58] He was asked about the sale and purchase agreement which bore the handwritten reference to three-quarter:one-quarter shares, and he says Mr Sherry included those provisions, but he does not know why they were not initialled. He said that he was shocked when he learned that the agreement was in both names, and that the reference to a three-quarter:one-quarter share was supposed to be “under a separate contract”. He could not explain why the agreement was in both names. He said he resented the fact that Din’s name was included and it was only later that Mr Sherry came forward and handwrote on it. He said Mr Sherry said a separate contract recording shares was “just formalities”.
[59] He did not remember the joint loan application, and he said “I have not seen this and I would certainly not agree with this ....”, and he did not agree with the bank’s note of 26 November 1996 that the deposit was made up of $30,000 from Abu and
$10,000 from Din. He said that he had discussions with their father not long before he died and at some stage he gave $10,000 in cash to Abu, and wanted Abu to help Din but there was no indication that he should buy a house for him. The $10,000 was to help Abu out with expenses to that end. He could not explain why the mortgage consultant would record contributions of $30,000 from Abu and $10,000 from Din. He then said that he had never met the mortgage consultant at all, although he had said he had a meeting with the broker. He said he met with the real estate agent, but definitely did not meet the mortgage broker. He acknowledged that he was asked to provide detailed evidence of his pay and his employment position in Singapore, and he sent that to the BNZ.
[60] He was cross-examined about his evidence that he would be the sole borrower from the bank and if the property was sold he would get a three-quarter share and Din would get a one-quarter share. He says that these were the key ingredients of the “plan”. He remembers meeting with a mortgage broker and he was referred to the broker’s note of 26 November 1996, four days after the agreement for sale and purchase was signed. It was put to him that the contents were not consistent with the “plan” that he devised. If the purchase was for himself, then why was the agreement for sale and purchase in both names? He said “I have no answer to that because I don’t know”. He said he asked Din about the agreement for sale and purchase and “He said nothing about it”, and then Mr Sherry handwrote the reference to differential shares. He said there was going to be a separate agreement with Din “that I would, upon completion of the mortgage, give him a quarter share when we (or me) decided to sell the house.”.
[61] Mr Malham’s diary note of 26 November 1996 refers to Abu working in Singapore and a request to forward confirmation of his income. The ‘deposit’ was recorded as being $30,000 from Abu and $10,000 from Din “and this to can be confirmed in due course” [sic]. Abu agreed there was no reference to a shared property arrangement in Mr Malham’s diary note but he repeated that the $10,000 was given to him by his father to help with “certain expenses and expenditure”. Abu again said he never met the broker, and he did not know how Mr Malham’s file note came about. He thought that he met the real estate agent, not the broker. He agreed, however, that he was asked to provide information about his pay and his position “But I never met any men”.
[62] In 1998, when Abu sought to have the property registered in three-quarter:one-quarter shares, he was asked about the $10,000 paid to Din well before the $29,000 was remitted from Singapore. He said the $10,000 sent to Din was “as a safekeeping” and sent as a deposit.
[63] He said the only reason he helped Din out was because their mother repeatedly told him to do so, and the request had come from their father. He rejected the idea that the mother and father wanted to help Din with a house purchase in Christchurch.
[64] He said that according to their family’s religious beliefs, on their father’s death assets would be divided between the sons and their sister “and upon death that’s what we did”. He did not know what his mother inherited. It was put to him that there was enough money in their mother’s account to send $29,000 to Abu to send on to New Zealand, but he said that would not be possible because that was “where the division comes in”. He said if his mother had transferred $29,000 to him, that would be provable because there are records 20 years old in Singapore. He did not produce any such records to show the source of funds he sent for the purchase.
[65] He said his mother is not telling the truth in her account of the circumstances in which the property was purchased, and when it was put to him that Din had applied the rent to the mortgage interest and principal, and insurance, Abu said that was what he had to do. He did not know if renovations and underfloor heating were installed over the last 20 years, but he has spent nothing on the property.
[66] He was taken by the Court to the sale and purchase agreement and asked about the inclusions, as to a three-quarter share and as to a one-quarter share, and he said that he saw Mr Sherry write them in and that was before he signed the agreement. He could not explain why those inclusions were not initialled.
[67] He was then asked about the transfer of $29,000 on 18 December 1996, referred to in a letter to Mr Sherry recording that a copy of a telegraphic transfer made on 18 December 1996 was attached. Abu said that money came from his savings earned as a general manager of a Singaporean company.
[68] In the same letter, he referred to “proportions I specifically instructed... in the presence of Din, Jenny Chong, Stephen Maughm, you [Mr Sherry] and Abu”. He repeated that he was told a separate agreement would be entered to record the three-quarter:one-quarter ownership. However, he repeated that the three-quarter:one-quarter inclusion in the agreement for sale and purchase was made before the agreement was signed.
Hajah Sapiah
[69] Hajah Sapiah made a statutory declaration on 7 June 2017. She says she cannot recall the amount involved but she gave Abu a sum of money to send on to Din to help him to purchase the property. She has no knowledge of Abu personally making any contribution.
[70] Hajah Sapiah says she does not regard Abu as honest and gives an example to do with rent collected by him to be deposited into her account. I expressly do not bring this to bear as to Abu’s credibility, as the evidence is wholly lacking. Hajah Sapiah’s opinion of Abu in this respect is not proof. She says after Din came back to Singapore in 1998, she spoke with Abu and he claimed he had contributed
$20,000 to the purchase of the property, so she offered to pay that to him if his name was removed from the title. Abu wanted more. She says she also helped with payment of the mortgage on the property. Din was upset by the dispute with his brother and talked about not paying the mortgage, and walking away from the problem.
[71] She refers to Abu’s affidavit of 27 October 2017, and says she has no knowledge of her late husband having confided in Abu regarding Din’s welfare, and says that assertion is surprising because they (Abu and his father) did not have a close relationship. She has no knowledge of his giving money to Abu to pass on to Din, but she is sure she would have been told by her husband if that was the case, as he told her that he wanted to get Din established New Zealand, to own a property. Hajah Sapiah says she was not told anything by Abu about a “plan” as to buying and owning property and “this also makes no sense to me as the whole idea was to purchase the property for Din”.
Oral evidence – Hajah Sapiah
[72] Hajah Sapiah had great difficulty with her evidence and was distressed, explained through the interpreter as her feeling ashamed to be so distressed in court. She was to the Court a dignified and maternal presence.
[73] She did say that the house was meant for Din but she does not know about there being the two names on the agreement for sale and purchase. She questioned Abu’s credibility, and did not believe he made a monetary contribution.
Affidavit evidence: Mr Sherry
[74] Mr Sherry, by his affidavit, says he acted for Din and Abu in respect of the purchase and he has little recollection of what occurred, but he has read the documents and makes comment based on those. He has no recollection of a meeting regarding the name or names in which the property was to be purchased and he does not know or recognise the name “Steven Maugham”. He does not remember writing “three-quarter:one-quarter shares” into the agreement, but he says it looks like his handwriting, and he expresses surprise about Abu’s evidence that he (Mr Sherry) said the signing process was a mere formality to expedite the purchase and that documents would be sorted out later. He would never describe a sale and purchase agreement as “a mere formality”, and he does not remember writing the “three-quarter:one-quarter shares”. He recalls no agreement between Abu and Din as to how they would own the property at the time.
[75] Looking at the documents, Mr Sherry thinks there was urgency in getting the loan drawn down for settlement on 20 December 1996, and the prospect of delay until January 1997 is evident on the contemporaneous record. The narration in the trust account ledger of “mortgage advance Bank of New Zealand in the sum of $144,200” cannot be right because that was in excess of the bank loan, so that must have been a mortgage advance with other money coming into the trust account as one sum. He does not know who contributed the difference between the purchase price and the bank loan.
[76] In April 1998, a matter was opened in the trust account system entitled “Title alteration to Wadhurst Pl.” His belief is that he must have thought this was agreed between Abu and Din, but that soon was put aside, as they (plainly) disagreed about what was proposed, and because he had acted for both of them on the purchase, it was not appropriate that he act any further.
[77] Mr Sherry has no recollection as to why the transfer was amended, initialled by him. He has no recollection of a meeting in 1998 as to how ownership of the property should be recorded, nor Abu’s evidence that he provided Abu with a copy of a valuation report. He cannot remember anything about Mr O’Donnell holding a Power of Attorney. He thinks the reference to different shares on the agreement for sale and purchase was probably made after the agreement was signed, but he does not know when or why.
Submissions
[78] Mr Moran submits that Din is entitled to a declaration that he is the sole and rightful owner of the property and that submission is set against the presumption that the ownership interests are those registered on the title.1 Mr Moran relies on a rebuttal of that presumption, if it is established on the balance of probabilities that the interests shown in the title do not reflect the beneficial interests in the property.2 Indefeasibility of registered title does not exclude a claim in personam founded on law and equity.3
[79] Mr Moran says that Abu holds his registered one-half interest for Din pursuant to an institutional constructive trust or resulting trust and he cites the judgment of Tipping J:4
... an institutional constructive trust arises upon the happening of the events which bring it into being. Its existence is not dependent on any order of the Court. Such an order simply recognises that it came into being at an earlier time, that provides for its implementation in whatever way is appropriate.
[80] Mr Moran says the Court should find that the cash put into the purchase came in part from Haja Sapiah who had an inheritance from his father’s estate, but for reasons that are unclear, perhaps to assist with the loan application, Abu’s name was added to the transaction.
[81] If an institutional constructive trust is not upheld, a resulting trust is submitted to apply where the law presumes an intention to create a trust from the facts of the
1 Land Transfer Act 1952, ss 35, 41 and 62.
2 Kumar v Wendt [2018] NZHC 72 at [17].
3 Frazer v Walker [1967] NZLR 1069 (PC) at 1078.
4 Fortex Group v McIntosh [1998] 3 NZLR 171 (CA).
case. Mr Moran submits that if Abu played no part in funding the acquisition of the property, a resulting trust in favour of Din “must result”.
[82] He submits there is no limitation issue which precludes the claim in equity, but he otherwise cites authority that when a declaration is sought as here, the Limitation Act does not apply. This does not get him far because a declaration would not necessarily convert into the relief which he seeks. That is not the reason for excluding declarations from limitation considerations.
[83] Mr Frampton for Abu submits the proceeding is statute barred, and that Abu’s interest is indefeasible and his client has been cast in the position of a volunteer who has not contributed to the property, as Din alleges. In any event, he refers to Tipping J who said Parliament did not intend to prohibit volunteers from acquiring indefeasible title, saying that there is no such provision in s 62 LTA5. Mr Frampton places emphasis on the fact that a volunteer who takes without fraud has the benefit of an indefeasible title. There is no suggestion of fraud in the purchase itself, at least no evidence to support that proposition, so he submits that does not assist judgment. He submits there has been no pleading of fraud, no consciously dishonest conduct alleged associated with the purchase and certainly nothing which points to Abu trying to cheat Din of a known existing right, unless that is the factual determination of the Court. That, Mr Frampton submits, is in essence what Din alleges, although he does not put it so bluntly.
[84] Mr Frampton says there is every indication that Din intended to purchase the property with Abu. There was informal legal advice. Din and Abu signed the sale and purchase agreement and both names were included. The BNZ loan was signed by Din for himself and for Abu. An Enduring Power of Attorney expressly gave Din authority to execute all such documents “necessary to complete our purchase of the property at 6 Wadhurst Place, Christchurch pursuant to an agreement for sale and purchase dated 22 November 1996”.
5 Regal Castings Ltd v Lightbody [2008] NZSC 87, [2009] 2 NZLR 433 at [131].
[85] When Mr Sherry wrote on 23 April 1998 about their interests being recorded in unequal shares, as opposed to joint tenants, Din did not agree, but he did not raise any issue about Abu being a joint owner.
[86] Mr Frampton says it is 20 years since the property was purchased, and six years have passed since any possible “loss” could have reasonably been discovered by Din, hence the claim by Din is statute barred.
C ANALYSIS
[87] I found Din to be straightforward. His evidence was credible while largely lacking in detail about the way the purchase was funded. He was, to a degree, naive, as he seemed not to recognise that if nothing else, Abu was a party to the mortgage advance from BNZ. That was not surprising in the sense that he knew very little about the purchase, as to the source of funds, other than what was on record, but he cannot just ignore the assumption of liability by Abu which in part enabled the purchase.
[88] Abu on the other hand, gave evidence that was so conflicting that his credibility is, I find, very much in issue. I recognise that the passage of time and an unfamiliarity with the New Zealand legal system, and sale and purchase of land in New Zealand, may mean that his evidence is at times unreliable, but there are aspects of his evidence which I simply do not believe. One of those is the circumstances in which $10,000 was applied towards the purchase, which I find on all the evidence was for Din from their father, or out of his estate. Hajah Sapiah, I find, was involved in supporting Din’s purchase. This purchase was for Din, intended to assist him in his life in New Zealand. The $10,000 was not just for Abu’s expenses and I reject his evidence in that respect.
[89] Otherwise, I do not accept Abu’s evidence as to the agreement for sale and purchase including reference to three-quarter:one-quarter shares. That was untrue and consistent with an attempt to try to adjust his interest later. The idea of the agreement being just a formality in that regard is plainly not right.
[90] Hajah Sapiah is an honest and dignified woman who supported the intent of a purchase for Din, and tried to help resolve issues when Abu asserted an interest.
(ii) The funds for the purchase
[91] The indisputable facts associated with the purchase are that nearly $40,000 was contributed as equity, from somewhere, and that it came in two tranches, of $10,000 sometime before, and $29,000 on the eve of settlement. Both brothers are named in the agreement for sale and purchase, both were parties to the loan application to the BNZ, and the execution of the relevant loan documentation, Din on Abu’s behalf, but Abu providing evidence of his financial position in support of the loan application.
[92] That much is known as is the fact that the mortgage was paid off largely from rents through Din’s stewardship of the property over 20 odd years, and some funds which belonged to Din who lived in the home, worked and saved in New Zealand, and had a child here.
[93] The $10,000 was a contribution from their father or his estate for the purchase. It is not clear but it was plainly not Abu’s money and I find was intended to assist with the purchase of a house for Din. The $29,000, which Abu says came from Abu’s account to New Zealand to assist in the purchase, is more difficult to determine. Din thinks it came from the family, perhaps through his father’s estate, and Abu says it was his money and he transferred it to New Zealand for settlement. That is consistent with his having a one-half interest in the property at least and may in principle explain why he has pressed for a three quarter:one quarter share over so many years. It would mean that he put more of his own money into the purchase than did Din at the time. They were both liable under the mortgage, for the principal sum and interest.
[94] If he did not put $29,000 of his own money into the purchase and it was all a gift to Din from their parents, then Din has put all the equity into the purchase, then managed the property over nearly some 22 years, made improvements, put his own money into mortgage repayments and his has been the major contribution by far with Abu only really contributing by his legal commitment to the mortgage. I do not minimise the importance of that, as the reasonable inference is that he was required to sign the loan documents, and provide information about his financial position, and
thus was integral to the purchase. He put himself at financial risk, and in this way, facilitated the purchase.
[95] The $29,000 source records will still be available according to Abu, but none are before the Court and I have to assess his evidence without that. The $29,000 does reflect about a three-quarter share of the equity contributed at purchase. It is therefore consistent with Abu’s position that he put this money in. However, he acted in a way entirely inconsistent with wanting to help Din by very soon asserting a three-quarter interest, and contemplating sale of the property to his advantage. That was not therefore consistent with a “plan” to help Din but I find an opportunistic response to the position in which he found himself on the title, but as to a one-half share. I reject his evidence as to the source of the $29,000 find that he is, opportunistically, trying to leverage off money derived from their father’s estate. I also reject his evidence that the $10,000 was for his expenses.
[96] It is, of course, relevant that Abu, very shortly after the purchase was made, began to assert an interest of at least three quarters in the property, which fits with the
$10,000 paid as a deposit, and his contributing $29,000. His attempts to assert this have continued over a long period of time, but when I assess his credibility and make a finding of fact in this regard, I conclude that his “helping” Din with a “plan” on his version of events would not have helped him much at all because very shortly after a property was acquired, Abu wanted to acquire the greater interest, and indeed, on the evidence, to have that interest paid to him. His interest in the value of the property arose early in the piece, and if he were to have a long-term holding interest in the property, then his stance was entirely inconsistent with that.
[97] There was not a shred of evidence that his “plan” to help Din was generated by brotherly motivated goodwill for Din’s position.
[98] This conclusion is not easy to come to given the dearth of evidence, but because I reject Abu’s account of the source of funds for the purchase, I am left with the conclusion that the money for the purchase was paid for Din’s benefit, as a gift to him, and that Abu’s interest in the title was the product of having to obtain a mortgage. That, undoubtedly, exposed both of them to significant personal risk, each liable for
the whole sum to the bank. But Abu from the point of purchase onwards did nothing towards the upkeep or sustenance of the property, and left it all to Din who clearly has managed his responsibilities well. He has met the mortgage as expected, and paid off part of the mortgage debt from his own funds. He has, in that regard, done well, but he is now asked to disgorge one half of the interest, or will be, in circumstances where Abu’s interest lies in the title, but he has done little more than expose himself to the risk under the mortgage.
[99] It can be seen how the $29,000 is of importance, as on the face of the documents, this was a purchase by Abu and Din for their joint interests. There is no doubt Din put in some money as the $10,000 was for him. I have concluded that the
$29,000 sent by Abu was family money which was routed through Abu, and Din should be credited with all the equity put into the purchase, together with ensuring it was paid off in rents over many years, doing up the house, and paying off the mortgage from his own money.
[100] I conclude that the intent was that Abu would be involved in the purchase to the extent that that was necessary to achieve it, but his contributions lie in his involvement in helping to arrange the purchase. They were not financial, other than his commitment to the mortgage. I find there was ‘a plan’, but it was to help Din so that he could buy a house for himself, not that it be purchased for him to use with ownership lying otherwise to the advantage of Abu.
Law
[101] The Courts have recognised that exceptions to the general principle of indefeasibility of title “should be confined to cases that truly engage the conscience of the party whose registered proprietorship is challenged”.6 A recognised category of exceptions is where equity will protect the interests of a beneficiary of an express, constructive, or resulting trust.7
7 Gold Band Finance Ltd v Philpott, above n 6 at [25].
[102] Mr Moran submits that Abu’s interest in the property is held either pursuant to an institutional constructive trust or a resulting trust in favour of Din.
Institutional constructive trusts
[103] Institutional constructive trusts, unlike remedial constructive trusts, are not created by the Court. They arise in their own right out of the circumstances of the case and are merely declared to exist by the Court. Such trusts have been recognised by the Courts in different settings and a common definition has been elusive. Jessica Palmer, in her chapter in Equity and Trusts in New Zealand, given the following summary:8
The more common examples of institutional constructive trusts are where:
(a) A fiduciary makes an improper profit from his or her fiduciary position;
(b) An intended transfer of property is invalid because of defective formalities.
(c) A person makes an unconscientious assertion of ownership in respect of property to which another has contributed;
(d) An agreement has been made to execute mutual wills and after the death of one party the other revokes the will or acts inconsistently with it;
(e) A vendor has entered into a contract to sell land;
(f) Property has been obtained by fraud; and
(g) Property is acquired by killing.
The common factor in all those scenarios would appear to be the unconscionability of the defendant denying the plaintiff an equitable interest in the relevant property because of a previous understanding, whether subjectively agreed upon between the parties or more commonly deemed by the law to have been appropriate in the circumstances. It is the element of consent or intention (or lack of either of these, as the case may be) that triggers the institutional constructive trust to address the unconscionability.
[104] As Glazebrook J put it:9
8 Jessica Palmer “Constructive Trusts” in Andrew Butler (ed) Equity and Trusts in New Zealand
(2nd ed, Thomson Reuters, Wellington, 2009) at [13.2.1].
9 Commonwealth Reserves I v Chodar [2001] 2 NZLR 374.
Constructive trusts are distinct from any other form of trust in that they are not directly dependent on the intention of the parties. Express and implied trusts arise from the actual or inferred intention of the parties, while resulting trusts are based on the presumed intention of a transferor of property. In contrast to this, a constructive trust is imposed by the operation of a rule of law, and possibly through the exercise of the Court’s remedial discretion.
[105] At first blush, a constructive trust of the type referred to by Ms Palmer at (c) above may seem appropriate here. That type of constructive trust has developed in the context of domestic relationships, where a party claims an equitable interest in property which is legally owned by the other party, on the grounds that they have contributed to or improved that property over the course of the relationship. The leading case is Lankow v Rose.10 In that case, Tipping J set out a four-part test. The party claiming the equitable interest must show:
(a) Contributions, direct or indirect, to the property in question;
(b) An expectation of an interest;
(c) A reasonable interest;
(d) The defendant should reasonably expect to yield to the claimant an interest.
[106] Here, Din has been nearly been the sole contributor to the property. The
$39,000 equity was funded by money gifted to Din and not to Abu and was not otherwise from Abu. Din has lived in the property over many years, paid for its upkeep, and financed the mortgage, and paid off part of the loan from his own resources. Abu’s only contribution has been his joint liability under the mortgage which I do not minimise as it enabled the purchase.
[107] It is argued that Din can reasonably expect, as a result of his disproportionately higher contributions, that a portion of Abu’s share of the property would reasonably be expected to be held in trust for him.
10 Lankow v Rose [1995] 1 NZLR 277 (CA).
[108] However, there are problems with such an analysis. First, as Palmer observes, the Lankow v Rose line of cases focused on the situation where the person making the unconscionable assertion of ownership is the sole registered proprietor.11 Where both parties are registered proprietors, the Courts have instead applied the concept of a resulting trust.12 It seems without exception that the cases under this line of authority involve one party, who otherwise would not get anything, claiming a ‘slice of the pie’ on equitable grounds.
[109] A further problem is that it is not only Din’s contributions post-purchase that Mr Moran says give rise to unconscionability. What Din is saying is that, right from the beginning, it was never intended by anyone involved that Abu would get a slice of the pie. The fact that Abu ended up on the title was more like a mistake or a misunderstanding about what that would mean for Din. His case is that Abu knew this was the understanding, and it is unconscionable for Abu to rely on his legal interest in such circumstances.
[110] As such, I do not think the Lankow v Rose line of cases offers assistance. Nor do the circumstances fit into the other categories of institutional constructive trust listed by Palmer. There is not a closed list of circumstances in which an institutional constructive trust may arise but the Court should be wary of creating a new category, and especially here where it has not been argued at any length by counsel, and where an alternative approach may be available.
Resulting trust
[111] Where two interests are registered on the title the Courts have been more inclined to analyse equities through the concept of the resulting trust. This makes sense, as the logic of a resulting trust is that the trust property results back to the settlor as the original proprietor had no intention to divulge a beneficial interest and that gives rise to the trust.
11 Lankow v Rose, above n 10, Palmer, above n 8, at [13.2.4].
12 Burns v Burns [1998] NZFLR 654; Cossey v Bach [1992] 3 NZLR 327 (CA).
[112] Institutional constructive trusts operate by contrast not as a return, but as an advancement of property to a beneficiary whose claim arises not from some original interest but from a subsequent contribution or event.
[113] Like the category of constructive trusts considered above, resulting trusts are “institutional” in that they come into existence at a particular moment on the facts, and are not in that sense imposed by an order of the Court, but recognised by the Court. A significant difference is that they arise at the time of the transaction not by virtue of conduct/contributions of the parties after the transaction.13
[114] The Court of Appeal considered the resulting trusts in detail in Crampton-Smith v Crampton-Smith, where the oft cited statement of Lord Browne-Wilkinson in the Westdeutsche case was affirmed:14
Where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B; the money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions. It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter-presumption or by direct evidence of A’s intention to make an outright transfer...
[115] The Court went on to say:
[37] Where the presumption applies, it is generally regarded as having dispositive effect unless the presumption is rebutted. This is explained by Farwell LJ in The Venture:15
“On its being provide that Percy Stone had advanced a certain part of the purchase money, the presumption of law arose that he was beneficially entitled to a corresponding share in the yacht. It was for the plaintiff to displace that presumption by bringing evidence to the contrary; but she has entirely failed to bring any such evidence. The Court must, therefore, give effect to the assumption, and must hold that, as the defendant paid a part of the purchase money, he acquired an interest in the yacht...”
14 Crampton-Smith v Crampton-Smith [2011] NZCA 308, [2012] 1 NZLR 5, at [35], citing
Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] UKHL 12; [1996] AC 669 (HL) at 708.
15 The Venture [1908] P 218 (CA) at 230.
[38] In Fowkes v Pascoe Mellish LJ also outlined how the presumption operates as a first step independent of any evidential or factual inquiry:16
“In such a case, although the rule of law, if there was no evidence at all, would compel the Court to say that the presumption of trust must prevail, even if the Court might not believe that the fact was in accordance with the presumption, yet, if there is evidence to rebut the presumption, then, in my opinion, the Court must go into the actual facts.”
[39] Likewise in New Zealand this Court in Bateman TV Ltd v Bateman has adopted the discussion in The Venture and considered the presumption to have dispositive effect in the absence of rebuttal evidence:17
“In such a case, where no satisfactory evidence is produced to rebut it, a presumption will arise to a resulting trust in favour of him who finds the consideration.”
[40] As Lord Browne-Wilkinson said in Westdeutsche, the presumption may be rebutted either by the counter-presumption of advancement or by direct evidence of an intention to make an outright transfer... An outright transfer might occur by way of gift or by the transferee providing consideration. In either case, the presumption of a resulting trust would be rebutted.
[116] The classic case of this type of resulting trust is an ‘apparent gift’, where, for example, a party is registered or shown on a title without providing consideration for that. The presumption applies that the party who did provide the consideration did not intend to gift the proprietary interest to the party who did not.
[117] Here, Abu provided consideration in the form of liability under the mortgage. The presumption thus applies not in relation to Abu’s entire share, but a share “proportionate to the parties’ contributions”. There is some debate as to whether assumption of mortgage liability constitutes a “contribution”, and whether the fact that one party actually pays the mortgage instalments is relevant to the assessment of the parties’ respective contributions. I have been unable to find any New Zealand judicial or other commentary, but Dal Pont provides some assistance in the Australian context. The leading case of Calverley v Green, is discussed in the following terms:18
Calverley v Green involved property purchased by parties to a de-facto relationship. The financier required both parties to sign the mortgage as a condition of extending finance. Of the purchase price ($27,000), the appellant contributed $9250, the remaining $18,000 being secured by the mortgage. The house was purchased in joint names. For five years subsequent to the purchase, the appellant paid all the mortgage instalments, whilst the
16 Fowkes v Pascoe (1875) LR 10 Ch App 343 at 353.
17 Bateman TV Ltd v Bateman [1971] NZLR 453 (CA) at 463.
18 Dal Pont, above n 13, at [26.70].
respondent paid general household expenses. Upon the breakdown of the relationship, the respondent sued, as co-owner, for the appointment of trustees to hold the house on statutory trust for sale. The appellant cross-claimed for a declaration that the respondent held her interest in the house on trust for him. The High Court held that the price for the respondent’s liability under the mortgage constituted a direct contribution to the purchase price for the purposes of the doctrine of resulting trust. Gibbs CJ explained that “the amount...borrowed under the mortgage was provided equally by the parties, for it was lent to them jointly, on terms which made them jointly and severally liable for its repayment, and, having thus borrowed, was applied by them in part payment of the purchase price.” On this reasoning, the Court found that, in equity, the respondent was entitled to a share in the property proportionate to her contribution, namely 9000/27500. In effect, the respondent held the proportion 4625/27250 of her legal interest on resulting trust for the appellant.
[118] That reasoning is applicable in this case. The mortgage liability was shared equally by the brothers, but I have found Din contributed the whole of the $39,000 deposit. Applying Calverley v Green, Din contributed $39,000 plus, it might be said the liability secured by the mortgage. However, the bank makes no distinction and can recover the whole advance against either of the borrowers. Abu’s contribution is thus equivalent but on Din’s case Abu could recover any payment made to the Bank, according to the joint liability or equities found in this judgment.
[119] If the presumption applies and is not rebutted, Abu would therefore hold part of his legal interest on resulting trust in favour of Din. It is for Abu to rebut the presumption giving the findings in this judgment by pointing to evidence that gives rise to the counter-presumption of advancement, or evidence that Din intended to make an outright transfer to Abu of a 50 percent share of the property. The presumption of advancement arises where there is evidence that the relationship between the parties is such that there is a “natural obligation” for party A to provide for party B. In this case, it would arise if there was evidence pointing to an obligation on the part of Din to provide for his brother. There is no such evidence. The evidence suggests strongly that if anything, the opposite was true. Din was the sibling who did not then have a property of his own, and the evidence is that their father and mother saw the need to involve Abu in the arrangement because of Din’s inability to do it on his own. Nor do I consider the fact that Din signed the mortgage as attorney for his brother gives rise to the presumption of advancement. That, in my view, was a convenient arrangement by the brothers’ lawyer and did not exhibit any ongoing obligation on Din to provide for his brother or any more general fiduciary arrangement.
[120] Nor does it appear on the evidence that Din intended to make an outright transfer to Abu. His evidence, which is supported by that of his mother, was that he and the family considered Din had the sole beneficial interest in the property.
[121] In my view, there is a sound basis for a finding of resulting trust in such terms and that Din should receive significantly more than an arithmetical construct of the percentage interest based on the equity contributed at purchase, and his management of, and paying off the bank loan, and work on the house.
[122] I have come to the view that Din should have the majority share in equity, pursuant to a resulting trust. I find some assistance in considering what a remedial constructive trust, if it had been agreed, would look like.
Remedial constructive trust
[123] A remedial constructive trust differs from an institutional constructive trust in that it “depends for its very existence on the order of the Court; such order being creative rather than simply confirmatory” per Tipping J.19 Palmer describes it as “Given as a remedy in situations not already covered by institutional constructive trusts but in which Judges feel a proprietary remedy is necessary to achieve justice”. It is a remedy which excites debate, and there is no simple test to be applied.
[124] Glazebrook J’s discussion in Chodar is a comprehensive statement of principle:20
[40] The Court of Appeal in Fortex left open the question of whether a remedial constructive trust should be “confirmed” as a part of New Zealand law. This would imply that the doctrine has at the least a foot in the door. What was made clear in that case, however, was that there must be a principled basis for the imposition of such a remedy.
[41] In Fortex at 175 Tipping J stated that there needs to be some asset or assets in the defendant’s hands upon of which the Court considers it appropriate to impress a trust. He says that this must be on a principled basis vis a vis both the person owning the assets and any third party who has an interest in the assets. He went on to say:
19 Fortex Group Ltd v Macintosh, above n 4 per Tipping J.
20 Commonwealth Reserves I v Chodar, above n 9.
“Equity intervenes to prevent those with rights at law from enforcing their rights when in the eyes of equity, it would be unconscionable for them to do so.”
A similar caveat is discernible in re Goldcorp; Kensington v Liggett [1994] 3 NZLR 385 at 404.
[42] The question for this case is what that principled basis is. There appears to be two potential triggers for the exercise of the Court’s discretion to grant a remedial constructive trust. One is unjust enrichment, the other unconscionability.
[43] The approach based on unjust enrichment is substantially that developed in Canada. There, a remedial constructive trust will be the normal response to an instance of unjust enrichment per Cory J.21 The remedial constructive trust as a response to unjust enrichment seems to be accepted in principle by Henry J in Fortex at 180, based on the leading case,22 the three elements of an unjust enrichment are: an enrichment of the defendant, to the detriment of the plaintiff, and in the absence of a juristic reason for the enrichment.
[44] The other trigger for a remedial constructive trust is unconscionability, as it is often characterised as “the formula through which the conscience of equity finds expression23, cited with approval by Cooke P in Beatty v Guggenheim Exploration Co (1919) N.Y. 380 at 386 per Cardozo J, cited with approval by Cooke P.24 In Elders Pastoral, Cooke P then went on to find that a constructive trust existed, based on the dictum of Bingham J in Neste Oy v Lloyds Bank Police [1983] 2 Lloyd’s Reparation 658 at 665-6. He stated at 186 that “[i]n short, I do not think that in conscience, the stock agent can retain this money.”
[45] A fiduciary relationship does not appear to be necessary for a remedial constructive trust. In Elders Pastoral, Somers J said that there was a relationship which was “fiduciary in character”. It is unclear what this means: see Dixon, The Remedial Constructive Trust based on:25 However, Somers J cited similar statements to those reproduced from the judgement of Cooke P and can be taken as having at least accepted the possibility of a remedial constructive trust arising in the absence of a fiduciary relationship.
[46] There is, however, a significant distinction between having jurisdiction to impose a remedial constructive trust, and choosing to exercise that discretion. It is apparent that a remedial constructive trust is potentially available as a remedy in cases of unconscionability and unjust enrichment. It is not inevitable that one will be awarded.
[47] Reliability and certainty are primary considerations of any system of property rights, and the unprovoked alteration of those rights is to be avoided where possible. This is all the more true in a commercial, rather than a domestic context. The Court must carefully examine the reasons why other
21 Rawluk v Rawluk (1990) 65 DLR (4th) 161 (SCC) at 172 per Cory J.
22 Pettkus v Becker (1980) 117 DLR (3rd) 257.
23 Beatty v Guggenheim Exploration Co. (1919) 225 N.Y. 380 at 386 per Cardozo J.
24 Elders Pastoral Ltd v Bank of New Zealand [1989] 2 NZLR 180 at 185.
25 Unconscionability in the New Zealand Commercial Environment (1992) 7 AULR 147 at 153.
forms of relief are inadequate, the interests of any third parties and the other circumstances of the case and consider whether proprietary relief can be justified.
[125] Here I find it would be unconscionable for Abu to claim a 50% interest in the property given:
(a) The true understanding of all family parties involved that the house was intended to belong to Din alone;
(b) The fact Din (through the gifts derived from his parents) was the sole contributor to the deposit; and
(c) The fact that Din has been the sole contributor to the property for the last 20 years, including renting and all maintenance and mortgage payments.
[126] The utility of a remedial constructive trust in these circumstances is that it is unashamedly a legal construct imposed to rectify an unconscionable outcome. Had it been pleaded, I would have reached judgment according to my assessment of unconscionability.
Conclusion
[127] While I have concluded that a resulting trust is (just) made out it would not meet the justice of this case if Din had the sole equitable interest. I have found that Abu’s mortgage liability contribution cannot be discounted, and Din is wrong to do so.
[128] Abu did not put any money into the purchase, but, in effect, took advantage of the opportunity presented by the request made by their father with the support of their mother, to enable Din to acquire a property in Christchurch, for himself.
[129] Abu seeks to diminish the contribution by Din from their father and mother is an important element of the assessment of his credibility. He simply is not credible, in my view, in this regard, and his transparent attempt to take advantage of the situation
has counted against his credibility in respect of the $10,000 and $29,000 funding to effect settlement.
[130] Din really has very little to say about this other than that the money was required for settlement, and he understood that the monies were coming from his family but he could not identify the specific source. Abu says the money was his, but I have rejected that on the evidence and concluded on the balance of probabilities, the money came from family.
[131] Din cannot conscionably assert an equitable interest in the whole one-half share of Abu reflected in the title. I consider Abu has to account to Din for part of that interest, and I conclude that measuring the entirety of contributions over the now some 22-year period, that Abu should account to Din for one-half of his registered interest. For those reasons, I conclude that under a resulting trust, and by a constructive trust had it been pleaded, the interests in the property are held in equity, 75% by Din and 25% by Abu.
Disposition
[132] The particular form of declaration will require further submissions. I am uncertain what the practical effect of this judgment will be and the parties should confer as to potential outcomes, which may include refinancing to meet Abu’s one-quarter interest, and there may be issues of valuation, and costs associated with this exercise.
[133] I otherwise reserve the question of costs and leave, if the parties wish to revert to the Court after they have discussed an appropriate method of formal disposition.
...........................................
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Meares Williams, Christchurch Saunders & Co, Christchurch
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