Hinds v Song [2022] NZHC 3017 (17 November 2022)

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This judgment was delivered by Associate Judge Andrew on 17 November 2022 at 4.00 pm

[1] Mr James Hinds makes an application under s 146 of the Land Transfer Act 2017 for an order that a second caveat may be lodged against four properties on Auckland’s North Shore. The properties are owned by the respondents. Mr Hinds was previously married to the daughter of the first respondent, Ms Song.

[2] The original caveats lapsed because of administrative error by Mr Hinds’ legal representatives.

[3] In the substantive proceedings Mr Hinds contends for an institutional constructive trust over the four properties based on what he says were extensive contributions made over a sustained period to the acquisition, preservation and enhancement of the properties. Mr Hinds says that he was an integral part of a family property enterprise.

[4] In opposing the application, the respondents say that Mr Hinds has not discharged the onus put on him by s 146 to justify the lodging of a second caveat. They say that Mr Hinds does not have a reasonably arguable case because the contributions he made to the properties were minor, that there was never a reasonable expectation that he would have an interest in the properties and that it is not reasonably arguable the respondents should reasonably expect to yield to Mr Hinds any interest in the properties.

[5] The critical issue I must determine is whether Mr Hinds has established a reasonably arguable case for an institutional constructive trust based on the principles of the well-known case Lankow v Rose upon which he relies.¹

[6] Mr Hinds and his former wife, Ms Dong, were in a de facto relationship from approximately May 2007 to 2013. They were married in 2013 in China and separated

[7] Mr Hinds and Ms Dong met as bartenders at SkyCity in 2007. Between 2008 and 2016, they lived in various properties on the North Shore owned by the respondents.

[8] Attached and marked ‘Appendix A’ is a chronology of the acquisitions by the respondents, of which Mr Hinds says comprises the family property portfolio. It demonstrates which properties the parties lived in, when they were sold and for what profit. The attachment is based on currently untested and challenged evidence given by Mr Hinds. It is not disputed that the respondents funded the acquisition of all of the properties. Only four of the properties in the attachment are the subject of these caveat proceedings.

[9] In December 2013, Ms Song settled the Song Family Trust.²The beneficiaries of the Trust are Ms Song and her children. Mr Hinds has never been a beneficiary of the Trust.

[10] The second respondent, Xiuling Trustee Ltd,³was incorporated in 2015 and appointed a trustee of the family trust that day.

[11] Ms Song previously lived in China until around 2018 when she moved permanently to New Zealand.

[12] Following separation, in August 2019 Mr Hinds lodged caveats against the four properties at issue:

[13] Ms Song is the registered owner of the properties subject to caveat 1. The second respondent, XTL, is the registered owner of the property subject to caveat 2.

[14] In July 2022, the respondents applied to lapse caveats 1 and 2. Both caveats subsequently lapsed. It is agreed that the lapsing of the caveats was a result of administrative errors and oversight by the legal representatives of Mr Hinds.

[15] In September 2022, the respondents were served with Mr Hinds’ statement of claim dated 20 July 2022. He contends for an institutional constructive trust over all four properties.

Unless the court orders otherwise, a caveat against dealings must not be lodged by or on behalf of the same person to protect the same estate or interest as a caveat against dealings that has been removed under section 142 or lapsed under section 141(2)(a) or 143.

⁴This section is substantially the same as its predecessor, s 148 of the Land Transfer Act 1952.

[18] It is not seriously in dispute that Mr Hinds has a reasonable explanation for failing to exercise his rights as caveator. The original caveats lapsed because of solicitor and counsel error; he was not personally at fault.

[20] As noted, Mr Hinds contends that he has a reasonably arguable case for an institutional constructive trust. He pleads his case on reliance on Lankow v Rose. That case requires that he prove:⁶

[21] The quantification of the claimant’s contribution is a matter for the Court based on evidence presented. This is assessed based on the claimant’s contribution relative

[22] The Court of Appeal has recognised that the Lankow v Rose test (and cases following) have established that the person claiming the institutional constructive trust must establish a “more than a minor contribution” and that both parties must be taken reasonably to have accepted that the claimant would share in the assets as a result. Further:⁸

... While the contributions do not need to be monetary in nature, there must be a causal relationship between the contributions and the acquisition, preservation or enhancement of the defendant’s assets; and the contributions that are made must manifestly exceed any benefits that the claimant derives from the arrangement.

[23] In addressing each of the four elements of Lankow v Rose, I agree with the submission of Ms Chambers KC that Mr Hinds’ case is, on the evidence before me, a weak one. However, the evidence is untested, and the test is not whether his case is weak. As the Court of Appeal recently affirmed in Green & McCahill Holdings Ltd v Ara Weiti Development Ltd,⁹an order for the removal of a caveat should only be made if it is patently clear that the caveat cannot be maintained. While a case might appear to be weak, the proper test is whether it is arguable or not.¹⁰The Court further affirmed that an application to sustain a caveat is not the place to resolve bona fide disputed issues of fact.

[24] In addressing the Lankow v Rose elements, I accept that the focus should be on whether there is a reasonable expectation of an interest in the property and whether the respondents should reasonably expect to yield to Mr Hinds such an interest. Those are the two particular elements that require close scrutiny.

⁷Lankow v Rose, above n 1, at 286 per Hardy-Boys J and 289–290 per McKay J.

⁸Wakenshaw v Wakenshaw [2017] NZCA 252, [2018] NZAR 532 at [25]; Hitchcock v Murphy

⁹Green & McCahill Holdings Ltd v Ara Weiti Development Ltd [2022] NZCA 218 at [82].

¹⁰Green & McCahill Holdings Ltd v Ara Weiti Development Ltd, above n 9, at [98].

[25] Ms Chambers submitted that it cannot be seriously disputed that Mr Hinds did not make any meaningful financial contributions to any of the four properties. He and his former wife, Ms Dong, received significant assistance from Ms Song, a very successful businesswoman in China who has developed a significant property portfolio over the years. Ms Chambers emphasised that the couple lived for the majority of their relationship rent-free in properties owned by Ms Song and her family trusts. The couple lived on government financial assistance and low incomes from unskilled work. Ms Chambers described the statement of claim with alleged details of “extensive contributions” made to the properties as nothing more than a laundry list of assertions, with little or no records showing that the alleged contributions had been made.

[26] I acknowledge the force of those submissions. However, there are significant and important factual matters in dispute. That includes the contention by Mr Hinds that he was a project manager, an integral part and the essential New Zealand connection for the development and enhancement of the property portfolio. Mr Hinds claims, albeit contested, that his contributions to the properties were not simply maintenance and landscaping. He says that the respondents were reliant on his knowledge of the local property market, particularly given that he had building and electrical experience. An ongoing theme of his contentions is that he was an important member of the family and that his contributions were made in order to grow wealth for all of them into the future.

[27] Despite the obvious weakness of Mr Hinds’ case, I find that it is arguable that the contributions he made were more than minor and not outweighed by the significant benefits he did receive. The issue of whether, as Ms Chambers submitted, any contributions he made were “swamped by a tidal wave of benefits” is a trial issue.

[28] In contending that Mr Hinds’ contributions were minimal, the respondents referred to the decision of this Court in Hitchcock v Murphy.¹¹The respondents say

[29] The parties in Hitchcock were siblings. Mr Hitchcock claimed an interest in the property in question on the basis of an oral agreement for sale and purchase, or alternatively a constructive trust arising from contributions made to the development of the property. Mr Hitchcock’s application that his caveat not lapse was dismissed. Associate Judge Gardiner held that although Mr Hitchcock had expended money on the property and had undertaken physical works, the contributions he made did not exceed the benefit he had received from being able to reside on his sister’s property, rent-free, for at least ten years.¹²

[30] However, I find that Hitchcock does not assist the respondents. It is quite a different case. The relationship between the parties was one of debtor/creditor and some of the work relied upon by Mr Hitchcock as contributions to the property, including structures that appeared to be associated with the growing of cannabis, had not improved the property significantly, or at all. Associate Judge Gardiner held that a purchaser would almost certainly demolish those structures.¹³I note also that in Hitchcock there was cross-examination on some critical matters of credibility.

[31] The facts of this case are quite different and in my view it is reasonably arguable that the contributions made here are in fact more significant than those of Mr Hitchock; the arguable case threshold that they exceed any benefits that Mr Hinds received is made out here.

[32] Ms Chambers further contended that it is inconceivable that Mr Hinds could have a reasonable expectation of an interest in the properties. She noted that he had never asserted any expectation of a proprietary interest during his relationship with Ms Dong, that he had never asked for money in relation to properties that were sold nor asked to be on the title, and that he knew that he was not a beneficiary of the Trust.

[33] There is again some force in those contentions. However, there are a significant number of factual matters in dispute relating directly to this critical issue of reasonable expectation. Mr Hinds says that he was given oral assurances by Ms Song that he would share in and benefit from the joint family enterprise. He says that he gave up his previous employment to work full-time for the family enterprise and that there was a high degree of trust amongst the family members. In those circumstances it was not necessary for him to become a registered owner of the property. He says that it was not until 2017 that he realised that the respondents would not provide him with any interest in any of the properties. Paragraph [209(s)] of the statement of claim in the substantive proceedings pleads:

The consistent theme of all the plaintiff’s [Mr Hind’s] discussions with the fourth defendant and the second defendant [Ms Dong and Ms Song] was that he was an important member of the family and his contributions would help grow wealth for all of them into the future. As part of the family, the plaintiff believed that, by working hard while they were young, they could set themselves up for a comfortable future for the family and their children. This was constantly and repeatedly reinforced by the fourth defendant and the second defendant.

[34] At paragraph [211] of the statement of claim, Mr Hind expressly pleads that Ms Dong and Ms Song represented to him that he would receive an interest in the properties to which he was contributing.

[35] I find that these are all significant factual issues that need to go to trial for determination. Mr Hinds has established that it is reasonably arguable that he had an expectation of an interest in the properties and that such an expectation was a reasonable one.

[36] As to the fourth element of Lankow v Rose, namely whether the respondents should reasonably expect to yield to Mr Hinds an interest in the properties, Ms Song has addressed that issue at some length in her affidavit. She contends that Mr Hinds was in essence living off her and received a huge financial benefit as a result. She

[37] The element of an expectation to yield is not dependent on whether the defendant is willing to yield an interest or did not expect to have to do so, it is whether the defendant should reasonably expect to do so. As Tipping J makes clear in Lankow v Rose,¹⁴the Court stands, in equity, as the defendant’s conscience, and the conscience of the legal owner may require him or her to acknowledge the other party’s beneficial interest in the property.

[38] Ms Chambers submitted that in assessing the issue of yielding an interest to Mr Hinds, it was important to have regard to the broader family context here involving the interests of the independent third party, namely the Trust (in which the second respondent, XTL, is a trustee). She noted that this is not a property relationship proceeding and in reliance on the High Court decision Burgess v Monk,¹⁵submitted that the interests of the independent third-party trust are important.

[39] I find that these are again all trial issues. I cannot conclude at this stage that Mr Hinds has no reasonable prospect of successfully proving at trial that the respondents should reasonably expect, as a matter of conscience, to yield to Mr Hinds an interest in the property. Viewed at this stage, Mr Hinds may well face formidable obstacles in proving his case, but it is not my role to prematurely determine those matters. I also acknowledge Ms Fisher’s submission that Mr Hinds has not yet filed all of his evidence.

[40] On the critical issue of the strength of the case, I conclude that Mr Hinds has demonstrated that he has a reasonably arguable case in relation to each of the four elements of Lankow v Rose.

[41] I therefore find Mr Hinds has established a proper basis for a second caveat in relation to all four properties. I note there is no real issue as to unavoidable prejudice by those who may have acted in reliance on the register.

[42] I also reject the respondents’ submission that even if Mr Hinds could establish a reasonably arguable case (as I have found), that I should exercise my discretion not to grant the orders sought. Mr Hinds may not have acted promptly, but there is no real basis for concluding that his interests could be reasonably accommodated in some other way aside from the lodging of caveats.¹⁶This argument was not pursued with any real vigour by the respondents.

[43] The application by Mr Hinds to lodge a second caveat against each of the four properties referred to in the application dated 1 August 2022 is granted.

[44] As to costs, having succeeded, I am of the preliminary view that Mr Hinds, the applicant, is entitled to costs and on a 2B basis. If agreement cannot be reached, then memoranda (no more than three pages) are to be filed and served within 14 days.

¹⁶Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] NZCA 264; [1996] 2 NZLR 652 (CA) at 656.

Dates	Property	Owner	Lived in by Mr Hinds & Ms Dong	Increases in value
1.5.2008 – 12.6.2012	14 Westminster Gardens	1^stRespondent Price $604,250	Yes	Sold $648,000 Profit $43,750
12.7.2012 – 11.11.2014	383 East Coast Road	1^stRespondent Price $990,000	Yes	Sold $1.46m Profit $470,000
18.6.2013 – 18.11.2015	1E Hart Road	Applicant and Ms Dong Price $650,000	Yes	Sold $898,000 Profit $248,000
14.2.2014	10 Quebec Street, Milford CAVEAT 1	1^stRespondent Price $1.545m	No	Current value $3.64m Potential profit $2.095m
12.9.2014	8 Frances Street, Hauraki CAVEAT 2	1^stRespondent Price $1.11m	No	Current value 42.44m Potential profit $1.329m
17.6.2015	26 Spencer Terrace, Hauraki CAVEAT 3	1^stRespondent Price $1.468m	Yes	Current value $2.48m Potential profit $1.012m
29.9.2015 – 12.8.2016	58 Potters Avenue	Ms Dong Price $1.512m	No	Sold $1.9m Profit $388,000
30.9.2015 – 15.5.2017	4 Bittern Place	2^ndRespondent Price $1.127m	No	Sold $1.3m Profit $173,000
12.10.2016	44 Channel View Road, Campbells Bay CAVEAT 4	2^ndRespondent Price $1.97m	Yes	Current value $2.6m Potential profit $630,000

UNDER	Land Transfer Act 2017, s 143
IN THE MATTER OF	An originating application to lodge a second caveat
BETWEEN	JAMES DANIEL HINDS Applicant
AND	XIULING SONG First Respondent XIULING TRUSTEE LIMITED Second Respondent

Hearing:	2 November 2022
Appearances:	A C M Fisher KC and S M Wilson for Applicant D A T Chambers KC and D Oh for Respondents
Judgment:	17 November 2022

High Court of New Zealand Decisions

Hinds v Song [2022] NZHC 3017 (17 November 2022)