Hemara v Lowe [2023] NZHC 1253 (26 May 2023)

Last Updated: 1 June 2023

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-675 [2023] NZHC 1253

IN THE MATTER OF	a proceeding in equity for breach of trust under Part 18 of the High Court Rules 2016
BETWEEN	JOHN SHANE HEMARA Plaintiff
AND	KELLEE LOUISE LOWE Defendant

Hearing:	24 May 2023
Appearance:	S A Grant for plaintiff
Date of judgment:	26 May 2023

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 26 May 2023 at 11.00am.

Pursuant to Rule 11.5 of the High Court Rules.

.............................. Registrar/Deputy Registrar

Counsel/Solicitors:

Sandra Grant, Barrister, Auckland Carter Atmore, Auckland

HEMARA v LOWE [2023] NZHC 1253 [26 May 2023]

[1] As duty judge, I have for formal proof John Hemara’s claim Kellee Lowe was acting in breach of trust to pledge and sell a property in Northland’s Hikurangi. Mr Hemara seeks a declaration Ms Lowe holds the property on trust, and an order revesting the property. Ms Lowe is the property’s registered proprietor.

Background

[2] The property was the family home of Mr Hemara, together with his nine siblings, as children of the late Joseph Moses Hemara and Turu May Hemara. After the parents’ deaths the property ultimately was transferred to the children as tenants in common. They later transferred the property to Ms Lowe, who pledged it as security and sold the property (albeit the sale did not settle).

[3] The factual background is set out in greater detail in this Court’s judgment in a related proceeding, granting Mr Hemara’s application his caveat over the property not lapse in the face of Ms Lowe’s challenge to it,¹ which findings I adopt.

Discussion

[4] On a formal proof hearing, I need only to be satisfied Mr Hemara has filed affidavit evidence establishing each cause of action relied upon.²

[5] So far as the establishment of an express trust is concerned,³ I am satisfied by Mr Hemara’s affidavit evidence — including undated minutes of a family meeting at which Ms Lowe was present recording “House belongs to children of May & Joe Hemara and must remain with them, until passed onto next generation”; record of the property’s 27 July 2009 transfer to Ms Lowe for a purchase price of $100,000 as a debt owed to those children; and their 20 October 2009 gift to her of the forgiveness of that sum in consideration of their natural love and affection for her — the property was transferred to Ms Lowe as trustee for the benefit of the children and their whānau,

1. Hemara v Lowe [2022] NZHC 1215 at [12]–[37]; appeal struck out, Lowe v Hemara [2023] NZCA 134.

² High Court Rules 2016, r 15.9(4).

³ Trusts Act 2019, s 15(1)(b). See also Knight v Knight [1840] EngR 862; (1840) 3 Beav 148, 49 ER 58 (Ch) at 68 and

Foreman v Hazard [1984] 1 NZLR 586 (CA) at 594.

on terms including the property would not be mortgaged, charged or sold, but in any event with duties to act for the benefit of the beneficiaries.⁴

[6] The July 2009 transfer constituted part performance of the children’s oral disposition of the property on trust to Ms Lowe, unaffected by any requirement for written disposition of interests in land.⁵ The transfer plainly was substantial and unequivocal, explicable only in the children’s reliance on the agreement to their detriment by alienating their legal interest in the land to Ms Lowe and it would be unconscionable for her to rely on the Property Law Act 2007’s requirements for written dispositions.⁶

[7] I also am satisfied by Mr Hemara’s affidavit evidence Ms Lowe mortgaged and sold the property, in breach of the terms of the trust on which she held it.

[8] I will make the declaration Mr Hemara seeks. He also originally sought the property revest in the children (or their personal representative(s)). However — given differences between the children to that end, and liabilities coming with it — he alternatively proposed he and a sibling hold the property as trustees for all descendants, for formalisation in a Court-approved trust deed after consultation with the children. As not materially or unjustly diverting from the object of the original pleading,⁷ I consider the alternative both available and preferred in the circumstances.

Result

[9] I declare Kellee Louise Lowe holds the property at 45 Waro Drive in Northland’s Hikurangi (the “property”) on trust for the children of the late Joseph Moses Hemara and Turu May Hemara (the “children”).

[10] I order the property vest in John Shane Hemara and Barbara Rose Hemara on terms they:

⁴ Section 26.

⁵ Property Law Act 2007, s 26.

6. Fleming v Beevers [1994] 1 NZLR 385 (CA) at 391–392, referring to TA Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 (CA) at 109.

⁷ Stone v Smith [1887] UKLawRpCh 57; (1887) 35 ChD 188 at 190.

(a) hold it on trust for the descendants of the late Joseph Moses Hemara and Turu May Hemara;

(b) consult with the other children (or their personal representatives) on a draft trust deed; and

(c) within four weeks of registration of the vesting under s 89 of the Land Transfer Act 2017, submit the draft trust deed to the Court for its approval.

[11] I reserve costs pending such conclusion.

Postscript

[12] Mr Hemara’s diligent pursuit of this proceeding was a condition of his success in the other proceeding.⁸ This proceeding was listed for a formal proof hearing after Ms Lowe failed to file any timely statement of defence.

[13] Despite the parties being involved in the related proceeding and on its appeal, Ms Lowe’s solicitors and counsel in that proceeding lacked instructions to accept service of the present proceeding on Ms Lowe’s behalf. When Ms Lowe’s whereabouts were unable to be established for personal service, this Court directed substituted service on her solicitor and counsel in the other proceeding.⁹

[14] By affidavit filed on the day of hearing, Sophie Coomber deposed to her receipt of an email from Ms Lowe on 19 May 2023.¹⁰ Ms Lowe is the daughter of one of the children. On receiving a copy of privileged material relating to the proceeding addressed to the children from her mother, Ms Lowe “absolutely object[ed] to the placement of the house into a trust for the whanau”. Contending to have rebuilt and extended the house at a cost of “hundreds of thousands of dollars”, she would “never agree to the house being taken off [her]”.

⁸ Hemara v Lowe, above n 1, at [111].

⁹ Hemara v Lowe HC Auckland CIV-2022-404-0675, 23 November 2022.

10. Although Ms Coomber accompanied Mrs Grant at the hearing, given the (albeit scrupulously uncontentious) affidavit, I have excluded her appearance as counsel.

[15] On the day prior to the hearing Ms Lowe also communicated by email with the Court’s registry, asking for an adjournment of the hearing. She explained she was “currently in Perth and ... not able to fly home due to a bout of Covid”. She said “I was sent an email regarding this court case on Friday”, inferentially meaning that forwarded by her mother, “and haven’t had time to appoint a Lawyer to act on my behalf. I was just asked if I object?” The last sentence appears a reference to the privileged material sent to the children.

[16] Regrettably without copying Mr Hemara’s counsel and at least as regrettably misstating April 2022 service on Ms Lowe, the registry responded with a copy of this Court’s direction the proceeding be listed for a formal proof hearing and declined her request for an adjournment. Ms Lowe replied:

Nothing has been served on myself and know nothing about this. My lawyer was meant to be filling an appeal but find out they did not. We thought that an appeal was being lodged and turns out it hasn’t. How were they meant to serve me? -do they serve it in person because this has not happened?

and the registry recommended Ms Lowe obtain legal advice.

[17] The correct position is, on this Court’s 23 November 2022 order for substituted service, Ms Lowe’s solicitor and counsel in the other proceeding were served with the claim in this proceeding. The accompanying notice advised Ms Lowe then had 25 working days within which to file any defence, and warned if she did not “the Plaintiff may at once proceed to judgment on the Plaintiff’s claim, and judgment may be given in your absence”. Ms Lowe had until 20 January 2023 to file a defence. When she did not, on 24 February 2023, Mr Hemara sought the proceeding be listed for formal proof. That was directed on 28 March 2023.

[18] Moreorless contemporaneously, on Ms Lowe’s appeal in the other proceeding, the Court of Appeal recorded:¹¹

... The appeal was set down for hearing on 21 March 2023. On 8 December 2022 Ms Lowe was directed to file submissions by 14 February 2023. She failed to comply with that direction. On 21 February 2023 Ms Lowe’s counsel sought and was granted leave to withdraw on the grounds of non-payment of fees and lack of instructions regarding the appeal.

¹¹ Lowe v Hemara, above n 1, at [1] and [4]–[5] (footnotes omitted).

...

On 9 March 2023 the fixture was vacated and notice was given pursuant to r 44A(2) [of the Court of Appeal (Civil) Rules 2005] requiring Ms Lowe to comply with the direction to file submissions by 24 March 2023. She did not do so. Nor did she take any other steps in the appeal.

We are satisfied that the appropriate course is to strike out the appeal. We make an order to that effect.

[19] In the circumstances — particularly of Ms Lowe having counsel at the time of service and throughout the period for filing of her defence but not doing so, and of her appeal being struck out for her failure to take any steps there also — I saw no reason not to proceed with the scheduled formal proof hearing, as I have done.

—Jagose J