Wichman v Wichman [1989] CKHC 4; OA No 02.1989 (13 September 1989)

IN THE HIGH COURT OF THE COOK ISLANDS
HELD AT RAROTONGA
(CIVIL DIVISION)
O.A. No. 2/8

BETWEEN

TEAVAKE WICHMAN
of (Rarotonga), Businesswoman
Applicant

AND

PAPEHIA RERE WICHMAN
of (Rarotonga), Builder
Respondent

Counsel: Mr. Gibson for Applicant
Mr. Appleby for Respondent

Date of Hearing: 17th, 18th & 22nd August 1989
Date of Judgment: 13th September 1989

JUDGMENT OF ROPER CJ

The parties were married in March 1972, the Applicant then being 42 and the Respondent 49, and separated in August 1986 in unusual circumstances which will be detailed later.

In these proceedings the Applicant seeks a declaration that she is entitled to a half share of all property acquired during the marriage by virtue of a constructive trust.

THE PROPERTY IN ISSUE

This consists primarily of four areas of leasehold land in Rarotonga as follows:-

Section 91 C1

This section, having a total area of 1 acre 2 roods 30 perches, was leased to Rere Wichman, the Respondent's father, in 1972 for a term of 60 years. On the 24th June 1977 Rere Wichman assigned 2007 M² of the section to the Respondent "for the consideration of the natural love and affection borne by the Assignor to the Assignee". The assigned parcel will hereafter be referred to as 91 C1 (Inland). On the 3rd October 1977 Rere Wichman assigned a further area of 2 roods 13 perches to the Respondent, again in consideration of "natural love and affection". This area will be referred to as 91 C1 (Seaward).

I understand that the balance of 91 C 1 may have been assigned to other members of the Wichman family by the Respondent's father.

Section 91 C2

On the 8th February 1978 the Respondent took an assignment of lease of 2 roods 19 perches of this section for a consideration of $7000 (hereafter referred to as 91 C2 (Inland)); and on the 6th May 1982 took an assignment of lease over a further 2 roods for $37,000. This latter area is referred to as 91 C2 (Seaward).

THE MATRIMONIAL HISTORY

At the time of the marriage in 1972 both parties were living in New Zealand and each owned, and apparently still own, a house there. The Respondent's first wife had died in 1966 and the five children of that marriage were then living in New Zealand. There were no children of the second marriage, but the Applicant undertook the care of one of the Respondent's grandchildren. It seems that the Applicant had quite a responsible job in New Zealand as supervisor at a clothing factory, and according to her, was able to help the Respondent financially in the building of his house. The Respondent denies this, but it is not a conflict that requires resolution. It seems that whatever money each had went into a joint account.

The couple returned to Rarotonga in 1974 and decided to remain there. They brought building materials back from New Zealand, which had been left over from the Respondent's house, and purchased other materials from their joint account. The Applicant said that she provided $5000 by way of a mortgage on her New Zealand home, and this was not denied by the Respondent. Together they built what became the matrimonial home on 91 C1 (Inland). The building had a shop attached. The Respondent accepted that his wife worked hard on the building project and there was other evidence which supported the Applicant's claim of "equal effort".

In 1978 the adjoining section, 91 C2 (inland) was leased and a new shop and bake-house with living accommodation attached was built by the Respondent. In the meantime the Applicant continued working in the original shop. The new building was financed from earnings from the original shop and some financial assistance from the Respondent's daughters in New Zealand. The Respondent accepted that earnings from the original shop paid for 91 C2 (inland), but I assume he was there referring to the land only.

When the building on 91 C2 (Inland) was completed, the Applicant ran the bake-house and the Respondent the shop, and I accept that they both worked long hours. The building on 91 C1 (Inland) was converted into a kind of tourist lodge with rooms available at $12.50 per night.

It seems clear that the shop and bake-house complex was run by the couple in partnership, for on the 1st November 1981 they entered into an agreement whereby they transferred the whole of the enterprise to a company, Rutaki Wholesale Ltd, in which the Respondent holds 51% of the shares and the Applicant the balance. There was no transfer of land to the company.

The company then moved into the wholesale business against the Applicant's wishes and set up a number of shops around the island, but this venture proved to be a financial disaster, and by 1983 the shops had been closed leaving the company with debts, according to the Respondent, totalling over $200,000 which have now been substantially paid. The accounts produced, which, to say the least, are not very helpful, do not support this alleged indebtedness. The couple continued with the shop and bake-house until the separation.

In May 1982 the Respondent purchased the lease of 91 C2 (Seaward) from a Mr. Rudkin for $37,000, and thereafter the building on it was run as a tourist lodge with rooms let at $15 per night. This property poses a real problem. The Applicant conceded that she played no part in the purchase of the property but knew that Louisa, a daughter of the Respondent, had provided $5,000 towards the purchase price. Most of the balance came from a mortgage to Clarkes Nominees Ltd over 91 C1 (inland) and 91 C2 (Seaward) for $30,000 which has now been repaid. According to Louisa, 91 C2 (Seaward) belongs to her and it was only put in the Respondent's name because he could provide the necessary security for a mortgage. The Respondent confirmed that.

I accept Louisa's evidence that it was she who negotiated the purchase with Rudkin in New Zealand, having been interested in a possible purchase of the property since 1976 when she was on holiday in Rarotonga. I also accept that she discussed her interest in telephone calls to the Applicant, which the Applicant denies. It was Louisa's belief that mortgage repayments would be met from rents, but it seems that at least $12,000 may have come from proceeds from the shop and bake-house in which the Applicant certainly had an interest.

That brings me to 91 C1 (Seaward) which was in effect gifted to the Respondent by his father. The only building on this section was a shack which was the father's home. According to the Respondent and his brother there was a Wichman family meeting at which it was agreed that the Respondent should have this section, but for some reason, at least according to the Respondent, Mr. Wichman senior made it a condition that a house was not to be built on it. The Respondent said that ever since he took title he had planned to build a skating rink and bar complex on the site. He said that with that plan in mind he paid all the outgoings on the bake-house and the two lodges out of shop income (presumably by a siphoning process which would not stand Tax Department scrutiny) and arranged for the Applicant to bank the proceeds from the bake-house and lodges in a joint account, so providing a fund for construction of the skating rink/bar complex. He said that over a period of some five years he gave the Applicant between $1000 and $1500 per week to pay into the joint account and had no reason to suspect that it was not being deposited (although I note that bank statements for the joint account were sent in joint names) until August 1986 when his wife was on holiday in New Zealand. At that time the balance in the account was $138 when, on the Respondent's evidence, it should have been at least $260,000. Shortly after the Applicant's return to Rarotonga the Respondent broke down the door of the bake-house and chased the Applicant with a hammer. The Applicant then moved into the original matrimonial home and has been there ever since. The discovery that his wife had been deceiving him for years could account for such bizarre behaviour.

A curious feature is that according to the Applicant she had not the faintest idea why her husband had acted as he did, and, what is more to the point, never sought an explanation. She denied that she had ever received weekly sums to pay into their joint account. I was rather impressed with the Respondent's first few tearful words to the effect "The shack property owned by my father - that was the cause of all our problems". The "shack property" [91 C1 (Seaward)] had hardly received a mention in the evidence up to that time, and the significance of those first words did not become apparent until much later in the Respondent's evidence.

I believe there was some deceit on the Applicant's part, but on the evidence before me it is impossible to determine its nature, extent or magnitude. I could not possibly accept, for example, that up to $1500 per week could be drawn off from the bake-house and lodges, and I find it curious that, if the deposits were as substantial as the Respondent claims, he did not take the trouble over a five-year period to see how close he was to his goal of a tourist facility. It is also relevant that for a time at least income from the lodge on 91 C2 (Seaward) was being applied to mortgage repayments.

Apart from the leases there was evidence of bake-house equipment taken by the Applicant and plant in the shop, but I do not propose to deal with those items, which are in fact company property.

THE LAW

Unlike New Zealand, Australia and England where statutory developments have superseded the common law in property questions as between husband and wife, the Cook Islands' legislature has left such issues to the Courts, to be determined by the application of principles of law and equity. In the decided cases the aggrieved spouse or de facto partner has sought to prove circumstances which would justify the Court holding that a trust of an appropriate share exists.

Since Pettitt v. Pettitt [1969] UKHL 5; [1970] A.C. 777 and Gissing v. Gissing [1970] UKHL 3; [1971] A.C. 886, it has been accepted that when substantial capital contributions have been made to the acquisition or improvement of a property, and when a common intention of shared beneficial ownership can be inferred, the Court may hold a trust to exist. It is immaterial that the legal title may be in the name of one party only. Some confusion has been caused by the fact that the trust has been characterised as "resulting" or "constructive" when in fact the circumstances in which each will be imposed are quite different.

Then followed a series of decisions by the English Court of Appeal led by Lord Denning M.R. which were at variance with the principles stated in Gissing and rearranged the property rights of estranged spouses and de-facto partners by reference to what result would be "fair". Those cases, which have been the subject of criticism by text-book writers and in subsequent judgments of the English Court of Appeal, include Heseltine v. Heseltine [1971] 1 All E.R. 952, Cooke v. Head [1972] 2 All E.R. 38, and Eves v. Eves [1975] 3 All E.R. 744.

Matters have been brought to a more or less even keel, at least for the time being, by the decision of the English Court of Appeal in Grant v. Edwards [1986] EWCA Civ 4; [1986] 2 All E.R. 426, which was referred to with approval in the Privy Council in Maharaj v. Chand [1986] 3 All E.R. 107.

In Grant v. Edwards, Sir Nicolas Browne-Wilkinson V-C said at P. 437:-

"In my judgment, there has been a tendency over the years to distort the principles as laid down in the speech of Lord Diplock in Gissing v Gissing [1970] UKHL 3; [1970] 2 All ER 780, [1971] AC 886 by concentrating on only part of his reasoning. For present purposes, his speech can be treated as falling into three sections: the first deals with the nature of the substantive right; the second with the proof of the existence of that right; the third with the quantification of that right."

He then went on to analyse Lord Diplock's speech in Gissing v Gissing, and the following is an edited version of that analysis:

"1. The nature of the substantive right

If the legal estate in the joint home is vested in only one of the parties (the legal owner) the other party (the claimant), in order to establish a beneficial interest, has to establish a constructive trust by showing that it would be inequitable for the legal owner to claim sole beneficial ownership. This requires two matters to be demonstrated: (a) that there was a common intention that both should have a beneficial interest; and (b) that the claimant has acted to his or her detriment on the basis of that common intention.

2. The proof of the common intention

(a) Direct evidence. It is clear that mere agreement between the parties that both are to have beneficial interests is sufficient to prove the necessary common intention. Other passages in the speech point to the admissibility and relevance of other possible forms of direct evidence of such intention.

(b) Inferred common intention. Lord Diplock points out that, even where parties have not used express words to communicate their intention (and therefore there is no direct evidence), the court can infer from their actions an intention that they shall both have an interest in the house. This part of his speech concentrates on the types of evidence from which the courts are most often asked to infer such intention, viz. contributions (direct and indirect) to the deposit, the mortgage instalments or general housekeeping expenses. In this section of the speech, he analyses what types of expenditure are capable of constituting evidence of such common intention; he does not say that if the intention is proved in some other way such contributions are essential to establish the trust.

3. The quantification of the right

Once it has been established that the parties had a common intention that both should have a beneficial interest and that the claimant has acted to his detriment, the question may still remain: what is the extent of the claimant's beneficial interest? This last section of Lord Diplock's speech shows that here again the direct and indirect contributions made by the parties to the cost of acquisition may be crucially important.

If this analysis is correct, contributions made by the claimant may be relevant for four different purposes, viz.: (1) in the absence of direct evidence of intention, as evidence from which the parties' intentions can be inferred; (2) as corroboration of direct evidence of intention; (3) to show that the claimant has acted to his or her detriment in reliance on the common intention (Lord Diplock's speech does not deal directly with the nature of the detriment to be shown); (4) to quantify the extent of the beneficial interest."

It is not suggested in the present case that there was any express agreement between the parties concerning their respective beneficial interests in any of the assets acquired during the marriage except the grocery and bake-house business, which was subsequently taken over by the company and which I am not concerned with in these proceedings. It follows that if the Applicant is to succeed it must be shown that the circumstances were such that a common intention that she should have a beneficial interest can be inferred; and that she acted to her detriment on the basis of that common intention, and in the belief that by so acting, she would acquire a beneficial interest.

In the present case both Counsel accepted that on the evidence an inference could be drawn that there was a common intention that each should have a beneficial interest, while disagreeing as to the scope of that intention and the quantification of the interest.

The position is of course, as was made clear in Pasi v. Kamana [1986] NZCA 93; [1986] 1 NZLR 603 (if indeed it needs to be made clear) is that the Court's inquiry must focus on whether there has been a sufficient direct or indirect contribution to a specific property to carry an interest in it.

That approach requires a consideration of the particular circumstances surrounding the acquisition of each of the four properties in issue and the part played by the Applicant in providing direct or indirect contributions. In this inquiry it is relevant that at the time of the marriage the parties were mature people, each worldly wise in his or her own way, and although I am not required to consider their grocery business activities, their approach to them gives some guide to their attitude to the union. I now consider the four sections in issue.

91 C1 (INLAND)

The erection of the first matrimonial home on this section was very much a joint effort with money for materials being provided from a joint account to which each contributed. I accept also that the physical labour involved in the erection was equally shared. Mr. Appleby does not dispute that the Applicant's contributions justify equal sharing in the home but challenges equal sharing in the section itself. It is true that 91 C1 (inland) was gifted by the Respondent's father, but as I understand the evidence, the assignment of the lease to the Respondent alone took place some two years after the parties had erected the dwelling. I think a reasonable inference can be drawn that it was not the intention of the Respondent, by taking the assignment in his name alone, that the Applicant should be effectively deprived of her interest in the home.

I therefore make the declaration that the Respondent holds 91 C1 (Inland) in trust for the Applicant as to one half.

91 C2 (INLAND)

Here there is even a clearer case for equal sharing. The Respondent may well have received some financial aid from his daughters (whether by gift or loan is not clear), but I accept the Applicant's evidence that the primary source of finance for the purchase price of $7000 and the erection of the shop and bake-house came from takings from the original shop, and while the Respondent built the shop the Applicant continued working in the original shop.

I therefore declare that the Respondent holds 91 C2 (Inland) in trust for the Applicant as to one half.

91 C1 (SEAWARD)

This too was gifted to the Respondent by his father but throughout the marriage there was no development of the land. The Applicant certainly contributed nothing to it and suffered no deprivation as a result of her husband's ownership.

The Applicant's claim in respect of this section fails.

91 C2 SEAWARM

I have referred earlier to the problems associated with this section. It comes down to a question of credibility, and as indicated, I accept the evidence of the Respondent's daughter, Louisa. On that basis the beneficial owner of this section is Louisa with her father holding it on trust. It may be that the Applicant is entitled to some sort of charge over the property in respect of mortgage and other payments made out of matrimonial or company funds, but that is not an issue I can decide on these proceedings.

The Applicant's claim in respect of this section also fails.

Mr. Appleby submitted that the Respondent should be allowed a credit for money taken fraudulently by the Applicant, but I cannot accept that for the reasons already stated.

In summary, my decision is that there will be a declaration that the Respondent holds 91 C1 (Inland) and 91 C2 (Inland) in trust for the Applicant as to one half. The Applicant's claim in respect of 91 C1 (Seaward) and 91 C2 (Seaward) fails.

Reference was trade by Counsel to furniture. There is no evidence as to what it is, or how it was acquired, so I can make no decision concerning it. That is a matter that must surely be capable of settlement.

Leave is reserved to apply for any further directions that may be necessary.

I require memoranda from Counsel on the question of costs.

ROPER CJ