Dearnaley v Kumar [2012] FJHC 1220; HBC 54.2012 (16 July 2012)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

Action No. 54 of 2012

IN THE MATTER of Section 110 of the Land Transfer Act (Cap. 131)

BETWEEN:

MATHEW JOHN DEARNALEY of 71 Kimber Hall Ave, Mt. Roskill, Auckland 1041, New Zealand.
PLAINTIFF

AND:

JAGENDR KUMAR of Lot 23, Kanace Road, Valelevu, Nasinu.
DEFENDANT

BEFORE: Master Deepthi Amaratunga

COUNSEL: Mr. Rajnil Abhikash Krishna for the Plaintiff
Mr. S. Chandra for the Defendant

Date of Hearing: 5TH June, 2012
Date of Determination: 16TH July, 2012

DECISION

A. INTRODUCTION

1. On or about 22 February 2012, the Plaintiff, Mathew John Dearnaley filed a Summon under section 110 of the Land Transfer Act applying for an extension of Caveat No. 742868B lodged against Native Lease No. 21913. The Defendant, Jagendra Kumar is the registered proprietor of the Property, Jagendra is opposing the Application. The Plaintiff is seeking extension upon an alleged debt to him from the Defendant. The Plaintiff allege that said money was given to the Defendant as a loan to establish themselves in New Zealand, but the Defendants have returned to Fiji and allegedly expended the said money for improvements to the property in issue. The Defendant admit receipt of money from the Plaintiff but state that the money was for the services rendered by him and his wife, while they were in New Zealand. The Defendant denies that the said money was expended on the property. The Plaintiff's claim against Defendant is that he is a constructive trustee of the property in which the alleged improvements were done.
   

B. FACTS

2. On or about 1 March 2011, Munro Leys as agent for Mathew lodged the Caveat against the Property. The Caveat was in the following form:
   

TAKE NOTICE that MATHEW JOHN DEARNALEY of 71 Kimber Hall Ave, Mt Roskill, Auckland, 1041, New Zealand, Journalist, the Caveator, claiming an estate or interest by virtue of an implied trust arising from the use by the Caveatee of moneys lent to him by the Caveator to contracts a dwelling on the land, and which moneys were lent pursuant to a Memorandum dated 2 February 2010, .....

3. On or about 2 February 2012, a Notice of Removal of Caveat addressed to Plaintiff was received by Munro Leys from the Registrar of Titles Office, Suva.
   
4. On or about 22 February 2012, the Application was filed.
   

The following affidavits have been filed:

In support

(a) Affidavit of Mathew sworn on 21 February 2012 and filed herein on 23 February 2012

(b) Affidavit of Maya Wati sworn on 22 February 2012 and filed herein on the same day and

In opposition

(c) Affidavit of Jagendra sworn on 12 April 2012 and file herein on 17 April 2012

In reply

(d) Affidavit of Mathew in reply sworn on 3 May 2012 and filed herein on 7 May 2012.

Maya Wati (who has sworn an affidavit in support of the Application) is the Defendant, Jagendra's sister.

C. ANALYSIS

5. On or about September 2009, Defendant and his family moved to New Zealand with the intention of settling there and the Plaintiff's wife, Nita Dearnaley and Defendant's wife Anjali Devi Kumar are cousins.
   
6. On 2 February 2010, Mathew lent to Jagendra the sum of NZ$10,000. This fact is denied by the Defendant, but he has not specifically dealt with the document that is attached to the proof of that amount. If he denies that it should be a forged document, and no such allegation is made by the Defendant and the alleged signature of him is not specifically dealt.
   
7. The Plaintiff state that the Defendant acknowledged having received this sum by signing a written memorandum dated 2 February 2010, by that letter the Defendant, agreed to repay Mathew the full sum (interest free) within one year or at his 'earliest convenience' .
   
8. The purpose of the loan is not mentioned and cannot be inferred from the facts that are before the court. The Defendant deny the said fact but denial is a bare denial without sufficient particulars.
   
9. Allegedly money is advanced to the Defendant and his wife for the specific purpose of assisting the Defendant and his family establishing themselves in New Zealand, but this cannot be ascertained at this stage.
   
10. On or about 29 August 2011, Munro leys filed writ action No. 321 in the Nasinu Magistrates Court against Jagendra to recover the moneys lent to him. The Writ also claimed judgment against wife of Defendant for moneys lent to her A separate writ action No. 326 was filed in the Nasinu Magistrates Court against Anjali, the wife of the Defendant to recover the moneys lent to her by Nita, the wife of the Plaintiff. The jurisdiction of the Magistrates Court to hear the actions is challenged.
    
11. Defendant claims that the moneys given to him by the Plaintiff were for consideration of him carrying out repair works and painting on vehicle owned by Plaintiff. The Defendant further says that the moneys given to his wife, were in consideration of babysitting when they were in New Zealand.
    
12. Defendant state that he received moneys from his wife's sister in Canada between 2009 and 2011.
    
13. The Plaintiff in affidavit in reply stated that:
    
    • (a) Only minor repair works done to one of the cars used in the family and
      
    • (b) The second car that was painted was done as a good faith gesture for the help provided to Defendant and his family.
      

The Plaintiff states that the Defendant's wife was never employed by his family as a babysitter and never stayed at their house for more than brief visits.

D. LAW ON EXTENSION OF A CAVEAT

Land Transfer Act (Cap 131)

14. Section 106 of the LTA states:
    

106. Any person –

(a) claiming to be entitled or to be beneficially interested in an land subject to the provisions of this Act, or any estate or interest therein, by virtue of any unregistered agreement or other instrument or transmission, or of any trust expressed or implied, or otherwise howsoever; or

(b) ...........

May at any time lodge with the Registrar a caveat in the prescribed form, forbidding the registration of any person as transferee or proprietor of, and of any instrument affecting, such estate or interest either absolutely or unless such instrument be expressed to be subject to the claim of the caveator as may be required in such caveat. [Emphasis added]

Section 110 of the LTA states:

110.- (1) Except in the case of a caveat lodged by the Registrar the caveatee or his agent may make application in writing to the Registrar to remove the caveat, and thereupon the Registrar shall give twenty – one days' notice in writing to the caveator requiring that the caveat be withdrawn and, after the lapse of twenty – one days from the date of the service of such notice at the address mentioned in the caveat, the Registrar shall remove the caveat from the register by entering a memorandum that the same is discharged unless he has been previously served with an order of the court extending the time as herein provided.

(2) Every such application shall contain an address in Fiji at which notices and proceedings may be served.

(3) The caveator may either before or after receiving notice from the Registrar apply by summons to the court for an order to extend the time beyond the twenty-one days mentioned in such notice, and the summons may be served at the address given in the application of the caveatee, and the court, upon proof that the caveatee has been duly served and upon such evidence as the court may require, may make such order in the premises either ex-parte or otherwise as the court thinks fit.

15. In Cambridge Credit (Fiji) Ltd v. WFG. Ltd 21 FLR 182 the Fiji Court of Appeal said (at p 184 at paragraph [H]):
    

That the respondent must however, bring itself within the provisions of section 106 and in order to do this must satisfy the Court that the following are fulfilled.

1. That it is a person claiming to be entitled to or to be beneficially interested in any land estate or interest under the Act; and
   
2. That it is so claiming by virtue of an unregistered agreement or other instrument or transmission or any trust expressed or implied or otherwise howsoever." [Emphasis added]
   

The Privy Council in Eng Mee Yong and Ors v. V Letcumanan s/o Velayutham [1980] AC 331. stated:

....where an application to the court under [section 110] for the removal of a caveat was by the registered proprietor of the land, the caveator had to satisfy the court that there was a serious issue to be tried and, having done so, to show that on a balance of convenience, the status quo should be maintained until trial .....although on such application a conflict of evidence usually indicated that there was a serious issue to be tried and it was normally inappropriate to resolve that conflict on affidavit, the judge was entitled to consider whether the plausibility of the evidence merited further investigation.... [Emphasis added]

16. Associate Judge Abbott in Cintro Holdings Limited v F M Custodians Limited 331 stated the general principles which apply to the removal; of caveats as:
    

[18] The general principles which the Court applies when determining an application for extension of caveat are well established. They appear in the well – known statement of the Court of Appeal in Sims v Lowe [1988] NZCA 253; [1988] 1 NZLR 656, 659 – 660:

It is clear that this summary procedure for the removal of a caveat against dealings is wholly unsustainable for the determination of disputed questions of fact. From this it follows, and has been consistently held, that an order for the removal of such a caveat will not be made under s 143 [which equivalent to section 110 of the Fiji Land Transfer Act] unless it is patently clear that the caveat cannot be maintained either because there was no valid ground for lodging it or that such valid ground as then existed no longer does so.

See eg Plimmer Bros v t Maur, Re Caveat No. 2538 (1906) 26 NZLR 294, 296; Catchpole v Burke [1974] 1 NZLR 620,623 -624, 625 (a case under s 145); Mall Finance & Investment Co Ltd v Slater [1976] 2 NZLR 685, 686, 688. The patent clarity referred to will not exist where the caveator has a reasonably arguable case in support of the interest claimed.

17. The Plaintiff at this stage can only prove advancement of money to the Defendant, but why he gave that money and whether it is utilized for some other purpose cannot be decided now. The alleged beneficial interest in the property is based on alleged constructive trust. Once the money is given whether that was utilized for the improvements to the house or not is a difficult thing to prove, unless it was done in special circumstances where a new property is brought or a specific improvement is alleged. In this case the alleged improvement is for the house that the Defendants live and no possible evidence available for a constructive trust involving the property.
    
18. The courts in Fiji have recognized constructive trust affecting the rights of a registered proprietor. In the case of Nisha v Munif [1999] 45 FLR 246, a mother and son shared the family home of which the son was the registered owner. The mother claimed that she had contributed to the home by donating building material and furnishings and by helping with the mortgage. She claimed a half share in the property. Shameen J held that in the circumstance of the case it was clear that the parties had intended to share the property equally. Accordingly a constructive trust to that effect was imposed on the son. The facts in the said case can be clearly distinguishable from the case before me as there is no such cogent evidence establishing the trust. There is no evidence even for arguable case relating to the property in issue.
    
19. Halbury's Laws of England 4th Ed. Reissued, Vol. 48, Paragraph 584 states as follows in regards to constructive trust:
    

A constructive trust attaches by law to specify property which is neither expressly subject to any trusts nor subject to a resulting trust but which is held by a person in circumstances where it would be inequitable to allow him to assert full beneficial ownership of the property. Such a person will often hold other property in a fiduciary capacity and it will be by virtue of his ownership of or dealing with that fiduciary property that he acquired the specific property subject to the constructive trust.

20. In Hussey v Palmers [1972] EWCA Civ 1; [1972] 3 All ER 744 at 747, Lord Denning MR said:
    

The two [resulting trust and constructive trust] runs together. By whatever name it is described, it is trust imposed by law whenever justice and good conscience require it. It is a liberal process, founded upon large principles of equity, to be applied in cases where the defendant cannot conscientiously keep the property for himself alone, but ought to allow another to have the property or a share in it.

21. The Plaintiff should prove that the Defendant cannot conscientiously keep the property for himself alone, which cannot be applied to this case from the material before me and there is not even an arguable case for such a finding. The Defendant did not buy the property in issue from the alleged money lent by the Plaintiff. The evidence before me is grossly inadequate to allow a caveat on the property this can be clearly distinguishable from the cases referred to me where it would be inequitable to allow the Defendant to assert full beneficial ownership of the property.
    
22. There is no compelling evidence indicating that the money gave by the defendant has been expended on the property. On the evidence before me there is no arguable case for constructive trust on the property in issue.
    
23. In Trustees Executors Limited v Eden Holdings 2010 Limited [2010] NZCA 626. The facts were completely different. In that Mr. Mayer was involved in a major mortgage fraud scheme. Under the scheme, Mr. Mayer would sell properties at higher than market value to his associates or associated companies and would (fraudulently) obtain finance for these purchases from Trustee Executors. The profits made from this scheme were used by Mr. Mayer and his associates to invest in real property. Trustee Executors, the Plaintiff/ Caveator, claimed that the property over which it had placed a caveat (Mt Eden property) was one the properties bought from the scheme profits. The New Zealand Court of Appeal said the principal issue in the case was whether the evidence established:
    

[2] ...a reasonably arguable case that money obtained from Trustees Executors by the fraudulent actions of a Mr. Malcolm Mayer was applied towards the acquisition of equity in the property over which the caveat had been lodged, thus giving rise to an institutional constructive trust in favour of Trustees Executors.

Though there was no direct evidence that the moneys from the scheme were used to purchase the Mt Eden Property. However the Court of Appeal, on fresh evidence admitted on how Mr. Mayer perpetrated these frauds, held that there were:

[31] ....factual basis for a finding that it is reasonably arguable that the proceeds of the fraudulent activity of Mr. Mayer was used to fund Champion to purchase the Mr. Eden property and are therefore represented by an equity available in the Mt Eden property.

The Court of Appeal further said:

[32] We find, therefore, that Trustees Executors has established that it is reasonably arguable that Mr. Mayer/ Champion obtained money by fraud from Trustees Executors and used those funds to purchase the Mt Eden property. The prerequisites for the creation of an institutional constructive trust, as identified by Eden in the High Court are satisfied.

....................

[34] In New Zealand Limousin Cattle Breeders Society Inc v Robertson, Somers J expressed the view (obiter)that where stolen money is used to acquire or improve the thief's home, that would give rise to an equitable interest in the home in favour of the victim of the theft. We apply that dictum to the facts of this case ...............

24. The Court of Appeal also held that although Mr. Mayer's associated company (Champion), which has bought the Mt Eden property, had sold it to the defendant company. The defendant company was not a purchaser in good faith and that it knew of the fraud by Mr. Mayer and champion. The Court of Appeal allowed for an extension of the caveat lodged on the Mt Eden property.
    
25. First, this case can be distinguished from the facts before me on the ground that there is no evidence establishing an arguable case for any fraud or the said money being utilized to buy the property on which the caveat is lodged. The allegation is some improvements to the house was done by the Defendant. The threshold for a caveat has not been established on mere hearsay evidence or on an alleged statement and no arguable case can base on such evidence.
    
26. In Zhong v Wang [2006] NZCA 242 the Plaintiff, Mr. Zhong, lodged a caveat on two properties owned by the defendant, Mr. Wang, claiming an interest in the properties as a beneficiary under a constructive trust. Mr. Zhong claimed that he had lent moneys to Mr. Wang to fulfill certain requirements of New Zealand immigration to enable him to obtain residency in New Zealand. These moneys were to be repaid in two year's time. The moneys were not repaid. Mr. Zhong filed an action to recover the moneys. A second action was also filed based on constructive trust. The case was an appeal from the decision of the High Court of New Zealand refusing Mr. Zhong's application for an extension of the caveat lodged on the two properties.
    

Mr. Zhong claimed that:

(a) The loan was made for the sole purpose of qualifying for residence status in New Zealand and since the purpose failed there was a resulting trust in favour of Zhong or

(b) Alternatively since the moneys loaned were not applied for the purpose it was made, the misappropriation of the moneys gave rise to a constructive trust.

The Majority of Court of Appeal (Wild and Health JJ) held that Mr. Zhong should succeed on his constructive trust argument. The Court held this despite agreeing the relationship between Mr. Zhong and Wang was essentially that of a debtor and creditor. The court said:

[91] ...On evidence common to both Mr. Zhong and Mr. Wang, money paid by Mr. Zhong was paid to or at the direction of Mr. Wang. In that context Mr. Wang must be regarded as Mr. Zhong's agent for the purpose of applying the money in terms of Mr. Zhong's instructions.

[92] ...On any view, unless Mr. Wang's evidence that the money was paid to him to acquire shares in Yini were accepted, Mr. Wang was not authorized to use the money paid by Mr. Zhong for the purpose of acquiring for the benefit of himself or others associated with him

.............

[94] In Attorney – General for Hong Kong v Reid [1994] 1 NZLR 1 (PC) the long standing authority of Lister & Co v Stubbs [1890] UKLawRpCh 73; (1890) 45 Ch D 1 (CA) was overruled, with the consequences that the existence of a relationship of debtor and creditor as between parties did not prevent a relationship of trustee and beneficiary from co-existing with it.

The majority of the Court of Appeal concluded their decision as:

[97] Once the problem of a co-existing relationship is removed, there is no basis on which to deny that a constructive trust could arise in this case. [98] We are satisfied that, in terms of Sims v Lowe, a reasonably arguable case to support a constructive trust on this basis has been made out. For those reasons, the caveats should remain pending determination of the new proceeding issued by Mr. Zhong or earlier order of the High Court.

27. Unlike in the said case the Plaintiff in this case has only a hand written note to the dispatch of money and the purpose of the said money given is not to be seen clearly as in the case above and more importantly there is no clear nexus between the alleged money and to the property. In the said case the purpose of the money lent was clear and where that money was spent was also clear. Admittedly the property upon which a caveat is lodged, was not purchased from the said money only allegation is some improvements were made to the property. The extent of the improvements is also not known and without knowing it the court cannot come to a conclusion as to whether the 'defendant cannot conscientiously keep the property for himself alone, but ought to allow another to have the property or a share in it namely the Defendant. There is no beneficial interest accrued to the Plaintiff on the said property and the evidence before me is grossly inadequate establishing an arguable case for constructive trust on the property in issue.
    

E. CONCLUSION

28. The Plaintiff has not submitted sufficient materials to court establishing a beneficial interest in the property. What the plaintiff is trying to do is to use the caveat as a bargaining tool to expedite the recovery of the alleged debt. I agree that relationship of debtor and creditor as between parties did not prevent a relationship of trustee and beneficiary from co-existing with it, but the circumstances in the case before me is far from that. The allegation is some money was given to the Defendant, while he was in NZ to repay that money without any interest within a fixed period and the Defendant has failed to honour it. So, the transaction was a bona fide advancement by the Plaintiff to the Defendant, and cannot be linked to the alleged improvements to the residential dwelling in Fiji. Whether the said money was expended on the improvements and the extent of the improvement is not before me to consider whether 'defendant cannot conscientiously keep the property for himself alone, but ought to allow another to have the property or a share in it. (per Denning MR in Hussey v Palmers [1972] EWCA Civ 1; [1972] 3 All ER 744 at 747). The evidence before me is insufficient to formulate even an arguable case against the Defendant on constructive trust relating to the property in issue. The application for extension is refused and the summons for extension is struck off and the cost of this application is assessed summarily at $500. The caveat is ordered to be removed forthwith.
    

F. FINAL ORDERS

1. The summons of the plaintiff seeking the extension of the caveat is dismissed and struck off.
   
2. The registrar of lands is ordered to remove the caveat forthwith.
   

100. The Defendant is granted as cost of $500 assessed summarily.
     

Dated at Suva this 16th day of July, 2012.

Master Deepthi Amaratunga
High Court, Suva