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constructive trusts

£200 then, $120,000 now?

In 1961 Andrew Taylor advanced £200 to his mother to assist with the purchase of a property.  Andrew’s contribution, which equated to 7% of the value of the property was recorded by need that recorded:

… My son, Andrew Taylor, has provided two hundred pounds [200 pounds] towards the purchase price of the property, and in the event of any disposition of the property I will account to him for his share in full.

The original property was sold and a new property purchased, which was also sold, and another property (16 Ireland Street) was purchased.   Each subsequent property was rented by Andrew’s mother before being purchased by her.

In 1994, Andrew’s sister Eva purchased the Ireland Street property from their mother.  The purchase price was met by way of a debt back that was progressively forgiven although Eva’s position was that she paid $10,500 required to be paid by their mother to secure the right to purchase the property.

The matter came before the Court when Andrew, who lodged a caveat on the title, was arguing that he was a beneficiary pursuant to a constructive trust as a result of his indirect contributions.  The argument before the Court was that there was “enough in the evidence to raise the real possibility that Eva is fixed with knowledge so as to entitle Andrew to relief by way of constructive trust, in respect of his contribution to the first Spring Street property. This would be in the form of an order that his contribution is traceable as an indirect contribution to the later properties, which was then acquired by Eva on trust for him when she acquired her interest in the Ireland Street property.”

A claimant seeking the protection of a constructive trust must establish that their alleged contribution is:

  •  ‘more than a minor’ contribution into the acquisition, preservation or enhancement of specified assets
  • causally related to that acquisition, preservation or enhancement,, and
  • manifestly in excess of any benefits derived from the arrangement.

AJ Sargisson was satisfied that the original 7% contribution was more than minor give that each subsequent property was in the same locale.  The fact that Eva and her mother shared a common solicitor and other documented evidence was sufficient to satisfy the court that Andrew’s expectation was reasonable and known to Eva.

The end result was that Andrew was required to file his substantive claim and that that the caveat could lapse if $120,000 of the proceeds of sale were hid by the Court pending resolution of the matter.

It remains to be seen whether a constructive trust interest in one property can be traced through to subsequent properties in such circumstances.

Reference:

  • Taylor v Naera [2019] NZHC 1862
  • Wakenshaw v Wakenshaw [2017] NZCA 252

 

 

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