Case note: Possession of home and trusts — Lindsay v Lamb

Written by Bill Atkin*

The trusts problem

Is it going too far to say that the complications caused by trusts are the most intransigent in relationship property disputes? The law on this is an inconsistent patchwork of legislation and case law. It is a mess in urgent need of reform. The new Minister of Justice could gain kudos by picking up the issue and dealing with it ahead of a full-scale reform of the Property (Relation- ships) Act 1976 (PRA). The fulsome report by the Law Commission in 2019¹ will take a long time to address, but the trust issues can still form a neat package on their own ahead of a clean sweep. The Law Commission has provided the road map for this, and I hunch that it would get cross-party support.

The focus of this note is on one aspect of the trusts problem. It is about getting an occupation or tenancy order over the family home or other premises that are in the name of a trust. The decision of Judge Coyle in Lindsay v Lamb² is the spring- board for the discussion. It shows the potential for a spouse or partner, in this instance a de facto widow, to be left in the lurch. In some situations, though not in the case, this could extend to children.

Lindsay v Lamb

Ms Lindsay and Mr Lamb had been in a de facto relationship until Mr Lamb’s death. Ms Lindsay sought an occupation order— or alternatively a tenancy order — over the “family home”, with an ancillary furniture order if successful. The home was owned by the late Mr Lowe’s family trust, of which the discretionary beneficiaries were his children and grandchildren. Ms Lindsay was not a beneficiary. There was disagreement over when the de facto relationship started but for the purposes of the judgment under review it was not a “short relationship” in the PRA sense, and it did not matter when the start date was. It would matter to a claim under s 44C, which allows compensation when relation- ship property such as the parties’ home is transferred to a trust during the relationship. Ms Lindsay would argue that the trans- fer was after the de facto relationship began, whereas the trust would argue that it occurred beforehand. That, however, is for another day, but it signals some of the complications of the current law. Other proceedings under the Family Protection Act 1955 and under the constructive trust doctrine were also in the wind but were not the subject of the judgment under discus- sion.

Mr Lowe died in 2021 and Ms Lindsay remained in the home. The trustees initially approved of this but then informed her that she would have to vacate on or about 20 August 2022, which was two years after she was widowed. This led Ms Lind- say to seek an order for possession. Judge Coyle held that he had no jurisdiction to grant either an occupation or a tenancy order, and thus did not have to consider the merits of doing so. The reasoning relating to the two kinds of order differed, but the existence of the trust was at the heart of the matter.

Occupation orders

An occupation order under s 27 of the PRA gives the recipient “the right personally to occupy the family home or any other premises forming part of the relationship property” to the exclusion of the other spouse or partner. The latter point was irrelevant in the case as the partner had died. What, however, is meant by “the family home”? The definition of this phrase in s 2 states that it “means the dwellinghouse that either or both of the spouses or partners use habitually or from time to time as the only or principal family residence”. This does not say that one or both of the parties must “own” the home, unlike the definition of “family chattels” in s 2, which uses the word “own”.³ “Owner” is defined as “the person who, apart from this Act, is the beneficial owner of the property under any enactment or rule of common law or equity”. Under s 8(1)(a), the family home “whenever acquired” is relationship property. The reference to acquiring implies that, to be relationship property, the home must be owned by one or both of the parties, otherwise it would not have been acquired. This makes some sense: the court surely cannot randomly make orders dividing property that belongs to someone else, including a family trust. Does this carry through to the making of occupation orders? As s 27 does not state that the home must be owned by one or both of the parties, the argument was made that usage as the family home rather than ownership should determine jurisdiction to make an occupation order. Judge Coyle expressly rejected this argument and cited Keats v Keats, where Judge Grace held that one or both of the parties had to be beneficial owners.⁴ This is reinforced by the language of s 27(1), which refers to “the family home or any other premises forming part of the relationship property”. While “family home” could be read as being discrete from the remain- ing words, the word “other” implies that the family home must be relationship property just like the “other” premises.⁵

The question then became one about who owned the home. Did either of the parties, Ms Lindsay or Mr Lowe’s estate, have any beneficial interest in the home that could support an occupation order? Counsel cited several cases on the point, but Judge Coyle considered himself bound by Lobb v Ryan⁶ where Powell J set out what Judge Coyle described as the “fundamental legal principles that trust property is not relationship property as a matter of law”. If this is so, then there is no jurisdiction to grant someone like Ms Lindsay an occupation order under the PRA. Lobb v Ryan made the legal position “emphatically clear”.⁷

However, is the picture quite as black and white as this? First, let us look at another failed argument. Ms Lindsay claimed that she lived in the house with the agreement of the trustees. This, it was argued, was a property interest in the house sufficient to support an occupation order. Apart from the point that the trust owned the house, Judge Coyle, with some justification, pointed out that the trustees had told Ms Lindsay to leave. Any right to stay in the house “has come to ‘an irreversible end’.”⁸ The issue arose in Lobb v Ryan as well where it failed. Importantly though, the Court of Appeal, in rejecting leave to appeal in that case, added:⁹

... [Peart has] argued that a resolution giving the beneficiaries exclusive rights to possess the home (provided that right has not come to an irreversible end) is sufficient for the Court to have jurisdiction under s 27. This is a question of law that might warrant leave in an appropriate case.

On the facts of that case, it was not necessary to decide the point as the applicant was currently residing in the relevant home unopposed and it was considered that the application was a tactical one to assist in his relationship property dispute. What however if the licence to occupy was shrouded in terms that made revocation much harder than in Lindsay v Lamb? What if the merits of the situation were much more strongly in favour of an occupation order? The Court of Appeal has left open the possibility that a sufficient interest in the home may exist.

Secondly, we look at another failed argument in Lindsay v Lamb. It was argued that the claims Ms Lindsay was pursuing under ss 44 and 44C of the PRA and the constructive trust claim against the trust constituted a sufficient interest in the home to provide jurisdiction for an occupation order.¹⁰ With good rea- son, Judge Coyle held that a claim under the PRA does not in itself create an interest in the home. Even if there was a success- ful claim, say under s 44C or under a constructive trust, com- pensation would be payable, rather than the creation of an interest in the property. We can contrast this to the approach of the courts to s 42 notices. Such a notice can be lodged where there is a claim to a real property interest under the Act, for example the home. In Martin v Guy,¹¹ a man’s s 42 notice was sustained even though it related to trust property. The home had been transferred to his ex-partner’s pre-existing family trust, of which she was a trustee with her mother and a surviving settlor. Although a notice cannot normally be lodged against trust property, this is not so if the land is vulnerable to a potential claim under the Act. As Gwyn J said:¹²

The claim must be arguable, but need not be established definitely. Trust land may be vulnerable for three reasons: one of the parties has a property interest in the trust, or the trust is invalid for some reason, or a disposition to the trust may be vulnerable to a claim under ss 44 or 44C of the PRA.

On the facts, it was reasonably arguable that the ex-partner’s powers under the trust amounted to an interest in the property. There was thus a good basis for the s 42 notice. Could a similar argument be made with respect to occupation orders?

This leads to the third point. What if the claimant’s former spouse or partner has “a bundle of rights” in the trust? This constitutes a property interest in the trust that is capable of being divided under the PRA if it is relationship property. The primary source of this line of reasoning is the Supreme Court judgment in Claytonv Clayton[Vaughan Road Property Trust].¹³ Taking account of the wide definition of “property” in the PRA and using “worldly realism”, the Court held that the trust in question gave the husband such powers that he had a discrete interest in the trust property that it could be classified and divided under the PRA. Although the parties had settled the claim, the Supreme Court indicated that, given the extreme nature of the circumstances, the value of the interest equalled that of the trust property. It follows that, in less extreme situations, the interest may be a partial one. When we apply this to the question of jurisdiction to grant an occupation order, the extent of the bundle of rights is not of the essence so long as there is an interest of some kind. Arguably, if the trust owns the family home and one of the parties has a bundle of rights in relation to the trust, then that party has a sufficient interest in the home to satisfy the jurisdictional requirements for an occupation order. As the trust owns the home and as the party with the bundle of rights has an interest in the trust, it is not too much of a stretch to say that that party is an “owner” of the home in accordance with the definition of “owner” in the PRA. There is, however, one further potential problem. An occupation order is likely to be sought soon after the parties separated. This means that it will not have been finally determined whether a bundle of rights exists. Would a prima facie argument in favour of a bundle of rights be enough? Could the Judge considering the application not make a ruling sufficient for occupation order purposes? This is close to what Gwyn J did in Martin v Guy, discussed above in the context of s 42 notices. It also relates to jurisdiction and leaves the Court to determine whether the facts justify an order. Any apparent injustice can be met by denying the order or placing conditions on it such as its duration.

If we return to Lindsay v Lamb for a moment, it is hard to see how the bundle of rights argument, if accepted, could apply. Mr Lowe had settled the trust and the beneficiaries were his children and grandchildren. There is no indication that he had powers of the kind that would give rise to a Clayton interest. Moreover, he was now deceased and his executors would not have gained any of the necessary powers. Further, even if juris- diction existed to grant an occupation order, it is hard to see how an order would be justified on the facts unless it was for a very short transition time. Ms Lindsay and Mr Lowe had been living in the home as if it were their own. They would have had emotional capital in it that was compromised when Mr Lowe died. In recognition of this, she had been allowed to stay on for two years. Judge Coyle had “enormous sympathy” for Ms Lind- say’s predicament¹⁴ but one may also have sympathy for the beneficiaries of the trust, Mr Lowe’s children and grandchil- dren. Ms Lindsay had no dependent children living with her as far as we know and so perhaps it was time for her to make adjustments. Either way, the exercise of discretion, if jurisdic- tion existed, is not clear-cut.

Another angle on occupation orders is to consider the power to make such orders under the Family Violence Act 2018. In determining whether there was jurisdiction to make an order overatrusthouse underthe previous Domestic Violence Act 1995, Judge Burns in M v M [Occupation order]¹⁵ took into account the definition of “property” in the now repealed Act (s 2):

property, in relation to a person, means property that —

• (a) the person owns; or
• (b) the person does not own but —
• (i) uses or enjoys; or
• (ii) is available for the person’s use or enjoyment; or
• (iii) is in the person’s care or custody;
• (iv) or is at the person’s dwellinghouse.

It will be evident that this is a very wide definition, much wider than the extended definition in the PRA, mentioned above. “Property” covers not just items that are owned but also, for example, used and enjoyed. While the key provisions on applications for an occupation order and the power to make such an order do not mention “property”, they came under the heading “Orders relating to property”. In referring to a dwellinghouse, they use the language that “either party to the proceedings owns or in which either has a legal interest (including, but not limited to, a tenancy)” (ss 52 and 53, not repealed). In the absence of further key definitions, Judge Burns applied the wide definition of “property” to cover the situation where the dwellinghouse is held in trust.

This ruling may be thought to be extending the notion of ownership beyond its usual meaning, even given that the defi- nition of property does so. If it is correct though, then it goes beyond the understanding in Lindsay v Lamb. Does the picture change with the Family Violence Act 2018? The definition of “property” in s 8 is drafted slightly differently but is in substance still the same. However, the law on occupation orders was changed. While the 1995 Act applied generally, the 2018 Act limits the availability of occupation orders to situations where a protection order is sought or is in force. The following is also added (s 115(4)):

However, no occupation order may be made in respect of any dwellinghouse unless either party to the proceedings owned it, or either party to the proceedings had a legal interest (for example, a tenancy) in it, at a time when the family relationship in respect of which the protection order is sought or was made existed.

What precisely this adds is not clear, but the implication is that an order cannot be made unless there is ownership or a legal interest in the dwellinghouse. This signals caution in making orders, but if we follow Judge Burns’ reasoning, we can still interpret ownership widely in line with the definition of “prop- erty”. In any event, it is unlikely that resort to the Family Violence Act to get round the problem of trusts will be easy or common.

Tenancy orders

The law relating to tenancy orders is very different from that governing occupation orders. For example, a tenancy order may be made “at any time” (PRA, s 28(1)) and is not ancillary to other orders under the PRA. While s 27 on occupation orders does not use the phrase found in s 28, case law has reached the same conclusion.¹⁶ A key provision on jurisdiction is s 28(1A):

(1A) The court may not make an order under this section unless, at the time of the making of the order,—

• (a) the spouse or partner against whom the order is made (the other party) is or was the sole tenant of the dwellinghouse, or is or was a tenant hold- ing jointly or in common with the applicant; and
• (b) the other party is a tenant of the dwellinghouse; and
• (c) either spouse or partner is residing in the dwellinghouse.

The drafting of this leaves a lot to be desired. For example, as Judge Coyle points out,“may” in the opening line means “must”.¹⁷ This means that it is mandatory to fulfil the conditions set out under (a) to (c). Judge Coyle agreed with counsel that on the clear facts Ms Lindsay and the late Mr Lowe were not tenants but simply had a licence to occupy. Since Mr Lowe’s death, Ms Lindsay paid no rental and the period of the licence had expired. There is another difficulty: Mr Lowe could not be “the other party” as he was no longer alive. Judge Coyle pointed out that, given Mr Lowe’s death, s 91(3) had to be complied with:

(3) The court may not make an order under section 28 in favour of a surviving spouse or partner unless,—

• (a) at the time of the making of the order, the tenancy of the dwellinghouse is vested in the personal rep- resentative of the deceased spouse or partner; and
• (b) either—
• (i) at the time of the making of the order, the surviving spouse or partner is residing in the dwellinghouse; or
• (ii) at the date of the death of the deceased spouse or partner, the deceased spouse or partner was the sole tenant of the dwellinghouse, or was a tenant in common with the surviving spouse or partner.

On the facts, the tenancy of the property was not vested in the executors, nor at the time of death was (b)(ii) satisfied. Thus, for a variety of reasons, there was no jurisdiction for a tenancy order. It is hard to disagree with this result as a matter of law.

The future

A quick read of cases such as Lindsay v Lamb and Lobb v Ryan would lead us to the view that the current law does not allow occupation or tenancy orders to be made against trust-held property. This is so even if the property has been the home of the family for some time, or if it is the main accommodation for children following parental separation or, as in Lindsay, a parental death. Families may be left stranded in a way that sets most family lawyers’ nerves on edge. On deeper examination, even if cursory as in this note, we find that the legal position is not so straightforward. It is however complex and not necessar- ily based on wise principles. A better and fairer law is needed.

The Law Commission, independently of its recommenda- tions on accounting for trust assets in the division of relation- ship property, has a proposal to tidy up the area of law under discussion. The proposal should be reasonably straightforward to implement and is not dependent on unravelling the trust structure. It relates to jurisdiction and leaves the court to make the call as a matter of discretion whether to grant an occupation order and in what terms. The proposal is to enable a court to make an order at any time in respect of:¹⁸

b. property held on trust, when:

1. either or both or any child of the relationship are beneficiaries of the trust (including discretionary beneficiaries); or
2. either or both partners are trustees of the trust ...

This is a practical way forward. Ironically, it is unlikely to help Ms Lindsay given the nature of the trust in her case.

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Footnotes

*. Professor Emeritus, Te Herenga Waka/Victoria University of Wellington.

1. Law Commission Review of the Property (Relationships) Act 1976 |Te Arotakeite Property(Relationships) Act 1976 (NZLC R143, 2019).
2. Lindsay v Lamb [2023] NZFC 8072, [2023] NZFLR 419.
3. There is separate provision in (b) of the definition of “family chattels” for “possession” of a chattel as opposed to ownership.
4. Lindsay v Lamb, above n 2, at [12]. See Keats v Keats [2006] NZFLR 470 (FC). Also cited was Beric v Chaplain [Occupation order] [2018] NZFC 3885, [2018] NZFLR 1052 per Judge Whitehead.
5. See Lobb v Ryan [2020] NZHC 834, [2020] NZFLR 211at [25] [Lobb v Ryan HC] (case discussed later).
6. Lindsay v Lamb, above n 2, at [15], citing Lobb v Ryan HC, above, at [30] and [31].
7. Lindsay v Lamb, above n 2, at [18].
8. At [14], citing Lobb v Ryan [2021] NZCA 425 at [25] [Lobb v Ryan CA].
9. Lobb v Ryan CA, above, at [25]. See Nicola Peart “Occupation Orders under the PRA” [2011] NZLJ 356 at 358 and 359.
10. Lindsay v Lamb, above n 2, at [26]–[27].
11. Martin v Guy [2023] NZHC 1963. For further discussion of this issue, see Fisher on Relationship Property (online ed, LexisNexis) at [9.17].
12. Martin, above, at [31].
13. Clayton v Clayton [Vaughan Road Property Trust] [2016] NZSC 29, [2016] 1 NZLR 551, [2016] NZFLR 230. The further Supreme Court decision in Cooper v Pinney [2023] NZSC 80 (leave to appeal judgment) is awaited at the time of writing.
14. Lindsay v Lamb, above n 2, at [29].
15. M v M [Occupation order] [2010] NZFLR 746 (FC) espe- cially [35] and following.
16. Lobb v Ryan HC, above n 5, at [21] and [22]. Nothing in s 23 suggests that an occupation order is conditional on an application for any other order.
17. Lindsay v Lamb, above n 2, at [20].
18. Law Commission above n 1, discussion of occupation or possession at [15.75]–[15.106].