The cautionary tale that follows is an example of why written agreements need to be in place when families enter into multi-generational housing arrangements.
The importance of who gets what
Winning a Lotto prize is always a reason to celebrate; dreams can be realised and life can be more comfortable. Banking a lump sum can, however, give headaches to families as they not only grapple with newfound wealth, but also how it could be distributed amongst family members.
A recent case concerned a family that fell out over its $250,000 Lotto win.
The family comprised Mrs Kaniamma Winter, her children Angeline Narain and Ajnesh Chinappa, and Ajnesh’s wife, Vilashni Chinappa.
In January 2009, Angeline bought a Lotto ticket. That ticket was in Mrs Winter’s possession when she went shopping with her daughter-in-law, Vilashni, and checked the ticket numbers at a Lotto shop. Even though Mrs Winter said the ticket was her daughter Angeline’s, she completed a claim form in her own name on the spot; Mrs Winter used Vilashni’s bank account details as she could not remember her own.
When Lotto deposited the winnings, Vilashni transferred $220,000 to a bank account in the names of Mrs Winter and Angeline, leaving $30,000 in her own account. Mrs Winter signed a gifting certificate for this $30,000; this sum was then transferred to the joint bank account that held the rest of the winnings.
The family, then living in a Kāinga Ora property, decided to use their Lotto winnings to buy a six-bedroom home in Papatoetoe. The deposit of $36,000 was paid from the joint bank account (in the names of Mrs Winter and Angeline), but the property was purchased in the names of Ajnesh and Vilashni Chinappa, who borrowed $288,000 to assist with the purchase. The balance of $37,046.70 that was required to settle was paid from the joint account.
The four family members moved into the property and lived there harmoniously. Angeline contributed generously to the maintenance costs and improvements – until Angeline’s new partner, Daniel Prasad, moved in. When relations within the family broke down, Angeline registered a caveat; the Chinappas responded by trespassing Mrs Winter, Angeline and Daniel from the property. The three were forced to rent elsewhere for 10 years while the Chinappas enjoyed exclusive occupation of the Papatoetoe property. The situation deteriorated to the point that the Chinappas filed court proceedings in the High Court.
The High Court, “faced with completely contradictory narratives” about who owned the Lotto ticket, the status of the gifting certificate and other contributions, found that:
• Angeline owned the Lotto ticket
• Angeline had contributed 20% of the purchase price of the Papatoetoe property
• It was reasonable for Angeline to expect an interest in the property
• Angeline had contributed generously to furnish and upgrade the property, and
• The gifting certificate was drafted solely to meet the bank’s requirements, the money was not intended to be a gift and it could not be used to suggest the ticket was Mrs Winter’s.
The High Court awarded Angeline a 50% interest in the house, after deduction of the mortgage amount, on the basis of a constructive trust. The decision to award 50% rather than 20% was made on the grounds that Angeline had not had the benefit of occupation for 10 years. The Chinappas appealed this decision.
Court of Appeal
The Court of Appeal agreed that Angeline owned the Lotto ticket, had contributed 20% of the purchase price, and made further direct and indirect contributions to the property. Angeline’s indirect contributions to the property, however, were not materially greater than that of the Chinappas, meaning Angeline could not reasonably expect a greater share than the 20% (of the full market value) she contributed under a constructive trust.
A twist in the tail
The Court of Appeal then took a very interesting step that was to award occupation rent to Angeline. This was to compensate Angeline for the 10 years the Chinappas had excluded her from occupying the property that was in breach of her reasonable expectation that she would both own a share in the property and be able to occupy it.
The Chinappas were directed to compensate Angeline by paying her occupation rental, calculated at 20% of the market rental for the property, for the period of her exclusion. At the average weekly rental for Papatoetoe, that would amount to an additional $67,600 – a much lower amount than that awarded by the High Court.
Multi-generational housing is becoming increasingly common as it provides an excellent opportunity for families to support each (for example, through providing child care and, later, elder care). Caution is needed, however, to ensure there is a written agreement that records:
• The basis on which funds are contributed to the purchase, maintenance and outgoings on the property
• Who is occupying the property, and, most importantly
• How the parties will exit the arrangement.
If you are considering multi-generational housing, give us a call early on so we can advise on an agreement that is fair to all parties. You can contact Law North on 09 407 7099 or email@example.com
 Chinappa v Narain  NZCA 183.
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