Becker v Anderson
[2013] NZHC 2798
•24 October 2013
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV 2010-488-420 [2013] NZHC 2798
BETWEEN WILFRED BECKER & SILVIA BECKER Plaintiffs
ANDMAURICE CHARLES ANDERSON First Defendant
ANDROGER BELL & ORS AS PARTNERS IN WEBB ROSS JOHNSON
Second Defendants
ANDCAROL ANN ANDERSON Third Defendant
Hearing: 20 September 2013
Appearances: M I S Phillipps for plaintiffs
V Amundsen for the first defendant and proposed third defendant
Judgment : 24 October 2013
JUDGMENT OF ALLAN J
In accordance with r 11.5 I direct that the Registrar endorse this judgment with the delivery time of 12 pm on Thursday 24 October 2012
Solicitors/counsel : Ladbrooks, Auckland MIS Phillips, Auckland Ayres Legal, Auckland
Hesketh Henry, Auckland
BECKER & ANOR v ANDERSON [2013] NZHC 2798
Introduction
[1] These are applications by the plaintiffs for orders granting leave to file a further amended statement of claim, and for the joinder of a new defendant as third defendant.
[2] The proceeding has an extensive history which it is necessary to set out in some detail.
Procedural history
[3] Between December 1998 and October 1999, the plaintiffs lent to Mrs Carol Anderson in Whangarei, sums totalling $280,000. Some repayments were made, but the plaintiffs allege that they are now owed $337,872.25, together with accumulating interest.
[4] Mrs Anderson was adjudicated bankrupt on 29 November 2006. In this proceeding, commenced on 7 July 2010, the plaintiffs sue Mrs Anderson’s husband, Maurice Charles Anderson, as first defendant, and the partners in Webb Ross, solicitors, Whangarei, as second defendants. That firm acted for the plaintiffs in
2005 when initial debt recovery steps were taken.
[5] The proceeding was the subject of a five day fixture to commence on Monday 15 July 2013. Towards the end of the preceding week, I conducted a telephone conference in which I granted Mr Jerram leave to withdraw as counsel for the plaintiffs. At that time, the Court was advised that Mr Phillipps had been freshly briefed for them. He had not received the files, which he was to collect from Hamilton over the weekend. It was arranged that the fixture would be stood over to Tuesday 16 July to enable Mr Phillipps to get to grips with the case.
[6] When the case was called on 16 July, Mr Phillipps advised the Court that the claim against the second defendants had been settled, and that the plaintiffs sought the leave of the Court to discontinue the proceeding against that defendant. I granted the plaintiffs leave to discontinue by consent accordingly.
[7] Mr Phillipps next tendered a document entitled “Further and Alternative Claim against First Defendant” which was in effect an application to amend the statement of claim by adding a further cause of action against the first defendant. Ms Amundsen for the first defendant indicated that any application for amendment would be opposed, chiefly upon the basis that the allegations appearing in the proposed new cause of action were statute barred, but on other grounds as well.
[8] Counsel were agreed that the trial ought not to proceed until the final shape of the statement of claim was determined, and that accordingly it was appropriate to reschedule the trial which I adjourned, on the basis that counsel would in due course obtain a fresh fixture. In the meantime, the opposed application for leave to amend the statement of claim was set down for hearing on Friday 19 July 2013, which would have been the fifth and last day of the trial.
[9] As the argument proceeded on 19 July, it became evident that there were difficulties with the amended statement of claim for which Mr Phillipps was seeking leave. Although it contained a single prayer for relief, on analysis it comprised several new, distinct causes of action which I considered ought to be separately pleaded.
[10] After hearing Mr Phillipps at some length (and then from Ms Amundsen more briefly), I concluded that the plaintiffs’ proposed amended statement of claim ought to be reformulated, and that a fresh fixture should be obtained for the hearing of the argument for leave to amend.
[11] On 16 August 2013, the plaintiffs filed an application for an order granting leave to join Carol Anderson as a third defendant, and to file a yet further amended statement of claim against the first defendant, as envisaged at the earlier interlocutory hearing. The new pleading is substantially different from the statement of claim upon which the plaintiffs originally intended to proceed to trial. Indeed, the proposed amended pleading does not include any of the causes of action appearing in the earlier statement of claim.
[12] In the earlier formulation of their claim, the plaintiffs (accepting that Mrs Anderson could not be sued by reason of her bankruptcy), proceeded against Mr Anderson, claiming that he made various promises and given certain assurances in respect of the borrowed sum, such that he had become liable to the plaintiffs independently of Mrs Anderson.
[13] The new proposed pleading contains three causes of action. The first is a claim that both Mr and Mrs Anderson were fiduciaries with obligations to the plaintiffs to ensure that the loan monies were applied for a stipulated purpose and not otherwise, and that they fraudulently breached those obligations. Alternatively, if Mr Anderson was not himself a fiduciary, it is claimed that he knowingly assisted in a breach by Mrs Anderson, and that he knowingly received a benefit from the breach.
[14] The second cause of action is a claim that Mrs Anderson was a trustee under a Quistclose Trust, with obligations to ensure that the loan monies were applied for the stipulated purpose and that she fraudulently breached her duty with the assistance of Mr Anderson, who knowingly received a benefit from her breach.
[15] The third cause of action, advanced solely against Mr Anderson, alleges estoppel by representation or alternatively, promisory estoppel. The thrust of this allegation bears some resemblance to the original cause of action against Mr Anderson, but is explicit in its reliance upon estoppel principles.
[16] The plaintiffs seek an order joining Mrs Anderson as third defendant, for the purpose of proceeding against her as pleaded in the proposed new statement of claim.
Factual background
[17] Much of the factual background is not in dispute, although there is disagreement about some detailed matters of fact, and as to the application of legal principle.
[18] Mr and Mrs Becker were born in Germany and spent much of their lives there. In December 1996 they emigrated to New Zealand. A year later they bought a house at 3 Beaumont Court, Whangarei, taking occupation on 28 January 1998. Their neighbours, at 4 Beaumont Court, Whangarei, were Maurice Anderson (the first defendant) and Carol Anderson (the proposed third defendant). The parties quickly became friendly and saw a good deal of each other for some time. However, the Beckers say that the Andersons lost interest in them once the last of the loans that are the subject of this proceeding had been advanced.
[19] The Beckers had some money to invest. Mr Anderson had been involved in various business activities, although he was bankrupt during the period leading up to the making of the loans.
[20] During the latter part of 1998, the Beckers became aware that the Andersons wished to purchase the house they had been renting at 4 Beaumont Court. There is some evidence that Mrs Anderson was distressed at the prospect of losing the house, which the landlord wished to sell. The Beckers say that the original proposal was that they would purchase the house, on the basis that they would transfer it to the Andersons a year later. But the Andersons later indicated that the landlord would sell only to them, if a sale at the special price offered by the landlord was to be secured. Instead, agreement was reached that the Beckers would make a loan to Mrs Anderson in order to facilitate the purchase of the property at 4 Beaumont Court. The loan was advanced in three tranches because the Beckers’ funds came from Germany and became available to them only over a period of some months.
[21] The first loan of $80,000, is evidenced by a “personal finance agreement” dated 10 December 1998. The brief written agreement was prepared by Mrs Anderson and signed by her and the Beckers. There is no evidence that any party took legal or financial advice before entering into the agreement. Mrs Anderson alone is named as borrower because Mr Anderson, who was then bankrupt, was unable to borrow money without the consent of the Official Assignee.
[22] The personal finance agreement was in the following terms:
PERSONAL FINANCE AGREEMENT
10 December 1998
Lender: Mr Wilfred & Mrs Silvia Becker
3 Beaumont Court
Maunu WHANGAREI
Borrower: Mrs Carol Anderson
4 Beaumont Court, Maunu WHANGAREI
The above parties agree to enter a financial arrangement on a personal basis under the following terms and conditions
Amount $80,000
Term Two years
Interest rate 8.50% fixed 2 years
Interest Payable Monthly by way of direct credit to an account of the lenders choice or by self payment.
Principle(sic) Repayable on or before two years from the date of agreement.
The loan will be on an interest only basis with the borrower having the option of making principle (sic) repayment throughout the term. Interest will be calculated daily.
I/We accept this offer.
Wilfred Becker Silvia Becker
Carol Anderson
[23] Subsequent loans are evidenced by further personal finance agreements dated
21 April 1999 and 18 October 1999 respectively. They evidence further advances of
$75,000 and $125,000, and are on exactly the same terms as the first agreement, save that the interest rate is 7.5% in each case rather than 8.5%.
[24] Interest payments were duly made for some years, but although the loans reached their maturity dates in 2000 and 2001, they were not repaid. Some sporadic principle repayments were made over the next few years, but in 2005, having become dissatisfied with the delays, the Beckers consulted the second defendants (Webb Ross).
[25] Following negotiations, the plaintiffs entered into a fresh arrangement with Mrs Anderson. In a “deed of acknowledgement of debt” prepared by Webb Ross, the parties agreed:
2. Consideration
2.1In consideration of the Principal Sum lent to the Borrower by the Lender the Borrower agrees to perform and observe all terms and conditions contained or implied in this deed.
3. Terms of advance
3.1 The Borrower agrees that she is indebted to the Lender for the
Principal Sum of $251,830.55.
3.2The Borrower will within 24 hours of signing this acknowledgement of debt pay to the Lender via its solicitor, Webb Ross Johnson, the sum of $80,000 in reduction of the Principal Sum.
3.3The Borrower will pay the Lender the balance of the Principal Sum in one lump sum on or by 1 June 2010.
3.4The Borrower shall be entitled at any time whatsoever to make lump sum repayments in reduction of the Principal Sum.
3.5The Principal Sum or any amount then outstanding will incur interest at the rate of 8% per annum.
3.6On the 10th of every month, the Borrower will make interest only payments to the lender. The payments are to be made by direct credit to the lender’s bank account and are to be calculated on the amount of the principal sum then outstanding at the interest rate outlined in clause 3.5 above.
3.7If the Borrower fails to repay the Principal Sum or interest due under this agreement then the Borrower agrees to pay penalty interest to the Lender at the rate of 15% per annum and such penalty interest will accrue and be calculated on a daily basis for the period beginning on the date on which the Principal Sum and/or interest became due and payable until the date on which the Principal Sum and/or interest and all accrued penalty interest has been paid in full.
[26] The payment of $80,000, for which provision was made in cl 3.2 of the deed, was duly made, and for a time interest payments were received by the plaintiffs, but later in 2006 they ceased, and in November 2006 Mrs Anderson became bankrupt on her own application. Thereafter, the Beckers took various steps. They were actively involved in an investigation by the Official Assignee of Mrs Anderson’s affairs. They took legal advice; they made a complaint to the police. Ultimately, in 2010,
they commenced this proceeding against Mr Anderson as first defendant and Webb
Ross as second defendant.
The pleadings old and new
[27] The plaintiffs’ original statement of claim was filed on 7 July 2010. The claim against Mr Anderson was that he:
(a) was an instigator of and involved in discussions and requests to the plaintiffs for money to be lent to Mrs Anderson; and
(b)following his discharge from bankruptcy in 2000, agreed with the plaintiffs that he would cover for and repay all monies owed to them as soon as he could – or words to that effect;
[28] The plaintiffs subsequently repleaded and provided additional particulars, but the allegation against Mr Anderson as first defendant remained essentially unchanged up to the trial date.
[29] At the earlier adjourned hearing of these applications in July, Mr Phillipps, newly instructed, conceded that the plaintiffs would have faced difficulties with the claim against Mr Anderson as pleaded, in that the statement of claim was couched in contractual terms and appeared to signal a claim that Mr Anderson had given an oral guarantee to the plaintiffs of repayment of the loan advances, together with interest. Framed in that way, the claim did indeed face obvious difficulties.
[30] The proposed amended statement of claim departs almost completely from the earlier pleading, raising new causes of action in equity and pleading fraud for the first time, not only against Mr Anderson, but also Mrs Anderson. All of the allegations against her involve fraud. It is common ground that the circumstance of her earlier bankruptcy is accordingly irrelevant.
[31] The proposed new pleading comprises three causes of action. The first is a claim that both Mr and Mrs Anderson were fiduciaries, with obligations to the plaintiffs to ensure that the loan advances were applied to the purchase of 4
Beaumont Court, and not otherwise dissipated, and that the Andersons fraudulently breached those duties. It is further alleged against Mr Anderson that, if he was not a fiduciary, nevertheless he knowingly assisted Mrs Anderson in the breach, and knowingly received a benefit from it.
[32] The second cause of action is a claim that Mrs Anderson was a trustee under what is known as a Quistclose trust with obligations to ensure that the loan advances were applied to the purchase of 4 Beaumont Court and not otherwise dissipated, and that she fraudulently breached her duty with the knowing assistance of Mr Anderson, who knowingly received a benefit from that breach.
[33] The third cause of action, advanced solely against Mr Anderson, is that he orally guaranteed repayment of the loans made to Mrs Anderson and that he is estopped from contending that the guarantee is unenforceable. Alternatively, Mr Phillipps argues, it is open to the plaintiffs to contend that, having regard to the authorities, the Court could simply conclude that it would be unconscionable to allow Mr Anderson to deny the existence of his obligations to the plaintiffs.
[34] Copious particulars are provided of the breaches of duty alleged by the plaintiffs against Mr and Mrs Anderson.
Amendment and joinder principles
[35] No amended pleading may be filed or interlocutory application made, after the close of pleadings without the leave of a Judge.1 No close of pleadings date was fixed in this case, but it is agreed that having regard to the stage the proceeding has reached, the provisions of r 7.7 are engaged.2
[36] A number of factors will be taken into account in determining whether it is appropriate to grant leave to amend. What has been termed the paramount consideration is that the parties should have every opportunity to ensure that the real
controversy goes to trial so as to secure the just determination of the proceeding.3
1 High Court Rules r 7.7.
2 See also r 7.77.
3 See Shanton Apparel Ld v Thornton Hall Manufacturing Ltd [1989] 3 NZLR 304 at 309 ; Chilcott v
The Court must also have regard to whether the proposed amendment will cause significant delay or prejudice another party.4 Even where serious prejudice and significant delay will arise, an amended pleading may nevertheless be permitted if the proposed claim has substantial merit and will not cause injustice to the defendants.5
[37] The Court should also take into account the administration of the Court process and the impact of granting the amendment on case management issues. It will be relevant also to consider whether the amendment includes a fresh cause of action and, importantly in this case, whether or not the fresh cause of action is statute
barred. If it is, then it cannot be introduced.6
[38] The extent to which the application is late will also be a matter to be taken into account. As Ms Amundsen submits, there is a heavy burden on a party who seeks to raise a new and significantly different case at the opening of the trial.7
Ms Amundsen relies on Swain-Mason v Mills as authority for the proposition that there is a significant burden on a party seeking to raise a new and significantly different case at the start of a trial to explain satisfactorily why the change is so late and was not sought earlier, whether or not on substantially the same facts as
previously pleaded.8 She points out also that the burden becomes heavier if a party
is seeking to bring what is effectively a distinct case for the first time, rather than seeking merely to clarify the issues already in dispute.9 She refers the Court also to the observation by the Court of Appeal in Swain-Mason to the effect that the mere re-appraisal by newly instructed counsel of the merits of a case would be unlikely of
itself to carry significant weight.10
Goss [1995] 1 NZLR 263 (CA) at 272-273.
4 Elders Pastoral Ltd v Marr (1987) 2 PRNZ 383 (CA).
5 Body Corporate 177519 v Auckland City Council HC Auckland CIV-2005-404-5563, 24 May
2011.
6 See r 7.77(2); Matai Industries v Jensen [1989] 1 NZLR 525 (HC), Murray v Morel & Co Ltd
[2007] NZSC 27 [2007] 3 NZLR 721 at [33].
7 Swain-Mason & Ors v Mills & Reeve (a firm) [2011] EWCA Civ 14 (citing Worldwide
Corporation Ltd v GPT Ltd & Anor [1998] EWCA Civ 1894).
8 At [106].
9 Ketteman v Hansel Properties Ltd [1987] 2 WLR 312; [1988] 1 All ER 38 at [62c].
10 Swain-Mason at [69].
[39] In Swain-Mason the trial Judge had allowed an amendment at the commencement of the trial which had the necessary effect of requiring that the trial be adjourned. The Court of Appeal upheld an appeal. Lloyd LJ said:
[72] As the court said, it is always a question of striking a balance. I would not accept that the court in that case sought to lay down an inflexible rule that a very late amendment to plead a new case, not resulting from some late disclosure or new evidence, can only be justified on the basis that the existing case cannot succeed and the new case is the only arguable way of putting forward the claim. That would be too dogmatic an approach to a question which is always one of balancing the relevant factors. However, I do accept that the court is and should be less ready to allow a very late amendment than it used to be in former times, and that a heavy onus lies on a party seeking to make a very late amendment to justify it, as regards his own position, that of the other parties to the litigation, and that of other litigants in other cases before the court.
[40] A reading of the judgment suggests that a powerful factor in the ultimate determination of the case in the Court of Appeal was the continuing (post- amendment) inadequacy of the amended pleading, there having been difficulties with the plaintiff’s case from the outset. Swain-Mason was not however a case in which there had been a change of counsel just before the trial, unlike Worldwide Corporation Ltd v GPT Ltd. The latter case concerned amendments refused by the trial Judge during trial in respect of certain aspects only of the statement of claim, new counsel for the plaintiff having concluded that without the amendments those parts of the case would fail.
[41] Mr Phillipps suggests that there is a distinction to be drawn between this case, which is essentially domestic in character, and the complex commercial cases (particularly Worldwide Corporation) with which the Court was dealing in both that case and Swain-Mason. I accept that consideration may be of some marginal significance, but it cannot be permitted to carry significant weight in my view.
[42] Finally it is relevant to note the comment in Swain-Mason,11 that an order for payment of the costs of an adjournment may well not adequately compensate someone who is desirous of being rid of litigation which has been hanging over his
head for some time, and may not adequately compensate him for being totally
11 At [69].
“mucked about” as Lloyd LJ put it. There is reference also in the same paragraph of Swain-Mason to the disruption caused to other litigants by last minute adjournments, which ought also to be brought into the scales.
The merits
[43] The strength of the proposed new causes of action are not always listed among the factors to be taken into account by the Court on an application for leave, although they will often be considered in the course of determining where the justice of the case lies. But where, as here, the amendments are sought at a very late stage, the underlying merits of the proposed causes of action will assume some importance, first, because they will help to determine where the “real controversy lies” and second, because they will be relevant to an assessment of the degree of prejudice likely to be suffered by either party in the event of an adverse outcome.
[44] The case for the plaintiffs as now formulated is that a fiduciary relationship arose between them and Mr and Mrs Anderson by virtue of their respective dealings at a personal level, and by reason of the degree of trust and reliance placed upon the Andersons by the Beckers to repay the loans in circumstances where the Beckers were helping the Andersons to achieve a strongly desired objective, namely the purchase of 4 Beaumont Court. The plaintiffs’ proposed case is that:
(a) The loan advances were to be applied in the purchase of 4 Beaumont
Court;
(b) Less than half of the loan monies were applied for that purpose;
(c) Instead, Mrs Anderson formed a trust which purchased two rental properties 12 days after the first loan fell into default through non- repayment of the $80,000 advance;
(d)The Andersons applied a portion of the proceeds of the loan in the acquisition of the two properties by funding the trust for that purpose;
(e) Additionally, the defendants purchased a BMW, other cars and a boat, and gifted money to their children, mostly at times when Mrs Anderson was already in default under the loan contracts;
(f) At all material times the plaintiffs knew nothing of the purchase of the rental properties.
[45] A mere relationship of lender and borrower does not of course give rise to a fiduciary relationship. But the two types of relationship can co-exist.12
[46] Ms Amundsen submits that the relationship between the plaintiffs and the defendants was simply that of parties to a contract. They were respectively lenders and borrower. There was no relationship between them beyond their friendship. She points out that in order to establish a fiduciary relationship, it is necessary to show
that the plaintiffs reposed trust and confidence in the defendants.13 Further, she
notes, where contractual parties are at arm’s length, difficulties arise when an attempt
is made to extend that relationship into the area of fiduciary obligations and duties.14
[47] Mr Phillipps accepts that the starting point here is the contractual relationship. However, he submits the critical feature is the fact that the loan was made by the plaintiffs to Mrs Anderson for the specific purpose of facilitating the acquisition of 4 Beaumont Court. He accepts that this is the key element of the relationship and that in order for the plaintiffs to establish that the Andersons were fiduciaries, it will be necessary for them to show that the loans were advanced on the basis that they were to be applied in the purchase of that property.
[48] There is nothing in the three loan agreements to that effect. Neither does the Court have any briefs of evidence or substantive affidavits from the plaintiffs, or indeed the defendants, on this point, which will turn on the strength of the oral
evidence given at trial.
12 Zhong v Wang (2006) 5 NZ ConvC 194,308 (CA) at [94].
13 See Estate Realties Ltd v Wignall [1991] 3 NZLR 482 (HC).
14 United States Surgical Corp v Hospital Products International Pty Ltd (1984) 58 ALJR 587.
[49] There is however no doubt that the loans were discussed and then made in the context of the strong desire of the Andersons to purchase 4 Beaumont Court. It is common ground that they did in fact buy that property, utilising at least in part, sums advanced by the plaintiffs.
[50] I consider that the plaintiffs have a moderately strong case in respect of their claim that a fiduciary relationship arose. It is not possible to be more definite than that.
[51] It is appropriate here to deal with the 2005 deed of acknowledgement which substituted for Mrs Anderson’s contractual obligations under the three loan agreements, a single contractual obligation to pay $80,000 forthwith, to pay the balance of the principal in 2010, and to pay stipulated interest in the meantime.
[52] Ms Amundsen says that the plaintiffs cannot now claim a loss from an earlier state of affairs that they accepted by entering into the deed of acknowledgement of debt, because any breaches of fiduciary duty have been subsumed in the new contractual obligation.
[53] I do not accept that. Any fiduciary obligations stand separate and apart from contractual obligations. The substitution of one contract by another will not necessarily bring any outstanding fiduciary obligations to an end. Moreover, Mr Anderson was not a party to the deed of acknowledgement.
[54] Ms Amundsen argues that there is no evidence to support the claim of knowing assistance against Mr Anderson. She refers to the need to establish that the alleged knowing assistor acted dishonestly and not merely carelessly or naively.15
As to that, Mr Phillipps simply points to the proposed amended statement of claim and argues that it contains sufficient particulars to enable the defendants to identify the factual allegations made against Mr Anderson. In essence, the plaintiffs plead that Mr Anderson was a knowing party to, and participant in, all of Mrs Anderson’s
activities.
15 Royal Brunei Airlines v Tan [1995] 2 AC 378; Twinsectra Ltd v Yardley [2002] UKHL 12 [2002]
2 AC 164..
[55] Ms Amundsen complains of the absence of evidence to support the claims made for the plaintiffs in their proposed first cause of action, but this being an ordinary witness proceeding in which no evidence has yet been given, the plaintiffs can hardly be expected to supply evidence as such. They have however supplied detailed particulars.
[56] The second cause of action pleads what is known as a Quistclose trust, or a close variant of it. A Quistclose trust arises when in the context of a loan advance, the loan agreement includes a clear term that the loan monies can only be used for a specific purpose.16 Ms Amundsen points out that such trusts arise by operation of law and that they will not be implied lightly. A Quistclose trust will not arise simply from a loan advance without more.17
[57] Here it is to be noted that none of the various loan agreements stipulates the purpose for which the loan funds are advanced, and so even if the plaintiffs can construct an evidential framework for their fiduciary trust arguments, they may be in some difficulty in establishing a Quistclose trust in its conventional sense.
[58] However, as the Court of Appeal noted in Zhong v Wang, it may be open to the Beckers to argue for a constructive trust on the basis that the advances made to Mrs Anderson were to be applied at the direction of the Beckers, and she was therefore their agent for the purpose of applying the advances on their instructions.18
The present proposed pleading supports an argument for a constructive trust.
[59] Four Beaumont Court was sold in February 2004. It is to be assumed for present purposes that the Beckers were aware of that sale by the time they entered into the deed of acknowledgement later in 2005. Ms Amundsen submits that any resulting trust arising out of the imposition of a Quistclose trust must necessarily have been subsumed in the provisions of the deed of acknowledgement which created a fresh acknowledgement of contractual liability by Mrs Anderson to the
Beckers. That is certainly an arguable position for Mrs Anderson, but it would not
16 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 (HL).
17 Zhong v Wang above fn 12..
18 At [91].
apply to Mr Anderson. Neither would it apply to an argument based on an alternative constructive trust as contended for by Mr Phillipps.
[60] In their third cause of action the plaintiffs say that immediately prior to execution of the first loan agreement, Mr Anderson stated that he would ensure that the loans were repaid in full within two years, and thereafter on between 12 and 15 occasions (of which eight are particularised), he made various promises to the plaintiffs, to the effect he would not let them down and that he would ensure that the outstanding liability was met. The first of these promises was said to have been made on 10 February 2001, and the remaining seven particularised occasions were between 16 May 2004 and 14 February 2005.
[61] The making of all but one of those promises is denied by Mr Anderson. The Beckers say that they deferred taking any action against the Andersons in reliance on the various promises made by Mr Anderson. An oral guarantee is of course unenforceable, but in particular circumstances there may be a proper basis for identifying an estoppel by representation, precluding a guarantor relying on the
absence of writing.19
[62] Where there is nothing in writing to support an intention to create a relationship of creditor and guarantor, and where, as here, the alleged guarantor denies almost all of the alleged oral representations, the plaintiffs face significant hurdles. The provisions of the Contracts Enforcement Act 1956 (and now s 27 of the Property Law Act 2007) were enacted for the very purpose of enabling the Court to avoid the need to decide which side was telling the truth about whether or not an old
promise had been made, and exactly what had been promised.20
19 Tait-Jamieson v Cardrona Ski Resort Ltd [2012] 1 NZLR 105 (HC), where it is to be noted French J, sitting on appeal from the District Court, having found that the authenticated signature fiction relied on in the District Court was unavailable, nevertheless held that an estoppel had been made out on the evidence, granted leave to the appellant to amend the statement of claim on appeal and gave judgment on the basis of an estoppel.
20 Actionstrength Ltd (t/a Vita Resources) v International Glass Engineering IM.GL.EN SpA [2003] UKHL 17 [2003] 2 AC 541 at [19]; Northcott v Davidson HC Whangarei CIV-2012-488-
97 7 June 2012.
[63] I consider the plaintiffs’ prospects in respect of the third cause of action to be limited but not negligible. Much will depend on the scope and reliability of their oral evidence.
The limitation point
[64] The provisions of the Limitation Act 1950 (the Act) apply to acts or omissions occurring prior to 1 January 2011.21 It is common ground that in this case the provisions of the Act apply to the exclusion of the Limitation Act 2010. Subject to certain exceptions, proceedings in contract and tort cannot be brought after the expiration of six years from the date on which the cause of action accrued.22
[65] But s 4(9) of the Act provides:
(9) This section shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any provision thereof may be applied by the Court by analogy in like manner as the corresponding enactment repealed or amended by this Act, or ceasing to have effect by virtue of this Act, has heretofore been applied.
[66] The effect of s 4(9) is to exempt claims in equity from the limitation period which is applicable under s 4(1), save in those cases where the equitable claim is sufficiently analogous to the statute-barred claim to make it inequitable to allow the plaintiff to proceed.23
[67] The necessary degree of concurrence between the pleaded equitable claim and a parallel statute-barred claim was discussed in Johns v Johns by Tipping J, delivering the judgment of the Court of Appeal. He explained that:24
[80] …There will be a bar by analogy only when the fiduciary claim parallels the statute-barred claim so closely that it would be inequitable to allow the statutory bar to be outflanked by the fiduciary claim. In order to determine how close the parallel is the Court must examine not only the underlying facts but also the nature of the relationship between the parties and the policy and purpose of the different causes of action. If there is a sufficient difference in any material respect, the suggested parallel is unlikely to be close enough to make it appropriate in equity to apply an analogous bar.
21 Limitation Act 2010, s 59.
22 Section 4(1).
23 Johns v Johns [2004] 3 NZLR 202 (CA) at [68].24 At [80]-[81].
[81] This, we think, is the point Butler is making at ch 31.1.3(4)(c), (d) and (e), pp 966 – 967 by reference to the decision of Paterson J in Simpson v Elliot (High Court, Auckland, CP 54/99, 14 March 2001) and the decision of the Supreme Court of Canada in M(K) v M(H) (1992) 96 DLR (4th) 289. The judgments in Matai Industries and S v G should not be read as suggesting that the issue can be concluded solely by reference to the degree of concurrence of the factual allegations. That of course must be the first focus because, if there is no sufficient degree of concurrence in that respect, the suggested analogy is likely to fail at that point. If, however, there is factual concurrence in the sense that the different causes of action are simply different ways of putting the same factual complaint, and there are no policy or other reasons militating against it, the case for an analogous bar is likely to have been made out.
[68] In order therefore to establish a statutory bar by analogy, it is necessary to demonstrate that there is a statute-barred corresponding claim which is sufficiently analogous to the equitable claim. The analysis requires a consideration of the degree of concurrence of the factual allegations and further, a consideration of any policy
reason relevant in the particular circumstances.25
[69] I consider first the third proposed cause of action against Mr Anderson alone, in which the plaintiffs plead that:
(a) Mr Anderson confirmed on a number of occasions that he would be jointly and severally responsible for all of the repayments due under the loans;
(b)they assumed that these promises constituted an enforceable agreement between them and Mr Anderson;
(c) this assumption was induced and encouraged by Mr Anderson, who intended that they rely on his promises, and
(d)they acted to their detriment by entering into the loan agreements, advancing the loans and forbearing from taking any steps to enforce the agreements until March 2005. The plaintiffs say that Mr Anderson
is bound to make good his promises, and that it would be
25 Litt v Litt [2012] NZHC 607 at [53].
unconscionable to allow him to deny the existence of his obligations to the plaintiffs.
[70] Although now couched in the language of equitable estoppel, this claim effectively mirrors the cause of action now abandoned by the plaintiffs against Mr Anderson, but upon which they were, until Mr Phillipps was instructed, proposing to go to trial. That former cause of action was in effect, a claim upon an oral guarantee. But it relied upon precisely the same facts as are now pleaded in respect of the proposed third cause of action.
[71] In my opinion, the proposed third cause of action so closely parallels the former claim, that it would be inequitable to allow the statutory bar to be avoided, simply because the plaintiffs have now decided to plead their case using the language of estoppel. The relevant facts are precisely the same. I consider that the third cause of action, based as it is on promissory estoppel, to be time barred by analogy with the contract based claim, now abandoned by the plaintiffs. Policy considerations support that outcome. Estoppel arguments ought not to be allowed to routinely subvert the need for a written guarantee. Tait-Jamieson was an especially strong case with substantial surrounding documentation.
[72] I turn to the proposed first and second causes of action, which raise different considerations. These causes of action allege fraud against both the first and proposed third defendant.
[73] Section 21(1) of the Act provides that no period of limitation prescribed by the Act shall apply to an action by a beneficiary under a trust, in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy.
[74] In their proposed first and second causes of action, the plaintiffs plead that Mr and Mrs Anderson fraudulently breached their fiduciary obligations to the plaintiffs for their own benefit by:
(a) allowing and arranging for only part of the funds advanced by the Beckers to be applied to the purchase of the property at 4 Beaumont Court;
(b)allowing and arranging for the balance of the loan advances to be dissipated;
(c) allowing and arranging for part of the loan monies to be applied in payment to the Andervich Family Trust (settled by Mrs Anderson) for the purpose of purchasing properties at 45/3 Kahiwi Street and 39
West End Avenue;
(d) the making of a payment to Mr Anderson from Mrs Anderson of
$80,000 in late 2005;
(e) failing to advise the plaintiffs of the sale of 4 Beaumont Court and permitting and directing that the proceeds of sale be dissipated and not applied in reduction of the principal sums due under the loans;
(f) failing to account to the plaintiffs for any of the proceeds of sale of 4
Beaumont Court, 45/3 Kahiwi Street, and 39 West End Road, apart from the $80,000 paid by Mr Anderson to the plaintiffs on 13 October
2005;
(g)failing to account to the plaintiffs for any other money received from the sale of chattels or other assets purchased by the plaintiffs, using part of the loan advances.
[75] These various claimed breaches are pleaded in terms that encompass fraud in a common law sense, that is involving actual and deliberate dishonesty. It appears
however, that the provisions of s 21(1) apply also to cases of equitable fraud.26
26 Collier v Creighton [1993] 2 NZLR 534 (CA) at 538; Johns v Johns HC Auckland CP3-SD/00
12 May 2003 at [67]; Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed Thomson
Reuters, Wellington 2009) at 38.1.2(c)..
[76] I am satisfied that the first and second causes of action fall within the provisions of s 21(1) of the Act, and accordingly, are not caught by s 4(1). Mr Phillipps does not rely on s 28 because it is unnecessary to do so in the light of s 21. It may be however, that s 28 would also be available to the plaintiffs. It provides that where a proceeding is based upon the fraud of the defendant, the period of limitation shall not begin to run until the plaintiff has discovered the fraud, or
could with reasonable diligence have discovered it.27
Acquiescence and laches
[77] Ms Amundsen submits that the plaintiffs ought not to be permitted to proceed on the proposed amended pleadings because they have been guilty of both acquiescence and laches. Section 31 of the Act provides that nothing in the Act affects any equitable jurisdiction to refuse relief on the ground of acquiescence or otherwise.
[78] The concepts of acquiescence and laches are closely inter-related. Acquiescence gives rise to a defence in the nature of equitable estoppel in those situations where a plaintiff stands by while he or she sees the violation of his or her rights in progress and takes no steps to interfere.28
[79] The doctrine of laches may also provide a bar to relief. In equity, where there has been unreasonable delay, relief may be refused in the exercise of the Court’s equitable discretion, but it seems that mere delay without prejudice to an opposing party, may be insufficient to give rise to a laches defence. As was explained by Anderson J, delivering the judgment of the Supreme Court in Eastern Services Ltd v
No.68 Ltd:29
This is because the doctrine of laches requires a balancing of equities in relation to the broad span of human conduct. In the abstract, facts and the weight to be given to them are infinitely variable. But in a particular case they have to be identified and weighed for what they are, as a singular exercise.
27 See generally the discussion in Inca Ltd v Autoscript (NZ) Ltd [1979] NZLR 700 (SC) at
709,710.
28 Andrew Butler Editor Equity and Trusts in New Zealand above fn 26 at [38.1.5]; Souter v
Souter [1923] NZLR 1078.
29 Eastern Services Ltd v No.68 Ltd [2006] NZSC 42 [2006] 3 NZLR 335 at [37].
[80] A similar approach is called for in relation to an argument based on acquiescence. I accept Mr Phillipps’ submission that it is not feasible in the absence of detailed evidence, to grapple properly with defences of acquiescence or laches. They are matters which may be advanced at the trial, where the trial Judge will have had the advantage of hearing the detailed evidence, and will be in a position to determine where the relevant equities lie.
Conclusions
[81] Ms Amundsen argues strongly that these applications should not be allowed because significant prejudice to the first and proposed third defendants will result. There will undoubtedly be a degree of prejudice, in that if the applications are refused this proceeding will effectively come to an end.
[82] But the interests of justice nevertheless favour the grant of the applications, at least in part. The allegations contained in the first and second causes of action in the proposed amended statement of claim are not on their face untenable. If the plaintiffs are able to make out a case on the evidence, then the circumstances are such that their claims ought to be heard.
[83] On the other hand, the defendants will suffer the detriment of additional cost (which can be largely compensated for in costs at the end of the day), and the continuation of a proceeding which has now been on foot for some time against Mr Anderson, but will be newly advanced against Mrs Anderson.
[84] These competing considerations must be weighed one against the other. In the end I have reached the conclusion that the interests of justice favour the grant of the applications. In arriving at that outcome I have taken into account the various other discretionary factors referred to earlier in this judgment.
Orders
[85] There will be an order granting the plaintiffs leave to file an amended
statement of claim in the form appearing as exhibit A to the plaintiffs’ affidavit dated
15 August 2013, but excluding the third cause of action pleaded therein.
[86] There will be a further order granting the plaintiffs leave to join Carol Ann
Anderson as third defendant in this proceeding.
[87] The Court has been advised that in the event of the making of an order for joinder, Ms Amundsen will be acting for Mrs Anderson, and that service may be effected on Ms Amundsen accordingly. No orders were sought in respect of such service or the filing of a statement of defence, or of the future case management of the proceeding.
[88] Mr Phillipps believes that beyond the filing of a statement of defence, there would be no need for further interlocutory steps. Ms Amundsen was not convinced about that. Mr Phillipps indicated also that in the light of Mr Becker’s uncertain health, there was a need for an early fixture.
[89] In the light of these various matters, the Registrar is asked to place the file in
an Associate Judge’s list for such further directions or orders as may be appropriate.
Costs
[90] At the request of counsel, costs are reserved. If agreement cannot be reached, memoranda should be filed on or before 8 November 2013.
C J Allan J
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