Clark v Clark

[2022] NZHC 786

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2021-409-000463

[2022] NZHC 786

BETWEEN

GREGORY BERNARD CLARK

Plaintiff

AND

FELICITY KATE CLARK

Defendant

Hearing:	29 March 2022
Appearances:	G E Slevin and S C Lester for Plaintiff J Moss for Defendant
Judgment:	13 April 2022

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 13 April 2022 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

CLARK v CLARK [2022] NZHC 786 [13 April 2022]

[1]                 The plaintiff (Mr Clark) and the defendant (Felicity) are father and daughter.1 Mr Clark seeks summary judgment for sums Felicity is said to owe under four loan agreements. Felicity opposes summary judgment on the basis the advances were gifts not loans or, in the alternative, it is unclear what portions of the advances were loans and what were gifts.

Background

[2]                 Felicity has a background in property management. In 2015, she purchased a property at Bickerton Street as an investment. She asked her parents to lend her

$70,000 for costs relating to the purchase and for repairs. She provided her parents with a form of loan agreement dated 21 August 2015. It stated that she intended to repay the loan within three years or as soon as practicable from surplus rental income. It also stated she would be looking to “duplicate this model” by borrowing further funds from her parents.

[3]  That loan agreement was never signed by Mr and Mrs Clark. They did, however, make an advance to Felicity on 27 August 2015. On that day, $171,178.77 was transferred from Mr and Mrs Clarks’ Westpac Bank account to Felicity’s solicitor’s trust account to complete the purchase of the Bickerton Street property. Felicity repaid her parents $103,000 the same day. The net result was an advance to Felicity of $68,213.77.2 I understand the transaction occurred in this way because Felicity needed cleared funds to settle the purchase.

[4]                 Subsequently, further amounts were advanced to Felicity by her parents from their Westpac Bank accounts. An amount of $22,500 was advanced on 24 September 2015 for a deposit on a property at Woodham Road. An amount of $202,895 was advanced on 22 October 2015 to complete the purchase of the Woodham Road property. On 7 March 2016, $40,000 was advanced for renovations to the Bickerton Street property.

1      I am referring to the defendant as Felicity rather than Ms Clark to more clearly distinguish between her and her mother.

2      Which takes into account bank charges incurred to transfer the advance as same day cleared funds.

[5]                 On 6 March 2016, Mr Clark and Felicity entered into four loan agreements in respect to the four advances. The loan agreements were prepared by Mr Clark. Felicity made alterations to them in her own handwriting. The loan agreements show the amount of each advance, the dates the advances were made, and under the signatures of Felicity and Mr Clark the  date  the  loan  agreements  were  signed. Mrs Clark witnessed the signatures of Mr Clark and Felicity but was not a party to the loan agreements.

[6]                 The circumstances under which the loan agreements were signed is disputed. Felicity says she was forced to sign them as a result of threats of violence. Mr and Mrs Clark deny that.

[7]The loan agreements were largely identical in their terms except in respect to:

(a)the amounts borrowed;

(b)the dates for repayment; and

(c)the property granted as security for the advances.

[8]The loan agreements all contained the following terms:

Promise to pay:

Within 36 months from today, Borrower promises to pay the Lender [amount in words and numerals] plus fixed interest at the mortgage rate of 4.4% pa.

Borrower will pay back in the following manner:

Borrower will repay the amount of this note in equal uninterrupted monthly instalments comprising of surplus rental income (less insurance and council rates) on [date of month loan agreement entered into] of each month commencing when the property is tenanted. The loan is expected to be paid in full in the month of [36th month after month of advance].

Late Charges:

If for any reason Borrower fails to make any payment on time, in full or misses a scheduled instalment, Borrower shall be in default. Any monthly payment not remunerated within seven (7) days of its due date shall be subject to a $20 penalty charge added to the scheduled instalment for any such late, short or missed instalment.

Security:

To protect Lender, Borrower gives what is known as an unconditional security interest or mortgage in the [street name] property; until such time the loan is repaid being [amount in numerals].

[9]                 Two of the loan agreements provided Felicity was to give a mortgage over the Bickerton Street property. The other two loan agreements provided she would give a mortgage over the Woodham Road property. In each case, Felicity added in her own handwriting that the security was provided only until the actual sum advanced was repaid.

[10]             The loan agreements contemplated monthly repayments but Felicity did not make any repayments.

[11]             The Woodham Road property was sold in around October 2018, but none of the sale proceeds were paid to Mr and Mrs Clark.

[12]             On 11 September 2020 (by post) and again on 26 November 2020 (by email) Mr and Mrs Clarks’ solicitor, Peter Maciaszek, wrote to Felicity seeking repayment of the advances. Felicity says she did not receive the letters. The letters referred to the advances as loans. Repayment, either in full or by instalments, was sought as Mr and Mrs Clark wished to plan for their retirement.

[13]             On 4 June 2021, Mr Maciaszek wrote to Felicity again. Felicity received that letter. Each of the loan agreements was identified including relevant terms. Felicity was asked to respond by 11 June 2021 with her repayment arrangements.

[14]             On 16 July 2021, Felicity emailed her parents referring to their claim for repayment of the advances as “sheer fantasy”. The email has a number of notable features. First, it refers to loans and loan documents. Second, it refers to the “agreement” having changed significantly since the loan documents were drawn up through verbal discussions and, specifically, that Mrs Clark had verbally agreed that some of the money was to be a gift. Third, it referred to Felicity having suffered years of physical and psychological abuse from Mr Clark and her brother. Fourth, Felicity states she had thought that Mrs Clark was gifting her the money as an

acknowledgement of the treatment she had received. Fifth, it is stated that Mrs Clark had agreed that interest would be waived on the advances and the remainder would be paid back from future property transactions when Felicity was “sufficiently liquid”.

[15]             A meeting was arranged between the parties to attempt a resolution, but it was cancelled in light of the allegations made by Felicity in her 16 July 2021 email. These proceedings followed.

The statement of claim

[16]             The statement of claim contains just one cause of action and it is based upon the loan agreements. Mr Clark pleads that between 27 August 2015 and 6 March 2016, he and Felicity entered into the four loan agreements advancing in total $333,608.77. The terms of the loan agreements are pleaded as is the fact that no repayments were made. Mr Maciaszek’s letters of 11 September 2020, 26 November 2020 and 4 June 2021 are relied upon as demands for payment. There are calculations of the amounts payable under the loan agreements as at 30 September 2021 by way of principal, interest and penalties amounting to $423,442.61, for which judgment is sought. Further interest, penalties and costs are also sought from 30 September 2021.

Summary judgment principles

[17]               A  plaintiff’s  application  for  summary  judgment  is  brought  pursuant  to  r 12.2(1) of the High Court Rules 2016. It provides:

The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.

[18]             The Court may give judgment in relation to a part of a claim only if the plaintiff cannot prove the whole of it. Further, the Court may give judgment on liability and order a trial on the issue of amount if the party applying for summary judgment satisfies the Court that the only issue to be tried is one of the amounts claimed.

[19]             An oft cited summation of the correct approach to summary judgment applications is contained in Krukziener v Hanover Finance Ltd as follows:3

[26] The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA) . The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

[20]I emphasise the following:

(a)The plaintiff must satisfy the Court that the defendant has no arguable defence to a cause of action in the statement of claim. Self-evidently, a plaintiff cannot seek summary judgment upon a cause of action that it has not pleaded in its statement of claim. The issue is whether there is a real question to be tried in respect to a cause of action in the statement of claim.

(b)The onus remains on the plaintiff throughout, but where the plaintiff’s unchallenged evidence is sufficient to convince the Court the defendant has no arguable defence, the defendant will have to respond with evidence of an arguable defence in order to defeat the application.

(c)It is generally not possible to determine disputed issues of fact based on affidavit evidence alone, particularly when issues of credibility arise.

(d)Issues of law, even though they may be complex can, however, be determined in an application for summary judgment.

3    Krukziener v Hanover Finance Ltd [2008] NZCA 187.

(e)The Court is not required to accept possible defences which are not bona fide, credible or are lacking in detail. The Court should adopt a robust and realistic approach to the assessment of evidence, but nevertheless summary judgment may be inappropriate where the ultimate determination turns on a judgment that can only properly be reached after a full hearing of all the evidence.

(f)The Court’s power to enter summary judgment is discretionary, but the discretion is of a residual kind. There is also little scope for exercising the discretion not to grant summary judgment where there is no suggestion of injustice.

The rejoinder evidence

[21]             A preliminary issue concerns what was described as rejoinder evidence. This refers to affidavits of Felicity and Andrew Williamson that were filed after Mr and Mrs Clark had submitted their reply affidavits.

[22]             Mr Slevin objected to the affidavits on the basis there is no provision in the Rules for the filing of rejoinder affidavits and, in this instance, the further affidavits should not be admitted, as the evidence sought to be adduced was not cogent, compelling or conclusive of any matter I need to determine.

[23]             Mr Moss argued that I should accept the affidavits because they exposed    Mr Clark as a liar and his credibility is at the heart of this case.

[24]             There is no doubt that I can receive the affidavits in the exercise of my discretion, but I am not going to do so in this case. The evidence is not cogent or compelling and certainly not conclusive of any issue before me. The affidavits concern peripheral matters. I do not accept Mr Moss’s submission that the evidence proves that Mr Clark is a liar, nor do I consider it was necessary or appropriate to make that submission.4

4      Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, r 13.8.1.

Submissions

Mr Clark’s submissions

[25]             Mr Slevin’s approach was two-fold. First, that the Court should take a robust approach which will lead inexorably to the conclusions that Felicity’s evidence lacks credibility and the advances were loans. Second, that to the extent there are disputed matters of fact (which he acknowledges there are) the Court does not need to resolve them because they do not provide a defence to the claim.5

[26]             In response to a submission for Felicity that the presumption of advancement applies, Mr Slevin argues the presumption is rebutted by evidence that proves the advances were intended to be loans.

[27]             Mr Slevin submits Felicity’s assertion the advances were gifts is contradicted by the affidavit evidence of Mr and Mrs Clark and:

(a)the draft loan agreement she prepared before the first advance asking for a loan;

(b)the loan agreements;

(c)Mr Mackiaszek’s letters requiring repayment of loans; and

(d)Felicity’s email of 16 July 2021 referring to loans and the loan agreements.

[28]             Mr Slevin contends while Felicity asserts a subjective belief the advances were gifts there is nothing to suggest that belief was shared by her parents. He submits I can safely dismiss her allegation she was subject to abuse but, in any event, I need not decide whether there was family violence because that cannot, as a matter of law, afford her a defence to a claim under the loan agreements.

5      Jowada Holdings Ltd v Cullen Investments Ltd [2003] NZCA 100 at [29].

[29]             He also notes Felicity’s evidence the loan agreements were a device to protect her in the event of the break-up of the relationship with her partner contradicts her assertion she signed the loan agreements as a result of threats of violence.

[30]             He refers to Felicity’s evidence she did not consider the loan agreements created an obligation to repay the advances as “doubtful” given her age and university qualifications.

[31]             Mr Slevin argues there is nothing in the fact Mr Clark did not demand repayments as that was because Felicity was struggling financially and Mr and Mrs Clark did not need the money for themselves at that time. He also asserts it is inherently improbable Mr and Mrs Clark would gift their retirement funds to just one of their three children.

[32]             Mr Slevin then submits there is nothing to corroborate Felicity’s evidence that Mrs Clark had forgiven all or some of the advances and that assertion is contrary to text messages that passed between Mrs Clark and Felicity and, also, inconsistent with her email of 16 July 2021. In any event, he says, Mrs Clark was not a party to the loan agreements and could not vary their terms.

Felicity’s submissions

[33]             Mr Moss’s approach was to argue this claim is not suitable for summary judgment because there are many factual disputes, the resolution of which are necessary before the Court can determine if the advances were gifts or loans.

[34]             Mr Moss submits that whether the advances were gifts or loans is a matter of fact and this depends upon the intention of the parties when the advances were made.

[35]             The starting point, he argues, in the case of an advance from parent to child, is the presumption the advance is intended to be a gift. He referred to N v N [Relationship property: Loan] as authority that the presumption can only be rebutted by evidence of

acts or declarations of the donor reasonably contemporaneous with the transfer.6 He says the presumption is not rebutted in this case.

[36]             Mr Moss notes the loan agreements were not entered into contemporaneously with each advance, which is contrary to the evidence in Mr Clark’s first affidavit. He is generally critical of the evidence of Mr Clark. He contends, not only is there a dearth of evidence as to what the parties intended when the advances were made, there is hardly any evidence, either, as to what occurred between the first advance (August 2015) and when the loan agreements were signed (May 2016), which may illumine their intentions.

[37]             Mr Moss relies upon Felicity’s evidence that the loan agreements were only ever intended to protect her from relationship property claims by her partner and that she was forced to sign them under duress.

[38]             Mr Moss also argues it is inconsistent with the advances having been loans that no repayments were ever made, Mr Clark did not require repayment from the sale of the Woodham Road property, the repayment terms were impossible to comply with (as monthly repayments would far exceed any surplus rental), and no mortgage or caveats were registered or lodged over the Bickerton Street or Woodham Road properties.

[39]             Mr Moss referred to the content of Mr Maciaszek’s letter of 11 September 2020 as “odd” as it made no mention of the loan agreements but, on the other hand, does confirm, he says, that no demands for repayment had been sought earlier (contrary to Mr Clark’s evidence).

[40]             Mr Moss also relies on text messages between Felicity and Mrs Clark and requests by Mrs Clark for money to buy a car. He argues that the filing of this claim was a response to Felicity’s failure to give them money.

6      N v N [Relationship property: Loan] [2010] NZFLR 161 (CH) at [42]. There is other authority that the preferable approach is to treat any subsequent conduct as admissible to rebut the presumption with its probative value being a matter for the Court to assess in any given case. See Snell’s Equity (34th ed, Sweet & Maxwell, 2019) at [25-013] and Comins v The Public Trust  [2021] NZHC 1172 at [26].

[41]             Mr Moss submitted, also, that the advances were in fact made by both Mr and Mrs Clark and Mrs Clark was therefore able to gift them and bind Mr Clark.

My analysis

[42]             Whether the advances were intended to be loans or gifts is plainly an issue that will need to be determined in this proceeding. However, regardless of the view I take on that issue, it is not appropriate to grant summary judgment. This is because I am not satisfied that even if the advances were loans they were made on the terms set out in the loan agreements. This is fundamental in the present context because the only claim that is made is based on the loan agreements. The obligations that Felicity is said to owe Mr Clark to repay the advances on certain dates, to provide security and to pay interest and penalties, are all said to arise under the loan agreements.

[43]             It is alleged in the statement of claim that the loan agreements were entered into between 27 August 2015 and 6 March 2016. The inference to be drawn from the statement of claim is that the loan agreements were entered into contemporaneously with each advance. While Mr Clark did not actually say in his first affidavit the loan agreements were entered into when the advances were made, and despite Mr Slevin’s attempt to convince me otherwise, that is what Mr Clark’s evidence plainly conveyed. For instance, with reference to the September 2015 advance, Mr Clark says, “We agreed and re-used the form of loan agreement we had for the first loan” and advanced Felicity the $22,500. The meaning to be taken from that evidence is the loan agreement was entered into in September 2015 and the parties had used the same form of loan agreement for the earlier advance.

[44]             It is now accepted the loan agreements were all signed on 6 May 2016. Felicity says these were “new loan agreements” and that she cannot say whether previous loan agreements were signed or not. Mr Clark says they could not get Felicity to sign earlier loan agreements but he does not produce any such loan agreements or any documents evidencing Felicity’s assent to their terms. In short, there is an absence of evidence as to what Mr Clark and Felicity agreed at the time of the advances concerning the terms upon which loans would be made.

[45]             For present purposes,7 I accept it would be open to Mr Clark and Felicity to agree loan terms after the advances were made. But there are several difficulties facing the argument that the loan agreements signed on 6 May 2016 are binding on Felicity.

[46]             First, Felicity’s evidence is the loan agreements were only ever intended to protect her from the possibility of a relationship property claim. Effectively, she argues the loan agreements were a sham to disguise gifts as loans. There is some evidence of problems between Felicity and her partner that might be thought supportive of her position. Further, while Mr Slevin argued initially that Felicity’s evidence was wholly specious because the loan agreements could not protect her from a relationship property claim, I understood him to later accept that, in fact, documenting the advances as loans might provide her that protection.

[47]             Second, Felicity says she signed the loan agreements under duress. In the context of her evidence that there was a history of family violence, some of which is acknowledged by Mr and Mrs Clark, and her quite detailed description of events on the day the loan agreements were signed, I cannot say I am left without any real doubt or uncertainty as to whether these events occurred as Felicity says they did.

[48]             Third, while Mr and Mrs Clark deny Felicity’s evidence, both in respect to abuse and the events of 6 May 2016, Mr Clark’s first affidavit gives a misleading picture of the circumstances under which the loan agreements were signed and his veracity is plainly challenged.

[49]             Fourth, the terms of the loan agreements appear unworkable in certain respects and to have been disregarded. It does seem the repayments were never going to be covered by surplus rental. Not a single repayment was made. No mortgages were registered over the Bickerton Street or Woodham Road properties, and it was not until June 2021 that Mr Clark lodged a caveat over the Bickerton Street property. No demand (at least formally) for repayment of the advances was made until September 2020, even though under the loan agreements repayment was to have been made in

7      Mr Moss raised an argument that loan agreements entered into after advances were made would be unsupported by consideration.

full by no later than October 2018. Furthermore, upon the sale of the Woodham Road property, no payment was made to Mr and Mrs Clark from the sale proceeds.

[50]             Of course, all of these matters may reflect the parties’ close relationship and, as Mr and Mrs Clark say, their wish to assist Felicity with her ambition to be a property developer, but that is not a judgment that is appropriate to make on this application.

[51]             I am, therefore, left in the position that I cannot be satisfied that Felicity does not have a tenable defence to a claim that is founded on the loan agreements, which is, as I have said, the only claim that has been made. In those circumstances, summary judgment will not be granted.

[52]             That leaves unresolved the issue of whether the advances were intended to be loans. There is force in Mr Slevin’s submissions in this regard. Before any advances were made, Felicity had requested her parents to make loans to her, there is nothing to suggest the advances were made out of a sense of guilt other than Felicity’s assertion she considered this may have been the case, and her email of 16 July 2021 indicates she considered the advances were loans. Furthermore, I do not see that the discussions she had with her mother could be taken as a release from an obligation to repay loans. Indeed, Mrs Clark’s requests for money from Felicity suggests the contrary. However, in a summary judgment context, and while I consider Felicity’s position is weak, there is sufficient difference on factual matters for me to conclude that I cannot rule out her defence as untenable.

Result

[53]The application for summary judgment is dismissed.

[54]             Costs in circumstances such as this are commonly reserved and I see no reason to depart from that approach in this case, and I so order.

[55]             The case is to be set down for a case management conference on the first available date. It is a straightforward case and suitable to be set down for hearing immediately at the first case management conference. Counsel shall file a preferably

joint memorandum with a proposed timetable at least three working days prior to the conference.

O G Paulsen Associate Judge

Solicitors:

Maciaszek Brown Law (Peter Maciaszek), Christchurch Shaun Cottrell Law (Shaun Cottrell), Christchurch