Coombe v Jenkison
[2020] NZHC 3178
•3 December 2020
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2019-419-73
[2020] NZHC 3178
BETWEEN ANTHONY BRIAN COOMBE and
MURRAY KAID MCLEAN as trustees and executors of the Estate of the late Ian Alexander McClean
Plaintiffs
AND
JOHN ELLIOT SOPER JENKISON, PETER WARD THOMAS BAKER,
BRENDA J FLAY and HAYLEY M GREEN
Defendants
Hearing: 1 September 2020 with additional submissions on 4 and
7 September 2020
Appearances:
N R Williams and S B C O’Connor for the plaintiffs P M Fee and V S Wethey for the defendants
Judgment:
3 December 2020
JUDGMENT OF PALMER J
This judgment was delivered by me on Thursday 3 December 2020 at 11.00am.
Pursuant to Rule 11.5 of the High Court Rules.
………………………… Registrar/Deputy Registrar
Counsel/Solicitors:
G N E Bradford, Barrister, Auckland Fee Langstone, Auckland
Meredith Connell, Auckland
COOMBE v JENKISON [2020] NZHC 3178 [3 December 2020]
Summary
[1] Purnell Jenkison Oliver (PJO) is a law firm in Thames, Coromandel. A member of the firm drafted a will for Mr Ian McClean which contained a significant error. Three of his surviving family members obtained $1 million (collectively) from the estate because of that. Mr Anthony Coombe and Mr Murray McLean, the executors of Mr McClean’s estate, now sue PJO for negligence. PJO applies to strike out the suit, or for summary judgment, on the basis the suit is out of time under the Limitation Act 2010 (the Act). At this stage of the proceedings, I do not consider the late knowledge date under s 14 means the suit is out of time. Neither can I rule out the possibility a limitation defence might be estopped, depending on facts proven at trial. I dismiss the application.
What happened?
The relevant facts
[2] The late Mr Bruce Oliver of PJO drafted a will for Mr McClean, a farmer, which was executed on 28 February 2013. Mr McClean died on 4 April 2013. His estate was worth over $6.5 million. Probate was granted, and the executors appointed, on 3 May 2013. Clause 9 of the will purported to leave the residue of the estate in the Ian McClean Trust “for the benefit of the local and wider community and needy persons (including my nieces and nephews) in the Hauraki Plains/Hauraki/ Coromandel area” and noted it “may pay my sister’s [Muriel Turner’s] care and hospital bills”. The trustees were instructed to “invest my estate’s capital wisely and distribute each year’s income to suitable successful applicants”.
[3] On 2 May 2014, the solicitors for Ms Muriel Turner at Patterson Hopkins sent the trustees a letter suggesting cl 9 was “almost completely devoid of meaning” and suggesting it might be ineffective. The trustees sought advice from PJO.1 On 8 May 2014 PJO advised that Ms Turner may well pursue claims even if advised her position had little merit.2
1 Affidavit of Anthony Coombe, 30 June 2020 (Coombe), at [28].
2 Coombe at Exhibit ABC-1.
[4] On 30 May 2014, PJO instructed Greg Kelly Law to provide a legal opinion regarding the potential claim by Ms Turner including, among other things, whether cl 9 established a valid trust.3 On 1 August 2014, PJO wrote a one-page letter to the trustees with “good news” that “in a nutshell GKL have reached the view that intestacy is unlikely to occur in this case” and they should apply to the High Court for approval of a charitable scheme.4 PJO responded to Patterson Hopkins accordingly.
[5] Mr Kelly’s opinion dated 18 August 2014 was that cl 9 “creates a difficulty” but he suggested it could be saved if the High Court were to approve a scheme under s 32 of the Charitable Trusts Act 1957, to give effect to the general charitable intention.5 He recommended the trustees apply to the High Court for approval of a scheme; otherwise, if cl 9 were held to be invalid, there would potentially be a resulting intestacy. The evidence of one of the executors is that they received this letter on 2 September 2014.6
[6] There is evidence that the trustees instructed an application to be made to the High Court but it did not proceed.7 There is nothing before me to indicate why it did not proceed. Mrs Fee, for the defendants, submits that it is a matter for trial. In any case, on 2 August 2016, Ms Muriel Turner and her children issued proceedings challenging the will. On 15 March 2018, in the Hamilton High Court, Whata J issued judgment holding that cl 9 sought to establish an imperfect trust and validated the trust gift to the charitable purposes only, under s 61B of the Charitable Trusts Act 1957, subject to some provision being made for the plaintiffs.8 In September 2018, the trustees paid Muriel Turner and her children a settlement of $1 million and legal costs.
The proceeding
[7] In a proceeding filed on 21 March 2019, the trustees now seek to recover the losses from PJO in this suit for negligence, breach of the Consumer Guarantees Act 1993 and breach of the Fair Trading Act 1986 (FTA). PJO applies to strike out all
3 Coombe at Exhibit ABC-2.
4 Coombe at Exhibit ABC-3.
5 Affidavit of Brenda Flay, 23 April 2020, at Exhibit D (letter from Greg Kelly to Damian Quinn regarding the estate of Ian McClean, 18 August 2014) at [3.1]-[3.2].
6 Coombe at [46].
7 Coombe at [53].
8 Turner v Coombe [2018] NZHC 315, [2018] NZAR 574 at [63]-[64].
three causes of action, or for summary judgment, because they are time barred under s 11 of the Act and s 43A of the FTA. The trustees oppose the application.
[8] At the hearing on 1 September 2020 Mrs Fee, for the defendants, sought leave to file an affidavit providing factual context of when PJO ceased acting for the plaintiffs. She submitted the documents exhibited were uncontentious. Mr Williams, for the plaintiffs, objected on the basis any reply evidence was due on 10 July 2020 according to the agreed timetable and he had not had time to take instructions on the matter. I indicated I would decide once I had heard counsel’s oral submissions. Having considered the matter, I do not consider the affidavit would make a difference to my reasoning or decision. I do not grant leave for it to be filed.
[9] Also at the hearing, Mrs Fee did not address the plaintiffs’ position on estoppel (reflected in their notice of opposition and written submissions) in her written or oral submissions but said she would deal with it in reply. In reply, she handed up further written submissions and authorities on the point. Accordingly, I gave leave to Mr Williams to respond in writing. In doing so, Mr Williams objected that the reply submissions tabled at the hearing were out of time. He invited me to disregard them. Mrs Fee submits that is wholly inappropriate because he did not object at the hearing. Given that Mrs Fee had prepared written submissions and further authorities, it would have been better for her to have addressed them during her oral submissions rather than springing them on Mr Williams in reply. But I consider the opportunity I provided Mr Williams to reply in writing cured any unfairness arising from that. I deal with the submissions on their merits.
Relevant law
Strike-out
[10] Under r 15.1 of the High Court Rules 2016 (the Rules) the Court may strike out a pleading if it discloses no reasonably arguable cause of action or is frivolous, vexatious or otherwise an abuse of process. In summary:9
9 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267 (approved by Elias CJ and Anderson J in Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33]).
(a)the facts pleaded are assumed to be true;
(b)the causes of action must be so untenable I must be certain they cannot possibly succeed;
(c)the jurisdiction is to be exercised sparingly and only in a clear case;
(d)the jurisdiction is not excluded by the need to decide difficult questions of law; and
(e)particular care is required in areas where the law is confused or developing.
[11] As the Supreme Court said in Murray v Morel & Co Ltd, a cause of action can be struck out on the basis of a limitation defence if the Court is satisfied the causes of action “are so clearly statute-barred that the plaintiff’s claim can properly be regarded as frivolous, vexatious or an abuse of process”.10 Otherwise, as Mallon J said in Scott v ANZ Bank NZ Ltd, “[i]t is not usually desirable to decide limitation points at a preliminary stage without full consideration of the evidence”.11
Summary judgment
[12] Rule 12.2(2) of the Rules provides that the Court “may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed”. Affidavit evidence can be the basis for an application for summary judgment, but the Court need not accept uncritically evidence that is inherently lacking in credibility.12 An issue of law can be determined on a summary judgment application but a novel issue or developing area of law may require the context of evidence at trial.13
10 Murray v Morel & Co Lt [2007] NZSC 27, [2007] 3 NZLR 721 (SC) at [33].
11 Scott v ANZ Bank NZ Ltd [2020] NZHC 906 at [190].
12 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
13 Westpac Banking Corp v MM Kembla NZ Ltd [2001] 2 NZLR 298, (2000) 14 PRNZ 631 at [62].
Limitation Act 2010
[13] In Davys Burton v Thom, before enactment of the Act, the Supreme Court held a cause of action in negligence does not exist until there is both an act or omission breaching a duty of care and loss or injury to the plaintiff caused by that.14 Loss is not suffered if it is contingent on the occurrence of a future uncertain event but reduction in the value of an asset is actual damage.15 The Court held the plaintiff suffered loss when the solicitor there negligently prepared a pre-nuptial agreement that was not legally enforceable, because the plaintiff thereby immediately obtained a damaged asset.16
[14] The purpose of the Act as set out in s 3, “is to encourage claimants to make claims for monetary or other relief without undue delay by providing defendants with defences to stale claims”. Section 11(1) provides for a defence to money claims if the defendant proves the claim is filed after the claim’s “primary period” of six years from the date of the act or omission on which the claim is based. Section 11(3) applies instead if the claim is made after its primary period but the claim is filed at least three years after the claim’s “late knowledge date” under s 14 (if there is one). The plaintiffs here rely on the “late knowledge” date. Section s 14 of the Act provides:
14 Late knowledge date (when claimant has late knowledge) defined
(1)A claim’s late knowledge date is the date (after the close of the start date of the claim’s primary period) on which the claimant gained knowledge (or, if earlier, the date on which the claimant ought reasonably to have gained knowledge) of all of the following facts:
(a)the fact that the act or omission on which the claim is based had occurred:
(b)the fact that the act or omission on which the claim is based was attributable (wholly or in part) to, or involved, the defendant:
(c)if the defendant’s liability or alleged liability is dependent on the claimant suffering damage or loss, the fact that the claimant had suffered damage or loss:
(d)if the defendant’s liability or alleged liability is dependent on the claimant not having consented to the act or omission on
14 Davys Burton v Thom [2008] NZSC 65, [2009] 1 NZLR 437 at [38].
15 At [46].
16 At [47].
which the claim is based, the fact that the claimant did not consent to that act or omission:
(e)if the defendant’s liability or alleged liability is dependent on the act or omission on which the claim is based having been induced by fraud or, as the case may be, by a mistaken belief, the fact that the act or omission on which the claim is based is one that was induced by fraud or, as the case may be, by a mistaken belief.
(2)A claimant does not have late knowledge of a claim unless the claimant proves that, at the close of the start date of the claim’s primary period, the claimant neither knew, nor ought reasonably to have known, all of the facts specified in subsection (1)(a) to (e).
(3)The fact that a claimant did not know (or had not gained knowledge), nor ought reasonably to have known (or to have gained knowledge), of a particular fact may be attributable to causes that are or include fraud or a mistake of fact or law (other than a mistake of law as to the effect of this Act).
[15] In Driver v Radio New Zealand, Clark J held a plaintiff in defamation will have constructive knowledge for the purposes of s 14 when they know enough to make it reasonable to begin to investigate whether or not they have a case against the defendant.17 The plaintiff cannot postpone the start of a limitation period by shutting their eyes to the obvious.18 The plaintiff does not need to know for certain but with sufficient confidence to justify embarking on the preliminaries of issuing proceedings.19
Fair Trading Act 1986
[16] Section 43A of the Fair Trading Act 1986 (FTA) provides that a person may apply to a court for an order consequential on breach of the Act “within three years after the date on which the loss or damage, or the likelihood of loss or damage, was discovered or ought reasonably to have been discovered”.
[17] In Commerce Commission v Carter Holt Harvey, the Supreme Court held “likelihood of loss or damage” referred to knowledge of losses that were likely to arise
17 Driver v Radio New Zealand [2019] NZHC 3275 at [30], citing Broadley v Guy Clapham & Co
[1994] 4 All ER 439 (CA) at 448.
18 At [31].
19 At [32], citing Haward v Fawcetts [2006] UKHL 9; [2006] 1 WLR 682 which cited Halford v Brookes [1991] All ER 559 (EWCA) at 573–574.
in the future and were discovered by the applicant, so “time starts running when the applicant discovers or ought to have discovered that loss or damage has already occurred, or is likely to occur in the future”.20 “Likely” means more probable than not.21 The loss or damage discovered must be more than minimal.22 The relevant loss or damage required is loss or damage by conduct of a person that constitutes contravention of the FTA.23
1 Should the proceedings be struck out or summary judgment granted?
Submissions
[18]Mrs Fee, for the defendants, submits:
(a)The late knowledge date under the Act is determined by when a solicitor’s negligent advice was acted upon, according to the Court of Appeal’s judgment in Thom v Davys Burton. It is not necessary that the plaintiffs know they have a cause of action against the defendant but that they know the facts upon which their complaint is based. The test is objectively construed knowledge, not subjective lack of knowledge. Section 43A of the FTA has the same effect. Here that is preparation of the invalid will.
(b)The late knowledge date was 2 May 2014, the date the letter was received from Patterson Hopkins putting the plaintiffs on notice of substantial issues regarding the validity of the will. They knew PJO was responsible for it. Their knowledge of the need to get legal advice, at a cost, was sufficient to amount to a loss.
(c)Alternatively, the late knowledge date can be no later than 18 August 2014, when the plaintiffs received the Kelly opinion. That is when the plaintiffs must have been aware that cl 9 included charitable and non-
20 Commerce Commission v Carter Holt Harvey [2009] NZSC 120, [2010] 1 NZLR 379 at [25] and [27].
21 At [30].
22 At [34].
23 At [9], citing s 43(1).
charitable purposes, was flawed and potentially invalid, did not give effect to Mr McClean’s testamentary intentions and they should obtain a court order validating the will. The money spent on the opinion was more than minimal loss and amounted to the required loss for limitation purposes. That is when the reasonable trustee would have known all the requirements of s 14(1)(a) to (c) were satisfied. So the limitation period lapsed no later than 18 August 2017 and the claim is out of time.
[19]Mr Williams, for the plaintiffs, submits:
(a)Section 14(1) expressly requires the plaintiff’s actual or constructive knowledge of the requisite facts in s 14(1)(a) to (e) and there is little case law on its interpretation. While the United Kingdom Supreme Court found in AB v Ministry of Defence that subjective belief was sufficient to constitute knowledge,24 the opposite conclusion is plainly arguable as a matter of statutory interpretation of the New Zealand provision. The interpretation should be determined in the light of facts proved. Constructive knowledge is highly contextual and fact- dependent on what was reasonable in the circumstances. The test in relation to the FTA requires a connection between the loss or damage and actionable fault.
(b)The plaintiffs gained knowledge on 15 March 2018, the date of Whata J’s judgment, that the will had been negligently drafted, the defendants were responsible for the negligent drafting and the estate had suffered damages as a result. Only then was it clear the estate would have to pay some form of benefit to Ms Turner and her children.
(c)The limitation issue is not so clear cut that there can only be one answer, against the plaintiffs. The plaintiffs could not have appreciated the loss was more probable than not on 1 May 2014 or 18 August 2014 because:
24 AB v Ministry of Defence [2012] UKSC 9, [2013] 1 AC 78.
(i)Unlike other cases the plaintiffs, as executors, were not clients of the defendants at the time the will was drafted. They did not know what instructions Mr McClean gave PJO or what advice they gave him. The executors resisted challenges to the will and relied on the advice of PJO in doing so. A key piece of evidence is that PJO never said to the plaintiffs that there was a problem with the will so they needed to take advice, as they were required to do by r 5.11 of the Lawyers: Conduct and Client Care Rules 2008 (the Rules). It would be relevant to know when PJO notified their insurers of the potential claim.
(ii)In relation to the 1 May 2014 Patterson letter, the executors understood from PJO, that there was no basis to the assertions made.25 Mr Patterson was only making an inquiry and had not filed a claim. This was just a lawyer trying it on. And Mr McClean’s instructions to them had been that he did not want Ms Turner or her son to benefit further than what was already provided in the will.
(iii)The Kelly Law letter of 18 August 2014 advised that Ms Turner would be unlikely to successfully claim against the estate by asserting the will was invalid, and recommended applying to Court. Read in the context of previous correspondence, particularly the letter of 1 August 2014, it did not point to constructive knowledge that it would be reasonable for the plaintiffs to start making inquiries about suing their own lawyers. There was no reason to believe the will was negligently drafted.
Should the proceedings be struck out or summary judgment issued?
[20] The negligence claim here is based on PJO’s alleged breach of their duty of care causing loss to the plaintiffs. The claim is based on the fact that negligence in
25 Coombe at [20]-[23].
drafting the will caused the plaintiffs loss as trustees and executors. The “late knowledge date” is the earlier of the points at which the plaintiffs gained knowledge, or ought reasonably to have gained knowledge, of the following facts in s 14(a) to (e) of the Act:
(a)the occurrence of the act on which the claim is based;
(b)that the act was attributable to, or involved, the defendant; and
(c)that the plaintiff had suffered loss.
[21] The phrase “ought reasonably to have gained knowledge” can be characterised as constructive knowledge. The test could be characterised as “objective” but that may not be particularly helpful. It is a person in the position of the plaintiff for whom it must have been reasonable for knowledge to have been gained.
[22] This is a different test from s 14 of the Limitation Act 1980 (UK) which refers to a person’s knowledge including “knowledge which he might reasonably have been expected to acquire”. I do not consider the interpretation of that provision by a majority of the United Kingdom Supreme Court in AB v Ministry of Defence applies to s 14 of the New Zealand Act.26 The plain meaning of the words should be applied, in accordance with their purpose.
[23] On the basis of the pleadings here, and the evidence as it currently stands, I do not consider the late knowledge date was 2 May 2014. The Patterson Hopkins letter may reasonably have put the plaintiffs on notice that there might be a legal issue that required addressing. But I cannot see how it could be said that the plaintiffs ought reasonably to have known that meant PJO had been negligent in drafting the will. That was not suggested in the letter and was most certainly not suggested in PJO’s ensuing advice. And there was no loss caused by negligence at that point. The plaintiffs would not reasonably have known that the cost of getting legal advice represented a loss caused by PJO’s negligent drafting. Rather, PJO’s advice at the time
26 AB v Ministry of Defence, above n 24.
gave no indication the legal costs were not part of the usual cost of administering an estate.
[24] Receipt of the Kelly Law opinion, which one of the executors says took place on 2 September 2014, is closer to constituting a constructive late knowledge date. But, as Mr Williams submits, the plaintiffs’ reasonable knowledge of the contents of that opinion must be viewed in the context of the previous correspondence. That includes PJO’s letter to the plaintiffs of 1 August 2014 which foreshadowed “good news” from Kelly Law that intestacy was unlikely. While the final opinion itself identified that cl 9 of the will “creates a difficulty”, it provided advice as to how potential intestacy could be avoided. I do not consider, on the pleadings and evidence before me, the plaintiffs must reasonably have known from that, that PJO had been negligent and caused them loss. By contrast, the plaintiffs would have known from Whata J’s judgment of 15 March 2018 that PJO had negligently drafted the will, causing the plaintiffs loss. At this stage of the proceedings, I do not consider the late knowledge date under s 14 means the suit is out of time.
[25] I do not rule out the possibility that the evidence at trial might establish, on the balance of probabilities, a different position regarding when the plaintiffs ought reasonably have known what. But to strike out the proceedings on the basis of the limitation defence, the causes of action must be so untenable I am certain they cannot possibly succeed. I am not. The defendants are some distance from persuading me that the plaintiffs’ claim can properly be regarded as frivolous, vexatious or an abuse of process. Neither am I satisfied, for the same reasons, that none of the causes of action can succeed, justifying summary judgment for the defendants.
2 Are the defendants estopped from relying on limitation?
[26] Given my conclusions on strike out and summary judgment, I do not strictly need to decide the estoppel point. But for completeness, I deal with it briefly.
Submissions
[27] Mr Williams, for the plaintiffs, submits it would be unconscionable for the defendants to be permitted to rely on a limitation defence when they had a duty under
r 5.11 of the Rules to advise the plaintiffs to take independent legal advice on whether they had a claim against the defendants for drafting the will. He submits silence can give rise to a representation, r 5.11 creates a duty to speak, it makes little sense to speak of reliance on an omission, and the evidence is clear that the plaintiffs relied on the defendants. He submits this creates an estoppel which is a complete answer to a limitation defence. He submits that is consistent with the presumption that the rules of equity are imported by implication in an enactment and that the Act does so. He calls equity in aid, if necessary, to prevent what he submits would be an unconscionable outcome. He relies on United Kingdom case law and submits they hold an intensive factual analysis of the circumstances is required before it can safely be concluded whether estoppel is available. He submits the matter should be fully aired at trial.
[28] Mrs Fee, for the defendants, submits there is no estoppel to use of the limitation defence because the defendants had no duty under the Lawyers: Conduct and Client Care Rules 2008 (the Rules) to disclose breach of a tortious duty as alleged by the plaintiffs. The Rules cannot be used to modify the Act. Here, there was no unequivocal representation, no causation of a mistaken belief and the defendants had no actual or constructive knowledge or even suspicion that the plaintiffs were relying on a false assertion.
Is it unconscionable for the defendants to rely on the limitation defence?
[29] The Rules set out professional standards for lawyers. They are guiding principles and a reference for the disciplining of lawyers.27 While they may be consistent with, or reflect, the legal duties on lawyers, including those arising from common law, they do not constitute a sole foundation for legal duties. Rule 5.11 reflects the fiduciary obligation of lawyers to advise a client to seek independent advice when the lawyer becomes aware the client may have a legal claim against the lawyer.28
27 Paul Collins “Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 in Matthew S R Palmer (ed) Professional Responsibility in New Zealand (Wellington, LexisNexis NZ Ltd, 2020) at [11.4].
28 See Bouma v Sando HC Rotorua CP 6/98, 22 March 2001, at [100].
[30] The facts currently before me do not establish that PJO necessarily breached its fiduciary duty to the plaintiffs in this way. But I cannot rule out that evidence sufficient to establish that could be adduced at trial, if the pleadings were to make that a relevant issue.
[31] Andrew McGee’s English text on Limitation Periods, suggests “[a]s a matter of principle . . . estoppel ought to be recognised as a possible response to a limitation defence”.29 He refers to English cases applying that principle though he notes “establishing estoppel in relation to the Limitation Act is likely to be a formidable task and one which can be accomplished only in the most exceptional cases”.30 I have not located a case where such a claim has defeated a limitation defence under s 14 in New Zealand.
[32] But if a breach of fiduciary duty were established here, I could not rule out the possibility of a claim of estoppel succeeding, even though I agree it would be a formidable task. It would depend on the evidence and submissions at trial. And that is the point, for the purposes of an application to strike out or issue summary judgment. The possibility of estoppel also militates against strike out and summary judgment here.
Result
[33] I dismiss the application for strike out or summary judgment. I award costs on a 2B basis, and reasonable disbursements, to the plaintiffs.
Palmer J
29 Andrew McGee Limitation Periods (8th edn, Sweet & Maxwell, London, 2018) at [21.025].
30 At [21.025].
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