Craig v The New Zealand Guardian Trust Company Limited
[2023] NZHC 2058
•4 August 2023
IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY
I TE KŌTI MATUA O AOTEAROA NGĀMOTU ROHE
CIV-2022-443-65
[2023] NZHC 2058
BETWEEN RODERICK STUART FRASER CRAIG
Plaintiff
AND
THE NEW ZEALAND GUARDIAN
TRUST COMPANY LIMITED as executor of the Estate of Max Alexander Craig Defendant
JAMES GORDON CRAIG
Interested Party
Hearing: 6 July 2023 Appearances:
R T Wilson for Plaintiff
S W Hughes KC for the Defendant and Interested Party
Judgment:
4 August 2023
JUDGMENT OF ASSOCIATE JUDGE SKELTON
[1] This matter relates to the estate of Max Alexander Craig who died on 11 December 2021.
[2] The plaintiff, Mr Roderick Craig, has brought a claim against the defendant, the New Zealand Guardian Trust Company Ltd, as executor of the deceased’s estate under the Law Reform (Testamentary Promises) Act 1949 (TPA).
[3] The deceased left a will and probate of the will was granted on 8 February 2022. Under the will:
(a)the defendant was appointed executor;
CRAIG v THE NEW ZEALAND GUARDIAN TRUST COMPANY LIMITED [2023] NZHC 2058
[4 August 2023]
(b)various legacies totalling $600,000 were made;
(c)the residuary estate being left to the plaintiff’s younger brother,
Mr James Craig (the interested party); and
(d)nothing was left to the plaintiff.
[4] The amount of the residuary estate is somewhere in the vicinity of NZD10,900,000.
[5] The defendant and the interested party now apply for summary judgment against the plaintiff under r 12.2(2) of the High Court Rules 2016. For convenience, and where appropriate, I refer to the defendant and the interested party in this judgment as “the defendants”.
[6] The defendants also seek leave of the Court to bring the application for summary judgment under r 12.4(3) of the High Court Rules, as the application was not made until after the statements of defence were filed and served.
Background
[7] The plaintiff alleges that on numerous occasions between 1978 and about 1983, the deceased verbally promised the plaintiff that the plaintiff would inherit his estate. The plaintiff says that the deceased explained that he needed a partner to help him with his shoe and knitwear retail business in Norfolk Island and he wanted the plaintiff to relocate to Norfolk and become his business partner. The plaintiff alleges the promise made was in these words, or similar words to the following effect:
I will finance you to buy in as my business partner and when I retire you can take over my share of the business and when I die you will inherit my estate
[8] The plaintiff alleges that, in or about February 1981, he provided a service to the deceased by relocating from Manaia, Taranaki, to Norfolk Island to assist the deceased with the running of the business. The plaintiff alleges that for approximately three years he provided work and services to the deceased by working in the business.
[9] The plaintiff says that, prior to relocating to Norfolk Island, he owned and operated an established panel beating business in Manaia, which he closed when he relocated. He says he was settled and established living in Manaia with his wife and two children. He says that he and his family were reluctant to relocate to Norfolk Island, but he was persuaded by the promise made to him by the deceased.
[10] The plaintiff alleges that after he relocated to Norfolk Island, his parents arranged their affairs and estate planning on the basis that the interested party would inherit their drycleaning business. The plaintiff alleges that in making this decision, his parents considered they would not need to provide significantly for the plaintiff due to him inheriting from the deceased.
[11] The plaintiff alleges that the deceased treated him badly once he relocated to Norfolk Island. The plaintiff says he was treated more like an employee than a business partner. He says he was not properly paid by the deceased for the services and only received a basic weekly payment similar to what counter staff were paid.
[12] The plaintiff alleges that, as a result of the poor treatment and poor relationship with the deceased, he suffered from poor mental health from around 1982 and his marriage ended about late 1983.
[13] On 3 February 1984, the deceased and the plaintiff entered into an agreement (the Agreement). The Agreement recorded:
(a)that the deceased and the plaintiff had operated a partnership from the 2 March 1981;
(b)that the deceased had contributed $300 towards the capital of the partnership and the plaintiff had contributed $100;
(c)the plaintiff had indicated his wish to dissolve the partnership on the terms set out in the Agreement.
[14]The Agreement then provided that:
1. In consideration of the [deceased] paying to the [plaintiff] the sum of [AUD30,000.00] (the receipt of which sum is hereby acknowledged by the [plaintiff]) the [plaintiff] does hereby transfer to the [deceased] all his right title and interest in the capital business stock good will and any other assets of the partnership and hereby further releases the [deceased] from all actions demands claims which he may have or may be entitled to make in respect of the partnership and business thereof from the date hereof.
[15] The plaintiff received the AUD30,000 referred to in the Agreement. Soon after signing the Agreement, the plaintiff returned to New Zealand.
[16] The plaintiff alleges that the deceased never revoked his promise that the plaintiff would inherit his estate.
Legal principles — defendant summary judgment
[17] In Stephens v Barron, the Court of Appeal summarised the principles for defendant summary judgment discussed in Westpac Banking Corp v M M Kembla NZ Ltd:1
[9] … This Court’s decision in Westpac Banking Corp v M M Kembla New Zealand Ltd makes it clear that a defendant seeking summary judgment has a considerable burden to discharge. Elias CJ delivering the judgment of the Court, made the following points:
(a)The defendant has the onus of proving, on the balance of probabilities, that the plaintiff cannot succeed. Usually, this will arise when the defendant can offer evidence which is a complete defence to the plaintiff’s claim.
(b)An application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment able to be properly arrived at only after a full hearing of the evidence.
(c)The Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment is not to be arrived at on a fine balance of the available evidence as would be appropriate at trial.
(d)The residual discretion of the Court to refuse summary judgment would be properly invoked to avoid the oppression which would otherwise result if an application by a defendant for summary
1 Stephens v Barron [2014] NZCA 82 at [9] citing Westpac Banking Corp v M M Kembla NZ Ltd
[2001] 2 NZLR 298 (CA) at [61]–[68].
judgment would pre-empt a plaintiff exercising the right to amend the pleadings.
(e)Summary judgment should not be applied for, unless the substantive merits of the case are clear and capable of summary disposal.
(footnotes omitted)
Leave
[18] As noted above, the defendants require the leave of the Court to bring their application for summary judgment under r 12.4(3) of the High Court Rules. The Court of Appeal has emphasised that leave should not be treated as a formality and should be addressed as a prior step to the merits of an application.2
[19] No guidelines are laid down in the High Court Rules for the granting of leave. The question is a discretionary one and it is up to the party applying for leave to show why it should be granted.3
[20] It is recognised that there are three factors that should be considered in relation to the issue of leave:4
(a)the explanation for the delay;
(b)the merits of the applicant’s case for summary judgment; and
(c)the risk of miscarriage of justice in determining the application at a later point in time.
[21] In this case, Mr Wilson, for the plaintiff, properly accepts that there is no risk of miscarriage of justice in granting leave.
[22] As to delay, Ms Hughes KC, for the defendants, submits that the application was bought only 19 working days after it could have been bought as of right. She says
2 Stephens v Barron [2014] NZCA 82 at [13].
3 Tip Top Icecream Ltd v Polarland Ltd (2002) 7 NZBLC 103,564 at [27].
4 Fowler v Selwyn District Council [2021] NZHC 2218 at [12] citing Tip Top Icecream Ltd v Polarland Ltd, above n 4, at [28].
there was no intervening court event or step taken by the plaintiff in that period and no case management conference had been allocated.
[23] Ms Hughes submits that the Agreement was not disclosed by the plaintiff until 19 December 2022, and this had to be considered before the defences could be finalised. The statement of defence of the interested party was filed on 23 January 2023 and the defendant filed its statement of defence on 20 February 2023. The application for summary judgement was filed on 17 March 2023. Ms Hughes submits that it was only after both statements of defence had been filed that the defendants could confer on the summary judgment application.
[24] Mr Wilson submits that it has now been accepted by the solicitor for the defendant, that it would have been possible for the defendant and the interested party to confer between the end of January 2023 and 20 February 2023.
[25] In my view, it is relevant that the Agreement was not disclosed by the plaintiff until 19 December 2022. The summer holiday period then intervened. While the defendant and the interested party could have conferred in relation to the summary judgment application prior to the service of the defendant’s statement of defence on 20 February 2023, the application for summary judgment was filed only 19 working days after it could have brought as of right. The delay is minimal, and I do not consider that it is a basis for declining leave in this case.
[26] The issue of the merits of the applicant’s case is bound up with consideration of the defendants’ substantive application for summary judgment. Although I have declined the defendants’ substantive application, which I discuss in detail below, I consider that the application had sufficient merit to warrant leave being granted.
[27] Accordingly, I grant leave for the defendants to bring their application for summary judgment.
Defendants’ substantive application for summary judgment
[28]The plaintiff’s claim is brought under s 3(1) of the TPA which provides:
3Estate of deceased person liable to remunerate persons for work done under promise of testamentary provision
(1)Where in the administration of the estate of any deceased person a claim is made against the estate founded upon the rendering of services to or the performance of work for the deceased in his lifetime, and the claimant proves an express or implied promise by the deceased to reward him for the services or work by making some testamentary provision for the claimant, whether or not the provision was to be of a specified amount or was to relate to specified real or personal property, then, subject to the provisions of this Act, the claim shall, to the extent to which the deceased has failed to make that testamentary provision or otherwise remunerate the claimant (whether or not a claim for such remuneration could have been enforced in the lifetime of the deceased), be enforceable against the personal representatives of the deceased in the same manner and to the same extent as if the promise of the deceased were a promise for payment by the deceased in his lifetime of such amount as may be reasonable, having regard to all the circumstances of the case, including in particular the circumstances in which the promise was made and the services were rendered or the work was performed, the value of the services or work, the value of the testamentary provision promised, the amount of the estate, and the nature and amounts of the claims of other persons in respect of the estate, whether as creditors, beneficiaries, wife, husband, civil union partner, children, next-of-kin, or otherwise.
[29] Ms Hughes submits that all four of the following elements must be established for the TPA claim to succeed:5
(a)the plaintiff must have rendered services or performed work for the deceased;
(b)there must have been an express or implied promise for reward;
(c)there must be a nexus between the promise and the reward; and
(d)the deceased must have failed to make the testamentary provision or remunerate the claimant.
[30] Ms Hughes submits that, without making a formal admission and for the purposes of the summary judgment application only (with the position reserved for
5 Saunders v New Zealand Guardian Trust Company Ltd HC Palmerston North CIV-2008-454-389, 12 August 2010 at [10].
any trial), the defendants accept that the plaintiff can establish (a) and (b) above. However, the defendants contend that there is no nexus between the promise and the reward sought.
[31] Ms Hughes submits that, assuming the promise was made, and the plaintiff rendered services between 1981 and 1984, the payment of wages during that period and the payment under the Agreement means that there is no nexus between the promise and the reward sought. Further, the deceased has fully remunerated the claimant both while he did the work and by the settlement payment at the end.
[32]Therefore, the defendants contend that the plaintiff cannot establish elements
(c) and (d) above.
Nexus argument
[33] The defendants’ argument in this regard seems to be that there is no nexus between the promise and the reward because the plaintiff is seeking $6,000,000 from the deceased’s estate. This would amount to $2,000,000 per year during the business partnership on top of the wages paid to the plaintiff while he was working for the deceased on Norfolk Island and the sum provided in the Agreement (AUD30,000). The defendants note that the AUD30,000 paid in 1984 would equate to approximately AUD108,000 in 2022.
[34] Ms Hughes submits that, because of the amounts previously paid for wages and under the Agreement, there is no nexus between the promise and the reward sought.
[35] Mr Wilson submits that this is really an argument which goes to the separate submission by the defendants that the plaintiff has been fully remunerated for the services provided. I agree.
[36] In Jones v Public Trustees,6 the Court of Appeal held in relation to the requirement of nexus:
6 Jones v Public Trustees [1962] NZLR 363 (CA) at 364.
… it is essential that the promise must, either expressly or impliedly, be one to reward the promisee for services rendered or work done by making some testamentary provision … and not a mere promise to make testamentary provision which is not linked with, or founded upon, such services or work.
[37] In my view the issue of the nexus (or link) between the promise and the reward sought requires consideration of the evidence of services or work provided by the plaintiff on the basis of the promise.
[38] I agree with Mr Wilson that there is affidavit evidence from the plaintiff before the Court which provides evidential foundation for the link between the promise and the reward. The promise was conditional on the plaintiff relocating to Norfolk Island. The plaintiff did relocate and worked in the deceased’s business for three years until February 1984.
[39] I do not consider that the defendants have satisfied the onus on them of proving, on the balance of probabilities, that the plaintiff cannot succeed at trial in establishing the nexus between the promise and the reward.
The Agreement
[40] Ms Hughes submits that the Agreement is a bar to the plaintiff’s TPA claim. As I understand the argument, the defendants say that the Agreement operates as a bar because a payment was made under the Agreement which, together with the wages paid to the plaintiff, represents full remuneration of the plaintiff in terms of s 3(1) of the TPA. Ms Hughes submits:
[33] … the plain and ordinary meaning of the Retirement Agreement is such that any testamentary promises claim that may have at that time existed out of any promise, or work in the business was extinguished by the payment made. This was the remuneration, such that there is now no unremunerated sum for which the Plaintiff can claim.
[41] I do not understand the defendants to be contending that the Agreement would operate as a bar in the absence of any payment being made under the Agreement. Therefore, the defendants’ argument in this regard turns on whether the deceased has been adequately remunerated so that there is now no unremunerated sum for which the plaintiff can claim. In my view, determination of the remuneration issue would
require full hearing of the evidence, possibly including expert evidence, as discussed later in this judgment.
[42] The defendants also contend that the effect of the Agreement is that the plaintiff is now estopped from bringing his TPA claim on the basis that:7
(a)a belief or expectation on the part of the deceased has been created or encouraged by words or conduct by the plaintiff that the plaintiff had no claim against the deceased or his estate;
(b)that the deceased relied to his detriment on this representation by regulating his affairs on the basis of the Agreement; and
(c)it would be unconscionable for the plaintiff to depart from the belief or expectation created by him.
[43] In my view, the estoppel argument cannot properly be determined on a summary judgment application without a full hearing of the evidence. For example, there may need to be further evidence as to the belief or expectation held by the deceased prior to his death and further evidence as to how the deceased regulated his affairs. Further, it seems to me that the issue of whether it would be “unconscionable” for the plaintiff to depart from the belief or expectation would again raise the issue of whether the payments made fully remunerated the plaintiff.
[44] Apart from the remuneration issue, Mr Wilson raises a number of arguments as to why the Agreement cannot operate to extinguish the plaintiff’s claim including:
(a)that when the Agreement was completed the plaintiff had no TPA claim because TPA claims arise only on death;
(b)the release in the Agreement cannot be of a TPA claim as such claim was at best a possible future claim against the deceased’s estate and
7 Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] 3 NZLRT 567 at [44].
there is nothing the wording of the Agreement which releases any future claims;
(c)the release is limited to actions, demands and claims in respect of “the partnership and business” and a TPA claim is not a claim in respect of the partnership and business thereof and is wholly separate to the partnership obligations between the deceased and plaintiff; and
(d)the release is between the plaintiff and the deceased and not between the plaintiff and the administrators of the estate of the deceased.
[45] These are contract interpretation or legal issues which could possibly be resolved in the context of a summary judgment application. However, as noted above, and discussed further below, my view is that the remuneration issue requires full hearing of the evidence. Further, Mr Wilson submits that, even if the points raised above are not accepted by the Court, the plaintiff has an arguable case that the Agreement is not binding on him. Mr Wilson submits that the plaintiff has an arguable case that he can avoid the agreement because it was an unconscionable bargain or because he signed it under economic duress.8
[46] Mr Wilson submits that there is evidence that the deceased was the dominant partner, the plaintiff was kept in the dark about the finances of the partnership, and in the end felt he could no longer work with the deceased and felt he had been driven out. With regard to the Agreement, the plaintiff states in his affidavit:
When I was finishing up Max told me that he had appointment set up for us to go into the lawyer to sign a document. He told me I was going to get $30,000. He told me nothing else other than it was to dissolve the partnership. There was no negotiation about this, he was just telling me what was going to happen. I do not know how Max calculated the figure. I accepted the figure because I felt I had no choice other than to leave. I could no longer work with Max. I felt he had driven me out. I was not in a position to disagree. I had no fight left in me.
We went to see the lawyer immediately, I can’t remember his name but there was only one lawyer in Norfolk Island at the time. This was the same lawyer that Lynne [the plaintiff’s wife] was using.
8 McIntyre v Nemisis DBK Ltd [2009] NZCA 329, [2010] 1 NZLR 463 at [22]; and Gustav & Co Ltd v Macfield Ltd [2008] NZSC 47, [2008] 2 NZLR 735 at [6].
I cannot remember anything that the lawyer said to me about the document. As far as I can remember the document was either read or explained to me. I understood the basics of it. I had never met the lawyer before. I had no opportunity to get my own legal advice on it.
I signed the document. I felt I had no other choice …
[47] At this stage, the plaintiff could still raise these matters in reply to the defendants’ reliance on the Agreement. I consider that determination of allegations of unconscionable conduct and economic duress would require full hearing of the evidence and, in particular, cross-examination of the plaintiff.
[48] Ms Hughes contended that there would be limitation issues for the plaintiff in this regard under the Limitation Act 1950 or the Limitation Act 2010. Mr Wilson submitted that the arguments would not be subject to limitation defences. It is not clear to me how issues under the Limitation Act 1950 or the Limitation Act 2010 would arise to prevent the plaintiff from raising economic duress or unconscionable bargain in response to the defendants’ reliance on the Agreement as a bar to his TPA claim. However, issues of affirmation or delay may well arise. Again, these issues are likely to require full hearing of the evidence.
[49] In summary, I do not consider that the defendants have satisfied the onus on them of proving that the plaintiff cannot succeed at trial because the Agreement is a bar to his TPA claim.
Remuneration
[50] As discussed above, the defendants submit that there has been full remuneration for the services provided by the plaintiff (by the payment of wages and the payment of the sum under the Agreement) such that there is now no unremunerated sum for which the plaintiff can claim.
[51]Clause 3(1) of the TPA provides that:
…the claim shall, to the extent to which the deceased has failed to make that testamentary provision or otherwise remunerate the claimant (whether or not a claim for such remuneration could have been enforced in the lifetime of the deceased), be enforceable against the personal representatives of the deceased in the same manner and to the same extent as if the promise of the
deceased were a promise for payment by the deceased in his lifetime of such amount as may be reasonable, having regard to all the circumstances of the case, including in particular the circumstances in which the promise was made and the services were rendered or the work was performed, the value of the services or work, the value of the testamentary provision promised, the amount of the estate, and the nature and amounts of the claims of other persons in respect of the estate, whether as creditors, beneficiaries, wife, husband, civil union partner, children, next-of-kin, or otherwise.
(emphasis added)
[52] Ms Hughes referred to the following sections from Re Welch in which section 3(1) was discussed: 9
… More significantly for present purposes, in 1961, Parliament discarded the provision to the effect that, when the promise specified an amount, it was automatically that amount for which the claim was enforceable against the estate. Instead, in all cases where a claim lies it is enforceable as if there has been a promise for payment by the deceased in his lifetime of such amount as may be reasonable, having regard to all the circumstances of the case, including certain listed factors in particular.
Among the particular factors listed are the value of the services or work and the value of the testamentary provision promised (in 1961 the latter words were enacted in place of “the value of any real or personal property specified in the promise”). So, it is plain, considering s 3(1) as a whole, that whenever a claim to relief is made out under it, the criterion as to the relief to be granted is reasonableness. That is always the result at which the Court is to aim, no matter whether the award is of money or of specific property. If the deceased promised a certain sum or a certain property, that is relevant consideration but not necessarily decisive. Their Lordships do not find this approach surprising. To give one hypothetical example, if there were a promise of the whole Estate prompted by gratitude, in perhaps an emotional moment, for a single act of rescue or kindness, it would not necessarily be reasonable to enforce that promise to the full.
It is not to be doubted that, for instance, where there have been meritorious services and considerable sacrifice on the part of a claimant and the property promised had been a central feature in the services or the life of the claimant, the natural order under the Act may be one vesting the property in the claimant, provided that this does no injustice to any others with meritorious claims against the estate. Jones v Public Trustee was such a case. On the other hand, despite a promise of a specific property, either the limited value of the claimant’s service by comparison or other circumstances of the case may result in a lesser or different award, as in Public Trustee v Bick and Re Townley.
(in text citations excluded)
9 Re Welch [1990] 3 NZLR 1 (PC) at 6.
[53] Ms Hughes submits that assuming the promise and the services have been established, then the Court can and should take into account all the circumstances of the case in determining the quantum of any award. She submits that there must be an unremunerated outstanding balance and, in this case, there is no unremunerated balance.
[54] As I understand the defendants’ argument, they say that there is no unremunerated balance because, the amounts that the plaintiff received for wages while working on Norfolk Island together with the amount paid under the Agreement, meet the requirement of “reasonableness” having regard to all the circumstances of the case.
[55]Mr Wilson made a number of points in response to this argument as follows:
(a)the qualifying services are not just those carried out when the plaintiff was in Norfolk Island, but also include the relocation from Taranaki to Norfolk Island, involving sacrifice for the plaintiff and his family;
(b)there is also the issue of reliance by the parents of the plaintiff who arranged their affairs on the basis that the plaintiff would inherit from the deceased and they would leave their drycleaning business to the interested party;
(c)the plaintiff says the weekly payments he received during his time on Norfolk Island were inadequate remuneration as was the AUD30,000 paid to buy out his interest in the partnership;
(d)the value of the work and services provided often operates as an effective cap in testamentary promises cases, but where the estate has sufficient means to meet the claims of all persons that the deceased has a duty to provide for (as in this case) then the value of the service is less likely to operate as a cap; and
(e)at trial, the plaintiff may call expert evidence on the issue.
[56]Mr Wilson referred to plaintiff’s affidavit evidence where he states:
I do not believe I was adequately compensated by Max for my work in the business. From the little that I was told by Max about the finances of the business I believe that turnover was about $1.5m per annum in 1981 and that this increased to over $2m per annum by the time I left. I was also told that the value of stock had increased to over $2m compared to the $1.5m I was told we paid to Pines at the outset. A one quarter share of the increase in value of stock alone would have been $125,000.
Throughout the time I worked with Max I was paid a weekly amount of $200 and bonuses which were dependent upon sales made. The bonuses ranged from around $20 to $80 each week. This was about the same as what counter staff are paid.
[57] Mr Wilson notes that there is no evidence from the defendants directed at the issue of adequacy of the remuneration at this stage.
[58] In my view, the issue of the reasonableness of remuneration and whether there is any unremunerated outstanding balance is a key issue in determining the plaintiff’s TPA claim. This requires consideration of all the circumstances of the case, including the value of the services or work provided by the plaintiff. It is apparent from the points raised above by Mr Wilson, and the issues raised in the plaintiff’s affidavit evidence, that this will require a full hearing of the evidence as to the relevant circumstances of the case and possibly expert evidence. I do not consider that the remuneration issue can be properly determined in the context of an application for summary judgment and on the basis of the evidence currently before the Court.
Conclusion
[59] Overall, for the reasons set out above, the defendants have not established that the plaintiff cannot succeed on its claim against the defendant.
Result
[60] The application by the defendants for summary judgment against the plaintiff is dismissed.
[61] My preliminary view is that the plaintiff is entitled to costs on a 2B basis. If the parties are unable to agree on costs, then memoranda may be filed (not exceeding five pages) and costs will be determined on the papers.
[62] The matter is to be included in the next Associate Judge’s chambers list in New Plymouth for directions to be given as to the next steps in the proceeding.
Associate Judge Skelton
Solicitors and counsel:
A Habershon, Perpetual Guardian, Christchurch for Plaintiff Quin Law, New Plymouth for Defendant and Interested Party
1
3
0