Devereux v Ngakuru
[2017] NZHC 1451
•28 June 2017
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV-2016-488-53 [2017] NZHC 1451
BETWEEN JARED SHANE DEVEREUX, MARNIE
PETRIA DEVEREUX AS EXECUTORS OF THE ESTATE OF CALLIS PETER NGAKURU
Plaintiffs
AND
APIRANA BUNNY NGAKURU Defendant
Hearing: 19, 20 June 2017 Appearances:
AR Gilchrist for Plaintiffs
Defendant in personJudgment:
28 June 2017
JUDGMENT OF TOOGOOD J
This judgment was delivered by me on 28 June 2017 at 12.30 pm
Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Devereux & Ors v Ngakuru [2017] NZHC 1451 [28 June 2017]
Introduction
[1] Peter Ngakuru and the defendant Apirana Jason “Bunny” Ngakuru were brothers. They acquired the family dairy farm at Waimamaku, Northland, following the death of their father in 1968, and they were the equal shareholders in the farming company, Ngakuru Farms Limited (“the Company”), when Peter died in January
2009.
[2] Jared and Marnie Devereux, Peter’s children and the executors of his estate, sue Bunny Ngakuru for $653,495.00, the amount of his shareholder debt to the Company at the time it was liquidated in December 2012.
[3] Mr Ngakuru admits he owed the Company that debt, and that it was assigned to the executors as part of the distribution of the Company’s assets on the liquidation. He says, however, that he met with Ms Carole Devereux, Jared and Marnie’s mother, on what he now accepts was 4 May 2012. Mr Ngakuru’s defence to the claim is that, speaking on behalf of Jared and Marnie, Ms Devereux promised him that the executors would not seek to recover the debt from him if he transferred a block of land to the Company. The land was transferred and he now pleads alternative defences of accord and satisfaction, estoppel and waiver.
[4] Jared and Marnie agree that Mr Ngakuru promised to transfer the block of land to the Company, and that he did that in June 2012. But they say he also agreed that he would contribute approximately $150,000.00 to cover a half share of the Company’s outstanding liability for tax and the liquidators’ fees. Since he failed to do that, they claim they are entitled to sue for the shareholder debt.
[5] The outcome of the case turns entirely on what was agreed at the meeting in
May 2012. That is disputed by the parties.
The background facts
[6] There is general agreement between the parties about the essential factual background to the competing claims. From 1968, the Company farmed both land it
owned and land owned by Peter and Bunny individually. In October 2005, Peter and Bunny agreed they would bring their combined farming operations to an end, wind up the Company and distribute the assets (including various blocks of land) equally. Among other things, Bunny agreed to transfer his shares in the Company to Peter and to transfer his interest in three blocks of land to the Company, including two parcels of “partnership land”: the Waimamaku B2G4C Block (in CT 602/245) and
40 hectares described as the Waimamaku B2G4A Block (in CT 43B/247) (“the 40ha Block”). It appears, though it is not clear, that Peter and Bunny owned those blocks as tenants in common in equal shares.
[7] Although the farming operations ceased and livestock, plant and machinery were sold off, the Company was not wound up and the brothers did only some of the other things they had agreed upon. Bunny Ngakuru did not transfer his interests in the partnership land to the Company. By May 2006, his shareholder current account was overdrawn by $1.7 million as a result of the transfer of certain blocks land to him by the Company under the 2005 agreement. The Company also had accrued tax liabilities. The brothers reached another agreement in December 2008, the intention being to complete the equal division of the jointly held assets and liquidate the Company.
[8] Peter died in January 2009, before the terms of the 2008 agreement were carried out. The brothers were still equal shareholders in the Company and Bunny became the sole director. Peter’s children assumed ownership of Peter’s shares as the executors of his estate. It seems that with the assistance of Ms Devereux, who had been married to Peter between 1965 and 1971, Jared and Marnie managed the financial affairs of both the estate and the Company after Peter’s death. Little evidence was given about the dealings between the parties after Peter’s death but difficulties sorting out the somewhat muddled affairs of the brothers’ partnership have strained the relationship between Bunny and the Devereux family.
[9] In terms of the 2008 agreement, Bunny Ngakuru was required to transfer his interest in one of the blocks of partnership land (in CT 602/245) to Peter. He did not do that before Peter died and title automatically passed to him, but he eventually transferred it to the estate in 2010. Both the 2005 and 2008 agreements required
Mr Ngakuru to transfer his interest in the 40ha Block to the Company. He did not do that.
[10] The Company went into voluntary liquidation in November 2010. During the ensuing 18 months, Carole, Jared and Marnie managed the shareholders’ interests in the Company, including negotiating with the Inland Revenue Department and the liquidators, hoping to save the farm land from being sold off to meet Company debts.
[11] By 4 May 2012, the Company remained in some financial difficulty. On
30 April 2012, the liquidators had issued a letter to Mr Ngakuru and to the estate’s solicitors informing them that the Company’s properties would be sold if the liquidators’ fees and the Company’s debts to the IRD and other creditors were not paid off within 14 days. The total indebtedness exceeded $300,000. Mr Ngakuru’s shareholder current account was overdrawn by $1,535,990, representing the value of the land and money he had withdrawn from the Company since 2004.
The meeting on 4 May 2012
[12] Ms Devereux arranged the meeting on 4 May 2012. She attended it with her husband Colin, Mr Ngakuru and Max Horsford, the local Stake President of the Church of Jesus Christ of the Latter Day Saints of which both Ms Devereux and Mr Ngakuru were members. Ms Devereux did not know Mr Horsford; she said that when she contacted him she explained the nature of the meeting and its urgency and asked him to assist by chairing the meeting. She did not provide either Mr Horsford or Mr Ngakuru with an agenda for the meeting, but Mr Ngakuru acknowledged in evidence that he knew the meeting was to discuss the liquidators' letter containing the 14-day demand about the taxation liability and the liquidators' costs. He also understood that around $300,000 was needed to satisfy the Company's obligations and that Ms Devereux considered that the debt could be satisfied by the estate and Mr Ngakuru each paying around $150,000. Mr Ngakuru accepted that the meeting was not arranged to resolve his obligations to his deceased brother or the estate.
Carole Devereux’s evidence on behalf of the plaintiffs
[13] Ms Devereux's evidence was that following a prayer and a brief introduction, Mr Horsford asked for comments from each of the parties involved. She said that Mr Ngakuru "launched into a background on the farm and how he and his brother had agreed to divide up their interests in October 2005. There was a lot of talk about blocks of land and who got what." She said that, when she eventually got to speak, she returned the discussion to "the actual reason why we were there." She said she outlined the developments since the estate had engaged a private accountant and how he had made significant progress with mitigating both the taxation liability and reducing Mr Ngakuru's current account liability. Ms Devereux evidence was that she said at the meeting that $150,000 was an affordable amount for each party to pay and that estate had its share in reserve. She said that, referring to the long-standing dispute between Mr Ngakuru and his brother (and, later, the estate) over resolution of the respective interests in the Company, which had included litigation, she appealed to Mr Ngakuru to bring a seven-year dispute to an end and he agreed to do that.
[14] Ms Devereux's evidence was that after he had agreed to pay his share of the Company’s debts, Mr Ngakuru introduced the subject of his own current account and wanted to know if the estate was going to pursue him for that share. Ms Devereux said that she told Mr Ngakuru that jurisdiction over the current account was in the hands of the liquidators and that they had talked about selling it to a collection agency. She said that she felt sure that if both parties settled the Company debts the liquidators would have no reason to proceed with that process and would be in a position to distribute the remaining assets to the shareholders. She said that in those circumstances the estate would be unlikely to pursue Mr Ngakuru: she was aware that the estate had first call on the land assets under the equity distribution and, even if they ended up owning a part of the current account debt, they would be very unlikely to attempt recover it.
[15] Ms Devereux said that as the meeting wound down she decided to use the presence of Mr Horsford to settle the outstanding dispute over the 40ha Block, which Mr Ngakuru had been refusing to transfer to the Company despite the binding agreement of 2008 requiring him to do that. She said Mr Ngakuru claimed that he
was prevented from honouring that condition because of an unresolved subdivision. Ms Devereux said she responded by saying that the subdivision involved Company properties that were under the control of the liquidators and that they were not interested in any subdivisions. She said the private 40ha Block was not under the liquidators' control and that there was no excuse for Mr Ngakuru continuing to frustrate the estate. She said that the logic of that statement was not lost on Mr Horsford because he looked to Mr Ngakuru for a response. Ms Devereux said that it was only then that Mr Ngakuru agreed to transfer the 40ha Block to the estate by the following week.
[16] Ms Devereux’s evidence was that there was then a discussion about providing some form of encumbrance over the land in CT 602/245 to preserve a right of access to the family cemetery or urupa for the Ngakuru family. It was agreed that if that was done, Mr Ngakuru would lift his caveat over that property. Ms Devereux said that Mr Ngakuru then made a comment about proceeding with the subdivision once the liquidation had been completed. She was surprised by that because she thought Mr Ngakuru had clearly understood that he would not be likely to get the land owned by the Company ahead of the estate when he had such a large current account debt.
[17] Ms Devereux said in evidence that Mr Ngakuru’s reaction made it clear that her reminder about the position had the potential to unwind his previous commitment to pay his share of the debts. She said that at that point her husband, Colin, spoke up for the first time. He told Mr Ngakuru that everything that had been discussed that day was contingent on Mr Ngakuru paying his share of the debt; if Mr Ngakuru came back with anything less than that share, all deals were off. She described Mr Devereux’s intention as clear and forceful and said that Mr Ngakuru took umbrage at it.
Colin De Bohun Devereux’s evidence on behalf of the plaintiffs
[18] Carole Devereux's account of the meeting was corroborated by her husband Colin, who was not required for cross-examination. Importantly, Mr Devereux’s evidence was that Mr Ngakuru's agreement to transferring the 40ha Block to the estate was "clearly in addition to his agreement to pay his share of the shareholders'
debt and not instead of [it]." Mr Devereux said that he was absolutely clear that the transfer of the land (that is, the 40ha Block) was not to be in full and final settlement of Mr Ngakuru's obligations as a shareholder. He said he had intervened in the discussion to remove any doubt that the likely waiver of his current account was dependent on the payment of his share of the Company's indebtedness to creditors and the liquidators.
Bunny Ngakuru’s evidence
[19] Mr Ngakuru’s evidence was that the first matter discussed at the meeting, after the prayer and introduction, was Carole Devereux's request for him to sign over the 40ha Block to her children, in return for which she said "the kids" (referring to Jared and Marnie) would release him and forego the $653,000 owing to them through his current account. He said that agreed to that proposal and that Ms Devereux then raised the liquidation costs and the tax debt owed by the Company. He said that he was silent while Ms Devereux spoke about those matters and did not agree to pay a half-share because he did not have the money and was not in a position to borrow it. He agreed that the other matter discussed was the access to the family urupa and whether that should be preserved by way of an easement or a Maori Reservation.
[20] Mr Ngakuru said that, by the end of the meeting, it had been agreed that the
40ha Block would be transferred to the estate in return for the plaintiffs not pursuing him for the debt owed in relation to his current account. He said that although nothing was written down he "had the feeling that there was an agreement" and that at no time was he told that his debt to the Company would be pursued if he did not contribute a half-share to the Company's debts.
[21] Mr Ngakuru's evidence was that approximately one month after the meeting, after he had transferred the 40ha Block to the estate, he received an email from Ms Devereux advising him "that she was cancelling our agreement and that I would have to pay the $653,000." He said that he had made several attempts to recover the email but to date had not been successful.
Evidence of Maxwell George Horsford
[22] The brief of evidence sworn to by Mr Horsford on behalf of Mr Ngakuru contains his recollections of the meeting; they align broadly with Mr Ngakuru's evidence. In particular, he said that the principal discussion concerned the transfer of two blocks of land by Mr Ngakuru to the Company in return for which it was agreed Mr Ngakuru would not be pursued to make a contribution to the Company's debts. He said it was his recollection that Mr Ngakuru did no more than undertake to talk to his bank and discuss his options.
Discussion about what was agreed on 4 May 2012
[23] The discrepancy between the evidence-in-chief of both Carole and Colin Devereux on the one hand, and Mr Ngakuru and Mr Horsford on the other, about what was agreed at the meeting on 4 May 2012 requires consideration of both the reliability and the credibility of the respective witnesses. The evidence conflicts and is not capable of reconciliation.
The evidence of Ms Devereux is accepted
[24] Where there is disagreement, I prefer the evidence of Mr and Ms Devereux, which I found to be both credible and reliable. I am satisfied that the recollections of Mr Ngakuru and Mr Horsford about the meeting are fundamentally flawed and unreliable. As I said to Mr Ngakuru during closing submissions, it is not my view that he attempted to mislead the Court in his evidence. I see the conflicts in the evidence being resolved by making findings about the present-day perceptions of those who participated in that meeting and their respective abilities to recall what was discussed and decided. I set out my reasons for rejecting Mr Ngakuru's account and accepting the evidence of Mr and Ms Devereux.
[25] First, I was impressed by the manner in which Ms Devereux gave evidence. She appeared to me to be a capable person with relevant business experience who had, on my perception, a very detailed knowledge and recollection of the history of the business dealings between her late former husband, Peter, and Bunny, and over
the past seven years since Peter's death, between the estate, the liquidators and Bunny. Ms Devereux seems to have undertaken principal responsibility for the management of the estate's affairs on behalf of Jared and Marnie. She gave her evidence firmly but not dogmatically and responded carefully and in a reasoned manner to contrary suggestions put to her in cross-examination.
[26] Next, Ms Devereux's evidence was consistent with the notes she had made prior to the meeting. While the notes are self-serving to a degree, I am satisfied that they were genuinely made prior to the meeting. I accept Ms Devereux's evidence that she was satisfied at the meeting that all of the points she had intended to make were not only made but the outcome agreed. The notes emphasise the significance of the liquidators' 14-day demand, the willingness of the estate’s executors to raise the money to meet their share, and their view that Mr Ngakuru should honour his share also. There is no reference in the notes to the transfer of any land by Mr Ngakuru.
[27] Significantly, and most importantly, Ms Devereux's evidence is consistent with the contemporaneous documents and with the correspondence subsequently exchanged between the respective legal advisers to the parties. At 3.59 pm on
4 May 2012, after the meeting had been completed, Mr David Daniel, the solicitor for the estate, sent an email to the liquidator, Mr Finnigan, and the barrister instructed by him, Mr Frogley, to provide an initial response to the 14-day letter. In that email, Mr Daniel said that the shareholders of the Company had met that day and agreed to provide in equal shares the funds necessary to pay the outstanding taxation and the liquidators' expenses, thus enabling the distribution of the Company's assets. The email recorded that although confirmation from the IRD of the exact amount of the tax debt was not known, both parties were approaching their banks to make the necessary arrangements for payment. He asked the liquidators to defer the sale of land (and the debt), pending confirmation of finance and clarification of the amount required.
[28] That email was copied to Ms Devereux who responded at 8.45 pm that evening. Ms Devereux set out for Mr Daniel what she described in evidence as a "roll-out" of the key elements of what had been agreed. She explained that the five
key elements listed mapped what would happen as a result of the agreement which had been reached. She recorded that it had been agreed that the estate and Mr Ngakuru would each pay half the costs when the final amounts were known, and that Mr Ngakuru was going to transfer the 40ha Block to the estate. She also recorded that Mr Ngakuru had withdrawn his demand for a Maori Reservation and was happy with an encumbrance over the other parcel of partnership land.
[29] Ms Devereux then recorded that the liquidation would occur (on payment of the Company's debts to the liquidators and the IRD and other creditors) and that the assets would then be distributed. She then said that the estate would not pursue the deficit in the equity share (that is, $653,000 (half) of Mr Ngakuru’s debt which she expected would be transferred to the estate as part of the equalisation process upon completion of the liquidation), so long as the estate got the land which was assigned to it.
[30] Ms Devereux explained that the agreement that the estate would not pursue the deficit in equity share assumed that Mr Ngakuru had met his undertaking to pay half the Company's debts. I find that must have been the case, because until the Company's debts were paid, the question of pursuing Mr Ngakuru for repayment of the overdrawn current account remained in the hands of the liquidators and not the estate. It would only be in the interests of the estate to pursue the current account deficit if the Company's debts were paid off and a half-share of Mr Ngakuru's current account overdraft was assigned to the estate as an asset pursuant to equalisation on a final liquidation of the Company. Ms Devereux's note to the estate's solicitor recorded that Mr Ngakuru had agreed to go to the bank and his lawyer on the following Monday; that he would transfer the 40ha Block and ask for a loan; and that he would sell assets and repay the loan. Ms Devereux's email, prepared and sent only a few hours after the meeting, confirmed her evidence on other matters relevant to the 4 May 2014 meeting.
[31] Significantly, in a letter dated 10 May 2012 addressed to Mr Dominick, who was acting for Mr Ngakuru, Mr Daniel said:
We understand it has been agreed that the land in certificate of title
NA43B/247 currently in the joint names of Peter and his brother will be
transferred to the Estate. This will involve a transmission of the property into Bunny's name as survivor with a simultaneous transfer to the Estate and a withdrawal of the caveat over the property. Please confirm your e-dealing details and we will create a dealing accordingly.
The agreement by the parties was to the effect that Bunny would:
a) Complete the transfer of the property as above; and
b) Pay one half of the liquidators costs and outstanding debts of Ngakuru
Farms Limited (IRD and Max Hayward).
In return the Estate (assuming it will become the owner of all or part of the debt owned by Bunny to the Company) will not pursue that debt against Bunny.
Please confirm.
[32] The reference to the assumption that the estate would become the owner of all or part of the debt owed by Bunny to the Company is instructive as confirming Carole Devereux's explanation that the agreement to forgive the half-share of Mr Ngakuru's debt to the Company could only have effect once the liquidation was complete and that that, in turn, could only occur if the indebtedness to the IRD and the liquidators was satisfied.
[33] The terms of Mr Dominick's response to Mr Daniel, by email at 5.13pm on
15 May 2012 are instructive. Mr Dominick confirmed what had apparently been prior telephone advice to Mr Daniel that Mr Ngakuru had been unable to come up with the half-share of the liquidators' costs and outstanding debts of the Company. He said:
Bunny's proposal to finance the costs and debts unfortunately cannot proceed.
Bunny has confirmed he is still able to transfer the land in CT NA43B/247 in consideration of the Estate not pursuing the debt against Bunny. We note you will refer the matter back to your client.
[34] There would have been no need for Mr Daniel to take further instruction from the estate if the agreement at the meeting had been that the transfer of the land was the only consideration for the forgiveness of the debt. Mr Dominick’s email was an acknowledgement that Mr Ngakuru’s failure to raise funding for his contribution to
the repayment of the Company’s debts meant he could not fulfil the terms of the
agreement reached at the meeting. He offered a different arrangement.
[35] Mr Daniel responded the following day, reflecting Ms Devereux's instructions to him. He told Mr Dominick that the agreement to transfer the jointly owned land (that is the 40ha Block) was not conditional or tied to the other matters discussed at the meeting. He said that block of land was always intended to go to Peter under the agreements (in fact, it was to go to the Company and then to Peter) and, even when it was transferred, there would remain a significant imbalance between the distributions from the estate. Mr Daniel explained that because Mr Ngakuru was unable to pay his share of the Company's costs it was “probably inevitable” that the liquidators would sell the remaining land with the result that the estate would receive little or nothing from the liquidation other than the debt owned by Mr Ngakuru. He said that if that was the case then naturally the estate would want to recover what it could from Mr Ngakuru.
[36] Mr Daniel said that the liquidators were also suggesting a possible discounted sale of the debt (that is, Mr Ngakuru's debt to the Company). He speculated that, although the purchaser would no doubt vigorously enforce the debt, that would be of no benefit to the estate. He then asked Mr Dominick to confirm urgently his edealing details so that Mr Daniel could create the dealing for the transmission and transfer of the 40ha Block.
[37] Mr Dominick's response at 4.21 pm that day is also instructive. He said:
We have spoken further with Bunny who still expects the transfer to be in consideration of the release by the Estate of the debts owing by Bunny. Bunny will instruct us to prepare the A&I documents once we have that agreement and it is documented.
[38] Ms Devereux instructed Mr Daniel by email at 7.32pm that evening. She asked Mr Daniel to reiterate that the estate had no power to release Mr Ngakuru from the current account debt which was under the liquidators’ jurisdiction. The undertaking by the estate not to pursue Mr Ngakuru for the debt was given only if Mr Ngakuru could fund his share of the repayment of the Company’s debts allowing
the liquidation to proceed and the assets to be distributed to the shareholders. That is consistent with her evidence.
[39] After taking instructions from Ms Devereux, Mr Daniel reiterated in an email sent at 12.54 pm on 17 May 2012 that the 2005 and 2008 agreements required Bunny to transfer the 40ha Block to Peter. He reiterated Ms Devereux's position that at the meeting on 4 May 2012 Bunny agreed that he would forthwith complete that transfer and said there were no conditions attached nor was that undertaking tied to any of the subsequent matters discussed. Mr Daniel then referred to what he described as a further proposition whereby Bunny agreed to meet half the Company's debt (largely IRD and liquidators' costs) and said, that had that happened with the estate contributing the other half of the debts, the Company's remaining land could have been distributed to the estate (as part of the equalisation). Mr Ngakuru would have a corresponding amount credited against his current account but there would remain a part of Mr Ngakuru's debt owing effectively to the estate. It was under those circumstances that the estate agreed (and would still agree) to not pursue any such debt.
[40] Mr Daniel then said:
Now that Bunny is not going to pay his half-share of the debts the situation has changed completely in that the company land will be sold and the liquidators will remain in control of Bunny's current account debt with the estate having no power to release it even if there was the slightest justification to do so.
[41] Ms Devereux says that the order in which the agreements were reached is incorrectly set out in Mr Daniels’s letter and that the agreement that Mr Ngakuru would contribute half the cost of satisfying the Company's debt was reached before any discussion about the transfer of the land. That order of events is logically consistent with the legal position:
(a) Mr Ngakuru had a pre-existing obligation to transfer the 40ha Block to the estate and was in default of that obligation.
(b)It made no commercial sense for the estate to accept that Mr Ngakuru would not be required to contribute to the Company's indebtedness of over $300,000.
(c) In order for the estate to obtain any satisfactory distribution of assets upon the liquidation, the full amount of the debt had to be paid and there was no reason, given the large deficit in Mr Ngakuru’s current account, why the estate would take on a further burden relieving him of the obligation to pay around $150,000.
(d)I accept Ms Devereux's evidence that she was satisfied that Mr Ngakuru had the ability to meet a half-share of the Company's indebtedness, although she acknowledged that he would be required to dispose of other assets in order to do so.
(e) Any right to recover from Mr Ngakuru a half-share of his overdrawn current account would only accrue to the estate once the liquidation was complete.
[42] What is significant, however, is that without further negotiation, and without securing an agreement from Mr Daniel on behalf of the estate that the transfer of the
40ha Block would result in Mr Ngakuru having no further indebtedness either to the Company or the estate, Mr Dominick sent an email to Mr Daniel on 21 May 2012 which read simply:
David,
We have instructions to proceed.
edealing details are - pc dfullam001, cp sdominick001.
[43] That email was followed up by a letter of 31 May 2012 confirming the arrangement. It is noteworthy also that on 25 May 2012 Ms Devereux sent an email to the liquidators in which she said, among other things:
There were discussions with Bunny over what might happen IF the estate ultimately became the owner of all or part of that debt but those discussions have come to nothing because Bunny has not produced any money.
[44] To achieve its purposes in the light of Mr Ngakuru’s failure to raise funds, the estate borrowed further money and repaid all external creditors including the Inland Revenue Department and the liquidators. The liquidators recorded in a letter to Mr Ngakuru dated 4 December 2012 that Mr Ngakuru's current account had a debit balance of $1,535,990 and said that in order to complete the liquidation, the recovery of half of that sum had been assigned to the estate. They recorded that this meant that the estate had the ability to pursue Mr Ngakuru for $653,495 and that the Company obligation was reduced to nil.
[45] I consider it to be significant that Mr Ngakuru did not then or subsequently tell the liquidators, or inform the trustees of the estate or Ms Devereux, that he considered himself to be free of any obligation to the estate because of the agreement reached regarding the transfer of the 40ha Block.
Mr Ngakuru’s evidence is rejected
[46] As I have said, the exchanges of correspondence to which I have referred confirm Ms Devereux's evidence. There is nothing in the material before the Court to contradict it. Moreover, Mr Ngakuru's recollection of what led to and occurred at the meeting of 4 May 2012 is unreliable. I do not consider him to have wilfully misled the Court but I am satisfied that he simply blocked these matters from his mind once the Company was finally wound up and the land dealings in 2012 were completed. As Ms Devereux had suggested, what took place brought to an end the dealings between Mr Ngakuru and the estate of his late brother, except to the extent that he had failed to repay the $1.5 million overdraft in his shareholder's account.
[47] Mr Ngakuru acknowledged in cross-examination that his initial recollections of what had taken place were seriously deficient. First, he had said in an affidavit responding to the estate's application for summary judgment that the 4 May 2012 meeting had occurred in either 2009 or 2010. As he acknowledged in cross- examination, that was entirely wrong. Moreover, Mr Ngakuru said in his earlier affidavit that the Company was not in liquidation at the time of the meeting with Carole at which it was agreed he would transfer the 40ha Block to the Company. That was also plainly wrong. Mr Ngakuru explained his error by saying that he had
not given a lot of thought to the circumstances of the meeting – who was there, the time, who said what – for a period of about four years. He said that he had agreed at the meeting that he would transfer the two titles in accordance with the earlier agreements with his brother, whereas one had already been transferred. Mr Ngakuru acknowledged that he did not take any notes of the meeting but that Mr Horsford had done so.
[48] Mr Horsford's notes, however, have been mislaid. I am satisfied that in preparing his evidence-in-chief, Mr Horsford was dependent entirely upon Mr Ngakuru's flawed and self-serving recollection of what had taken place. As might have been expected of an honest, objective and independent witness, Mr Horsford acknowledged in cross-examination that there had been a lot of discussion at the meeting about the outstanding tax and the fees owed to the liquidators, and that that was the reason why Mr Ngakuru was to go and talk to the bank about meeting his share of that debt. Mr Horsford confirmed that the pressing thing was that the parties were trying to save the land from being sold. Significantly, Mr Horsford said that since he prepared his brief of evidence he had seen Ms Devereux and Mr Devereux's evidence. He said that, when he read Ms Devereux’s evidence:
It actually brought a lot of things back to my understanding and memory of
... what actually happened at the meeting.
When asked whether he accepted Ms Devereux's brief of evidence, he said:
There is nothing in her evidence that I would dispute, that she's entered about the meeting.
[49] As for Mr Devereux's evidence, Mr Horsford said that he thought Mr Devereux had actually spoken very well at the meeting and was actually straight to the point. He understood the seriousness of the pressure the liquidators were putting on both parties at that time and the seriousness of getting it settled.
Conclusions about what was agreed on 4 May 2012
[50] I have no doubt on the evidence that Mr Ngakuru is mistaken in his assertion that the estate agreed that it would not pursue recovery of the half-share of his
current account debt to the Company which had been assigned to the estate if he transferred the 40ha Block to the Company. The undertaking given by Ms Devereux on behalf of the estate at the meeting on 4 May 2012 was that which was recorded by Mr Daniel in his letter of 10 May 2012 to Mr Dominick. The agreement reached was to the effect that Mr Ngakuru would:
(a) complete the transfer of the 40ha Block; and
(b) pay one-half of the liquidators' costs and outstanding debts of
Ngakuru Farms limited (IRD and Max Hayward),
in return for which, assuming the estate became the owner of all or part of the debt owned by Mr Ngakuru to the Company, the estate would not pursue that debt against him.
Result
[51] Because Mr Ngakuru failed to pay one-half of the liquidators' costs and other debts owed by the Company, the factual basis for the defences of accord and satisfaction, estoppel and waiver simply fall away. The debt of $635,495 having been admitted by Mr Ngakuru, the plaintiffs are entitled to judgment.
Orders
[52] Accordingly I order that there shall be:
(a) Judgment for the plaintiffs against the defendant in the sum of
$653,495.
(b)The defendant shall pay interest on that sum pursuant to the Judicature Act 1908 from the date of demand (4 December 2012) down to the date of judgment.
Costs
[53] The plaintiffs are entitled to costs, which shall be calculated on a Category
2B basis, together with disbursements. If the parties cannot agree on the amount of costs and disbursements to be paid, the plaintiffs shall file and serve a memorandum not later than 21 July 2017. The defendant shall have until 11 August 2017 to file and serve a memorandum in response. Costs shall then be determined on the papers unless the Court directs otherwise.
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Toogood J
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