Eden Property Developments Limited v Williams
[2016] NZHC 939
•10 May 2016
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
CIV-2015-441-133 [2016] NZHC 939
UNDER the Companies Act 1993 BETWEEN
EDEN PROPERTY DEVELOPMENTS LIMITED
Applicant
AND
STANLEY DAVID WILLIAMS Respondent
Hearing: 29 April 2016 Counsel:
T R Wano for the Applicant
J McDowell for the RespondentJudgment:
10 May 2016
JUDGMENT OF ASSOCIATE JUDGE SMITH
[1] The applicant (Eden Property) applies to set aside a statutory demand dated
8 December 2015 for the sum of $174,840.55 plus costs. In the alternative, the applicant asks for an order extending the time for compliance with the demand.
Background
[2] Mr Peter Eden and Mrs Cathryn Eden are both directors and shareholders of Eden Property. With a company called Lighthouse Nominees Ltd, they are also the trustees of a Trust known as the Te Aomarama Trust (the Trust).
[3] The respondent (Mr Williams), who issued the statutory demand, is
Mrs Eden’s father.
[4] Mr Eden and Mrs Eden separated in October 2012. Relationship property proceedings were filed in the Family Court by Mrs Eden, but those proceedings were
struck out for want of prosecution on 1 August 2014.
EDEN PROPERTY DEVELOPMENTS LIMITED v STANLEY DAVID WILLIAMS [2016] NZHC 939 [10
May 2016]
[5] The Trust is the registered proprietor of two residential properties situated in Taradale. Mr Eden lives in one of them, in the house which he and Mrs Eden occupied before they separated. The second Taradale property, which I will refer to as “the property”, is occupied by Mr Williams.
[6] Mr Eden says that he built a house on the property (the house) in 1995, and Mr Williams moved to live in the house in about 2010. When Mr Williams moved onto the property, Mr Eden says that Mr Williams told him that he wanted to renovate the house, so that it would be as Mr Williams wanted. Mr Eden says that Mr Williams pulled out the kitchen and built a new one, painted the house inside and out, and built an ensuite onto the bedroom. He also built a new laundry, and pulled up the concrete outside of the house and paved it.
[7] Mr Eden contends that none of that work was actually required, except perhaps for the interior painting. More importantly, he says that there was never any agreement that the money spent by Mr Williams on this work would be repaid, whether by the Trust, Eden Property, or Mr Eden. He contends that the renovation work had nothing to do with Eden Property, given that the property is owned by the Trust.
[8] The renovation work was done in 2010 and early 2011, and it is not disputed that between March 2010 and February 2011 Mr Williams paid Eden Property a total of $174,840.55 for the work. The payments he made were as follows:
Cheque number Date Amount 001220
05/03/2010
$5,700.00
001221
10/03/2010
$60,000.00
001225
26/03/2010
$40,000.00
001247
11/08/2010
$22,410.00
001253 08/09/2010 $5,000.00 001264
08/10/2010
$20,000.00
001266
19/10/2010
$11,200.00
001273
23/11/2011
$6,330.55
001282
08/02/2011
$4,200.00
Total
$174,840.55
[9] There was no written agreement setting out the terms on which Mr Williams made the payments to Eden Property. Mr Williams says that the payments were made as loans to Eden Property, and that he is now entitled to have them repaid. He contends that he was given a promise, before he paid the money, that it would be repaid. That is denied by Mr Eden, who contends that, in the absence of any evidence that a loan was intended, Mr Williams has no claim on Eden Property: the best that Mr Williams can argue is that he has a claim against the owner of the property (the Trust) in constructive trust, arising from his contributions to the property.
The evidence
Mr Williams
[10] Mr Williams states that he had been living at Paremata until early February
2010, when his Paremata home was sold. He lived with another daughter in Wellington for some time before he moved up to live in the house. He says that he did not take part in discussions relating to the alterations to the house – those discussions took place between Mr and Mrs Eden in early 2009, while Mr Williams was still living in Wellington.
[11] Mr Williams says that after the sale of his Paremata home he travelled back and forth between Wellington and Taradale, and on one occasion he had a discussion
with Mr Eden and Ms Eden about the alterations to the house. He says that Mr Eden and Ms Eden were aware that he had sold his home, and that he had the proceeds from the sale in a bank account. He says that his clear recollection of the discussion is that he would advance the monies to Eden Property for the alterations to the house.
[12] When Mr Williams moved into the house, he understood that the property was a rental property owned by Eden Property. He was aware that Eden Property also owned other rental properties in the area. Under a written tenancy agreement made with Eden Property as landlord, he paid rent of $1,200 per month to Eden Property.
[13] Mr Williams says that he was initially prepared to wait for the relationship property issues to be resolved between Mr Eden and Mrs Eden before he looked for repayment of the $174,840.55. He eventually issued the statutory demand which is the subject of this proceeding, on 8 December 2015.
[14] Mr Williams says that his recollection is that the arrangements for the renovation work on the house were made independently of him. The work was done by a builder, who sent his invoices to Eden Property. In response to a statement by Mr Eden that Mr Williams carried out the work himself, Mr Williams says he was 78 years old at the time, and had a number of health issues which meant that he was not in a position to carry out any of the renovation work.
Mrs Eden
[15] Mrs Eden’s evidence was given in the form of an affidavit filed in this proceeding, in which she generally supports Mr Williams’ claim, and two affidavits which she had filed in May and November 2013 in the Family Court proceeding
between Mr Eden and herself.1
1 The Family Court affidavits were produced by Mr Eden as annexures to his affidavit in opposition to the setting aside application, along with a copy of an affidavit sworn by himself in the Family Court proceeding. No objection was taken to the Family Court evidence being produced in that way, and it has been considered and taken into account in this judgment.
[16] In the Family Court proceeding, Mrs Eden appears at first to have been under the impression that the property was owned by Eden Property. In fact, the property was sold by Eden Property to the Trust in 2008.
[17] By the time she swore her second affidavit in the Family Court proceeding, on 6 November 2013, Mrs Eden must have been aware that title to the property had passed to the Trust. However she still maintained that the money for the renovation work was paid by Mr Williams to Eden Property because Eden Property was the entity that owned the property and benefitted from the work that was done. She explained that she had always understood that the property had never been sold out of Eden Property. She produced a copy of the tenancy agreement covering Mr Williams’ occupation of the property, which was signed by Eden Property as landlord, and she deposed that the mortgage over the property, taken out by Eden Property, had never been transferred to the Trust. In her earlier Family Court affidavit, sworn on 21 May 2013 she had stated that a further $103,000 was borrowed to complete the upgrading of the property (in addition to the $174,840.55 paid by Mr Williams), and that it was Eden Property that borrowed the additional money. Her evidence was that all transactions relating to the renovation of the property had been operated through Eden Property’s accounts.
[18] Mrs Eden stated that Mr Eden knew of the arrangement with her father, and consented to it. She expressed the view that the Trust had been enriched by the payments made by Mr Williams. She did not see it as being either morally right or appropriate that the debt not be repaid.
[19] In her affidavit filed in this proceeding, Mrs Eden confirms her recollection that Mr Williams’ expenditure was an advance made at the request of her and her husband. She says that there was a need to carry out improvements to the house, and Mr Williams was asked if he would fund the alteration work. She says that Mr Williams was asked to pay the money to Eden Property because Eden Property could then claim the costs as deductions for income tax purposes. There was no discussion of the property being held in a Trust, and the property was always shown in Eden Property’s accounts as being an asset of the company. It had been let by Eden
Property to tenants since 2001, and Eden Property had accounted for rental income received from the property in its tax returns.
[20] Mrs Eden refers to a meeting at the office of Eden Property’s accountant, Mr Spicer, at which the issue of Mr Williams’ payments to Eden Property was discussed. She says that a decision was then made that the money paid by Mr Williams would be treated as a debt owed by Eden Property to him.
[21] Mrs Eden confirms that, to her knowledge, Mr Williams never carried out any physical work on the property.
Mr Spicer
[22] Mr Spicer swore an affidavit in this Court on 1 October 2015. The original does not appear to have been filed, at least in this proceeding, but a copy was attached to Mr Eden’s affidavit. Again, Mr McDowell did not take any point about the manner in which this evidence was adduced.
[23] Mr Spicer stated that he had been the accountant for Eden Property and Mr and Mrs Eden since 2000. He referred to what he described as “a number of unusual incidents” in respect of the management of Eden Property’s affairs, the first being that Eden Property was subjected to a detailed audit by the Commissioner of Inland Revenue, covering all dealings with the company in the period from 2000 to 2010.
[24] He stated that the majority of Eden Property’s day-to-day bookkeeping work was carried out by Mrs Eden, and that it was “not always easy to have Mr Eden engage in this process”.
[25] Mr Spicer then stated that it “became important to have a decision made as to how the money which was advanced to the company for the completion of building work was to be managed”.
[26] Mr Spicer stated that he travelled from Wellington to Hawkes Bay to meet with Mr and Mrs Eden. A little later Mr Williams joined the meeting. Mr Spicer stated that the purpose of the meeting was to have agreement reached as to the
treatment of the monies advanced by Mr Williams. Mr Spicer went on to say that his “recollection” was that the decision made by Mr and Mrs Eden, upon which the tax returns and the company financial statements were completed, was that the money advanced by Mr Williams was a debt owed by Eden Property. He said that it was his “clear recollection” that this was agreed to by both Mr and Mrs Eden, and that their decision was subsequently communicated to Mr Williams.
[27] Mr Spicer did not say when this meeting occurred. However, it is clear that it must have been after at least some of the payments had been made by Mr Williams. Mr Spicer’s affidavit contained no annexures, such as working notes, completed financial statements, or tax returns for Eden Property, showing how Eden Property did treat the payments by Mr Williams for accounting and tax purposes.2
Mr Eden
[28] In his affidavit in the Family Court proceeding, sworn on 29 August 2013, Mr Eden stated that the property was transferred by Eden Property to the Trust in May 2008.
[29] He stated that he had no knowledge of the additional borrowings of $103,000 until he read about it in Mrs Eden’s first Family Court affidavit. He said: “I am not sure if the money was borrowed by [Eden Property] before or after the property was transferred to the Trust. Clearly there will be issues if the fund [sic] were borrowed by [Eden Property], secures over a Trust asset.”
[30] In his affidavit filed in this proceeding, Mr Eden does not address the question of why the payments made by Mr Williams over the course of almost a year were made to Eden Property. Instead, he relies on the absence of any written loan agreement, the absence of any clear agreement as to terms (eg, as to date of repayment and interest rate), and the absence of any specific reference to a loan from Mr Williams in Eden Property’s financial statements for the year ended 31 March
2012 (these financial statements were exhibited to one of Mrs Eden’s affidavits
sworn in the Family Court proceeding). Mr Eden says that the evidence for Mr
2 Neither party produced copies of Eden Property’s completed tax returns for any year after the
year ended 31 March 2012.
Williams is simply too vague, and in those circumstances his own sworn evidence (that there was never any agreement that the money would be repaid, whether by himself, the Trust, or Eden Property) is sufficient to create a genuine and substantial dispute. He acknowledges that Mr Williams may have a constructive trust claim against the Trust, based on his contributions to the value of the property, but that would be a claim against the Trust, not Eden Property.
[31] With reference to Mr Spicer’s statement that his recollection of the relevant meeting was that “the decision made by Mr and Mrs Eden was that the money advanced by Mr Williams was a debt owed by the company”, Mr Eden says that he does not consider Mr Spicer’s “recollection” of matters discussed takes the issue any further. As Mr Eden puts it, the bottom line is that the property is owned by the Trust, and work done on the property cannot possibly result in a debt being owed by Eden Property. Eden Property does not own the property, and at best Mr Williams has a constructive trust claim against the Trust.
[32] Mr Eden refers to a set of financial statements which Mrs Eden had produced in her evidence given in the Family Court proceeding. These statements, purporting to be for the Eden Property tax year ended 31 March 2013, showed as a term liability an advance of $174,840.55 from Mr Williams. Mr Eden points out that no such liability was shown in the financial statements for the year ended 31 March 2012 (which appear to have been prepared by Mr Spicer’s firm), and that the March 2013 statements produced by Mrs Eden were printed on 19 April 2013, only 19 days after the end of Eden Property’s financial year. He says that these statements were incomplete and were never finalised. He did not agree to them. He also notes that by the time this set of accounts was printed in April 2013, he and Mrs Eden had separated.
[33] Mr Eden also gives evidence of an earlier statutory demand issued by
Mr Williams for the same amount of money. This demand was issued on
23 April 2015. Eden Property did not apply to have that demand set aside, as Mrs Eden would not agree to the company filing a setting aside application. However Mr Eden instructed a solicitor to raise his concerns about the claim with Mr Williams’ solicitor.
[34] Mr Eden produced copies of correspondence passing between the solicitors in
2015. Eden Property’s solicitor wrote to Mr Williams’ solicitor on 27 May 2015, contending that the issue of the April 2015 statutory demand was inappropriate given the absence of any agreement for reimbursement of Mr Williams’ expenditure. Eden Property’s solicitors stated that their instruction was that the work had been carried out to improve Mr Williams’ living conditions, and that Mr Eden had made it clear at the time that if Mr Williams wished to proceed with the work he would have to bear the costs.
[35] In a reply dated 3 June 2015, Mr Williams’ solicitors drew attention to the affidavit evidence given by Mrs Eden in the Family Court proceeding which attached the financial statements for Eden Property as at 31 March 2013. Mr Williams’ solicitors contended that these financial statements had been accepted by Mr Eden, signed by him, and submitted to the Inland Revenue Department. Mr Williams’ solicitors also referred to the fact that the invoices for the renovation work were addressed to Eden Property.
[36] Eden Property’s solicitors replied on 19 June 2015. They drew attention to the fact that no liability to Mr Williams was shown in the March 2012 statement of financial position for Eden Property. They pointed out that the alleged debt to Mr Williams appeared for the first time in the 31 March 2013 balance sheet produced by Mrs Eden in the Family Court proceeding. They also stated that Mr Eden had not signed Eden Property’s financial statements for the year ended 31 March 2013: those statements had not been completed, let alone filed with the Inland Revenue Department.
[37] Mr Williams’ solicitor replied on 26 June 2015, setting out his understanding that Mr Eden had signed the financial statements and filed a tax return based upon the March 2013 financial statements referred to by Mrs Eden in her Family Court affidavit. That understanding was rejected by Mr Eden’s solicitors in a further letter dated 3 July 2015.
Reply evidence
[38] Eden Property did not submit any reply affidavits.
Setting aside statutory demand – legal principles
[39] Section 290 of the Companies Act 1993 materially provides:
290 Court may set aside statutory demand
(1) The court may, on the application of the company, set aside a statutory demand.
…
(3) No extension of time may be given for making or serving an application to have a statutory demand set aside, but, at the hearing of the application, the court may extend the time for compliance with the statutory demand.
(4) The court may grant an application to set aside a statutory demand if it is satisfied that—
(a) there is a substantial dispute whether or not the debt is owing or is due; or
(b) the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or
(c) the demand ought to be set aside on other grounds.
(5) A demand must not be set aside by reason only of a defect or irregularity unless the court considers that substantial injustice would be caused if it were not set aside.
(6) In subsection (5), defect includes a material misstatement of the amount due to the creditor and a material misdescription of the debt referred to in the demand.
(7) An order under this section may be made subject to conditions.
[40] The general principles to be applied by the Court in determining applications under s 290 are well established:3
(a) The onus is on the applicant to show that there is arguably a genuine and substantial dispute as to the existence of the debt. The task for
3 Brookers Company and Securities Law (looseleaf ed, Brookers), at CA290.02, citing United Homes (1988) Ltd v Workman [2001] 3 NZLR 447, (2001) 9 NZCLC 262,605 (CA), Fletcher Homes Ltd v Ellis HC Auckland M471IM99, 23 July 1999; Forge Holdings Ltd v Kearney Finance (NZ) Ltd HC Christchurch M149/95, 20 June 1995; Queen City Residential Ltd v Patterson Co-Partners Architects Ltd (No 2) (1995) 7 NZCLC 260,936 (HC); Rennie v Prospect Resources Ltd HC Greymouth M14/95, 3 November 1995; Crown Transport Services Ltd v Waipa District Council HC Hamilton CIV-2007-419-1711, 2 July 2008 and Taxi Trucks Ltd v Nicholson [1989] 2 NZLR 297, (1989) 1 PRNZ 390 (CA).
the Court is not to resolve the dispute but to determine whether there is a substantial dispute that the debt is due. The mere assertion that there is a genuine substantial dispute is not sufficient: Queen City Residential Ltd v Patterson Co-Partners Architects Ltd (No 2) (1995) 7 NZCLC 260,936 (HC).
(b) The mere assertion that a dispute exists is not sufficient. Material, short of proof, is required to support the claim that the debt is disputed.
(c) If such material is not available, the dispute should normally be resolved other than by means of proceedings in the Companies Court.
(d) An applicant must establish that any counterclaim or cross demand is reasonably arguable in all the circumstances. The obligation is not to prove the actual claim. Such an obligation would amount to the dispute itself being tried on the application.
(e) It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise.
Discussion and conclusions
Preliminary matters
[41] Counsel had originally agreed that deponents on each side should be made available for cross-examination. Mr Wano did not seek to cross-examine any witnesses for Mr Williams, but at the hearing Mr McDowell asked leave to cross- examine Mr Eden on his affidavit. He pointed out that a direction had been made by consent in February 2016 that deponents were to be available for cross-examination. I indicated to Mr McDowell that in my view cross-examination would be unusual on a summary application such as this, where the Court’s task is not to determine the facts but simply to decide whether or not the respondent has raised a genuine and substantial dispute. I stood the matter down to look at the point, and also to allow the Registrar to make arrangements for recording any cross-examination if that were to occur. However, when the case was called again, Mr McDowell withdrew his request to cross-examine Mr Eden.
[42] In the course of the hearing Mr McDowell also sought leave to call Mr Spicer to give oral evidence. That was opposed by Mr Wano, and I declined the application. Directions had been given for the provision of evidence by way of affidavit, and no reason was given why any additional evidence from Mr Spicer had not been
provided by affidavit in accordance with the timetable. Further, it seemed not unlikely that if Mr Spicer were permitted to give oral evidence, Mr Eden might also wish to call additional evidence. Given the lateness of the application, and the essential nature of a proceeding such as this (where the issue is only whether there is a genuine and substantial dispute), I concluded that no basis had been established for calling additional oral evidence.
The setting aside application
[43] The onus is on Eden Property to show that there is a genuine and substantial dispute as to the existence of the debt. To do that, it must provide sufficient information, going beyond “mere assertion”, in support of the alleged dispute.
[44] While it is not normally the Court’s role in cases such as this to resolve disputed questions of fact on affidavit evidence, the Court is not required to accept uncritically any or every disputed fact. As Associate Judge Faire (as he then was) put it in Freemont Design & Construction Ltd v W Stevenson & Sons Ltd: “In essence, the enquiry is whether or not the assertion made passes the threshold of credibility”.4
[45] On the facts of this case, the first substantial point in Mr Williams’ favour is that the payments were made by him to Eden Property. Further, there were no fewer than nine payments, spread out over almost one year between 5 March 2010 and
8 February 2011. There is evidence showing the builder’s invoices for at least some of the work were addressed to Eden Property, and were paid by Eden Property.
[46] The obvious question is why Eden Property received the money from Mr Williams at all if it was not a loan. If Mr Williams was making voluntary contributions to the property, why not simply allow him to pay the builder and other
contractors direct?
4 Freemont Design & Construction Ltd v W Stevenson & Sons Ltd HC Auckland CIV-2005-404-
4807, 20 April 2006 at [8], citing Pemberton v Chappell [1987] 1 NZLR 1 at 3 and Orrell v
Midas Interior Designer Group Ltd (1991) 4 PRNZ 608 (CA) at 613.
[47] In Crampton-Smith v Crampton-Smith,5 the Court of Appeal dealt with a claim between brother and sister over the payment by the brother of a sum of money which was used to buy certain land in Rotorua. When the land was acquired, title was registered in the name of the sister. The sister later subdivided the land, built two townhouses on it, and sold the townhouses. The brother (who lived in Australia) said he knew nothing of this. When he found out, he filed a proceeding claiming the gross proceeds of the sale of the townhouses, on the basis that the land (and the proceeds of sale) were held by the sister for him under a resulting trust. The sister denied that there was a trust, claiming that the funds provided by her brother to purchase the land were a loan to her.
[48] The Court of Appeal upheld the brother’s submissions that (i) there was a presumption that the proceeds were held by the sister on a resulting trust in the brother’s favour, and (ii) the sister had failed to rebut that presumption. The Court noted that, where the presumption applies, it is generally regarded as having a dispositive effect unless the presumption is rebutted.6
[49] In this case, the parties are in opposite positions from the brother and sister in Crampton-Smith. Here, the person who made the payments (Mr Williams) contends that they were loans, while a director of the recipient (Mr Eden) contends that any claim Mr Williams might have can only be in trust (and then only against the Trust as the owner of the property).
[50] In Crampton-Smith, the Court noted that the key issue is what was intended at the time of the transaction.7 The Court also noted that, if a loan or gift had been intended, there was no reason why the funds would not have been paid directly to the sister or her solicitor (the funds were paid into a Postbank account in the name of the brother and his then partner, and the sister was given full authority to operate the account). Also, there had been no evidence or finding by the Judge in the Court
below about what the terms of such a loan (if such were intended) might have been.8
5 Crampton-Smith v Crampton-Smith [2011] NZCA 308.
6 At [37], citing The Venture [1908] P218 (CA), and Bateman TV Ltd v Bateman [1971] NZLR
453 (CA).
7 At [43].
The Court noted the parties’ failure to document the arrangements, but did not
consider that unusual in family arrangements.9
[51] Applying Crampton-Smith in this case, the starting point is that the law will presume that the payments made by Mr Williams to Eden Property were not made by way of gift. Absent other evidence on the point, the law would find that the payments received by Eden Property were received subject to a resulting trust in favour of the payer (Mr Williams).
[52] But Mr Williams clearly did not intend Eden Property to simply hold the money for him – it is clear that he expected Eden Property to use the money to pay the invoices for the renovation work.
[53] Mrs Eden’s evidence provides some explanation of why Mr Williams paid the
money to Eden Property. In her affidavit in opposition, she says that:
The request [for payment from Mr Williams] was made that the money be paid to [Eden Property] because [Eden Property] could then claim those costs against the company tax liability.
Mr Eden did not dispute that statement.
[54] It is understandable that Mr Williams would not have known about that. It did not directly concern him, and he was asked to sign a tenancy agreement with Eden Property. When he sent the cheques for the building work to Eden Property, he did so believing that he was sending them to the owner of the property. It is more difficult to understand how or why Mrs Eden could have believed that Eden Property remained the owner of the property, but it seems that is what she did believe.
[55] It may be that the “unusual incidents” referred to by Mr Spicer in his affidavit include the fact that Mrs Eden apparently believed (wrongly) that the property was owned by Eden Property, however that is not clear. All that can be said on the evidence before the Court is that Mrs Eden and Mr Williams both understood that the work on the property was being done to benefit Eden Property, not the Trust.
And it was Eden Property who received the rental income from the property, and paid tax on it.
[56] Mr Eden’s apparent lack of knowledge about the additional loan of $103,000 is surprising: he is, after all, a director of Eden Property, and the amount was not insubstantial. However his apparent lack of knowledge may perhaps be explained by the statements in Mr Spicer’s affidavit that the day-to-day bookkeeping work for Eden Property was done by Mrs Eden, and it was not always easy to have Mr Eden engage in the process.
[57] The evidence is incomplete and unsatisfactory, on both sides. It is beyond dispute that Mr Williams did make the payments he says he made to Eden Property, and that Eden Property used the money to pay for the renovation work which Mrs Eden, a director of the company, believed would benefit Eden Property by increasing the value of one of its assets (and, apparently, provide some unspecified tax benefit for Eden Property).
[58] However Mr Williams has produced no evidence at all of the terms of alleged loans. When were they to be repaid? Was interest payable, and if so at what rate? Why were advances from Mr Williams not shown as a liability in Eden Property’s financial statements for the year ended 31 March 2012 (two term liabilities were included, neither of which appears to have represented the money received from Mr Williams, and the current liabilities totalled only $4,400.68)? And if the balance sheet which Mrs Eden produced for the year ended 31 March 2013 was correct in showing advances from Mr Williams among the “Term Liabilities”, what was the term? When was the loan to be repaid?
[59] The absence of evidence from the sister on matters of that sort was regarded as important in Crampton-Smith, and I think it is also important here. It is to be remembered that Mr Williams was living in the property, and although he was paying rent there is no evidence that he was paying a full market rent. If he was not, Mr Eden’s contention that Mr Williams was simply making contributions that he himself would benefit from as the occupant of the property might have greater force.
[60] There is also some evidence which may suggest that the “loan” status of the payments made by Mr Williams to Eden Property was not originally agreed to by Mr Eden. I think that is a reasonable inference from Mr Spicer’s evidence on the meeting he had with Mr and Mrs Eden when he travelled up to Hawkes Bay: there would presumably have been no need to discuss the treatment of Mr Williams’ payments (i.e. loan or something else) if that was already clear between the parties.
[61] Eden Property did not file any reply affidavit challenging Mrs Eden’s evidence on the “tax benefit” point, but it is not clear on the evidence what tax advantage there could have been to Eden Property if the money was simply coming in from Mr Williams to Eden Property and immediately going out to the contractors and suppliers involved with renovation work on a property (the property) which Eden Property did not own.
[62] It is clear from Crampton-Smith that the important matter is the intention of the parties at the times the payments were made. The meeting with Mr Spicer appears to have taken place after the payments were made, and Mr Eden denies that an agreement of the kind alleged was made at the meeting. No notes or other documents made at or about the time of the meeting have been produced, and Eden Property’s March 2012 financial statements do not appear to have recorded the existence of any loans from Mr Williams. In those circumstances I do not think the evidence that Mr Williams’ payments were either confirmed as, or somehow converted into, loans, in the course of the meeting with Mr Spicer, is strong enough for me to say that there can be no dispute about it.
[63] The ultimate question is whether Eden Property has raised a genuine and substantial dispute, or whether Mr Eden’s evidence goes no further than “mere assertion”, insufficiently supported by documents or other contemporaneous evidence of the relevant events.
[64] The starting point is the presumption of resulting trust, under which Mr Williams is presumed to have made the payments (to the party he understood to be the owner of the property) in order to improve the property, arguably acquiring a beneficial interest in the property in so doing. The question is whether Mr Williams
has sufficiently rebutted that presumption, to the point where there can be no genuine dispute that he was lending the money to Eden Property. In my view he has not satisfied that standard of proof, and the dispute is not suitable for determination on a setting aside application. There are far too many grey areas in the case advanced for Mr Williams, particularly on the question of what were the terms of the loans (if they were loans). And if Mr Williams’ proper claim does turn out to be a trust claim based on contributions made by him to the property, such a claim is not a claim for a debt which could be the subject of a statutory demand issued under s 289 of the Companies Act 1993.
Result
[65] I make an order setting aside the statutory demand.
[66] Counsel may file memoranda on the question of costs if they wish, but my preliminary impression is that this is a case where (notwithstanding the success of the application) costs should lie where they fall. I bear in mind that the application was effectively opposed by one of Eden Property’s shareholders (Mrs Eden), and that it appears that Mr Williams may well have a valid claim against at least one of the entities in which Mr and Mrs Eden are interested (Eden Property or the Trust).
[67] Any memorandum by Eden Property seeking costs should be filed and served within 15 working days of this judgment. Any reply memorandum is to be filed and served within 10 working days of service of Eden Property’s memorandum.
Associate Judge Smith