Fisher v Faafiu

[2018] NZHC 2584

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-685 [2018] NZHC 2584

IN THE MATTER

of an appeal against summary judgment

BETWEEN

NIGEL CLAUDE FISHER AND WACKROW SMITH & DAVIES TRUSTEE SERVICES LIMITED as Trustees of MARLIN TRUST

Appellants

AND

SATUI ALEFAIO FAAFIU, SOOTAGA AFAMASAGA, FAIFAISOO FAAFIU AND SONNY FAAFIU as Trustees of the RACE TO VICTORY SUPPORT TRUST Respondents

Hearing:	2 October 2018
Appearances:	A Barker QC and H H Clark for the Appellants S I Perese for the Respondents
Judgment:	3 October 2018

JUDGMENT OF GORDON J

This judgment was delivered by me

on 3 October 2018 at 11 am, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar
Date:

Solicitors:           Wackrow Williams & Davies, Auckland

Saseve Solicitors, Auckland

Counsel:            A Barker QC, Auckland

FISHER v FAAFIU [2018] NZHC 2584 [3 October 2018]

Introduction

[1]      The appellants are the trustees of the Marlin Trust.  The respondents are the trustees of the Race to Victory Support Trust (RVST), a charitable trust incorporated under the Charitable Trusts Act 1957 on 13 May 2013.

[2]      Nigel Fisher, as one of the trustees of the Marlin Trust, signed an agreement for sale and purchase dated 18 May 2013 for the sale of a commercial property owned by the Marlin Trust to the respondents, as trustees of the RVST (the Agreement). RVST paid the first half of the deposit but was unable to pay the second half.  The solicitors for the Marlin Trust cancelled the Agreement.

[3]      By way of judgment dated 15 March 2018, Judge Harrison in the District Court at Auckland granted the respondents’ summary judgment application against the appellants.1     He entered judgment against the appellants for $102,000, being the balance of the deposit the RVST had paid.2

[4]      The appellants now appeal that decision.

Factual background

[5]      The Marlin Trust owns a number of commercial properties. It has two trustees, the appellants, Mr Fisher and Wackrow Smith & Davies Trustee Services Limited (WSD).   Donald Wackrow is a director and sole shareholder of WSD.   Te Kani Williams is the other director of WSD. The two are also partners or directors of a law practice, Wackrow Williams & Davies Limited (WWDL).  WWDL are the solicitors for the Marlin Trust.

[6]      The respondents are members of the Panmure Samoan Assembly of God Church (the Church) which operates from rented premises.  The Church is registered with the Charities Board.  Satui Faafiu, one of the respondents, is the spiritual leader of the Church.

1      Faafiu v Fisher [2018] NZDC 4713.

[7]      The Church wished to acquire a property so that it could operate its activities from a permanent location. By April 2013, it had saved approximately $150,000. That month, the Church investigated the possibility of acquiring a commercial property at

2 Te Apunga Place, Mount Wellington, Auckland (the Property).  The Property was owned by the appellants as trustees of the Marlin Trust.

[8]      On 16 May 2013, the respondents, as trustees of the RVST, offered to purchase the Property for $1,200,000.  The typed words in the Agreement record the name of the vendor as “Nigel Claude Fisher, Trustee of the Marlin Trust”.  Mr Fisher counter signed the Agreement at a figure of $1,220,000 and added the handwritten words “AND WACKROW SMITH + DAVIES TRUSTEE SERVICES LIMITED” to the name of the vendor.  Mr Fisher was the only trustee of the Marlin Trust to sign the Agreement.   The respondents subsequently signed the Agreement.   It was dated

18 May 2013.

[9]      The Agreement provided for a deposit of 20 per cent, which was payable upon the Agreement becoming unconditional.

[10]     However, after further negotiation, a variation of the Agreement was executed on 22 May 2013 (the variation). It provided for payment of the deposit in two separate amounts. As Judge Harrison explained:

[7]      … the first payment of 10 percent of the purchase price being payable upon the agreement being declared unconditional, and the second payment of

10 percent was payable on 1 September 2013. Settlement date was stated as 1
November 2013.

[11]     Each of the respondents signed this variation.  Mr Fisher, again, was the only trustee of the Marlin Trust to sign the variation.

[12]     On 25 May 2013, the respondents paid $122,000 in cash, being the first half of the deposit.

[13]     The respondents did not have the funds to pay the second half of the deposit due on 1 September 2013. The solicitors for the Marlin Trust cancelled the Agreement on 12 September 2013, and the Property was sold to another purchaser.

[14]     The respondents sought the return of the deposit.  They recovered $20,000 from one of the real estate firms involved in the sale.  They sought the remaining

$102,000 from the appellants. The appellants have not refunded the deposit.

District Court decision

[15]     Judge Harrison stated that the respondents’ case was essentially that no valid agreement for sale and purchase came into existence because it was not executed by both trustees of the Marlin Trust.3  The appellants acknowledged that only one trustee had signed the Agreement, but claimed that the Agreement was later ratified by

Mr Wackrow as a director of the other trustee, WSD. The sole issue, as expressed by the Judge, was whether WSD had ratified the Agreement.4

[16]     After setting out the legal principles, Judge Harrison referred to an affidavit filed by Mr Wackrow, who deposed that Mr Fisher is a client of WWDL. Mr Wackrow produced correspondence between Mr Fisher and both Blair James, a real estate agent, and Bernadette Arapere, a director of WWDL.

[17]     The Judge stated that:

[29]     The case for the Marlin Trust was that the correspondence I have referred to and various subsequent correspondence concerning particularly cancellation of the agreement amounted to ratification of the agreement to sell by WSD.

[18]     However, the Judge concluded that none of the correspondence could amount to ratification by WSD because “it was all correspondence emanating from or received by the law firm and not WSD”.5   He said:

[31]      In the entire transaction, there is no document of any description from WSD approving the agreement to sell. In the passage from the Hansard decision quoted at [21] above, I underlined the word “act” where the court said “the ratifying act must show that the trustee considered the exercise of his or her power as a trustee and consented to the action taken”. I can discern no act whatsoever by WSD which shows that it considered the exercise of its power as a trustee and consented to the action taken.

3      Faafiu v Fisher, above n 1, at [14].

4 At [17].

[19]     The Judge did not refer to the evidence of Mr Fisher and Mr Wackrow as to their discussions about the transaction or their approval of correspondence.

[20]     Judge Harrison concluded that WSD did not ratify the Agreement to sell the Property and that the Agreement was not a valid contract because it was not signed by both trustees.6   He entered summary judgment against the appellants for $102,000 on the basis that the failure of WSD to sign the Agreement, or to prove that it ratified the Agreement entered into by Mr Fisher, was fatal to the establishment of any credible defence to the claim.7

Summary judgment principles

[21]     The test for summary judgment is contained in r 12.2(1) of the District Court

Rules 2014:

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

[22]     The onus of proof was on the plaintiffs (the respondents in this Court), to prove on the balance of probabilities that the defendants (the appellants in this Court), had no arguable defence.  As the Court of Appeal in Krukziener v Hanover Finance Ltd said, there must be no real question to be tried.8   It further commented:

[26]      … The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable … In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it …

Approach on appeal

[23]     Section 124(2) of the District Court Act 2016 provides the appellants with a right of appeal to this Court.

6 At [36].

7      At [37]-[38].

8      Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26].

[24]     Section 127 of that Act provides that the appeal must be by way of rehearing. The appellants are entitled to judgment in accordance with the independent opinion of this Court.9    But they ultimately bear the onus of persuading this Court to reach a different conclusion.10

[25]     On appeal, the powers of this Court are as follows:

128     Powers of High Court on appeal

(1)      The High Court may, after hearing an appeal,—

(a)      make any decision it thinks should have been made: (b)     direct the District Court—

(i)       to rehear the proceeding; or

(ii)to consider or determine, whether for the first time or again, any matters the High Court directs; or

(iii)to  enter  judgment  for  a  specified  party  to  the proceeding:

(c)      make any further or other orders the High Court thinks fit: (d)       make an order as to costs.

…

Submissions

[26]     Mr Barker QC, on behalf of the appellants, submits that Judge Harrison erred in finding that the appellants had no arguable defence and that there was no real question to be tried.  He submits that the particular issue in the appeal is a narrow question of fact.

[27]     Mr Barker submits, for the purposes of this application, and leaving aside enforceability issues against the Marlin Trust, it can be accepted that the RVST was bound by the Agreement, that it failed to perform the Agreement by not paying the second half of the deposit, and that the Marlin Trust was entitled to cancel the Agreement.

[28]     The question therefore, as put by Mr Barker, is whether the RVST is able to excuse its non-performance because the Agreement was not signed by WSD, one of the two trustees.

[29]     Mr Barker accepts that a director of WSD had to approve the sale for it to bind the Marlin Trust.  He submits that Mr Wackrow did approve and sanction the sale on behalf of the Marlin Trust, both before the Agreement was signed by Mr Fisher and in his subsequent actions.

[30]     Mr Barker further submits that the evidence of ratification of the Agreement is overwhelming.  As this is a question of fact, he submits the judgment in the District Court should be set aside and the matter referred back to that Court.

[31]     Mr Perese, for the respondents, submits that WSD did not at any time ratify the Agreement.   He says that there can be no doubt that WSD did not objectively demonstrate its intention to be bound by signing the Agreement.  He notes that the Agreement was received by Mr Wackrow, yet he did not sign it.   In those circumstances, the failure to sign renders all the arguments about ratification otiose. WWDL cannot ratify something that Mr Wackrow did not agree to.  He submits the appeal should be dismissed.

Trustees must act unanimously

[32]     Subject to the trust deed, trustees must act unanimously in the execution of their powers.11

[33]     As  Judge  Harrison  identified,  clause  11.6  of  the  Marlin  Trust  deed acknowledges this rule of law:12

11.6     Unanimous approval: Where there is more than one Trustee in office, except as provided in this deed, all powers and discretions of the Trustees shall be exercised with the unanimous approval of the Trustees.

There is no other provision in the deed exempting the trustees from observing this rule.

[34]     However, there are ways in which a transaction entered into by one trustee on behalf of the trust can still be valid.

[35]     One such way is where the trustee acts with the ostensible authority of the other trustee or trustees while entering into the transaction.   As Gendall J explained in Thorpe v Hannam:13

[24]      A corollary of the unanimity principle noted above is that the act of one co-trustee, which has the sanction and approval of the other, is binding upon both … given the admonition against delegation of responsibility by trustees, any claimed approval by one trustee to act in a particular way by all trustees must be clearly established …

[25]    … Any such ostensible authority is to be inferred from the circumstances, and must be given by the other trustees, not the agent trustee

…

[36]     Another is where the other trustee or trustees subsequently ratify the action done on behalf of the trust. As the Court of Appeal explained in Hansard v Hansard:14

[51]      … in order to ratify a transaction, the person ratifying must know the essential detail of the act or decision in question. It is not sufficient to show that he or she was aware of a change in the trust's financial position, even if that change carries with it the necessary implication that some sort of transaction must have occurred. For a trustee to validly ratify a decision, it must be shown that there was more than a passive acquiescence to a decision made by another trustee. The ratifying act must show that the trustee considered the exercise of his or her power as a trustee and consented to the action taken.

(Citations omitted)

Discussion

[37]     The issue is whether it is reasonably arguable that Mr Wackrow, as a director of the other trustee, WSD, approved the sale of the Property.  Did Mr Fisher act with the ostensible authority of WSD when he entered into the Agreement and/or did WSD subsequently ratify the Agreement?

13     Thorpe v Hannam (2010) 11 NZCPR 471 (HC).  See also the discussion in Niak v Macdonald

[2001] 3 NZLR 334 (CA) and Lang v Southen HC Christchurch AP15/01, 24 July 2001.

14     Hansard v Hansard [2014] NZCA 433, [2015] 2 NZLR 158. See also Rowmata Holdings Ltd (in liq) v Hildred [2013] NZHC 2435 at [65]-[70].

[38]     There is evidence that Mr Fisher and Mr Wackrow discussed a sale of the

Property, before the Agreement was signed.  Mr Fisher’s evidence was:

3.        From September 2010, through to October 2013 the Marlin Trust owned a property at 2 Te Apunga Place, Mr Wellington. I raised with [Mr Wackrow] this property should be sold and this was agreed.

[39]     Mr Wackrow’s evidence was:

5.        [Mr Fisher] raised the sale of Te Apunga Place, Mt Wellington and we agreed on it.  I was aware the purchaser was intended to be people who were somehow associated with a Church group. I was expecting an agreement for sale and purchase to be received in our offices.

[40]     Mr Wackrow then referred to an email from Mr Fisher to Ms Arapere dated

22 May 2015 which provides support for the above evidence in that it indicates at least that Mr Wackrow was aware that Mr Fisher “[had] been in the process of selling 2 Te Apunga Pl, Mt Wellington”.

[41]     The Agreement and variation were emailed by Mr Fisher on 22 May 2018 to Ms Arapere for checking and to undertake the conveyancing work. Mr Wackrow said that Ms Arapere forwarded the email and the annexed Agreement and variation to him. Mr Wackrow’s evidence was that he did not undertake the work but it was done under his supervision.

[42]     Mr Wackrow’s evidence was that both he and Mr Fisher expressly approved a letter  of  6 September  2013  from  a  solicitor  at WWDL to  the  solicitors  for  the respondents.  That letter noted that the deposit amount due on 1 September 2013 had not been paid and required payment of the full amount outstanding ($122,000) by

11 September 2013.

[43]     There is also evidence from both Mr Wackrow and Mr Fisher of a telephone discussion they had on the evening of 11 September 2013.   Mr Wackrow says he explained to Mr Fisher that if the deposit was paid overnight, the Agreement would still continue and could not be cancelled.  He says that he and Mr Fisher agreed that they would check the respective bank accounts the following morning and if the money had not been received, “we would then cancel”.

[44]     In  my  view,  it  is  reasonably  arguable  that  Mr  Wackrow  did  ratify  the

Agreement:

(a)The evidence in the affidavits referred to in [38]-[39] above as to the prior discussion is in general terms. A Court, after hearing the evidence of the two witnesses, may or may not conclude that Mr Wackrow, as a director  of  the  other  trustee,  authorised  Mr Fisher  to  sell  to  the particular purchaser.  However, I accept Mr Barker’s submission that even if the evidence does not in the end establish a sanction and approval of the Agreement prior to its execution by Mr Fisher, it is part of  the  context  for  a  consideration  of  Mr Wackrow’s  actions,  and whether or not there was ratification by him, after the Agreement and variation were signed by Mr Fisher.

(b)The letter of 6 September 2013 reviewed and approved by Mr Wackrow may be seen as an endorsement of the Agreement; and

(c)The discussion on the evening of 11 September 2013 only has meaning in the context of there being an agreement for sale in the first place, that is an agreement ratified by Mr Wackrow as a director of WSD.

[45]     I do not overlook Mr Perese’s submission that whatever Mr Wackrow did cannot amount to rectification, because if he had approved the sale, he would have signed the Agreement.

[46]     In my view, this is an issue that needs to be explored at trial and Mr Wackrow will need to explain why he did not sign the Agreement when it was sent to his office. But for the purposes of this appeal, there is nothing otherwise in the evidence that suggests that Mr Wackrow was doing anything other than agreeing that the Agreement had been ratified by him.

[47]     From the foregoing, it is apparent that I disagree with the conclusion of the District Court Judge that all of Mr Wackrow’s actions were done in his capacity as the lawyer for the Marlin Trust.  The idea that the provision of legal services under the

supervision of a director of one of the trustees of the Marlin Trust does not itself imply approval by that director to the underlying transactions, is not realistic in my view.

[48]     But, in any event, the question of ratification is a question of fact and the appellants have satisfied me that there is a sufficient basis for this matter to go to trial.

Conclusion

[49]     On the basis of the evidence I have summarised above, I consider that it is reasonably arguable that Mr Wackrow as a director of WSD sanctioned the Agreement, if not before it was signed by Mr Fisher, at least by his subsequent acts.

Orders

[50]     I therefore set aside the judgment of the District Court Judge and remit the matter back to the District Court for timetabling through to trial.

Costs

[51]     I award costs on a 2B basis to the appellants and disbursements to be fixed by the Registrar.

Gordon J