Fraser v Fraser
[2017] NZHC 1055
•19 May 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-2987 [2017] NZHC 1055
UNDER Section 22 of the Trans-Tasman
Proceedings Act 2010
IN THE MATTER
of an application for stay
BETWEEN
ROBERT LINDSAY FRASER AND GENENE FLORENCE FRASER Plaintiffs
AND
ROBERT WILLIAM FRASER AND DEBORAH JEAN FRASER Defendants
Hearing: 8 May 2017 Counsel:
CR Andrews and KK Kommu for plaintiffs
GA Cooper for defendantsJudgment:
19 May 2017
JUDGMENT OF FITZGERALD J
[On application for stay pursuant to s 22 of the Trans-Tasman Proceedings Act
2010]
This judgment was delivered by me on 19 May 2017 at 4 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: McVeagh Fleming, Auckland
Cavell Leitch, Christchurch
Fraser v Fraser [2017] NZHC 1055 [19 May 2017]
Introduction
[1] This is a somewhat sad proceeding. Mr Robert Fraser, together with his wife Genene Fraser, is suing Robert’s brother, Ronald Fraser and his wife, Deborah Fraser. Robert and Genene seek to recover from Ronald and Deborah a principal amount of NZ$255,783.16 (plus interest of NZ$12,334.08 and accruing interest), pursuant to what they allege to be a loan transaction between the respective couples.
[2] Robert and Genene are based in Auckland. Ronald and Deborah are based in Perth, Western Australia. As is self-evident, these proceedings were commenced against Ronald and Deborah in the High Court in Auckland. Ronald and Deborah now apply pursuant to s 22 of the Trans-Tasman Proceedings Act 2010 (“Act”) for a stay of this proceeding, on the basis that an Australian court is the more appropriate court for the proceeding.
Factual background
[3] It appears that, until events giving rise to this proceeding, the brothers and their respective wives enjoyed a good relationship.
[4] Robert and Genene have lived in Auckland for at least the last 30 years. Ronald and Deborah originally lived in Christchurch, where between about 1985 and
2004 they undertook a number of subdivisions and residential building projects. Ronald explains in his affidavit in support of the application for a stay that the majority of these projects were building “spec” (i.e. speculative) houses. These projects were carried out through two companies, namely Debron Developments Ltd and Linron Developments Ltd.
[5] Ronald explains that in 2004, he and Deborah relocated to Perth to be closer to their daughters and grandchildren. They are now the shareholders and directors of two Australian companies:
(a) Abingdon Court Consulting Pty Ltd (“Abingdon Court”); and
(b) Debron Homes Pty Ltd (“Debron Homes”).
[6] In his affidavit, Ronald states that in 2011 financial year, Abingdon Court purchased two sections in Perth for potential further development. He says that at the beginning of 2013, the sections were valued at around AUD$300,000 each.
[7] The next steps in the chronology are contentious, and I am not in a position, nor required, to make any findings in relation to them on this application.
[8] Ronald says that in late 2012, he and his brother Robert had a series of conversations about the possibility of working together to build spec houses on the sections that had been purchased through Abingdon Court. Ronald says that Robert and Genene sent over numerous house design ideas and concept plans that they had sourced in and around Auckland. He says that at the time, the Western Australia State economy and the Perth property market was strong. Houses were selling after a short time on the market with multiple offers and good capital gains.
[9] In his affidavit in opposition to the stay, Robert accepts there were conversations between Ronald and himself at that time, but denies that they were about “working together” to build spec houses on the sections purchased by Abingdon Court, or otherwise with the intention of going into business together. He says that during those conversations, he suggested that he and Genene would be prepared to loan funds to Ronald and Deborah in return for interest payments. Robert says that the reference in Ronald’s affidavit to Abingdon Court is the first that he or Genene have ever heard of this company.
[10] Ultimately, Ronald and Deborah say that the arrangement which arose out of
these conversations was akin to a “loose partnership” between the couples.
[11] Ronald sets out in his affidavit what he says were the terms of the “loose partnership”, namely:
12.1Deborah and I would put up the sections held by Abingdon Court for development;
12.2Robert and Genene would contribute around NZD$600,000 to be used to develop the sections and build the spec houses on them;
12.3 I would project manage the development of the sections;
12.4The completed houses would be sold upon completion and the proceeds put towards the purchase and development of further sections;
12.5The agreement would remain in place for two to three years to allow for the purchase, development and sale of the further sections;
12.6At the end of the agreement, there would be a final accounting and each party would be paid their share of the residue of the partnership.
[12] Robert and Genene dispute this, and say that the relationship was simply one of lender and borrower, and that there was a straightforward loan transaction between the parties. Robert says in his affidavit that:
We weren’t concerned to inquire specifically how Ron and Deborah applied the loaned funds, so long as we received interest payments from them. The only reason building spec houses may have come up in conversation was to give us some assurance and confidence that those interest payment would be made.
It was up to them how they applied the funds. However, we saw them as a good lending risk.
[13] Robert and Genene also allege that it was agreed that interest would be charged on the amounts advanced, at 10 per cent per annum. Ronald and Deborah dispute that it was agreed that interest would be paid, let alone at that interest rate. In this context, they point to a document executed by the parties (in Perth) on 23 July
2013, entitled “Acknowledgement of Loan”. That document provides, in part, as follows:
The purpose of this document is to record this loan transaction and should it become necessary, will serve as a confirmation for other family members of either party, that such loan exists and becomes an amount due for repayment to Robert and Genene Fraser. Repayment to include reasonable additional interest that may have accrued through the investment options undertaken by Ronald and Deborah Fraser.
[14] It does not appear to be in dispute that this document does not actually amount to the alleged agreement (be it by way of a loose partnership or a loan transaction), which had been entered into sometime earlier, and pursuant to which
the original payment of NZ$600,000 had been made. However, Robert and Genene rely on this document as showing that the arrangement that had been entered into was a loan transaction only, rather than the “loose partnership” alleged. Ronald and Deborah in turn rely on this document to support their proposition that interest was not agreed to be paid (pointing to the word “may” in the extract cited above), and that nowhere does the document mention an interest rate of 10 per cent.
[15] It is not in dispute that Robert and Genene ended up advancing a total of
NZ$900,000 to Ronald and Deborah, in two instalments:
(a) The first of NZ$600,000 on or about 25 March 2013; and
(b) The second of NZ$300,000 on or about 3 April 2014.
[16] Unfortunately, over the following year, the property market in Western Australia took a downward turn. The statement of claim pleads that, in or about August 2015, the parties agreed that Ronald and Deborah would fully repay Robert and Genene the principal of the loans, together with accrued interest, following the sale of their housing stock and/or business interests in Western Australia. The statement of claim goes on to plead that certain repayments towards principal and interest were made, through to 30 May 2016. However, Robert and Genene plead in their statement of claim that by 22 November 2016, and despite the various payments in the interim, the sum of NZ$268,117.24 remained outstanding.
[17] I reiterate that for the purposes of this application, it is not appropriate or necessary for me to make any observations or findings in respect of the parties’ competing contentions as to the nature of the relationship between them.
Principles governing stay applications
[18] The principles governing an application for a stay pursuant to the Act are not in dispute.
[19] The purpose of the Act is to streamline the process of resolving civil proceedings having “a Trans-Tasman element”, in order to reduce costs and improve efficiency.1
[20] Section 21 of the Act (a guide to the following sections) relevantly provides as follows:
21 Guide to this subpart
…
(3) The New Zealand court may only stay the proceeding if it is satisfied that an Australian court has jurisdiction to determine the matters in issue and that it is the more appropriate court to determine those matters. In determining whether the Australian court is the more appropriate court, the New Zealand court must take certain matters into account. They are set out in section 24(2).
[Emphasis added]
[21] Section 22 of the Act is the operative provision, which permits a defendant in proceedings commenced in New Zealand to apply to the relevant court for an order staying the proceedings, on the grounds that an Australian court is the more appropriate court for the proceedings.
[22] Section 24(2) of the Act sets out the factors that a court must consider when determining an approach for a stay. It provides as follows:
24 Order of stay of proceeding
…
(2) In determining whether an Australian court is the more appropriate court to determine the matters in issue between the parties to the proceeding, the New Zealand court must not take into account the fact that the proceeding was commenced in New Zealand, but must take into account the following matters:
(a) the places of residence of the parties or, if a party is not an individual, its principal place of business:
(b) the places of residence of the witnesses likely to be called in the proceeding:
1 Skelton v Z487 Ltd [2014] NZHC 707 at [12].
(c) the place where the subject matter of the proceeding is situated:
(d) any agreement between the parties about the court or place in which those matters should be determined or the proceeding should be instituted (other than an exclusive choice of court agreement to which section 25(1) applies):
(e) the law that it would be most appropriate to apply in the proceeding:
(f) whether a related or similar proceeding has been commenced against the defendant or another person in a court in Australia:
(g) the financial circumstances of the parties, so far as the New
Zealand court is aware of them:
(h) any other matters that the New Zealand court considers relevant.
[23] Four further points are relevant:
(a) First, it is not in dispute that I should not decide any of the substantive merits of the case. While the issues in the substantive proceeding need to be identified as best they can at the early stage of the proceeding,2 what is relevant is the “content” of the matters in issue.3
(b)Second, a defendant who wishes to apply for a stay is required to file the application within 30 working days of being served with the proceedings.4 As such, it is possible that no statement of defence will have been filed by the time the Court hears the stay application (as in this case). The issues will not have crystallised through the competing pleadings. In those circumstances, and consistent with the comments in Leeds v Richards, the issues will need to be identified as best as they can, through examination of the statement of claim and the materials filed in support of and in opposition to the application
for a stay.
2 Leeds v Richards [2016] NZHC 1191 at [28].
3 Lifestyles Investment Group v Coral Investments Securities Ltd [2016] NZHC 2262 at [15].
4 Section 22(3)(a) of the Act.
(c) Third, s 23(1) of the Act provides that, unless otherwise requested by the parties, the New Zealand court may determine the defendant’s application without a hearing. This indicates that consideration of such a matter is intended to be relatively straightforward and conducted expeditiously.
(d)Finally, s 24(2) of the Act states that the New Zealand court must not take into account the fact that the proceeding has been commenced in New Zealand. Accordingly, even where matters are relatively finely balanced, there will be no “presumption” in favour of the New Zealand courts on the basis that that is where the proceeding has been commenced.
Application of s 24(2) factors in this case
[24] As a preliminary point, the parties accept that both the New Zealand and the Western Australian courts would have jurisdiction to determine the matters in issue. As such, the question for determination is which is the more appropriate court.
[25] In the balance of this judgment, I consider each of the factors that I must take into account when answering that question, and the parties’ competing submissions in relation to each of them.
The places of residence of the parties
[26] Robert and Genene reside in Warkworth, New Zealand. Ronald and Deborah reside in Perth, Australia. In that sense, the place of residence is a neutral factor. However, Mr Andrews, counsel for Robert and Genene, submits that further facts which “tip” this factor in favour of New Zealand are that Ronald and Deborah are shareholders of and directors in Debron Developments and Linron Developments (as noted above, both New Zealand companies). There is some evidence that at least Linron Developments has a trading account with Placemakers, and that Ronald engaged with Placemakers (by signing their new terms and conditions of trade) during a Christmas visit in 2015/2016. There is also a suggestion in the evidence that Linron Developments is currently indebted to Westpac Bank in the sum of
approximately NZ$460,000, secured by a mortgage security over a section in Pegasus Estate, north of Christchurch. Mr Andrews submits that these facts demonstrate that Ronald and Deborah have at least some remaining connection with New Zealand, such that this is not a case of someone with no connection whatsoever to New Zealand being sued in New Zealand.
[27] I do not consider these factors to be relevant to the parties’ place of residence. In my view, these matters are more appropriately considered in the context of the final factor that I must take into account, namely “any other matters considered relevant”. I therefore address these points at paragraphs [44] to [45] below.
[28] I accordingly consider that the parties’ places of residence to be a neutral
factor.
The places of residence of the witnesses likely to be called in the proceeding
[29] Mr Cooper, counsel for Ronald and Deborah, submits that, in respect of Robert and Genene’s argument that the relationship between the parties is simply one of a loan transaction, the only relevant witnesses will be the respective couples, and in particular Ronald and Robert. However, he submits that, given Ronald and Deborah’s case will be that the relationship was akin to a partnership, and the amounts to be repaid to Robert and Genene dependent on the accounting for that partnership, there is likely to be a broader range of relevant witnesses, many of whom are based in Perth. Mr Cooper submits that some of these witnesses will also be relevant to a foreshadowed counterclaim, namely that the repayments made to date exceed what was due and owing to Robert and Genene under the partnership.
[30] In terms of evidence relevant to these broader issues, Mr Cooper says the following witnesses will be called:
(a) The builders involved in building the spec houses, to corroborate the costs of the various developments and the downturn in the property market. The builders reside in Perth. At the hearing, Mr Cooper expanded upon this, and said that the builders’ evidence will also be relevant to one of the primary matters in issue, namely the nature of
the parties’ relationship. He submitted that the builders will be able to give evidence corroborating Ronald’s evidence that Robert and Genene visited Australia and visited the sites of the spec homes and inspected them. It will be presumably be submitted that this evidence supports the proposition that the relationship was broader than that of a simple loan transaction.
(b)Real estate agents located in Perth, in relation to the marketing and sale of the developed properties.
(c) An expert valuer, on the property market in Perth at the time each of the completed spec homes was sold. Mr Cooper says that this is particularly so given there has been an allegation that one of the completed spec houses was sold to Ronald and Deborah’s daughter and son-in-law at cost, and without Robert and Genene’s knowledge. On this basis, it is submitted that the daughter and son-in-law will also need to give evidence, and that they also reside in Perth.
(d)Ronald and Deborah’s, and the partnership’s, accountant, in relation to each party’s contribution to the partnership, the assets held by the partnership, the partnership’s income and expenditure, the partnership’s tax obligations in Australia and the apportionment of the partnership’s assets and liabilities upon a winding up. The accountant resides in Perth.
(e) A local (Perth-based) banking expert, in relation to the retail credit and interest rates that would have been available to Ronald and Deborah for the developments. Mr Cooper submits that this evidence will be directly relevant to the credibility of Robert and Genene’s pleading that interest was agreed to be paid at a rate of 10 per cent. Mr Cooper says that this evidence will demonstrate that if a simple loan transaction was all that was involved, borrowings could have been acquired from local banks at much more favourable interest rates.
(f) Ronald and Deborah’s business and real estate compliance consultants, including during the period that the alleged partnership was formed and completed. Both witnesses in this regard reside in Perth.
[31] Mr Cooper submits that the above witnesses’ evidence will be necessary to:
(a) Support Ronald and Deborah’s claim there was a partnership in place; (b) Establish the property developments were undertaken in a normal
manner;
(c) Show that a full accounting of the venture was undertaken; and
(d)Confirm that the sections were purchased and the completed spec houses were sold at market value, including the sale and purchase of one of the spec houses to Ronald and Deborah’s daughter and son-in- law.
[32] Mr Cooper accordingly submits that the location of these witnesses in Perth weighs heavily in favour of the Western Australia court being the most appropriate forum.
[33] Mr Andrews submits that, even in light of the foreshadowed allegation of a partnership arrangement and counterclaim, the only witnesses that will be able to give relevant evidence on those issues are the parties themselves. That is because it is only the parties themselves that can give probative evidence about what they agreed or did not agree in relation to the relationship between them. Mr Andrews submits that Ronald and Deborah have effectively “stacked the deck” in terms of the number and location of potential witnesses. He says that none of the above witnesses are likely to need to give evidence on the matters that will arise on the issues to be determined, including on the basis that:
(a) The builders will not be required to give corroborating evidence, as it will not be in dispute that Robert and Genene visited the site of the
properties with Ronald and Deborah. Mr Andrews says that the evidence will be that this was simply a brother taking a natural interest in what his brother was doing through his business.
(b)The real estate agent’s evidence will not be relevant to either the nature of the relationship between the parties nor the interest rate, if any, to be charged.
(c) No expert valuer’s evidence is necessary to determine the nature of the relationship between the parties and any interest to be paid (and if so, at what rate).
(d)No evidence will be required about the sale of one of the completed spec houses to Ronald and Deborah’s daughter and son-in-law, as that issue has now be cleared up through the evidence, and so it will not be at issue in the proceeding.
(e) Whether or not the accountant would need to give evidence is entirely speculative at this stage. Mr Andrews points to Ronald’s evidence, in which he states that he has “always intended to get” his accountant to prepare financial statements for the partnership, and then “depending” on what they reveal, he will “in all likelihood” counterclaim. Mr Andrews submits that this means whether any evidence will be required in relation to the accounts is highly speculative. He submits there is therefore no basis upon which the Court can treat the evidence as being likely to be relevant.
(f) At the hearing, Mr Andrews accepted that, in theory at least, the banking expert evidence might be relevant to the credibility of an agreement to borrow funds from Robert and Genene at 10 per cent per annum. But he says that, in reality, evidence of the banking market at that time, and the interest rates then available, is unlikely to be contentious and may well be able to be dealt with by way of agreed facts.
(g)Finally, Mr Andrews submits that the business and real estate compliance consultant witnesses cannot give evidence relevant to the key issues, namely the nature of the relationship between the parties and any agreement on interest payable.
[34] Having considered the parties’ competing written and oral submissions on this factor, I agree with Mr Andrews that the list of potential defence witnesses is somewhat overblown. Few of those witnesses will be able to give probative evidence of the key matters in issue, namely the nature of the parties’ relationship and any agreement on interest payable. Nevertheless, a key issue will be the nature of the parties’ relationship. If the Court were to find that it was indeed a partnership arrangement, it cannot be excluded at this early stage that evidence from an accountant (as to the accounting for that partnership) will be required. It also cannot be excluded at this stage of the proceeding that local banking evidence may be relevant (to discredit the argument that a 10 per cent interest rate was agreed). I do not share Mr Andrews’ optimism that this type of evidence will be able to be dealt with by agreement.
[35] Accordingly, had the issues in the proceeding been limited to a loan transaction, this would have been a neutral factor. However, given the nature of the parties’ relationship is in dispute, and the evidence that will be relevant if there is a finding of a partnership, Ronald and Deborah are likely to call a broader range of witnesses than Robert and Genene. Accordingly, and while I am sceptical that the full list of witnesses advanced by Mr Cooper will be required at the hearing, I consider this factor weighs slightly in favour of the Australian courts being the more appropriate court.
The place where the subject matter of the proceeding is situated
[36] The “subject matter of the proceeding” is of course in contention. Robert and Genene submit that this is a simple loan transaction. On that basis, this factor could be viewed as neutral, in that the funds have been advanced from New Zealand but ultimately used in relation to matters in Australia (though it is not in dispute that the funds were advanced via Ronald and Deborah’s bank account in Christchurch).
There is no evidence as to where the repayments of the loan originated from, but it is not in dispute that the repayments were directed to Robert and Genene’s bank account at Warkworth in Auckland.
[37] Mr Cooper submits that the subject matter of the proceeding is the partnership arrangement between the parties to build spec houses in Perth. He also points to the record of the arrangements, namely the July 2013 “Acknowledgement of Loan” document, which was prepared and signed in Perth. He also submits that the partnership incurred losses in Australia and the parties are subject to Australian tax law in respect of the partnership’s business activities. He accordingly submits that the defence and counterclaim arise from the partnership, which undertook property developments in Perth.
[38] Again, there is no clear answer in relation to this factor, given the “subject matter” of the proceeding is in dispute. However, given the nature of the defence and the foreshadowed counterclaim, I again consider that this factor weighs slightly in favour of the Australian courts.
Any agreement between the parties about the Court or place in which the dispute should be determined
[39] This factor is not relevant, as there is no evidence of any agreement between the parties about where any disputes arising out the arrangements between should be determined.
The law that it would be most appropriate to apply in the proceeding
[40] Mr Cooper submitted that as the signing of the acknowledgement of loan document occurred in Perth, and the alleged partnership’s activities took place solely in Perth, Australia, it would be appropriate that Australian law (presumably the laws of Western Australia) would apply. Mr Andrews submits that, given it is in dispute that the partnership activities took place solely in Perth, that fact cannot be relied on as an established fact for the purposes of this factor. He submits that the converse position is that the proceedings primarily concern loan agreements entered into and performed in New Zealand. Mr Andrews therefore submits that as the question of
applicable law may turn on disputed facts to be determined at trial, the Court is not in a position to give any particular weight to this factor.
[41] I agree with Mr Andrews’ submission. Given the nature of the matters in dispute at this stage of the proceeding, it is not possible to ascribe any particular weight to this factor. What law governs the particular arrangements between the parties may well be subject to quite complex conflicts of law issues.
Related or similar proceedings commenced in Australia
[42] There are no related proceedings in Australia.
The financial circumstances of the parties
[43] There is no evidence before me which indicates that this factor is anything other than neutral. There is nothing to suggest that Robert and Genene could not afford to litigate this dispute in Perth, nor that Ronald and Deborah could not afford to litigate the dispute in New Zealand. Ultimately, given the similarity of the legal and court systems in Australia and New Zealand, it may well be that the costs of litigating in either jurisdiction will be similar.5
Any other matters considered relevant
[44] As noted above, Robert and Genene rely on the fact that Ronald and Deborah at least have some continuing connection with New Zealand, through the companies they own and which appear to own property in Christchurch.
[45] I do not consider these facts add materially, if at all, to the analysis. The evidence suggests that these companies do not actively trade. It is also clear that the companies are irrelevant to the matters in dispute. Accordingly, the fact Ronald and Deborah are not “wholly unconnected” with New Zealand does not persuade me that New Zealand courts are the more appropriate forum for the determination of the
present dispute.
5 Though I accept that if any Perth-based witnesses are required to give evidence in New Zealand, there is likely to be some travel costs associated with that. While it is possible that witnesses could give evidence by AVL, that is a matter for the trial judge and not something I can pre- judge in the context of this application.
Conclusion on factors
[46] Having carefully considered all of the above factors and assessing them against the likely issues in this proceeding, I consider the matter to be relatively finely balanced. However, and predominantly on the basis of the likelihood of a broader range of matters being canvassed in evidence for the defence, I conclude that the balance is tipped slightly in favour of the Australian courts being the appropriate forum. I am also mindful of the fact that, in a finely balanced case such as this, I am not permitted to take into account the fact that the proceeding has already been commenced in New Zealand.
Result
[47] I accordingly grant the defendants’ application for a stay pursuant to s 22 of the Act.
Costs
[48] As Ronald and Deborah have been successful in their application, my preliminary view is that costs should follow the event in the ordinary way, and on a
1A basis. If the parties are not able to agree costs, then each party may submit a memorandum on costs within ten working days of this judgment, upon which I will
determine costs on the papers.
Fitzgerald J
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