Irwin v Mules
[2020] NZHC 748
•20 April 2020
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2019-470-000115
[2020] NZHC 748
UNDER The District Court Act 2016 IN THE MATTER OF
An appeal against a decision of Judge Cameron in the District Court at Tauranga dated 11 October 2019
BETWEEN
BRETT RAYMOND IRWIN
Appellant
AND
PHILLIPA JANE MULES
First Respondent
AND
ROSS FITCHES
Second Respondent
Hearing: 4 February 2020
Further Submissions from the Appellant 13 February 2020 Further Submissions from the Respondents 18 February 2020
Appearances:
R Mark for the Appellant
D Hayes for the Respondents
Judgment:
20 April 2020
JUDGMENT OF HINTON J
This judgment was delivered by me on 20 April 2020 at 3:00 pm pursuant to Rule 11.5 of the High Court Rules
…………………………………………………………………… Registrar/Deputy Registrar
Solicitors/Counsel:
R Mark, Barrister & Solicitor, Kerikeri Stace Hammond Lawyers, Hamilton
D Hayes, Barrister, Hamilton
IRWIN v MULES [2020] NZHC 748 [20 April 2020]
Introduction
[1] This appeal relates to issues over conversion of a classic car, a 1974 Ford Falcon GT, owned and lovingly restored to a high standard by the appellant, Mr Brett Irwin, between 2009 and 2015.
[2] Mr Irwin alleged that the first respondent, Ms Mules, by the actions of her agent the second respondent, Mr Fitches, had unlawfully converted the vehicle to her use.
[3] In a reserved decision of 20 July 2018, Judge Cameron found Ms Mules was liable to Mr Irwin in conversion. He reserved the question of liability on the part of Mr Fitches and also damages.1
[4] In a further reserved decision of 11 October 2018, the Judge effectively reversed that finding, holding that Mr Irwin had no equity in the vehicle at the time Mr Fitches took it, such that Mr Irwin had suffered no loss, and therefore could not claim in conversion. The Judge entered judgment in favour of Ms Mules and Mr Fitches.2 Mr Irwin now appeals against this second judgment.3
Background
[5] Ms Mules and her ex-husband Mr Mules had previously owned the Ford Falcon. Ownership of the vehicle vested in Ms Mules pursuant to a Family Court order made on 20 June 2003 following the dissolution of her relationship with Mr Mules. Ms Mules’ evidence before Judge Cameron was that Mr Mules hid the vehicle from her, and that she had no knowledge of its whereabouts until 2016, when she instructed Mr Fitches to repossess it.
[6] It is not disputed that in February 2006 Mr Mules had changed the vehicle’s registration plates and then in February 2007 sold it to a Mr King. The vehicle then passed to a Mr Thomas, and then a Mr Bradley, who sold it to Mr Irwin (as a third-
1 Irwin v Mules [2018] NZDC 11829.
2 Irwin v Mules [2019] NZDC 20003.
3 Ms Mules had brought an appeal in respect of the first judgment. As that judgment was overtaken by the second judgment, Ms Mules did not pursue that appeal before me.
party bona fide purchaser for value) on 13 February 2009. As noted, Mr Irwin invested considerable time, money, and effort in rebuilding the vehicle. He sold it to a Mr Alexander on 14 August 2015. That, saliently, is before Mr Fitches uplifted it.
[7] On 19 September 2016, Mr Fitches repossessed the vehicle from Mr Alexander on instruction from Ms Mules. Ms Mules contended she was the rightful owner of the car, Mr Mules having wrongly sold it without her authority to Mr King in 2006. Mr Alexander, believing Ms Mules to be the car’s rightful owner, surrendered it to Mr Fitches, who then gave it to Ms Mules.
[8] Following the repossession by Mr Fitches, Mr Alexander claimed compensation from Mr Irwin. On 25 January 2017, Mr Irwin settled that claim by way of deed. He covenanted to pay Mr Alexander a total of $46,000 and Mr Alexander agreed Mr Irwin’s payment of the settlement sum would constitute full and final settlement of all claims between them in respect of the Falcon.
[9] In June 2017, Mr Irwin then threatened Ms Mules and Mr Fitches with proceedings unless the vehicle was returned to him. He commenced this proceeding in the District Court on 17 July 2017, claiming against both Ms Mules and Mr Fitches in conversion.
[10] On 21 August 2017, doubtless having identified the issue as to standing to which I return below, Mr Irwin entered into a further deed with Mr Alexander under which he purchased the vehicle for $1 and Mr Alexander assigned to Mr Irwin “all his legal and equitable things in action (including his estate, interest, debt, chose in action, and rights) in the Ford Motor Vehicle.” The deed records that Mr Irwin “wishes to recover his loss from Ms Phillipa Mules.” I address this transaction further below.
[11] Relying then on the 21 August 2017 deed, on 23 November 2017 Mr Irwin filed an amended statement of claim in conversion and detinue against Ms Mules and in conversion against Mr Fitches as joint tortfeasor.
[12] Apparently unknown to Mr Irwin at the time he issued his proceeding, the vehicle was or became subject to three registered security interests, the validity of
which is disputed. The Personal Property Securities Register (the Register) recorded these interests as follows:
(a)a first security interest registered on 27 August 2007 naming Mr Mules as the debtor and a Mr Frank Salmons as secured creditor. This was renewed on 21 August 2012 but expired on 21 August 2017. (It seems that no reliance has been placed on this interest by anyone.)
(b)a second security interest registered on 23 August 2012, between Mr Mules and the National Mortgage Company Ltd. This was renewed on 17 August 2017.
(c)a third security interest registered on 16 January 2018 between Mr Mules and Beta Taxation Ltd.
[13] Most relevant for present purposes is the second security interest. On 14 March 2018 New Zealand Forest & Asset Investments Ltd (NZFAI) became the holder of this interest and on 31 March 2018 NZFAI repossessed the vehicle from Ms Mules. The amount outstanding under the second security interest at about that date was approximately $417,000, well exceeding the value of the vehicle. NZFAI’s post- possession notice and correspondence with counsel for Mr Irwin refers to the second security interest as relating to an original credit contract dated 21 August 2002, which would pre-date the Family Court order vesting the vehicle in Ms Mules. The credit contract is not in evidence.
[14]NZFAI sold the vehicle to a Mr Bond on 9 June 2018.
[15] Following the first hearing before Judge Cameron, which was on 12 June 2018, Mr Irwin took steps under the Personal Properties and Securities Act 1999 (the Act) to have the second and third security interests removed from the Register. On 2 July 2018 he served on NZFAI a notice demanding registration of a financing change pursuant to s 162 of the Act. The grounds given in the notice were that Mr Mules did not possess or have any rights in the vehicle when the second and third security interests were created, and the interests were accordingly invalid on registration.
It appears that NZFAI’s position was that the second interest was valid because of their reliance on the August 2002 credit contract, at the time of which Mr Mules had rights in the vehicle. However NZFAI took no steps in response to the notice because it had already on-sold the vehicle. On 14 August 2018, the second and third security interests were removed from the Register.
Judge Cameron’s First Judgment (20 July 2018)
[16] The Judge began by dismissing Ms Mules’ claim that she was the rightful owner of the vehicle at the time of repossession and had been entitled to reclaim it. He considered any claim by Ms Mules in respect of the vehicle would have become statute-barred by February 2012 at the latest, but also her rights had vested in the Official Assignee when she was bankrupted in 2006.
[17] The Judge held that when Mr Irwin regained ownership of the vehicle, he was entitled to demand immediate possession. Having regained the right to demand possession, Ms Mules’ failure to return the vehicle to him despite demand constituted ‘wrongful detention’ of the vehicle as from the time demand was made.
[18] Judge Cameron said the position was different in respect of Mr Fitches, because his potentially tortious actions had all occurred before Mr Irwin reacquired the vehicle, and thus any claim against him depended on the validity of the assignment. The Judge left that issue open.
[19] The Judge also rejected a defence submission that any loss incurred by Mr Irwin stemmed from his agreement with Mr Alexander to refund his purchase of the vehicle, not from any conversion. He held that once Mr Irwin reacquired title to the vehicle, Ms Mules’ wrongful detention of it resulted in loss.
[20] Turning to the security interests, the Judge recorded that all parties acknowledged in Court “the possibility that [NZFAI] may have had a legitimate charge” over the vehicle since 2002 and would have been entitled to repossess and sell it. If that was the case, all parties recognised, Mr Irwin’s claim for damages would fail as he would be unable to prove any loss had flowed from the conversion of the vehicle.
[21] Judge Cameron adjourned the proceeding to allow Mr Irwin to take the necessary steps under the Act in respect of any charge holders, to allow the Court to determine if any losses could be proven.
[22] The net effect of the first judgment was therefore that the Judge had found for Mr Irwin, apparently in conversion, against Ms Mules, but left open the question of liability on the part of Mr Fitches and also the question of damages against either defendant.
Judge Cameron’s Second Judgment (11 October 2018)
[23] As already noted, on 14 August 2018 the second and third security interests were removed from the Register following Mr Irwin’s serving NZFAI on 2 July 2018 with a notice under s 162 of the Act demanding their removal.
[24] At the second hearing before Judge Cameron, Mr Irwin claimed that, because the reason given in the s 162 notice for demanding the interests be removed was that Mr Mules did not have any rights in the vehicle when the interests were created, and the interests were therefore void from the outset, and because the interests were removed pursuant to the notice, the interests could be presumed to be void ab initio. The Judge rejected this submission, finding it unsupported by the Act and case law. He said that the only effect of removing the registered security interests from the Register was that, as from the date of removal on 14 August 2018, the interests no longer attached to the vehicle.
[25] The Judge said that Mr Irwin would have to challenge the validity of the second security interest by challenging the validity of the August 2002 credit contract allegedly underpinning that interest. The Judge considered that there may have been a legitimate charge over the vehicle since 2002.
[26] Judge Cameron held that Mr Irwin’s claim therefore failed as he had not shown that Ms Mules’ actions in refusing to return the motor vehicle had in fact caused him loss, which in the Judge’s view was an element of conversion. Judgment was entered for Ms Mules and Mr Fitches, reversing at least part of the previous decision regarding liability in tort.
Approach on Appeal
[27] This appeal is brought pursuant to the general right of appeal to this Court from District Court decisions.4 This is a general appeal, to proceed by way of rehearing.5 I must provide my own view of the merits, including as to matters of evaluation and degree, though Mr Irwin must satisfy me that the decision under appeal is wrong and that I should depart from it on appeal.6
Analysis
Loss is not an element of the tort of conversion
[28] The Judge found for Mr Irwin in conversion against Ms Mules and then in effect reversed that decision in his second judgment, which fell outside his jurisdiction. Given my conclusion that he was right in the first instance I simply deal with this by way of the substantive appeal, on the same footing as the parties have.
[29] Counsel for Mr Irwin, Mr Mark, submits that Ms Mules and Mr Fitches can be liable in conversion, or alternatively in Ms Mules’ case detinue, even if Mr Irwin’s losses are nominal. The respondents do not seriously challenge this submission.
[30] Mr Mark is undoubtedly correct in this respect. Conversion is actionable per se, requiring proof only that the tortfeasor has deliberately encroached on the plaintiff’s right to possession by engaging in conduct inconsistent with that right to such an extent as to exclude him or her from the use and possession of the chattel.7
[31] It follows that, at least from the latest time Mr Irwin retook ownership of the vehicle from Mr Alexander, being 21 August 2017, Ms Mules was liable to him in conversion. Her deliberate conduct in retaining possession of the vehicle excluded Mr Irwin from possession, contrary to his rights as owner. Ms Mules liable to
4 District Court Act 2016, s 124.
5 Section 127 and High Court Rules 2016, pt 20.
6 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [3]-[5] and [16].
7 Kuwait Airways Corp v Iraqi Airways Co (Nos 4 and 5) [2002] AC 833 at 1084 (HL), adopted in Glenmorgan Farm Ltd (in rec and liq) v New Zealand Bloodstock Leasing Ltd [2011] NZCA 672, [2012] 1 NZLR 555 at [26].
Mr Irwin in detinue on the same basis.8 The Judge erred in finding Ms Mules was not liable.
[32] For completeness, I note that Mr Fitches’ only involvement was in the earlier repossession and delivery of the vehicle. He is not therefore liable for Ms Mules’ retaining the vehicle after 21 August 2017.
Mr Alexander’s causes of action against Ms Mules and Mr Fitches were properly assignable, and in fact assigned
[33] The position as to whether Ms Mules and Mr Fitches were liable in tort to Mr Irwin in respect of the September 2016 repossession depends on the validity of the assignment purportedly entered into between Mr Alexander and Mr Irwin on 21 August 2017. Absent a valid assignment, Mr Irwin has no claim against Mr Fitches in conversion at all, as Mr Fitches’ only dealing with the vehicle was during the period it was owned by Mr Alexander. I called for and have gratefully received further written submissions on this issue, dated 13 and 18 February 2020.
[34] The assignment of a bare right of action is void as contrary to public policy, as an outgrowth of the historic prohibition on champerty and maintenance.9 A recognised exception to this rule is where the assignee had a ‘genuine’ commercial interest in taking the assignment.10 A ‘genuine’ interest arises, for example, where a cause of action is assigned to a creditor in exchange for the release of debt,11 or where the totality of the transaction is otherwise such that there is no risk of trafficking in causes of action for profit.12 The Courts have interpreted this as excluding from valid assignment, rights of action for personal torts such as false imprisonment, in the trafficking of which there can be no legitimate commercial interest.13 This is in distinction to torts related to property, in respect of which a genuine commercial interest may well exist.14
8 Detinue being deliberate and conscious detention of another’s property: EE Mcardy Ltd v Postmaster-General [1959] NZLR 553 at 556.
9 Trendtex Trading Corp v Credit Suisse [1982] AC 679 (HL) at 696, 697, and 703.
10 At 703; and Waterhouse v Contractors Bonding Ltd [2013] NZSC 89, [2014] 1 NZLR 91 at [57].
11 See Re Timothy’s Pty Ltd [1981] 2 NSWLR 706 (SC).
12 Brownton Ltd v Edward Moore Inbucon Ltd [1985] 3 All ER 499 (CA) at 504-505.
13 First City Corporation Ltd v Downsview Nominees Ltd [1989] 3 NZLR 710 at 757.
14 At 757.
[35] Mr Hayes says the ‘genuine commercial interest’ exception does not avail Mr Irwin for two reasons.
[36] First, he says conversion is an in personam claim, and therefore a ‘personal tort’. I do not agree. All torts are, as a matter of form, in personam claims. That does not make them all personal torts. Torts concerned with the vindication of property rights, like conversion, are not generally considered to be ‘personal’ torts, but rather torts relating to property. The relevant question is not one of form but whether there is a commercial interest such that the public policy concern to avoid trafficking in litigation is not triggered.15
[37] Secondly, Mr Hayes says Mr Irwin had no pre-existing commercial relationship with Mr Alexander to which the assignment can be said to relate. He says Mr Irwin was motivated to obtain the assignment purely for the purposes of this litigation after the claim had already been apprehended.
[38] In support of this submission, Mr Hayes adopted Fogarty J’s discussion of the law on assignments in this Court in Fleetwood Apartments.16 In that case, Fogarty J adopted the Australian standard of the need, at a minimum, to identify commercial considerations pre-existing the litigation to establish a genuine commercial interest.17 In doing so, the Judge expressly refused to follow the England and Wales Court of Appeal in Brownton.18 That case, which has previously been followed in New Zealand,19 provides authority for the proposition that a legitimate commercial interest in assigning a cause of action can exist for reasons connected entirely to the existence of the apprehended claim, such as the commercial desirability of expediting the litigation or reducing a potential adverse costs award.20
[39] I am not bound to follow Fleetwood Apartments as a matter of authority and because of its particular facts that case is not on point. But whether Fleetwood
15 Auckland City Council as Assignee of Body Corporate 16113 v Auckland City Council [2008] 1 NZLR 838, (2007) 18 PRNZ 785 (HC) at [46].
16 Body Corporate 160361 (Fleetwood Apartments) v BC 2004 Ltd and BC 2009 Ltd [2014] NZHC 1514, [2014] 3 NZLR 758.
17 At [146].
18 Brownton Ltd v Edward Moore Inbucom Ltd [1985] 3 All ER 499 (CA).
19 Above n 15 at [47]-[53].
20 Above n 18 at 505-509.
Apartments or Brownton is applied makes no difference. In this case, there were commercial considerations which preceded this litigation. This is clearly not a case which involves meddlesome or abusive, or any, trafficking in litigation.21
[40] Mr Alexander could have sued Ms Mules, Mr Fitches and Mr Irwin. He did not need to because he achieved a settlement with Mr Irwin by which Mr Irwin refunded him the purchase price of the car. As a matter of form, the settlement was some months before the assignment was entered into. However, viewing the whole circumstances of the assignment, putting substance above form as the authorities require,22 the gist of the transaction was that Mr Alexander, in consideration for the refund of the purchase price paid to Mr Irwin plus $1, transferred ownership of the vehicle to Mr Irwin, together with his causes of action in respect of the vehicle and also, effectively, settled any claims against Mr Irwin. That was of practical and economic benefit to both Mr Alexander and Mr Irwin. It follows that I am satisfied that the causes of action were properly assignable.
[41] Taking a final point under this heading, Mr Hayes submits the form adopted by Mr Irwin and Mr Alexander did not in fact amount to a valid assignment of the causes of action. The use of the words “all of [Mr Alexander’s] legal and equitable things in action … in the Ford motor vehicle” in the deed did not, he says, convey an intention to assign the relevant causes of action as they are not “things in action […] in the motor vehicle”. Literally applied, the words of the deed did not constitute an assignment.
[42] The case relied on by Mr Hayes in support of his proposition that the assignment should be construed strictly, relates to settlement agreements and is distinct.23 Rather, it is well established that there are no clear requirements as to the form of an assignment. Provided there is a clear intention to assign, “the language is immaterial if the meaning is plain.”24 In particular, regard may be had to a course of
21 See Waterhouse v Contractors Bonding Ltd, above n 10, at [58], citing Giles v Thompson [1994] 1 AC 142 (HL) at 164.
22 William Brandt’s Sons & Co v Dunlop Rubber Co [1905] AC 454 (HL). See also Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385 (HCA) at 391; and Elders Pastoral Ltd v Bank of New Zealand [1991] 1 NZLR 385 (PC) at 387.
23 Chilcott v McLachlan HC Auckland 2007-404-2796, 22 December 2009.
24 William Brandt, above n 22, at 462.
conduct and the surrounding circumstances in identifying the relevant intent, so as to understand the meaning of the words used by the parties.25
[43] Adopting this approach, I consider it clear that Mr Irwin and Mr Alexander’s intention was, inter alia, to effect an assignment of Mr Alexander’s causes of action in conversion and detinue against Ms Mules and Mr Fitches to Mr Irwin. Indeed, the parties had recorded Mr Irwin’s desire to pursue proceedings against Ms Mules and make good his claimed loss. In the overall context, Mr Irwin and Mr Alexander intended, by referring to things in action in the motor vehicle, to assign the current causes of action.
[44] For these reasons, I am satisfied that Mr Alexander’s causes of action against Ms Mules and Mr Fitches were properly assignable and were in fact assigned.
Conclusion on liability
[45] It follows, returning to the question of liability, that Mr Fitches is liable to Mr Irwin in conversion in respect of the repossession of the vehicle on 19 September 2016. Ms Mules is also liable to Mr Irwin in conversion in respect of the repossession as Mr Fitches’ principal and for her continuing retention of the vehicle from the date of repossession. She is also liable to Mr Irwin in detinue from the date he made demand for the return of the vehicle onwards.
The quantum of damages
[46] Liability having been determined in Mr Irwin’s favour, the remaining question is whether any loss resulted from Mr Fitches’ and Ms Mules’ tortious actions. Whether there is any loss turns on the validity or otherwise of the second security interest. This, as will be apparent from the earlier discussion, brings into play the Act and also NZFAI.
25 Hela Pharma AB v Hela Pharma Australasia Ltd [2005] NZCA 11 at [60].
[47] As recognised by counsel during the hearing, the damages question raises a substantial number of issues, many of which are not capable of resolution on this appeal.
[48] In particular, there is the question of whether the alleged 2002 credit contract existed and was valid. As I have said, that contract is not in evidence. Mr Mark has a number of other arguments to the effect the second security interest was or became invalid. NZFAI as the enforcer of the alleged security interest should presumably be added as a party.
[49] For the above reasons, amongst others, I am not able to dispose of the question of loss or damages on the appeal. I expressly record that I do not decide this point and remit that issue to the District Court.
[50] I note that one of the many issues raised in regard to damages and validity of the second security interest is the extent of the District Court’s jurisdiction, which turns on whether it would be required to determine an issue of law under the Act.26 That is a matter for the appellant to consider before taking further steps.
Result
[51]For all of the above reasons, the appeal succeeds in part.
[52] I find that the District Court Judge erred in his judgment dated 11 October 2018 in concluding that loss is an element of the tort of conversion, in finding that Ms Mules was not liable to Mr Irwin in conversion and detinue, and in finding that Mr Fitches was not liable to Mr Irwin in conversion.
[53]I enter judgment for Mr Irwin as set out at [45] above.
[54] I reach no conclusion in respect of the question of damages and remit that question as recorded above.
26 See Personal Properties Securities Act 1999, s 16.
Costs
[55] Mr Irwin having succeeded in respect of liability against both defendants is presumptively entitled to costs on a 2B basis in this Court, plus disbursements.
[56] If the parties cannot agree costs, Mr Mark is to file and serve a memorandum within three weeks from the date of this judgment, with Mr Hayes having three weeks to reply. Memoranda are not to exceed five pages, exclusive of covering sheets and supporting materials such as invoices.
Hinton J
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