Johnston v Mapp
[2013] NZHC 2858
•30 October 2013
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV 2012-485-259 [2013] NZHC 2858
IN THE MATTER OF the Estate of Philip Roland Gordon
IN THE MATTER OF the Administration Act 1969
BETWEEN GLYNIS ROSE JOHNSTON Plaintiff
ANDVANESSA LOUISE MAPP Defendant
Hearing: 26-27 June 2013
Counsel: S Gaines for the Plaintiff
No appearance for the Defendant
Judgment: 30 October 2013
JUDGMENT OF MALLON J
Table of Contents
Introduction ....................................................................................................................................... [1] Procedural matters............................................................................................................................ [6] Issue 1: De facto relationship? ......................................................................................................... [9] The law ........................................................................................................................................... [9] The facts ....................................................................................................................................... [13] The contested evidence ................................................................................................................. [19] Submissions for Mrs Johnston ...................................................................................................... [30]
My assessment .............................................................................................................................. [32] Estate ............................................................................................................................................ [35] Issue 2: A gift? ................................................................................................................................. [36] The facts ....................................................................................................................................... [37] Alleged gift ................................................................................................................................... [55] Submissions for Mrs Johnston ...................................................................................................... [59]
My assessment .............................................................................................................................. [61] Issue 3: personal guarantees?......................................................................................................... [62] The evidence ................................................................................................................................. [63] Submissions for Mrs Johnston ...................................................................................................... [66]
My assessment .............................................................................................................................. [67]
Declarations and orders? ................................................................................................................ [68] Result ................................................................................................................................................ [74]
JOHNSTON v MAPP [2013] NZHC 2858 [30 October 2013]
Introduction
[1] Philip Roland Gordon, a United Kingdom citizen, died in England on 11 May
2010. He died intestate. His parents predeceased him, he did not marry and he had no children. He is survived by four siblings, including Glynis Johnston (the plaintiff) who is the eldest child in the family. Vanessa Mapp (the defendant) claims that she was the de facto partner of Mr Gordon at the time of his death. It is that claim, which is disputed by Mrs Johnston, and Ms Mapp’s actions taken on the basis of that claim, which has led to this proceeding.
[2] The background to this proceeding concerns money advanced by Mr Gordon from 2007 to 2009which was invested in a property development in New Zealand in which Ms Mapp was involved.1 In total Mr Gordon provided funds of
$1,078,740.37. However the property development was not successful and at the time of Mr Gordon’s death there remained $695,734.82 of these funds. That money has now gone as a result of actions taken by Ms Mapp after Mr Gordon’s death. Those actions were taken by Ms Mapp as administrator of Mr Gordon’s estate.
[3] Ms Mapp was granted the letters of administration for Mr Gordon’s New Zealand estate on 5 November 2010 on the basis that she was his de facto partner. In her application for that grant she did not mention that Mr Gordon had siblings. On behalf of the surviving siblings of Mr Gordon, Mrs Johnston applied for the recall of that grant of administration on the basis that Ms Mapp was not Mr Gordon’s de facto partner. By consent, that grant was revoked and replaced with a grant to Mrs
Johnston on 27 March 2013.2
[4] Mrs Johnston now seeks declarations and related orders in respect of Mr Gordon’s estate. She claims that Ms Mapp has no lawful entitlement to Mr Gordon’s estate, Mr Gordon’s siblings are entitled to his estate, and Ms Mapp and other parties through whom the money passed hold the estate on a constructive trust and are liable
to repay this sum to Mrs Johnston and her siblings. It is these matters that are for
1 His United Kingdom estate was modest, amounting to about £11,000.
2 Johnston v Mapp [2013] NZHC 700 at [24]. Mrs Johnston obtained orders for the administration
of Mr Gordon’s United Kingdom estate on 25 March 2011.
determination by me. Whether the declarations and orders should be made turn on the following issues:
(a) whether Ms Mapp was in a de facto relationship with Mr Gordon at the time of his death;
(b) whether Mr Gordon provided the money as an advance or a gift;
(c) whether Mr Gordon personally guaranteed to repay investments made by others in the property development; and
(d)whether associates of Ms Mapp or companies in which she was involved knowingly received the estate funds or dishonestly assisted Ms Mapp in her disposal of the funds.
[5] Although there is now nothing left of Mr Gordon’s money, Mrs Johnston is pursuing this claim because of other proceedings. She has instructed solicitors to pursue a negligence claim against the firm of solicitors in the United Kingdom who acted for Mr Gordon and his interests in New Zealand. In order to pursue that claim, Mrs Johnston must exhaust available remedies in New Zealand.
Procedural matters
[6] Because there were persons, other than the parties with a potential interest in the claim, the Court directed that, as well as Ms Mapp, the claim be served on Mr Gordon’s three other siblings, Miles Buckingham (a business associate of Ms Mapp), various named companies (through which Mr Gordon’s money passed),3 Izard Weston (the firm of solicitors that prepared Ms Mapp’s application for the grant of
letters of administration and acted for Ms Mapp on other related matters), and other
3 Aquila Real Limited, Brougham Street Trustee Company Limited, Twig Luxury Trustee
Company Limited and Wellington Luxury Limited.
parties who held mortgagee interests.4 The effect of that direction was that these parties were then able to take steps in the proceeding.5
[7] Ms Mapp filed a statement of defence and affidavits in support of her defence. Mr Buckingham filed two affidavits in support of Ms Mapp’s defence but otherwise took no steps. Mr Gordon’s three other siblings agreed to abide the decision of the Court. The liquidator of Aquila Real Limited, one of the companies through which the money from Mr Gordon’s estate passed, filed affidavits tracing the money. No other party took any steps.
[8] The day before the hearing, Ms Mapp notified the Court that she elected not to defend Mrs Johnston’s claim. As a result the matter proceeded before me by way of formal proof. In determining whether Mrs Johnston has proved her claim, I consider the matters raised by Ms Mapp in her statement of defence and affidavits which are:
(a) she was entitled to succeed on the intestacy because she was Mr
Gordon’s surviving de facto partner; and/or
(b) Mr Gordon gifted his investment to her in writing; and/or
(c) Mr Gordon personally guaranteed the repayment of the investments of her parents and Mr Buckingham.
Issue 1: De facto relationship?
The law
[9] Where a person has died wholly intestate:
4 Spinnaker Capital Limited, Singleton Investments Limited, John Denis Kane, David John Reynolds, Linda Rose Reynolds, Lynette Lois Davies, Anne Janferie Kane, John Anthony Davies and Cressida One Capital Limited.
5 High Court Rules, rr 18.6 and 18.11
(a) The right to apply for letters of administration of that person’s estate is determined in accordance with the order of priority.6 The person first in order of priority is a surviving de facto partner.7
(b)A surviving de facto partner is entitled to succeed on the intestacy of his or her deceased partner where the deceased has neither issue nor parent.8 The surviving de facto partner is entitled to succeed to the exclusion of any surviving siblings. Surviving siblings are next in the order of priority.9
[10] In order for a surviving de facto partner to succeed on intestacy, the following three requirements must be met:
(a) the deceased must have died on or after 1 February 2002;10
(b)the de facto partner must have been a “surviving de facto partner”, which is defined as a person who was living in a de facto relationship with the deceased person at the time of his or her death;11
(c) the de facto relationship must have lasted for three or more years unless there is a child of the de facto relationship or the partner has made a substantial contribution to the de facto relationship, and the Court is satisfied that not being entitled to succeed on the intestacy
would result in serious injustice to the partner.12
6 Rule 27.35(1).
7 Rule 27.35(4).
8 Administration Act 1969, s 77.
9 Section 77. If there is no surviving de facto partner, no issue and no parents, but one or more siblings, all of the estate is held on the statutory trusts for the one or more brothers or sisters.
10 The amendments to the Administration Act 1969 relating to de facto partners apply only in respect of the estate of persons who die on or after 1 February 2002: Administration Amendment
Act 2001, s 3.
11 Administration Act 1969, s 2.
12 A de facto relationship of short duration, for the purposes of s 77B of the Administration Act
1969, is defined in s 2E(1)(b) of the Property (Relationships) Act 1976 as a de facto relationship in which the de facto partners have lived together as de facto partners for a period of less than three years, or for a period of three years or longer but the Court considers it just to treat it as a relationship of short duration.
[11] For these purposes a relationship between two persons is a “de facto relationship” if they “live together as a couple.”13 In determining that question “all the circumstances of the relationship are to be taken into account” including the following matters:14
(a) the duration of the relationship:
(b) the nature and extent of common residence: (c) whether or not a sexual relationship exists:
(d) the degree of financial dependence or interdependence, and any arrangements for financial support, between the parties:
(e) the ownership, use, and acquisition of property:
(f) the degree of mutual commitment to a shared life: (g) the care and support of children:
(h) the performance of household duties:
(i) the reputation and public aspects of the relationship.
[12] In determining whether a de facto relationship exists, the Court is ultimately concerned with the intention of the partners and the commitment to a shared life manifested by conduct.15 A de facto relationship ends if the de facto partners cease
living together as a couple.16
The facts
[13] Mr Gordon was born on 3 May 1962 in the United Kingdom which was his home for most of his life. On 23 November 2004 Mr Gordon travelled to New Zealand on a six month working visa. During that time Mr Gordon worked as a
farmhand on a farm in Pine Valley, Marlborough, owned by Ms Mapp’s parents.17
13 Administration Act 1969, s 2; Property (Relationships) Act 1976, s 2D(1)(a). They must also be both aged 18 years or older and not be married or in a civil union with each other. There is no issue about these matters in this case.
14 Property (Relationships) Act 1976, s 2D(2). The regard to be had and the weight to be given to these matters as may seem appropriate to the Court in the circumstances of the case (s 2D(3)(b)).
15 Nicola Peart and others Relationship Property on Death (Brookers Ltd, Wellington, 2004) at
[2.6.2(2)(c)].
16 Property (Relationships) Act 1976, s 2D(4).
17 Valerie Mapp’s affidavit says that her and her husband first met Mr Gordon in 2003, but Mr
Gordon’s passport says he entered New Zealand in 2004.
Mr Gordon did not meet Ms Mapp that year as she was away from the farm. During that first visit Mr Gordon made friends with a New Zealander, Mr David Buckley.
[14] Mr Gordon travelled to New Zealand for the second time on 1 November
2005, once again on a six month working visa. Mr Gordon returned to work on the Mapp family farm in about late November.18 Ms Mapp was “house sitting” at a high country station but came back to live in a cottage on the family farm at around this time.19 Mr Gordon and Ms Mapp met and formed a relationship. The nature of that relationship is a matter of dispute, other than that it did involve a sexual relationship.20
[15] Mr Gordon returned to the United Kingdom in or around May 2006, following the death of his father in March 2006. He remained there until his death in 2010. During this period Mr Gordon obtained an arboreal qualification. He then gained full-time employment as an arborist. In 2007 Mr Gordon was elected as a
councillor for the Leicester electorate for a three year term.21 Tragically he died
when he fell out of a tree while working on it. He was 48 years old at the time of his death.
[16] From the time of his return to the United Kingdom until his death he did not return to New Zealand and Ms Mapp did not visit him. The nature of their relationship during this period is in dispute. It is not in dispute that there was some continuing contact between them and Ms Mapp travelled to the United Kingdom to attend Mr Gordon’s funeral.
[17] It was while Mr Gordon was back living in the United Kingdom, that Mr Gordon provided money which was applied to property transactions in which Ms Mapp was involved. The first sum provided was $350,000. It was applied to purchase a property in Karaka Bay, Wellington on 13 February 2007. When that
property was sold, the $350,000 together with further sums from Mr Gordon
18 The exact timing is unclear on the evidence.
19 Evidence from the affidavit of Valerie Mapp (Ms Mapp’s mother).
20 Vanessa Mapp says that she and Mr Gordon “lived together in the cottage at Pine Valley for six months”. Valerie Mapp says that her daughter and Mr Gordon were in a sexual relationship and says that Mr Gordon moved into the cottage with Ms Mapp in around November.
21 Mrs Johnston says that Mr Gordon also looked at purchasing a house in Leicestershire.
totalling $1,078,740.37 between 2007 and 2009, was then applied to the purchase of a property on 25 October 2007 in Brougham Street, Wellington and its subsequent development.
[18] On 12 May 2010, the day after Mr Gordon’s death, Ms Mapp restructured the
Brougham Street investment (discussed in further detail below). On 2 November
2010 Ms Mapp filed an interlocutory application without notice for letters of administration for Mr Gordon’s estate. She did not refer to the surviving siblings, although she was aware of them through having attended Mr Gordon’s funeral. The application was granted on 5 November 2010. Subsequent to the sale of the Brougham Street property on 18 November 2010 to a third party, Ms Mapp applied the sale proceeds in various ways, with the result that there was nothing left in Mr Gordon’s estate.
The contested evidence
[19] Ms Mapp’s affidavit evidence is that during the six month period in
2005/2006 she and Mr Gordon lived together in the cottage on the family farm and they were planning their next step together in the months before he left. She says that she was certain “that when he left he intended on coming back to NZ to live with me”. She says that Mr Gordon returned to the United Kingdom to say goodbye to his family and friends before he moved to New Zealand permanently. Ms Mapp explains Mr Gordon’s period in the United Kingdom as follows:
Phil got elected as a city councillor in 2007 for a three year term. He ran as a paper candidate on the basis that he had no chance of being elected ... He was not happy about the role or being committed to a three year term, but felt he had to see it through given the public had chosen him. Since I was very busy with property projects in NZ during this time, and Phil was stuck with his new job, he also retrained as an arborist. This was work he loved and was a transferable skill for NZ. As he’d sold his houses in the UK and sent me the money, he then struggled with rental accommodation. He did look at buying something temporary to live in while he was finishing his councillor term ...
[20] Vanessa Mapp has provided supporting affidavit evidence from her mother, Valerie Mapp, who says:
[Mr Gordon’s return to the UK] happened at the same time as Vanessa and
Phil’s relationship was maturing and they were planning what their next step
together would be. ... Phil was very keen to support [Vanessa] in whatever she wanted to do. He offered to send money from the UK to fund the project and any profit Vanessa made would go towards creating their future together. It would also help Phil’s residency application. My understanding is that they were working on a timeframe of about 12 months for Phil to get things sorted in the UK ... before Phil came back to NZ and they decided the next step together. Despite circumstances keeping them apart their relationship continued up until Phil’s death in May 2010. Phil stayed in contact with us. Nothing in his letters, emails or phone calls to us up until his death indicated that his love for Vanessa had diminished.
[21] Ms Mapp’s evidence is also supported by an affidavit from her uncle, Owen Mapp. It was his understanding that Mr Gordon planned to live in New Zealand long-term and did not intend to stay in the United Kingdom permanently. He says that Ms Mapp was “fighting to salvage a foundation for the future that she and Phil had planned” and they had specific goals they wanted to achieve together, like having children.
[22] Ms Mapp’s evidence is also supported by an affidavit from Mr Follett, one of
Mr Gordon’s friends, who says:
... I was told by [Mr Gordon] of his plans in New Zealand and he told me plainly that the property venture and life with Vanessa Mapp in New Zealand was his ultimate goal. I was told by him that he had invested much of what he had in that arrangement, and had done so willingly such was his trust and affection for Vanessa Mapp and his desire for their property venture to be successful. My understanding was that he was very much in love with Vanessa Mapp and only Vanessa Mapp.
[23] There is also supporting evidence from Mr Buckingham. He was flatting with Ms Mapp from about October 2006. He says that Ms Mapp remained emotionally involved with Mr Gordon, often talking to him on the telephone and was grieving a great deal when he died.
[24] The evidence provided in support of Ms Mapp’s position is challenged by Mrs Johnston. She accepts that Mr Gordon and Ms Mapp had a relationship for a “few months” during the period of his working visa in New Zealand, but says that at the request of Ms Mapp the relationship ended before he left New Zealand. She says:
It was evident from my discussions with Philip that although Philip may have wished that the relationship with the defendant might have continued;
that ultimately Philip acknowledged the defendant’s wishes, and he accepted
the personal relationship was at an end.
It was also evident in our discussions that any on-going involvement by
Philip with the defendant was only on a business basis.
[25] Mrs Johnston says that after Mr Gordon arrived back to the United Kingdom in 2006 she asked him whether he had ever thought about living in New Zealand on a permanent basis. According to Mrs Johnston, he replied that England was his home and most of his family and friends were there, and Ms Mapp had made it clear to him that she had no intention of living in the United Kingdom. Mr Johnston, the plaintiff’s husband, says that Mr Gordon was given the opportunity to borrow money to travel to New Zealand to see Ms Mapp but Mr Gordon declined the offer.
[26] Mrs Johnston further says that the frequency of the contact between Mr
Gordon and Ms Mapp was “less than consistent”. She says:
On his visits to us Philip would sometimes sit up into the early hours of the morning waiting for a phone call from the defendant which more often than not did not materialise.
Philip would also check patiently for emails which often met the same end.
[27] There is also evidence to suggest that Mr Gordon was attempting to establish relationships with women other than Ms Mapp. In November 2008 Mr Gordon was emailed by a friend, Ray, asking if Mr Gordon wanted to contact a few friends who were looking for a husband. Mr Gordon replied on 17 November 2008, “Well Ray, in the light of a very recent disappointment on the romance front, I guess I’m bound to answer your question with a resounding YES!”
[28] Ray forwarded this email to his daughter, who put Mr Gordon in contact with a New Zealand woman named “Jo”. In February 2009 Mr Gordon, in an email to David Buckley, wrote “So what is there to report on Jo. Well, on the strength of our emails, I guess it’s possible to claim we’re garnering something of an appreciation for one another.” In an email to Jo on 22 February 2009, Mr Gordon refers to Ms Mapp as a “good friend”. Mr Gordon and Jo emailed each other until his death in
2010.
[29] Mrs Johnston mentioned in her affidavit that Mr Gordon was also in contact with another woman named “Valerie”. Ms Mapp contacted Valerie who has provided an email advising that there was “absolutely no question” of her having a relationship with Mr Gordon and that they merely shared many interests and would catch up for a glass of wine occasionally.
Submissions for Mrs Johnston
[30] Counsel for Mrs Johnston says that the onus is on Ms Mapp to establish, on the balance of probabilities,22 that a qualifying de facto relationship was established. Starting with the period when Mr Gordon was in New Zealand he says that there is insufficient evidence to establish that the relationship moved from being a dating relationship or even a couple living in the same house, to being a de facto relationship. He makes the following points:
(a) Mr Gordon and Ms Mapp’s relationship in New Zealand was at most six months, but in reality more likely to be four to five months as Mr Gordon started working on the farm around November 2005.
(b)It is improbable that Mr Gordon and Ms Mapp lived together as de facto partners while Mr Gordon was in New Zealand. The evidence demonstrates that the cottage was temporary accommodation, was not the principal place of residence for Mr Gordon or Ms Mapp (as Ms Mapp was house sitting a station) and could not properly be characterised as a home in the sense of de facto partners importing permanency into a relationship.
(c) There is an absence of evidence suggesting that Ms Mapp and Mr Gordon lived together. For example, there is no evidence they each accounted for a pro rata share of costs, contributed to the costs of maintenance or that Mr Gordon contributed to Ms Mapp’s living costs.
(d)Mr Gordon and Ms Mapp were not financially interdependent while Mr Gordon was in New Zealand. For example they did not operate joint bank accounts, assume joint financial obligations, share existing assets or invest on a joint basis in real or personal property. All the investments were made by Mr Gordon after he returned to the United Kingdom and were for purposes other than the relationship.
(e) Although Mr Gordon and Ms Mapp had a sexual relationship, that in itself is not sufficient to show that Mr Gordon and Ms Mapp lived together as a couple.
[31] In relation to the time from when Mr Gordon went back to live in the United
Kingdom to his death, counsel for Mrs Johnston submits:
(a) When Mr Gordon left the United Kingdom, any co-habitation ended which suggests the end of any de facto relationship (if there was one).
(b)Mr Gordon and Ms Mapp did not visit each other and Mr Gordon’s actions in the years prior to his death suggest that he intended to stay in the United Kingdom on a permanent basis. This weighs significantly against Mr Gordon and Ms Mapp having the intention of “cohabitating wherever possible so that their ‘consortium’ was regarded as continuous”.23
(c) There was no sexual relationship between Mr Gordon and Ms Mapp from the time he left New Zealand to the time of his death.
(d)Mr Gordon seems to have been pursuing relationships with other women in 2008 and 2009, most notably “Jo” from New Zealand.
(e) Mr Gordon did not represent to members of his family or friends that he was in a continuing relationship with Ms Mapp.
(f) Mr Gordon’s money was for investment purposes, not for Ms Mapp’s
living expenses.
My assessment
[32] The evidence filed in support of Ms Mapp’s position that is in dispute cannot be given any weight when Ms Mapp elected not to defend the matter, was not available for cross examination, and there is no documentary evidence (such as emails between Mr Gordon and Mrs Mapp evincing a commitment to a shared life) adduced in support of her position.
[33] Regardless of the nature of the relationship during the six month period in New Zealand, I am not satisfied that there was a de facto relationship that continued until Mr Gordon’s death. They did not see each other in the four year period before his death, let alone live together or continue a sexual relationship. Mr Gordon provided money to Ms Mapp for New Zealand investments, but that on its own does not demonstrate a mutual commitment to a shared life. Mr Gordon’s activities after leaving New Zealand are consistent with a return to his own life in England and inconsistent with an ongoing de facto relationship. There is documentary evidence (in the form of the emails leading to the contact with “Jo”) that Mr Gordon was not in a relationship with anyone by 2008.
[34] Overall the evidence is consistent with a mutually affectionate personal and sexual relationship that came to an end, either with his return to England or certainly by 2008, albeit to the disappointment of Mr Gordon (it seems). Thereafter their continued contact was as friends with ongoing business interests. The evidence is not consistent with the two of them living together as a couple at the time of his death.
Estate
[35] This conclusion means that Ms Mapp was not entitled to Mr Gordon’s New
Zealand estate. That estate was held on a statutory trust for Mr Gordon’s siblings.24
Issue 2: A gift?
[36] The next question is whether the money provided by Mr Gordon to Ms Mapp was in the nature of a gift or an advance.
The facts
[37] On 7 February 2007 Mr Gordon provided the sum of $350,000 to Ms Mapp to assist in the purchase of the Karaka Bay property (refer [17] above).25 That property was purchased in Ms Mapp’s name on 13 February 2007 for $560,000.26
The terms on which the sum was provided are set out in a Deed of Declaration of Trust and Indemnity between Ms Mapp and Mr Gordon dated April 2007. The Deed provided that the “sum of $350,000 ... was utilised to contribute to the purchase of a property situated at ... Karaka Bay, Wellington” and that the property was purchased “on trust” for Mr Gordon or a subsequent family trust or company to be formed on instructions from Mr Gordon. It further provided that Ms Mapp was to transfer the property to Mr Gordon (or his trust or company) “upon demand” and the registered mortgage would also be transferred to Mr Gordon (or his trust or company).
[38] On 7 June 2007 the Karaka Bay property was transferred to Bast Investments Ltd (BIL),27 a company wholly owned by the Bast Trust. The Bast Trust was settled by Mr Gordon, the trustees were Mr Gordon and Mr Buckingham and the beneficiaries were Ms Mapp and Mr Gordon. On 16 October 2007 the property was transferred to Bast Investments Limited (half share) and Miles Buckingham (half share).
[39] On 25 October 2007 BIL (half share) and Mr Buckingham (half share)
purchased the Brougham Street property (refer [17] above). The purchase price was around $1.15 million. The intention was to develop this property.
25 See Deed of Declaration of Trust and Indemnity signed by Ms Mapp and Mr Gordon, August
2007. That transfer appears to have been made on 7 February 2007.
26 That purchase price was noted by Ms Mapp in her affidavit evidence.
27 BIL was incorporated in April 2007.
[40] On 18 September 2008 the Karaka Bay property was sold to unrelated parties for $505,000.28 It appears that the balance of the proceeds from this sale (including the $350,000 from Mr Gordon) was reinvested in the property development at Brougham Street. Mr Gordon provided further sums for this development on various dates between 2007 and 2009. Together with the original $350,000 from the Karaka Bay property, the money provided by Mr Gordon totalled $1,078,740.37 by 12
October 2009.
[41] There were a number of securities entered into in respect of these sums. Specifically:
(a) An unregistered mortgage agreement over the Brougham Street property dated 12 October 2009 between BIL and Mr Buckingham (as mortgagor) and Mr Gordon (as mortgagee) in respect of a principal sum of $1,078,740.37 repayable on demand and at nil interest.
(b)A caveat registered against the title of Brougham Street in Mr Gordon’s name on 7 December 2009 which refers to an unregistered mortgage in Mr Gordon’s favour dated 4 December 2009 (the details of any such mortgage of that date is unclear).
(c) A deed of acknowledgement of debt for $1,078,740.37 dated 29
January 2010 between Mr Gordon as lender and BIL as borrower which provided that the debt was repayable on demand and interest was payable on the debt at a rate of nine per cent per annum. A schedule annexed to this deed set out the payments which comprised the debt.
(d)A general security agreement dated 30 March 2010 between BIL (as debtor) and Mr Gordon (as security holder) and a registered financing
statement in favour of Mr Gordon on 31 March 2010.
28 As recorded in a copy of the sale and purchase agreement provided by Ms Mapp.
[42] According to Ms Mapp, Ms Mapp’s parents advanced $160,000 to Ms Mapp from October 2008 to November 2011 to help with the Brougham Street property.29
In 2009 BIL, Mr Buckingham and Ms Mapp’s parents entered into an agreement to
mortgage. It provided that
In consideration of the $118,350,00 (sic)30 loan (and interest and fees accrued thereon) made by [Ms Mapp’s parents] to [BIL and Mr Buckingham] the parties formally record their agreement that [BIL and Mr Buckingham] will on written demand ... sign a registrable mortgage in favour of [Ms Mapp’s parents] to secure repayment of all money owed by [BIL and Mr Buckingham] to [Ms Mapp’s parents].
[43] It was agreed that the mortgage would be over the Brougham Street property. The agreement also provided that the parties would register a caveat over the Brougham Street property to protect the “interests” of Ms Mapp’s parents. It seems that caveat was lodged on 28 August 2009. BIL also entered into a general security agreement and registered a financing statement in favour of Ms Mapp’s parents in
2010.
[44] The Brougham Street development was not a success. The property market turned and bank foreclosure was a prospect. Efforts were made to avoid this. Mr Buckley refers to a desperate email from Mr Gordon in April 2010 about this and Mr Gordon asking Mr Buckley if he knew of anyone who could assist.
[45] It seems that with a view to avoiding foreclosure, Aquila Real Limited (Aquila) was incorporated on 17 February 2010. An agreement for sale and purchase was entered into on 19 February 2010 for the Brougham Street property between BIL and Mr Buckingham (as vendor) and Aquila (as purchaser) for
$2,500,000. The agreement provided that $1,260,000 of the purchase price would be paid by Aquila releasing BIL and Mr Buckingham from the debt owed by them to Mr
Gordon, and the balance was to be paid in cash.
29 In a table provided by Ms Mapp the loans amount to $160,000 inclusive of interest. But the evidence about this is conflicting. On one version this is exclusive of interest, and with interest the total is said to be $183,000.
30 This sum is clearly incorrect as there has never been any suggestion that there was any loan of this size by Ms Mapp’s parents. It appears that the amount loaned at this stage was about
$118,350.
[46] As at 11 May 2010 it seems that the shareholders of Aquila were Mr Gordon
(80 per cent) and a Mr Ashley Owers (20 per cent). A deed of indemnity dated 11
May 2010 (the day Mr Gordon died) between Mr Gordon and Mr Owers was entered into.31 This deed refers to the intended purchase of the Brougham Street property by Aquila, and loans to Aquila from Southern Cross Finance Limited for $1,236,000 and Matthew Ryan for $300,000 to assist with that purchase. Under this deed Mr Owers agreed to guarantee these loans and Mr Gordon agreed to indemnify Mr Owers.
[47] The Brougham Street property was transferred to Aquila on 12 May 2010 (the day after Mr Gordon’s death). Through this transaction BIL discharged its obligations to repay Mr Gordon’s loans and, with the loans from Southern Cross and Mr Ryan, BIL discharged its secured debts over the property.32 The loans from Southern Cross and Mr Ryan were secured by first and second registered mortgages respectively. A third mortgage was also registered to secure legal fees owed of
$58,756.26.33
[48] About two weeks later, on 18 November 2010 the Brougham Street property was on-sold by Aquila to an unrelated third party. The purchase price was $2.43 million. On settlement Aquila discharged the three registered mortgages. On 19
November 2010 Aquila received the balance of the sale proceeds being $707,589.62
(into an Aquila “00” account).34
[49] From the sale proceeds:
(a) $400,000 was initially put on term deposit; and
31 Mr Gordon’s signature is witnessed by solicitors in Leicester, England.
32 The BIL liquidator’s report dated 15 February 2011 observes: “The third ranking secured creditor was a gentleman named Philip Gordon. Mr Gordon was domiciled in the United Kingdom and has since passed away. We have been able to evidence the advances from Mr Gordon to [BIL] over a certain time frame ... Mr Gordon’s debt was assigned to Aquila Real Limited ...” As at 30 August 2011 BIL’s unsecured creditors were collectively owed
$247,891.25 and remained unpaid.
33 A spreadsheet provided by Ms Mapp showing Aquila Real Limited’s transactions notes that
“Phil agreed to take on this debt as a third mortgage”.
34 See affidavit from the liquidator of Aquila Real Limited. Compare with spreadsheet attached to
Matthew Ryan’s affidavit, prepared by Ms Mapp, which records that the sale proceeds were
$707,477.68. The difference of $112.55 is not explained.
(b) the balance ($307,589.62) was put into another account. [50] From the balance amount (of $307,589.62):
(a) $83,000 was transferred from Aquila to Wellington Luxury Limited on 23 November 2010. Wellington Luxury Limited was incorporated on 21 October 2010 and Ms Mapp is the sole director and shareholder; and
(b) two small payments were made for a valuation report and legal fees.
[51] After that transfer and payments there was a balance of $215,484.26. This was returned to the Aquila “00” account. The term deposit of $400,000 was broken and that sum plus interest was also deposited in the Aquila “00” account. On
25 November 2010 the funds in this account totalled $615,689.85. Ms Mapp transferred $612,689.85 to an account in Mr Gordon’s name and then, on the same date, that sum plus about $45 ($612,734.82) was transferred to Wellington Luxury Limited.
[52] Ms Mapp then allocated 32 of Mr Gordon’s 96 shares in Aquila to Mr Buckingham, and the remainder to herself. Aquila was put into voluntary liquidation on 15 December 2011. A certificate of solvency was filed verifying that the company could pay its debts.
[53] All the money in the Wellington Luxury Limited accounts was expended. The money was expended in the following ways:
(a) payment to Ms Mapp’s parents of $100,000 (in two separate transactions amounting to $37,000 and $63,000) on 1 December 2010;
(b) payment of $399,604.31 to purchase the Homebush property on
16 December 2010. Included in this payment is what is said to be a repayment to Mr Buckingham of the $195,000 he invested (said to be a loan that Mr Gordon and Ms Mapp personally guaranteed) which was applied to the Homebush property purchase;
(c) forfeited deposit on Balgownie House (transferred through Twig
Luxury Trustee Company Limited) amounting to $83,000; (d) mortgage repayments and penalty interest;
(e) building materials; and
(f) personal expenditures.
[54] The Homebush property was purchased in the name of Brougham Street Trustee Company Limited, a company of which Mr Buckingham is the sole director and shareholder. Twig Luxury Trustee Company Limited, of which Mr Buckingham is the sole director and shareholder, held the deposit for the purchase of Balgownie House and paid the holding costs on the purchase for a year. The agreement for sale and purchase was assigned to Wellington Luxury Limited. Wellington Luxury Limited was put into liquidation on 4 March 2013.
Alleged gift
[55] Ms Mapp claims that Mr Gordon gifted her the $1,078,740.37 that he invested in property developments and formed the basis of the estate. She says:
Phil sent me a letter legally gifting me the money. This was so that whatever we created in NZ was joint property, didn’t incur any ex-pat tax, and would support his residency bid.
[56] She further says:
Phil sent me a hand written letter dated late August 2006 gifting me the monies he sent to NZ. [I have been unable to locate that letter] There are also emails referring to the letter gifting the money ... The intention behind this letter was that it would support The Deceased’s NZ residency application if the money was legally gifted to me as his de-facto partner. It would also mean that he would not be liable to pay non-resident tax on any profit from the business. To not be liable for this tax The Deceased had to qualify as having an enduring relationship in NZ.
[57] Ms Mapp does not provide a copy of the letter referred to. She has provided documents which purport to be copies of the emails. These documents are undated. They are both headed “Quoting Philip Gordon <[email protected]”. The first
email is purportedly from Mr Gordon to Ms Mapp and says “IE – I gift you £100000 or $300000 as it is the latter figure that will ultimately show in my psi nz bank account”. The second email is again purportedly from Mr Gordon to Ms Mapp and says “Hey 181 letter gifting sum of monies as requested by bank will hopefully be airborn as we speak”.
[58] Ms Mapp further says that she set up the securities in 2009 and 2010 to try and give protection to the equity that she and Mr Gordon had in the property as a mortgagee sale was imminent. She says:
I structured the money [Mr Gordon] had sent me in NZ since 2006 as a “loan”. This was the only way to try to give some protection to the equity we had in the property in the imminent mortgagee sale situation. Later it was the mechanism by which I managed to the get the property refinanced within the new company [Aquila Real Limited].
Submissions for Mrs Johnston
[59] Counsel on behalf of Mrs Johnston says that the onus is on Ms Mapp to establish that the money was gifted and she has not provided any reliable evidence to show that it was. In any event, counsel says that the following circumstances suggest that the money was not gifted, but was in fact a loan:
(a) Mr Gordon took out various loans in the United Kingdom to send to New Zealand after August 2006, particularly in 2009, so well after the alleged letter gifting funds was sent.35 It is likely that Mr Gordon would have had to put assets forward to support the loans.
(b)As noted above at [41], BIL provided various securities in favour of Mr Gordon, including an unregistered mortgage agreement, caveat, deed of acknowledgment of debt and the registration of a financing statement.
(c) Ms Mapp acknowledged that Mr Gordon’s investment was a loan to
be repaid in an email to Mr David Buckley dated 5 April 2010. In that
35 This is supported by Mrs Johnston’s affidavit, where she says that Mr Gordon “borrowed extensively to continue to fund the New Zealand property developments”.
email, Ms Mapp stated “Phil has all the real power as his current loan to Bast of $1,260,000 [including interest] would be transferred to ARL as the deposit for the $2.5 mil sale agreement.” In an email dated 6
April 2010, Ms Mapp stated “It’s Phil’s money, so Phil can offer whatever return he wants in exchange for any of these.” Those emails were sent one month before Mr Gordon’s death.
[60] Counsel also says that Ms Mapp’s claim of a de facto relationship is inconsistent with her claim that Mr Gordon gifted her the money. He says that if the money was gifted, there was no need for Ms Mapp to claim de facto status because she would already have been entitled to Mr Gordon’s estate. He also submits that the gift is inconsistent with Mr Gordon’s need to demonstrate financial means to support his (alleged) residency bid.
My assessment
[61] I am not satisfied that the money was gifted to Ms Mapp as she claims. The letter she relies on was not adduced. It is not clear that the copies of the emails provided by Ms Mapp are copies of the actual emails sent by Mr Gordon. The copies are not dated, they do not appear to be the full email trail and it is not clear what Mr Gordon is referring to. A gift is inconsistent with the securities that were later entered into. Ms Mapp was not available for cross examination on these matters. In these circumstances the evidence is insufficient to establish that the money was gifted to Ms Mapp.
Issue 3: personal guarantees?
[62] The next question is whether Ms Mapp was entitled to use the funds to repay advances to her parents and a loan from Mr Buckingham. Ms Mapp says that she was on the basis that Mr Gordon personally guaranteed these advances/loans.
The evidence
[63] Ms Mapp says that Mr Gordon gave these guarantees orally and they were not documented. In relation to the loan from her parents Ms Mapp says:
To enable us to sell Brougham St to [Aquila], my parents agreed to lift all their securities and become unsecured creditors. This was done when Bast was in liquidation. ... In return [Mr Gordon] and myself both gave them personal guarantees that their loan would be repaid in priority to any money we might see. This is the basis on which my parents have been paid out by Phil’s estate. They were debtors of Phil’s estate.
[64] The affidavits from Ms Mapp’s parents support Ms Mapp’s claim. Mrs Mapp says:
Lloyd and I loaned Phil and Vanessa money in the sum of $160,000 plus capitalized interest, in various instalments. The money was to help finish the Brougham Street property to enable sale. The first loan advance was 10-10-
2008. Our lawyer advised us not to loan them the money ... We agreed to lift the caveat to allow transfer of title from Bast Trust to Aquila Real Ltd [ARL]. It was explained to us that this transaction was the only way Vanessa and Phil could protect the capital in the property ... Vanessa paid us back this money after Phil’s death, when the Brougham Street property was sold. The total amount repaid was $183,000. I understand this was on the basis that both Vanessa and Phil had personally guaranteed us that it would be repaid. Vanessa transferred $100,000 to our account. The other $83,000 we agreed to advance to Vanessa through her company, Wellington Luxury Ltd, as a new loan. This new loan was to be used as a deposit for her next project, Balgownie House.
[65] Mr Buckingham says, in relation to his loan:
I loaned Phil and Vanessa money to the sum of $150,000 plus capitalized interest, in various instalments. The first instalment of $100,000 was advanced to help purchase the Brougham Street property ... Vanessa and Phil always assured me that I would be paid out, along with Vanessa’s parents before they saw any return. I advanced another $50,000 to help finish the project when things got difficult ... By the time Aquila Real Ltd sold the Brougham Street property I was owed $195,000 from the money I had invested in it. This money was secured in various ways at different times, but always in priority to Phil and Vanessa’s capital, as their personal guarantees and GSAs attested.
Submissions for Mrs Johnston
[66] Counsel for Mrs Johnston submits that the onus is on Ms Mapp to show that Mr Gordon gave the personal guarantees alleged. He emphasises that the only evidence is from those who stand to gain. He also says that the evidence is uncorroborated and untenable because:
(a) there is no documentary evidence of the guarantee;
(b)the evidence lacks detail - for example, there is no evidence on the dates of the discussions or the content of the discussions;
(c) Ms Mapp’s parents say they took legal advice when they made loans to Ms Mapp, yet they only obtained the personal guarantee just before Mr Gordon died; and
(d)Mr Gordon had never met Mr Buckingham, yet apparently decided to personally guarantee his loan.
My assessment
[67] I agree that the evidence falls short of establishing personal guarantees. The evidence is vague. It comes from those who stand to gain. They were not available for cross examination. There is no documentary evidence to support the guarantees.
Declarations and orders?
[68] Aquila’s sale of the Brougham Street property resulted in a loss on Mr Gordon’s investment of $371,150.75. Mrs Johnston accepts that this loss would have occurred even if Mr Gordon was still alive. That left $707,589.62 belonging to Mr Gordon’s estate. From that sum, $11,854.80 was paid by Aquila in post- settlement miscellaneous fees and costs.36 As a result Mrs Johnston’s claims that Mr Gordon’s estate was $695,734.82.
[69] Because Ms Mapp was not the surviving de facto partner of Mr Gordon, his estate was to be held on a statutory trust in favour of the siblings. As administrator of the trust she had a duty to account to the siblings in accordance with that statutory trust.37 Instead she applied the funds in the manner set out above ([49] to [54]). In so doing she acted in breach of trust.
[70] Those who received the funds paid in breach of the statutory trust may be personally liable to the beneficiaries (the siblings). They will be personally liable to
36 This being the difference between the net balance of the investment and the amount Ms Mapp paid into the account of Wellington Luxury Ltd.
37 Nicky Richardson Nevill’s Law of Trusts, Wills and Administration (11th ed, LexisNexis, Wellington, 2013) at [1.2.6].
account to the beneficiaries if they knowingly received the funds in breach of trust or dishonestly assisted in the breach of the statutory trust.38 On this basis Mrs Johnston claims against:
(a) Mr Buckingham for $195,000 (being the amount he received from the
Brougham Street sale proceeds);
(b) Aquila for $695,734.8239 (being the net proceeds from the Brougham
Street sale);
(c) Brougham Street Trustee Company Limited for $400,000 (this company having received $400,000 from the Brougham Street sale proceeds which was applied to purchase the Homebush property); and
(d)Wellington Luxury Limited (in liquidation) for $695,734.82 (being the net proceeds from the Brougham Street sale).
[71] Declarations were sought that each of these entities held the estate funds on a constructive institutional trust for the benefit of the surviving siblings. Orders were also sought for payment of the estate funds they were said to have received. In my view the declarations sought against Mr Buckingham and the other entities are unnecessary and possibly do not accurately state the legal position.40 I am, however, prepared to make appropriate declarations in respect of Ms Mapp and to make orders
to account in respect of the amounts knowingly received by any of these parties.41
38 David Hayton and others Underhill and Hayton Laws of Trusts and Trustees (18th ed, LexisNexis, London, 2010) at [98.2]; Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Brookers, Wellington, 2009) at [18.1.2]; Nicky Richardson Nevill’s Law of Trusts, Wills and Administration (11th ed, LexisNexis, Wellington, 2013) at [4.2.2]; Geraint Thomas and Alastair Hudson The Law of Trusts (2nd ed, Oxford University Press, New York, 2010) at [30.07]. The three (affirmed) categories of knowledge are actual knowledge, wilfully “shutting one’s eyes” to the obvious, and wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make: Butler at [18.4]; Hayton and others at [98.28].
39 This is the figure claimed. However the amount transferred from Aquila seems to have been $45 less than this sum.
40 Hayton and others, above n 38, at [28.1]; Butler, above n 38, at [13.4].
41 Each of these parties was served with these proceedings (refer [6] above). They had the opportunity to take steps to defend the claims against them. Having not done so, I infer that they had knowledge that the funds belonged to Mr Gordon’s estate and were paid to them in breach of the statutory trust in favour of the siblings. The claim against these parties was also made on the basis of knowing assistance. However on the present facts, this alternative does not add anything to the knowing receipt basis on which orders were also sought.
[72] The orders to account which are sought against each of these parties is established on the evidence in all but two respects:
(a) First, on the evidence it does not appear that Mr Buckingham personally received any money. Rather $195,000 from the net sale proceeds said to be repayment of this loan was allocated to Brougham Street Trustee Company Limited, as part of the purchase of the Homebush property.
(b)Secondly, Aquila received the net sale proceeds of $707,598.62 of which $612,689.85 was transferred to an account in Mr Gordon’s name on 25 November 2010. At that point the funds were still held for Mr Gordon. Ms Mapp subsequently transferred that sum to Wellington Luxury Limited. Her actions are not necessarily attributable to Aquila at this point. This means that the claim against Aquila is confined to the $83,000 which was transferred from Aquila to Wellington Luxury Limited on 23 November 2010.
[73] Each of the parties who are liable to account to Mr Gordon’s estate are jointly
and severally liable.42 The orders set out below are made on that basis.
Result
[74] I make the following declarations:
(a) When the defendant was appointed administrator of Mr Gordon’s estate, his estate was held on a statutory trust in favour of Mr Gordon’s surviving siblings.
(b)The defendant acted in breach of that trust when she applied the net proceeds of $695,734.82 from the Brougham Street sale to persons
and entities other than Mr Gordon’s siblings.
42 Hayton and others, above n 38, at [97.25].
[75] I make the following orders:43
(a) Ms Mapp is liable to pay to Mrs Johnston (as administrator of
Mr Gordon’s estate) the sum of $695,734.82;
(b) Aquila Real Limited (in liquidation) is liable to pay to Mrs Johnston
(as administrator of Mr Gordon’s estate) the sum of $83,000;
(c) Brougham Street Trustee Company Limited is liable to pay to
Mrs Johnston (as administrator of Mr Gordon’s estate) the sum of
$400,000;
(d) Wellington Luxury Limited (in liquidation) is liable to pay
Mrs Johnston (as administrator of Mr Gordon’s estate) the sum of
$695,734.82;
(e) Twig Luxury Trustee Company Limited is liable to pay Mrs Johnston
(as administrator of Mr Gordon’s estate) the sum of $80,000.
[76] Interest pursuant to the Judicature Act 1908 is payable on those sums.44 I did not receive any submissions on the appropriate interest rate. The matter is probably academic given that I understand that none of the above parties will be able to meet their liability to the estate in respect of the principal sum. I set the interest rate at three per cent on the basis that interest rates generally have been low for some years.
Mallon J
43 Mrs Johnston initially sought orders against Izard Weston but that application was withdrawn orally at the hearing. Mrs Johnston is not pursuing orders to pay the net profits derived from the investment of the Mr Gordon’s New Zealand estate in further development properties as there are unlikely to be any net profits.
44 Or pursuant to the comparable jurisdiction in equity: McGechan on Procedure (online looseleaf ed, Brookers) at [J87.03(1)]. Compound interest was sought but there were no submissions on why this was appropriate.
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