Leipst v McVeigh HC Napier Ap61/00

[2001] NZHC 477

IN THE HIGH COURT OF NEW ZEALAND
NAPIER REGISTRY AP.61/00

BETWEEN BARRY FREDERICK LEIPST and BARBARA JEAN LEIPST of Napier, Distributors
Appellants

AND DEBBIE McVEIGH
(as Trustee of the Estate of John Stephen McVeigh)
First Respondent

AND MALCOM CHARLES McVEIGH of Auckland, Commercial Cleaner (as Executor of the Estate of Phyllis Eileen McVeigh late of Hastings, Retired)
Second Respondent

Hearing: 27 April 2001

Counsel: MJ Wenley for Appellants
GW Calver for First Respondent
AJ Harris for Second Respondent

Judgment: 14 May 2001

JUDGMENT OF ELIAS CJ

Solicitors:
Messrs Willis, Toomey Robinson, Napier for Appellants:
Messrs Gresson Grayson and Calver, Hastings for First Respondent:
Messrs Gifford Devine and Partners, Hastings Solicitors for Second Respondent:

[l] This is an appeal against a decision of Judge Christiansen in the District Court at Hastings refusing an application by the appellants for a garnishee order against the second respondent.

[2] The appellants obtained judgment in the High Court on 28 January 1999 against the Estate of John Steven McVeigh for $16,000 together with interests and costs of $1,500. The judgment was entered on a claim by Mr and Mrs Leipst for misrepresentation on the sale of a property at Pakowhai purchased by Mr and Mrs Leipst. The property purchased was sold by the Administrator of the Estate of John McVeigh.

[3] By the time judgment was obtained against the John McVeigh Estate, it had been much depleted by the costs of the litigation. It is common ground that the Estate is insufficient to meet the judgment debt. In those circumstances the appellants as judgment creditors sought a garnishee order against the Executor of the Estate of Phyllis Eileen McVeigh. Phyllis McVeigh was the mother of John McVeigh. The garnishee order was sought in respect of an advance of $90,000 made by the John McVeigh Estate to Phyllis McVeigh in her lifetime.

[4] The application is under s 96(l) of the District Courts Act 1947 which provides that:

“Any person who has obtained a judgment or order for the payment of money may take proceedings in accordance with the rules to obtain payment to him of the amount of any debt owing or accruing to the judgment debtor from any other person or so much thereof as may be sufficient to satisfy the judgment or order and the costs of the garnishee proceedings.”

[5] The procedure for such applications in the District Court is set out in R631-648 of the District Court Rules 1998. The Rules provide for notice to be given to any person from whom the judgment debt is sought to be recovered. Such person is referred to in the Rules as the “sub-debtor”. Where a sub-debtor disputes liability, R639(2) empowers the Court “after hearing the judgment creditor, the sub-debtor, and the judgment debtor, or such of them as appear” to

“(a) Determine the question of the liability of the sub-debtor, and make such order as to the payment of the judgment creditor of any sum found to be due from the sub-debtor to the judgment debtor, and as to costs, as maybe just; or

(b) Order that any issue necessary for determining the question of the liability of the sub-debtor be tried in such manner as the Court thinks fit, and direct which of the persons interested . . . . . . . shall be plaintiff and which shall be defendant; or

(c) Order that the judgment creditor be at liberty to sue the sub-debtor for the amount alleged to be due by the sub-debtor to the judgment debtor, if it is less than the judgment debt, or, if it is greater, then for the amount of the judgment debt with costs of suit.”

[6] The Executor of the Phyllis McVeigh Estate gave notice that as sub-debtor he disputed the debt claimed to be due to the John McVeigh Estate. Affidavits were filed on behalf of the judgment creditor, the judgment debtor and the sub-debtor. The matter was heard by Judge Christiansen on 13 November 2000. No party sought to cross-examine the deponents of any other party. Nor did any party suggest that the optional procedures provided by R639(2) under sub-paras(b) or (c) (which permit resolution of such disputes by action or trial in such manner as the Court may direct) be used to determine the liability of the sub-debtor.

[7] The sub-debtor did not dispute the advance of $90,000. It maintained rather, that an arrangement made between John McVeigh and his mother in their lifetimes gave rise to a set-off. Since both parties to that arrangement had died the evidence of the arrangement was derived from documents and oral hearsay evidence contained in the affidavits.

[8] Such documents as existed were produced. Their authenticity was not the subject of challenge. The fact of the making of the oral hearsay statements was similarly not challenged by any party. What was in dispute were the inferences properly to be drawn from the evidence as a whole were in dispute. In those circumstances, it is not surprising that no party thought it necessary to have the question of the sub-debtor’s liability determined by the alternative processes. The Judge made his determination of the sub-debtor’s liability on the basis of the affidavit material as he was empowered by R639(2)(b) to do without objection from any party that that course was not appropriate.

[9] The Judge determined that the sub-debtor was not liable to the judgment debtor because it was entitled to a legal set-off on the basis that the John McVeigh Estate owed the Phyllis McVeigh Estate “at least $90,000.00”. The effect of the set-off was that there was no liability.

[10] The issues on the appeal are:

• Whether there was a proper evidential basis for the factual determination that the John McVeigh Estate owed the Phyllis McVeigh Estate “at least $90,000.00”.

• Whether the District Court Judge was wrong to reject the submission that the Phyllis McVeigh Estate was estopped from claiming a set-off, even if the Judge was correct in holding that the John McVeigh Estate owed the Phyllis McVeigh Estate $90,000.

History of the Advances Between John McVeigh and Phyllis McVeigh

[11] Phyllis McVeigh was the mother of John McVeigh. In 1994 each owned a separate property in Tauranga. John McVeigh was bringing up two children from his first marriage and had separated from his second wife, Debbie McVeigh. Phyllis McVeigh had a good relationship with her son and had been of great assistance to him in caring for his children. They decided to move to a lifestyle block at Pakowhai so that John McVeigh could work around the property while caring for the children.

[12] Both Tauranga properties were sold. John McVeigh received net proceeds of $97,000 from the sale of his Tauranga house. The exact amount received by Phyllis McVeigh from the sale of her Tauranga home is not disclosed on the material before the Court.

[13] In a handwritten note prepared for her solicitors after John McVeigh’s death for the purposes of claims against his estate in contract and under the Testamentary Promises and Family Protection legislation, Phyllis McVeigh described how, when in Tauranga, John McVeigh had resigned from his employment to look after his children and was in receipt of a domestic purposes benefit. He felt, she said, that he was “going backwards”. He suggested that he and his mother sell their homes to buy a property together from which John McVeigh could make some income, eventually repaying her. The note claims that the proceeds from both Tauranga properties were pooled and put into the purchase of the Pakowhai property. It was purchased however in John McVeigh’s name. This note prepared by Phyllis McVeigh was admissible after Mrs McVeigh’s death under s 3 of the Evidence Amendment Act 1980 (No.2).

[14] John McVeigh’s lawyers received the money to settle the purchase of the Pakowhai property from two sources. $80,000 was an advance from Countrywide Bank to be secured by mortgage against the property. The balance of $161,294.75 was received by the solicitors for John McVeigh for his credit from Phyllis McVeigh. The receipts were attached to the affidavits before the Court. In her written memorandum Phyllis McVeigh said that the amount of $161,294.75 was paid from her Post Office Savings Bank account.

[15] Why the money should have been paid out of the account of Phyllis McVeigh is not explained. There is some speculation on the material before the Court that the use of his mother’s account may have been thought prudent by John McVeigh because of his receipt of a domestic purposes benefit. The speculation is not material. What is more important is that there is no suggestion on the evidence that John McVeigh had access to any moneys other than the net proceeds of his Tauranga property to put into the purchase. Those proceeds are known to have amounted to $97,000.

[16] In her handwritten note Phyllis McVeigh did not identify the amount of money she said she contributed to the Pakowhai property. During her lifetime her solicitors on her behalf claimed that $90,000 was put into the property by each of them.

[17] Malcolm McVeigh, Phyllis McVeigh’s other son, deposed in an affidavit before the Court that from his own “personal knowledge” and from the records of his mother’s estate file, his mother “always asserted that only $90,000.00 of the $161,294.75 advanced was contributed by her”.

[18] In this Court, Mr Wenley for the appellants suggested that on its own face the suggestion that Phyllis and John McVeigh had each contributed $90,000 to the purchase was inconsistent with the trust account receipt for $161,294.75 but the trust account receipt is for the moneys received to enable settlement to take place. The documentary substantiation does not extend to the deposit which would have preceded settlement. The claims put forward on behalf of Phyllis McVeigh, alternatively based upon contract or the Testamentary Promises or Family Protection legislation in respect of $90,000 advance and benefits amounting to $54,000, were or was put forward before the orchard property was sold and long before any dispute arose between the appellants and the estate. In my view the Judge was entitled to accept that Phyllis McVeigh contributed $90,000 to the purchase.

[19] That was the claim she made through her solicitors in February 1995, one month after John McVeigh died. The letter then written by her solicitors identifies the moneys claimed by Phyllis McVeigh to have been advanced to John McVeigh as comprising two different types of advance. A schedule to the solicitor’s letter of 21 February 1995 to the solicitor for the John McVeigh estate records them as:

“1. Funds directly advanced to her son in orchard purchase

This is $90,000.00. Both her and her late son each put in $90,000.00. Their shares were derived from the sales of their respective residential homes in Tauranga.

2. Other funds advanced to her son for a miscellany of reasons

These matters are set out in Mrs McVeigh’s handwritten notes which accompany this letter. Some items are quite obviously loans whilst others may be less certain.

The total of these items (whatever the interpration) is $54,378.88.”

[20] John McVeigh died in January 1995, only 6 months after moving into the property. Apart from minor items, the only substantial asset in the estate was the orchard property at Pakowhai. John McVeigh died intestate. Letters of Administration were granted to his wife, Debbie McVeigh. Phyllis McVeigh immediately through her solicitors gave notice of her claims against the estate, as recorded in the letter of 21 February by her solicitors.

[21] By May 1995 Debbie McVeigh had indicated that she herself had renounced any interest in the John McVeigh estate. The solicitor acting for John McVeigh’s children wrote acknowledging that, from their point of view “the $90,000.00 loan is clearly not in dispute. The remainder of the amount sought by Mrs McVeigh to reclaim what is described as “further loans” would appear to be questionable.

[22] The solicitors for the John McVeigh estate, for Phyllis McVeigh and for the children of John McVeigh entered into settlement discussions in respect of Phyllis McVeigh’s claim which are the subject of correspondence which was before the District Court Judge. Although Mr Wenley suggested that this correspondence, being “without prejudice,” was not admissible, no claim of privilege is maintained by those entitled to assert it. In my view the correspondence was properly admissible and indeed in the end the point was not pressed by Mr Wenley on the appeal.

[23] By August 1995 the parties interested in the John McVeigh estate had come close to a settlement of Phyllis McVeigh’s claim. The proposal included “a payment of $100,000 to [Phyllis McVeigh] in full and final settlement of loan repayments including the original $90,000.00 advance and subsequent claims made by your client of other sundry matters”. Counsel for the children indicated that the terms were acceptable.

[24] The settlement was not concluded at that time because Phyllis McVeigh was not happy with the further proposal as to how she should leave her estate after her death. The Administrator was anxious to protect John McVeigh’s children as far as possible but Phyllis McVeigh took the view that her Will was a private matter for her.

[25] In the meantime, the Pakowhai property had been sold by the Administrator to the appellants. Settlement of the sale took place in August 1995. Phyllis McVeigh had moved out of the property at Pakowhai and had entered into possession of a flat property she intended to purchase. By 13 November 1995 her solicitors wrote to the solicitors for the Administrator as follows:

“Our client is now under considerable pressure to make unconditional a flat property that she has entered into possession of in contemplation of receiving her entitlement from the Estate.

We repeat that in our view our client has a simple debt owing to her from the Estate for monies advanced to her son over the years.

Please advise by return if you are in a position to pay to us the sum of $100,000.00 immediately? If the full sum is not available is the sum of $90,000.00 available?

If we are unable to obtain payment in either form then it is likely our client will need to vacate the property she has just moved into which would cause her considerable distress not to mention financial loss.

Can you please if possible get an answer to us today. We are copying this to Mackenzie Elvin [the solicitors for the Administrator].”

[26] No settlement of the dispute was concluded. By this time, a dispute had arisen about the sale by the John McVeigh Estate of the Pakowhai property. It appears from the contemporary correspondence, particularly a hand delivered letter from the solicitors for the John McVeigh Estate dated 16 November 1995 that the Estate was not willing to settle Phyllis McVeigh’s claim without resolution of the Leipst claim. The arrangement entered into to enable Phyllis McVeigh to settle her flat purchase was that the Estate granted her an interest free advance of $90,000, repayable “upon demand”. The deed of acknowledgement of debt sent by the solicitors for the estate to Phyllis McVeigh for her signature was on the basis set out in the letter of 16 November:

“You will see that the document records an interest free advance of $90,000.00 repayable “upon demand” and contains an agreement to mortgage resulting in a caveatable interest in favour of the estate.

Although the advance is repayable “upon demand” the intent of the loan is to allow your client to purchase the house she has found and likes, and also allow more time in which to resolve both the Leipst issues and the finality of your client’s claim.

As mentioned all costs and disbursements associated with this loan will be met by the estate. When the estate is finally ready to be distributed, we will make demand of the repayment of the loan via your firm in return for a cheque from our firm to yours being the amount finally agreed to by the estate in favour of your client. Naturally any shortfall between the loan repayment and the amount finally paid to your client would need to be met by your client to yourselves to balance your trust account, all such movements of money taking place in the one banking day.

We look forward to the return of the enclosed documents duly executed just as soon as possible.”

[27] In accordance with this proposal Phyllis McVeigh entered into a deed dated 17 November 1995 by which the John McVeigh Estate advanced her the sum of $90,000 to assist with the purchase of her flat. The advance was expressed to be free of any interest but payable “upon demand”. The deed obliged Phyllis McVeigh to grant a memorandum of mortgage over the property if required to do so. It also contained an acknowledgement that the Estate was entitled to register a caveat against the property.

[28] Malcolm McVeigh in his affidavit expressed the view that Phyllis McVeigh had no option but to accede to this arrangement in the interim. That view is amply justified by the sequence of events and the express terms of the correspondence.

[29] More importantly, the express terms of the letter of 16 November envisage that any demand for repayment of the advance would be “in return for a cheque from our firm to yours being the amount finally agreed to by the estate in favour of your client”. That language anticipates a set-off. It is clear that an accounting between the parties which resolved their liabilities was the basis upon which any demand for the loan would be made. The advance was clearly without prejudice to Phyllis McVeigh’s claim and indeed the terms of the letter look to payment by the Estate to her in respect of her advance.

[30] Phyllis McVeigh died on 2 February 2000. The claim she had against her son’s Estate had not been resolved in her lifetime. That may have been because the John McVeigh Estate continued to be embroiled in litigation with the appellants. The litigation was only resolved in January 1999 in the High Court. The application for garnishee order was made in September 2000.

The Decision in the District Court

[31] After reciting the various positions of the three parties before the Court, the Judge concluded that “monies from the sale of the properties of J.S. McVeigh and Phyllis McVeigh were plainly amalgamated in that sum of $161,294.75 paid from the latter’s account to the solicitors of the former”. Some criticism was made on the appeal of the fact that the Judge thought it a reasonable inference that John McVeigh did not wish to be seen as holding money in his own name when a Social Welfare beneficiary.

[32] I agree with the Judge that may well be an explanation for the fact that his money was passed through his mother’s account, but in any event it is clear from the judgment that such inference was irrelevant to the conclusion reached by the Judge. That turned upon Phyllis McVeigh’s claim for repayment upon her son’s death. Mr Wenley had criticised the lack of any direct statement by Phyllis McVeigh that she had supplied $90,000 towards the purchase price. As the Judge indicated in response to the same argument, the correspondence between the solicitors contains the details of the claims.

[33] The Judge acknowledged that much of the correspondence was on a “without prejudice” basis but considered it to be admissible. As indicated above, I agree with the view as to admissibility. The Judge considered that it was “in deference to the position surrounding the Leipst’s claim and because of Phyllis McVeigh’s immediate need for funds, that the $90,000 was structured as an advance to her from her late son’s estate:

“I am firmly of the view that but for the Leipsts claim, it was inevitable an agreement would have been reached to repay that sum of $90,000.00 to Phyllis McVeigh. Whilst noting that the adminstratrix of the J.S. McVeigh estate stated she never acknowledged such sum was due to Phyllis McVeigh and would have put that estate to proof upon its claim, she herself had renounced any interest in the J.S. McVeigh estate in favour of the two children. Further, counsel acting for those two children at the time stated that from the children’s point of view, the $90,000.00 loan was clearly not in dispute.

I apprehend that the reason that motivated the administratrix of the J.S. McVeigh estate not to admit liability to repay the sub debtor estate was to put pressure on that estate to make provision for the late J.S. McVeigh’s two children, who otherwise have generally been deprived of any entitlement to that estate, not the least by the huge costs that estate has borne in meeting the Leipsts claim.

In my judgment the Phyllis McVeigh estate has a set-off and therefore a defence to any claim by the J.S. McVeigh estate. Because her son did not repay the loan Phyllis McVeigh had little choice but to borrow that amount from the estate so that she could purchase a flat. There are two liquidated debts between the two estates. They are capable of legal set-off. I accept the submission that even an equitable set-off would be available due to the link between the loans. The loan to Phyllis McVeigh arose out of her demand for repayment of her advances that were by then due by her son’s estate.”

[34] The Judge rejected a contention on behalf of the appellants that a limitation argument defeated any claimed set-off. There is no need to refer further to that point. It was not pursued on appeal.

[35] Ultimately, the Judge concluded on the balance of probabilities that there was enough evidence to prove that the John McVeigh Estate owed the Phyllis McVeigh Estate “at least $90,000.00.” The Phyllis McVeigh Estate for repayment of the $90,000 advance had a valid set-off and defence to any claim made by the John McVeigh Estate. The Judge determined that “the quantum of liability due by the Phyllis McVeigh estate to the J.S. McVeigh estate is nil”. It followed that the application for garnishee order was refused.

Decision

[36] I am satisfied that there is no substance in the detailed criticisms made by Mr Wenley of the Judge’s reliance on evidence said to be inadmissible. As already indicated, I consider that the without prejudice communications were admissible in circumstances where no claim of privilege was made by any party entitled to it. For the most part those communications pre-date the dispute between the appellant and the John McVeigh Estate. There was no occasion, therefore, for the facts to have been distorted by members of the same family seeking to defeat a claim from an order, such as Mr Wenley suggested.

[37] To the extent that the letters proceed on the basis of information as to the circumstances of the purchase of the Pakowhai property which were supplied by Phyllis McVeigh, they are hearsay. However they are admissible under s 3(1)(a) of the Evidence Amendment Act 1980 (No.2). The correspondence records Mrs McVeigh’s claim that she had advanced $90,000 to her son for payment of the Pakowhai property. Phyllis McVeigh’s handwritten narrative, supplied to her solicitors and relied upon by them in their correspondence, describes the basis of the advance as a loan which John McVeigh undertook to repay when he was able to do so. That statement too is admissible under s 3 of the Evidence Amendment Act (No.2).

[38] Malcolm McVeigh’s affidavit that his mother “always asserted” that only $90,000 of her money was applied to the Pakowhai property, indicates a repetition of the position which he deposes was information he had by reason of his personal knowledge. Malcolm McVeigh was not cross-examined on his affidavit. The assertions of his mother are oral hearsay evidence admissible under s 7 of the Evidence Amendment Act (No.2).

[39] Corroboration for Phyllis McVeigh’s account is supplied by the payment of the settlement moneys through her bank account against the background of the sale of the Tauranga properties. The amount of money available to John McVeigh from the sale of his property was well short of the amount required for settlement of the Pakowhai property. There is no suggestion that he had access to other funds. His status as a welfare beneficiary at the time does not appear to have been in contention.

[40] Although initially Mr Wenley advanced a submission that Phyllis McVeigh’s handwritten note was inadmissible because not an original document and not certified as true under s 6 of the Evidence Amendment Act (No.2), that submission was not maintained in the end. I record it only for completeness.

[41] In my view all this evidence was rightly admitted. Nor do I accept the further contention on behalf of the appellants that it was not entitled to any weight. Although the Administrator of the John McVeigh Estate has not formally acknowledged the debt to Phyllis McVeigh (no doubt for reasons of caution given the litigation still on foot with the appellants), it is striking that neither the Administrator nor the children of John McVeigh have sought to challenge the existence of the debt. As Mr Wenley acknowledged in argument, the fact that no one in the family potentially affected challenged Phyllis McVeigh’s claim that she had advanced $90,000 for the Pakowhai property was relevant to the credibility of the claim. Before the dispute with the appellants arose, the parties on a without prejudice basis had been willing to settle Phyllis McVeigh’s claim by a payment of $100,000 out of the John McVeigh Estate. It was not necessary for the dispute between the two Estates to be formally resolved by agreement or litigation before the Phyllis McVeigh Estate could defend the present proceedings for garnishee order. As R631 makes clear and as Mr Wenley acknowledged in the course of argument, these proceedings are apt to determine the question of liability.

[42] The fact that no claim was made by Phyllis McVeigh during the lifetime of her son is not surprising. The property had been acquired only some months before John McVeigh died. There was no time within which the arrangements for repayment could have been effected. There is no inconsistency in Phyllis McVeigh’s not making any formal claim until her son died. There was no occasion to do so beforehand. What is striking is that the claim was made immediately upon her son’s death and well before there was any fear that his Estate might not be sufficient to meet other debts. That position only arose after the claim by the appellants. At the time it was put forward it is notable that Phyllis McVeigh’s claim in respect of the $90,000 advance was not contentious within the family.

[43] In my view there was ample evidential foundation upon which the Judge could conclude that Phyllis McVeigh had advanced $90,000 to her son by way of loan and that his son was in debt to her to at least that extent. The dollar amount of the advance appears in Phyllis McVeigh’s solicitor’s letter, made with her authority during her lifetime. It is consistent with the shortfall from the sum of money known to have been received by John McVeigh from the sale of his Tauranga property. It is also consistent with the sale of Phyllis McVeigh’s Tauranga property at the same time. Although the $180,000 suggested by Phyllis McVeigh as having been put into the Pakowhai property ($90,000 from each of them) does not exactly coincide with the settlement receipts, that circumstance is explicable by the likely amount of the deposit paid.

[44] In all the circumstances the Judge was right to conclude that at least $90,000 was owed by the John McVeigh Estate to his mother’s Estate.

Estoppel

[45] The debt owed by the John McVeigh Estate to his mother’s Estate gave rise to a legal set-off in respect of the advance recorded by the deed of acknowledgement of debt made in November 1995. The Judge in my view was also correct to hold that the circumstances were such that an equitable set-off would also be available in application of the principles described in Grant v NZMC Ltd [1989] 1 NZLR 8.

[46] I accept the proposition contended for by the appellants that a person may be estopped from relying upon rights of set-off but I am unable to accept that any question of estoppel arises on the facts of this case.

[47] The second respondent does not deny the effect of the deed in its terms. There is no question therefore as to estoppel by deed. The argument advanced on behalf of the appellants is that the stipulation in the deed that the advance there recorded from the John McVeigh Estate to Phyllis McVeigh was repayable “upon demand” is a stipulation which precludes set-off. Mr Wenley did not go so far as to say that in no cases where an advance must be repaid upon demand can set-off be asserted. His argument is that where an acknowledgement of liability to repay upon demand is made in the knowledge of the facts which would give rise to set-off, the agreement to pay “upon demand” creates an estoppel which prevents the setting up of a set-off. No authority was cited in support of this contention. I regard it as unsound.

[48] The terms of the deed did not purport to exclude set-off. The advance being made had to be determinable either by date or by an event such as demand. In my view there is no inconsistency between agreeing to repay a loan upon demand and subsequently meeting that demand with a set-off otherwise available. I do not think it matters at all whether the basis of the set-off was in existence and known to the borrower at the time of the advance.

[49] In the absence of any explicit representation that no set-off would be advanced, none can be inferred in the circumstances of this case. Indeed all the circumstances point to the opposite conclusion. The letter of 16 November records the basis of the arrangement entered into under the deed of acknowledgement of debt. It was clearly a device to hold the position for the Estate while the disputes were resolved. The indication that demand would be made for repayment “in return for a cheque from our firm to yours being the amount finally agreed to by the estate in favour of your client” is explicit acknowledgement that the two debts were to be adjusted by way of set-off. There is no possible basis upon which it could be said that the John McVeigh Estate has altered its position to its detriment as a result of the actions or representations of the debtor under the deed of acknowledgement of debt. There is no question here of the John McVeigh Estate having been led to believe that Phyllis McVeigh was abandoning her claim. The argument that the second respondent is estopped from raising a set-off in respect of its indebtedness to the John McVeigh Estate is without merit.

[50] The appellants appear to have felt aggrieved that the Phyllis McVeigh Estate, through set-off, is able to achieve payment of the debt owed to it when the John McVeigh Estate is unable to meet the judgment debt to them. That is an attitude which applies hindsight inappropriately. At the time the arrangement was entered into between the John McVeigh Estate and Phyllis McVeigh, there was no question of preference of creditors. Phyllis McVeigh claimed that the Estate of John McVeigh owed her at least $90,000. The matter could equally have been determined by the settlement negotiated at the time. If it had been, no complaint could have arisen.

[51] The arrangement entered into under the deed of acknowledgement of debt preserved the John McVeigh Estate pending the determination of whether it in fact owed $90,000 to Phyllis McVeigh. If it had not, the money advanced in November 1995 would have been repaid, augmenting the size of the Estate. These proceedings have resolved the question of the liability of the sub-debtor by determination of the Court rather than by settlement. There is no unfairness or prejudice to the judgment creditor. The deed of acknowledgement of debt operated as security while the liability of the John McVeigh Estate to Phyllis McVeigh was determined. The availability of set-off was integral to the proposal and allowed the position to be held in the meantime. The judgment creditor could succeed in the present proceedings only if the Phyllis McVeigh Estate failed to establish the debt owed to it.

[52] The judgment creditor cannot be in a better position than the John McVeigh Estate. Through this procedure the Administrator of the John McVeigh Estate has put the Phyllis McVeigh Estate to proof. It has discharged that proof on the balance of probabilities to the satisfaction of the District Court Judge and to my satisfaction. The appeal is dismissed.

[53] The respondents are entitled to costs. The second respondent carried the burden of the argument on appeal, as was appropriate given its interest. The argument took the best part of a day. The appellants are to pay costs of 5,000 dollars to the second respondent and 1,000 dollars to the first respondent.