MacDonald v MacDonald
[2024] NZHC 1134
•9 May 2024
IN THE HIGH COURT OF NEW ZEALAND BLENHEIM REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WAIHARAKEKE ROHE
CIV-2023-406-7
[2024] NZHC 1134
UNDER Section 56 of the Senior Courts Act 2016 IN THE MATTER
of an application for leave to appeal a decision on an interlocutory application
BETWEEN
ANDREW PHILLIP MACDONALD AND KATHRYN GISELLE ENOCINO MACDONALD
Applicants
AND
PHILLIP MACDONALD
Respondent
Hearing: 30 April 2024 Appearances:
S R Moon for Applicants M J Radich for Respondent
Judgment:
9 May 2024
JUDGMENT OF McHERRON J
Introduction
[1] A family dispute has arisen over the sale of a large rural property north of Blenheim. The applicants, Andrew MacDonald and Kathryn MacDonald as trustees of the Maka Trust, sold the property on 2 March 2018 to Andrew’s father, the respondent, Phillip MacDonald (Phillip).1
[2] The applicants claim Phillip has failed or refused to pay $500,000 owing under a deed of acknowledgment of debt associated with the sale of the property (the Deed).
1 In this judgment, I refer to Phillip MacDonald as Phillip to avoid any confusion with the other parties whose surnames are also MacDonald. No disrespect is intended.
MACDONALD v MACDONALD [2024] NZHC 1134 [9 May 2024]
The applicants applied for summary judgment against Phillip. On 18 August 2023, Gendall J dismissed the summary judgment application.2 Leave is required to appeal from Gendall J’s judgment.3 I grant leave to appeal (out of time) for the following reasons.
Background
[3] The property compromises around 7.9 hectares at Wairau Bar. On the property there is a house and farmland where grapes are grown commercially. The property has been owned within the MacDonald family since 1969. The property was transferred to Andrew in 1996 (and later to the applicants as trustees of the Maka Trust).
[4] The applicants’ need for cash drove the sale of the property to Phillip in 2018. Phillip agreed to take out a loan for the funds the applicants needed ($650,000). The dispute between the applicants and the respondent is about whether Phillip agreed to pay an additional $500,000, on top of the $650,000 he had borrowed, in return for the property.
[5] Phillip instructed his lawyer, David Dew, to prepare documents to support the transaction. Mr Dew advised the sale price would need to be at market value to avoid gifting issues. The agreement for sale and purchase states that the purchase price was
$1,150,000.4 Mr Dew’s evidence was that:
(a)this price excluded improvements on the property valued at $700,000 that were owned by Montford Corporation Ltd;
(b)the $500,000 gap between the lending Phillip had obtained and the sale price would be covered by the Deed – this was recorded in further terms of sale annexed to the agreement for sale and purchase;
2 MacDonald v MacDonald [2023] NZHC 2255 (Judgment to be appealed).
3 Senior Courts Act 2016, s 56(3).
4 The standard form approved by the Real Estate Institute of New Zealand and the Auckland District Law Society was used.
(c)his recommendation as to the sale price and the Deed was accepted by the parties;
(d)Phillip signed the agreement for sale and purchase in Mr Dew’s office on or around 2 March 2018;
(e)the Deed was prepared separately and signed on 6 April 2018 by Phillip’s other son Haysley under a power of attorney;
(f)he sent a settlement statement to Phillip recording the purchase price of
$1,150,000, comprising the loan funds of $650,000 and vendor finance of $500,000 secured by acknowledgement of debt.
[6]Final settlement of the property transaction took place at the end of April 2018.
[7] In March 2022, before commencing these proceedings, the applicants made formal demand upon Phillip for full repayment of the $500,000 owing under the Deed.
Judgment to be appealed
[8] Gendall J was satisfied “there is a genuine conflict of evidence in this case which needs resolution at a substantive hearing”.5 The Judge considered there was a real question to be tried, and a material conflict of evidence.6 He found that aspects of the affidavit evidence “would benefit from testing … by way of cross-examination to achieve some clarification”.7
Application for leave to appeal
[9] The applicants seek leave to appeal Gendall J’s dismissal of the summary judgment application to the Court of Appeal. There is no automatic right of appeal, as this was an interlocutory application.8
5 Judgment to be appealed at [41].
6 At [41].
7 At [40].
8 Senior Courts Act 2016, s 56(3). See also MacDonald v MacDonald HC Wellington CIV-2023- 406-7, 13 November 2023 (Minute of McQueen J) at [3].
[10]Relevantly, s 56 of the Senior Courts Act 2016 (the Act) provides:
…
(3)No appeal, except an appeal under subsection (4), lies from any order or decision of the High Court made on an interlocutory application in respect ofany civil proceeding unless leave to appeal to the Court of Appeal is given by the High Court on application made within 20 working days after the date of that order or decision or within any further time that the High Court may allow.
(4)Any party to any proceedings may appeal without leave to the Court of Appeal against any order or decision of the High Court—
(a) striking out or dismissing the whole or part of a proceeding, claim, or defence; or
(b) granting summary judgment.
(5)If the High Court refuses leave to appeal under subsection (3), the Court of Appeal may grant that leave on application made to the Court of Appeal within 20 working days after the date of the refusal of leave by the High Court.
(6)If leave to appeal under subsection (3) or (5) is refused in respect of an order or a decision of the High Court made on an interlocutory application, nothing in this section prevents any point raised in the application for leave to appeal from being raised in an appeal against the substantive High Court decision
[11] In the present case, the summary judgment application was not granted but was dismissed, so s 56(3) applies, rather than s 56(4)(b).
[12] As the application for leave was filed one day late, the applicants applied to extend the time to file an application for leave to appeal. Phillip consented to the application to extend time. Associate Judge Skelton ordered an extension by consent on 31 January 2024.9 Therefore, I proceed to consider whether leave to appeal should be granted.
9 See MacDonald v MacDonald HC Wellington CIV-2023-406-7, 31 January 2024 (Minute of Associate Judge Skelton).
Legal test for leave to appeal
[13] The Court of Appeal set out the test to be applied for leave to appeal under s 56(3) of the Act in Greendrake v District Court of New Zealand:10
… the requirement for leave to appeal should serve as a filtering mechanism to ensure that unmeritorious appeals of interlocutory orders, or appeals of interlocutory orders of no great significance to either the parties or more generally, do not unnecessarily delay the proceedings in which the orders were made. The following considerations were recognised as relevant on an application for leave to appeal:
(a) a high threshold exists;
(b) the applicant must identify an arguable error of law or fact;
(c) the alleged error should be of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value;
(d) the circumstances must warrant incurring further delay; and
(e) the ultimate question is whether the interests of justice are served by granting leave.
[14] When an interlocutory order has a substantive effect, but is not covered by s 56(4), the threshold for leave can be lower than that applied to a proposed appeal from standard interlocutory orders (on discovery or other such truly interlocutory matters).11 This is a consideration that informs the ultimate question of what is in the interests of justice.12 However, the fact that an appeal would be dispositive of the case either in law or as a practical matter is of itself insufficient to justify the granting of leave.13
10 Greendrake v District Court of New Zealand [2020] NZCA 122 at [6], citing Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [13]. Counsel for the applicants, Ms Moon, relies on Yu v Bradley [2018] NZHC 2312 which adopted a two-step approach for appealing an interlocutory decision. However, with no disrespect to counsel, I prefer to apply the criteria identified the Court of Appeal in Greendrake as summarised above.
11 Simons v ANZ Bank New Zealand Ltd [2022] NZHC 2842 at [7], cited in Jessica Gorman and others, McGechan on Procedure (looseleaf ed, Thomson Reuters, Wellington) at [SC56.07].
12 Mathias v Earthquake Commission [2023] NZHC 705 at [32].
13 Ngāi Te Hapu Inc v Bay of Plenty Regional Council [2018] NZCA 291 at [17].
Submissions
Applicants’ submissions
[15]The specific grounds identified in the application for leave to appeal, are that:
(a)the Judge erred in law when he failed to grant summary judgment on the basis of the signed Deed;
(b)the Judge erred in fact at [41] when he found there was a genuine dispute regarding the purchase price in the agreement for sale and purchase;
(c)the decision not to grant summary judgment will cause the applicants to incur substantial cost and delay to resolve this matter, in circumstances where there is no genuine defence to their claim;
(d)it is in the public interest that the summary judgment process is correctly applied to prevent the Court’s time being used to determine a matter to which there is no defence; and
(e)the interests of justice will be served by granting the appeal.
[16] The applicants submit that Gendall J misinterpreted the evidence and wrongly concluded a mistake may have been made in establishing the purchase price. The applicants submit that the Judge was wrong to do so in the absence of pleadings and argument. Moreover, the applicants point to the absence of any mistake in fact.
[17] The applicants consider that it is expeditious for this proceeding to be resolved through summary judgment. If they succeed in the Court of Appeal then that will likely be the end of the Court proceeding. The applicants also submit that the issues are sufficiently important to them to outweigh the time and cost of an appeal.
[18] The specific questions the applicants wish to raise on appeal, as identified in their written submissions, are whether the Judge erred:
(a)in fact, at [39], in indicating that the purchase price “should have been in the order of around $460,000”; and
(b)in law, at [38], in finding that further clarification was required about what cl 19.3 of the agreement for sale and purchase “might truly mean”; and
(c)in fact, at [41], in finding there was a genuine conflict of evidence that needs resolution at a substantive hearing.
[19]In summary, the applicants argue that:
(a)Gendall J was wrong to open the sale price up for consideration given the clear record of what the parties had agreed as the sale price, as recorded in the agreement for sale and purchase: $1,150,000;
(b)Gendall J erred in concluding that further clarification of the meaning of cl 19.3 of the agreement for sale and purchase was required. Rather, they submit that the natural meaning of that clause is clear. Moreover, the solicitor who drafted it, Mr Dew, has given evidence supporting a conclusion that the sale price of $1,150,000 was calculated to exclude the improvements on the property that were owned by Montford Corporation;
(c)contrary to Gendall J’s decision, Mr Dew’s evidence is unequivocal and there is no genuine conflict of evidence that needs resolution at a substantive hearing.
Submissions for the respondent
[20] The respondent’s notice of opposition states the following grounds on which leave is opposed:
(a)No error of law, let alone an arguable error, was made by the Judge in declining to grant summary judgment as there is a genuine dispute between the parties.
(b)No factual error, let alone an arguable error, was made by the Judge at
[41] when he determined that there is a genuine dispute regarding the purchase price in the agreement for sale and purchase.
(c)The granting or the orders sought will cause the parties substantial and unnecessary cost and delay. The circumstances of the case do not warrant incurring the further delay that the appeal process would involve.
(d)The interests of justice will be served by the applicants being declined leave and the dispute being determined in the usual way.
(e)The alleged errors are not of general or public importance that require the determination or otherwise of sufficient importance to the applicants to outweigh the lack of any general or precedential importance.
[21]On behalf of the respondent, in her written and oral submissions, Ms Radich:
(a)submits that there is a genuine legal and factual dispute between the parties precluding summary judgment.
(b)objects to the applicants’ arguments in relation to the Judge’s decision at [38]–[39] (set out at [18](a) and [18](b) above) because these specific challenges were not raised in the application for leave to appeal. The respondent submits that the Court does not have jurisdiction to consider those alleged errors of fact and law.
(c)emphasises Mr Dew’s evidence that the property’s rateable value was used to determine the sale price. She submits Gendall J correctly assessed that the sale price “should have been in the order of around
$460,000”14 after deducting the Montford Corporation improvements worth around $700,000.
(d)argues that cl 19.3 of the agreement for sale and purchase is ambiguous on its face.
(e)asserts that it is disputed whether the Deed was tendered at settlement and whether Phillip was aware of and agreed to its terms. Again, if the sale price for the property was correctly based on the rateable value, after deduction of the value of the improvements, then the applicants cannot succeed, as the alleged debt was not properly incurred and was not owing.
(f)submits that the evidence before the Court raises a genuine dispute and that it is not open to the applicants to relitigate that evidence.
Assessment
Jurisdictional challenge
[22] I dismiss the respondent’s jurisdictional challenge identified at [21](b) above. The applicants’ submissions were filed about two weeks before the hearing, giving the respondent adequate and fair notice of the nature of the arguments in support of leave. Moreover, the basis on which I have decided to grant leave reflects quite closely the grounds stated in the application, as listed above at [15].
Threshold for granting leave to appeal
[23] Requiring leave to appeal is a “filtering mechanism”, as described in the excerpt from Greendrake (set out above at [13]). In my view, the proposed appeal cannot be described as “unmeritorious” or of “no great significance to the parties”. Rather, the objective of the applicants is to follow a simple procedure (summary judgment) that will resolve the underlying dispute as quickly and inexpensively as possible. If they succeed in their appeal, the proceeding will likely be at an end.
14 Judgment to be appealed at [39].
Although it is interlocutory, the application therefore has potential to become substantive in nature. This would support a applying lesser threshold for leave to appeal in this case.15 However, even if the usual high threshold applies, I consider it is met, as the applicants have raised an arguable error in the Court’s decision.
Has an identifiable issue of law or fact been established?
[24] The real issue in this application for summary judgment is whether Phillip has established the existence of any fairly arguable defence.16 For the purposes of summary judgment, there are two competing ways of viewing the transaction:
(a)to accept the sales documentation at face value and to reject Phillip’s defence as an unconvincing and unfounded attempt to revise the purchase price retrospectively; or
(b)to accept there is a genuine dispute about what the parties agreed to be the purchase price for the property.
[25] Phillip disputes that he agreed to pay $1,150,000 for the property.17 He says that he agreed to purchase the land from the applicants for $650,000.18
[26] Gendall J accepted the applicants’ arguments to the contrary (that Phillip clearly did agree to pay $1,150,000 for the property), “do have some merit”.19 These arguments include:
(a)Phillip’s failure to dispute the applicants’ demand for payment of the
$500,000 for over a year.
(b)The fact that Phillip signed the sale and purchase agreement (and his attorney signed the Deed).
15 As was applied by the Court in Simons v ANZ Bank New Zealand Ltd [2022] NZHC 2842 at [7].
16 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3 per Somers J.
17 Affidavit of Phillip MacDonald sworn on 24 April 2023.
18 Statement of defence, para 4.
19 Judgment to be appealed, above n 2, at [32].
(c)The lack of any alternative sale and purchase agreement or any other contemporaneous documents supporting Phillip’s claim he purchased the property for only $650,000.20
(d)Mr Dew was the lawyer acting for both parties and prepared the documentation including the $1,150,000 sale price which was accepted by all parties. Mr Dew also recommended and received instructions to prepare the Deed to cover the funding gap.
(e)A settlement statement was prepared for all parties including Phillip showing the total purchase price, including the $500,000 debt due to the applicants.
(f)If the purchase price had only been $650,000 there would have been no need for the Deed to record the $500,000 indebtedness to have been prepared or signed.
[27] However, Gendall J found it was difficult to reconcile Mr Dew’s comment in his affidavit that the sale price was established from the rating valuation and Heartland Bank’s requirement treat the value of the transaction was to be at least the rateable value, with the acknowledgement in the Deed that the purchase price was ascertained on the basis that the vineyard improvements are owned by Montford Corporation.21
[28] Gendall J concluded, on the basis of Mr Dew’s evidence alone, which Gendall J described as “equivocal”, that there was a genuine conflict in the evidence, needing resolution at a substantive hearing.22
Arguable error in Gendall J’s decision
[29] Gendall J’s focus on the rating valuation for the property is understandable given Mr Dew’s evidence that the sale price was established from the rating valuation. Indeed, the sale price was only $10,000 different from the rating valuation then
20 Noting that all dispositions of land must be in writing: Property Law Act 2007, s 24.
21 Judgment to be appealed, above n 2, at [38]
22 At [41].
applicable. However, there was no evidence that Mr Dew intended (and no contemporaneous evidence that the parties instructed Mr Dew) that the sale price should reflect the rating valuation minus the cost of the improvements.
[30] Nor do there appear to be any contemporaneous documents supporting Phillip’s assertion that the purchase price was $650,000, or that he had agreed the applicants could purchase the property back for $650,000. These assertions might be argued to be improbable, given the latest rating valuation information for the property (released in October 2023) gives a land value of $1,350,000, an improvements value of $940,000 and a capital value of $2,290,000.23
[31] It is a reasonably arguable question for the appeal whether Gendall J was correct that a trial was necessary to determine what a fair price for the property ought to have been, rather than focusing on the issue of what the sale price actually was, as established by the contemporaneous documents.
[32] The applicants ought to be given an opportunity to appeal the decision to allow that question to be considered. If given such an opportunity, they will be able to argue that the clear contents of the sale documents, and the lack of any persuasive evidence undermining them, support summary judgment being entered against Phillip.
[33] I consider the passages of Mr Dew’s evidence about which Gendall J had concerns are arguably capable of being reconciled with the transaction as the applicants say it occurred.
[34] Mr Dew’s evidence was that he advised the sale price needed to be at “market value”.24 Apart from the agreement for sale and purchase, there is no evidence as to what the market value was, but it is not unusual for market value to differ from rating valuation. Mr Dew’s evidence was:
23 Marlborough District Council Rates Search (9 May 2024) search?searchBy=ratesNumber&ratesNumber=528613&property=528613. At footnote 3 of the judgment to be appealed, above n 1, Gendall J referred to the present valuation from the Council’s rates records, dated December 2020, but he did not refer to the October 2023, revaluation.
24 At [35(20)].
(a)that the sale price was established from the rating valuation;25
(b)that it excluded the value of the improvements;26 and
(c)that there needed to be a deed of acknowledgment of indebtedness to cover the $500,000 gap between the $650,000 lending and the
$1,150,000 purchase price.27
[35]Moreover, Mr Dew deposes that:
(a)Phillip gave him his “predominant instructions” on “other aspects of the Agreement, such as the sale price”; and
(b)the parties accepted his recommendation as to the price and the need for a deed.28
[36] The arguable reconciliation of the evidence is that $1,150,000 was agreed by the parties on the sale price after excluding the value of improvements.
[37] Should the applicants be given the chance to invite the Court of Appeal to take a robust and realistic approach to the opposition raised by Phillip?29 On my reading of Mr Dew’s evidence, it is arguably reconcilable with the clear interpretation of the property sale documents advanced by the applicants. I consider they ought to have the opportunity to argue for the rejection of the respondent’s opposition as inconsistent with the contemporaneous documents, lacking in credibility and inherently improbable.30
[38] It follows that I accept that the proposed appeal raises reasonably arguable points.
25 At [35(21)].
26 At [35(23)].
27 At [35(24)].
28 At [35(22) and (24)].
29 Bilbie Dymock Corporation Ltd v Patel (1987) 1 PRNZ 84 (CA).
30 Krukziener v Hanover Finance Ltd [2010] NZAR 307 (CA) at [26], citing Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341.
General or public importance
[39] This summary judgment application does not have general or public importance. However, I accept the matter is of significant importance to the applicants because an appeal has a reasonable chance of resolving the dispute. That factor supports the grant of leave.
Delay and cost
[40] If an appeal were to succeed it would likely be the end of legal proceedings. However, if leave is not granted the matter will need to continue as a general proceeding with discovery, a trial, and consequent delays. Given these competing considerations I do not consider that the possibility of a moderate additional delay occasioned by an appeal (if unsuccessful) to count against leave. An appeal would not add pointless delay; it could make a real difference. Moreover, in all likelihood, more litigation costs will be saved overall by a successful appeal than will be lost by an unsuccessful one.
Interests of justice
[41] Overall, having regard to the above considerations, I conclude that the interests of justice support the grant of leave to appeal.
Result
[42]The application for leave to appeal succeeds.
Costs
[43]Costs are reserved.31
McHerron J
Solicitors:
Pitt & Moore, Nelson for Applicants Radich Law, Blenheim for Respondent
31 Costs were also reserved on the summary judgment application.
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