MacDonald v MacDonald
[2023] NZHC 2255
•18 August 2023
IN THE HIGH COURT OF NEW ZEALAND BLENHEIM REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WAIHARAKEKE ROHE
CIV-2023-406-000007
[2023] NZHC 2255
UNDER The High Court Rules 2016 IN THE MATTER OF
Summary Judgment
BETWEEN
ANDREW PHILLIP MACDONALD, self-
employed, of Queensland Australia AND KATHRYN GISELLE ENOCINO
MACDONALD, Team Manager, of Queensland Australia, as trustees of the Maka Trust
Plaintiffs
AND
PHILLIP MACDONALD of Blenheim, Farmer
Defendant
Hearing: 14 August 2023 Appearances:
S R Moon for the Plaintiffs M J Radich for the Defendant
Judgment:
18 August 2023
JUDGMENT OF GENDALL J
Introduction
[1] This proceeding involves an acrimonious dispute between members of the Macdonald family.
[2] Before me is an application for summary judgment by the plaintiffs, Andrew Phillip Macdonald (Andrew) and Kathryn Giselle Enocino Macdonald (Kat) in their capacity as trustees of the Maka Trust. The application and claim is against the
MACDONALD v MACDONALD [2023] NZHC 2255 [18 August 2023]
defendant, Phillip Macdonald (Phillip), who is Andrew’s father, for an alleged debt amounting to $500,000 plus interest.
[3] According to the plaintiffs, this is a straightforward contractual claim made under a properly executed Deed of Acknowledgement of Indebtedness dated 6 April 2018 (the Deed) recording a loan from them to Phillip repayable “upon demand in writing being made and pending demand no interest shall be payable”. The Deed was executed pursuant to a property Sale and Purchase Agreement dated 2 March 2018 (the ASP) and prior to settlement of that property transaction.
[4] As both parties acknowledge, there are factual disputes in the affidavits before the Court. Whilst acknowledging that generally the summary judgment procedure is not a suitable one for resolving factual disputes, the plaintiffs’ position is that judgment should still be entered here because:
(a)their claim is based on a standalone Deed, clearly acknowledging the indebtedness, and they maintain there is no factual challenge relating directly to that document; and
(b)Phillip’s challenge to the whole arrangement, and the validity of the ASP upon which the indebtedness is said to be based, according to the plaintiffs, completely lacks credibility here. This Court, accordingly can safely proceed to disregard Phillip’s evidence in this regard.
[5] In opposition to the present application, Phillip maintains there is a genuine legal and factual dispute between the parties such that this is not a straightforward contractual claim as the plaintiffs allege. It is therefore, he says, an unsuitable matter for summary judgment.
Background facts
[6] As I have noted, this is a family dispute. The background to this matter relates to a large Macdonald family property containing 7.8914 hectares at Wairau Bar, northeast of Blenheim (the subject land).
[7] As I have noted, the plaintiffs, Andrew and his wife Kat, are the trustees of the Maka Trust and they live in Australia. The defendant, Phillip, is Andrew’s father and as I understand it, he has been involved in the Marlborough area for many years growing grapes and operating a vineyard.
[8] On the subject land, there is a house and a significant amount of rural land upon which grapes are grown commercially. A company in which Phillip holds 70 per cent of the shareholding, Montford Corporation Limited (Montford) grows grapes on the farmland portion. Phillip is a director of Montford along with Andrew’s brother Haysley Macdonald (Haysley) and their mother as the third director.
[9] The subject land has been in the Macdonald family since 1969. It passed to Phillip and his brother Brigham Macdonald (Brigham) in 1984. Later it was transferred to Andrew in 1996, and from there passed to Andrew and Kat as trustees of the Maka Trust.
[10] David William Richard Dew (Mr Dew), a solicitor in Marlborough since 1973, has filed an affidavit dated 30 June 2013in this proceeding. He deposes that he has acted for Phillip and various other members of the family for a period of approximately 20-30 years so he says he knows the Macdonald family background well.
[11] Mr Dew, in his affidavit, maintains that when the subject land was transferred to Andrew in 1996:
[8] It is clear in my mind that Andrew did not pay market value when he initially acquired the Property, and that is why there was a leaseback arrangement put in place without rental being paid for the rural land.
And:
[9]...Andrew only paid for the house portion, hence it was agreed that Andrew would lease the rural land back [to his father and uncle and then later to Montford] for 20 years at no cost.
[12] In March 2018 the plaintiffs Andrew and Kat sold the subject land to Phillip under the signed ASP which had been prepared by Mr Dew. That ASP for the 7.8914 subject land appeared to be signed by Andrew and Kat as vendors and Phillip as purchaser. The sale was at a stated total purchase price of $1,150,000 (inclusive of
GST if any). Importantly the ASP, which provided for a settlement one month later, provided a number of “further terms of sale” at paragraph 19.0 which read as follows:
19.0 Purchase price
19.1 The purchase price owing to the vendor shall be partially satisfied by way of a Deed of Acknowledgement of Indebtedness from the vendor (“donor”) to the purchaser (“donee”) in the sum of $500,000 (“debt”).
19.2. The purchase price will be accordingly satisfied as follows: Debt: $500,000
Cash: $650,000 Total: $1,150,000
19.3 The purchase price has been ascertained on the basis that the vineyard improvements on the property in the sum of $700,000 are owned by Montford Corporation Limited.
[13] On or about 6 April 2018, the Deed, which recorded specifically an amount of indebtedness at $500,000 and its “origin” as being for “cash advance for the purchase of the property at Wairau Bay Road, Marlborough…” appeared to be signed by Andrew and Kat as “creditor” and on behalf of Phillip as “debtor” by his attorney Haysley. Haysley also completed an appropriate certificate of non-revocation and non-suspension of the enduring power of attorney dated 5 November 2013 he held for Phillip and that he confirmed had been granted to him on 5 November 2013. Haysley’s signature of the deed on behalf of Phillip was witnessed by a legal executive from Mr Dew’s legal firm.
[14] The Deed which acknowledged this $500,000 of indebtedness went on to state at [2] that:
[2] Such indebtedness is payable by the debtor to the creditor upon demand in writing being made and pending demand no interest shall be payable.
The Deed provided further at [4] that the debtor, if called upon by the creditor, would provide to the creditor a mortgage over the Wairau Bay property to secure the
$500,000 indebtedness. No such mortgage it seems was ever requested or provided.
[15] A final settlement under the ASP took place around 26 April 2018 at which time Phillip paid to the plaintiffs $650,000 (using bank borrowings over the property he had sourced from Heartland Bank) and the balance purchase price of $650,000 was settled by way of the Deed. Mr Dew, through his legal firm, completed a settlement statement for the sale and purchase to record these matters. A copy of it is before the Court.
[16] Some years went by. Then in March 2022 the plaintiffs made a formal demand upon Phillip for full repayment of the full $500,000 owing under the Deed.
[17] It was not until over a year later in April 2023 when Andrew and Kat’s summary judgment application was nearing a hearing before this Court that Phillip formally disputed liability by filing his Statement of Defence and Notice of Opposition to the summary judgment application along with an Affidavit in Support.
[18] In his Notice of Opposition to the summary judgment application, Phillip sets out his grounds for opposing the summary judgment orders sought in the following way:
(a)There was no agreement on the terms alleged whereby the defendant agreed to pay the plaintiffs $1,150,000 for the property (as defined in the Statement of Claim).
(b)The terms of the agreement on which the plaintiffs rely were not accepted by the defendant and there is no completed agreement on these terms on the solicitor’s files of the defendant.
(c)There is therefore a genuine dispute between the parties as to whether the sum of $500,000 is payable by the defendant which should be resolved in the course of ordinary proceedings.
[19] And, in his statement of defence to the proceeding and claim filed against him by Andrew and Kat, Phillip says:
(a)He denies that he has properly executed the ASP or otherwise agreed to purchase the property from the plaintiffs at the specific price and terms alleged;
(b)He contends $1,150,000 was not the value of the subject land owned by the plaintiffs at the time of the transaction. This was because the plaintiffs’ interest was limited to the bare land because Phillip’s related company, Montford Corporation Limited, leased the farmland portion of the property from the plaintiffs throughout and had established a vineyard and substantial improvements on the subject land. The property sold therefore excluded the vineyard improvements which were not the plaintiffs’ to sell. Phillip says he only agreed to purchase the land from the plaintiffs for a price of around $650,000; and
(c)Phillip’s position is that, although Haysley purported to sign the Deed as Phillip’s Attorney, by the time the sale and purchase settled on 26 April 2018, it was known that the Deed was not properly an obligation of his under the ASP the parties had reached for the sale of the house and land including Montfort’s vineyard improvements.
[20] To date it is clear Phillip has made no payment towards the debt said to be due from him under the Deed.
Summary judgment principles
[21] The present application is brought pursuant to r 12.2 of the High Court Rules 2016 which relevantly provides:
12.2 Judgment when there is no defence or when no cause of action can succeed
(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
[22] The relevant summary judgment principles are well-known and are not in dispute here. Those principles are summarised by the Court of Appeal in Krukziener v Hanover Finance Limited:
The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the
defendant will have to respond if the application is to be defeated…the Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility…in the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it.1
[23] In Pemberton v Chappell, Somers J made the object of summary judgment clear when he said:
The general object of the rules about summary judgment is clear. It is to enable a plaintiff to obtain judgment where there is really no defence to the claim made, so to put an end to the spectacle of a worthless defence being raised and pursued for the purposes of delay.2
[24] Also in Pemberton v Chappell, Somers J clarified that the words “no defence” mean:
In this context the words “no defence” have reference to the absence of any real question to be tried. That notion has been expressed in a variety of ways, as, for example, no bona fide defence, no reasonable ground of defence, no fairly arguable defence.
[25] Finally, it is accepted that r 12.2 is discretionary, although it has been held that the discretion is to be of the most residual kind.
[26] Where a defendant presents a defence, this is not necessarily a bar to granting summary judgment. The Court in Pemberton v Chappell noted:
There may, however, be cases in which the Court can be confident – that is to say, satisfied – that the defendant’s statements as to matters of fact are baseless. The need to scrutinise affidavits to see that they pass the threshold of credibility, is referred to in Eng Mee Yong v Letchumanan [1980] AC331, 341, and in the judgment of Greg J in Attorney-General v Rakiura Holdings Limited (Wellington CP23/86, 8 April 1986).
[27] It is clear too that a defendant is under an obligation to lay a proper foundation for any defence claimed by providing the Court with appropriate particulars and a reasonable level of detailed substantiation. A bald assertion without elaboration or detail is unlikely to raise an arguable defence for the purpose of resisting a summary judgment application. The robust approach available to a Court, which a number of
1 Krukziener v Hanover Finance Limited [2010] NZAR 307(CA) at [26].
2 Pemberton v Chappell [1987] 1 NZLR 1.
authorities have mentioned, allows it to grant summary judgment even where arguably there may be possible suggestions of a defence on factual matters, provided that the lack of a tenable defence is plain on the material placed before it.
Discussion
[28] As I have noted, the plaintiffs contend this is a straightforward contractual claim in which they are simply suing to recover debt owing under the Deed. Accordingly, they say the factual disputes relating to the history of the subject land and the ASP are broadly irrelevant. What they maintain as crucial here are the terms of the Deed and its expression of the $500,000 interest-free indebtedness due to the plaintiffs from Phillip upon demand, a demand properly made many months ago.
[29] Also as I have noted, that Deed, specifically provided for at paragraph 19.1 of the ASP, a document signed by Phillip, was itself however not signed by Phillip but rather by his son and attorney Haysley on 6 April 2018 (as Phillip was overseas at the time).
[30] The documents at issue here on their face appear clear. The Deed records a debt owing from Phillip to the plaintiffs of $500,000 repayable when demand is made for repayment, a demand which it seems happened in March 2022. As I have also noted, it was not until over a year later in April 2023 when the proceeding was before this Court that Phillip formally disputed liability for the debt in documents he provided then to the Court.
[31] Before me in his Notice of Opposition to the summary judgment application and in affidavit evidence, as I note Phillip maintains that, despite the ASP stating the price he would pay for the subject land in his purchase from the plaintiffs was to be
$1,150,000 (with $650,000 paid in cash and $500,000 represented by the acknowledged debt) this was not the true agreement reached. He says the sale terms and particularly the sale price were different in that he was only to pay $650,000 cash payment he did make. Phillip says further any terms of the ASP otherwise were not accepted by him and therefore there was no completed agreement to include the
$500,000 alleged debt here claimed.
[32] Here, I need to acknowledge that the arguments for the plaintiff to counter these contentions from Phillip, do have some merit. Even if there is a factual dispute regarding the sale price for the subject land, Phillip’s claim according to the plaintiffs has no credibility and is baseless for the following reasons:
(a)If Phillip was genuine in thinking the $650,000 cash paid at settlement for his purchase of the subject land was in full satisfaction of the purchase price, he would have immediately raised this as an issue when the plaintiffs demanded repayment of the $500,000 in March 2022. They say he did not do this. Instead, he simply ignored the repayment claim. It was only when filing his opposition to the summary judgment application that he raised what the plaintiffs say was a serious allegation that they were relying on an ASP different from the contractual form that he had signed.
(b)No alternative agreement for sale and purchase for the subject land has been produced by Phillip supporting his claim that he purchased the property for only $650,000. This is despite the fact that all dispositions of land, in terms of s 24 of the Property Law Act 2007, need to be in writing to be enforceable.
(c)As a lawyer, Mr Dew was acting on this transaction, albeit for both parties. He prepared all the documentation and the plaintiffs say it is inherently unlikely there could be any genuine issue as to the sale price or terms of the ASP.
(d)Mr Dew they note was also Phillip’s own lawyer and had been for many years. Andrew and Kat also claim that Mr Dew confirms in his affidavit evidence that:
(i)The ASP that the plaintiffs rely upon was signed by Phillip in its complete form including the $1,150,000 sale price and the further terms for sale.
(ii)Mr Dew had himself recommended the Deed of Acknowledgement of Indebtedness be used to cover the funding gap and subsequently received instructions to prepare this.
(iii)A settlement statement showing the total purchase price including the $500,000 debt due to the plaintiffs was prepared for all parties including Phillip.
(iv)Mr Dew stated it was his practice to “require Phillip to give his instructions in writing…to avoid future confusion” – para 25 of Mr Dew’s affidavit.
(e)The Plaintiffs claim further that para 19.3 of the ASP supports their position that the subject land was sold to Phillip for $1,150,000 and they maintain there is no inconsistency here with this special clause.
(f)Finally, the plaintiffs argued that if the purchase price, as Phillip contends, had only been $650,000 there would never have been any need for the Deed recording the $500,000 indebtedness to have been prepared or signed.
[33] Accordingly, the plaintiffs suggest here that Phillip already has not met his obligation to lay down any proper foundation for his defence and Summary judgment should be granted in their favour.
[34] As to these arguments, on the face of the documents signed (the ASP and the Deed) arguably there is a debt of $500,000 due from Phillip which has been demanded and remains unpaid. That simple position, however, is not the end of the matter here as I see it. Putting to one side for a moment strongly contested affidavit evidence before me from Andrew on the one hand and Phillip on the other, it is important to consider what Mr Dew, as the largely independent solicitor acting for all parties in this transaction, had to say in his 30 June 2023 affidavit.
[35]Importantly, Mr Dew in this affidavit deposed:
8. It is clear in my mind that Andrew did not pay market value when he initially acquired the Property [in 1996], and that is why there was a leaseback arrangement put in place without rental being paid for the rural land.
9. ….but Andrew only paid for the house portion, hence it was agreed that Andrew would lease the rural land back for 20 years at no cost.
10. However, as matters eventuated, Phillip and Brigham’s partnership was dissolved (including the entity that held the lease with Andrew).
11. Phillip continued to use the Property, under his new entity, Montford Corporation. However, I do not recall any formalities occurring such as a new lease agreement being signed.
12. The family tended to trust each other, and often did not worry about formalities such as legal paperwork. Often legalities were left until the very last minute which made things awkward.
13. Sometime after Andrew had moved to Australia, Phillip came into my office requesting my assistance.
14. Phillip told me that,
(a) he was about to go overseas;
(b) Andrew needed money urgently.
(c) He (Phillip) had secured a loan for $650,000 and was going to give that to Andrew.
(d) That the Property was going to be transferred temporarily from the plaintiffs to Phillip to support the loan; and
(e) Andrew was to eventually buy the Property back.
15. I prepared the Agreement for Sale and Purchase (the Agreement) upon instruction to do so. The sale price in that agreement was $1,150,000. The Agreement included the further terms of sale (clause 19).
…
18. I asked Phillip if he wanted to include something about the buyback arrangement in the Agreement. Phillip did not want to worry about that as he trusted Andrew.
19. The only instructions I got from Andrew was to get the agreement done so he could get his money. Andrew’s only concern was to get the $650,000 as soon as possible. Andrew really wasn’t concerned about the details. I don’t recall discussing the buyback arrangement with Andrew at all. I don’t recall getting specific instructions from Andrew about other aspects of the Agreement, such as the sale price – my predominant instructions came from Phillip.
20. I advised that the sale price of the Property should be at market value otherwise they would run into gifting issues. I recall that Heartland Bank also
wanted to see the value of the transaction was at least the rateable value of the transaction.
21. From memory the sale price was established by Dew & Co from the rating valuation.
22. My recommendation was accepted by the parties.
23. The sale price of $1,150,000 was calculated to exclude the improvements (worth $700,000) on the Property that were owned by Montford Corporation. This is recorded in cl 19.3 of the agreement.
24. As this sale price was more than the lending Phillip had obtained, the gap had to be covered. I recommended that the parties execute a Deed of Acknowledgment of Indebtedness to address the $500,000 gap. The parties accepted the recommendation.
…
29. During settlement, we prepared and sent Phillip a settlement statement which records both the $650,000 lending and the $500,000 Deed (the settlement statement).
…
31. I never received any instructions to record or document any agreement between the parties that Andrew (or the plaintiffs) would purchase the property back from Phillip.
[36] With this sworn confirmation/explanation from Mr Dew in his affidavit in mind, I turn to paragraph 19.3 in the ASP for the plaintiff’s sale of the subject land to Phillip. Again, this para 19.3 states:
19.3 The purchase price [of $1,150,000] has been ascertained on the basis that the vineyard improvements on the property, in the sum of $700,000 are owned by Montford Corporation.
What this paragraph might mean and its effect in this transaction is not entirely clear as I see the position.
[37] It is however useful to note that in the evidence before me, from a Marlborough District Council rates search for the 2017-2018 rating year, the Government Valuation for the subject land then was shown at a total capital value of
$1,160,000 being $530,000 land value and $630,000 improvements value.3
3 Perhaps of some interest here too is what I understand to be the present Government Valuation for the subject land from the Marlborough District Council rates records Valuation (as at December 2020) of $1,620,000 capital value being $750,000 land value and $870,000 improvements value.
[38] On this basis, it is somewhat difficult at this point to reconcile the comment made by Mr Dew in his affidavit at paragraphs 20 and 21 of his affidavit noted at [35] above (that the sale price was established from the rating valuation and Heartland Bank’s requirement the value of the transaction was to be at least the rateable value) and this acknowledgment at paragraph 19.3 of the ASP. Clearly, in my view some further clarification is required from Mr Dew and others as to what cl 19.3 of the ASP might truly mean, and what impact this might have on the sale price under the ASP and the debt back.
[39] If, as all parties seem to accept without question that the vineyard improvements on the subject land are owned by Montford, and in March 2018 at the time of the ASP they had a value of $700,000, then presumably this would have meant a purchase price to be paid to the plaintiffs, if based solely upon the Government Valuation at the time, should have been in the order of around $460,000. I am mindful too of Mr Dew’s comments noted at [19] of his affidavit as to Andrew’s position over the ASP in March 2018 and the trusting and lack of formalities comments at [11], [12] and [18].
[40] These aspects clearly would benefit from testing of the affidavit evidence before the Court by way of cross-examination to achieve some clarification.
[41] On the basis of Mr Dew’s evidence alone, which in my view is at best equivocal on this point, I am satisfied there is a genuine conflict of evidence in this case which needs resolution at a substantive hearing. There is a real question to be tried here and although the indebtedness recorded simply in the Deed of $500,000 owing by Phillip to the plaintiffs on its face is clear, as I see the position there is a material conflict of evidence even on Mr Dew’s own statements regarding this matter.
Result
[42] For these reasons, I find that the plaintiffs Andrew and Kat have been unable to satisfy the onus upon them to show that the defendant Phillip has no defence to their claim against him.
[43]This application for summary judgment accordingly fails and is dismissed.
Costs
[44] As to costs, I heard little argument from counsel on this issue. They are therefore reserved. My preliminary view, however, is that costs here should simply lie where they fall. This is because this whole matter represents an unfortunate conflict between members of the same family and perhaps more importantly, there is an argument, as I see it, that had Phillip responded at the outset to the plaintiffs’ demand for repayment of the alleged $500,000 debt and Mr Dew (who acted for all parties at the operative time) become involved then, this proceeding and the summary judgment application might not have been required.
Gendall J
Solicitors:
Pitt & Moore for the Plaintiffs Radich Law for the Defendant
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