McNaughton v McNaughton

[2022] NZHC 857

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV-2021-454-33

[2022] NZHC 857

BETWEEN

RICHARD MCNAUGHTON

Plaintiff

AND

JANET MCNAUGHTON

First Defendant

JAMES MCNAUGHTON

Second Defendant

Hearing:

28 April 2022

Appearances:

Plaintiff in person

M B Ryan for Defendants

Judgment:

28 April 2022

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]    This case involves an unfortunate falling out between the plaintiff, Mr Richard McNaughton, and his parents, the defendants, Mr James and Mrs Janet McNaughton, over the sale of a property located at 48A Pownall Street in Masterton by Richard (and his         wife, Mrs Veronica McNaughton), to James and Janet.

[2]    The background is not complicated. In mid-2017 Richard, or a company he incorporated for the purpose, acquired a plumbing business from a Mr Rod Miller or his interests.

[3]    The business venture was disastrous. Within a short time it became apparent that the business was insolvent, and Westpac Banking Corporation, which held a security over Pownall Street, were looking to foreclose.

MCNAUGHTON v MCNAUGHTON [2022] NZHC 857 [28 April 2022]

[4]    On 9 October 2020 the directors of the company that acquired the plumbing business resolved to appoint liquidators.

[5]    Earlier, Richard had been discussing with James and Janet raising money within the family to support the business. To cut a long story short Richard’s grandmother, Janet’s mother, Mrs Allison Munford, sold her home, gifted the proceeds to James and Janet and moved in with them. James and Janet then used the proceeds to acquire Pownall Street. By the time this occurred the company that acquired the plumbing business was in liquidation. Richard utilised the proceeds of the sale to clear the indebtedness to Westpac, and the residue to fund a claim against Mr Miller and others who he held responsible for the failure of the plumbing business.

[6]    Richard says that the parties agreed that James and Janet would hold the property as trustee for him and that the terms of the trusteeship were that he could repurchase the property at any time for the price that they paid. There is a direct clash of evidence on this point. James and Janet accept that they purchased the property in order to assist Richard to clear the indebtedness to Westpac and pursue his claim, but they do not accept that they were to hold the property as trustees.

That, essentially, was what lead to the proceeding being commenced. In the context of this interlocutory application, the Court is in no position to form any view as to the merits of the parties’ conflicting positions.

[7]    Consistent with his view of things, Richard lodged a caveat against the title to the property asserting an equitable interest in the same.

[8]    In circumstances which are not described in the evidence before the Court, a notice of discontinuance dated 5 October 2021 was filed in this proceeding. It is common ground that this document was prepared and signed by Richard, that Richard arranged for the solicitor acting for James and Janet to sign it and that he then arranged for it to be filed and served. The notice of discontinuance expressly said that costs had not been resolved between the parties.

[9]    Richard having discontinued the proceeding, James and Janet took steps to have the caveat discharged. They gave the usual notice pursuant to the Land Transfer Act. Richard took no step to maintain his caveat, and it lapsed. He says that is because he did not receive the notice, and he accuses his parents of deceit, alleging that they arranged for the service of the notice at an address at which they knew he did not live, in the expectation that he would not receive the notice, would not respond and that by that means be able to have the caveat removed. Again, the Court cannot make any determination on that issue in the present context.

[10]   James and Janet subsequently sought a costs order consequent upon the discontinuation of the proceeding. Richard opposed this. On 5 October 2021 I issued a costs judgment. I ordered Richard to pay costs to James and Janet on a 2B basis.

[11]   Now Richard comes to the Court and seeks an order setting aside the notice of discontinuance — and therefore the costs judgment.

[12]   Richard contends that the Court has inherent jurisdiction to set aside a notice of discontinuance. He has not been able to point to any authority for that contention. Nor when I asked him was he able to suggest what criteria the Court should consider in determining whether or not to make such an order. Nevertheless, I do not doubt that Richard is correct that there are circumstances in which the Court may set aside a notice of discontinuance. In an extreme situation where for example a plaintiff was forced to file and serve a notice of discontinuance by coercion or undue influence, or induced to do so by fraud, I can see the Court treating the discontinuance as a nullity, reinstating the claim and giving the plaintiff leave to proceed. However, to be successful, an application involving an allegation of such seriousness would demand compelling evidence. As Richard ultimately conceded when I raised this with him and asked him where I should look for such evidence, there is simply nothing before the Court in this case that approaches the sort of evidence that would be necessary.

[13]Richard’s application cannot succeed.

[14]   It follows that there is no basis upon which Richard could successively contend that the costs order should not stand. It is elementary that a plaintiff discontinuing a

proceeding is liable for the costs down to the point of discontinuance unless the parties have agreed otherwise. There is no convincing evidence of any agreement as to costs.

[15]Accordingly, for those reasons, the plaintiff’s application is dismissed.

[16]   As to costs, having heard from the parties, the defendants having been wholly successful are entitled to a costs order. As Mr Ryan very fairly conceded, 2B costs would seem to be overly generous in the circumstances. The defendants will have their costs on a 2A basis, together with such disbursements as may be allowed by the Registrar.

Associate Judge Johnston

Solicitors:

M V Ryan, Palmerston North for first and second respondents