Miyazaki v Miyazaki
[2016] NZHC 873
•4 May 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV2015-404-003041 [2016] NZHC 873
BETWEEN AYAKO MIYAZAKI
Plaintiff
AND
KAZUO MIYAZAKI First Defendant
MASAKO MIYAZAKI Second Defendant
Hearing: 2 May 2016 Appearances:
Z Kennedy/J Spring for the Plaintiff
P M Webb for the First Defendant
L Kearns for the Second DefendantJudgment:
4 May 2016
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
04.05.16 at 11:30am, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
A MIYAZAKI v K MIYAZAKI AND M MIYAZAKI [2016] NZHC 873 [4 May 2016]
Background
[1] The plaintiff is the sister of the first defendant. The first defendant and second defendant were married in 2003. They separated in November 2013 although the first defendant made it clear in April 2013 that their marriage was over. Their relationship property issues are subject to proceedings filed in the Family Court. Those proceedings have been deferred pending determination of the plaintiff’s claim.
[2] The first defendant does not oppose his sister’s summary judgment
application against him.
The claim
[3] In September 2007 the defendants wished to purchase a property at Alfriston, Auckland as a residence but also for the purpose of operating a bed and breakfast business. The first defendant requested the plaintiff to advance funds to assist with the purchase.
[4] The property was purchased on 23 November 2007. On 26 November 2007 the plaintiff orally agreed to advance the sum of $30,000 to assist with payment of the deposit. The plaintiff says that advance was to be repayable on demand or upon the sale of the property.
[5] Later, at the request of the first defendant, the plaintiff agreed to advance the further sum of $353,000 on 5 February 2008 to assist with settlement of the purchase. The plaintiff says that agreement was evidenced by a written loan agreement dated 10 February 2008 and by which:
(a) Interest was to be charged at the rate of 15 per cent per annum compounding annually;
(b)The principal amount and any interest owed by the first defendant to the plaintiff was to be paid on demand or upon the sale of the property;
(c) The advance was unsecured.
[6] The funds were paid into the trust account of Phillip Wong & Ben Bong Law
Office, solicitors acting on the property purchase.
[7] In December 2013 and shortly after the defendants separated, the first defendant sold the property for $1,475,000. The net proceeds of $1,230,021.20 are presently held in a solicitors trust account on behalf of the defendants’ jointly pending resolution of their relationship property issues.
[8] On or about 8 September 2015 the plaintiff by her solicitors wrote to each counsel representing the defendants making demand on the defendants jointly for payment of the sum of $1,157,285.50 (including compounding interest calculated to
11 September 2015).
The plaintiff ’s claim
[9] The plaintiff says the advances made to the first defendant, are a relationship debt pursuant to s 20(D)(b) of the Property (Relationships) Act 1976 (PRA). By that provision relationship property value is calculated after the deduction of any secured or unsecured relationship debts owed by either or both spouses or partners.
[10] The plaintiff calculates that interest on the amount of $353,000 at the compounding rate of 15 per cent per annum from the loan date until 30 November
2015, totals $694,806.60. Interest on the amount of $30,000 to 30 November 2015 is calculated at $15,513.38. The plaintiff also claims interest on the $30,000 at the prescribed rate under the Judicature Act 1908 from 1 December 2015.
The plaintiff ’s evidence
[11] The plaintiff has exhibited a copy of the loan agreement as it has been translated from Japanese by the Department of Internal Affairs Translation Service. Exhibited to the plaintiff’s affidavit is an untranslated copy of that. That copy notes the certification of Mr Wong, lawyer for the first defendant, that the copy was a true copy of the original.
[12] The plaintiff deposed that the defendants’ marriage was one that could be called a traditional Japanese marriage; where it is accepted practice that the husband takes care of the business arrangements and the wife takes care of the children and runs the household. She states this was the reason that the money was advanced only to the first defendant and that only his name appears on the title to the property. She says in her discussions with the defendants it was clear both were aware of the loan agreement and that the property was their joint property.
The second defendant’s evidence
[13] The second defendant deposes that early in their separation, settlement discussions ensued by way of an email, dated 8 June 2013, from the first defendant advising that he believed a sum of between $300,000 and $400,000 was owed to his mother. That email also contained his acknowledgement that there was no proof of the alleged debt to his mother. The second defendant says she had no knowledge of such advances, and told the first defendant she did not accept that such a debt even existed. She suspects the first defendant’s claim of a debt owed is just a fabrication aimed at keeping for himself a disproportionate share of the relationship property.
[14] The second defendant says the first defendant deliberately excluded her from knowledge of their finances despite her requests to be involved. She denies claims it is common in Japan for a man to control the family finances, and says in her experience financial arrangements in Japan look much like those in New Zealand with some couples leaving those arrangements to one partner or the other, while many deal with financial arrangements jointly.
[15] There was no mention at that time about a debt owing to the plaintiff, even though there is now clear evidence of the transfer of the sum of $353,000 by the plaintiff to the first defendant which was utilised for the purchase of the property at Alfriston in which the defendants lived.
[16] The second defendant recalls two occasions only during their marriage when the subject of a debt to the first defendant’s family members was raised. The first of those concerned the purchase of a property at Onehunga in 2006 or 2007 when the
first defendant advised her they owed $100,000 to the plaintiff for she had paid the deposit on the purchase of their property. In that regard she says that after moving into the Alfriston property the plaintiff said to her:
You know you guys owe me $100,000.
[17] The second defendant deposes there was no mention of a debt of $353,000 or any mention of interest being payable.
[18] The second defendant says she heard nothing further from the first defendant about the supposed debt to his mother. Then on 7 November 2013 she said she was presented with a photocopy “of the purported contract with the lawyer via my then lawyer”. This was after she and the first defendant had separated.
[19] She deposed that the lawyer then acting for her asked that the original contract be disclosed. She says that request has been constantly denied. She believes the purported contract is a fabrication invented by the first defendant, with the cooperation of the plaintiff, post-separation for the purpose of excluding her from her full entitlement to relationship property. She says she has through her lawyer put the plaintiff on notice that she wishes to have the hard drive of the computer on which the purported contract was created examined forensically in order to establish the true date on which the document was created.
[20] The second defendant says the first defendant had control of around eight or
10 bank accounts many of which were in the names of his family including in the names of his mother, father and another sister. She suspects the funds in these accounts originated from the first defendant’s business dealings and that the accounts were utilised for tax evasion purposes as they were subject to non-resident withholding tax.
[21] The second defendant then provided in some detail her explanation of the purchase and sale of other properties prior to their purchase of the Alfriston property. These included a Taupo property the first defendant owned when they married. She believes the $100,000 deposit paid for the purchase of that property was later utilised for the payment of a deposit on the purchase of the Onehunga property in the name
of the plaintiff. She believes the equity from the sale of an Onehunga property funded the purchase of a Dannemora property in 2004 in the name of the plaintiff. She believes in August 2006 the Taupo property was transferred from the first defendant’s name to the plaintiff’s name and the Dannemora property was transferred from the plaintiff’s name to the first defendant’s name. In that outcome of matters she believes the plaintiff acquired the Taupo property equity of about
$250,000 for no consideration at all. She believes the plaintiff may have a debt owing back to the first defendant and to her of between $200,000 and $400,000.
[22] In January 2008 the Dannemora property was sold and shortly after the
Alfriston property was purchased. The second defendant’s belief is that the
$353,000 referred to as having been advanced to the first defendant to assist with the purchase of Alfriston was actually the net proceeds of sale of the Taupo property comprising.
[23] The second defendant says whilst believing the purported loan agreement was not executed at the time the plaintiff alleges, that had she been presented with such a document she would never have signed it.
The plaintiff ’s reply evidence
[24] The plaintiff deposes the first defendant told her that the second defendant understood and accepted the terms of the loan agreement. She states there is no basis for an allegation that the loan agreement is a fabrication. She says the loan agreement was drafted by her and signed by the first defendant on 10 February 2008, five days after she advanced the funds to him.
[25] She says she has never refused to make the original loan agreement available; that in October 2013 the first defendant’s then lawyer, Mr Wong, asked him to obtain the original loan agreement from her, which she then sent immediately to the first defendant. She said it was returned to her in February 2014. She is currently looking for it but has not been able to find it. However she has provided two certified copies of the loan agreement, one which was signed by Mr Wong and the other by a Justice of the Peace.
[26] The plaintiff denies the second defendant’s account of events suggesting previous property transactions or of any benefits accruing to her at the expense of the defendants. She denies saying in passing that the defendants owed her $100,000 for any reason. She asserts all transactions in the account in her name and from which funds were provided to enable the defendants to purchase the Alfriston property, was hers. She agrees that reluctantly she transferred her Dannemora property to the first defendant in return for the first defendant’s Taupo property being transferred to her. She said she only agreed to the property swap to assist with the purchase of the Alfriston property. She believes that in the swap process she lost approximately
$65,000 in value. In summary she deposes:
17… I purchased the Onehunga Property and the Dannemora Property in my own name using a combination of my own funds and mortgages with BNZ. Kazuo and I then swapped the Taupo and the Dannemora Property. I did not use Kazuo’s money to buy the Onehunga Property and Dannemora Property, or received equity in the Taupo Property without providing sufficient consideration as Masako suggests.
First defendant’s evidence
[27] The first defendant says he bought and developed the Taupo property with funds lent by his mother.
[28] In 2002 they occupied the plaintiff’s property at Onehunga and in 2004 the plaintiff sold her property and purchased the property at Dannemora; that the defendants chose the house for the plaintiff because she was in Japan at the time. When they wished to purchase the Alfriston property he said it was agreed with the plaintiff that the Taupo and Dannemora properties had similar value. Later it was agreed those properties be transferred between them.
[29] With the sale of the Dannemora property (in order to purchase the Alfriston property) the defendants were about $400,000 short of the purchase price required. He said the plaintiff, reluctantly, agreed to lend the money provided the defendants accepted a high interest be paid.
[30] The first defendant says it is wrong for the second defendant to deny the existence of the loan for he says she knew the property could not have been
purchased without the plaintiff’s assistance. Regarding interest rates he notes at the time they were approximately 9.39 per cent and his sister made it clear to him “that she was requiring a 15 per cent compounding interest rate to take into account the fact that we could not borrow the money from the bank and that she did not really wish us to go ahead with the purchase”. She said the plaintiff was surprised they agreed to accept that rate. He said the second defendant was well aware of the reasons for the high interest rate but simply wished for the purchase to proceed.
[31] Regarding the second defendant’s claims of her lawyer having been denied
disclosure of the loan documentation, the first defendant denies this and says that on
3 December 2013 his solicitor Mr Wong offered to provide the original contract but did not hear back from the second defendant in relation to the matter.
[32] Regarding claims that he controls eight or 10 bank accounts some of which were in his family names, he says he has only ever had one BNZ bank account although had various accounts using suffixes to his bank account number.
[33] The first defendant wants to immediately pay his sister from the loan proceeds of the sale of the Alfriston property but he says the second defendant has delayed resolution of these issues and in the result each of the defendants will only get about $50,000 from which they will have to deduct legal costs.
Reply affidavit of second defendant
[34] The second defendant reaffirms her assertions that she had no knowledge of what additional funding was required to purchase the Alfriston property or from what source it was obtained; that she had no knowledge of a loan of 15 per cent compounding interest and had that been put to her she would have refused to go ahead with the purchase.
[35] The second defendant annexes a copy of an account summary of bank statements in the control of the first defendant. This she says clearly shows the existence of separate accounts in the names of family members, in the control of the first defendant. Also she refers to having recently discovered an email which the
first defendant admits he kept from her details of the borrowing arrangements he had made with his family. A copy of that email is attached to the affidavit of Ms Fisher a qualified translator of Japanese language.
Principles
[36] Summary judgment can be awarded where a defendant has no defence to the claim; that is when there is no real question to be tried.1
[37] Where there is a conflict of evidence the Court will not normally on the summary judgment application resolve these or assess the credibility of deponents. However the Court need not accept evidence that is inherently lacking in credibility or is inconsistent with undisputed contemporary documents, or is inherently improbable.2
[38] The plaintiff must prove there is no defence.
[39] The Court must be satisfied there is a debt owing which is a relationship property debt which has been incurred for the purpose of acquiring improving, or maintaining relationship property.3
Considerations
The loan agreement
[40] The plaintiff’s case is that there is evidence of the advance of $383,000 to facilitate the purchase of the Alfriston property. Of that amount $30,000 was paid out of the plaintiff’s bank account on 27 November 2007 and $353,000 on
5 February 2008.
1 Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA).
2 Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC).
3 Section 20 Property (Relationships) Act 1976.
[41] The first defendant accepts the funds were received for purchase purposes and does not dispute the plaintiff’s evidence that the loan agreement was prepared and signed on 10 February 2008.
[42] Regarding the second defendant’s claims that she had no knowledge of the loan agreement’s existence and would never have entered into it, and that it was a fabrication, Mr Kennedy counsel for the plaintiff responds that it is clear the second defendant left the financing of the purchase to the first defendant and that it does not matter that she now takes issue with the terms upon which the advance was made.
[43] Mr Kennedy submits an interest rate of 15 per cent on a compounding basis reflects the risk the plaintiff assumed in the circumstances and was consistent with market rates at the time.
[44] Regarding suggestions of fraud, Mr Kennedy submits there is no proper factual foundation for these claims.
[45] The plaintiff claims the original loan agreement has not been withheld from the second defendant, the original having been provided immediately upon request to the first defendant’s solicitor in October 2013; that on 3 December the first defendant’s then solicitor wrote to the second defendant’s then solicitor offering to make the original loan agreement available for inspection, but no response was received. Mr Kennedy explains that the plaintiff has since been unable to locate the original loan agreement but has provided certified copies. In short, Mr Kennedy submits the second defendant has not been able to adduce admissible evidence in support of allegations that the loan agreement is not a genuine document that was executed on 10 February 2008.
Whether the debt is a relationship debt
[46] Mr Kennedy submits the debt is a relationship debt because it was used to acquire relationship property and that under section 20D of the Property (Relationships) Act 1976 that debt must be deducted from the sale proceeds currently
held. Only then, counsel submits, are the defendants entitled to divide the balance of the proceeds between them as relationship property.
[47] Mr Kennedy submits the second defendant cannot disavow the loan agreement and yet claim an entitlement to the sale proceeds as relationship property when the property could not have been purchased without the plaintiff’s loans.
Whether the second defendant has an arguable defence
[48] Mr Kennedy submits that issues raised by claims that the plaintiff ’s bank account was not her own or that the funds advanced to use to purchase the property were not hers, or that the plaintiff owes monies to the defendants as a result of the Taupo property exchange, or that the first defendant has engaged in criminal conduct, or that the plaintiff’s affidavits are unreliable, do not constitute an arguable defence.
[49] Mr Kennedy submits the clear evidence is that the plaintiff’s bank account was truly her own and that there is no doubt that funds advanced to the first defendant to purchase the Alfriston property were from the plaintiff.
[50] It is clear counsel submits that the first defendant’s affidavit corroborates the plaintiff’s version of events and that the plaintiff’s prior property dealings with the first defendant are irrelevant to this case; that even if it could be shown the plaintiff is indebted to the defendants as a consequence of those prior property dealings, this would not be an answer to the summary judgment application for such a claim is not a set off, and in any event would be barred by the Limitation Act 1950.
Conclusions
[51] The issues are about the claim of a debt due in respect of sums of money the plaintiff says were lent to enable the defendants to purchase a property.
[52] The first and second defendants were married in 2003. Their matrimonial home at Alfriston was purchased in January 2008. They separated in November
2013 just one month before their Alfriston property was sold. The proceeds of sale
$1,230,021.20 remain with solicitors pending resolution of relationship property issues and the plaintiff’s claim.
[53] The plaintiff is the sister of the first defendant. The plaintiff has produced a copy of a loan agreement dated 10 February 2008 which she says evidences the loan arrangement she had with the first defendant and by which she lent $383,000 in total to the first defendant which enabled the first and second defendants to purchase their Alfriston property.
[54] That loan agreement provided for interest at 15 per cent per annum to be paid and for interest to compound annually on any unpaid repayments. There were no loan repayments made which explains why as at 30 November 2015 the plaintiff’s claim includes interest of $694,806.60.
[55] The issues raised by the second defendant include her claim of no knowledge of the debt arrangement; that the arrangement was probably fraudulent; and that she would never have agreed to borrow funds subject to terms of the agreement.
[56] The second defendant says that the first she knew of the agreement was in November 2013 (after they separated) when she was provided with a photocopy of the loan agreement.
[57] The plaintiff deposes the second defendant was told about the lending arrangement. She provides no details in this regard. Nor does the first defendant provide any detail in that regard. A credible view of matters suggests any loan arrangement was entered into without the second defendant’s knowledge even though the second defendant may (although she does not necessarily accept this) have been aware that funds would be required to purchase the Alfriston property.
[58] An equally credible view of the evidence is that there was a significant element of inter-property dealings between the plaintiff and first defendant and concerning which there was little or no information provided to the second defendant.
[59] Mr Kennedy submits the second defendant knew funding was needed for the Alfriston property purchase. The second defendant says that she was aware in general terms that more money was needed than they had available for that purchase; but that the first defendant dealt with that financing and did not discuss it with her at all; that she had no knowledge of how much was required or from where it was obtained.
[60] The plaintiff’s position is that the funds were advanced to enable the defendants to purchase their home. Further, and whilst relationship property issues have not been resolved, s 20 of the Property (Relationships) Act 1976 provides, in effect, that loans obtained by the first defendant to purchase the home for he and the second defendant must be deducted from the sale proceeds before the balance is distributed to the relationship partners.
[61] The second defendant claims the loan agreement is a fabrication. She believes for reasons explained in relation to previous properties including a property exchange between the plaintiff and defendants, that the plaintiff may in fact have been in debt to the defendants before that date when she claims funds were advanced to enable the defendants to purchase, albeit in the first defendant’s name alone, their property in Alfriston.
[62] For these reasons, and also because the first defendant claims that no funding assistance was ever provided by the second defendant’s family, the second defendant asserts the loan arrangement was not genuine but if it was then she should not assume any liability for the plaintiff’s claim.
[63] Objection is taken by the plaintiff and first defendant to strong suggestions by the second defendant that fraud may have been involved in the making of the loan agreement.
[64] Inferences of misconduct are raised by reference to inter-property dealings between the plaintiff and first defendant in the distant past. Indirectly, these arise also by reference to the making of the loan agreement.
[65] However claims of an existing loan agreement had not been referred to until the parties were separated i.e. nearly six years after the date the loan agreement bears.
[66] Before the first defendant advised the second defendant of the loan agreement, he had, the second defendant says suggested there was a debt of
$300,000 to $400,000 owing to his parents.
[67] Mr Kennedy submits it is clear that mere allegations of fraud are not enough. That is so. And, it is probably well beyond the capability of the second defendant to prove the loan document is not what it purports to be. However, it is a matter that is capable of further enquiry by the hearing of oral evidence. Certainly there are a lot of questions raised by other facts in connection with the production of that original loan agreement.
[68] The plaintiff relies on s 20 of the Property (Relationships) Act 1976. The wording of that section should not assume, the Court considers, that a spouse bear equal responsibility for payment of a debt incurred by the other spouse about which nothing was known and the terms of which may have been quite unacceptable. The plaintiff acknowledges setting a high interest rate to dissuade the first defendant from borrowing from her.
[69] In the background of matters there is the issue of the first defendant regarding the fact, as he says that his family alone and not the second defendant’s family have provided funding to assist them during their marriage.
[70] The current issue is about the existence of a loan agreement and whether if the loan does exist, the first defendant ought to be responsible for a half share of that debt before receipt of her property relationship entitlement. There is a lot more to this loan than the appearance of a straightforward commercial transaction may suggest because the debt was (the second defendant says) incurred without her knowledge and the terms of the loan arrangement are such now that they threaten to take from the first defendant nearly all of her share in the relationship property entitlement.
[71] The Court considers that further factual enquiry is needed.
[72] In the particular circumstances of this case, the Court does not agree that the second defendant’s evidence is inadmissible or speculative or is unsupported by documentary record, or indeed is not relevant to the issues.
[73] Therefore, the Court does not agree the plaintiff can prove her case against the second defendant upon her summary judgment application. Further, that in the circumstances the Court should not enter summary judgment against the first defendant even though he offers no opposition to the plaintiff’s application.
Result
[74] The summary judgment application is dismissed.
[75] The plaintiff shall pay the second defendant’s costs on a 2B basis together
with disbursements approved by the Registrar.
Associate Judge Christiansen
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