Nichols v Racey Constructions Pty Ltd - [2014] NZHC 2995

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-3606 [2014] NZHC 2995

BETWEEN
RHONDA MARIE NICHOLS

Plaintiff

AND

RACEY CONSTRUCTIONS PTY LTD First Defendant

DAVID GEOFFREY PUNTER Second Defendant

Hearing: 20 October 2014

Appearances:

C K Lyon for the Plaintiff
D G Punter on behalf of the Defendants

Judgment:

28 November 2014

JUDGMENT OF BROWN J

This judgment was delivered by me on 28 November 2014 at 10 am, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors: Law Direct, Kerikeri Counsel: C K Lyon, Auckland Copy To: Defendants

NICHOLS v RACEY CONSTRUCTIONS PTY LTD [2014] NZHC 2995 [28 November 2014]

[1] Mrs Rhonda Nichols as trustee of the Eungella Trust (“the Trust”) brought a proceeding to recover the sum of $359,120 together with accrued interest of
$163,300, from the first and second defendants on the grounds that the principal sum was a loan advanced to them by the Trust which has not been repaid. The defendants resist the claim on the bases that first, there was no relationship at any material point in time between them and the plaintiff and secondly, the nature of the transaction was not a loan advance but instead a direct investment by the Trust in a property development undertaken by Calliope Resort Developments Pty Ltd.

[2] In the course of the hearing a question arose as to whether the consent of the other trustee, Mrs Nichols’ former husband Mr Roy Nichols, to the bringing of the proceeding had been obtained. An application was then made for leave to amend the pleading to delete Mrs Nichols as a plaintiff in her trustee capacity and to add her as a plaintiff in her personal capacity.

[3] Consequently the following issues fall for determination: (a) Was the claim validly brought by Mrs Nichols?
(b) If not, should the application to amend the pleadings be allowed? (c) If the answer to (a) or (b) is yes, is the claim made out?

Was the claim validly brought by Mrs Nichols?

[4] The Eungella Trust was established by a Deed of Trust dated 21 April 1996. The beneficiaries of the Trust included Mrs Nichols and Mr Nichols. A minimum number of trustees was provided for in clause 13 as follows:

13. (a) THE minimum number of Trustees shall be two PROVIDED HOWEVER that there shall at all times be at least one Trustee who is not a beneficiary nor a relative of a beneficiary within the meaning of Section 96 of the Income Tax Act 1976.

(b) THE Trustees right to exercise discretionary powers under this Deed of Trust shall be suspended during periods of non-compliance with Clause
13(2) hereof.

Clause 13 of the Schedule of Powers and Conditions provided that all decisions of the trustees were to be unanimous.

[5] By a Deed of Settlement dated 12 March 2004 the then trustees of the Eungella Trust were removed and replaced as trustees by Mrs Nichols and Mr Nichols.

[6] On or about 26 July 2007…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2014] NZHC 2995
Decision Date: 28 November 2014

CaseChat Overview and Summary

In the case of Nichols v Racey Constructions Pty Ltd, Rhonda Marie Nichols, as trustee of the Eungella Trust, sought to recover $359,120 plus accrued interest from the defendants. The defendants argued that no loan was made and that any transaction was an investment in a property development. A critical issue was whether Mrs Nichols validly brought the proceeding as a trustee and whether she could amend the pleading to sue in her personal capacity.

The court found that the Trust Deed required unanimous decisions by the trustees. Mrs Nichols had not obtained the consent of the other trustee, Mr Nichols, to bring the proceeding. Consequently, the court held that the proceeding was not validly brought. The court also declined to allow an amendment to the pleading to substitute Mrs Nichols in her personal capacity as the plaintiff, finding that any claim she had was in her capacity as trustee.

The court dismissed the proceeding and awarded the defendants one set of costs on a 2B basis.

Orders