Nixon v Richardson HC Auckland CIV 2010-404-1412

[2010] NZHC 1546

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2010-404-001412

BETWEEN  SHAUN ROGER NIXON Plaintiff

ANDMARTIN VICTOR RICHARDSON Defendant

Hearing:         5 August 2010

Appearances: T A Chubb for Plaintiff

F J Thorp for Defendant

Judgment:      1 September 2010

JUDGMENT OF KEANE J

This judgment was delivered by Justice Keane on 1 September 2010 at 11am pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Date:

Solicitors:

Boyle Mathieson, Henderson, Auckland for Appellants

Fleming Foster & Co, Manurewa, Auckland for Respondents

NIXON V RICHARDSON HC AK CIV 2010-404-001412  1 September 2010

[1]      Until 9 March 2004, when Shaun Nixon withdrew from his partnership in the Auckland  accountancy firm, Gosling Chapman,  he  and Martin Richardson were partners.  They  then  remained  trustees  of  Mr  Nixon's  family trust  that  held  Mr Nixon's partnership interests; Mr Nixon was a discretionary beneficiary and enjoyed a power of appointment.

[2]      On  9  March  2004  Mr  Nixon  withdrew  from  the  partnership  against  the prospect that, unless he did so, he would be expelled by the partners the following day. In this action he pursues against Mr Richardson, as trustee of his family trust, a claim factually indistinguishable from one he pursued without success at arbitration against the partners; and proved, in the respect material to this case, unable to be disturbed on appeal to this Court and to the Court of Appeal.

[3]      In  this  action,  Mr  Nixon  contends,  Mr  Richardson  is  answerable  quite distinctly for three breaches of his fiduciary duties as trustee.   He failed to act in good faith and in the trust's best interests. He acted when under a conflict of duty. He acted in breach of a duty to disclose. Mr Nixon seeks the damages he failed to obtain at arbitration: $15,000 for having had to leave the partnership on 9 March 2004 without three months’ notice and $496,130 for resulting losses of professional and investment profits. At such short notice, he contends, he was unable, immediately he left the partnership, to set up on his own.

[4]      Mr Richardson seeks to have this claim struck out on the grounds that it discloses no reasonably arguable cause of action, that it is likely to cause prejudice or delay, and that it is frivolous or vexatious and constitutes an abuse of process. He founds his application on two distinct but related grounds.

[5]      In the first place, Mr Richardson contends, Mr Nixon pursues this claim in breach of an agreement, dated 7 October 2004, settling with two exceptions all issues arising when he withdrew from the partnership as he did. These extended to any concerning the trust. Of the two issues reserved for arbitration, Mr Richardson contends secondly, both were decided against Mr Nixon and one is indistinguishable from his present claim.

[6]      At arbitration Mr Nixon, on the presently pleaded facts, claimed from the partners the damages he now claims from Mr Richardson. At arbitration he alleged against the partners breach of a consultancy agreement. Now he recasts his claim to allege a breach of fiduciary duty on Mr Richardson's part as trustee. Mr Nixon, Mr Richardson contends, must be estopped from doing so by the arbitrator's findings or, if not that, his claim has to be an abuse of process.

[7]      There is also this singular twist. Though in this claim Mr Nixon claims not to challenge the arbitral award, he has applied to the Supreme Court for leave to appeal the decision of the Court of Appeal vindicating the award in the respect material. Relying on the same circumstances he now has in train two claims for the same losses on, as Mr Richardson says, and Mr Nixon denies, irreconcilable bases. That, Mr Richardson contends, and Mr Nixon denies, has in itself to be an abuse.

Narrative

[8]      On about 27 March 1997, as Mr Nixon pleads in his statement of claim, just before he became a partner in Gosling Chapman, one of the existing partners, Geoffrey Walker, settled for him his family trust. He and Mr Richardson, then another existing partner, became the co-trustees. He, himself, became a discretionary beneficiary and retained a power of appointment.

[9]      Mr Nixon, as he next pleads, chose to hold his partnership interest in that way, following the example of some existing partners.  Others had elected to hold their interests personally.  His choice of a trust vehicle, I understand Mr Nixon to plead, if implicitly, was not a structural feature of the partnership.   It created a relationship between Mr Richardson, as trustee, and himself, as trustee and also as beneficiary, distinct from their relationship as partners.

[10]     On 1 April 1997, when he became a partner, Mr Nixon pleads, he obtained by agreement for sale and purchase, or rather his trust did on his behalf, his interest in the partnership's current account and in companies incorporated for the purposes of the partnership. He agreed to be bound by the agreement, dated 15 May 1995, governing the partnership as a whole.

[11]     In September 2001, Mr Nixon pleads, all partnership assets were transferred to Gosling Chapman Limited. Its shares were taken up entirely by Gosling Chapman Holdings Limited, and the partners, however they did so, took up the shares in the holding company.  Mr Nixon's family trust assumed his interest.

[12]     On 13 January 2003, or thereabouts, Mr Nixon pleads, he told the partners that  he  intended  to  retire  from  the  partnership.  Shortly  after,  he  pleads,  Mr Richardson and another partner, Timothy Goldfinch, acting on behalf of partners, invited him to become a consultant. It is here that he and the partners, as at the arbitration, begin to part company.

[13]     In June - July 2003, Mr Nixon pleads, he and Mr Richardson negotiated a consultancy agreement between himself and Gosling Chapman Limited, which he believed to be binding. Mr Richardson, he pleads, knew that to be his belief. Yet Mr Richardson knew, he pleads, that the partners generally did not accept that.   Mr Richardson, he pleads, did not disabuse him. Rather, Mr Richardson acted as if they had reached an agreement. That is his essential complaint.

[14]     One of the terms they agreed, Mr Nixon pleads, is that he would announce his consultancy to the managers on 22 July 2003 and to the staff, two days later, on

25 July 2003. Another was that either he or Gosling Chapman Limited could terminate the consultancy on three months’ notice.

[15]     On 25 July 2003, Mr Nixon pleads, as he and Mr Richardson had agreed, he did announce to the managers that on 1 April 2004, the day after he was to resign from Gosling Chapman, he was to become the firm's first consultant. On 25 July

2003, he pleads, he announced that to staff. On 25 July, he pleads, Mr Richardson was present; he had approved the terms of both announcements.

[16]     Furthermore, Mr Nixon pleads, after that and until 10 February 2004 he and Mr Richardson worked together, in terms of the agreement, to reallocate his clients to other partners. At Mr Richardson's request, again as the agreement called for, he made a $10,000 payment to equalise his current account.

[17]     On 10 February 2004, Mr Nixon pleads, Mr Richardson told him that the partners did not consider themselves bound; and that they expected that, when he resigned  his  partnership  on  31  March  2004,  he  would  leave  altogether.    Yet Mr Richardson then knew, Mr Nixon pleads, that he required two months to set up on his own. Also that within two days, on 12 February 2004, he was to take his family on a 10 day holiday to Australia.

[18]     On 8 March 2004, Mr Nixon pleads, and it is uncontested, he was advised of a partnership meeting to be held on 10 March 2004 at which his expulsion was to be discussed. On 9 March, he pleads, and it is undisputed, the partners, amongst them Mr Richardson, gave him an ultimatum. He was to resign that day or be expelled the following day. He left that day.

[19]     The next day, Mr Nixon pleads, as a stopgap measure he took up work as an employee in another accounting firm. The short notice he had received prevented him from setting up on his own as from 31 March 2004.   Hence his claim for damages first made in contract against the partners in the arbitration but now, as a beneficiary, against Mr Richardson as trustee.

[20]     Mr Nixon claims, as he did at arbitration, $15,000 for not having received three months’ notice and $496,130 for his ensuing loss of profits; a loss resulting from the loss of the opportunity over the next two years to set up and practice on his own account and, independently, to create wealth by personal investment.

Three causes of action

[21]     In his first cause of action, Mr Nixon contends, Mr Richardson, as trustee, owed him and the trust a fiduciary duty to act in good faith and in their best interests. In fraudulent or wilful breach, he contends, Mr Richardson did not tell him or the trust that the other partners of Gosling Chapman believed they had not agreed any consultancy with him or the trust.

[22]     In his second cause of action, Mr Nixon contends, Mr Richardson, as trustee, owed him and the trust a fiduciary duty to act in good faith and in their best interests

and not to place himself in a position where his personal interests conflicted with theirs. In fraudulent or wilful breach, he contends, Mr Richardson preferred his own best interests and those of the firm.

[23]     In his final cause of action, Mr Nixon contends, Mr Richardson, as trustee, owed him and the trust a fiduciary duty to disclose anything that would have a negative impact on the trust. In fraudulent or wilful breach, he contends, Mr Richardson did not tell him or the trust that the other partners considered they had not agreed a consultancy with him or the trust.

[24]     As to his first and third causes of action, in which Mr Nixon makes the same essential complaint, he relies on three particulars. First, he pleads, Mr Richardson allowed him to announce to managers and staff he was to be a consultant; and Mr Richardson approved the announcement to staff and did not contradict two partners who spoke to staff about Mr Nixon becoming a consultant. Secondly, he pleads, Mr Nixon encouraged him, between 25 July 2003 - 10 February 2004, to tell his clients that on 1 April 2004 he was to become a consultant; and he was privy to Mr Nixon's client list identifying those clients told of the impending consultancy and the liaison partner assigned. Thirdly, he pleads, on 25 July 2003 Mr Richardson asked him to pay $10,000 to equalise his current account.

[25]     In his second cause of action Mr Nixon relies as a particular only on the general complaint he makes in his first and third causes of action; that he was alone in his belief that a binding agreement had been reached. As to all three then, Mr Nixon contends, Mr Richardson acted as if a consultancy had been agreed, under which he enjoyed three months’ notice, only to join in the partners' 9 March 2004 ultimatum.  As  a  trustee,  it  is  his  case,  Mr  Richardson  has  to  be  personally answerable.

Strike out jurisdiction

[26]     The defendant applies to strike out the plaintiff's application relying on r 15.1 of the High Court Rules which says:

15.1 Dismissing or staying all or part of proceeding

(1) The court may strike out all or part of a pleading if it –

(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or

(b)      is likely to cause prejudice or delay; or

(c)      is frivolous or vexatious; or

(d)      is otherwise an abuse of the process of the court.

…

[27]     The Court’s power to strike out under this rule is without prejudice to its inherent jurisdiction: High Court Rules, r 15.1(4). In exercise of the power the Court may dismiss a proceeding or enter a stay: High Court Rules, r 15.1(2) and (3). And, as  to  the  usual  primary  ground,  untenability,  Richardson  P  stated  in  Attorney-

General v Prince and Gardner, the principles that apply:[1]

A striking-out application proceeds on the assumption that the facts pleaded in the statement of claim are true. That is so even although they are not or may not be admitted. It is well settled that before the Court may strike out proceedings the causes of action must be so clearly untenable that they cannot possibly succeed …; the jurisdiction is one to be exercised sparingly, and only in a clear case where the Court is satisfied it has the requisite material  …;  but  the  fact  that  applications  to  strike  out  raise  difficult questions  of  law,  and  require  extensive  argument  does  not  exclude jurisdiction ….

[1] Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267.

[28]     To strike out entirely for untenability is a measure of last resort. It is not to be resorted to where there may be a cause of action, which has been insufficiently or inaccurately pleaded. Strike out is only justified when there is no cause of action disclosed, however pleaded.[2]

[2] Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [31].

[29]     Mr Richardson's application rests in part on untenability but as much, or more, on the grounds that Mr Nixon's claim is both vexatious and an abuse of process.   Mr Nixon, he contends, is precluded from advancing his claim by the general release he gave in the settlement agreement and, quite separately, by issue estoppel, or because his claim involves an abuse of process. Mr Richardson invokes

the public interest in finality;[3]  and that interest in its widest sense, as Somers J

[3] Z v Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1 at [58] and [62].

described it in New Zealand Social Credit Political League Inc v O'Brien, is this:[4]

Estoppel per rem judicatum, issue estoppel and abuse of process in at least one of its manifestations, may be seen as exemplifying similar concepts - that a matter once determined may not be again litigated, that a matter which could and should have been raised in proceedings which have been determined should not be allowed to be raised subsequently, and that a collateral attack upon a final decision in other proceedings will not be permitted.

[4] New Zealand Social Credit Political League Inc v O'Brien [1984] 1 NZLR 84 (CA) at 95.

[30]     Insofar as Mr Richardson contends for an abuse of process, that is to be resolved in 'a broad, merits-based judgment which takes account of the public and private interests involved'.[5]

Settlement agreement

[5] Z v Dental Complaints Assessment Committee, above n 3, at [63] per Elias CJ and at [127] per

Blanchard, Tipping and McGrath JJ, quoting with approval Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1 (HL) at 31 per Lord Bingham. See also Attorney-General v McVeagh [1995] 1 NZLR 558 (CA).

[31]     Mr Nixon's claim, it is Mr Richardson's case, has to be precluded by the agreement that he entered into on 7 October 2004 with the continuing partners, including Mr Richardson and Gosling Chapman Limited. He entered into that agreement both in his personal capacity and with Mr Richardson on behalf of his family trust. In his personal capacity he has to be bound as a beneficiary also.

[32]     Secondly, it is Mr Richardson's case, the agreement as a whole, agreed at conciliation, resolved once and for all every claim that had then arisen or might yet still arise from the circumstances in which Mr Nixon withdrew from the partnership. It extended to any claim that Mr Nixon might have been able to bring, not only as a partner but as a trustee and as a beneficiary.

[33]     Only  two  of  Mr  Nixon's  claims,  or  those  of  his  former  partners,  Mr Richardson's case is, were singled out for arbitration from the otherwise general release Mr Nixon gave. One of the two was Mr Nixon's claim for the damages he

now seeks. He then looked to the partners relying on a breach of  a  concluded consultancy agreement. He did not attempt to reserve any claim against Mr Richardson as trustee. As to that, he must have given a release.

[34]     Mr Nixon's case in response is that he signed the agreement as a withdrawing partner and as a trustee but not as a beneficiary. It is as a beneficiary that he launches this proceeding. The trust had to be a party to the agreement only because, to give effect to his undertakings, it had to relinquish his partnership interests.

[35]     The agreement to which he subscribed, Mr Nixon contends, on its face and against its context, had one overriding purpose, to settle the cross-claims that arose between  Mr  Nixon  and  the  partners  generally  and  himself  as  the  withdrawing partner. Though he bound himself, as did Mr Richardson, as trustee, he did not bind himself as a beneficiary of the trust.

[36]     Mr Nixon contends, finally, that he was not in a position to release Mr Richardson from any breach of fiduciary duty. The interests of the trust are not confined to the partnership interests. Nor could the agreement bind the discretionary beneficiaries of whom he was one only.

Release principles

[37]     Where, as here, the effect of an agreement granting a release of claims is in question, the House of Lords held in Bank of Credit and Commercial International SA v Ali,[6] the general principles governing interpretation of contracts apply, subject to some considerations of policy.

[6] Bank of Credit and Commercial International SA v Ali [2001] UKHL 8, [2002] 1 AC 251 (HL).

[38]     In that case, where the issue was, as it is said to be here, whether a general release extended to a claim that neither party had then identified, the House of Lords held that, because the cause of action there in  question did not exist when the agreement was entered into, the release given could not have extended that far.

Whether the principle on which that case was decided applies analogously in this case, or does not begin to do so, is decisive as to this ground of Mr Richardson's application.

[39]     Lord Bingham, with whom all except Lord Hoffman agreed both as to the principles applying and the result, construed the release in that case on the principles that Lord Hoffman had identified in Investors Compensation Scheme Ltd v West Bromwich Building Society.[7]   Lord Bingham said this:[8]

In construing this provision, as any other contractual provision, the object of the court is to give effect to what the contracting parties intended. To ascertain the intention of the parties the court reads the terms of the contract as a whole, giving the words used their natural and ordinary meaning in the context of the agreement, the parties' relationship and all the relevant facts surrounding the transaction so far as known to the parties. To ascertain the parties' intentions the court does not of course inquire into the parties' subjective states of mind but makes an objective judgment ….

[7] Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 (HL) at 912-913.

[8] Bank of Credit and Commercial International SA v Ali, above n 6, at [8].

[40]     Then, in two passages, Lord Bingham identified the limiting considerations of policy:[9]

[9] Ibid, at [9] and [10] respectively.

A party may, at any rate in a compromise agreement supported by valuable consideration, agree to release claims or rights of which he is unaware and of which he could not be aware, even claims which could not on the facts known to the parties have been imagined, if appropriate language is used to make plain that that is his intention. …

But a long and in my view salutary line of authority shows that, in the absence of clear language, the court will be very slow to infer that a party intended to surrender rights and claims of which he was unaware and could not have been aware.

[41]     Agreeing generally with Lord Bingham, Lord Nicholls said this as to where the line was to be drawn:[10]

[10] Ibid, at [27].

When, therefore, a claim whose existence was not appreciated does come to light, on the face of the general words of the release and consistently with the purpose for which the release was given the release is applicable. The mere fact that the parties were unaware of the particular claim is not a reason for excluding it from the scope of the release. The risk that further claims might  later  emerge  was  a  risk  the  person  giving  the  release  took  upon

himself. It was against this very risk that the release was intended to protect the person in whose favour the release was made.

[42]     As against that, he continued to say:[11]

However widely drawn the language, the circumstances in which the release was given may suggest, and frequently they do suggest, that the parties intended, or, more precisely, the parties are reasonably to be taken to have intended, that the release should apply only to claims, known or unknown, relating to a particular subject matter.

[11] Ibid, at [28].

[43]     In that case the claim that the release was held not to capture was one that arose afterwards by a retrospective change of law. That was held decisive. But, even then, Lord Hoffman differed. There were, he considered, two issues involved. As a matter of plain language against the context, he considered, the release captured even such a claim. Secondly, he held, the bank should be entitled to rely on the generality of the release. It had not withheld from its employee, from whom it obtained the release, the fact that he might have a claim of which he was unaware.

[44]     As to the first question, that of interpretation, Lord Hoffman said that it had to be realistic. It was not realistic, he said, in a remark arguably apposite to this case, to:[12]

… attribute to the parties an intention to make fine distinctions between different kinds of unknown claims; for example, between those which were conceivable but not conceived of and those which (perhaps because of what was then thought to be the law) were not even conceivable.

[12] Ibid, at [47].

[45]     Rather, Lord Hoffman said, the practicalities pointed the other way. Claims improbable at the time when an agreement was reached, could be assumed to have been discarded:[13]

[13] Ibid.

To regard such claims as nevertheless included in the class of those released does not seem to me extravagant. On the contrary, the more improbable the claim, the more likely it is that the reasonable employee would be willing to part with it for ready money. And the construction gives effect to the object of  the  bank,  which  must  have  been  to  draw  a  final  line  under  the employment relationship.

Pertinent terms

[46]     Clause 2.1 of the agreement stated that, subject to clause 7, Mr Nixon was to withdraw from the partnership and cease to be a partner with effect from 9 March, except as to goodwill payments or refunds, both to be the subject of arbitration. As from that date, cl 2.2 recorded, Mr Nixon as the withdrawing partner, and he and Mr Richardson as the trustees of his family trust, were to cease to have any right, title or interest in the partnership or its assets or goodwill or in Gosling Chapman Limited or the other companies. Clause 2.3 included this statement:

For the avoidance of doubt, this agreement records the entire agreement between  the  Continuing Partners  and  the Withdrawing Partner as to  his withdrawal and supersedes all previous agreements including (without limitation) the provisions set out in the Partnership Agreement and the Shareholder Agreement relating to a withdrawal of a partner ….

[47]     Clause 3.3(a) obliged Mr Nixon to procure the transfer by the trustees of the shares in Gosling Chapman Limited and the other companies; and cl 3.5 deemed the partnership and shareholder agreements amended to reflect the fact that Mr Nixon was to withdraw from the partnership. In exchange Mr Nixon was to receive, under cl 4, a payment from the continuing partners; cl 5 provided for an adjustment on account of debtors and cl 6 limited the trustees' liability. To the extent that it is material it said this:

The individual liability under this agreement of the Nixon trustees is limited to the assets of the Firm Trust which are in their respective hands as a trustee of that trust.

[48]     Finally, for present purposes, cl 7.1 set out the releases each of the parties to the agreement gave to each other and reserved the two issues for arbitration:

All claims between any one or more of them the Withdrawing Partner, the Nixon Trustees, the Continuing Partners, GCL and the Other Companies, in relation to the entitlements of the Withdrawing Partner or the Nixon Trustees arising  out  of  or  in  any way  connected  with  the Withdrawing  Partner's involvement with the Partnership and/or GCL and/or the Other Companies are hereby settled on the basis set out in this agreement with the exception of the  following claims  which  shall  be referred to  and  finally resolved  by arbitration in New Zealand in accordance with New Zealand law before one arbitrator to be agreed upon by the parties and if they should fail to agree within  7  days  from the  date  of  execution  of  this  agreement  then  to  be appointed by the President of the Auckland District Law Society:

(a)What amount, if any, by way of payment or refund of Goodwill is due from the Withdrawing Partner to Kurt Sherlock and/or Dianne Ludwig or to the Withdrawing Partner from Kurt Sherlock and/or Dianne Ludwig.

(b)What amount if any is due to the Withdrawing Partner by way of compensation for an alleged wrongful termination of partnership/employment/consultancy  arrangements  by  the Continuing Partners.

Nixon submissions

[49]     Clause 7.1, Mrs Chubb submits for Mr Nixon, on its face and against its context, does not, and cannot, bar Mr Nixon's present claim.

[50]     First, cl 7.1 limited the scope of claims to which it applied. It was confined to

'the entitlements of the Withdrawing Partner or the Nixon Trustees arising out of or in any way connected with the Withdrawing Partner's involvement with the Partnership'. Any breach of fiduciary duty on Mr Richardson's part was not comprehended. Mr Nixon did not forego his right as a beneficiary to claim against Mr Richardson as trustee.

[51]     Secondly, and consistently, cl 7.1 stated that the settlement was 'on the basis set out in [the] agreement' and the scope of the dispute was as described in paras (f) and (g) of the introduction to the agreement. Mr Nixon had decided to withdraw from the partnership. He and the partners had entered into the agreement to record the terms and conditions of his withdrawal. His trust was only mechanically implicated.

[52]     Thirdly, and consistently, cl 2 confined the agreement solely to the issues that arose out of Mr Nixon's withdrawal from the partnership and shareholder agreement. These were the arrangements referred to in cl 2.3 that were superseded. If the intent had been to supersede the trust deed that would have been said.

[53]     Fourthly,   and   consistently,   cl   3   of   the   agreement,   under   the   title

'acknowledgements' listed the arrangements reached. All concerned Mr Nixon's entitlements under the partnership agreement, or gave effect to his withdrawal from it. They listed the payments to be made to him, or by him as a withdrawing partner.

[54]     Finally, Mrs Chubb submits, cl 6 might have limited the liability of the trustees, and might do so still, but only as to their liability under the agreement. It did not and  cannot  now  extinguish  claims  for  breaches  of  trust  independent  of  the agreement. Indeed cl 6 would be redundant if the issues under the trust had been settled.

Conclusions

[55]     The trustees of Mr Nixon's family trust, I accept, had necessarily to be parties to any agreement he entered into when he withdrew from the partnership. The trust held his interests in the partnership and in Gosling Chapman and related companies.

[56]     Mr Nixon, I accept also, might not have envisaged this present claim when he entered the agreement. His focus then was on his claim against the partners for breach of the consultancy he believed had been concluded. The fact remains that, as Mr Thorp submits, Mr Nixon did subscribe to the agreement as a trustee. He did subscribe in his personal capacity. In the latter capacity, particularly, he has to be bound by the agreement, so far as it plainly applies to him, even as a beneficiary.

[57]     Clause 7.1 is very widely expressed. It records that the agreement constitutes a full and final settlement of:

All claims … in relation to the entitlements of [Mr Nixon] or the [trust] arising out of or in any way connected with [Mr Nixon's] involvement with the Partnership and/or GCL and/or the Other Companies.

[58]     The words  'all claims', I consider, must mean what they say, more especially when coupled with the words 'arising out of or in any way connected with'. They are to be liberally construed.[14]  Given their normal and natural meaning, they cannot be confined only to claims identified at conciliation. They must capture any claims linked to or with Mr Nixon's partnership, as long as that link is real.[15]

[14] Premium Nafta Products Ltd v Fili Shipping Co Ltd [2007] UKHL 40, [2007] 4 All ER 951 at [12]-[13]. See also David St. John Sutton, Judith Gill and Matthew Gearing Russell  on Arbitration (23rd ed, Sweet & Maxwell, London, 2007) at [2-074].

[15] Baltic Shipping Co Ltd v Pegasus Lines SA [1996] 3 NZLR 641 (CA) at 648. See also SOS Maritime Brokers v The ship Dana Star [1996] 2 NZLR 482 (HC).

[59]    Furthermore, by reserving his consultancy claim against the partners for arbitration, Mr Nixon clearly accepted it arose out of or was connected with his involvement in the partnership. He must have  accepted also the corollary. That unless he reserved it he abandoned it.

[60]     The  essence  of  that  claim  was  that  the  partners  were  bound  principally because of what Mr Nixon said and did on their behalf. In this present claim against Mr Richardson alone Mr Nixon inverts that assertion only to this extent. He says that even though the partners had not agreed to a consultancy, Mr Nixon did not disabuse him of his belief that they had and that constitutes his breach of fiduciary duty. This fresh  claim,  though  framed  differently  in  law,  must  equally arise  out  of  or  be connected with Mr Nixon's involvement in the partnership.

[61]     In each case also, Mr Nixon claims the same losses, relying on a contrast between  what  he  earned actually and  what  he  might  have  earned  as  a  Gosling Chapman consultant or on his own account. Even though Mr Nixon now looks only to Mr Richardson in breach of trust, he can hardly say that the losses he claims did not have the same genesis as his claim at arbitration. If they did not arise out of the partnership in a literal sense, to the extent that he is able to pursue them, they are certainly connected with his involvement with it.

[62]     Mr Nixon could, had he chosen, have reserved from the otherwise general release that he gave in the agreement not just his claim against the partners for these losses, but this alternative claim. He did not do so and he has to be fixed with his choice. His present claim, like every other that he might have had, or even contemplated, he abandoned forever in the otherwise general release that he gave the remaining partners, including Mr Richardson, and Gosling Chapman Limited.

[63]     That conclusion, by itself, warrants the grant of Mr Richardson's application. In case it does not, however, I must still refer to Mr Richardson's two remaining grounds. Mr Richardson next contends that the arbitrator's findings estop Mr Richardson even if the agreement does not.

Issue estoppel

[64]     In  contending  for  an  issue  estoppel  Mr  Richardson  cannot,  I  consider however, meet the point Mr Nixon makes in response. It is this. Even if this present claim rests on facts that are indistinguishable from those in the claim against the partners at arbitration, this present claim differs in law. Mr Nixon does not here claim in contract. He claims in trust. The breaches on which he relies are of a fiduciary duty.

Governing principles

[65]     In Talyancich v Index Developments Ltd the Court of Appeal stated:[16]

[16] Talyancich v Index Developments Ltd [1992] 3 NZLR 28 (CA) at 37-38.

Issue estoppel arises where an earlier decision is relied upon, not as determining the existence or non-existence of the cause of action, but, as determining,  as  an  essential  and  fundamental  step  in  the  logic  of  the judgment,  without  which it could  not stand,  some  lesser issue which  is necessary to establish (or demolish) the cause of action set up in the later proceedings ….

… an issue estoppel can only be founded on determinations which are fundamental to the decision and without which it cannot stand. Other determinations  cannot  support  an  issue  estoppel  however  definite  the language in which they are expressed.

[66]     In this the Court adhered closely to what it had said in the much earlier case Craddock’s  Transport  Ltd  v  Stewart,[17]   and  indeed  in  cases  intervening;  and Craddock is highly apposite. There the Court held that a second claim arising from the  same  motor  accident  involving three  people  was  not  precluded  by an  issue estoppel resulting from findings made in the earlier claim. The duties of care owed by the two drivers to the passenger of one were different from those they owed each

[17] Craddock’s Transport Ltd v Stewart [1970] NZLR 499 (CA).

other. And Turner J identified how closely the questions in the two cases need to align where issue estoppel is contended for:[18]

[18] Ibid, at 520.

Issue estoppel depends entirely on the validity of the proposition that the same question has been decided between the same parties, as fundamental to the decision of earlier litigation between them. If the question now being litigated is not necessarily precisely the same question as the one previously

decided, it cannot be enough. It is not enough that the questions are similar, or very similar, or almost the same; or that they may be the same. They must necessarily be precisely the same.

(Emphasis added.)

Conclusions

[67]     At arbitration, as Mr Richardson says, Mr Nixon advanced a claim that is indistinguishable from the one he now brings, except as to its foundation in law. The pleadings are nearly identical and in each he claims the same measure of damages. The arbitrator, in dismissing Mr Nixon's earlier claim, made findings of fact that bear very closely indeed on Mr Nixon's essential complaint in this present claim.

[68]     The arbitrator found, as a matter of fact, and unimpeachably as the Court of Appeal held, that no consultancy agreement had ever been entered into, because essential terms had not been agreed. Mr Richardson, he held, at no stage held out to Mr Nixon that an agreement had been concluded. Mr Nixon himself, the arbitrator found, cannot have believed that an agreement had been concluded. He was aware that his hourly rate, a principal term, had still to be accepted by the partnership as a whole.

[69]     At arbitration, however, the essential issue that the arbitrator had to resolve was whether there was a consultancy agreement and he held that there was not because essential terms had not been agreed. He did not, the Court of Appeal said, have to decide such wider issues as whether the partners were estopped by conduct from denying such an agreement. That had not been pleaded. Nor did he need to decide whether Mr Richardson had bound the partners by exercise of actual or ostensible authority. Mr Richardson's conduct in those ways, given the arbitrator's principal finding, ceased to be relevant.

[70]     The issues that arise on Mr Nixon's present claim, it seems to me, at least arguably lie more within the ambit of the findings that the arbitrator did not need to make than those that he did. More basically, the issue in law to which this present claim gives rise is different. It is whether Mr Richardson failed to act in good faith in the best interests of Mr Nixon and the trust. That may be very close to what the

arbitrator found he had to decide to resolve the contract claim. It cannot be said to be identical. That has to be fatal to any claim of issue estoppel.

Abuse of process

[71]     Even if, however, Mr Richardson cannot rely on the letter of the agreement, contrary to my primary conclusion, or on issue estoppel, to contend that Mr Nixon's claim against him is barred he is right, I consider, when he contends that the fresh claim does constitute an abuse of process in a wider more fundamental sense.

[72]     The abuse does not, as Mr Richardson contends, lie in the fact that for the first time in six years after conciliation and arbitration Mr Nixon alleges against him that he has been fraudulent in some unspecific way. The fraud Mr Nixon alleges is not dishonesty. It is equitable fraud. It is a failure to have acted consistent with his duty; a duty of which he ought to have been aware and by which he is bound even if he was not aware of it.

[73]     Rather, the abuse that Mr Richardson can rightly complain of is this. Mr Nixon and Mr Richardson as partners and as trustees, and Mr Nixon in his personal capacity more generally, entered into an agreement after conciliation to resolve once and for all every issue capable of founding a claim in law or equity that Mr Nixon could mount against the partners or Gosling Chapman Limited, and any that they could mount against him.

[74]     To achieve finality each gave the others a general release except for two claims expressly reserved for arbitration that were then resolved in that way. In seeking to resurrect one of the claims by recasting it in law, Mr Nixon at once offends the release he gave, which was expressed to be general, and indirectly if not directly he mounts  a  collateral  attack  on the  arbitral  award,  the  subject  of  two unsuccessful appeals. That has to constitute an abuse of process.

[75]     That abuse is compounded, it seems to me, because Mr Nixon pursues this claim while at the same time seeking to obtain the leave of the Supreme Court to challenge the arbitrator's award by seeking to reverse the decisions of the Court of

Appeal, and before that this Court, vindicating that aspect of the award. Presently in separate proceedings he is seeking the same losses from different parties on irreconcilable bases in inference if not fact.

[76]     That to my mind, however, is merely to compound the abuse that this present claim constitutes in itself. Even without that compounding factor, I consider, Mr Nixon's claim must be struck out for breach of the settlement agreement and more generally for abuse of process.

[77]     There will be that order. Mr Richardson is entitled to costs. If they cannot be agreed his memorandum is to be filed within 10 working days of the date of this

decision and Mr Nixon's reply within the succeeding 10 working days.

P.J. Keane J