Perriam v Wilkes
[2012] NZHC 1250
•13 June 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2009-425-284 [2012] NZHC 1250
BETWEEN WENDY JOY PERRIAM Plaintiff
ANDLAWRENCE ERNEST WILKES First Defendant
ANDSTEPHEN JOHN BRADSHAW Second Defendant
ANDALEXANDER MCLENNAN WILSON Third Defendant
ANDLESLEY MARGARET INSTONE Fourth Defendant
ANDJUDITH ELEANOR FLETT Fifth Defendant
ANDQBE INSURANCE (INTERNATIONAL) LIMITED
Third Party
Hearing: 9 May 2012
(Heard at Auckland)
Counsel: S.J. Callanan - Counsel for Plaintiff
P. Churchman - Counsel for Defendants
Judgment: 13 June 2012
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
This judgment of Associate Judge Gendall was delivered by the Registrar on 13 June
2012 at 4.00 pm under r 11.5 of the High Court Rules.
Solicitors: Lewis Callanan, Solicitors, PO Box 35361, Browns Bay, Auckland
Burrowes & Co, Solicitors, PO Box 24515, Manners Street, Wellington
WJ PERRIAM V LE WILKES HC AK CIV-2009-425-284 [13 June 2012]
Introduction
[1] This action has sprung out of what was a protracted relationship property dispute between the plaintiff Wendy Joy Perriam (Mrs Perriam) and her former husband Mark Francis Perriam (Mr Perriam), who is now bankrupt. In the present proceeding, the plaintiff Mrs Perriam brings a claim (essentially alleging breaches of fiduciary duty, equitable fraud and knowing receipt) against the defendant solicitors who were instructed by her husband Mr Perriam to set up a number of trusts and companies to hold a range of business assets. In essence, Mrs Perriam alleges that the defendants were involved in creating these structures and completing a range of transactions affecting them to knowingly defeat her interests in relationship property as between herself and Mr Perriam.
[2] In the present application before me, the defendants apply to strike out the plaintiff’s latest amended statement of claim on the basis that none of the pleaded causes of action are reasonably arguable and have any prospects of success. This strike out application relates to Mrs Perriam’s fourth amended statement of claim, which was filed on 16 March 2012. This followed four earlier pleadings which were an initial statement of claim filed in this proceeding on 9 June 2009, a first amended statement of claim filed on 18 November 2009, a second amended statement of claim filed on 17 May 2010 and a third amended statement of claim filed on 5 July
2011.
[3] There has been an earlier strike out decision in this proceeding. In a decision given on 6 October 2010 on that application, which was one by the defendants to strike out the plaintiff Mrs Perriam’s second amended statement of claim, His Honour Associate Judge Faire found that although that statement of claim was entirely unsatisfactory, nevertheless he would adjourn the strike out application and gave the plaintiff an opportunity to re-plead following further discovery.
[4] That did occur and obviously it lead to the filing of Mrs Perriam’s third and then her fourth amended statements of claim, the latter of which is the subject of the present strike out application. This application is opposed by the plaintiff, Mrs Perriam.
Background
[5] The plaintiff, Mrs Perriam, was married to Mr Perriam for 13 years before their separation on 4 April 2004. The defendants are or were solicitors practising in Invercargill and other places as partners in the firm Macalisters. Although the defendants are described individually in the pleadings as jointly and severally liable, they are sued in their capacity as partners of Macalisters. The first defendant, Lawrence Ernest Wilkes (Mr Wilkes), is the brother-in-law of the plaintiff, and at operative times he appears to have been the primary legal advisor to her husband Mr Perriam.
[6] MacAlisters through Mr Wilkes had advised Mr Perriam on general conveyancing matters and his will prior to his marriage to Mrs Perriam. Subsequently, they advised the couple on conveyancing matters with respect to joint property purchases and sales, in relation to estate planning matters and on the establishment of a family trust in January 1996. It seems the defendants also acted for the plaintiff once in her sole capacity in executing a will in 1995. Additionally, the defendants acted for Mr Perriam and his business partner in the affairs of a large property development business known as the Perriam Group. This involved the incorporation of a number of companies and the formation of trusts from about 2000 onwards. It seems that in this business operation, the general pattern was that a new company was incorporated for each property development which was undertaken by the Group. The business structure involved the establishment of a corporate trustee for Mr Perriam and one for his business partner, and those two corporate trustees were trustees of a number of trusts which predominantly held (on an equal basis) the Perriam Group’s shareholding assets.
[7] During the course of establishing those Perriam family trusts, Mr Wilkes for the defendants received instructions from Mr Perriam that the beneficial owners of the various companies and trusts were to be Mr Perriam and his children, but not the plaintiff. The plaintiff Mrs Perriam alleges now that the purpose of these trusts, namely the Colorado Property Trust, the Mark Perriam Trust, the Mayvilla Storage Trust, the Perriam Queenstown Trust and the Rural Property Trust, was to defeat her future matrimonial property claims. The last of these trusts was established on the
2nd of April 2004, two days before the couple’s separation. Upon separation the defendants advised both Mrs Perriam and Mr Perriam to obtain independent legal advice on their marital breakdown and on relationship property matters and they did so.
[8] The plaintiff Mrs Perriam alleges now that before accepting the earlier instructions from Mr Perriam and carrying out the legal work for the Perriam Group, Mr Wilkes and the defendants ought to have disclosed the nature of the transactions to her. She contends also that the defendants ought to have known that relationship property was going to be “transferred” to those entities and thereby her “equitable interest” in that property would be defeated.
[9] It is also alleged that the existence of those trusts and companies as the owners of what was said to be Mr Perriam’s property prevented the plaintiff from completing a relationship property settlement of the order of $1.6 million.
[10] The Perriam Group encountered serious financial difficulties. As I understand it, the companies forming the group in the main have now been placed into liquidation, and Mr Perriam was declared bankrupt on 28 June 2010. The group has no assets and currently owes something around $140 million to secured and unsecured creditors. Meanwhile, the plaintiff has instituted other relationship property proceedings against Mr Perriam in the Family Court, but the present status of those proceedings is unknown.
[11] On this aspect, at [13] of his 6 October 2010 decision in this proceeding, His
Honour Associate Judge Faire said:
[13] The plaintiff issued proceedings in the Family Court. Those proceedings have not been resolved. No advice has been provided to this court as to whether the trusts and companies which are the basis for the plaintiff bringing this proceeding have been involved in the relationship property proceeding, whether pursuant to the Property (Relationships) Act 1976, ss 43 or 44 or otherwise. In addition, no material has been placed before the Court indicating whether any of these trusts or companies have any assets at all.
There was still no change to this position in the hearing before me on 9 May 2012.
[12] In his earlier 6 October 2010 decision as I have noted at [3] above, His Honour Associate Judge Faire also refused to strike out the plaintiff’s second amended statement of claim, allowing her another chance to file an amended pleading to address serious deficiencies in the pleading. In doing so, however, the Judge found the second amended statement of claim to be unsatisfactory, as amongst other things, he said it was quite impossible to ascertain how the actions complained of caused the loss claimed by Mrs Perriam, if indeed any loss had been suffered, and that in addition there was a significant lack of proper particulars which amongst other things might lead to limitation issues arising. Significant suggestions were made to assist the plaintiff and her counsel in re-pleading her claim.
[13] The plaintiff then filed both her third and fourth amended statements of claim here. The defendants now apply again to strike out the plaintiff’s pleading, this time the fourth amended statement of claim, on the basis they say that none of the causes of action pleaded in this statement of claim are reasonably arguable in terms of r 15.1(1)(a) High Court Rules.
Legal Principles on Application to Strike Out
[14] Under r 15.1(1), this 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.
[15] The authors of McGechan on Procedure provide the following helpful summary of the principles relevant to r 15.1(1):[1]
[1] Andrew Beck and others McGechan on Procedure (online looseleaf ed, Brookers) at
[HR15.1.02(1)].
HR15.1.01 Introduction
.........
(1) Principles
The established criteria for striking out was summarised by the Court of Appeal in A-G v Prince [1998] 1 NZLR 262, (1997) 16 FRNZ 258, [1998] NZFLR 145 (CA) at 267, and endorsed by the Supreme Court in Couch v A-G [2008] NZSC 45 at [33], per Elias CJ and Anderson J:
(a) Pleaded facts, whether or not admitted, are assumed to be true.
This does not extend to pleaded allegations which are entirely speculative and without foundation.
(b) The cause of action for defence must be clearly untenable. In Couch Elias CJ and Anderson J, at [33], said: “It is inappropriate to strike out a claim summarily unless the court can be certain that it cannot succeed.”
(c) The jurisdiction is to be exercised sparingly, and only in clear cases. This reflects the Court’s reluctance to terminate a claim or defence short of trial.
(d) The jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument.
(e) The Court should be particularly slow to strike out a claim in any developing area of the law, perhaps particularly where a duty of care is alleged in a new situation. In Couch, at [33], Elias CJ and Anderson J said: “Particular care is required in areas where the law is confused or developing.” There is considerable authority that developments in negligence need to be based on proved rather than hypothetical facts.
Fourth Amended Statement of Claim
[16] A major issue to be addressed here is whether the fourth amended statement of claim remedies the deficiencies outlined by His Honour Associate Judge Faire in his previous decision. These were essentially inadequate particularisation of the claims and the loss suffered, and a failure to establish a causal link between the defendants’ alleged breach and the loss said to be incurred. In particular, among the points made in that decision were that there was a major disconnect between the acts complained of and the loss (see[34]); that there was a significant lack of particulars, particularly where fraud was alleged (see [37] and [38]); that it was not pleaded anywhere that the creation of the trust or company structures was the cause of the business failures (see [28]) and that the plaintiff Mrs Perriam appeared to have overlooked the fact that if the effect of the business venture failures was the loss of the assets owned by the various trusts and companies that were set up, it would not have mattered whether Mr Perriam had used trusts to carry on the business or held the assets in his own name (see [28]).
[17] And significantly, the decision, at [25] pointed out that Mrs Perriam had proceeded in her second amended statement of claim on a fundamental misapprehension that rights under the Property (Relationships) Act 1976 arose without any action being taken on her part to secure either an agreement providing ownership of the assets or an order of the court.
[18] At the outset, I need to say that in my view to a large extent, these defects remain. Essentially, what the plaintiff has done in her fourth amended statement of claim as I see it is simply to embellish the pleadings first, with many speculative and unsubstantiated allegations including liberal claims of “fraud”, “equitable fraud”, “money laundering”, “collusion”, “conspiracy” and “dishonesty”, and secondly, to include some additional allegations said to amount to “factual” information. Instead of picking up on this court’s suggestions as to the need first, for additional particulars, and secondly, to identify how the actions complained of caused the actual claimed losses, and the detail of those losses, the Fourth Amended Statement of Claim it might be said represents a fundamental challenge to the earlier suggestion by His Honour Associate Judge Faire that Mrs Perriam did not have the type of rights which she has asserted were breached, at the time of the claimed breaches of duty on the part of the defendants.
[19] Shortly, I will turn to address each specific cause of action in Mrs Perriam’s new pleading and in doing so I will discuss whether the current statement of claim goes any further in addressing those earlier deficiencies. But first, some general comments on the plaintiff’s principal claim here which is one of a breach by the defendants of their fiduciary duty to her.
Breach of Fiduciary Duty
[20] The plaintiff’s fourth amended statement of claim seems to turn generally on two points. These are that the defendants, in complying with their fiduciary duty owed to the plaintiff, had a duty to safeguard alleged relationship property first, during Mrs Perriam’s relationship when acting on instructions from her husband and secondly, after her separation from Mr Perriam in 2004, again when acting on instructions from him. The defendants’ alleged failure to protect these rights in
respect of her “current and future property”, is said to have caused Mrs Perriam losses of nearly $10 million dollars. But, as I will refer to later, in my view there is still a complete disconnect here between the quantum of the claimed loss and any pleaded action of the defendants.
[21] As I have noted, however, many of the plaintiff’s causes of action in her fourth amended statement of claim, like her second amended statement of claim, allege the existence of a fiduciary duty, breaches of it (and what is now described as equitable fraud) on the part of the defendants in their capacity as solicitors for the plaintiff. Mrs Perriam claims that the defendants’ fiduciary duties required them, when acting for the Perriam Group, in some way to retain property that was potentially eligible as relationship property and further to maintain at all times a loyalty and fidelity to the plaintiff. This included obligations she says first, to obtain the plaintiff’s informed consent to act where there was an alleged conflict of interest, secondly, to act with total regard to the interests of the plaintiff including a wide duty of disclosure, and thirdly, to act honestly at all times bearing in mind the plaintiff’s interests.
[22] Examples in the plaintiff’s pleading of where breaches of these alleged
fiduciary duties are said to have occurred broadly include the following:
a. On 29 March 2000, the defendants took instructions to “fraudulently” sell and/or dispose of shares in Marcam Developments Ltd to a Trust in which the plaintiff would have no right or interest.
b.Between 1999 and 2003 the defendants took instructions from Mr Perriam to establish the Colorado Property Trust, the Mark Perriam Trust, the Mayvilla Storage Trust, the Perriam Queenstown Trust and the Rural Property Trust, in all of which trusts the plaintiff was neither a trustee or beneficiary.
c. Between 2000 and 2003 the defendants assisted also in establishing a number of companies for each new property development, with 45% shareholding held by the Mark Perriam Trust. In doing so the
defendants knew that this structure would defeat the plaintiff’s claim or rights under the Property (Relationships) Act 1976, and further they did not disclose that information to her.
d.The defendants “allowed” Francis McLaren Ltd (one of the incorporated companies) to borrow against the matrimonial home and on lend that money for property developments. This was a breach of duty as the plaintiff would not benefit from that transaction as she was not a beneficiary or a shareholder in any of those companies.
e. The plaintiff ought to have been told of the Mark Perriam Trust Deed, the share transfers, the various shareholder consent forms and the dates that various companies sold their assets and allegedly made substantial “profits”, but was not.
[23] Overall, the nature of the plaintiff’s claim is that the defendant should have refused at all times to act on instructions given by Mr Perriam as it is said they knew it would defeat Mrs Perriam’s relationship property interests. The plaintiff says at the very least, if the defendants did chose to act, they ought to have made full disclosure of all the “facts” to her. Their failure to do so, she says, meant also that at the separation date the plaintiff could not ascertain the extent of relationship property assets and could not secure the settlement to which she was entitled.
[24] In Bank of New Zealand v New Zealand Guardian Trust Co Ltd, [1999] 1
NZLR 664 (CA) at 687, breaches of duty by fiduciaries were divided into three categories,
First, there are breaches leading directly to damage to or loss of the trust property; second, there are breaches involving an element of infidelity or disloyalty which engage the conscience of the fiduciary; third, there are breaches involving a lack of appropriate skill or care.
[25] In his 6 October 2010 decision adjourning the strike out application relating to the second amended statement of claim, His Honour Associate Judge Faire at [33] hinted that this case might fall under the second category of cases, if it was appropriately pleaded. He stated that there might well be a proper basis here for
pleading that there was a significant degree of trust and confidence reposed in the defendants acting as solicitors for the plaintiff.
[26] The Privy Council decision in Clark Boyce v Mouat [1993] 3 NZLR 641 delineates the boundaries of solicitors’ fiduciary duties to their clients. The solicitor- client relationship is per se fiduciary, because reposing of trust and confidence is automatically assumed. A breach of this duty arises where the solicitor acts for a client in a matter in which he has a personal interest, or where a solicitor acts for both parties to a transaction without disclosing this to one of them, or where, having disclosed it he fails, unbeknown to one party, to disclose to that party material facts relative to the other party of which s/he is aware.
[27] However, these duties will only apply where the solicitor is instructed by the parties concerned to act on a particular matter. There is no general duty to take steps to notify former clients, like Mrs Perriam, of the details of instructions received that may prove at some point to be generally contrary to her interests. A fiduciary duty does not enlarge the scope of contractual duties, thus if there is no contractual duty to advise a client for example on the wisdom of entering into a transaction, he or she cannot claim that the solicitor owed her a fiduciary duty to give her that advice – see Clark Boyce v Mouat at [648].
[28] In Kilkelly v Arthur Watson Savage Legal,[2] the plaintiff and her husband together consulted a lawyer for the direct purpose of advising on and forming a family trust. Assets were transferred into the trust. Under the trust deed prepared by the defendants, only the husband was given the power to appoint and remove trustees. This compromised the wife’s ability to access what was formerly relationship property, and the Court found that given the contractual obligations between the parties, there was a breach of fiduciary duty and awarded damages
against the advising lawyers.
[2] Kilkelly v Arthur Watson Savage Legal HC Invercargill, CIV-2006-425-148, 23 July 2007.
[29] In Rawleigh v Tait [2008] NZCA 525 (CA), a solicitor was found to have breached his fiduciary obligation by advising both husband and wife on a personal guarantee matter before their separation. The wife agreed to guarantee a $1.4 million credit facility loan taken out by a company which had been purchased by her husband, she thought as part of a scheme to deprive her of her rights to matrimonial property. The defendant solicitor accepted that there was a conflict of interest here which was not explained or disclosed to the wife, nor was her informed consent sought, and thus he admitted there had been a breach of fiduciary duty on his part. Notwithstanding this, the Court of Appeal dismissed the wife’s appeal against the High Court decision refusing her claim against that former solicitor on the basis that, even with a proper explanation of the guarantee from her solicitor, she would still have executed the guarantee.
[30] The situation in this present case however might well be seen as different from and in large measure distinguishable from the basic position that prevailed in the cases noted at [28] and [29] above. Here, the transactions which the plaintiff alleges were designed to defeat her interests in relationship property it might be argued did not need the plaintiff’s consent nor any involvement of the plaintiff. The defendants were instructed by Mr Perriam and his business partner in their professional capacities and Perron Group in respect of separate business activities and transactions. It must be acknowledged however, that the defendants had acted previously for the plaintiff in her personal capacity, and for Mr and Mrs Perriam together. And, given that a solicitor’s fiduciary obligations may continue after he or she ceases to act, there is a possible argument open here that the defendants may have breached some duty to Mrs Perriam in assisting to establish those trusts and companies under which the plaintiff was neither a beneficiary nor had any interest. Although, in my view this argument is likely to face some difficulties here, I remind myself that the application before me is one for strike-out and the extent of any fiduciary obligations or breaches of those obligations in this instance might be seen in the circumstances prevailing here as not to be appropriate matters for a strike out application. More on this aspect later.
[31] Another aspect of this fiduciary duty is said by the plaintiff to arise here at the time the couple separated, when Mrs Perriam claims that she was entitled to full
disclosure of the transactions in which the defendants had acted for the Perron Group. Although issues of solicitor-client privilege might well surface in this situation, for present purposes I leave this aspect on one side. It is said for the defendants that Mrs Perriam and her counsel around that time did in fact receive disclosure of what was relevant as to all the entities involved and their financial positions. But, in any event at this stage, in my view in identifying a potential conflict of interest at the time and sending both parties away for independent legal advice, I would simply comment that as I see it the defendants had discharged their basic obligation. Again, more on this aspect later.
The Pleaded Causes of Action
[32] As noted at [19] above, I now turn to consider each of the specific causes of
action pleaded in the plaintiff’s fourth amended statement of claim.
First Cause of Action
[33] The first cause of action seems to relate to one of the trusts known as the Mark Perriam Trust and is headed “equitable fraud”. The damages sought are two separate amounts, being $175,850.00 and $300,000.00 respectively. They appear to relate to a sale of shares to the Trust in 2000 and receipt of a sum of $300,000.00 by the Trust in 2008. Various references to the fiduciary duty said to be owed by the defendants to the plaintiff are also referred to under this cause of action. Aspects of this duty are said to include “retention of the plaintiff’s property”, and to act with “total regard” to her interests, as well as an “absolute duty to act honestly with the plaintiff”. These duties are said to arise at all material times. There are no particulars however as to what the concept of “total regard” involves or as to how the defendants failed to act “honestly” with the plaintiff.
[34] In this broad area, before me, counsel for the plaintiff contended (and it is accepted) that the Court should be slow to strike out any proper claim in a developing area of law. As to this, counsel endeavoured to argue that the plaintiff’s claims relating to the defeating of her rights under the Property (Relationships) Act
1976 form part of what is a developing area of law. Several cases were then cited in
support of this proposition. However, in my view, the cases cited are not on point here as they all involved intentions that would be attributed in the present case not to the defendants but instead to the plaintiff’s former husband, Mr Perriam. In this regard, the plaintiff referred to Regal Castings v Lightbody [2009] 2 NZLR 433 in support of a proposition that “there is a legal duty on the defendants not to alienate the plaintiffs property”. This, of course, is a direct challenge to the Court’s ruling in Associate Judge Faire’s decision that, at the relevant time in the present case, the plaintiff did not have any property rights. On this, Associate Judge Faire cited at [26] and [27] Fisher on Matrimonial and Relationship Property at 1.26 and Walker v Walker [1983] NZLR 560 (CA) as clear authority for this proposition on the basis that relationship property rights are not equitable rights or retrospective and conventional property principles are retained unless and until the statutory relationship property regime is invoked by Court order or agreement.
[35] I am satisfied too that Regal Castings does not stand for the principle claimed by the plaintiff – that solicitors acting on instructions from one spouse cannot establish trusts or companies that could possibly have the effect of defeating the other spouse’s interests. No discussion whatsoever was made in the Regal Castings case of those like solicitors who assist in the establishment of trusts/companies which defeat (in that case) a creditor’s interests. It was only the debtor’s intention which was the topic of discussion there. It appears in the present case that, in reliance on this “principle” advanced by the plaintiff, which in my view does not in fact at law exist, Mrs Perriam claims that there is equitable fraud. Logically, in my judgment, this claim cannot have any merit either, because as I see the position its legal foundation does not exist. The plaintiff contends that the Court should be particularly slow to strike out a claim based on a developing area of the law and as I have noted this is accepted – A-G v Prince [1998] 1 NZLR 626, affirmed in Couch v A-G [2008] NZSC 45. However, in my judgment there is no developing area of the law at play in the present case, and that principle simply does not apply here.
[36] The alternative to the plaintiff’s first cause of action is described as “knowing receipt”. The sum of $300,000.00 already claimed in the first part of this cause of action is again sought. However, as the statement of claim itself acknowledges, a payment of this amount was made from the defendant’s trust account to the Bank of
New Zealand. It is arguable therefore that there was no “receipt” by the defendants of the sum of $300,000.00, or any beneficial interest in this amount to them. Recently, Duffy J in the High Court summarised the principle relating to knowing assistance at paragraph [212] of Eden Refuge Trust v Hohepa & Ors CIV-2003-404-
539 HC, Akld, 17/3/2010:
When a stranger to a trust beneficially receives trust property as a consequence of
the trustee’s breach of trust, there can be liability in equity for knowing receipt.
[37] This Court in a decision of Venning J given in this proceeding on 18 August
2011 also made findings in relation to this $300,000.00, describing the plaintiff’s claims in relation to this as an overstatement. It is set out at paragraph [17] of the decision that the funds in question clearly went to the Bank of New Zealand in proper reduction of a loan owed by the Lake House Trust. There would seem to be therefore a solid evidential basis on which it could be said that no beneficial interest was received by the defendants, and thus a reasonable argument exists that the claim of knowing assistance could not succeed.
Second Cause of Action
[38] The second cause of action which seems to relate to the Colorado Property
Trust is also headed “equitable fraud”. The damages sought are two amounts being
$1,376,465.50 and $286,154.00 respectively. Identical references to the alleged aspects of the fiduciary duty said to be owed as pleaded in respect of the first cause of action are repeated. The first sum sought as damages being $1,376,465.50 is said to be half of the alleged profit earned by the Colorado Property Trust as at 31 March
2006, nearly two years after Mrs Perriam’s separation from her former husband. It is pleaded that 29 properties were acquired by this Trust (from two companies and one entity that are not particularised), and then presumably sold. The proceeds of sale were then loaned from the trust to the Perron business (see para [78]. It was recorded in the judgment of Venning J in these proceedings on 11 August 2011 at [18], that the assets of the Colorado Property Trust were primarily the loan owed by Perriam Developments Limited, which went into liquidation on 19 February 2009. That loan is in the order of $2,737,000.00. The trustees of the Trust are both bankrupt. The fourth amended statement of claim does not seem to attempt to
address these issues or explain how the acts pleaded could possibly have caused the claimed loss. Nor does it appear to deal with the fact that any relationship property claim Mrs Perriam may have had in any event would be likely to relate to Mr Perriam’s shareholding interest in the company and not the company assets themselves.
[39] The reality in my view is that it did not matter whether the properties in question were sold through the trust, or through an earlier company Marcam Developments Limited when its shareholding was simply held by the plaintiff’s former husband Mr Perriam and his business partner. Applying the principles confirmed in Walker v Walker [1983] NZLR 560 (CA) that a spouse is free to deal with their property as they see fit prior to an order of the Court being obtained, Mr Perriam was free to arrange the purchase and sale of property under Marcam Developments Limited as he saw fit. Any such transactions would generally involve third parties and possibly outside creditors, and their interests too were recognised in Walker v Walker as being important and unaffected. Also, it is not pleaded that any distribution was made to the beneficiaries of the trust/s or to the shareholders of the companies, in respect of these alleged profits. It seems clear from the material before the Court that they were re-advanced back into the business for the purposes of future developments. Mr Perriam would have been equally entitled to have done this through the entity Marcam Developments Limited or indeed through other trusts and the same result would have occurred. The only proper conclusion that can be reached here is that it was not the creation of the trusts or different corporate entities which caused the plaintiff loss.
[40] An alternative to the second cause of action is described at para [79] of the pleading as “knowing receipt”. The sum of $1,376,465.50 already claimed in the first part of the claim is sought. For the reasons already discussed earlier at [36], this claim in my view is also untenable and needs to be struck out. There has been no “receipt” by the defendants of this sum or any beneficial interest in this amount held by them. A second alternative is then raised, again under the heading of “Knowing Receipt” at para [87] relating to the second claimed amount of $286,154.00. This claim is further described as “Fraudulent Laundering of Money by the Defendants”. This is a serious and extreme claim and, as I see it, the claim is quite unsupported by
any evidence or material before the Court here. Again, for the reasons discussed above, in my view, this claim is untenable and must be struck out as it is clear from the pleadings themselves that the defendants did not receive any beneficial interest in this money. In addition, at para [92] there is a bare unsubstantiated claim that the defendant’s knew or ought to have known that a sum of $286,154.00 which came into their trust account in June and July 2008, was relationship property or likely to be relationship property. There is no proper and required particularisation however as to why that is alleged to be the case.
[41] There is also what appears to be a third alternative to the second cause of action claimed at para [101] of the statement of claim. This alleges first, that Mr Wilkes was a trustee of the Colorado Property Trust, when that trust was repaid a portion of its loan by Perron Developments Limited and that this repayment money belonged in some way to the plaintiff and she was entitled to be paid it. This claim in my view however, ignores the fact that, according to the judgment of Venning J in this proceeding dated 11 August 2011 at [18], over $2,737,000.00 was outstanding on the loan balance. There was no profit or distribution made by the Colorado Property Trust with respect to this loan, the balance of which remains unpaid. There is no particularisation as to where the money alleged to have been received by the trust from Francis McLaren Limited by way of a loan secured over the family home in the order of $135,000.00 was paid to. The plaintiff seems to claim that this is her money. It is clear from the pleadings themselves at para [103] that this amount represented borrowings from the ASB and was not capable of amounting to relationship property. It is also noted that the plaintiff herself has confirmed, in her affidavit dated 6 July 2010 that the ASB is not pursuing her in respect of any debt owed over the family home. I am satisfied here that this Court is entitled to have regard to this evidence, given particularly the serious overall allegations of fraud on the part of the defendants that have been made, and given that Mr Perriam and all the trust and company entities here would appear to be hopelessly insolvent – see A-G v McVeagh [1995] 1 NZLR 558 (CA).
Third Cause of Action
[42] The third cause of action appears to relate to another trust, the Perriam
Queenstown Trust and is also headed “equitable fraud”. The damages sought are
$4,865,000.00, said to be the plaintiff’s loss arising from capital gain allegedly made by the Perriam Queenstown Trust. This trust it is said purchased properties from a company, Marcam Grand Lakes Limited, which was incorporated on 12 September
2001. It is not pleaded that the Perriam Queenstown Trust made a “profit” of this amount, or that any such profit was distributed to the beneficiaries of that Trust. The alleged “capital gain” that the plaintiff is said to be entitled to, also it seems arose two years after separation. Therefore, on its face the share that the plaintiff is said to have missed out on, would never in fact have been available to any other beneficiary or shareholder for distribution, and thus it is hard to see how Mrs Perriam can substantiate her claim that she did miss out on a share of this property.
Fourth Cause of Action
[43] The fourth cause of action as I see it essentially repeats that found in the second amended statement of claim under the heading second cause of action. This was found to be defective by this Court in Associate Judge Faire’s earlier decision. The fourth cause of action under the latest statement of claim, seeks the same damages under the broad heading of loss of opportunity. This amounts to a claim for
$1,600,000.00, being a sum which the plaintiff was offered by way of a 2005 relationship property settlement from her former husband, Mr Perriam. On this, the defendants have referred to the affidavit of Mr Wilkes filed herein dated 19 July
2010, where the offers made by the plaintiff’s former husband are discussed. What seems clear from Exhibit “C” to that affidavit, is that Mr Perriam chose to disregard the status of the global property concerned as property owned by trusts or companies, and to treat it as if it were all relationship property. A list of all the entities and the property involved was also provided at the time. The plaintiff’s claim of a failure to disclose here seems to fly in the face of this evidence before the Court. And, the plaintiff it might be said was also not disadvantaged by the existence of those entities, at the time that the offer was made in 2005. Her lost opportunity was arguably caused by her refusal to accept that offer, and a possible
subsequent decline in the value of the assets of the Perron companies, resulting in the liquidation of most of the entities, and the bankruptcy of the Perron business partners. Again, as I see it, this Court is entitled to have regard to this evidence (applying A-G v McVeagh), because it is not contradictory to the pleadings made in the statement of claim, but merely expands on matters which as I see it Mrs Perriam’s claim has not adequately dealt with.
Fifth Cause of Action
[44] The fifth cause of action is said to be an “amalgam” of the causes of action and losses claimed “in the preceding paragraphs”. These preceding paragraphs are not specifically identified however. It is presumed that they are all the earlier paragraphs in the pleading. In [127] of this pleading the defendants are said to have fraudulently assisted the plaintiff’s former husband Mr Perriam to defeat Mrs Perriam’s rights under the Property (Relationships) Act 1976. It is pleaded that the plaintiff’s “loss is total” and judgment as I understand it in the sum of $9,539,619.50 is sought. However, and again problematically for the plaintiff, apart from what I see as an inadequately particularised claim that Mr Perriam “as at 15 September
2009” some five years after separation had been said by liquidators to have taken
$2,636,241.00 from the Perron companies, there is again no pleading that the sums that the plaintiff is said to have lost, were distributed or paid to the beneficiaries or shareholders of the Perron business companies or anyone other than genuine third party creditors of the Perron Group. The role of the defendants in all of this is also difficult to see. And the sum alleged to have been taken by the plaintiff’s former husband Mr Perriam particularly does not bear any relationship to any of the relief claimed. This cause of action also in my view is not sustainable.
[45] At a more general level, it is also useful to note here that, in Winton Seeds Ltd v Tegel Foods Ltd (1993) 13 PRNZ 96, the pleadings were heavily criticised by the Court for being prolix. An unless order was made in that case strictly regulating the filing of a further claim, including a requirement that leave was to be obtained there to do so. Prolixity is also an unhelpful feature of the plaintiffs’ pleadings in the present case. Various claims are made which in my view are both prolix and fail to plead material facts (another reason why the pleadings were criticised in Winton
Seeds). These include simply by way of example at para [8](a) that the plaintiff and her husband had derived “substantial capital gains and equity” through the transactions identified in para [7.1]. No such substantial capital gains and equity are detailed in those paragraphs. The plaintiff also claims at para [8](e) that substantial gains and equity were derived through the company Marcam Developments Limited and the various companies set out in Schedule 1 of the statement of claim “as aforesaid”. Again, there are no details of the substantial equity and gains of these companies “as aforesaid”. These allegations as I see it are fundamental to the plaintiff’s claims here but are not properly particularised.
[46] The deficiencies identified above are also particularly relevant to possible limitation defences. As Associate Judge Faire noted at [29] in his 6 October 2010 decision, times or dates of alleged breaches are missing and in the absence of proper particularisation, it is impossible to assess the extent to which limitation issues might bar particular causes of action here. As I see it, that remains the case with the fourth amended statement of claim.
Causation
[47] Notwithstanding all the matters I have noted above, I now turn finally to consider here the critical aspect of causation. It need hardly be repeated that an important element in properly establishing any claim by a plaintiff is to prove the essential causal link between the defendant’s conduct and the plaintiff’s loss. Causation focuses on the link between what may have happened and the loss that has occurred and whether, taking other considerations into account, the defendant is liable to make good the loss.
[48] Although in the past the New Zealand Courts have shown some reluctance to favourably consider applications to strike-out on the basis that a cause of action was untenable for want of a causative link, on occasions our Courts have been prepared to act decisively on causation at an early stage – Fleming v Securities Commission [1995] 2NZLR514 (CA).
[49] On this issue of causation, it is clear that three basic elements must be established:
(a) First, whether the defendant’s action was a cause in fact of the plaintiff’s loss.
(b)Whether the action was an effective cause of the loss such that liability could arise (cause in law).
(c) Whether the loss is sufficiently closely connected to the action that the defendant is indeed liable (remoteness of damage).
[50] Even if a fiduciary duty can be established, the plaintiff here also must make out an arguable case that the breach of that duty caused loss to her. The defendants contend in this case that no material has been placed before the Court first, to indicate that the trusts and companies involved in the plaintiff’s claim had any assets at all, or secondly, to show how loss was caused by the creation of those structures. Faire AJ also stated at [34] that he could see no connection between the acts complained of and the loss suffered. I am not satisfied that the fourth amended statement of claim remedies this deficiency in causation.
[51] To have any reasonable prospect of success, I repeat that the pleaded particulars must establish that the breaches of fiduciary duty by the defendant caused the plaintiff some sort of recoverable loss. There must be a causal nexus between the breach and the loss suffered, and the breach must be material to that loss.[3] In Everist v McEvedy,[4] Tipping J held that to establish causation in respect of a claim against a solicitor generally, one needs to show that with appropriate independent advice or
full information, the client would have acted differently, for example by not entering
into the impugned transaction there, and therefore avoiding the loss.
[3] Whalan v Rout Milner and Fitchett HC Wellington CP201/99, 11 December 2000
[4] [1996] 3 NZLR 348 at 355.
[52] In Kilkelly the Court found that, if the plaintiff had been properly advised, the assets belonging to the trust might have remained relationship property, or the plaintiff would have had the power to appoint/remove trustees, and therefore would have been entitled to a more favourable relationship property settlement. In Rawleigh v Tait, however, the Court of Appeal upheld the High Court’s finding that even if the wife had been properly advised, she still would have executed the guarantee and suffered the same loss.
[53] In the situation before me, the plaintiff has not shown that she would have acted materially differently if proper advice and full information had been given. Even if she were properly advised of her husband’s business affairs, it is likely that the assets would have remained with the trusts and the companies. There might be a potential argument that, but for the alleged breach of duty, the plaintiff would have had a better chance of achieving a more favourable relationship property settlement after separation, as she would have known where and how all her husband’s assets were held. There might also be a potential argument that but for the duty she would have been more inclined to accept an initial relationship property settlement offer of
$1.6million. But, on that property settlement she was independently advised by other senior legal counsel and the undisputed evidence before the Court is that she and her advisers had been provided with full details of all the entities involved and their asset positions.
[54] And, in addition, what is fatal to the plaintiff ’s claim here as I see it is that even if she were properly advised and more information had been disclosed, there would be very little in the way of property that could be subject to a claim. The depletion of what she now claims might have been relationship property assets was caused by the failure of the Perron Group’s business ventures. These failures caused the loss of assets owned by all the trusts and companies that were set up. The establishment of those structures, in and of themselves, did not cause any loss. It would have made no material difference to the plaintiff’s position whether Mr Perriam had used companies and trusts to hold these business assets or whether he held them in his own name. Even if the plaintiff had full knowledge of every past transaction, there would have been no property available to be subject to a claim or a
relationship property settlement, and the loss would not have been avoided. As I see it, this issue of causation is fatal to the plaintiff’s claims here.
Loss
[55] Finally, I need to say that the plaintiff’s claim in the fourth amended statement of claim also fails to properly particularise the nature of the loss suffered. In some parts it is alleged to be the loss of assets that would otherwise be considered as relationship property, and in other parts it is alleged to be the loss of the opportunity to accept the relationship property settlement of $1.6million, or perhaps the loss of an opportunity to enter into relationship property negotiations after separation with full knowledge.
[56] In Kilkelly, the Court found that a loss of opportunity to extract a more favourable relationship property settlement was a real loss, if there is a material difference in the “real world bargaining position of the parties”.[5] In that case, the defendant argued that the actual loss in the amount of relationship property was caused by transfer of assets to a trust, which the plaintiff actually sought to do. However, the Court found that the plaintiff’s loss was also her inability to negotiate on an equal footing basis. This loss was caused by her inability to appoint or remove trustees, and that meant she was able to be unilaterally removed as a trustee. She
therefore lost her opportunity to achieve an “equal” matrimonial property settlement.
[5] See also Whalan v Rout Milner
[57] In the present case, the plaintiff has not made out the exact loss she claims to have suffered as a result of the actions of the defendants. It might possibly be argued that her bargaining position in respect of relationship property matters could have diminished as a result of her not being advised earlier of the trusts and companies which were incorporated during her marriage. Therefore, at the time of separation, she might endeavour to say she was in a materially less favourable position in terms of entering into negotiations to divide relationship property than she otherwise would
have been. However, despite the evidence before me which is to the contrary, the
plaintiff in any event as I see it encounters the same problem, in that even if her bargaining position would have been materially different, there were no assets remaining in the trusts or companies that could have been subject to a claim. If the Perron Group assets in some way were seen to be relationship property, so too would its debts to genuine outside third parties (which vastly exceeded the value of the assets) be seen as relationship debts.
[58] Another component of the alleged loss is in the lost opportunity to accept a settlement of relationship property for $1.6 million. The plaintiff claims that if she had been fully advised, she would have been more inclined to accept that sum. But, in my view here, it cannot be said that the plaintiff lost the opportunity to accept a settlement as a result of inadequate disclosure. By the time she was offered the $1.6 million settlement sum as I have noted, the plaintiff had instructed different solicitors and senior counsel and was well aware of the existence of the trusts, the companies and their holdings. Indeed, the assets of those entities were listed as a schedule to the settlement offer itself.
[59] Therefore, even if her claimed losses may in some way be possibly quantifiable, the plaintiff has not established in any sense that the defendant’s actions prior to the marital separation caused that loss.
[60] The reality in this case may well be that any losses the plaintiff feels she has sustained arose first, from her failure to accept the settlement offer from her former husband Mr Perriam at a time when he may still possibly have had some means to satisfy the relationship property claim, and secondly, from the general failure of the Perron Group businesses, and not from any “fraud” or collusion against her. Because of the Perron Group business failures and Mr Perriam’s bankruptcy, it might be contended here that the plaintiff has chosen to continue to advance what in reality are relationship property claims through the guise of this proceeding and thus to target the defendants simply as scapegoats. If that is the case, it goes without saying that it is not an appropriate course to take in all the circumstances here. And, in any event, as I understand it the plaintiff’s Family Court proceeding presently on foot in part at least relates to a relationship property claim against Mr Perriam and certain trusts for approximately $280,000.00 held presently undisbursed, on which the
Official Assignee on behalf of the bankrupt Mr Perriam and his creditors may well have some interest.
Conclusion
[61] Returning now to the plaintiff’s fourth amended statement of claim here, I have considered whether the repeated deficiencies in this pleading which I have outlined above can be remedied by further pleadings from the plaintiff. I am not satisfied however that any further opportunity to amend the statement of claim will establish a properly arguable case. The plaintiff has had ample opportunity to “fix” her pleadings and in particular to show how the defendants’ actions complained of, even if established, caused the losses the plaintiff says she has suffered. She has failed to do so. In my view, these pleadings are not capable of effective repair and are once more a “total write off” – see Tipping J in Marshall Futures Ltd v Marshall [1992] 1 NZLR 316.
[62] The defendant’s application to strike-out the plaintiff’s fourth amended statement of claim therefore succeeds. I now order that the causes of action detailed in this fourth amended statement of claim are struck out.
[63] As to costs the defendants have succeeded on their present strike-out application and I see no reason why they should not be entitled to an order for costs at the usual level.
[64] Costs are therefore awarded to the defendants against the plaintiff on this application on a category 2B basis together with disbursements as fixed by the Registrar.
‘Associate Judge D.I. Gendall’