Pollock v Washer
[2017] NZHC 2386
•29 September 2017
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2017-470-000029 [2017] NZHC 2386
BETWEEN STEVEN REX POLLOCK AND
NATHAN CHARLES POLLOCK Appellants
AND
PETER EDMUND WASHER First Respondent
CHERYL LINDA POLLOCK Second Respondent
Hearing: 12 July 2017 Appearances:
Matthew Ward-Johnson for the Appellants Keith Catran for the First Respondent Elliot Hudson for the Second Respondent
Judgment:
29 September 2017
JUDGMENT OF MOORE J
This judgment was delivered by me on 29 September 2017 at 3:00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Date:
POLLOCK & ANOR v WASHER & ANOR [2017] NZHC 2386 [29 September 2017]
Contents
Paragraph
Number
Introduction ............................................................................................................. [1] Background.............................................................................................................. [8] The Family Court judgment ................................................................................ [23] The appeal.............................................................................................................. [38] The cross-appeal .................................................................................................... [42] The issues ............................................................................................................... [43] Approach on appeal .............................................................................................. [45] Did the Judge misapply the evidential threshold? ............................................. [47] Did the Judge overstate the significance of both parties being deceased? ....... [57] Did the Judge overstate the significance of the lengthy delay?......................... [62] Did the Judge err in fact to an extent bearing on the correctness of his decision?
Mental health ...................................................................................................... [71]
Lack of financial records ..................................................................................... [78] Property assets not included in the relationship property agreement ................. [85] Evidence in support of the alleged oral contract ............................................... [88]
Did the Judge overstate the test for what constitutes serious injustice under
s 21J? ...................................................................................................................... [95] Conclusion.............................................................................................................. [99] Result .................................................................................................................... [102] Costs ..................................................................................................................... [103]
Introduction
[1] This is an appeal against a decision of the Family Court refusing leave to file proceedings out of time under the Property (Relationships) Act 1976 (the Act).
[2] The two people at the centre of the dispute, Rex and Pauline Pollock, separated more than twenty years ago and are now both deceased. The dispute arises out of a relationship property agreement executed in 1992 under which Mr Pollock received shares out of the couple’s relationship property. The proceedings sought to be filed allege that Mrs Pollock only entered into this agreement because Mr Pollock agreed orally to hold the shares on trust for the couple’s three children.
[3] Recent events reveal that Mr Pollock did not consider his ownership of the shares to be constrained by any such trust. In 2014 he transferred the shares to an express trust of which his second wife is a trustee. And in 2015 he died leaving no provision in his will for any of his children.
[4] The intended proceedings allege that the relationship property agreement executed over two decades ago is void in law and should be set aside on the grounds it has caused a serious injustice. If the claim is allowed to be filed and is ultimately successful the shares will fall to Mrs Pollock’s estate and will be available for distribution among the children.
[5] In the Family Court at Tauranga, Judge Coyle was not satisfied it was in the interests of justice to grant leave to file the proceedings.1 The Judge considered there was an inadequate evidential foundation for the claim to succeed and that granting leave would cause significant prejudice to the respondents given the inordinate delay in filing the proceedings.
[6] The appellants, being the executors of Mrs Pollock’s estate, appeal against the
Family Court’s decision alleging a variety of factual and legal errors. One of the central arguments advanced on appeal is that the Judge placed undue weight on
1 Pollock v Pollock [2017] NZFC 1510.
evidential matters which, in the appellants’ submission, require discovery and testing at trial before they can be properly resolved.
[7] The respondents cross-appeal on two minor points of law.
Background
[8] The Pollocks married in 1969. There are three children of the marriage, all of whom are now adults: Steven, Nathan and Letitia.
[9] In September 1972 the Pollocks established Todd & Pollock Builders Limited (“Todd & Pollock”) as a joint venture with Alan Todd. The business grew into a large and successful enterprise covering five divisions, including building, scaffolding, joinery, cranes and transport.2
[10] In 1986 Mrs Pollock began to suffer the mental health difficulties which would remain with her, to various extents, for the rest of her life. She was diagnosed with schizophrenia and depression.
[11] At around the same time, the couple purchased Mr Todd’s shares in Todd & Pollock. Pursuant to a relationship property agreement 50 per cent of the shares in the company were transferred to Mrs Pollock.
[12] Over the following years Mrs Pollock’s mental health difficulties deteriorated to the point she was made subject to a compulsory treatment order.3 This remained from November 1992 until 1 February 1993. During this time she resigned as a director of Todd & Pollock and the couple separated.
[13] On 14 December 1992, the Pollocks executed a relationship property agreement, which provided, among other things, that:
2 The business also changed its name on two different occasions. References to Todd & Pollock should be taken to include its later iterations and related companies.
3 Under the Mental Health (Compulsory Assessment and Treatment Act) 1992.
(a) Mr Pollock would retain as his separate property all shares in Todd & Pollock.
(b)Mr Pollock would pay Mrs Pollock $300,000 in respect of her interest in the company. This would be secured by a mortgage over the shares.
(c) Mr Pollock would provide $360,000 to enable Mrs Pollock to acquire a property at Marine Parade, Mount Maunganui.
(d) Mrs Pollock would retain her car and household chattels and effects but
Mr Pollock was to pay an additional $33,400 to enable her to acquire additional household chattels and effects and a further motor vehicle.
(e) Mr Pollock would retain as his separate property a caravan and trailer boat.
[14] The parties expressly deleted clause 18 of the agreement. This clause would have recorded that the parties had received legal advice before signing the agreement and acknowledged its terms as fair and reasonable. Clause 18 reads as follows:
“THE parties hereto hereby acknowledge that they have had independent legal advice before signing this Agreement and they further hereby acknowledge that they each consider the Agreement to be fair and reasonable in the light of all the circumstances at the date of the execution hereof and they further hereby acknowledge that they have given consideration to the possible changed circumstances in assessing the fairness and reasonableness of this Agreement.”
[15] On 15 July 1993 an order dissolving the parties’ marriage was made.
[16] Mr Pollock married his second wife, Cheryl Pollock,4 on 29 September 1995. They remained married until Mr Pollock’s death.
[17] Meanwhile, Mrs Pollock’s mental health difficulties persisted. On
12 November 2003 an accountant, Timothy Cooney, was appointed under the
4 Whenever I refer to Cheryl Pollock I use her full name. References to Mrs Pollock should be taken as references to Pauline Pollock.
Protection of Personal and Property Rights Act 1988 (“the PPPR”) as her property manager.
[18] In 2007 Mr Pollock’s mother settled the Judea Valley Trust which had as its trustees Cheryl Pollock and a corporate trustee, CML Trustees Limited. The Judea Valley Trust acquired all of the shares in Todd & Pollock on 1 April 2014. This transaction is the subject of a challenge in related proceedings in the High Court brought by Mrs Pollock’s executors who allege the transaction was procured through the exercise of undue influence.
[19] Mr Pollock died on 8 February 2015. His estate comprises assets of modest value. The vast majority of his wealth is represented in the shares now owned by the Judea Valley Trust.
[20] On 5 October 2015 Letitia Pollock applied under the PPPR to replace
Mr Cooney as Mrs Pollock’s property manager. She applied on the basis that
Mr Cooney was also the accountant for Mr Pollock, Cheryl Pollock and for the various trusts and companies associated with them. At the hearing Letitia Pollock was appointed as Mrs Pollock’s property manager in place of Mr Cooney given his conflicting professional obligations.
[21] On 23 December 2015 Letitia filed these relationship property proceedings in the Family Court on behalf of Mrs Pollock. The application claimed that the relationship property agreement executed in 1992 should be set aside on the following grounds:
(a) The agreement is void under s 21F of the Property (Relationships) Act
1976 because Mrs Pollock did not receive independent legal advice before signing it.
(b)Mrs Pollock was influenced in her decision to enter into the agreement by a mistake that was material to her, namely her belief that there was an oral collateral agreement that her shares in Todd & Pollock would be held in trust for her three children.
(c) Having regard to all the circumstances, giving effect to the agreement would cause serious injustice meaning the agreement should be aside under s 21J of the Act.
[22] Mrs Pollock died on 5 March 2016. Her executors, Nathan and Steven Pollock, continue the litigation. They have also brought proceedings against their father’s estate under the Family Protection Act 1995 and the Law Reform (Testamentary Promises Act) 1949.
The Family Court judgment
[23] On 1 March 2017 Judge S J Coyle issued a careful and thorough reserved judgment in which he refused leave to file the proceedings. The Judge’s reasoning and conclusions are summarised below.
[24] The Judge first directed himself as to the relevant legal principles. He referred to Beuker v Beuker in which McMullin J emphasised four factors to be borne in mind when considering whether to extend time to bring an application under s 24(2) of the Act.5 These are:
(a) the length of time which has elapsed between the expiry of the time limit fixed by statute and the bringing of the application;
(b) the adequacy of the explanation offered for the delay;
(c) the merits of the case; and
(d) the prejudice to the respondent.
[25] Judge Coyle recognised these factors are not exhaustive and that every case must be decided on its own particular facts.6
5 Beuker v Beuker (1977) MPC 20 (SC).
6 Citing Rutherford v Rutherford (1986) 4 NZFLR 70 (HC) at 72.
[26] The Judge rejected the respondents’ submission that there is an onus on the applicant to satisfy the test for leave. After citing a number of authorities,7 the Judge considered that justice between the spouses requires the matter to be decided without any specific onus of proof upon the applicant. The Judge also considered, citing Ritchie v Ritchie,8 that undue weight should not be placed on the length of time between the expiry of the time limit and the bringing of the application. Against that, his Honour took note of Anderson J’s observation in Ritchie that the longer the delay the greater the likelihood of an injustice arising to a respondent. The Judge directed himself that the ultimate assessment was one as to the overall interests and justice of the case.
[27] The first factor considered by the Judge was the length of time that had elapsed between the expiry of the statutory time limit and the bringing of the application. He observed that applications brought under s 24 of the Act are required to be brought within 12 months of an order dissolving the parties’ marriage. In the present case, the statutory time limit expired on 15 July 1994. The Judge calculated, therefore, that there had been a substantial delay of 21 years and five months in filing the proceedings.
[28] Judge Coyle noted a number of authorities cited by the applicant in which leave had been granted despite substantial delays of 15, 19 and 22 years.9 However, he did not consider any of these to bear any real similarity to the present circumstances observing that in the cases cited to him both of the parties were alive when the case when to trial.
[29] The Judge then considered the adequacy of the delay. He accepted as relevant an explanation that Mrs Pollock could not have known about the breach of the alleged
oral agreement until Mr Pollock had died and the provisions of the will made public.
7 LMP v TGP FC Greymouth FAM-2010-018-040, 14 October 2010; X v X [2009] NZCA 399, [2010] 1 NZLR 601; M v B [2006] 3 NZLR 660 (CA).
8 Ritchie v Ritchie (1991) 8 FRNZ 197 (HC).
9 JNL v DN FC Wanganui FAM-2004-083-363, 21 August 2006; Ritchie v Ritchie (1991) 8 FRNZ
197 (HC); West v Perry [2002] NZFLR 796 (HC).
[30] However, Judge Coyle rejected two other explanations proffered to account for the delay. First, he rejected the significance of Mr Cooney acting as Mrs Pollock’s property manager in a conflict of interest situation. Any alleged dilatory conduct on his part could not have occurred until after Mr Pollock’s death in February of 2015 and could only account for a small fraction of the two-decade delay. Secondly, the Judge rejected an argument that Mrs Pollock’s mental disorder prevented her from properly considering her legal position. The Judge, drawing on his own professional experience in the Family Court, observed that many patients subject to a compulsory treatment order are able to make detailed and informed decisions about all aspects of their lives. Moreover, in the Judge’s view, there was no unequivocal evidence before the Court sufficient to conclude Mrs Pollock’s mental disorder directly impacted on the issue of delay.
[31] Judge Coyle then considered the merits of the case. He first considered the cogency of an argument that the agreement was void because the applicant had not received legal advice before signing it. The Judge observed that although clause 18 of the agreement had been deleted, both acting solicitors had certified that they had given their clients independent legal advice as to the agreement before it was signed. The Judge thus inferred that the intention of deleting clause 18 was in relation to the fairness of the agreement and did not indicate an absence of independent legal advice.
[32] Judge Coyle then considered the alleged mistake, namely that Mrs Pollock mistakenly believed there was an oral agreement that her shares in Todd & Pollock would be held on trust for her children. The Judge set out the evidence of Nathan Pollock. According to Nathan, his father sought his agreement to contact Mrs Pollock’s solicitor to agree to Mrs Pollock’s shares being transferred equally to the three children. Nathan also gave evidence over the years that his father had maintained to him that his shares were safe in the Judea Valley Trust and that they were protected from any claim by Cheryl Pollock by virtue of a pre-nuptial agreement. Judge Coyle considered this evidence needed to be weighed against the lack of any record to support it. In the Judge’s view, there was simply an insufficient reliable evidentiary basis to enable a judge to be satisfied that there had in fact been a mistake.
[33] As for the alleged serious injustice under s 21J of the Act, the Judge noted that the test is a “very high” one. His Honour considered that an available interpretation of clause 18 is that the parties recognised the agreement was unfair but nevertheless decided to sign it fully cognisant of the unfairness.
[34] Judge Coyle concluded that the merits of the application were not strong and that the applicants were hampered by the absence of contemporaneous records. He considered it significant that both parties were deceased and not able to give evidence themselves.
[35] The Judge further observed that if the applicant succeeded in showing the shares were part of Mr and Mrs Pollock’s relationship property, she would still have to prove under s 44C of the Act that they were transferred to the Judea Valley Trust with the intention of defeating Mrs Pollock’s rights. The Judge considered there was no evidence in the pleadings before him that it was ever the intention of Mr Pollock and Cheryl Pollock to transfer the shares to the trust to defeat a claim or interest. In the Judge’s view, Mr Pollock and Cheryl Pollock would not have had any inkling of a potential claim because even Mrs Pollock did not know she intended to make a claim until Mr Pollock’s death 18 months later.
[36] The Judge then considered the prejudice to the respondents. The Judge said the issue of whether there would be significant prejudice to the respondents needed to be balanced against the serious injustice to the applicant if leave was not granted. The Judge said Mr Pollock and Mrs Cheryl Pollock had rearranged their affairs since 1992 on the basis that there had been resolution of Mr and Mrs Pollock’s relationship property. The Judge said it must be accepted that they had no knowledge at all that there was going to be a potential challenge to that relationship property settlement. He found that there was clear prejudice to the respondents in allowing leave to be granted, and that this prejudice outweighed any potential injustice to the applicants.
[37] The Judge therefore reached a “clear view” that leave should not be granted to file the proceedings out of time. He concluded:10
“Given the fact that neither Mr or Mrs Pollock are alive, that Mr Simmons the company accountant is deceased, the length of time before bringing the application, the inadequate explanations for delay, the absence of evidence from Ms Anderson,11 and the tenuous merits of the application to set aside the agreement, I am not satisfied that in all the circumstances it is in the interests of justice to grant leave.”
The appeal
[38] The overarching contention advanced on appeal is that the appellants have demonstrated a more than arguable case with evidence that requires testing at a substantive hearing. This contention manifests itself through a number of arguments alleging both legal and factual error. As for legal error, the appellants claim the Judge:
(a) misapplied the evidential threshold for applications for leave to bring relationship property proceedings out of time; and
(b)wrongly distinguished a number of cases allowing proceedings to be filed after lengthy delays on the basis that those cases involved parties who were both alive whereas in the present case both are dead.
[39] As for factual error, the appellants submit the Judge erred by finding that:
(a) Mrs Pollock was capable of managing her own affairs;
(b)there was a lack of financial records for Todd & Pollock for the period during and following the signing of the relationship property agreement;
(c) property assets were not included in the relationship property agreement; and
(d) there was no evidence to support the alleged oral agreement.
[40] With respect to the merits of the case, the appellants effectively advance an evidential argument. They say the Judge should not have made such firm legal conclusions in the absence of proper discovery and oral testimony. The appellants also allege the Judge erred in law by imposing an unnecessarily high test in respect of what constitutes serious injustice pursuant to s 21J of the Act.
[41] With respect to prejudice, the appellants say that any prejudice on account of both Mr and Mrs Pollock being dead is borne equally between the parties. The appellants submit the Judge gave undue weight to this factor given the disparity in the division of assets and the alleged collateral oral agreement.
The cross-appeal
[42] The respondents cross-appeal alleging the Judge erred in law by:
(a) determining that there was no onus upon the appellants to satisfy the requirements of s 24 of the Act; and
(b)determining that Mr Pollock’s contribution to the marriage, including establishing the business, would not justify a division of property on an unequal basis under s 15 of the (now repealed) Matrimonial Property Act.
The issues
[43] Once refined, the appeal may be determined by reference to the following issues:
(a) Did the Judge misstate the evidential threshold?
(b) Did the Judge overstate the significance of both parties being deceased?
(c) Did the Judge overstate the significance of the lengthy delay?
(d)Did the Judge err in fact to an extent bearing on the correctness of his decision? and
(e) Did the Judge overstate the test for what constitutes serious injustice under s 21J of the Act?
[44] It is only if the appellants succeed on any of these points that the cross-appeal will require determination.
Approach on appeal
[45] Before turning to address the issues, it is necessary to identify the nature of the decision under appeal as this will dictate the proper principles to be applied. The jurisdiction to extend time for filing is sourced from s 24(2) of the Act which provides as follows:
“(2) Regardless of subsection (1), the court may extend the time for making an application after hearing—
(a) the applicant; and
(b) any other persons who would have an interest in the property that would be affected by the order sought and who the court considers should be heard.”
[46] It is clear from the word “may” that the power to extend under s 24(2) of the
Act is a discretionary one, as confirmed by Dobson J in Williams v Williams.12
Accordingly, the principles identified in May v May continue to guide the proper role of the Court on appeal.13 The role of this Court is not to reach an original conclusion on the application. Rather, the appellants must show that the Judge acted on a wrong principle, failed to take into account some relevant matter, took account of some irrelevant matter or was plainly wrong.
Did the Judge misapply the evidential threshold?
[47] Mr Ward-Johnson, for the appellants, characterises the application for leave as an interlocutory application. He describes the evidential threshold as low; one requiring the applicant to demonstrate an arguable case. On this basis, Mr Ward- Johnson further submits the Judge placed undue weight on the absence of evidence in circumstances where the respondents had resisted discovery because the proceedings were only at an interlocutory stage.
[48] In support of this submission, Mr Ward-Johnson relies analogically on Re Eagle, a case involving a claim under the Law Reform (Testamentary Promises) Act 1949. There, Cartwright J was faced with an application to extend the time within which to make an application under s 6 of that Act. Her Honour observed:
“…Where a claim against an estate is notified either to executors or trustees, a Court requires prima facie evidence that the claimant has at least an arguable
case. Whether it is possible on affidavits to evaluate the likelihood of the success of the claim is another matter. In the present instance, the plaintiff has set out the basis upon which he has lodged his claim. He deposes that the
deceased promised on many occasions that he would be looked after in her will. This evidence crosses the initial threshold to making a claim but
presumably the plaintiff's chance of success cannot realistically be evaluated until it is tested in Court for its credibility and reliability. …”
[Emphasis added]
[49] Mr Ward-Johnson also refers to West v Perry in which Randerson J upheld a decision of the Family Court to grant leave for an applicant to bring proceedings under s 24 of the Act despite a delay of some 21 and a half years.14 There the Family Court Judge, after analysing the relevant evidence, concluded that the evidence filed by the parties up to that point did not allow any clear view to be formed on the merits of the case. The Judge considered the case would depend on credibility and whose evidence was accepted.15
[50] In response, Mr Hudson submits that the application is a substantive application and that the standard of proof required is higher than “an arguable case”. In Mr Hudson’s submission, a “prima facie case” is required. Mr Hudson refers to a
legal dictionary which defines a “prima facie case” as one which is “established by sufficient evidence that can only be overthrown by rebutting evidence advanced by the other side”.16
[51] While there is some force in Mr Hudson’s submission that leave applications are substantive and not interlocutory applications,17 it does not follow that a prima facie case, as he defines it, is required before leave will be granted. Indeed, the standard Mr Hudson contends for is inconsistent with the jurisprudence developed under s 24.
[52] The correct position is that the strength of the applicant’s case, having regard to both the legal and evidential position, is just one factor to be weighed in the overall assessment of whether it is just to grant leave in all the circumstances.18 If a delay is particularly lengthy and has not been adequately explained, the strength of the case will assume greater significance and the prospects of success may need to be shown to be reasonably good. On the other hand, if there has been only a very short delay in filing the proceedings which has been satisfactorily explained, the merits of the case may be of more limited significance. The touchstone is prejudice which must be considered from the perspective of both parties. And ultimately, the decision must accord with the interests of justice, again assessed from the perspective of both parties. To that end, references to an evidential “threshold” will often be unhelpful; the fact an applicant’s claim is capable of argument or that there may be further evidence to be tested at trial does not guarantee leave.
[53] Mr Hudson’s submission that a “prima facie case” is required misunderstands the reference to “prima facie” in the case law. In this context, the term “prima facie” refers to the provisional view reached by the Judge on the basis of the available evidence, bearing in mind that evidence has not been tested at trial. As Master Faire
(as he then was) put it in Clark v Sims, the “enquiry taken on a leave application is one
16 E R Ivamy, Herbert Mozley and George Whiteley Mozley & Whiteley’s Law Dictionary (11th ed, Butterworths, London, 1993) at 261.
17 See Campbell-White v Prattley [1999] 3 NZLR 449 (HC).
18 Beuker v Beuker (1977) MPC 20 (SC); Ritchie v Ritchie (1991) 8 FRNZ 197 (HC); May v May
(1982) 1 NZFLR 165 (CA).
by which the Court reaches a prima facie view as to the strength or weaknesses of the merits of the case and no more.19
[54] With these points in mind, I am not persuaded the Judge made an error of the type alleged by Mr Ward-Johnson. Right from the outset the Judge identified that the merits of the case (and this includes its evidential merits) form just one factor to be weighed in the exercise of his discretion. After discussing the merits of the case before him, the Judge concluded they were “not strong” and that the applicant was “hampered” by the lack of contemporary documentation.20 In concluding his judgment, the Judge referred to the “tenuous” merits of the application.21 These observations were made in the context of a number of others all bearing on the exercise of his discretion.
[55] It is also important to appreciate that the Judge was not resolving a conflict in the evidence which, depending on the circumstances, could well be undesirable in the context of a leave application. Rather, he was making the point that the only evidence of the alleged oral agreement is that of Nathan and Letitia Pollock, and that this evidence had to be weighed against the lack of any documentary evidence, the absence of evidence from Ms Anderson who drafted the agreement and was available as a witness, and the fact that the Pollocks are deceased. Thus, the Judge’s main concern was that the sufficiency of the evidence would not improve at trial. This distinguishes the present case from West v Perry in which a credibility conflict required resolution at trial.
[56] In sum, I do not discern any reversible error in the way the Judge stated or applied the law relating to the merits of the case. The sufficiency of the evidence was a legitimate factor bearing on the Judge’s discretion and I do not consider the Judge
erred in his treatment of this factor.
19 Clark v Sims HC Auckland M1358 SD/01, 21 August 2002 at [14] (emphasis added).
20 At [42].
21 At [47].
Did the Judge overstate the significance of both parties being deceased?
[57] Mr Ward-Johnson submits the Judge should not have placed much weight on the fact both the Pollocks are deceased. He says the Courts often deal with this type of situation and that any prejudice is borne equally by the parties.
[58] In determining this issue it is important to understand why the Judge placed weight on the fact that both Mr and Mrs Pollock are dead. It is clear the Judge was concerned with the evidential prejudice their deaths would have on the proceedings overall. In the Judge’s words:22
“There is of course a further clear prejudice to all parties by virtue of the fact that those intermittently23 acquainted with this matter are deceased; namely Mr and Mrs Pollock and the accountant Mr Simmons.”
[59] That observation must be correct. The appellants will be able to adduce hearsay evidence of what they claim their parents told them in respect of the primary issue of fact which arises in this case, namely whether or not there was an oral collateral agreement. But there do not appear to be any means by which that evidence is capable of being contradicted by direct evidence.
[60] Mr Ward-Johnson cites a number of authorities in support of his submission that the courts routinely deal with similar applications in circumstances where both parties are deceased. However, none of these materially assists the appellant’s case:
(a) In Public Trust v Nicholas (HC) a man died leaving no provision in his will for his partner who died just one day after him.24 The issue was a legal one, namely whether the right of a surviving spouse to elect under s 61 of the Act passed to the surviving spouse’s estate. Ellen France J held that the right of election did so pass. Here, however, the relevance of both parties being deceased does not go to a legal issue. Rather, it
goes to the evidential difficulty in proving the existence of the collateral
22 At [46].
23 The Judge may have intended “intimately”.
24 Public Trust v Nicholas [2005] NZFLR 923 (HC).
oral agreement alleged by the appellants. Nicholas does not assist the appellants’ case.
(b)In Hodges v H (FC) a wife, upon the death of her husband, decided she wanted to take relationship property under s 61 rather than under his will but died before commencing proceedings under the Act.25 Her executor applied for orders extending time to bring the proceedings and for orders dividing the couple’s relationship property. The application was granted. Hodges, being analogous with Nicholas, does not assist the analysis in this case.
(c) In Re Love (deceased) (HC) is similarly unhelpful.26 This case involved an application for strike-out in which Master Williams QC held that the right of a person otherwise qualified to be a claimant under s 3 of the Family Protection Act 1955 is not extinguished if that person dies after the death of the deceased defendant but before the issue of proceedings. This case sheds no light on the evidential prejudice caused by the death of two spouses when factual matters occurring over two decades ago are in dispute.
(d)MENB v RNTN (FC) falls in the same category.27 There, a wife’s estate commenced proceedings against the estate of her deceased husband in order to make an election under the Act. The husband’s estate tried unsuccessfully to strike out the claim.
[61] In summary, Judge Coyle was merely making the point that the deaths of both parties gives rise to evidential difficulties which make it very difficult for the appellants to establish their substantive claim. That is an unremarkable and unobjectionable observation. No reversible error arises under this point.
Did the Judge overstate the significance of the lengthy delay?
25 Hodges v H [2012] NZFC 1303.
26 Re Love (deceased) (1990) 5 PRNZ 689.
27 MENB v RNTN [2005] NZFLR 1053, (2005) 24 FRNZ 776.
[62] Mr Ward-Johnson submits as a starting point that the time period constituting the delay is not necessarily a bar to leave being granted. He refers to the three cases noted by the Judge in which leave has been granted to bring applications under s 24 of the Act notwithstanding particularly lengthy delays in filing.28 In any event,
Mr Ward-Johnson submits the cause of action arose on 17 March 2015 when
Mr Pollock’s will was probated and for that reason any delay is nominal.
[63] Mr Ward-Pollock further submits that Mrs Pollock’s mental illness provides an adequate explanation for the delay. He submits the Judge was wrong to reject the submission that Mrs Pollock was so mentally disordered it impacted on the issue of delay. He says the fact she was subject to a compulsory treatment order at about the time the relationship property agreement was entered into, coupled with the appointment of a statutory managers clearly shows she was lacking either partly or wholly in competence to manage her own affairs.
[64] In my view, the arguments advanced under this issue misunderstand the way the Judge Coyle viewed the delay. First, while he did find aspects of the explanation for the delay unsatisfactory, he appears to have accepted that there was some legitimacy in the delay on account of the fact Mrs Pollock would not be aware she had a cause of action until Mr Pollock’s will was probated. The Judge said:
“[23] It is my determination that the only relevant explanation for delay is the submission that Mrs Pollock could not have known about the breach in relation to the alleged trust until the death of Mr Pollock, and thus it was only at that time that the extent of any alleged unfairness or loss could have crystallised. It is appropriate at this junction to therefore consider the merits argument.”
[65] This finding diminishes the significance of Mrs Pollock’s mental health issues in the context of delay because the explanation accepted by the Judge as relevant comprised the significant majority of the delay in filing the claim. That made it “appropriate” to consider the merits of the argument. In any event, as I will deal with later, the evidential findings the Judge made in relation to Mrs Pollock’s mental health
were open to him.
28 JNL v DN FC Wanganui FAM-2004-083-363, 21 August 2006; Ritchie v Ritchie (1991) 8 FRNZ
197 (HC); West v Perry [2002] NZFLR 796 (HC).
[66] Secondly, the Judge analysed the lengthy delay primarily in terms of prejudice. He considered Mr Pollock and Cheryl Pollock, having rearranged their affairs in 1992, would suffer considerable prejudice if the proceedings were allowed to be brought. In the Judge’s words:29
“Mr Pollock, and Mrs Cheryl Pollock have rearranged their affairs since 1992 on the basis there had been resolution of Mr and Mrs Pollock’s relationship property. It must be accepted that they had no knowledge at all that there was going to be a potential challenge [to] that relationship property settlement. … I find that there is clear prejudice in allowing leave to be granted, and that this prejudice outweighs any potential injustice to the applicants.”
[67] And, as observed, the Judge considered there was further prejudice to all parties by virtue of the fact that those most closely acquainted with the matter have since died.
[68] Thirdly, it should not be overlooked that the Judge expressly referred to the caution in Ritchie v Ritchie against placing undue weight on the length of time between the expiry of the time limit and the bringing of the application.30
[69] Fourthly, I agree with the Judge that the cases in which leave has been granted to bring relationship property proceedings after lengthy delays in filing are materially different to the present case because in those cases both parties were still alive and able to give evidence.
[70] I am not persuaded the Judge placed undue emphasis on the length of the delay. It was not the fact of a lengthy delay that influenced the Judge in declining leave. Rather, it was the prejudicial effect of the delay, both in terms of evidential sufficiency and Mr Pollock and Cheryl Pollock’s ongoing reliance on the relationship agreement
executed over two decades earlier.
29 At [46].
30 At [11].
Did the Judge err in fact to an extent bearing on the correctness of his decision?
Mental health
[71] Mr Ward-Johnson attacks the Judge’s finding that there was an absence of evidence to show Mrs Pollock’s mental disorder prevented her from consideration of her legal position. Mr Ward-Johnson submits this finding is inconsistent with:
(a) the fact that Mrs Pollock was subject to a compulsory treatment order from 1 November 1992 until 1 February 1993 which is the relevant period in respect of the property division; and
(b)the evidence of Mrs Pollock’s GP, Dr Hanna, confirms that at or about the relevant time Mrs Pollock suffered from severe schizophrenia. Dr Hanna exhibited a number of relevant expert reports as to the extent of Mrs Pollock’s medical disorder at the relevant time.
[72] The appellants draw attention to the expert report of Dr Srzicah which considered that Mrs Pollock was likely vulnerable to undue influence at the time she signed the agreement. In Dr Srzicah’s words:
“… [Mrs Pollock] was very probably vulnerable to undue influence at the time she signed the property agreement. This would have been due to the process of negotiating the agreement in her chronically unwell state. Her mental state was likely to have been fragile and she would have required considerable support from people around her rendering her dependent on them to some extent.”
[73] The appellants submit the Judge required evidence of a cogency far beyond what was required in support of an application for leave to appeal out of time.
[74] In response, Mr Hudson endorses the approach taken by the Judge. He points to the qualified positions taken by the experts. Mrs Pollock’s GP, Dr Hanna, opined:
“It is difficult to say whether a patient being treated with Depixol Althium would not be capable of making reasoned and sensible decisions about any important matters.”
[75] Dr Srzicah complemented this presentation when he deposed:
“Pauline was clearly psychotic in September 1992. It is not clear if she suffered from psychotic symptoms in December 1992 although given her history she probably did. Even if she was psychotic it is not clear if the content of her delusions related to and affected her decisions regarding the Property Agreement as we know little about the content of her delusions. It is possible that despite her psychotic symptoms she was able to understand the nature and foresee the consequences of decisions relating to the Property Agreement and was subsequently competent.”
[76] On the basis of these passages, Mr Hudson submits the conclusions reached by the Judge were open to him.
[77] It is important to appreciate that the Judge was discussing Mrs Pollock’s mental health issues in the context of whether the delay had been satisfactorily explained. His conclusion was restricted to whether Mrs Pollock’s mental disorder “directly impacted on the issue of delay”.31 The Judge was not determining a trial issue. For this reason, the Judge was entitled to weigh the evidence and reach a determination. I cannot say that determination was plainly wrong. The evidence was, as the Judge emphasised, equivocal and, to some extent, speculative.
Lack of financial records
[78] Mr Ward-Johnson takes issue with the following paragraph in the judgment:32
“[40] … Ms Gravatt33 bases her submissions as to unfairness upon the recent share valuation undertaken by Mr Moriarty. However, as Mr Hudson points out in his submissions, there are some flaws in his methodology, through no fault of Mr Moriarty; it is simply due to the passage of time and the unavailability of sufficient contemporaneous documentary evidence. Thus, as Mr Moriarty concedes, because of very limited financial information, he had to make some assumptions which may or may not be accurate. There appear to be no other existing financial records for Todd & Pollock around the period of the parties separation (recorded in the agreement as having occurred in June
1991), or for the years following the signing of the property relationship agreement.”
[79] Mr Ward-Johnson submits the Judge erred in fact as there were two sets of unaudited financial statements of account for the period directly relevant to the time
31 At [22].
32 At [40].
33 Counsel for the appellants in the Family Court.
of the parties’ separation, a forensic accountant’s expert report and supporting evidence from three independent witnesses who gave evidence supporting Mrs Pollock’s position that the company was in a very sound financial position.
Mr Ward-Johnson further submits that the absence of any other financial records for the years following must be viewed in the context of an application for leave giving rise to issues requiring full discovery.
[80] I do not accept these submissions. The Judge was merely pointing out the difficulties Mr Moriarty faced in carrying out the valuation given the incomplete nature of the documents before him. Mr Moriarty recorded:
“I have had to rely upon one set of unaudited financial statements from 1991 to undertake this valuation. This lack of information has meant I have to make [a] number of assumptions in my valuation calculations.”
[81] Mr Dobson, an expert accountant called by the respondents, also pointed out the difficulties in carrying out the valuation. He noted:
“To form a robust view of the value of the shares in 1982 would involve a review of the financial statements of at least 4 years prior to the Valuation Date together with a budget at the Valuation Date for the ensuing year or at least being able to discuss the prospects for the business with someone actively involved in the business at that time to form a view as to future maintainable profits.
The Company was involved in the construction sector, in my experience this sector is subject to cycles and to form a view on the value of goodwill without reference to a reasonably long period is dangerous.
In this case the only financial statements available are for the year ended 31
March 1991 some 20 months prior to the Valuation Date.
I note that the Accountants disclaiming has not been signed and there are not signatures of the directors as required by the Companies Act 1993. This may well indicate that the financial statements are draft only not final.”
[82] Lastly, as Mr Hudson submits, the three independent witnesses who gave evidence supporting Mrs Pollock’s position were employees of the company rather than expert accountants.
[83] For these reasons, I consider that it was open to the Judge to make the findings he did.
[84] But in any event, the Judge made these comments in the context of his overview of the merits of the case. They formed only one consideration in his weighing up of the strengths of the case. Perspective is required. These submissions are yet another manifestation of the appellants’ overarching submission that the Judge applied an overly onerous evidential threshold. I have already rejected that submission.
Property assets not included in the relationship property agreement
[85] Mr Ward-Johnson objects to the following paragraph in the judgment:
“[41] Additionally as submitted by Mr Hudson the figures relied upon by
Ms Gravatt do not include the existence of any debts and it is unclear whether there were in fact any debts. Thus her calculations may not in fact be accurate. The agreement itself does not record any values of the parties’ property. There is no schedule of assets, and thus it is unclear to ascertain the exact scope of the property that was contemplated for division. …”
[86] Mr Ward-Johnson submits the Judge erroneously concluded that the Court was unable to ascertain the precise scope of the property that was contemplated for division. He submits there was a failure to give due consideration to the existence of relationship property assets that were not included in the relationship property agreement. He submits, for example, that Todd & Pollock owned a Tauranga property which was not disclosed in the relationship property agreement or in the financial statements.
[87] There is nothing in this point. The Judge was simply highlighting, as part of his provisional assessment of the substantive merits, the uncertainty now surrounding the nature and value of Mrs Pollock’s shares in the company as they stood in 1992. I do not discern any reversible error.
Evidence in support of the alleged oral contract
[88] The evidence in support of the alleged oral contract came from the Pollock’s children. Letitia Pollock deposed as follows:
“… Rex discussed with Pauline that he would not pay her out for the value of her shares in Todd & Pollock Builders Limited because they had both only a few years prior paid out their business partner, Allan Todd. Instead, he sought
her agreement to hold the shares on trust for me and my two brothers Steven and Nathan, and he would continue to build the company for our benefit. Pauline agreed, as she wanted her family to benefit from the business she had built with Rex.
[89] Nathan Pollock deposed:
“…To try and broker a resolution my father asked me to speak with my mother’s solicitor and ask if my parents could simply divide their personal assets and keep Pauline’s shares in the company for the three of us children. That way the company would be retained and we would all benefit.
My understanding was that it was later agreed by both lawyers and both parents were happy with the arrangement.
… The reason why Rex asked me to speak to Pauline’s lawyer was that Pauline had been advised that she was entitled to 50% of their personal assets and 50% of her share of Todd & Pollock Limited. Rex said to me that Pauline’s share in the company would be worth up to $3,500,000.00. Rex wanted me to ask Pauline’s lawyer to agree to Pauline’s shares being transferred equally to the three children. This way Rex will not need to buy the shares from Pauline.”
[90] I have already discussed this issue in the context of whether the Judge overstated the significance of both parties being deceased.
[91] In any event, Judge Coyle gave careful consideration to the sufficiency of evidence supporting the claim there was an oral collateral contract but noted that apart from the claims of the children, which needed to be carefully weighed having regard to the obvious self interest involved, there was no other corroborative evidence which might infer the existence of such an agreement. In that regard the Judge pointed to an absence of any references to a family trust being established by Mr Pollock for the benefit of the children in any company accounts or minutes, no evidence from either of the solicitors who certified the agreement and, in particular, no evidence from Ms Anderson, as one of the certifying solicitors, as to the circumstances in which the agreement was signed and the certificates issued. Apparently Ms Anderson is available and could have sworn an affidavit but has not done so. Furthermore, as the Judge pointed out there is no record in the agreement or correspondence between the solicitors as to the existence of any collateral oral agreement.
[92] There is further evidence which tends to throw some doubt on the existence of an oral agreement. For example, in Nathan’s evidence he said his father asked him to go to the solicitors to sign the documents but the evidence is that this never happened.
Another example is that there is a level of inconsistency between Letitia and Nathan as to the nature of the alleged oral agreement. Letitia says it was understood that the shares would be held in trust whereas Nathan says they would be transferred to the children and then later deposes to the shares being safe in the trust.
[93] Lastly, I regard as significant the evidence of Peter Washer, Mr Pollock’s solicitor at the time the agreement was entered into. As to the alleged oral agreement Mr Washer deposes:
“There is no reference to the agreement as alleged by Nathan in the property agreement ultimately signed by Rex and Pauline. Had Rex brought any such agreement to my attention, then those terms would have been included in the document which was signed by the parties. Further, Rex was a careful and cautious man particularly where legal matters were concerned. He would have been careful to ensure appropriate documentation of any such agreement. All this points, in my opinion, against the agreement which Nathan claims was agreed to between Rex and Pauline considering Pauline’s shares.”
[94] It was entirely open to the Judge to find that given these circumstances there was simply an insufficient reliable evidentiary basis.
Did the Judge overstate the test for what constitutes serious injustice under s 21J?
[95] The Judge made two points in relation to the test for what constitutes serious injustice under s 21J. First, he considered the test is “now a very high test”. He cited Harrison v Harrison in which the Court of Appeal, after noting the legislature had elevated the relevant test from “injustice” to “serious injustice”, went on to say:34
“[112] The consequence is that, at least for contracting out agreements, “serious injustice” is likely to be demonstrated more often by an unsatisfactory process resulting in inequality of outcome rather than mere inequality of outcome itself. Parties are in general free to agree in quite different arrangements to those otherwise imposed upon them by the Act. …”
[96] Secondly, the Judge said that unequal division of property is not in and of itself determinative. He cited Wells v Wells where Simon France J said:35
“[38] … It seems to me that the general thrust of the decision is that the legislation itself, and the legislative history, indicates a desire to respect the capacity of persons to contract out of the Act. Serious injustice must be
34 Harrison v Harrison [2005] 2 NZLR 349, [2005] NZFLR 252.
35 Wells v Wells [2006] NZFLR 870 (HC).
considered against that philosophy. The specific endorsement by the Court (para [82]) of an earlier statement by Fisher J in Wood v Wood is telling. In the passage in Wood v Wood ([1998] 3 NZLR 234), Fisher J had expressed concern at the apparent ease with which agreements were being set aside. Public acceptance of the whole statutory scheme was based in part on the recognition that people could opt out – it was an integral feature of its public legitimacy.”
[97] Mr Ward-Johnson submits the Judge applied a threshold which was too high.
[98] I do not accept this submission. The test is a high one as indicated by the qualifier “serious”. The authorities cited by the Judge remain good authority. And in any event, the Judge did not consider the existence of a collateral oral agreement as being insufficient to reach the standard of serious injustice, he simply considered the appellants would face grave evidential difficulties in proving such an agreement.
Conclusion
[99] For the appeal to succeed, the appellants must point to reversible error. I do not discern any. The Judge’s factual findings were open to him and he correctly stated the legal position. The central contention advanced on appeal is that the Judge refused the application on evidential grounds which was premature and improper given there had not been full discovery and evidence had not been tested at trial. The lack of a sufficient evidential foundation, which was to some extent inescapable given the delay in filing, was a legitimate factor bearing on the exercise of the Judge’s discretion. I cannot say the Judge erred in giving due weight to it nor can I say his decision was plainly wrong.
[100] In those circumstances, it is unnecessary to address the cross-appeal.
[101] Finally, I note that this judgment in no way prejudices the appellants’ related claims under the Family Protection Act 1955 and the Law Reform (Testamentary Promises Act) 1949. This appeal was determined in the context of an appeal against discretion and in circumstances where the appellants required leave to bring proceedings. While the claims in the related proceedings involve similar subject matter the legal issues raised are different and will require independent determination.
Result
[102] The appeal is dismissed.
Costs
[103] The respondents, being the successful party, are entitled to an award of costs.
[104] I invite the parties to consult with a view to filing a joint memorandum on the issue of costs.
[105] In the event the parties are unable to agree, memoranda not exceeding five pages are to be filed and served within 25 working days of the date of this judgment.
Moore J
Solicitors/Counsel:
Ward Johnson Barristers Limited, Tauranga
Cooney Lees Morgan, TaurangaElliot Hudson Barrister, Hamilton
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