Pool v Eggers
[2016] NZHC 240
•24 February 2016
IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY
CIV-2014-443-019 [2016] NZHC 240
BETWEEN HELEN ANNE POOL
Plaintiff
AND
KATHLEEN VERONICA EGGERS Defendant
Hearing: 9 - 10 February 2016 Appearances:
S Hughes QC for the Plaintiff
Defendant in personJudgment:
24 February 2016
JUDGMENT OF MUIR J
This judgment was delivered by me on Tuesday 24 February 2016 at 10.00 am pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date:………………………….
Counsel:
S Hughes QC, Barrister, New Plymouth
Solicitors:
S E Gifford, New Plymouth
Copy to: the Defendant
POOL v EGGERS [2016] NZHC 240 [24 February 2016]
Introduction
[1] In these proceedings the plaintiff (Helen) seeks recovery from her former mother-in-law (Kathleen) of an amount of $197,254.50 plus interest as awarded by the Family Court against Helen’s former husband (Matthew) and which has hitherto proven to be irrecoverable.
[2] She says that Kathleen is liable to her on a claim for breach of trust having disbursed a large sum in cash to Matthew which was in her control and which she knew to be subject to property relationship claims.
[3] On the day after conclusion of the hearing, payment was made of the
$197,254.50 claimed. Helen maintains her claim to interest and costs.
Background
[4] The background facts are largely uncontentious. On 6 January 2001 Helen married the defendant’s son Matthew Eggers. Although from a farming background, Matthew had formerly trained as a helicopter pilot. In 1998 his parents purchased a helicopter which they leased to Matthew on an informal basis. That aircraft was replaced with a second machine, again subject to informal lease arrangements in Matthew’s favour.
[5] In February 2004 Tarata Helicopters Limited (THL) was incorporated with the shares held equally by Helen and Matthew. They had, by this stage, become parents of twin sons with a further son born in August 2005.
[6] With the apparent agreement of Matthew’s parents, THL assumed the lease of the helicopter and commenced operating it. It did so profitably.
[7] On 27 September 2006 the parties separated. At that point (as the Family Court ultimately held) Matthew unilaterally (but with the agreement of his parents) assumed the lease of the aircraft which he operated on his own account trading as Tarata Helicopters.
[8] On 28 March 2007 Tarata Helicopters (2007) Ltd (THL 2007) was incorporated by Matthew who was its sole director and shareholder.
[9] On 5 April 2007 the Taopee Trust was settled of which Matthew’s parents and
their accountant were trustees and his sister and her children the beneficiaries.
[10] On 20 April 2007 and 27 April 2007 sums of $29,697 and $66,569.18 respectively were transferred on Matthew’s instruction from THL to THL (2007). On 1 May 2007 a further sum of $357,379 was transferred to THL (2007), from a party identified in the bank statements as “M J Eggers T/A Tarata Helicopters”. The extent of former transfers from THL into the account of Matthew trading as Tarata Helicopters was not in evidence.
[11] On 18 May 2007 the plaintiff issued proceedings in the Family Court seeking orders in respect of relationship property. In tandem there were protracted proceedings involving the children.
[12] On 23 August 2007 Matthew resigned as a director of THL (2007). Contemporaneously, Kathleen and her husband Leonard Eggers (Leonard) were appointed to that role. On the same date Matthew also transferred his shares in THL (2007) to the Taopee Trust. Thereafter Matthew entered into employment arrangements with THL (2007) at what is said to have been a minimal wage. In evidence before the Court the plaintiff’s solicitor invited me to conclude that these arrangements were for the purposes of minimising Matthew’s liable parent contributions. Although a possible inference, I make no finding in that regard.
[13] In the interim, further monies continued to accrue to the account of THL (2007) from its trading operations. By the end of 2008 the total amount standing to its account was in excess of $500,000.
[14] On 28 December 2008 events critical to Helen’s claim occurred. Having earlier made arrangements with TSB Bank (TSB) for it to be placed in funds, Kathleen attended on its Inglewood branch and, as one of the company’s directors and authorised signatories, withdrew the sum of $500,000 in cash. She then returned
home where she made a cash distribution to Matthew. In the Family Court she said that the amount she gave him was a “roundish 300”, meaning $300,000. In evidence before this Court she said that the amount was $350,000 with the balance retained by her to reflect monies she said were owing to herself and her husband.
[15] Her reasons for making the withdrawal and payment were the subject of evidence in the Family Court (on which she was cross-examined and in respect of which she did not demur in the present proceedings). Her relevant evidence in the Family Court was in terms:
… I am saying Matthew instructed me, after getting Helen’s affidavits of 18
November, he said “I want my money, our money out”, my money it would
have been by then, “I want my” – I don’t know the exact words, “get that money out for me, I’ll get it out”. I said, “all right then” and so that’s what happened…
I had enough. I suggested at the beginning when we first started, I said to the accountant I want nothing to do with this, and he said just leave it there and then it got that bad with all this harassment on our family that we’d had enough, and so when he said to me “I am taking it out” when he got that affidavit I said, well I couldn’t stop him anyway, couldn’t stop him taking it out.
[16] In summary, therefore, her reasons were twofold, namely that she had been instructed to do so by Matthew and that she had “had enough” – an apparent reference to the frustrations she and others felt as a result of the plaintiff’s relationship property claims, associated discovery requirements and disputes in relation to the children.
[17] Ms Hughes QC invites me to conclude that an obvious intention in withdrawing and distributing the money in cash was to frustrate the plaintiff’s property relationship claims. That inference may be available given the inevitable difficulties in tracing the same. However, it is unnecessary for me to make a finding in that regard.
[18] The plaintiff’s claims in the Family Court were heard on 10, 11 and 12
August and 20 October 2009. His Honour Judge Neale’s decision was published on
18 December 2009. He ordered that Matthew pay Helen the sum of $197,254.50 together with interest at the rate of five per cent per annum from the date of
separation until the date of payment. He made other orders vesting various assets in respective parties. His Honour’s award of interest from the date of separation was based on his finding that Matthew had retained the assets of the parties post- separation, used them in his business and subsequently retained control over the cash amount generated.1 Earlier in the judgment his Honour noted that the first
respondent had:2
… taken the assets of the company for his own purposes including the bank accounts and still has control over that.
[19] This judgment was not satisfied. In the result, Helen commenced bankruptcy proceedings and on 14 September 2010 an order for Matthew’s adjudication was made.
[20] By effluxion of time Matthew was due to be automatically discharged from bankruptcy on 18 October 2013 having filed the required statement of affairs on 18
October 2010. However, on 16 October 2013 the Official Assignee filed an objection to his discharge resulting in a subsequent application by Matthew under s 294 of the Insolvency Act 2006. That application came on for hearing before Associate Judge Sargisson on 24 February 2015. She concluded that it was in the public interest for Matthew’s bankruptcy to be extended and barred him from making a further application for discharge for two years from the date of her
judgment.3 She held that Matthew was not a person who took his obligations
seriously giving rise to significant issues of commercial morality. She noted his position “that just because the Family Court says I owe a debt”, he should not be held liable to that debt and that “I only have to abide by the law and the Family Court got the law wrong”. The Associate Judge clearly had significant reservations about Matthew’s evidence that he had dissipated the cash received from Kathleen on
lotto tickets, beer, holidays and general living expenses.
1 H E v M E and Ors FC NWP FAM-2007-043-396, 18 December 2009, at [84].
2 At [72].
3 Official Assignee v Eggers [2015] NZHC 1475.
The claim
[21] Against this background the plaintiff advances a single cause of action, namely that the defendant held the monies paid to her as trustee for its beneficial owners Matthew and Helen and that she breached that trust by making a cash payment to Matthew, pleaded as between $200,000 and $300,000 but acknowledged by the defendant in her evidence as being $350,000.
[22] The claim does not seek any element of proprietary relief, for the apparent reason that the defendant is demonstrably solvent. Rather, the claim is for payment of the Family Court’s base award ($197,254.50) “to compensate Helen for breach of trust”, for interest in accordance with the Family Court’s judgment and for costs.
Admission of claim
[23] In the course of the evidence in both the Family Court and this Court Kathleen candidly acknowledged that her decision to withdraw the cash from TSB Bank was made contrary to her accountant’s advice. She also acknowledged in both Courts that the monies paid into the account of THL (2007) from THL or Matthew trading as Tarata Helicopters “was never our property” in the sense of THL (2007)’s, monies.
[24] Consistent with that position Kathleen made a written offer in closing submissions that “we pay the sum of the Judgment of $197,254.50 but do not believe interest and costs lay with them (sic)”.
[25] Then, on the day following the hearing Leonard met with counsel for the plaintiff and gave her a cheque described as drawn on the “Eggers farm account”. This was made payable to Helen and in the amount of $197,254.50. The cheque was not tendered in full and final settlement. Ms Hughes advises that Leonard’s only request was that he be provided with a receipt. This recorded that the sum was received in partial settlement of the plaintiff’s claims.
[26] In response to this advice, I minuted the parties in terms that the payment appeared to me to be an admission of the claim but with a reservation of rights or
denial of liability in respect of interest and costs. I invited submissions from the parties.
[27] In response Ms Hughes stated that, in her submission the appropriate interpretation of these events was that Kathleen admitted the claim “in so far as that sum is due” but denied any liability for either interest or costs. Nevertheless, she invited me to make findings in relation to the existence of and breach of trust in order to “ensure that any judgment provided is robust and will sustain further scrutiny”. She further submitted that any judgment “can take into account the payment as an admission that Ms Eggers owed to Ms Pool the sum so tendered – thereby acknowledging liability to that extent”.
[28] Kathleen’s memorandum in response acknowledged “that she should not have withdrawn the money in cash”.4 She submitted that she should not, however, be liable for interest and costs on the basis that previous offers had been made to pay the amount of the Family Court’s base judgment. In so far as such offers are said to have been “at date of separation” or at “the hearing in 2009” she cannot, however, be correct for the obvious reason that the plaintiff ’s claim was not quantified until
publication of the Family Court’s judgment. She further seeks an outcome which she describes as “fair” and which “will allow both families to go forward and not look back”.
[29] I consider the only available conclusion on these facts is that Kathleen admits the claim against her for compensation for breach of trust but denies her liability for interest (in accordance with the Family Court’s judgment) and for costs. I come to that conclusion for the following reasons:
(a) Only one cause of action is pleaded against Kathleen with the prayer for relief being for “compensat[ion]” of $197,254.50 plus interest and
costs.
4 Memorandum dated 15 February 2016.
(b)In terms of Rule 15.155, an admission may be by way of pleadings “or otherwise”.
(c) In McGechan on Procedure6 the words “or otherwise” are said to encompass at least an admission in compliance with a notice to admit, an admission in a letter written before or after a proceeding is commenced, or admission made in an agreement or one made orally, provided it is properly proved. What is said to be important is that the admission is clear, although it may be either express or implied.7
(d)In my view the clearest and most unambiguous form of admission is by payment. It can leave no reasonable question in terms of the defendant’s acknowledgement of liability.
(e) That conclusion is in the present case reinforced by Kathleen’s written acknowledgment that “she should not have withdrawn the money in cash” and her evidence that the monies paid into the THL (2007) account from predecessor entities “was never our property” in the sense of THL (2007)’s monies.
[30] Since the payment was made in response to a single cause of action, it carries with it, in my view, two necessary admissions:
(a) that Kathleen held on trust the monies withdrawn from the TSB account for Helen and Matthew in shares ultimately to be determined by the Family Court and in accordance with its judgment; and
(b) that she was in breach of trust by subsequently paying the sum of
$350,000 in cash to Matthew.
[31] I do not, in that context, consider it necessary to make findings to like effect myself. However, had it been necessary, I would have been prepared to. I have no
5 High Court Rules, r 15.15.
6 Andrew Beck and others (ed) McGechan on Procedure (online looseleaf ed. Thompson Reuters)
at [HR 15.15.01(2)].
7 Relying on Technistudy v Kelland [1976] 3 All ER 632 (CA) at 634 per Roskill L.J.
doubt that the principles of equity are sufficiently flexible and its defences against unconscionable conduct sufficiently strong as to capture the particular and unusual circumstances of this case.8
[32] In terms of breach of trust, Kathleen denies that the payment was made with the intention of defeating Helen’s claims. She says that she and her husband had simply “had enough” of the various court proceedings and what she considered to be the inadequacy of arrangements for Matthew’s involvement in his sons’ lives. I am not required to make any findings in relation to Kathleen’s motivations. I am satisfied that in circumstances where she acknowledged to the Family Court that at the time she made payment to Matthew there was “no discussion about where the money was going to end up” and that her actions were driven by her son’s demands that he wanted “my” money out, the payment to him represented a breach of obligations imposed on her by law. The risks that Helen’s legitimate claims might thereafter be frustrated were obvious. In the event, that is exactly what happened. Helen’s loss is in the amount of the Family Court’s judgment, which, were it not for the breach, would have been recoverable from the monies held in THL (2007)’s account.
The liability for interest
[33] Kathleen says she should not be liable to pay the interest which was awarded on the Family Court’s judgment and totalling $92,250.29 as at the date the principal amount was paid.
[34] She submits that reasons for her not being liable include:
(a) previous offers to pay the principal amount;
8 In written submissions reliance was placed on the existence of a constructive trust on the principles appearing in Commonwealth Reserves et ors v Chodar et ors, HC Auckland CP73-
50/00, 25 September 2000 and Official Assignee v Sanctuary Propvest Ltd HC Auckland CIV-
2009-404-0852, 11 June 2009. I would have been prepared to find Kathleen was a constructive trustee, but an alternative analysis based on an implied trust may also be available. Similarly, although not pleaded, the case could, in my view, have been advanced on a knowing receipt/assistance basis.
(b)the fact that although she was a party to the Family Court proceedings she was not given the opportunity to appeal the interest award; and
(c) the fact that until the proceedings were issued she was unaware interest and costs were accruing against her.
[35] In respect of previous offers, Helen’s evidence was that an offer was made to her by Kathleen and Leonard in 2011 to pay an unidentified sum conditional on alternative schooling arrangements for Helen and Matthew’s children which she was not prepared to entertain on account of the fact that their schooling had already been disrupted.
[36] I cannot identify any basis for limiting Kathleen’s liability for interest on account of this offer.
[37] To my mind the liability for interest follows inevitably from the admission of the cause of action. I accept Ms Hughes submission that as a matter of logic the two are not divisible. Admission that the cash withdrawn from the TSB was held on trust for Helen to the extent of any ultimate award of the Family Court carries with it all incidents of such award including interest. Moreover, as Kathleen’s memorandum of
15 February 2016 itself acknowledges,9 interest is “just away (sic) of giving the
plaintiff the same amount of money she was offered in 2006”. Absent the breach of trust there was a fund from which all such claims were recoverable. Absent liability for accrued interest, Helen would not be made whole.
Result
[38] Helen is entitled to judgment in the amount of $92,250.29.
Costs
[39] As the successful party, Helen has the usual entitlement to costs. I consider a
2B basis appropriate. In anticipation of judgment Ms Hughes provided a schedule of
9 Albeit contrary to the evidence in so far as it infers a 2006 offer at the level of the Family
Court’s award.
attendances totalling $46,982.50 but I infer that there has not yet been any dialogue between the parties in terms of that assessment.
[40] Failing agreement between the parties on the quantum of costs I will receive memoranda on the following timetable:
(a) Helen’s memorandum to be filed and served by 14 March 2016;
(b) Kathleen’s memorandum to be filed and served by 21 March 2016;
and
(c) Helen’s reply memorandum (if considered necessary)to be filed and served by 30 March 2016.
[41] All such submissions should be limited to a maximum of five pages plus any necessary schedules.
Muir J
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