Potter v Duffy

[2016] NZHC 1866

NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO 11D OF THE FAMILY COURTS ACT 1980.  FOR FURTHER INFORMATION, PLEASE SEE

THE-FAMILY-COURT/LEGISLATION/RESTRICTION-ON-PUBLISHING- JUDGMENTS.

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV-2014-470-131 [2016] NZHC 1866

BETWEEN

TERI ANNE POTTER

Plaintiff

AND

MARK FRANCIS DUFFY First Defendant

THE TRUSTEES OF THE DUFFY TRUST - BEING TERI ANNE POTTER, MARK FRANCIS DUFFY AND LE PINE TRUSTEES LIMITED

Second Defendants

Hearing:	On the papers
Counsel:	E Eggleston for the Plaintiff V M Ammundsen for the First Defendant T Young and T Kirkham for the 3rd named Second Defendant
Judgment:	11 August 2016

JUDGMENT (NO.4) OF MUIR J (RECALL)

This judgment was delivered by me on Thursday 11 August 2016 at 4.00 pm

Pursuant to Rule 11.5 of the High court Rules.

Registrar/Deputy Registrar

Date:…………………………

Counsel:  Solicitors:

E Eggleston, Barrister, Tauranga                V M Ammundsen, Trust Law Ltd, Auckland

Holland Beckett Lawyers, Tauranga
Le Pine & Co (T Young/T Kirkham), Taupo for the

Trustees

Copy to:   The First Defendant

POTTER v DUFFY (No 4) (Recall) [2016] NZHC 1866 [11 August 2016]

Introduction

[1]      The plaintiff makes an application for partial recall of my judgment dated 27

November 2015 on the basis that, since delivery of that judgment (and in the context of sale of the Duffy Trust’s assets and payment of the Trust creditors which then occurred), new information has come to light which makes the declaration of the quantum  of the  first  defendant’s  current  account  debt  in  para [53](b)(ii) of my

judgment incorrect.1

[2]      In particular, from the proceeds of sale of the Trust’s lifestyle property in Tauranga, ASB Bank deducted the sum of $27,289.76 for the repayment of what is acknowledged as a personal debt of the first defendant, but which had been guaranteed by the Trust and which I refer to as the “Lady Luck” loan.2

[3]      Although the plaintiff had, in her capacity as a Trustee of the Trust, signed an unlimited guarantee of the debt on 10 August 2005, she had, by the date these proceedings  came  on  for  hearing  in  2015,  long  forgotten  about  the  contingent liability.  Nor, since the loan stood in the first defendant’s name alone, was she able she says to obtain information about it from ASB even if she had asked.

[4]      Moreover,  in  his  most  recent  affidavit  of  assets  and  liabilities  dated

19 October 2015 the first defendant disclosed the loan only to the extent of his global liability to the ASB Bank of $104,714 (stated in the affidavit to be secured over what was acknowledged as his separate property at National Park).   There was nothing therefore in his affidavit to alert the plaintiff to the continuing liability of the Trust under its guarantee.

[5]      The problem was compounded in a partial settlement of the parties’ claims reflected in a consent memorandum dated 20 November 2015.  That memorandum recorded that, on settlement of the sale of the Trust property, the proceeds were,

before resettlement on new trusts established by the parties, to be applied, inter alia,

1      Potter v Duffy (No 2) [2016] NZHC 2996.

2      The relevant loan had been taken out post separation to finance acquisition by the first defendant of his business partner’s interest in the vessel “Lady Luck”.  That vessel subsequently sank and the insurance proceeds were applied to other separate property of the first defendant (a property at National Park and an earthmoving machine).

to meet “the amounts required to repay the Duffy Trust liabilities to the ASB Bank”. Those liabilities were set out in a schedule to the agreement.  They did not include the $27,289.76 personal debt guaranteed by the Trust.

The first defendant’s obligations in relation to disclosure of the Lady Luck loan

[6]      I am satisfied that the first defendant did not demonstrate an adequate level of candour in relation to these issues.  He elected not to file an affidavit in opposition to the affidavit filed by the plaintiff in support of her recall application.  I consider it an available inference that he was aware of the guarantee position at the time the matter came before me in November 2015, understood ASB would seek repayment of the loan from the proceeds of sale of the lifestyle property and elected not to raise the issue of the loan, other than in the oblique way previously referred to.

[7]      The obligations of disclosure in a relationship property context were recently addressed by the Court of Appeal in Clayton v Clayton.3   At [186] the Court stated:

In our view when the public interest considerations lying behind the purpose and principles of the PRA are taken into account, there is merit in an approach that recognises that:

(a)    parties to relationship property proceedings are under an obligation  to  make  full  and  frank  disclosure  of  all relevant information in order to ensure that the Court is in a position to make appropriate orders for the ascertainment  and   division  of  relationship  property under the PRA…

[8]      I accept Mr Eggleston’s submission that the relevant issues concerned had their genesis in the parties’ relationship property disputes in that, if all necessary information had been before the Court, the Lady Luck loan would inevitably have been classified as a personal debt under s 20 of the Property (Relationships) Act

1976 with consequential adjustments to the current accounts, assuming payment of

the debt under the Trust’s guarantee.

3      Clayton v Clayton [2015] NZCA 30. Although the decision was appealed to the Supreme Court (Clayton v Clayton [2016] NZSC 29), [2016] 1 NZLR 551; Clayton v Clayton [2016] NZSC 30, [2016] 1 NZLR 590), the observations referred to in [7] of this judgment were not in issue on the appeal.

The jurisdiction to recall and application to present the facts

[9]      I accept that the jurisdiction in relation to recall of judgments must be closely confined within the principles established in Horowhenua County v Nash (No 2).4   In the present case recall could only be justified on the basis of the third category identified in Horowhenua being where justice requires it for some “very special reason”.

[10]     In  the  recent  decision  of  Owen  v  Thomas  Duffy  J  stated  that  the circumstances that can constitute a very special reason for recalling a judgment included:5

(a)       Where the parties had failed to draw the Court’s attention to a fact or

point of law that is plainly relevant;

(b)Where a judge has failed to determine an issue that has properly been put before him or her; or

(c)      Where  the  applicant  has  been  taken  by  surprise  by  a  particular application  from  which  the  Court  ruled  adversely  against  the applicant, and the applicant did not have a fair opportunity to be heard on it.

[11]    That list was not, however, intended to be exhaustive and although the jurisdiction should never be seen as a substitute for an appeal, the categories of case where justice requires it for “very special reasons” cannot be considered closed. Clearly, as Asher J said in Faloon v Commissioner of Inland Revenue,6 however, the jurisdiction does not extend to a challenge to any substantive findings of fact and law in the judgment nor to a party recasting arguments previously given, nor representing

them in a new form, nor to putting forward further arguments that could have been

raised at the earlier hearing but were not.

4      Horowhenua County v Nash (No 2) [1968] NZLR 632 (SC).

5      Owen v Thomas [2015] NZHC 2966 at [10].

6      Faloon v Commissioner of Inland Revenue [2006] NZTC 19, 832 (HC).

[12]     In  the  present  case  the  plaintiff  relies  on  the  formulation  of  principle contained in the judgment of Neuberger J (as he then was) in Blenheim Leisure (Restaurant) Ltd (No 3)7 in terms acknowledging the appropriateness of recall where there has been:

….a plain mistake on the part of courts; a failure of the parties to draw to the court’s attention a fact or point of law that was plainly relevant; or discovery of new facts subsequent to the judgment being given.

(emphasis added)

[13]     That  statement  was  cited  with  approval  by Sir  Christopher  Slade  in  the English Court of Appeal decision of Stewart v Inglis8 and was referred to by our own Court of Appeal in Unison Networks Ltd v The Commerce Commission.9    To the extent the first defendant denies that jurisdiction exists to recall the judgment, I cannot therefore accept his submission.

[14]     I have reservations about whether a recall application (as opposed to  an application to adduce further evidence on appeal) is the appropriate response to the discovery of any new fact after the issue of judgment.  However, coupled with the absence of candour which has occurred in this case and the obligations of full and frank disclosure which I consider applied to the first defendant in the context of the disputes which were before the Court, this is, in my view, a case where the Court’s

discretion to recall the judgment should be exercised.10   It is unsurprising that after a

period of 10 years Ms Potter should have forgotten about the Trust’s guarantee or have otherwise considered the personal loan discharged.  There was, in my view, a positive obligation on the part of the first defendant to disclose the loan as a contingent liability of the Trust and it is no answer for him now to say that, had he done so and the plaintiff had sought adjustments accordingly, he may not have entered into the deed of partial settlement.  That would be to allow him to benefit

from his own wrong.

7      Blenheim Leisure (Restaurant) Ltd (No 3) The Times, 9 November 1999.

8      Stewart v Inglis [2000] EWCA Civ 362, [2001] WLR 2268 at 2274.

9      Unison Networks Ltd v The Commerce Commission [2007] NZCA 49, at 32.

10     There is a broad analogy with the decision in Goh v Bank of New Zealand (1991) 4 PRNZ 92 (HC) where the court granted recall of a summary judgment application where circumstances material to quantum had not been disclosed in the plaintiff ’s affidavits.

[15]     I am in no doubt that if I had been required to decide how the relevant loan was properly accounted for between the parties I would have declared it to have been a liability of the first defendant, and, in the event of intended discharge of the loan by the Trust under its guarantee, made appropriate adjustments within the current accounts of the Trust.

[16]     In terms of remedy, I adopt the approach of Panckhurst J in Solicitor-General v Swann & Ors11  in recalling and amending paragraph [53](b)(ii) of my judgment (No 2).

Result

[17]     I recall [53](b)(ii) of my judgment Potter v Duffy (No 2) dated 27 November

201512 and substitute the following:

[53](b)(ii)      first defendant – $150,569.76 (the parties agreed sum plus $4,207 plus the sum of $27,289.76 referred to in my Judgment No 4 (Recall) dated 11 August 2016, [2016] NZHC 1866).

[18]     The plaintiff does not seek costs on her application for recall and none are awarded.

Muir J

11     Solicitor-General v Swann & Ors HC Dunedin CIV-2009-412-213, 29 October 2010.

12     Potter v Duffy (No 2) [2015] NZHC 2996.