Ready Mark Limited v Grant HC Auckland CIV-2010-404-008264

[2011] NZHC 1761

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-008264

BETWEEN  READY MARK LIMITED Appellant

ANDJILL GRANT Respondent

Hearing:         3 November 2011

Appearances: T Chubb for Appellant

M Vickerman for Respondent

Judgment:      18 November 2011 at 4:30 PM

JUDGMENT OF VENNING J APPLICATION FOR REVIEW

This judgment was delivered by me on 18 November 2011 at 4.30 pm, pursuant to Rule 11.5 of the

High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Foley & Hughes, Auckland

Dyer Whitechurch, Auckland

Copy to:            T Chubb, Auckland

M W Vickerman, Auckland

READY MARK LIMITED V GRANT HC AK CIV-2010-404-008264 18 November 2011

Introduction

[1]      Ready Mark Limited (Ready Mark) applies to review a decision made by Associate  Judge  Christiansen  striking  out  its  claims  against  the  respondent,  Ms Grant.

[2]      Ready Mark  is  controlled  by Mr  Grant.    Mr  Grant  and  Ms  Grant  were married in November 1987 but have been separated since June 2005.

[3]      In July 2010 Judge Ryan in the Family Court at North Shore delivered a decision  resolving  all  outstanding  relationship  property  issues.    Mr  Grant  was directed to pay Ms Grant $362,000. All interests in what were identified as the “trust entities”, including Ready Mark, were declared to be the sole and separate property of Mr Grant.

[4]      Ms Grant appealed three of Judge Ryan’s findings.  The appeal was heard and determined by Woolford J.  The appeal did not relate to the current issues before the Court.

[5]      On 15 December 2010 Ready Mark issued these proceedings against Ms

Grant. Ready Mark claims:

a)        $94,466.55 for renovation work carried out by it for Ms Grant on a property owned by her at Takapuna;

b)$154,042.00 for Ms Grant’s drawings from Ready Mark through her shareholder’s current account between 2002 and 2005; and

c)        $3,847.00 representing the value of a Ford Falcon belonging to Ready

Mark but retained by Ms Grant.

[6]      Ready Mark applied for summary judgment in the sum of $94,466.55 for the renovation work relying on Ms Grant’s failure to respond to a payment claim under the  Construction  Contracts  Act  2002.    Ms  Grant  opposed  the  application  for

summary judgment and responded with an application to strike out Ready Mark’s

claim in its entirety.

[7]      Ready Mark’s application for summary judgment and Ms Grant’s application for strike out were heard and determined by Associate Judge Christiansen.   In a decision delivered on 17 June 2011 the Associate Judge dismissed Ready Mark’s application for summary judgment and struck out each of Ready Mark’s claims.

[8]      Ready  Mark  has  appealed  the  decision  dismissing  the  application  for summary judgment to the Court of Appeal.  Before this Court it seeks to review the Associate Judge’s decision to strike out its claims.

[9]      Mrs  Chubb  confirmed  that  Ready  Mark  no  longer  pursues  its  claim  in relation to the Ford Falcon.  It accepts that Ms Grant may have genuinely believed she could keep the car and as such accepts that it could not establish that she had converted it.  However, she submitted the Associate Judge was wrong to strike out the other claims.

The decision under review

[10]     The Associate Judge concluded that Ready Mark was clearly the privy of Mr Grant and was bound by the consequences of the outcome of the Family Court decision affecting Mr Grant.  He considered that Ready Mark’s claims had been dealt with and resolved by Judge Ryan in the Family Court. The Associate Judge stated:

[47]      Judge Ryan adopted Mr McLoughlin’s approach, Mr McLoughlin was the plaintiff’s accountant. Mr McLoughlin ascribed no value to the debt due by Ms Grant to the plaintiff in the same way he ascribed no value to the other and significantly larger debts due from entities in Mr Grant’s control. He said in the context of the valuation exercise those debts should be considered to be irrecoverable, a conclusion clearly adopted by Judge Ryan in the outcome.

[48]     Therefore  Ms  Grant’s  debt  to  the  plaintiff  was  valued  for  the purposes of fixing the value of a half share in Mr Grant’s bundle of rights. Likewise, the level of the parties’ respective shareholders’ accounts was also taken account of in that valuation.

...

[53]    Clearly the issue concerning renovations and concerning the shareholders’ accounts  was  before  Judge  Ryan  but  neither  was  directly addressed by his decision in the outcome. With respect, nor should it have been. Implicitly they were the subject of consideration by Mr McLoughlin’s valuation and by Judge Ryan’s adoption of same. There was no further need for separate consideration of those items.

The Associate Judge concluded:

[66]     I agree with Mr Vickerman’s submission that what the plaintiff is attempting to do in its proceedings is to augment its value at the expense of Ms Grant to the sole benefit of her ex husband Mr Grant and thereby unsettle the distribution of family relationship property adjudicated upon in a Family Court.

[67]     More than having proved that she has an arguable defence to the plaintiff’s summary judgment claims, the Court is satisfied Ms Grant has proved the plaintiff cannot succeed with its claims.

The argument in support of the review

[11]     Mrs   Chubb   submitted   that   the   Associate   Judge   appeared   to   have misunderstood that Ready Mark did not apply for summary judgment in relation to the claim for the drawings.  Ready Mark’s application for summary judgment was limited to the claim for the renovation costs.   That misapprehension by the Judge was compounded, in Mrs Chubb’s submission, by his failure to direct himself to the principles applicable to strike-out applications and the fact he took disputed evidence into account to support Ms Grant’s application to strike out rather than restricting himself to the pleadings as was required.

[12]     Mrs Chubb submitted that the Associate Judge had also erred in concluding that Ready Mark was the privy of Mr Grant and finding that the principle of res judicata applied to prevent Ready Mark pursuing its claims in relation to the renovation costs and drawings.

[13]     In response Mr Vickerman submitted that the issues involving the renovation costs and the drawings were res judicata by virtue of the Family Court decision (and Woolford J’s decision on appeal).

[14]     Mr Vickerman submitted that the Family Court had determined Ready Mark’s claims were irrecoverable on the representations of the accountant engaged by Mr Grant’s interests, Mr McLoughlin.  He submitted Mr Grant was Ready Mark’s privy and that if the claims were allowed they would increase the value of Ready Mark and therefore the value of the bundle of rights retained by Mr Grant as a consequence of the relationship property orders.   Generally he submitted that the claims were an abuse of process and contrary to the principles and purposes of the Property (Relationships) Act 1976 and the principle of finality of litigation.

Issues

[15]     In relation to the two heads of claim still in issue, the central issues for this

Court are:

a)       Is Ready Mark Mr Grant’s privy for the purposes of res judicata?

b)Is there an issue estoppel in relation to either or both of the remaining issues?

Decision

Strike-out principles

[16]     It  does  appear  the  Associate  Judge  was  mistaken  and  considered  the application for summary judgment related to both of Ready Mark’s claims.   He commenced his judgment by saying:1

The plaintiff applies for summary judgment to recover the cost of renovation work undertaken for the defendant (Ms Grant).  It claims there is no dispute about the amount claimed.  It also wants Ms Grant to repay her overdrawn current account. It says the amount in question cannot be disputed because it is a matter of company record.

And concluded it with:2

1      Ready Mark Limited v Grant HC Auckland CIV-2010-404-8264, 17 June 2011 at [1].

2 At [68].

The summary judgment claims are dismissed because there is a clearly arguable defence to them. ...

[17]     The Judge’s mistake is perhaps understandable.  The parties had exchanged affidavits in relation to the application for summary judgment which  clearly he needed  to  have  regard  to.    It  appears  he  was  also  drawn  into  considering  the affidavits in relation to the strike-out applications.  However, applications to strike out  should  generally  proceed  solely  on  the  pleadings  without  reference  to  the evidence and particularly without reference to contested factual matters.

[18]     The correct approach is as was stated by the Court of Appeal in Attorney- General v Prince and Gardner:3

A striking-out application proceeds on the assumption that the facts pleaded in the statement of claim are true. That is so even although they are not or may not be admitted. It is well settled that before the Court may strike out proceedings the causes of action must be so clearly untenable that they cannot possibly succeed (R Lucas & Son (Nelson Mail) Ltd v O'Brien [1978]

2 NZLR 289 at pp 294 – 295; Takaro Properties Ltd (in receivership) v Rowling [1978] 2 NZLR 314 at pp 316 – 317); the jurisdiction is one to be exercised sparingly, and only in a clear case where the Court is satisfied it has the requisite material (Gartside v Sheffield, Young & Ellis [1983] NZLR

37 at p 45; Electricity Corporation Ltd v Geotherm Energy Ltd [1992] 2

NZLR  641);  but  the  fact  that  applications  to  strike  out  raise  difficult questions  of  law,  and  require  extensive  argument  does  not  exclude jurisdiction (Gartside v Sheffield, Young & Ellis).

[19]     The Supreme Court endorsed that approach in Couch v Attorney-General.4

As to the consideration of evidence on a strike-out application the Court of Appeal confirmed in Attorney-General v McVeagh:5

The Court is entitled to receive affidavit evidence on a striking-out application, and will do so in a proper case. It will not attempt to resolve genuinely disputed issues of fact and therefore will generally limit evidence to that which is undisputed. Normally it will not consider evidence inconsistent with the pleading, for a striking-out application is dealt with on the footing that the pleaded facts can be proved; see Electricity Corporation Ltd v Geotherm Energy Ltd [1992] 2 NZLR 641, 645-646, Southern Ocean Trawlers  Ltd  v  Director-General  of  Agriculture  and  Fisheries  [1993]  2

NZLR 53 at pp 62-63, per Cooke P. But there may be a case where an essential factual allegation is so demonstrably contrary to indisputable fact that the matter ought not to be allowed to proceed further. ...

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

4      Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].

5      Attorney-General v McVeagh [1995] 1 NZLR 558 (CA) at 566.

[20]     In an appropriate case a company may be regarded as privy to a previous action pursued by its shareholders or the parties who ultimately stood to gain by the company’s action:   Russell v Taxation Review Authority;6    Matai Industries Ltd v Jensen.7

[21]     In the Matai Industries case Tipping J made the following observations:8

Although it is trite law that a company is a distinct legal entity from its shareholders, the present action, which is the subsequent action under the American Restatement formulation, has in substance been brought by the company on account of the shareholders who are themselves bound by the rules of res judicata in respect of the earlier proceedings. If one adopts Lord Wilberforce's approach [in Carl-Zeiss-Stiftung v Rayner and Keeler Ltd (No

2) [1966] 2 All ER 536 (HL)] there is no doubt that the people behind both proceedings are the shareholders.

And later:9

There is not exact identity of parties but in my view the company in all the circumstances should be regarded as the privy of the shareholders, or vice versa, particularly when in the earlier proceedings the shareholders needed to establish an agreement between the Crown and the company and in both proceedings the effective beneficiaries of the litigation must ultimately have been the shareholders.  I am far from  saying that shareholders and their company will always, or indeed normally, in this field be regarded as privies but it seems to me that in the present case, particularly in the light of the discussion in the House of Lords on this subject, it would be unconvincing not to regard the present case as one of sufficient identity by privity.

...

Mr Atkinson submitted that the present action was not for the benefit of the same people, ie that the first action was for the shareholders and this for the benefit of the company. While analytically it might be possible to take that view, I am satisfied that in substance the present action, particularly in the light of the way the earlier cause of action was framed, must be regarded as for the benefit of the same people. The same comments apply to the propositions advanced that the Court was here dealing with a different loss or with different damage. So if it were necessary I would hold that sufficient privity had been shown to raise an issue estoppel.

6      Russell v Taxation Review Authority (2000) 19 NZTC 15,924 (HC).

7      Matai Industries Ltd v Jensen [1989] 1 NZLR 525 (HC).

8      At 550.

[22]     The proceedings in the Family Court between Mr Grant and Ms Grant were directed at resolving all issues that remained between the parties under the Property (Relationships)  Act  1976.    The  Judge  was  required  to  determine  the  parties’ respective interests in various assets, including the ultimate ownership of Ready Mark which was a “trust entity” as referred to by the Judge.  Following Judge Ryan’s decision in the Family Court, Ready Mark was declared to be the sole and separate property of Mr Grant.  For present purposes there is an identity of interest between Mr Grant and Ready Mark as a result of that order and the Judge’s findings.

[23]     Mrs  Chubb  submitted  there  was  no  union  or  nexus,  no  community  or mutuality of interest between Ready Mark and Mr Grant as required by Shiels v Blakely10 because Mr Grant only owned one share in Ready Mark and the rest were owned by Encore 2000 Limited, which was in turn owned by a trust, of which Mr Grant was only one of a number of discretionary beneficiaries.  But all interests in the trust entities, including Encore 2000 Ltd and the J & J Grant Family Trust, were declared to be the sole and separate property of Mr Grant.  The Judge excluded Ms Grant from any interest in those entities.   It is apparent that Mr Grant effectively

controls and directs Ready Mark.

[24]     I find that for present purposes there is a sufficient nexus or mutuality of interest between Mr Grant and Ready Mark so that the one is the privy of the other. The full citation from the decision of the Court in Shiels v Blakeley on the point is:11

We conclude that there must be shown such a union or nexus, such a community or mutuality of interest, such an identity between a party to the first proceeding and the person claimed to be estopped in the subsequent proceeding, that to estop the latter will produce a fair and just result having regard to the purposes of the doctrine of estoppel and its effect on the party estopped.

[25]     It follows that I agree with the Associate Judge’s conclusion that there was, in

this case, a sufficient identity of interest between Ready Mark and Mr Grant so that

Ready Mark can be regarded as the privy of Mr Grant and vice versa.

10     Shiels v Blakeley [1986] 2 NZLR 262 (CA) at 268.

[26]     The real issue is whether there is an issue estoppel in relation to the claims for the renovation costs and the drawings.  It is convenient to consider Ready Mark’s claim for the drawings first.

[27]     Ready Mark’s pleading to support its claim is commendably brief:

23.      [Ms Grant], through her shareholder’s current account, has borrowed

a total of $154,042 from [Ready Mark].

Particulars

a)        In 2002 she withdrew $54,000 from [Ready Mark];

b)       In 2003 she withdrew $19,000 from [Ready Mark];

c)        In 2004 she withdrew $26,845 from [Ready Mark]; and d) In 2005 she withdrew $54,197 from [Ready Mark].

24.[Ready Mark] has made demand for the repayment of the amounts borrowed by [Ms Grant].

25.      [Ms Grant] has not repaid any of these amounts back to [Ready

Mark]  and  remains  indebted  to  [Ready  Mark]  for  the  sum  of
$154,042.

[28]     Applying the strike-out principles those pleadings must be taken as capable of proof.  The issue, however, is whether, in light of evidence of indisputable fact the claim is barred by res judicata because of an issue estoppel.  It is permissible to have regard to Judge Ryan’s judgment in the Family Court and the evidence of Mr Grant’s accountant Mr McLoughlin to the extent that Judge Ryan accepted and relied on that evidence in his judgment.

[29]     The principles relating to issue estoppel have been discussed in a number of cases.   In Joseph Lynch Land Co Ltd v Lynch the Court of Appeal discussed the purpose behind cause of action and issue estoppel:12

The  purpose  behind  cause  of  action  estoppel  and  issue  estoppel  is  that litigants should not be twice vexed by the same claim or point and it is in the public  interest  that  there  be  an  end  to  litigation:  see  NZ  Social  Credit

12     Joseph Lynch Land Co Ltd v Lynch (1994) 7 PRNZ 605 (CA) at 610-611.

Political League v O'Brien [1984] 1 NZLR 84 (CA) at p 95 per Somers J, Gregoriadis v CIR [1986] 1 NZLR 110 (CA) at p 114 per Richardson J and at p 118 per Somers, J. and also the Carl-Zeiss case cited above at p 946 per Lord Upjohn.

...

The question is ... whether in the circumstances it is reasonable to regard the earlier decision as a final determination of the issue which one of the parties now wishes to raise. In Halsbury (supra) at para 977 it is said that the scope of the doctrine of issue estoppel depends on whether the Court takes a narrow or a wide view of the extent of the issue determined in the earlier case.

[30]     In the recent case of Contact Energy Ltd v Attorney-General13  the Court of Appeal again considered the question of issue estoppel and adopted the following passage from the previous Court of Appeal decision in Talyancich v Index Developments:14

An  issue  estoppel  will  apply to  prevent  a  party from arguing against  a precise finding made against that party in an earlier proceeding. The requirements for issue estoppel to apply were expressed by this Court in Talyancich v Index Developments Ltd [1992] 3 NZLR 28 at 37:

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

[31]     The question for present purposes is whether Judge Ryan determined the issue of whether Ms Grant was liable to repay her drawings from Ready Mark as an essential and fundamental step in valuing Mr Grant’s package of rights in various entities he referred to as the “trust entities”, among them Ready Mark. As part of the Judge’s determination of the division of relationship property he ordered that Mr Grant pay Ms Grant half this value, and declared that all interests in the trust entities were Mr Grant’s separate property.

[32]     In my judgment the answer to the question must be yes.  I find that it was a corollary of the value Judge Ryan ascribed the trust entities that Ms Grant was not liable to repay her drawings from Ready Mark.  However, because Mr McLoughlin’s

evidence has assumed importance in these and the earlier proceedings I briefly note that Mr McLoughlin appears to have approached the valuation on a different basis.

[33]     In exhibit three annexed to his second affidavit Mr McLoughlin set out the external net assets and related party balances of the trust entities (excluding one of them, Powershield Ltd, which he valued separately) as at 31 March  2009.   He recorded the relevant related party balances as follows:

AWB Sole Trader  (519,737)

John Grant  330,785

Jill Grant  147,847

Alex Grant  21,792

RF & JV Grant  20,000

John Grant Family Trust  (21,965)

Estate of S Grant  (13,663)

Total Related Party Balances  (34,941)

Ms  Grant’s  balance  includes  drawings  of  $144,847  from  Ready  Mark.    The difference between the $144,847 and the $154,042 claimed in this proceeding is not material for present purposes.

[34]     At [46] of his second affidavit Mr McLoughlin stated:

While the inter-entity account balances which off-set each other to produce a negative aggregate sum of $34,941 are relatively immaterial, they include several balances associated with the Parties themselves which require consideration for the purposes of settling relationship property.   These separate balances are as follows:

Advances from AWB

Advances from the John Grant Family Trust

Advances to Mr John Grant

Advances to Mrs Jill Grant

$(519,737)

$(21,965)

$330,785

$147,847

Net Amount owed to the Parties  $(63,070)

Source: Exhibit 3

[35]     The balances of Alex Grant, RJ & JV Grant and the estate of S Grant do not appear in the above schedule. They total $28,129. At [47] of his second affidavit Mr McLoughlin  expressly  excluded  these  balances  from  his  valuation  of  the  trust entities:

The residual related-party balance in the sum of $28,129 ($63,070 - $34,941) is the net amount owed by various family members.  This amount is unlikely to be settled.  I consider it no further.

[36]     By  implication  the  other  balances  (including  Ms  Grant’s  drawings  from

Ready Mark) were to be settled.  This is consistent with Mr McLoughlin’s valuation

of the trust entities, which follows at [48] of his second affidavit:

Net realisable commercial assets

Estimated    value     for     Powershield’s

business

Less: The Parties separate property

144,000

225,000

369,000

63,000

Net residual value  306,000

[37]     In other words, Mr McLoughlin:

a)       took the value of the net realisable commercial assets of the trust entities (excluding Powershield) (approximately $144,000);

b)        added the estimated value of Powershield ($225,000);

c)       deducted the net amount owed by the trust entities to the parties and entities associated with them (approximately $63,000); and

d)excluded from consideration the net amount owed the trust entities by various other family members ($28,129) that would otherwise constitute an asset of the trust entities (it being unlikely to be settled);

so as to arrive at an approximate value of the trust entities of $306,000.

[38]     It is implicit in (c) that the constituent related party balances set out in exhibit three, with the exception of only those of Alex Grant, RF & JV Grant and the estate of S Grant, be settled inter se.  Included amongst these were Ms Grant’s drawings from Ready Mark.

[39]     This is understandable.   First, it would appear at least somewhat intuitive given that the trust entities owed Mr Grant and entities associated with him (AWB and the John Grant Family Trust) $210,917, while Ms Grant owed the trust entities

$147,847.  Those debts would appear to be separate property.  It would follow that the trust entities (relationship property) be valued on the basis those debts be settled. Secondly, this approach would appear consistent with the terminology employed by Mr McLoughlin.   He describes the net approximately $63,000 owed by the trust entities to the parties and entities associated with them as “The Parties separate property” and states that the related party balances, while in aggregate “relatively immaterial”,  require   “consideration   for  the   purposes   of  settling   relationship property”.

[40]     This  is  not,  however,  how  Judge  Ryan  approached  Mr  McLoughlin’s

evidence.  He stated:

[39]      In paragraph [46] of his affidavit Mr McLoughlin identified that when reaching the negative sum of $35,000 several balances were included which are associated with the parties themselves, and he summarises these in that paragraph.  When these separate balances are taken into account there is a net amount owed from various family members, that is Mr Grant himself, a new trust formed by Mr Grant called the John Grant Family Trust, and [Ms Grant].   He concludes, and I do not disagree with him, that the sum of money due from those various persons and the John Grant Trust are unlikely to be settled and he considers that they should be excluded from the assessment of value.

[41]     The Judge appears to err in this respect.  Mr McLoughlin only excludes the net $28,129 owed by family members Alex Grant, RJ & JV Grant and the estate of S Grant on the basis it is unlikely to be settled.  Mr McLoughlin’s reference to “various family members” in [47] of his second affidavit does not refer to Mr Grant, the John Grant Family Trust or Ms Grant (or AWB).

[42]     The Judge later stated:

[76]     Monies are due from various of the trust entities to [Mr Grant].  As Mr McLoughlin asserts the inter-entity account balances offset each other to produce a negative sum of $34,941.  In paragraph 46 of his second affidavit he  provides  the  details  of those  account  balances and  observes  that  the residual related party balance of $28,129 is unlikely to be settled and as a result does not take it into account.

[77]. Applying that approach to the amended schedule produced by Mr

McLoughlin, I conclude that the net residual value of the trust entities is

$369,000.  I exclude the $63,000 deduction as set out in that schedule for the same reason Mr McLoughlin excluded it in his second affidavit.  He appears

to have overlooked that he had excluded it in his earlier calculation.

On   my   reading   of   Mr   McLoughlin’s   evidence   he   had   not   excluded   the

(approximately) $63,000 in valuing the trust entities.

[43]     However, it is neither necessary nor possible to resolve this issue on this application.  If the parties wished to challenge the basis upon which the Judge valued the trust entities they could have done so by way of appeal.

[44]     The critical point for present purposes is that Judge Ryan did exclude the net amount  of  approximately  $63,000  owed  by the  trust  entities  to  the  parties  and entities associated with them in valuing the trust entities.  This amount included Ms Grant’s drawings from Ready Mark.   It was a corollary of the value Judge Ryan ascribed the trust entities that Ms Grant was not liable to repay these drawings.  In other words, the determination of the issue of whether Ms Grant was liable to repay her drawings was an essential and fundamental step in the logic of Judge Ryan’s judgment.  The Judge determined the division of relationship property on the basis of the value he ascribed Mr Grant’s package of rights in the trust entities.  He ordered that half of that value be paid Ms Grant and declared that all interests in the trust entities were Mr Grant’s separate property  In doing so he determined the issue, inter alia, of whether Ms Grant’s drawings from Ready Mark were liable to be repaid. An issue estoppel  applies  to  prevent  Ready Mark  (as Mr Grant’s  privy for present purposes) from arguing against that determination in this proceeding.

[45]     If I am wrong in coming to that view, I consider that it would in any event, be an abuse of the Court’s process to allow Ready Mark to pursue Ms Grant for the drawings in the circumstances of this case in any event.  On this aspect, the present

case is similar to the situation considered by Robertson J in Pountney v Pountney.15

Robertson J was faced with an application to strike out proceedings issued by companies controlled by Mr Pountney to recover drawings on the basis the issues had been determined in the Judge’s previous decision determining the parties’ entitlements under the Matrimonial Property Act 1976.

[46]     In the previous decision Robertson J had addressed himself to the issue of each party’s drawings but put them to one side as effectively “water under the bridge” in determining the division of matrimonial property.   The companies then later sought to recover the drawings from Mrs Pountney.   The Judge rejected that attempt holding that, even if issue estoppel did not apply, to permit the companies to pursue their actions against Mrs Pountney would in any event be an abuse of process of the Court.  The proceedings were struck out.  In my judgment similar reasoning must apply to Ready Mark’s attempt to recover the drawings which were an issue directly considered by Judge Ryan in his decision.   I agree with Associate Judge Christiansen that Ready Mark, Mr Grant’s privy,  attempts in this proceeding to augment its value at the expense of Ms Grant to the sole benefit of Mr Grant and thereby unsettle the division of relationship property determined by Judge Ryan in the Family Court.  It seeks to abuse the process of the Court.

[47]     For those reasons I agree with the Associate Judge that the cause of action seeking to recover the drawings cannot succeed and was properly struck out.

The claim for building works

[48]     However, in my judgment the claim in relation to the renovation work falls into a quite different category.  There is no issue estoppel in relation to that matter. Judge Ryan did not directly address himself to the issue of the renovation work nor whether Ms Grant was liable for it.

[49]     Ready  Mark  pleads  its  claim  in  relation  to  the  renovation  work  in  the alternative.   First it relies on the Construction Contracts Act.   In the alternative it

relies on breach of contract.   Both causes of action allege generally that between

15     Pountney v Pountney HC Auckland CP1641/87, 24 May 1993.

April and June 2005 Ready Mark carried out renovation work at a property owned by Ms Grant.  The cost of the renovations claimed is $94,466.55.  Ready Mark then pleads:

9.In or about June 2005, [Ms Grant] requested that [Ready Mark] defer invoicing her until after her relationship property claim had been settled.

Particulars

a)In  June  2005  [Ms  Grant]  separated  from  Mr  Grant  and informed him that she did not have the funds to pay [Ready Mark] for the renovations.

b)At this time, [Ms Grant] requested that [Ready Mark] defer invoicing for the renovations undertaken on the Lake Road property until after she and Mr Grant had divided their relationship property.

c)[Ms Grant] agreed that at the time of settlement of their relationship property issues, the amount owing for the renovations would be taken into account by the parties.

...

11.      [Ready Mark] issued a payment claim on 17 August 2010 ...

[50]     The pleading is repeated for the breach of contract cause of action.   If the pleadings are taken as capable of proof, as is required on an application to strike out, then (subject to contrary indisputable evidence) there was an agreement between Ready Mark and Ms Grant that she would not be invoiced for the renovation work until after the division of relationship property and that at the time of settlement of relationship property the debt for the renovation work would be taken into account and settled.

[51]     The claim for the renovation work was not taken into account in the Family Court judgment.  Unlike the issue of drawings, Judge Ryan did not refer to it at all. Further, there was no consideration by the Judge of whether there was any agreement that the renovation work would be paid for later, after resolution of property issues.

[52]     As noted the Judge did not refer to the renovation work.   Mr McLoughlin only referred to it in passing.  The extent of Mr McLoughlin’s evidence about the debts owing to Ready Mark was in a quite different context:

53.      In my First Affidavit (at paragraph 83), I estimated approximately

$500,000 to be the recoverable sum which the J & J Grant Family Trust could expect to receive from Encore 2000 Limited.  Encore’s ability to repay the J & J Grant Family Trust the sum of $500,000 was entirely dependent on Encore’s ability to recover its advance to Readymark Limited.  Readymark Limited’s ability to repay its debt was, in turn, dependent on it realising reported work-in-progress of

$773,829.  The uncertainties associated with eventually recovering this reported asset is specifically referred in paragraph 82 of my First

Affidavit.

54.      In the event, the reported work-in-progress of $773,829 at 31 March

2008 was unable to be realised as cash.  The work-in-progress was carried out for the following associated entities:

Cheltenham Five

RMC

Jill Grant

Powershield

87,313

468,610

62,652

155,254

Total  $773,829

55.For the purposes of reporting its financial position at 31 March 2009, Readymark Limited has recategorised the Powershield fit-out cost of

$155,254 as a separate item.  The balance of the prior year work-in-

progress amount of $618,575 ($773,829 - $155,254) remains unpaid. I understand that eventual payment will not occur.

56.Accordingly, the underlying net worth which previously supported possible recovery of the J  & J  Grant Family Trust’s advance to Encore 2000 Limited is no longer a reasonable prospect.   In the circumstances, any value associated which Readymark Limited is restricted to the net third party working capital and fixed asset balances reported at 31 March 2009.  These balances form part of the values listed at paragraph 44 (a).

[53]     Mr McLoughlin discounted the likelihood of any recovery of the work-in- progress from the various entities.  At the most it could be said that Mr McLoughlin mistakenly understood that payment for any of the debts, including Ms Grant’s, would not occur.  It seems clear that he was not aware of the arrangement between Ready  Mark  and  Ms  Grant  that  the  renovation  debt  would  be  settled  on  the resolution of relationship property issues.

[54]     There can be no issue estoppel on this point.  The basis for the claim in these proceedings is that there was an agreement that the renovation debt would be paid by Ms Grant at the conclusion of relationship property issues.  That was not an issue

raised in the earlier proceedings and nor was it a matter determined in those proceedings.

[55]     At its highest, it could be argued that if the renovation debt had been taken into account then Ready Mark should have been valued at a higher figure.  However, it is apparent that neither Mr McLoughlin nor the Judge approached the ultimate valuation in such a detailed way.  As the Judge noted, Mr McLoughlin drilled down to the essentials.  There was a large degree of approximation and rounding of heads of claim.  If the renovations had been carried out for a third party and no value had been ascribed to them but, later, after the proceedings Ready Mark was able to recover the moneys there could be no basis upon which the matter could be re- opened.  The fact that Ms Grant is the debtor does not alter that in the circumstances where it is alleged she had agreed to settle the account later.  Further, the fact the Judge may not have ascribed a value to the renovation debt for the purposes of the hearing is a matter that Ms Grant could have raised in submissions at the hearing given the agreement or, like Mr Grant in relation to the drawings, could have raised it by way of appeal. As noted Ms Grant did take an appeal on other issues.

[56]     The Associate Judge seems to have been influenced in coming to his decision on this point because he considered that Ms Grant’s debt to Ready Mark was not a personal debt, but would have been a relationship debt under s 20 of the Property (Relationships) Act 1976.  However, as Mrs Chubb submitted, Judge Ryan recorded that Mr Grant accepted the purchase of the Takapuna property for which the renovation work was carried out had been funded from Ms Grant’s separate property. Section 20 did not apply.

[57]     It is strictly unnecessary to refer to any evidence on this issue.   It can be resolved on the basis of the pleadings, Judge Ryan’s judgment and Mr McLoughlin’s affidavit.  But if reference is had to the evidence it confirms Ready Mark’s position. Judge Ryan apparently did not consider that he had dealt with the claim for renovations in the judgment.  Counsel raised a number of issues of clarification with the Judge following delivery of the judgment.  The Judge issued a minute dated 9

August 2010 in which he recorded at [4]:

I agree with Mr Templeton’s submission that the evidence establishes a clear agreement between [Ms Grant] and [Ready Mark] to the effect that she will meet the costs of the renovations to the property at 306 Lake Road Takapuna upon resolution of the proceedings.  The difficulty however that I have in making the order sought by Mr Templeton is that [Ready Mark] is not a party to these proceedings.  This is really an issue between a third party and [Ms Grant] concerning an outstanding debt.   I do not consider that I have jurisdiction to make the order sought in these proceedings.  The claim should be between [Ready Mark] and [Ms Grant] by way of summary judgment in the Civil jurisdiction.

[58]     Further, Ms Grant’s evidence supports the agreement Ready Mark relies on.

At paragraph 116 of her first affidavit in support of relationship property issues dated

1 March 2007, Ms Grant acknowledged that the cost of renovations undertaken by

Ready Mark was $83,970.27 and at paragraph 117 of the same affidavit stated:

I have yet to pay for the renovation, it being agreed between John and I that I

will be invoiced on settlement of our relationship property.

[59]     Next, in a second affidavit of 3 September 2007 at paragraph 12.(7)(a) Ms

Grant stated:

I agree that John’s company performed renovations to the total of $83,970 although a Certificate of Compliance has not yet been issued.  It is a sum which we agreed will have to be taken into account in due course.

[60]     Finally, during cross-examination at the hearing Ms Grant acknowledged the debt to Ready Mark and said:

Q.        ... Coming back to Ready Mark for the moment.  Your counsel in his opening referred to the fact that you are indebted to Ready Mark for

83,970  plus  GST  of  10,000  odd,  totalling  94,000.   Those  were monies that were the cost of your renovations to Lake Road carried

out by Ready Mark, correct?

A.        Yes.

...

Q.        ... just to clarify my understanding here, my understanding is that from his opening and your evidence, or rather his opening rather, is that you haven’t paid that money back, you were waiting to see where it comes up in the wash as it were.

A.        Yes.

Q.        But you acknowledge that debt that you have to [Ready Mark]?

A.        Yes I have said to John that the renovations we’ll do at settlement.

...

A.       I’ll pay him his renovations costs at settlement yep.

[61]     Unlike the drawings issue, it cannot be said to be an abuse of process for Ready Mark to pursue Ms Grant for the renovation debt in accordance with the agreement she has earlier acknowledged.

[62]     For those reasons I consider the Associate Judge was wrong to strike out the causes of action relating to the renovation costs.

Result

[63]     The application for review of the decision of Associate Judge Christiansen is allowed in part.  The causes of action seeking to recover the cost of the renovation work are reinstated.   Ready Mark may pursue those causes of action against Ms Grant but the other two causes of action relating to the drawings and the Ford Falcon remain struck out.

Costs

[64]     At  the  request  of  counsel  costs  are  reserved.    If  counsel  cannot  agree memoranda may be exchanged.

Venning J