Reid v Castelton-Reid
[2020] NZHC 2313
•7 September 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-404-3009
[2020] NZHC 2313
BETWEEN ROSS RONAYNE REID
Plaintiff
AND
BARRY ROSS LAURENCE CASTELTON- REID
Defendant
Hearing: 23 July 2020 Appearances:
S Abdale for the Plaintiff
M J Matthews for the Defendant
Judgment:
7 September 2020
JUDGMENT OF GORDON J
This judgment was delivered by me
on 7 September 2020 at 12 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: Clive Gardner Law, Tauranga
Rennie Cox, Auckland
Counsel: S Abdale, Auckland
REID v CASTELTON-REID [2020] NZHC 2313 [7 September 2020]
TABLE OF CONTENTS
Introduction [1]
Summary of facts [5]
Further inquiry [12]
Court of Appeal findings [14]
Scope of resulting trust [19]
Payment of $800,000 to Dee Ann in September 2009 [19]
Payment for Barry’s apartment (first Eclipse apartment) [80] Payment for Ron and Mrs Reid’s apartment (second Eclipse apartment) [94] Allocation of the mixed fund and income earned between the parties [97] First affirmative defence: abuse of process [98] Validity of document and availability of revocation. [100] Second affirmative defence: equitable estoppel [134] Is equitable estoppel available to Barry? [134]
Representation evidence. [150]
Reliance evidence [161]
Detriment evidence [162]
Remedy [163]
Third affirmative defence: change of position [184]
Interest [211]
Result [219]
Orders [220]
Costs [221]
Introduction
[1] Mrs Esme Dede Reid died on 22 November 2008. Her husband, the plaintiff, Ross Ronayne Reid (Ron), and their son, the defendant, Barry Ross Laurence Castleton-Reid (Barry), have been in dispute for some years over matters relating to Mrs Reid’s estate. A large sum of money paid by Ron to Barry is in issue. Efforts at resolution in the earlier part of this decade failed, and have led to an extended period of litigation. The situation has been substantially exacerbated by Ron’s earlier unwillingness to obtain and act on legal advice. The issues which have arisen in this litigation are a direct consequence of mistakes Ron has made about his powers, rights and liabilities in several key transactions in the years since Mrs Reid’s death.
[2] This is the second time this matter has been before me. On the first occasion, I found against Ron on his three causes of action: breach of fiduciary duty; breach of constructive trust; and, restitution. This was on the basis of my finding that Ron had gifted the money in question to Barry. Having regard to my decision I did not consider Barry’s affirmative defences.1
[3] Ron appealed my judgment to the Court of Appeal. The Court of Appeal found Barry held the money on a resulting trust for Ron. The circumstances of the transaction raised a presumption of a resulting trust in Ron’s favour, which was not displaced by evidence of an alternative intention such as a gift or advancement. The Court of Appeal directed this Court to consider the three affirmative defences advanced by Barry and the allocation of the money between the parties given transactions which occurred while Barry held the money on the resulting trust for Ron.2
[4] This judgment is therefore concerned with whether Barry can resist Ron’s enforcement of Barry’s obligations under the resulting trust by way of three affirmative defences: abuse of process, equitable estoppel and change of position. As also directed by the Court of Appeal, it is necessary to consider the status of a payment of $800,000 made to Dee Ann Castleton-Reid (Dee Ann) (Ron’s daughter and Barry’s
1 Reid v Castleton-Reid [2018] NZHC 782.
2 Reid v Castleton-Reid [2019] NZCA 372.
sister), and of other amounts paid by Barry to settle purchases of two apartments, in the course of determining how the money in dispute is to be distributed between Ron and Barry.
Summary of facts
[5] The relevant terms of Mrs Reid’s will appointed Ron as sole executor and bequeathed Dee Ann certain personal property and a life interest in the family home at 27 Verbena Road, Birkdale (the castle). Barry was the residual beneficiary and received bequests of other property. Ron received no benefit under the terms of the will. Barry was the major beneficiary.
[6] There was also a sum of money in a bank account jointly held by Ron and Mrs Reid of $1,750,000. The background to this amount is traversed in my earlier judgment and need not be described again here for present purposes. Following Mrs Reid’s death, Ron paid, on 1 April 2009, $1,700,000 (the disputed amount) from the joint account to Barry. A share trading account was opened at a sharebroker in Barry’s name. Ron was given authority to manage that share trading account. It is the disputed amount that the Court of Appeal determined was held by Barry on a resulting trust for Ron.
[7] Over a period of about 12 months, with Barry’s consent, Ron traded very successfully in shares by investing the disputed amount (though without regard for Barry’s tax obligations, a point of some significance, as I will address below). During this time, other shares belonging to Mrs Reid solely were sold and the sum of $477,267 was realised. Under the terms of Mrs Reid’s will, these funds belonged to Barry (a point no longer in dispute). This amount was added to the share trading account on 8 July 2009 (Barry’s funds). The share trading account was thus a mixed fund, comprising the disputed amount and Barry’s funds (mixed fund). Barry’s funds were part of the mixed fund during the time Ron was buying and selling shares in the share trading account.
[8] Also during this period, three substantial amounts were withdrawn from the share trading account. First, Ron withdrew a total of $578,667 in Australian and New Zealand currency from the share trading account in 19 separate transactions between
12 May 2009 and 26 April 2010. The share trading account became the mixed fund with Barry’s funds during this time. Prior to 8 July 2009, when Barry’s funds came into the share trading account, Ron had withdrawn NZ$7,000 and AU$30,000. The two most significant amounts, AU$110,714.36 and AU$210,909.23, were withdrawn on 17 July 2009 and 2 September 2009 respectively. The final withdrawal by Ron was on 26 April 2010. Second, an amount of $800,000 was withdrawn from the share trading account on 25 September 2009. This was paid by Barry to Dee Ann to settle her potential claim in relation to her mother’s will. Finally, the sum of $395,169.61 was used by Barry to settle the purchase of an apartment.3
[9] In early May 2010, Barry sold the shares and transferred $1,545,017.29 remaining in the share trading account in two payments to his solicitor’s trust account.4 This sum was subsequently paid to Barry. At this point, the funds in the share trading account constituted the residue of the disputed amount plus income earned on that sum as well as all or part of Barry’s funds plus income earned on that sum. Ron calculates, and Barry does not dispute his calculation, that adding together the two amounts which went into the mixed fund (the disputed amount and Barry’s funds) and deducting from that the three amounts, referred to in [8] above, renders a gross profit, based on the final balance of the share trading account, of $1,134,047.
[10] Ron’s evidence indicates Barry paid income tax on this profit; Barry’s evidence is silent on this point. It is not clearly addressed by either party but I consider this can be described as gross profit as there is no evidence to indicate Barry used funds from the share trading account to discharge his tax liability.
[11] At this point, it is sufficient to say that the disputed amount did not constitute part of Mrs Reid’s estate as the $1,750,000, of which the $1,700,000 formed part, devolved to Ron solely as survivor. However, and this is a matter I will address in more detail below, there is dispute as to whether Ron thought the money was part of Mrs Reid’s estate.
3 Barry had entered into the contract to buy this apartment prior to Mrs Reid’s death. Ron and Mrs Reid had also entered into a contract to buy two other apartments in the same development. Barry settled the purchase of one of those apartments.
4 These transactions are not recorded in the share trading account statements filed in evidence. A document which appears to be a statement from Rennie Cox’s trust account shows two deposits from ASB totalling $1,545,017.29 on 6 May and 12 May 2010 ($781,184.45 and $763,832.84).
Further inquiry
[12]The Court of Appeal directed a further hearing on two points:
(a)Ron and Barry’s share of the proceeds of $1,557,0565 (plus interest earned); and
(b)Determination of Barry’s affirmative defences.
[13] In addressing the division of the disputed amount and interest, the Court of Appeal noted that it was unclear how the $800,000 paid to Dee Ann was to be allocated between Ron and Barry. There was also the additional withdrawal, by Barry, to settle the purchase of the apartment he had contracted to buy prior to Mrs Reid’s death.
Court of Appeal findings
[14] The Court of Appeal found that on payment of the $1,700,000 into the share trading account in Barry’s name, a resulting trust arose in Ron’s favour.6 This is a presumption which could be displaced by evidence of a contrary intention, including gift or advancement (a counter presumption). After reviewing the evidence, the Court of Appeal said “… we do not accept that the evidence supported the finding Mr Reid intended to make a present gift of the $1,700,000 to Mr Castleton-Reid”.7 Nor did the Court of Appeal consider the presumption of advancement applied, given Barry’s personal financial position and Ron’s age and personal financial position.8
[15] The Court of Appeal did not consider there was any other evidence of a contrary intention and concluded the presumption raised in Ron’s favour was not displaced. Ron had retained the beneficial interest in the disputed amount, which was held by Barry on a resulting trust for Ron. At most, the Court of Appeal found, “Mr Reid may have intended Mr Castleton-Reid to inherit the balance of the money
5 The Court of Appeal referred to the transfer of $781,224 on or about 5 May 2010 and $773,832 on 10 May 2010 totalling $1,557,056, at [21]. As noted in n 4 above, the solicitor’s trust account statement records a deposit of a lesser amount on the second occasion.
6 At [37].
7 At [77].
8 At [86].
in the Trading Account on his death”.9 The only exception was the proceeds of the sale of the shares in Auckland Airport and Air New Zealand, which the Court of Appeal found belonged to Barry.
[16] This Court necessarily has to proceed in light of the Court of Appeal’s findings. The Court of Appeal made no particular findings on the $800,000 paid to Dee Ann but did address the sum paid to Barry from the share trading account to purchase his apartment. The Court of Appeal considered its finding that there was no gift of the disputed amount did not preclude the possibility that the amount to purchase the apartment was a gift:
[69] … A substantial sum was withdrawn from the Trading Account to enable Mr Castleton-Reid to settle the purchase of the first Eclipse apartment. But that is not inconsistent with an intention that, on Mr Reid’s death, the investments and proceeds in the account would form part of Mr Castleton- Reid’s inheritance in any event. Nor is it inconsistent with Mr Reid retaining the beneficial ownership of the funds and making a specific gift from that amount for Mr Castleton-Reid’s benefit. After all, it was Mr Reid, not Mr Castleton-Reid, who authorised the payment as the operator of the account.
(emphasis added).
[17] The Court of Appeal thus found that Ron authorised the payment and that there may have been a specific gift of that amount to Barry. It is therefore necessary to review the evidence on this transaction. However, I also note the Court of Appeal’s observation that:
[59] … When a donor intends to make a gift, they intend to part with property that he or she believes belongs to them. If Mr Reid believed the money did belong to Mrs Reid’s estate, and not to him, then he could not have intended to gift it to Mr Castleton-Reid.
[18] Whether there was a gift of the amount by Ron to Barry to complete the purchase of his apartment depends on Ron’s intention. Intention turns on Ron’s knowledge of his rights to the disputed amount at the time of the transaction. While the Court of Appeal came to a conclusion on gift and presumption, and did so by reviewing the evidence, these findings do not extend to either Ron’s knowledge or his intention after the payment to Barry of the disputed amount on April 2009. In the absence of a gift or presumption of advancement (or any other evidence of contrary
9 At [88].
intention), the Court of Appeal did not need to make findings on either and specifically left for this inquiry the question of the possibility of a subsequent gift to Barry of part of the disputed amount.
Scope of resulting trust
Payment of $800,000 to Dee Ann in September 2009
[19] Ms Abdale, who appeared for Ron, submits this payment is premised on the following evidence:
(a)Ron authorised the payment from the share trading account; and
(b)Ron considered the payment was to satisfy Dee Ann’s claim against Mrs Reid’s estate and Barry consented to it.
[20] Ms Abdale’s three alternative submissions on the allocation can be summarised as follows:
(a)The amount was to come entirely from Mrs Reid’s estate:
(i)There was an agreement that Barry would return $800,000 from his mother’s estate;
(ii)Barry is therefore responsible for the entirety of the payment;
(iii)Loan documents signed by Ron and Dee Ann, to avoid liability for gift duty, reflects this situation;
(b)Alternatively, she submits there was an agreement between the parties, following a family meeting in December 2010, that Barry and Ron would share the burden of the payment equally; and
(c)In the further alternative, that Barry is liable for $500,000, being the portion due from his mother’s estate, and Ron for the remaining
$300,000 as an advance on Dee Ann’s inheritance from him.
[21] These three submissions reflect the manner in which Ron’s account of the payments to Dee Ann and Barry have evolved through the proceeding.
[22] In his affidavit of 28 January 2016 (by which time Ron had received legal advice that the disputed amount did not form part of Mrs Reid’s estate), Ron said:
I also withdrew from this account the sum of $800,000 on 25 September 2009 which I gifted to my daughter, Dee-Ann Stewart, as an advance on her inheritance, given that she had received very little from her Mother’s estate in comparison to Barry.
[23] In that affidavit, Ron was clear that the disputed amount belonged to him so the reference to “inheritance” can only mean a gift from him of the $800,000 to Dee Ann.
[24]In his brief of evidence of (undated) October 2017, Ron says:
I also negotiated with Dee-Ann Stewart, my daughter, an advance on her inheritance in the sum of $800,000, given that she was threatening to contest her mother’s will because she had received very little from her mother’s estate in comparison to Barry. I gifted Dee-Ann the sum of $800,000 from this account on 25 September 2009.
[25] Ron’s account of the payment to Dee Ann has changed substantially since his above evidence at the earlier hearing. There is general agreement on the negotiations which led to the payment. Dee Ann indicated her unhappiness with Mrs Reid’s will shortly after Mrs Reid died. Ron met with Dee Ann and the payment was agreed. In his affidavit sworn 22 January 2020 for this hearing, he said:
I recall that Dee-Ann and I spent about an hour discussing settlement before agreeing upon the settlement figure of $800,000. We did not record the agreement in writing. We did not obtain legal advice about the agreement. The defendant was not included in coming to the settlement figure, but his consent was subsequently obtained, following which I directed Craigs Investment Partners to transfer $800,000 to him and he then paid that sum to Dee-Ann.
[26] In his 22 January 2020 affidavit, Ron now says afterwards a new arrangement was reached:
Subsequently, at the family settlement meeting held in December 2010, it was agreed that the allocation between the defendant and I for the payment to Dee- Ann would be $400,000 each. If the Court accepts this allocation between the
defendant and me, then he also owes me $400,000 for his share of the payment to Dee-Ann.
[27] However, despite affirming his affidavit, this was not his oral evidence at the hearing. Ron was asked about Dee Ann’s evidence that she asked only for $500,000. He said he responded to her:
“How much do you want,” and she said, “Oh half a million,” I said, “All right, done,” and we settled on that when she said, have I made a will, a new will and I thought where the hell’s this going and I said no I hadn’t and she said well, “Why don’t you give the money you would have left me, now, and save you making the will, your will.”10 I said, “Okay, how about another 300,000.” I was making a lot of money on the exchange at the time, in fact in 12 months I cleared $1.1 million, so I had plenty of money as it were to play with, and I said, “Okay, so that’s 800,000 altogether.” Now it took me some little time to get that together and I think I did not – she came to see me a few days, a week or so after my wife died but it wasn’t until I think latish-September in ‘00 that I managed to get Locke to sell enough shares to put in the trading account for me to pay to Barry so that he could pay Dee-Ann out of his cheque account. I didn’t have a cheque account …
[28] It can be seen Ron was clear that $500,000 was to settle any claim by Dee Ann against Mrs Reid’s estate and the balance was an advance on his own estate.
[29] Dee Ann’s evidence is that after seeing her mother’s will on 23 November 2008 (the day after Mrs Reid died), she complained to Ron and Barry about her inheritance, which was limited to her mother’s personal possessions and a life-interest in the castle. She says that Ron told her, in September 2009, that he and Barry had agreed she would receive $800,000 “from my mother’s estate”. Ron told her that the money had come “from my mother’s estate”. He subsequently said the funds came from the Hallmark Trust.11 She later signed the loan documentation prepared by Barry’s accountant to avoid payment of gift duties. At that point, she says, Barry told her the funds had already been gifted to him by Ron and the payment to her had not come directly from Mrs Reid’s estate.
10 In an email to Barry, on 29 April 2010, Ron stated: “About ten years ago your mum and I finally faced the necessity of making our wills. These were identical each appointing the other as sole executors of what would become, on the death of either, the estate for the use and enjoyment of the survivor until their eventual death”. However, it is notable that, on this occasion, Ron said he did have a will.
11 For a discussion of the Hallmark Trust, see Reid v Castleton-Reid, above n 1, at [23]-[24].
[30] During cross-examination at this hearing, Dee Ann elaborated on the arrangements, indicating (consistently with Ron’s evidence) that she asked for
$500,000 to settle any claim she might make on Mrs Reid’s estate. At this point, Ron and Dee Ann’s accounts of the conversation diverge. According to Dee Ann, Ron responded that he had done well in investing “[Barry’s] share account” and that
$500,000 was now worth $800,000 and that was what she would receive. Ms Abdale put to Dee Ann the evidence Ron gave at the earlier hearing, that the $300,000 was an advance against his estate, and Dee Ann responded in emphatic terms:
That is absolute total farrago of lies. He said nothing of that. When we sat at the table, he … asked, “What do you want?” I said, 500,000. He said, “That’s a whimsical amount.” And I said, I’m perfectly happy with that. I never asked for any more. I didn’t want any more. I did not ask – he also said at the table in the presence of my husband, that my mother’s and his Will were identical. I did not ask him to do a Will, I did not ask for anything more. I cannot say anymore than that. I know what I’m saying, and I know it’s the truth and that
… [what] he has just said is a complete tissue of lies.
[31] In his brief of evidence dated 26 October 2017, for the first hearing, Barry says his father proposed the settlement with Dee Ann but that Barry had to arrange the payment:
I transferred $800,000 to my sister Dee-Ann. My father phoned me and said he proposed I give my sister $800,000 as she was going to dispute my mother’s Will/estate. I agreed as I felt my sister had received very little, she had already voiced her concerns to me directly, and I saw no issue with this. When I said I was ok with this proposal my father responded “she can use that to lick the salt out of her wounds”. I instructed my father, as manager of my share account, to transfer $800,000 to my bank account. My wife then had several conversations with my bank to transfer this onto my sister. My father could not action this transfer, as claimed, as he had no access, and has never had any access to my bank accounts. The money was first transferred out of my shareholding account into my ASB account on 25 September 2009, and then transferred into Dee Ann’s account, where it appeared as a credit on 29 September 2009. I note that my father claims that he actioned this transfer – in fact it was me, with my father’s encouragement – with the idea that it was to settle any claim she might have against my mother’s estate.
[32] For completeness, I note Ron’s oral evidence at this hearing that the transaction was arranged through Barry because Ron did not have a cheque account at that time.
[33] On its face, the evidence I have reviewed indicates that Ron gifted $800,000 to Dee Ann. However, the finding of a gift turns on Ron’s intention and, as the Court of Appeal observed, forming such an intention required knowledge that the funds
belonged to him.12 It is therefore necessary to establish such knowledge at the time of this transaction. I will review the contemporary documentary evidence to address this point. This evidence is primarily the emails between members of the Reid family after the payment of the disputed amount to Barry.
[34] I will do so in some detail because some of the communications indicate Ron’s position evolved considerably in response to changing circumstances. Those circumstances include, in particular, proceedings arising out of the contract entered into by Ron and Mrs Reid, prior to her death, to purchase two apartments in the Eclipse building in Auckland and the interest the Commissioner of Inland Revenue took in the arrangements regarding the mixed fund. The latter particularly relates to Barry’s liability for gift duty for amounts withdrawn from the mixed fund and for income tax on Australian income earned by the mixed fund and for capital gains generated by Ron’s share trading activities.
[35] There are no records of the arrangements which led to the September 2009 payment from Ron to Dee Ann via Barry. However, the series of emails commencing at the end of April 2010, about seven months later, provide helpful context and a clearer picture of Ron’s knowledge of his rights to the disputed amount. I start then with Ron’s emails to Barry at the end of April 2010. In the first, sent on 23 April 2010, Ron drew a link between the possible re-introduction of estate duties and the arrangement entered into with Barry:
Given the ongoing possibly that these [estate duties] could be reinstated overnight I took the opportunity – in the terms of your mum’s will – to put her estate residue into shares in your name.
(emphasis added).
[36] At the time the funds were put into Barry’s name and the share trading account opened, the only available funds were those from Ron’s joint account with Mrs Reid. Mrs Reid’s shareholdings in Auckland Airport and Air New Zealand would not be sold, and transferred into the share trading account, until 8 July 2009. The only funds Ron could be referring to are those from the joint account and he describes them as part of Mrs Reid’s “estate residue”. Ron does not refer to his own estate in this email.
12 Reid v Castleton Reid, above n 2, at [59].
Ron thought the funds from the joint account were part of Mrs Reid’s estate and vesting those funds in Barry would avoid any liability for estate duties, should they be re-introduced.
[37] This point is elaborated further in the second email, sent on 29 April 2010. The context for this email was that Barry had apparently raised the issue of a mortgage on the castle (which had passed to Barry). This mortgage secured the deposits on the two Eclipse apartments Ron and Mrs Reid had agreed to purchase prior to her death. Ron’s overriding concern was to assure Barry that the estate would meet any costs associated with Barry’s ownership of the castle. This was expressed by Ron in the following manner:
All costs, of any kind, attendant on your accession to the castle will be met by the ‘Estate’ - a term which I’ll define later. All legal fees, accountancy fees, taxation assessments, and maintenance costs – for at least two years – will be met by the estate as and when due.
[38] Ron did not go on to define what he meant by the “estate”, at least not expressly, though he explained that he and Mrs Reid executed identical wills appointing each other executor and granting life interests in the estate to each other:13
About ten years ago your mum and I finally faced the necessity of making our wills. These were identical each appointing the other as sole executors of what would become, on the death of either, the estate for the use and enjoyment of the survivor until their eventual death.
(emphasis added).
[39] Mr Reid expressed his intention to preserve the estate (not “squander” it) while enjoying his remaining years.
13 This interpretation is confirmed by an email Ron sent to Barry’s wife, Lisa, on 21 January 2011. After responding to a number of what he called “accusations”, Ron stated: “The two main things to be determined are the monetary value of ‘my remaining property’ referred to in C.6 of the will and the time to be allowed for this exercise. It clearly was my wife’s wish that this should take ‘so long as my trustee [me] shall think fit’.” Clause 6 of Mrs Reid’s will provided: “I GIVE DEVISE AND BEQUEATH all the rest of my property both real and person whatsoever wheresoever and of what nature of kind soever including any property over which I may have a power of appointment or disposition unto my Trustee UPON TRUST to sell call in and convert into money such parts thereof as shall not consist of money with power to my Trustee to postpone the sale calling in and conversion of any part thereof for so long as my trustee shall think fit notwithstanding that it may be of a terminable or wearing out nature or may consist of a hazardous investment and so that no reversionary interest shall be sold unless my trustee see special reason for doing so”. Clause 7 provided that Barry was to be the beneficiary of this trust, unless he did not survive Mrs Reid, in which case Dee Ann was the beneficiary.
[40] Of course, under the terms of Mrs Reid’s will, Ron did have a discretion as executor but he was not a beneficiary. His discretion could only be exercised to the extent that Dee Ann, who had a life interest in the castle, or Barry, as the residual beneficiary, would benefit from it. He could not apply the assets of the estate for his own benefit as that would put Ron, as executor of Mrs Reid’s estate, in breach of his fiduciary duty to Dee Ann and Barry. This was not addressed by counsel in submissions and I will not comment further on it as the issue to be determined is Ron’s knowledge and whether, in particular, Ron believed the disputed amount was part of the estate.
[41] I find that he did. First, while the funds derived from the sale of Mrs Reid’s shares (which passed to Barry under her will) were, by this time, in the share trading account, Ron did not distinguish between that amount and the disputed amount. He referred only to the share trading account. Second, the reference to “squander the estate” suggests a large sum of money. Much of Mrs Reid’s estate involved real property, which was bequeathed to Barry. It was not in a liquid form. The funds in the share trading account were either in liquid form or could easily be converted to liquid form. Ron referred to this large sum of money in terms of the estate. Third, Ron described his activities with the share trading account in the following terms:
Now. I had understood that you were content with my setting up the share- trading account in your name. I did this to allow for the perfectly legal avoidance of gift duty and the ever-possible reintroduction of death duties. You are, in any case, the eventual beneficiary. If you now prefer it I will close down this ‘operation’ and find other avenues for the estate which will not involve you in any way.
[42] In this paragraph, Ron refers to the share trading account. By now, it was a mixed fund. But Ron did not make that distinction. Indeed, if Barry’s ownership of the share trading account was to end, Ron anticipated taking back all of the funds in the share trading account, not just the disputed amount. The final sentence clearly connects the share trading account with the estate. The reference to Barry as “the eventual beneficiary” simply reflects Ron’s construction of the terms of Mrs Reid’s will, as set out earlier in the email, conferring on Ron a life interest in her estate, rather than a reference to Barry taking ownership via Ron’s estate. Finally, if the estate was to meet any costs associated with Barry’s ownership of the castle, as Ron stated, cash
was required. The most accessible form of cash in Mrs Reid’s estate was the share trading account, as Ron had frequently demonstrated.
[43] My findings on this email are further confirmed by another email, sent three days later, in which Ron asked if Barry had received an email that Ron said addressed “the origin and proposed use of ‘estate’ monies?” I take this to be the 29 April 2010 email. Ron added:
If so please let me know if you are happy with my, thus far, reasonably productive share trading. If not I will revert the shares to the estate and ‘take it from there’.
[44] Barry was the legal owner of the share trading account. Ron had managed those funds. Ron did not distinguish between the different funds in the share trading account. He characterised all of the funds in the share trading account as part of the estate. Ron’s intention was for the estate – Ron as executor – to take control of the share trading account from Barry if Barry was unhappy with Ron’s activities. If Ron believed the disputed amount was his personal property, he would have no reason to refer to the estate in this email.
[45] The life interest referred to by Ron in his 29 April 2010 email also explains his comment about timing, and the manner in which Ron described his relationship with the funds in the share trading account, in a subsequent email which forms part of an email chain between Ron and Barry on 3 May 2010:
I can live with your - ah gracious understanding that I could use what patently was mine “for my own expenses” but it will never compute with saying “the money is yours” It is the timing of the “understanding” which clearly is astray. I can accept having said that the money is yours but it would always have to be on the basis that I have first call on it surely. Seeing as how it is my money
…
I still can’t get my head around your taking so much so soon …
[46] There is only one reference to the estate in this email. Ron says that the estate owed Barry $439,000, “which would bring you level with the distribution, thus far, to Dee-Ann”. At this time, Dee Ann had received $800,000 paid out of the share trading account. If a payment to Barry of $439,000 would equal this amount, then Barry would have already received $361,000. Some of the evidence suggests Barry received
(around) this amount to settle the purchase of his apartment. Ron’s statement says, therefore, that Dee Ann’s payment had come from the estate and that Barry had also received a distribution from the estate.
[47] As to Ron’s statement that the money was his, this is explicable in terms of his construction of his role as executor of Mrs Reid’s will. In the context of the exchanges between Ron and Barry at this time, the statement that the money belonged to Ron or that Barry’s misunderstanding about the original transaction was one of timing, is not inconsistent with Ron’s understanding that the funds in the share trading account belonged to Mrs Reid’s estate. This is because Ron was of the view he had a life interest in the estate and Barry was entitled only to the residue.
[48] This is evident throughout the emails of this period. Ron refers to the share trading account in terms of the estate (the funds form part of the estate) but that Barry’s right to those funds is deferred because of Ron’s construction of Mrs Reid’s will conferring on Ron an absolute discretion to apply the funds for his own benefit and what amounts to a life interest. Ron was mistaken in several ways. First, that the disputed amount formed part of the estate (they belonged to Ron as survivor). Second, that Mrs Reid’s will gave him an interest in her estate (he was not a beneficiary of her will and was not entitled to use funds for his own benefit). Third, that the “absolute discretion” conferred on him in Mrs Reid’s will permitted him to use estate property for his own benefit (this would put him in breach of his fiduciary duties as executor).
[49] Moreover, in his email to Barry of 16 May 2010, as the vendor commenced proceedings against Ron in relation to the contract to purchase the two Eclipse apartments he and Mrs Reid had contracted to buy, Ron instructed Barry to advise his (then) counsel in terms which expressly disclaimed any interest in the disputed amount:
You should be aware that my client Ross R. Reid has no assets of cash or kind. Funds and property which he had expected on the death of his late wife were, instead, inherited by his only son Barry Castleton-Reid who is providing his father with such of his needs not met from his superannuation, his only source of income.
[50] The purpose of this statement was to cause the vendors to withdraw proceedings because Ron had no assets they could pursue for breach of contract.
[51] However, by 23 May 2010, Ron’s position had changed. It appears he had obtained some legal advice about Mrs Reid’s will (among other matters). In an email to Barry, he acknowledged that the will gave him no authority to spend “any of the residue on myself” and that using funds from the share trading account to purchase apartments in Australia was for Barry’s “eventual” benefit. He made a similar statement two days later for a specific reason which I consider below. This may have been a momentary insight into the scope of his authority as it is at odds with Ron’s earlier statements and actions.
[52] In his email of 25 May 2010, in the course of criticising legal advice Barry had received, Ron stated:
In my sworn duty as executor it would have been a criminal act for me to have diverted monies from the estate residue [which Ron considered included all funds in the share trading account] to my personal gain. On completion of the Australian property purchases, to cover this and any later estate disputation, I made a declaration that the purchases were made from funds derived from sales of your share-holdings and that they were made on your behalf in my name solely for the requisite bank financing. This document is lodged with the bank, together with the title deeds, and instructions to forward all documentation to you on my demise.
[53]Again, Ron expressly disclaimed any interest in the disputed amount.
[54] In a 29 May 2010 email to Barry, Ron confirmed the $1,750,000 was part of the estate left to Barry under the terms of his mother’s will (along with the castle and the house at 21/55 Verbena Road). The same day, Ron accepted Barry was entitled to the capital of the share trading account but Ron claimed the income earned. Later that day, Ron emailed again stating “You still have the $1,750,000 which was left to you”. He described his transactions in relation to the estate as “borrowed funds” which he “put to work; and then returned it”. Ron was unhappy that Barry wanted to retain his “earnings” in addition to the rest of the extensive inheritance he had received. His subsequent exchanges focus on those earnings, which he wanted retained and converted back into shares.
[55] This is evidence of Ron’s understanding the disputed amount was part of Mrs Reid’s estate and Barry either was or would become entitled to those funds, subject to Ron’s purported life interest and wide discretion to administer the estate. However, Ron’s position continued to evolve further over time. In particular, in the course of an email sent on 25 July 2010, Ron stated: “I feel that I have been pushed under a waterfall in the sudden realization that one half of what has been regarded as my wife’s “estate residue” is in fact mine!”
[56] The significance of this remark was explained in a further email sent just over a week later on 3 August 2010. Ron’s golfing companion the previous day had been a lawyer. During drinks afterwards, Ron reported that the lawyer’s advice was that Ron had a matrimonial property claim against the estate for at least half the assets and, given the circumstances of the other beneficiaries, to all of the “residual estate”. Ron assured Barry he did not plan any legal action, due to the cost. However, the lawyer suggested agreement between family members to share the estate was the best way forward (and would, apparently, avoid gift duties and not require loans). Ron’s tone was conciliatory though he did calculate the extent of his share of Mrs Reid’s estate, adjusting for the “$600,000 paid to me to date” (despite his earlier statements that these funds were used for Barry’s benefit). Ron was satisfied with that payment but expressed unhappiness with having “to beg for money”.
[57] As Barry pressed Ron on issues surrounding distributions from the Hallmark Trust,14 by early September 2010, Ron was describing the distributions as “matrimonial property”. Indeed, he had “googled the Family Protection Act and found that the fact that assets were held in one name or another or at one time or another counts for little”. And, in another email sent to Mr Riechelmann (a trustee of the Hallmark Trust) and copied to Dee Ann and Barry, also sent in early September 2010, Ron had now read the statute and was assured of the validity of his claim:
It was not until after my arrival in Townsville, and a chance discussion with a golfing lawyer, that I learned of the legal implications of ‘matrimonial property’. Of course I’d heard of the term but it never had any kind of place in our marital relationship - as you yourself can well attest to.
14 See n 11 above.
Having now read the Family Protection Act I am satisfied that I could get any court in the land to agree that our family assets, on the untimely death of [my] wife, could not be considered to be other than ‘matrimonial property’, as a matter of record, resulting from more than sixty years of a truly happy marriage.
[58] Ron insisted he had no plan to pursue his rights and told Mr Richelmann that Barry could keep Ron’s share of this matrimonial property, “since he and [his wife] Lisa are going to get it eventually anyway. And shouldn’t have too long to wait”.15
[59] Ron’s focus remained a matrimonial property claim through September 2010. In an email on 8 September 2010, he told his children half the funds in the share trading account belonged to Mrs Reid and “were effectively [Barry’s]”. This was on the following basis:
After a bit of a spend-up I started buying Air N.Z. and Ak Airport shares finally totalling 200,000 of each. THESE ARE NOWHERE MENTIONED IN THE
WILL. Apart from a few thousand in a cheque acc. The rest of our money - 1.75mil. was put in a term deposit fund in our joint names. THIS FUND IS NOWHERE REFERRED TO IN THE WILL..
Now you don’t have to be Oliver Wendell Holmes to see that Barry cannot lay claim to these assets. Unless, unless, you invoke the provisions of the Family Protection Act under which half of them - around 1.1mil. - would go into the ‘estate’ for distribution as set out. He will just have to wait for the other half, the good news being A that it should not be too long - especially as I am to be chucked out on my ear into the cold cold world - and B I’ve always said that he is welcome to hold the funds until that happy day. Provided only that he understands their status.
(emphasis in original).
[60] Ron had asked his former counsel for advice on these points, though there is no clear evidence on what advice was provided. Towards the end of 2010, the parties attempted to resolve their disputes by agreement but these efforts were unsuccessful and the dispute began to escalate. This included threats by Ron to make complaints to Police against Barry. At the end of March 2011, Ron again referred to the “R.P. Act” (sic) and his right to a half share in Mrs Reid’s assets.
15 Mr Riechelmann apparently disclaimed any knowledge of such a claim as Ron reported to both his children three days later that “… Butch [Mr Riechelmann] knows nothing of ‘matrimonial property’. He did a year on law at uni … We therefore cannot rely on him to shine much light into our tunnel”.
[61] In her brief of evidence dated 26 October 2017, Dee Ann states Ron first mentioned to her that the $1,750,000 in his joint account with Mrs Reid devolved to him solely on Mrs Reid’s death in an email sent on 10 January 2012. In this email, Ron recorded advice he had received from John Mather, an Auckland barrister who had represented Ron in earlier enforcement proceedings. Mr Mather’s advice was that Barry had inherited certain property through Mrs Reid’s will but the bank accounts jointly held by Ron and Mrs Reid at her death “legally are mine alone”. For the first time since Mrs Reid had died, Ron clearly understood his rights to the disputed amount. In subsequent emails, Ron asserted he had always known the disputed amount belonged to him but that is directly contradicted by the earlier emails Ron sent to Barry.
[62] Although Dee Ann’s evidence is that Ron continued to assert his claim to the disputed amount, discussions between them turned to an arrangement where Ron would receive an income from Dee Ann and, in return, stop pursuing Barry. During the course of this discussion, Ron sent Barry and Lisa a handwritten note dated 27 February 2012. It indicated Ron had taken legal advice on recovering the disputed amount and decided against proceedings. Instead, Dee Ann would provide him an income. He would not take any steps against Barry in exchange. A further document, dated 1 March 2012, gave effect to this agreement in the form of a declaration.
[63] The evidence establishes, then, that Ron first knew of his rights to the disputed amount, as surviving joint account holder with Mrs Reid, in January 2012. Until that time, he understood the disputed amount to constitute part of her estate but wrongly thought he had a life interest in the disputed amount on account of his wide discretion as executor. It is for this reason Ron referred to Barry’s interest as contingent. This is also consistent with Ron’s claim to a half share in Mrs Reid’s estate under the “Family Protection Act”.
[64] In this context, it is also necessary to consider two emails attached to Ron’s affidavit in reply dated 4 March 2016. Both emails are dated June 2010, and would, ordinarily, be considered in the course of the chronology above. The first email is dated 6 June 2010 and is said to have been sent by Ron to Barry. It states:
No I’m not angry - just rather surprised that you acted without first asking me. Bear in mind what is left of the one half of our ‘liquid’ assets which I’ve earmarked for your mum’s estate. The total comprised some $1,700,000 plus
$477,000 odd in shares half of which is $1,123,500. From this I paid $500,000 to satisfy Dee-Ann’s claim for receiving so little from you mum. I gave her an extra $300,000 from my own money against my not changing my will. Which left also left her nothing. I have given you some $376,000 which leaves about $246,000 to play with.
[65] There are three points from this email. First, Ron refers to the division of his half share of what I take to be relationship property, the other half belonging to Mrs Reid’s estate (to which Barry was entitled). But the other emails in evidence indicate this possibility first occurred to Ron in late July 2010, not the first half of June. It was developed further by Ron in August 2010 after his game of golf. Second, the amount of $500,000 was deducted by Ron from Barry’s interest in the estate. Third, the $300,000 also paid to Dee Ann was given to her by Ron. Both are at odds with Ron’s statements about the nature of that payment in emails up to the end of June 2010. I note that the email indicates Ron had a will.
[66] The other email is dated 10 June 2010 and is purported to have been sent by Barry to Ron. It states:
Dad I have been having trouble with the IRD, there’s a woman in there who has her hooks into me. I have had to declare that I inherited the money for the shares and my lawyer tells me that I will have to have you and Dee-Ann sign for “loans” to cover the outgoings from the share account. I will send the documents when my lawyer has done them. They will keep them in case they are needed for the IRD. They won’t be used for anything else.
[67] The second sentence would suggest that Barry invented an explanation in June 2010 in response to the Inland Revenue Department’s (IRD) interest in his financial affairs. The email is unclear but it would appear to be connected with the sums withdrawn from the share trading account by Ron and the payment to Dee Ann and possible liability for gift duty, rather than for income tax due on Australian income and on capital gains from share trading.
[68] Neither the 6 June 2010 nor 10 June 2010 email is in the format of a traditional email. Barry says he has never seen the second one he is said to have sent to Ron on 10 June 2010. He points out that it is purportedly sent from an email address which did not exist at that date. On the first email, Barry says this is not the email Ron sent
him that day. He also says that he was not in contact with the IRD at this time but was in discussions with his accountant.
[69] In his reply evidence, dated 1 June 2016, Ron accepts the documents were not original emails but “reproductions of emails sent.” He was unable to provide them in the original formats for the reason that “I lost all of my emails on my bigpond.au (sic) provider.” Ron denies any effort to deceive but does not explain how he was able to recall the wording of emails sent just under six years earlier after they had been lost.
[70] In summary, these two emails are challenged by Barry and were put together in circumstances which are far from clear. Moreover, they contain statements which are at odds with other emails sent by Ron in June 2010, which are in evidence. In particular, it does not appear Barry had received communications from the IRD at that point or that anyone had realised he would be liable for income tax on the funds earned in the share trading account. Moreover, Ron had yet to receive his free legal advice regarding his interest in relationship property. Less significantly, I note that Ron’s recent evidence is that he did not have a will (and Dee Ann asked for money from him in lieu of his making a will). The first email indicates he did have a will and is consistent with other evidence that he made a will. My overall assessment is that I can place no weight on these emails.
[71] Drawing all the threads together, the position is that the payment to Dee Ann occurred in September 2009. There is no contemporaneous documentation about the payment in evidence. But there is sufficient evidence to deal with Ms Abdale’s submissions. First, it is clear from the emails that at least until mid-2010, prior to his game of golf, Ron thought the entirety of the disputed sum formed part of Mrs Reid’s estate. Second, Ron thought that Mrs Reid’s will conferred on him a life interest in her estate through the exercise of his broad discretion. It did not. Ron appears to have appreciated this by insisting his purchase of the Australian apartments was for Barry’s benefit, at least until his conversation after golf when he instead claimed half of Mrs Reid’s estate. References by Ron to Barry inheriting the disputed amount on Ron’s death were therefore not a reference to Ron’s estate (and therefore a claim by Ron that the disputed amount belonged to him) but to the expiry of his life interest in Mrs Reid’s estate.
[72]What can be taken from this is that all parties, Ron included, thought the
$800,000 payment to Dee Ann from the disputed amount, was coming from Mrs Reid’s estate. Ms Abdale is correct when she makes this submission. However, Barry cannot be liable for it. First, Barry did nothing more than consent to an arrangement agreed by Ron and Dee Ann. Barry did so as the residual beneficiary of Mrs Reid’s estate. He then took steps to facilitate that arrangement following Ron’s directions. Barry was not involved in those negotiations and was not a party to the agreement. Barry cannot be bound it. Barry complied with those directions as Ron’s agent and there was no breach of Barry’s fiduciary obligations as he was acting on Ron’s instructions.
[73] That Ron was in error in directing the payment cannot make Barry liable in these circumstances. Moreover, Ms Abdale provides no basis for her submission that Barry is liable for Ron’s failure to properly administer Mrs Reid’s estate. If Ron wishes to recover this amount, he must look elsewhere for a remedy. This addresses both Ron’s claim for the full $800,000 and for the partial amount of $500,000. I consider Ron’s evidence at this hearing on the latter an effort to recast past events in light of my finding in my first judgment that the funds in the joint account devolved to him as survivor on his wife’s death. His evidence at this hearing on this issue is not consistent with the contemporary documentary evidence.
[74] Claims for a contribution by Ron from Barry are not connected with the payment of $800,000 to Dee Ann but go to arrangements reached afterwards. Such claims do not appear to be within the scope of this inquiry, concerned as it is with the allocation of the disputed funds, held on resulting trust by Barry for Ron. Such a claim is not concerned with enforcement of later agreements but rather with Barry’s fiduciary obligations to Ron.
[75] However, even if I am wrong on this point, I cannot be satisfied that the evidence discloses such an agreement. It is based solely on Ron’s recollection of a family meeting in December 2010. At that point, Ron did not know the disputed amount belonged to him. The context for the family meeting at that point were ongoing disputes arising from Barry’s decision to close the share trading account.
[76] The emails establish that Barry’s action was the consequence of the situation he found himself in during the first half of 2010. First, there were the financial arrangements relating to the purchase of two apartments, which Ron and Mrs Reid contracted to buy prior to her death, including the mortgage on the castle to secure the deposit on them. Second, there was Barry’s growing, and entirely legitimate, concern about his personal liability for gift duties, owing to the way in which the share trading account funds were being distributed by Ron. Third, and just as legitimate, was Barry’s concern about his personal income tax liability arising from Ron’s share trading activities (both in relation to capital gains and dividend income earned on Australian shares). Barry’s efforts during this time were focused on identifying the nature and source of funds to determine his own tax liability. The resulting trust in Ron’s favour has no impact on Barry’s liability for either, as he was the legal owner (even if Ron was the beneficial owner).
[77] The significance of these observations is that, through 2010, Ron became increasingly frustrated at Barry’s concerns about his tax position and his concern with the settlement of the two apartments, which Ron and Mrs Reid contracted to buy, and continuing questions about the estate and his parents’ financial arrangements. At the same time, Ron was searching for a way to access the funds and settled on claiming a half share in Mrs Reid’s estate under the “Family Protection Act”. He pursued this vigorously and his claims against Barry increased in stridence, with repeated assertions that he would lodge a complaint with Police. There is a detailed record of all these discussions. And yet, there is no record in evidence of the arrangements Ron alleges for payment of Dee Ann following the 2010 family meeting. Both Barry and Dee Ann deny it.
[78] In the circumstances, there is insufficient evidence before me to establish that such an arrangement for Ron and Barry to equally share the cost of the $800,000 payment to Dee Ann was reached or that it is enforceable by Ron against Barry.
[79] For all the above reasons, I do not accept any of Ms Abdale’s alternative submissions set out in [20] above, that Barry is liable for the full $800,000 or that he shares the burden equally with Ron or that he is liable for $500,000 of the total sum. Barry has no liability for any part of the $800,000 paid to Dee Ann in September 2009.
When it comes to allocating the closing balance of the share trading account between Ron and Barry, this payment is not a relevant consideration in determining any entitlement Barry might have.
Payment for Barry’s apartment (first Eclipse apartment)
[80] Ms Abdale’s submissions follow Ron’s evidence. His evidence appears to conflate the two different apartment transactions. In his 28 January 2016 affidavit, Ron said:
I also gifted the sums of $316,000 to Barry on 24 November 201516 and
$60,000 as advances on his inheritance, which sums Barry used to purchase an apartment in Vincent Street. These gifts came from the share trading account …
[81] As noted above, in this affidavit, Ron was clear that the funds belonged to him so the reference to “inheritance” can only mean a gift from him of these funds to Barry.
[82]In his brief of evidence (undated) in October 2017, Ron said:
I also paid to Barry from the share trading account the sums of $316,000 on 24 November 2009 and $60,000, which he used to purchase an apartment in The Eclipse Apartments in Vincent Street, which his mother and I had entered into an agreement to purchase, and which after her death I no longer wished to proceed with.
[83] This evidence confuses two distinct transactions. Prior to Mrs Reid’s death, Barry had contracted to purchase one Eclipse apartment. It is clear on the evidence that Barry settled on this Eclipse apartment using funds drawn from the share trading account. This transaction was not connected to the settlement, in June 2010, of the second Eclipse apartment, one of two Ron and Mrs Reid contracted to buy prior to her death (the vendor having agreed not to enforce the purchase of the second), which occurred after the share trading account was closed. It is also notable that this evidence is disingenuous as Ron was subject to a binding agreement to purchase, secured by a mortgage over the castle, now owned by Barry, and would have otherwise had to pay damages had Barry not taken over the purchase from him.
16 The year stated is clearly an error. It should have been 2009. See Ron’s further evidence in [82] below. The date 24 November 2009 is supported by a transaction statement for the share trading account.
[84] In his most recent affidavit of 22 January 2020, Ron offers an alternative account of the payment to Barry of $333,914.93 on 24 November 2009 and $61,254.68 on 8 January 2010.17 Ron says he “directed Craigs Investment Partners” to pay these amounts to Barry using his “absolute discretion” contained in Mrs Reid’s will to manage her estate. He says the total amount of $395,169.61, was a distribution from the $477,267.34 paid into the share trading account following the sale of Mrs Reid’s shares, which Barry had inherited under the will.
[85] Ron’s evidence is now that Barry is entitled only to the balance of $82,097.73 from the mixed fund (having been paid out $395,169.61 of the $477,267.34 which belonged to Barry). Ron also says that Barry is not entitled to any income earned by this money while in the mixed fund because cl 9 of Mrs Reid’s will provides (in full):
I DECLARE that as between the capital and income of my estate there shall be no apportionment of rents interest dividends and other periodical payments for the period current at my decease.
[86] Ron relies on this clause in the will to deny Barry any income earned on the money deposited into the share trading account following sale of the shares Barry inherited from his mother.
[87] Barry’s account of the use of funds in the shareholding account to buy his Eclipse apartment differs. He says that the price paid for his Eclipse apartment was
$323,619.44. He says he withdrew this sum from the shareholding account.
[88] The email correspondence from Ron to Barry and Dee Ann provides further evidence on the nature of this transaction. On 29 April 2010, Ron emailed Barry about the estate. As I have already found in [41] above, Ron did not at this point appreciate that the disputed amount belonged to him and he considered that they belonged to Mrs Reid’s estate. As noted in [38] above, when I earlier considered this email, Ron did not define the term “estate” in the email, as he said he would do, but the only reasonable inference which can drawn from the terms of the email is that the “estate” he was referring to included the disputed amount. Ron also clearly expressed the view
17 These figures differ to those given by Ron in his earlier evidence, as set out at [80] and [82]. The amounts given here are taken from the share trading account statements.
that the terms of Mrs Reid’s will permitted him to apply her estate to his own benefit during his lifetime (after which the residue would go to Barry).
[214] The causes of action arose when Ron demanded return of the money. That did not occur when Ron transferred the funds to Barry. This was, the Court of Appeal found, when the resulting trust arose, but Barry held those funds with Ron’s consent. Nor did it occur in 2010, when Barry closed the share trading account. Ron certainly remonstrated with Barry about this action and demanded access to the funds. But he did so on the basis of various mistakes. It was not until proceedings commenced that a clear demand was made for payment of the funds on a proper legal foundation.
[215] While the funds were held by Barry on resulting trust for Ron from the time of the first transaction, and Barry was liable to repay those funds on demand by Ron, in my view, at least for the purposes of establishing a cause of action, that demand needed to be made on a proper legal basis. It was not good enough for Ron to simply assert his right to the funds. All of the correspondence with Barry and other family members in 2010 and 2011 demanding some or part of the return of the funds were predicated either on Ron’s incorrect understanding of the terms of Mrs Reid’s will or on the basis he was entitled to a half share in Mrs Reid’s estate. These were not a proper basis for demanding the return of the funds. That proper legal basis did not arise until Ron received legal advice that the funds belonged to him as survivor. In my view, therefore, the date when the causes of action arose was the date Barry was served with the
72 Worldwide NZ LLC v NZ Venue and Event Management Ltd [2014] NZSC 108, [2015] 1 NZLR 1 at [25].
73 At [36].
proceedings.74 It contained a proper basis for the return of the funds and Barry’s refusal to pay those funds gave rise to the causes of action. That date is 15 December 2015.
[216] Alternatively, Ron’s mistakes as to his rights to the funds caused considerable delay in his commencing proceedings and Barry should not be liable for this period even if Ron was without his money. His claim to the money was mistaken and he did not know it was his. These are exceptional circumstances which should affect the period of interest, though I would not characterise this as Ron sleeping on his rights; he simply did not know what his rights were and took no proper steps to identify them for some time.75
[217] As to the appropriate rate, the prescribed rate is a maximum and the Act confers a discretion on the rate of interest awarded.76 The general practice is to award the prevailing commercial rate during the relevant period.77 Interest rates have declined considerably since the prescribed rate was set in July 2011 and further since the proceeding commenced in December 2015. To award the maximum rate of interest would not be in the interests of justice in this case in consequence. The average of the 90-day bank bill rate between December 2015 and August 2020 is approximately 1.76 per cent. I consider interest at 2.5 per cent adequately compensates Ron for being out of his money during this period.
[218]Interest at the rate of 2.5 per cent from 15 December 2015 is awarded on
$417,023.50.78
74 This finds some support in Tauranga Harbour Board v Clark [1971] NZLR 197 (CA), though the policy considerations addressed by North P and Turner J are likely very different in this case and it must be recognised that there is no fixed rule. In addition, in Wilson & Horton Ltd v Attorney- General [1997] 2 NZLR 513 (CA) at 530, the Court of Appeal observed it is usual in other types of proceedings to delay the start of interest until proceedings are issued.
75 Equiticorp Industries Group Ltd (In Statutory Management) v R (no 3) (Judgment no 51) [1996] 3 NZLR 690 (HC) at 694.
76 Kirk v Vallant Hooker & Partners (2000) 15 PRNZ 9 (CA) at [19].
77 Wilson & Horton Ltd v Attorney-General [1997] 2 NZLR 513 (CA) at 530.
78 Interest is not awarded on the (small) sum of $391.08 which is interest earned in the solicitor’s trust account, as that would be an award of interest on interest.
Result
[219]My decision in summary is as follows:
(a)Barry is not liable for the $800,000 paid to Dee Ann from the disputed amount;
(b)Barry is liable under the terms of the resulting trust to repay to Ron the amounts he used to purchase his Eclipse apartment and the Eclipse apartment Ron and Mrs Reid had contracted to buy. However the liability for both is subject to his second affirmative defence on which, as relevant to this liability, Barry succeeds. See (d) below;
(c)Barry’s first affirmative defence of abuse of process fails;
(d)Barry’s second affirmative defence of equitable estoppel succeeds. He is therefore not liable to repay the amounts used for the purchases of the two Eclipse apartments referred to in (b) above. This defence does not extend to the income earned on the mixed fund. The net income is to be shared equally between Ron and Barry. Barry must therefore repay Ron the sum of $417,023.50 together with $391.08 being a proportion of the interest earned while the funds were deposited in the solicitor’s trust account. The total amount Barry must repay Ron is
$417,414.58;
(e)Having found in favour of Barry on the second affirmative defence it was not strictly necessary to consider his third affirmative defence, change of position. However I did so in case I was wrong in finding in favour of Barry on the second affirmative defence. If I had not found in favour of Barry on the second affirmative defence, he would have been required to repay more to Ron under the affirmative defence of change of position. In addition to the $417,414.58 referred to in (d) above, he would also have been required to repay $358,338.40 being the amount paid to settle the purchase of the Eclipse apartment that Ron and Mrs Reid had contracted to buy.
Orders
[220]I order that Barry pay to Ron the following amounts:
(a)$417,414.58 being Ron’s half share of the net income earned on the mixed fund ($417,023.50) and a proportion of the interest earned while the funds were deposited in the solicitor’s trust account ($391.08); and
(b)Interest on $417,023.50 at the rate of 2.5 per cent from 15 December 2015.
Costs
[221] Each party has had a measure of success. The parties may therefore consider that costs should lie where they fall. In that case, or if the parties do not agree costs should lie where they fall but if they are able to agree costs, then a joint memorandum should be filed within 20 working days of the date of this judgment.
[222] If the parties do not agree that costs should lie where they fall and if they are not able to agree costs, each party may file (contemporaneously) a memorandum within 10 working days of the date for the joint memorandum.
[223] Each party may reply to the other’s memorandum within a further five working days.
[224] Costs memoranda should not exceed five pages, excluding any attachments. I will determine costs on the papers.
Gordon J
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