Savill v Rogers and Rutherford HC Christchurch CIV 2009-409-3011

[2010] NZHC 1081

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2009-409-003011

BETWEEN  SIMON LYDALL SAVILL DONALD JOHN STEWART REID Appellants

ANDROGERS AND RUTHERFORD First Respondent

ANDJEANETTE LUCY KETTLE Second Respondent

AND  OFFICIAL ASSIGNEE Third Respondent

Hearing:         20 April 2010

12 May 2010 (by conference call)

Appearances: D M Lester and S J Savill for Appellants

No appearance for First Respondent (appearance excused) A N Riches for Second Respondent

C R Vinnell for Third Respondent (abiding Court's decision) Judgment:       18 June 2010

RESERVED JUDGMENT OF HON. JUSTICE FRENCH

Introduction

[1]      Law firm Rogers and Rutherford is holding $100,000 in its trust account.

[2]      The money is the subject of competing claims as between the first claimant, Mrs Kettle, and the second claimants, Messrs Savill and Reid.  In order to resolve

SAVILL AND ANOR V ROGERS AND RUTHERFORD AND ORS HC CHCH CIV-2009-409-003011  18

June 2010

the competing claims, Rogers and Rutherford filed interpleader proceedings in the

District Court.

[3]      The $100,000 represents a payment due to Mrs Kettle under the terms of a matrimonial property agreement with her former husband.  It became payable to her in 2008.  Messrs Savill and Reid, however, contend that in 1996 Mrs Kettle assigned her interest in the $100,000 by way of mortgage to them as security for advances which they jointly made and which she has never repaid.   Under the terms of the deed of assignment, Mrs Kettle covenanted to repay the advances on her becoming entitled to payment of the $100,000 from her former husband.

[4]      There is a third claimant: the Official Assignee.  Mrs Kettle was adjudicated bankrupt in December 2001 and the Official Assignee contends that if she is found to be entitled to the funds as against Messrs Savill and Reid then the money is part of her bankrupt estate.

[5]      Messrs  Savill  and  Reid  applied  to  strike  out  Mrs  Kettle’s  claim  on  the grounds it disclosed no reasonable claim to the $100,000.   Following a contested hearing, a District Court Judge dismissed the strike out application and directed the money be released to the Official Assignee.

[6]      Messrs Savill and Reid now seek to overturn that decision on appeal.

[7]      The key issue is whether the debt being claimed by Messrs Savill and Reid is the same debt as a debt which was the subject of earlier proceedings in 2001, or whether there are two different debts.

Factual background

[8]      At the hearing before the District Court, evidence was  given by way of affidavits.   Mr Savill, who provided three affidavits on behalf of himself and Mr Reid, was also required to attend for cross-examination.

[9]      In support of their claim, Mr Savill deposed that he and Mr Reid were in business together under the name of “Gibbston Valley Estates” and made advances to Mrs Kettle and her second husband, Mr Kettle, under the deed of assignment by mortgage.

[10]     Mr Savill produced a schedule of the joint advances said to be secured by the deed of assignment.  The schedule shows a series of advances between 21 December

1995 and 2 August 1996 for varying amounts.   According to the schedule, the

Kettles only ever made one repayment and that was a payment of $25,000 on 23

April 1996.

[11]     The actual deed itself is dated 16 July 1996. It shows Mr and Mrs Kettle as the mortgagors, with Messrs Savill and Reid as the mortgagees.  The recitals state that Messrs Savill and Reid have made advances to the Kettles totalling $45,000, that the Kettles have agreed to provide security for “such advances and further advances” and that Mrs Kettle has agreed to assign her rights under her matrimonial property agreement to Messrs Savill and Reid by way of mortgage.

[12]     According to Mr Savill’s schedule, as at 16 July 1996 (the date of the deed) the balance amount owing by the Kettles to him and Mr Reid was $43,400 plus interest.  This, he claims, explains why the deed refers to advances totalling $45,000 as having been made.   As mentioned, the deed is also expressed to cover future advances.  Mr Savill testified that the subsequent advances and penalty interest make the final balance owing well in excess of $100,000.

[13]     In addition to these joint advances, Mr Savill says he and Mr Reid each made other, separate loans on an individual basis to the Kettles.

[14]     According  to  Mr  Savill,  one  of  the  other  separate  individual  advances involved the transfer of a property he owned in his sole name at Hanmer.   He deposed that in March 1996 he agreed to transfer his Hanmer property to Mrs Kettle so that she could use the property as security to raise a loan of $45,000 from the ANZ Bank.  The ANZ loan was duly drawn down on 23 April 1996.  The Kettles paid  $25,000  to  a  solicitor  (Mr  Savill  says  this  was  on  account  of  existing

Reid/Savill advances), $5,000 to Mr Reid, and used the balance for their own purposes.

[15]     Mrs Kettle signed a formal document confirming that she held the Hanmer property on trust for Mr Savill.  According to Mr Savill’s evidence, she also agreed to assume responsibility for the full amount of the ANZ mortgage, but failed to maintain the payments with the result that when, in 1999, legal title was re-conveyed back to Mr Savill, he was required to pay ANZ the then outstanding balance of

$44,748.75 out of his own funds.

[16]     In 2001, Mr Savill issued summary judgment proceedings in the District Court claiming recovery of the $44,748.75 from Mrs Kettle.  She originally defended the proceedings but subsequently signed an admission of claim.   Mr Savill then obtained judgment and issued bankruptcy proceedings which ultimately resulted in Mrs Kettle being adjudicated bankrupt.

[17]      According  to  Mr  Savill’s  case,  it  is  just  an  unfortunate  and  potentially confusing coincidence that the amount of the ANZ/Hanmer loan and the amount secured by the deed of assignment were both $45,000 and occurred at about the same time.  He says the two are, however, quite separate and distinct.  The Hanmer debt was unsecured and owing only to him, whereas the advances secured by the deed of assignment were secured and owing to both him and Mr Reid.   He proved in bankruptcy for the former, and now on behalf of himself and Mr Reid seeks to enforce the deed of assignment.

[18]     Mrs Kettle, however, has a very different version of events.   She claims amongst other things that it was Mr Savill who was having difficulty obtaining money from the bank, and that was the reason the Hanmer property was transferred to her.  She was to raise money on the property for Messrs Savill and Reid, as well as for herself.  Significantly for present purposes, she also claims that the reason for the deed of assignment was to secure the Hanmer property, and so when she re- conveyed  legal  title  back  to  Mr  Savill  in  1999  it  was  her  belief  the  deed  of assignment had been satisfied.   She also contends that because the 2001 District Court claim was for the balance of the funds owing or alleged to be owing in respect

of the Hanmer transaction, that debt formed part of her bankrupt estate and so was

“wiped” when she was discharged from bankruptcy in December 2004.

[19]     For completeness, I should record that neither Rogers and Rutherford nor the Official Assignee took an active part in the appeal.  They abide the decision.  I also note that Mr Reid has himself been declared bankrupt.

The decision of the District Court Judge

[20]     At the commencement of his decision, the Judge stated that Mrs Kettle and Messrs Reid and Savill shared the burden of convincing him on the balance of probabilities they had a claim to the $100,000.  He went on to say that Messrs Savill and Reid fell far short of discharging that onus and instead raised more questions for the Court than their evidence answered.

[21]     It is clear the Judge did not find Mr Savill a credible witness.   The Judge describes his evidence as “wholly unreliable, vague and at times disingenuous”.  The Judge held that Mr Savill had failed to satisfy him there existed a debt owing to him and Mr Reid separate to the Hanmer debt, that in the circumstances they had no better right to claim the $100,000 or any part of it than Mrs Kettle, and that there was accordingly no basis on which Mrs Kettle’s claim should be struck out.

[22]     The Judge then found that Mrs Kettle’s entitlement to the $100,000 under the matrimonial property agreement was a chose in action that vested in the Official Assignee pursuant to s 42 of the Insolvency Act 1967 when she was adjudicated bankrupt.   He directed payment of the $100,000 to the Official Assignee and also ruled that any decision as to the competing interests could be left to the Official Assignee.

[23]     Mrs Kettle has not filed any cross-appeal against the finding that her right to the money had vested in the Official Assignee.

Grounds of appeal

[24]     Mr Lester, on behalf of Messrs Savill and Reid, accepted that an appellate Court is traditionally reluctant to interfere in findings of fact, especially when they involve an assessment of credibility.   However, he submitted that in this case the Judge’s analysis of the evidence was so flawed it had demonstrably resulted in him coming to the wrong conclusion.

[25]     In support of that submission, Mr Lester identified the following alleged errors:

i)The Judge failed to have regard to the well-established rule of evidence known as “estoppel by deed” and therefore wrongly directed himself in terms of the burden of proof.   Under the rule, where a person has made a statement of fact in a deed, they will not be permitted to deny it.  The doctrine means Mrs Kettle is estopped from denying that Messrs Savill and Reid jointly advanced her monies and that those joint advances are secured against the $100,000 in issue.  The two men were not required to re-prove the contents of the deed. Rather the onus was on her to establish a defence to the estoppel (such as mistake or fraud) or to prove repayment of the joint advances. She did neither.  The estoppel created by the deed should have been the Judge’s starting point and indeed the end point.

ii)The Judge’s adverse assessment of Mr Savill’s credibility was coloured by a major mistake.  The Judge wrongly thought the

2001  proceedings  had  been  brought  in  the  joint  names  of Savill and Reid and that Reid’s name had been included in the bankruptcy petition against Mrs Kettle.  The correct position, however, is that all the 2001 proceedings were in the sole name of  Mr  Savill,  which  was  entirely consistent  with  his contention the two debts were distinct.

iii)      The Judge wrongly drew adverse inferences:

a.   from the failure to cross-examine Mrs Kettle on her affidavit when it was Mrs Kettle who bore the onus of proof and when she did not take issue with Mr Savill’s schedule;

b.from the failure to call Mr Reid, when the drawing of the inference was based on a mistaken belief Mr Reid had been a plaintiff in the 2001 proceeding, and in circumstances when Mr Reid could not usefully add any further evidence anyway ;

c.   from the absence of any explanation as to why the supposed separate Savill/Reid debts were not included in the bankruptcy, when there was an obvious clear commercial  answer which  did  not  require  evidence. With Savill and Reid protected by the deed of assignment, there would have been no point in proving in the bankruptcy and to have done so may have put the security at risk.

iv)The Judge wrongly considered there was no contemporaneous documentation concerning the various Savill/Reid advances when in fact the evidence as to how the joint advances were made up was there to be found amongst the various exhibits. The documents could be cross-referenced to each of the items in Mr Savill’s schedule.

v)The Judge failed to take into account the affidavit evidence given by Mrs Kettle in 2001 when she sought to defend Mr Savill’s application for summary judgment.   In her 2001 affidavit, Mrs Kettle denied owing any money to Mr Savill. She and her husband did however admit owing money to a

consortium which they said included Savill and Reid.   The Kettles deposed that the money owing to the consortium had been  secured  by  the  deed  of  assignment  and  was  only repayable  by  them  on  Mrs  Kettle  becoming  entitled  to payment of her matrimonial property settlement.   Mr Lester submits that the combined effect of that acknowledgement and Mrs Kettle’s subsequent abandonment of her defence of Mr Savill’s claim means that she herself in 2001 was recognising there were two separate debts, one of which was secured by the deed and the other owed to Mr Savill which was not.

vi)      The Judge also failed to take into account the legal effect of

Mrs Kettle’s formal admission of the 2001 claim, giving rise as it does to an issue estoppel.

Discussion

[26]     Several of the points made by Mr Lester are well founded.

[27]     There is no doubt for example that the Judge has made a mistake about the

2001 Hanmer proceedings.  They were in Mr Savill’s sole name.  There is also no doubt that the Judge’s mistake resulted in him placing significant weight on a perceived inconsistency which did not in fact exist.

[28]     I accept too that the Judge was wrong to place the weight he did on Mr Savill’s failure to explain why he did not prove the supposed joint debt in the bankruptcy.  Failing to prove in a bankruptcy would cast doubt on the existence of an alleged debt if it was unsecured but if the alleged debt was secured, then the same inferences are not able to be drawn or at least not with the same force.

[29]     Further, there is no doubt that there are inconsistencies between Mrs Kettle’s affidavit in 2001 and her affidavit in the current proceedings.   In the current proceedings, she claims that the re-transfer of the Hanmer property extinguished her liability under the deed.   Yet in 2001 (two years after the re-transfer) her then

affidavit evidence accepted there was an amount still owing under the deed, but that it was a deferred liability, only payable when her matrimonial property entitlement became payable.

[30]     However, notwithstanding all the above, my own review of the evidence has satisfied me the Judge’s ruling should not be disturbed.

[31]     I have come to that conclusion for the following reasons.

[32]     First, the recitals to the deed of assignment state that Mr Savill and Mr Reid have made advances to the Kettles totalling $45,000 “pursuant to an agreement dated the 19/4/96”.

[33]     The agreement in question is a facsimile letter signed by the Kettles and Mr Savill.  It is annexed to the deed and on my reading of it is clearly referable to the Hanmer/ANZ facility of $45,000.

[34]     The estoppel by deed rule applies to statements of facts contained in the recitals  of  a  deed  as  well  as  statements  contained  in  the  operative  part:  see Halsbury’s Laws of England (5ed 2009) Vol 11 at 964.

[35]     Both Mr Savill and Mr Reed are therefore themselves estopped from denying that the security provided by the deed related to the ANZ loan of $45,000 and that the Hanmer/ANZ $45,000 was advanced by both of them.

[36]  Secondly, contrary to Mr Lester’s submission, the contemporaneous documentation does not in fact support all the entries in Mr Savill’s schedule.

[37]     The first entry in his joint advances schedule is a $50,000 advance which Mr Savill deposes was paid to the Kettles’ solicitors and is verified by the solicitors’ trust account ledger.  However, the solicitors’ trust account ledger shows the sum of

$50,000 as being received not from Savill and Reid, nor from Gibbston Valley Estates,  but  from  two  companies  Gibbston  Valley  Estates  Ltd  and  Hampstead Holding Limited.   Gibbston Valley Estates Limited is in liquidation.   There is no evidence as to the ownership of that company or of  Hampstead Holding Limited.

[38]     If one excludes the $50,000 from Mr Savill’s joint advances schedule, his schedule does not show a figure approximating $45,000, or anywhere near it, as being owing at the date of the deed of assignment.  That being so, it is much more likely (especially when read alongside the facsimile letter of 19 April 1996) that the

$45,000 mentioned in the deed is indeed the one and the same $45,000 as the Hanmer/ANZ loan, rather than a separate debt.  The “just a coincidence” argument is not tenable.

[39]     Mr Savill’s schedule of the alleged joint advances shows two advances as having been made after the date of the deed, namely payments made on 17 July 1996 and 2 August 1996 totalling $8000.  Yet the receipt that was given at the time says “received from Simon Savill”, with no reference to Mr Reid.  Further, it is clear from a letter written in 2000 by Mr Savill’s then solicitors that those two payments were claimed at that time as having been advanced by Mr Savill alone and nothing to do with Mr Reid.

[40]     Then there is the evidence of the correspondence between Mr Savill and the Kettles’ solicitors that led up to the signing of the crucial deed of assignment.  Mr Lester sought to rely on this correspondence because it disclosed the existence of a draft deed and important changes being made to that draft. The draft had contained a specific reference to the ANZ loan which does not appear in the final version. The original draft also did not include Mr Reid as a party.

[41]     However in my view, the contemporaneous correspondence read as a whole tends to undermine Mr Savill’s claim of there being two distinct debts, rather than support it. That is because the focus of the correspondence leading up to the deed is in fact the ANZ $45,000, and significantly in a letter dated 12 July 1996 written on Gibbston Valley Estates letterhead, Mr Savill has written:

As there are pre- and post-mortgage advances and a possible future situation where we may only partially repay the ANZ bank loan, any amendment to the trust deed would be inappropriate. [emphasis added]

[42]     In an earlier letter of 10 July 1996, Mr Savill has also used the collective pronoun “we” when talking about paying off the ANZ bank loan

[43]     In addition, there is a file note written by the Kettles’ solicitor recording a telephone conversation with Mr Savill regarding the first draft of the deed.  The file note reads:

Will talk to Reid today.  Any future advances will be joint.  He must be a party.

[44]     These contemporaneous communications provide an explanation as to why a deed about the Hanmer loan was in joint names even although the Hanmer property was owned only by Mr Savill.  Or to put it another way, the fact Mr Savill was the sole registered proprietor of the Hamner property is not necessarily inconsistent with a finding the deed was for the purposes of securing the Hanmer/ANZ loan.

[45]     Further although the amended deed did remove a previous reference to the ANZ loan, there is no record of Mr Savill actually ever saying this deed has nothing whatsoever to do with the ANZ monies. On the contrary as I have said the correspondence between him and the Kettles solicitor about the trust deed is permeated with references to the ANZ monies.  Further, Mr Savill’s explanation for wanting amendments is not that the draft erroneously referred to something never intended to be included but that having discussed the first draft with his solicitors, “we feel [the enclosed amended deed] better suits the situation as there needed to be an interest rate specified and also compliance with the Credit Contracts Act.” [emphasis added]     I find it most unlikely that if the ANZ monies were completely outside the scope of the security, Mr Savill would not have said so explicitly.

[46]     The correspondence also reveals considerable confusion about the amounts of the various advances and the use to which the ANZ loan monies had been applied. The Kettles’ solicitor was reluctant for the Kettles to sign the amended deed until this was clarified and resolved.   Mr Savill, however, was pressing for the deed of assignment to be signed, and in a letter dated 10 July 1996 stated:

I am happy to discuss the deed with you in regard to its form should you wish  and  we  undertake  to  provide  a  statement  of accounting with  your clients for both principle [sic] and interest as soon as this matter is finalised.

There was no evidence of Mr Savill ever honouring this undertaking, and in a letter written four years later, the Kettles’ solicitor noted the promised statement had never eventuated.

[47]     Had Mr Savill honoured his undertaking, on which the Kettles must have relied in signing the amended deed against their solicitor’s advice, then the present dispute is unlikely to have ever arisen.   As a lender of monies, it was his clear obligation to keep proper records and provide a proper statement.

[48]     In upholding the Judge’s decision, I have not overlooked the fact that Mrs Kettle signed a formal admission of Mr Savill’s 2001 claim.  That claim expressly related to the ANZ loan monies and accordingly if (as both the District Court Judge and I consider to be the case) it was those ANZ monies that were secured by the deed, then Mrs Kettle would have had a defence (money not repayable until settlement of matrimonial property entitlement) and should never have admitted the claim. Her explanation is that she and her husband were living in China at the time, had no funds to defend the claim and thought it best just to acknowledge it and save costs. Mr Lester submits that whatever her reason Mrs Kettle’s abandonment of the defence in 2001 and the entry of judgment creates an issue estoppel against her and prevents her from re-running the same argument now.

[49]      I disagree.  Apart from anything else, it is a necessary condition precedent for an issue estoppel that the parties to the two sets of proceedings must be the same. In 2001, the parties were Mr Savill and Mrs Kettle.  In the current proceeding, the claimant is Mr Savill and Mr Reid.

[50]     Nor in my view, having regard to all the circumstances, is it an abuse of process for Mrs Kettle to raise the argument that the amount claimed is the same amount on which she was bankrupted.  The equities do not favour Messrs Reid and Savill.

Outcome of appeal

[51]     The appeal is dismissed and the Judge’s decision upheld.

[52]     As regards costs of the appeal, my expectation is that the parties will reach agreement amongst themselves.  However should that not prove possible, then leave is reserved for the parties to seek a conference call for the timetabling of submissions as to costs.

Solicitors:

R A Fraser & Associates, Christchurch

Rogers & Rutherford, Auckland

Saunders & Co, Christchurch

Anthony Harper Lawyers, Christchurch