Stratford v Phillips Shayle-George & Co - [2001] NZCA 299

IN THE COURT OF APPEAL OF NEW ZEALAND

CA199/00

BETWEEN	JENNIFER ANN STRATFORD
Appellant

AND	PHILLIPS SHAYLE-GEORGE
Respondent

Hearing:	9 August 2001
Coram:	Elias CJ Gault J Keith J Tipping J McGrath J
Appearances:	S J Brown for Appellant P Courtney and A Challis for Respondent
Judgment:	21 August 2001

JUDGMENT OF THE COURT DELIVERED BY TIPPING J

Introduction

The appellant, Mrs Stratford, established in the High Court that the respondent solicitors, Phillips Shayle-George (the solicitors) had been negligent when advising her in relation to a transaction into which she entered with her husband during 1987. But her claim for damages against the solicitors failed because Ellis J held it was statute-barred.
Mrs Stratford’s proceeding was commenced in January 1996. She therefore had to establish that her cause of action arose no earlier than January 1990. The issue on this appeal is whether the Judge was right in finding in favour of the solicitors on the limitation point. They do not challenge the finding of negligence against them. The background circumstances are of some intricacy. We will describe them only to the extent necessary to consider the limitation issue.

Background circumstances

By 1985 Mr and Mrs Stratford had accumulated substantial assets. Mr Stratford was a property developer and, because of the nature of his work and an earlier forced sale of their then family home, he and his wife decided to take steps to protect the current family home in Hinau Street, Lower Hutt. To that end Mr Stratford consulted Mr Thom of the respondent firm about putting the property as far as possible into Mrs Stratford’s name. It appears from the evidence that in December 1985 the proposal was to enter into a transaction making the parties owners in shares; those shares being 75% to Mrs Stratford and 25% to Mr Stratford. Mrs Stratford agreed with that proposal. The home was at the time settled on both of them as joint tenants under the Joint Family Home Act 1964. For reasons that were not identified no steps were taken to change that joint tenancy into a 75:25 arrangement.
The following year, acting on Mr Stratford’s instructions, Mr Thom prepared an agreement which was signed. It is dated 16 April 1986. Its effect was to transfer Hinau Street to Mrs Stratford at an agreed value of $350,000. Mr Stratford was to discharge the indebtedness on Hinau Street. Mrs Stratford received shares and other assets bringing the total she acquired under this agreement to $1,416,500. Mr Stratford retained shares and options valued at $2,360,000 and assumed debts of $590,000, making a net figure in his favour of $1,736,000. The agreement contained a clause which made all future property acquired by Mr Stratford in his name, his separate property, and similarly all future property acquired by Mrs Stratford in her name, her separate property. The agreement was expressed to be in full settlement of all matrimonial property issues both ways and was signed and certified as required by the Matrimonial Property Act…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2001] NZCA 299
Decision Date: 21 August 2001

CaseChat Overview and Summary

In the Court of Appeal of New Zealand, Jennifer Ann Stratford, the appellant, appealed against the decision of the High Court that her claim for damages against Phillips Shayle-George, the respondent solicitors, was statute-barred. Mrs Stratford had commenced her proceeding in January 1996. The issue on appeal was whether the Judge was right in finding in favour of the solicitors on the limitation point. The Court of Appeal found that the Judge was right in finding in favour of the solicitors on the limitation point. The Court of Appeal held that a cause of action accrues for limitation purposes when all the facts necessary to establish the claim are in existence. If the tortfeasor is a fiduciary, the position is the same unless there is also a breach of fiduciary duty. In the present case, the crucial question was when Mrs Stratford suffered loss or damage as a consequence of having entered into the mortgage to her husband. She thereby incurred a debt which did not hitherto exist. That debt was a present debt, albeit one which fell due in the future. It was not a contingent debt. There was no contingency attached to the obligation to pay the monies secured by the mortgage. Thus prima facie Mrs Stratford suffered loss or damage immediately upon her entry into the mortgage. Through the solicitors' negligence she assumed a debt, secured against her house, which, had she been properly advised, could have been avoided by using as consideration the monies which her husband owed her. Mrs Stratford's only escape from this analysis was to mount an argument not directly advanced by Mr Brown. It derived from the essence of the solicitors' negligence which was not to use the available alternative consideration. But by dint of not using her husband's indebtedness to her, Mrs Stratford still had that asset. The proposition was that this asset in nominal terms exactly matched the debt which she needlessly incurred. There were, however, problems with such an analysis for limitation purposes. The harm suffered by Mrs Stratford was a debt certain, secured over real estate that would otherwise have been unencumbered. Although the debt was payable a long time in the future, Mrs Stratford could not deal with her house as freely as would have been the case had there been no mortgage on it. She could not sell the house without arranging to discharge the mortgage, and she could not raise money on it as freely as would have been the case. While difficult to quantify, those aspects represented a species of loss or damage for limitation purposes. These issues did not have to be finally determined because, in any event, when Mr Stratford was adjudicated bankrupt, Mrs Stratford undoubtedly suffered loss or harm from the existence of the mortgage. The value of her husband's indebtedness to her was reduced either to nothing or to the point where unarguably it was less than her obligation to him under the mortgage. If, in view of the long date of the mortgage, her obligation to him were to be notionally reduced on a present value basis, the present value calculation would necessarily be influenced by the near certainty that the Official Assignee would challenge the transaction of which the mortgage was an integral part. On any view of the matter it follows that when Mr Stratford went bankrupt, Mrs Stratford's secured obligations under the mortgage exceeded his unsecured capacity to discharge his indebtedness to her. As a result of entering into the mortgage she therefore suffered loss or damage no later than 23 August 1989. This was more than six years before she commenced her proceedings in January 1996. Thus her cause of action in tort was statute barred. The appeal was dismissed. The appellant was to pay the respondent costs in the sum of $5000 plus disbursements including the reasonable travel and accommodation expenses of one counsel, to be fixed if necessary by the Registrar.

Orders