Strathern v Earle HC Nelson CIV-2007-042-000051
[2007] NZHC 1823
•11 June 2007
IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY
CIV-2007-042-000051
BETWEEN ALISON JAYNE STRATHERN Plaintiff
AND DAVID ANTHONY EARLE ALEXANDER JAMES JEREMY GLASGOW
TIMOTHY BASKIVELLE HARLEY
BRIAN JAMES MAURICE NELSON SUSAN RITCHIE
Defendants
Hearing: 7 June 2007
Appearances: J Hunter for Plaintiff
J R Parker for Defendant
Judgment: 11 June 2007
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN Upon Application for Summary Judgment
[1] This is an application for summary judgment. The facts are important in this case. If there is no important or material dispute regarding these then the matter may be considered appropriate for decision upon a summary judgment application. The converse applies: a conflict of evidence over material or important factual issues usually means a summary judgment application should fail.
[2] Even if, at the end of the day, the affidavit evidence provides a clear direction on factual issues, and assuming the law may point directly in an applicant’s favour, in some instances, rare they may be, summary judgment should be refused if further reflection might produce a different result.
[3] This case concerns a professional relationship between Alison and the law firm of Glasgow Harley. Alison and her husband, Michael, had separated. They
STRATHERN V EARLE AND ORS HC NEL CIV-2007-042-000051 11 June 2007
agreed to sell the former matrimonial home in which Michael still lived. As was customary, Michael’s solicitors, Glasgow Harley, acted as solicitors for Michael and Alison upon the sale. Alison continued to be represented by her own solicitors, Stallard Hunter, concerning relationship property matters. Although Glasgow Harley acted for Michael in those same affairs, they acted for both Alison and Michael on the property sale. Typically correspondence between the respective firms of solicitors expressed the expectation of the parties in the outcome of the property sale being settled.
The facts
[4] The sale of Alison and Michael’s home was settled on about 31 October
2006. That day, Stallard Hunter for Alison wrote by facsimile to Glasgow Harley:
Re: Strathern Relationship Property
We understand that your client is intending today to sign the transfer. Before we release the signed transfer to you we will require the usual undertaking to hold all proceeds on interest bearing deposit undispersed, save real estate agent’s commission, rates, mortgages and costs of conveyancing. Please provide your undertaking by return and we will deliver the transfer.
[5] Mr Glasgow, on behalf of Glasgow Harley, responded by noting on the facsimile he received:
We undertake upon the terms described in this fax.
[6] By letter dated 6 November 2006 Glasgow Harley wrote to Stallard Hunter:
…
As you will note, we are holding the balance of the funds on deposit until the relationship property matters are finalised.
[7] A statement attached to the letter noted the sum of about $900,000 was received by them from the sale.
[8] In or about early January 2007 a written property division agreement was circulated between the parties. It bears the date 8 January 2007, but other evidence
confirms that after some amendments it was not completed until about 24 January
2007.
[9] The agreement was prepared by Alison’s solicitors. For our purposes, relevant provisions include:
1.1 The Family Home
The former family home situated at 131 Aniseed Valley Road has been sold. After payment of mortgages etc the proceeds are to be divided equally.
1.2 Monetary Adjustment
Michael shall from his share of the proceeds of the former family home pay Alison the sum of $163,500 to equalise division and as agreed in a private agreement between them.
7.1 The parties acknowledge:
c. They agree to accept these provisions in full satisfaction and discharge of all claims by either of them whether against the other or his or her estate in respect of relationship property and separate property pursuant to the provisions of the Property (Relationships) Act 1976 or otherwise however the obligation may arise.
g. They have received independent legal advice before signing this agreement, and that they have explained to them the effect and implications of this agreement.
[10] The sum of $163,500 in clause 1.2 was hand-written in over a previously typed sum of $187,000. The amendment had been made by Michael when he consulted Mr Glasgow regarding the agreement. At that time, Michael initialled the change and signed the agreement. The agreement notes at its conclusion:
I, Jeremy Glasgow of Nelson, Solicitor hereby certify that prior to the execution of this agreement by Michael Strathern I fully explained the effects and implications of it to him.
[11] Apparently on or about 24 January 2007 Alison, in the presence of her solicitor, initialled the change to $163,500 and then she, too, signed the agreement.
[12] On or about 26 January 2007, Alison was to settle the purchase of another property for herself. She required the use of her share of the proceeds from the sale of the relationship property, for this purpose.
[13] By facsimile dated 25 January 2007, Glasgow Harley wrote to Stallard
Hunter:
Re: Alison Strathern
We have today deposited to your National Bank account… the sum of
$619,467.99 as evidenced by the attached funds transfer confirmation.
This represents half the sale proceeds plus the Relationship Property adjustment for Alison Strathern as shown in the statement which we also attach.
[14] The statement confirmed the particulars of payment made by way of bank link electronic transfer. The facsimile was signed by M V Cooke – Accountant.
[15] Before 7 p.m. on 25 January 2007 Mr Glasgow cancelled the payment, his advice of this to Alison’s solicitor was contained in an email timed at 23:33, 25
January 2007. It said:
We have cancelled the payment made by electronic transfer. First thing tomorrow we shall transfer to your trust account the amount our client believes both he and Alison had agreed upon. Our client spent some considerable time going through the figures contained in Mike’s email which you say you did not read. I am instructed that Alison had a clear understanding of what was intended, which clearly indicates she was mistaken as to the mathematical impact of the agreement as drafted. We trust that we can resolve this issue without further stress for our respective clients.
[16] On the morning of 26 January 2007, Alison’s solicitor sent a facsimile to Glasgow Harley warning them of the consequences of their cancellation of the funds transfer. It reminded Glasgow Harley that Alison required to complete a house purchase that day. It demanded the firm rectify its default.
[17] Later, an electronic transfer report dated 26 January 2007, and timed at
9:10:19 a.m. records the payment of a sum of $537,717.99 from Glasgow Harley to
Stallard Hunter.
[18] A second report dated 26 January 2007 and timed at 9:29:30 a.m. records the payment of a sum of $374,217.99 from Glasgow Harley to Michael.
[19] The total of the aforesaid two payments meant there was nothing further remaining in Glasgow Harley’s trust account that was available for payment to either Michael or Alison.
Considerations
[20] It will be immediately clear from this summary of undisputed facts that Mr
Glasgow and his firm are in a position of jeopardy. Unquestionably:
a) They acted for both Alison and Michael on the sale of the relationship property.
b) They undertook to hold the sale proceeds until relationship property matters were finalised.
c) They attended upon Michael when he signed the relationship property agreement which purported to resolve all matters in issue between Alison and Michael, and they certified they had explained its effect and terms to him before he signed it.
d)Having made an electronic transfer of funds in an amount which included about $163,500 of a half-share payable to Michael, they reversed that transfer and instead the following day remitted to Alison’s solicitors a sum equal to $163,500 plus half of the balance.
[21] The reversal of the electronic transfer would appear to be in breach of s89 of the Law Practitioners Act 1982, which requires that any money received by a solicitor on behalf of any person shall be held by that solicitor for that person and to be paid to that person as the client directs. In addition the Solicitors Trust Account Rules 1996 (Rule 5) permits a solicitor to make transfers or payments from a client’s trust money only if the client’s instruction or authority for the transfer has been obtained.
[22] At the core of Alison’s claims in this case is the fact that having correctly calculated what was due to her in terms of the relationship property agreement, and
having paid that sum to her account, Glasgow Harley reversed the transfer process and sent her a lesser sum and paid the balance instead to Michael. Glasgow Harley had undertaken to hold her funds to her account. Instead they paid some of these to Michael, and she says in doing so breached their undertaking to her. As well, they breached duties owed to her that were contractual and fiduciary.
[23] Alison’s claim in contract is based on the proposition that agreements concluded under the Property (Relationships) Act preserve the normal law relating to the enforceability of contracts. Clearly that is so. Further, the form of the agreement complies with s4(1) of the Property Law Act 1952 making the agreement a deed and enforceable as such. When there is a written contract parole evidence may not be introduced to add to, vary or contradict the written agreement. Also, if it is claimed the contract contains a mistake then the claimant should seek relief upon an application under the Contractual Mistakes Act 1977. Alison also claims that in receiving the funds from the sale, Glasgow Harley did so as her agent. From that situation a fiduciary relationship arose, and therefore Glasgow Harley could not do any act which would be in conflict of its duty to her. I agree this is probably so if the terms of the agency contract require an express or implied term that the funds be held on trust.
[24] Whether or not they are in breach of duties as a trustee, Alison claims nevertheless her relationship with Glasgow Harley was one of contractual retainer to act on her behalf until completion of the business for which they were retained, ie the funds due to her were paid to her.
[25] Alison’s claim against Glasgow Harley is not without precedent, nor precluded by the sometimes testing strictures applicable to summary judgment claims. The submissions advanced for Alison suggest Mr Glasgow’s case is not improved but rather made worse by his explanation for reversing the electronic transfer.
[26] By his affidavit, Mr Glasgow acknowledged an obligation to hold the nett proceeds of sale until a full and final resolution of all relationship property matters had been achieved by the parties. He said after his firm made the direct link
payment to Alison’s solicitors’ trust account in the later afternoon of 25 January
2007, Michael rang the firm’s accountant to find out the figure to be paid to him by way of balance. When told of it, Michael protested it could not be correct because it had been agreed Alison would receive $163,500 only more than him. Mr Glasgow deposes he immediately rang Alison’s solicitor to explain that a mistake had been made. When the solicitor did not agree he realised the only option was for him to reverse the payment. He did not do it lightly. He knew it was a very serious step to take. He explained that the following morning he arranged for the payment to Alison of $535,000. He said:
This sum reflected that portion of relationship proceeds which was not in dispute. This enabled the plaintiff to settle the purchase of her property. It was in effect a pragmatic disposition leaving any dispute between the parties as to division of the balance of relationship property to be resolved at a later date.
[27] Mr Glasgow denies that he acted in breach of a contract or a retainer when he withdrew funds paid to her from her solicitor’s trust account without her authority and justification. He said that retainer was limited to the conveyance of the sale of the relationship home. As to the charge that he failed to honour his undertaking to Alison, he stated it was his belief that after he had reversed the direct link and received the money back he was no longer in breach of his undertaking. He said:
That is because the terms of the undertaking were plain. I undertook not to disperse the funds until final agreement had been reached by the parties.
[28] As to his actions in paying funds to Alison the following day, he said:
I was concerned to ensure that the plaintiff was not disadvantaged by what had happened so I made arrangements for a distribution. I believe I would have been justified in holding the entire proceeds until the disagreement had been resolved but I did not do this because I wanted to try and move the parties quickly towards a constructive and amicable resolution.
[29] What is perhaps remarkable about this explanation is the fact that it contains no explanation about why he paid to Michael the funds he had on 26 January 2007 withheld from Alison. Indeed, in his affidavit he makes no disclosure at all of that additional payment to Michael. Instead, and having acknowledged there was a disagreement which required resolution between the parties, Mr Glasgow has probably pre-empted settlement of that disagreement by paying the disputed funds to
Michael. Clearly, this is not an appropriate approach. Mr Glasgow was probably prematurely acting on his view of what the true agreement of the parties was. Probably he should have paid nothing to anyone, but that, as he says, would have prevented Alison from completing her own purchase at that time.
Judgment
[30] There may be good cause to question the actions of Glasgow Harley and to reflect upon the reasons why they have not, until this hearing, acknowledged payment of the disputed amount to Michael. Nevertheless I am bound to the conclusion urged upon me by Mr Parker that notwithstanding the provisions of clause 1.2 of the agreement, there may never have been a final agreement reached between the parties. That such an agreement had been reached and was expressed in clear words to be so in their deed is at the core of all of Alison’s claims in this proceeding. The fact that Mr Glasgow acted as he did, with the consequences that were incurred for Alison, is a matter for another day and another forum. This Court cannot consider granting summary judgment against Glasgow Harley in an amount which it may be proved was not due to Alison pursuant to the agreement she reached with Michael over a division of relationship property.
[31] Unsurprisingly, the Court does not have any evidence from Michael before it. His position, and that of his former solicitors, would likely be in conflict if this Court should enter judgment against the latter.
[32] Curiously though, there is no evidence from Alison which directly asserts the terms of the agreement are a record of her understanding of the bargain reached with Michael. Of course, she need not do so, for on its face the provisions of clause 1.2 are quite clear. Clearly, Mr Glasgow and his firm were of the same view when the first electronic transfer was processed.
[33] However, there is more to Michael’s assertion of a mistake than the bald assertion that a mistake had been made. The evidence is contained in two emails written by Michael. In the first, dated 27 November 2006, to Alison, he wrote to her (about a figure of $140,000 then being discussed between them for payment to her):
Thanks for your time today. I wanted so much to agree in the meeting to the
140K, but I need to just map it out in my mind first and look at all the
deposits and large value items out there that need consideration…
Just as an example and based on a total estate value of $1,300,000 we would have $650,000 each. After dividing everything up 50/50 I propose to make an adjustment to I would get $650,000-$75,000= $575,000 and you would get $650,000+$75,000= $725,000 so you will be $140,000 better off.
…
[34] In response to Michael’s request for comments, Alison replied:
Thank you, thank you, thank you.
[35] And then, by an email dated 18 January 2007 circulated shortly prior to that occasion when the figure of $163,500 was hand-written in the final form of the agreement, Michael wrote to Mr Glasgow a letter which he copied to Alison and to Alison’s solicitor:
We have reached an agreement regarding the division of property and Alison has signed the agreement as you know as per the copy (with one amendment that I have informed Alison about that she is aware will need her counter signature) that you already have.
… Alison needs to know by MONDAY latest if the money will be available for her to purchase her house on the 26th or she will need a mortgage. I am reaffirming yet again I am not stopping her in any way releasing the money, and it is available for use to purchase our respective houses freehold.
…
We have agreed to resolve the issues not covered in the agreement… as the amounts are not great and should not stop us going ahead and releasing the
$900K with a $163,500 balance up of funds in Alison’s favour (needs amending in the agreement from $187,000 to $163,500) to balance up diff… as privately agreed between the two parties.
Calculations are as follows:-
… $163,500 total additional to Alison
House sale $900,000 less $163,500 equals $736,500 for equal division…
This would provide each party with the following amounts released from the sale of the house:-
Alison. $736,500/2 + $163,500 = $531,750
Mike. $736,500/2 = $368,250 ($163,500 less than Alison)
It is my expressed desire that the figure of $531,750 (plus interest) is released without delay from the Glasgow trust account as soon as possible… and sent to… the offices of Stallard Hunter to enable Alison to purchase her new house without need for a mortgage and use the $368,250 to pay off my mortgage with the BNZ and release the remaining to my bank.
I trust this is in order.
[36] Plainly, the substance of this email is at odds with the provision originally inserted in the relationship property agreement and which was amended only in respect of the amount inserted in clause 1.2. Plainly also, the terms of the relationship property agreement should, in the normal course of events, have been challenged by appropriate application under the Contractual Mistakes Act. However, there is no incentive for Michael to do this as he has now received that which he says he always expected. Further, Mr Glasgow’s failure to retain the disputed sum in his trust account pending resolution of the issue imposes a burden upon Alison should she pursue her claim for those funds she says were wrongly paid to Michael.
[37] Notwithstanding those matters, I remain of the view that it would not be proper against the background of disputed fact to grant summary judgment in respect of an amount which, as against Michael, Alison may not prove was owing to her by him.
Orders
[38] The application for summary judgment is dismissed.
[39] Costs are reserved. I am unlikely to make an order for costs if Alison pursues recovery of the amount she says is still due to her. In that event I would require the costs of the summary judgment application to be fixed in the outcome.
Solicitors:
Stallard Hunter Lawyers, Nelson
Morrison Kent, Wellington
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