Thomas v Thomas
[2015] NZHC 2517
•13 October 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-001235 [2015] NZHC 2517
BETWEEN MARGARET MAY THOMAS
Plaintiff/Respondent
AND
MURRAY JAMES THOMAS AND THOMAS BROOK AS TRUSTEES OF THE JAMAY FAMILY TRUST Defendants/Applicants
Hearing: (On the papers) Counsel:
S Jefferson QC and J Hawker for Plaintiff/Respondent
P Kennelly for Defendants/ApplicantsJudgment:
13 October 2015
JUDGMENT OF VENNING J
ON APPLICATION TO WITHDRAW AN ADMISSION
This judgment was delivered by me on 13 October 2015 at 4.45 pm, pursuant to Rule 11.5 of the High
Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Wynyard Wood, Auckland
Kennelly Law, Orewa
Copy to: S Jefferson QC, Auckland
THOMAS v THOMAS [2015] NZHC 2517 [13 October 2015]
Application
[1] The defendants apply for leave to withdraw an admission of claim they made in this proceeding.
General and procedural background
[2] In June this year the plaintiff commenced an application for summary judgment against the defendant trustees. The claim was based on a deed of acknowledgement of debt (the deed). Under the deed the trustees acknowledged the trust was in debt to the plaintiff in the sum of $350,000.
[3] The deed also provided for interest to be paid if demanded by the end of
February each year.
[4] The plaintiff subsequently forgave $27,000 leaving a balance due of
$323,000. The plaintiff also demanded payment of one year’s interest of $16,150.
The trustees failed to pay which led to the application for summary judgment.
[5] Prior to the scheduled first call of the summary judgment application on 18
August 2015 the parties reached an agreement. The defendants agreed, inter alia, they would pay the sums demanded (and interest) in exchange for the plaintiff not entering judgment and on the basis the defendants would be given four weeks to pay the agreed amounts.
[6] On the basis of the agreement, which was communicated to the Court by counsel for the plaintiff on 18 August, the matter was adjourned for four weeks to 15
September 2015.
[7] Pursuant to the agreement the defendant trustees paid $339,150 to the
plaintiff’s solicitors (including the $16,150 interest) before the next call.
[8] On 15 September, when the matter came before Asher J, His Honour noted that although the defendants had paid the $339,150 an issue had arisen between the
parties in relation to the plaintiff’s claim for interest at the judicature rate on the total
sum of $339,150 from the issue of proceedings.
[9] The Judge directed the parties to exchange submissions. The matter was adjourned to be revisited on 22 September. Asher J then went on to deal with costs on the application for summary judgment fixing costs on a 2B basis in the plaintiff’s favour.
[10] The day before the matter came back to the Court on 22 September the defendants applied to withdraw the admission of claim on the grounds that:
(a) the interest of $16,150, which they had agreed to pay, was not payable; and
(b)the plaintiff was not entitled to interest under the Judicature Act 1908 on the total sum claimed (other than on the balance of principal of
$323,000).
[11] When the matter was called before the Court on 22 September counsel for the plaintiff sought time to respond. Counsel both agreed that, given the relatively limited extent of the sum in dispute, the matter could be dealt with on the papers following an exchange of submissions.
[12] Judgment has not been entered as yet for the plaintiff against the defendants as the defendants have in fact paid the sum of $339,150. If the defendants are granted leave to withdraw the admission presumably it would be open for them to then pursue recovery of the $16,150 interest paid to the plaintiff or to at least offset it in part against the costs awarded against the defendants to date.
The approach to this application
[13] Rule 15.16(2) provides an admission can be withdrawn only with leave of the
Court. In P v Bridgecorp Limited (in receivership and in liquidation)1 the Supreme
Court confirmed that the rule, r 15.16(2), confers a general discretion on the Court to
1 P v Bridgecorp Limited (in receivership and in liquidation) [2013] NZSC 152.
be exercised in the interests of justice. The Court is not constrained by the considerations in r 15.16(5) that apply to setting aside a judgment entered on an admission. The Supreme Court observed:
[98] … we consider that r 15.16(2) confers a general discretion on the court, to be exercised in the interests of justice. That is not to say that an application to withdraw an admission will be granted simply because the maker of the admission has changed his or her mind. A reasoned case for withdrawal must be made out. … if the court is satisfied that it is in the interests of justice to do so, it is entitled to grant leave to withdraw an admission even though a ground similar to those in r 15.16(5) has not been made out.
[14] The defendants argue leave should be granted to withdraw the admission because they paid the $16,150 for interest by mistake. They say the payment was not properly due under the acknowledgement of debt. They argue the interests of justice support leave being granted.
[15] The relevant clause in the acknowledgement of debt is:
2.2 Interest
If on or before the last day of February in any year the Lender demands payment of interest on the unpaid part of the First Loan for the period or year ending on the next following 31st March, then the Borrowers will pay interest for that period or year at the rate (which shall not exceed the interest rate prescribed from time to time under the Judicature Act 1908) and in the manner specified in such demand.
[16] The plaintiff made demand for the principal, together with interest for the year ended 31 March 2015, on 20 February 2015. The defendants argue that as the demand was made in February 2015, interest for the year ended 31 March 2015 is not payable. They argue interest is only payable for the next year, from 1 April 2015
to 31 March 2016. Counsel referred to the clause as a Marshall Clause.2 Marshall
involved a challenge to an assessment by the Commissioner of Inland Revenue in the following circumstances. Mr Marshall had transferred shares to a trust. Payment for the shares was satisfied by the trust providing Mr Marshall with an equitable mortgage. Interest was payable if Mr Marshall made demand by a due date. The
relevant clause provided:
2 Re Marshall (deceased), Public Trustee v Commissioner of Inland Revenue [1964] NZLR 905; [1965] NZLR 851.
2. That so long as the said sum of £43,968 or part thereof shall remain unpaid upon demand in writing signed by the mortgagee and delivered to the trustees on or before the 8th day of the month of March in each year during the continuance of this security the mortgagors will pay to the mortgagee interest thereon or on so much thereof as shall from time to time be unpaid
… in respect of the period of twelve months then last past such interest to be
payable annually on the 8th day of March in each year in respect of which
demand is made as aforesaid, …
[17] The issue before the Court in Marshall’s case was whether the Commissioner was entitled to assess Mr Marshall for gift duty for the years in which he had not demanded payment.
[18] The issue in the Marshall case was quite different. The clause was in different terms to the present one. Ultimately the meaning of such a clause is a matter of interpretation in each particular case. In the present case the clause provides for demand to be made on the last day of February in any year with interest being payable for “[the] year ending on the next following 31 March.” The year ending on the next following 31 March after February 2015 was 31 March 2015.
“Next” is defined in the Oxford English Dictionary as:3
Designating the time, season, following directly after the one described
And “following” is defined, as relevant:
That comes after or next in order or in time; succeeding, subsequent, ensuing.
[19] In a way the “following” could be said to be otiose in the present case but as I read the clause the clear intent is that if demand is made in February of a particular year then interest is payable for the full financial year ending 31 March of that year. The Marshall case does not say anything different.4
[20] Nor does the other authority referred to by the defendants assist. Mr
Kennelly referred to the following passage from the Privy Council decision of New
Zealand Forest Products Limited v The Accident Corporation:5
3 Oxford English dictionary (2nd ed, online ed).
4 Re Marshall (deceased), Public Trustee v Commissioner of Inland Revenue, above n 2.
5 New Zealand Forest Products Limited v The Accident Corporation [1995] 3 NZLR 257, at 259.
It is common ground, as Ellis J found, that employers who began business after 1 April 1982 paid no levy until 31 May after 1 April which followed their commencing business. On 31 May in the next following year and in subsequent years they paid a full year's levy. They thus paid levy only on wages actually paid during the operation of the scheme. …
(emphasis added)6
[21] Mr Kennelly relied on the emphasised passage. Again that case and clause must be read in context. The case concerned the interpretation of statutory amendments to the Accident Compensation Employee Levy Regulations which were subsequently incorporated into the Accident Compensation Act 1982. In particular, s 43 of the Accident Compensation Act 1982 provided:
43. Statements by employers — (1) Every employer who is required to furnish, pursuant to and for the purposes of section 353(1)(e) of the Income Tax Act 1976, a reconciliation statement as defined in that Act shall, within the time in which he is required to furnish that reconciliation statement, deliver a statement of the amount of earnings as employees that have been paid by him in the year to which that reconciliation statement relates and at the same time pay in relation to every such statement a levy calculated in accordance with subsection (3) of this section.
[22] By s 353(1)(e) of the Income Tax Act 1976 (as amended) every employer was required to deliver the reconciliation statement by no later than 15 May each year. It is clear from its context that the statement provided by 15 May each year related to the earnings paid for the year ended the immediately preceding 31 March.
[23] The passage does not support the interpretation advanced by Mr Kennelly. The passage confirms that if an employer had begun business on say 1 September
1985 they were required to furnish a reconciliation statement by 15 May 1986 relating to the period from 1 September 1985 to 31 March 1986. The reference in the passage to “on 31 [15] May in the next following year and in subsequent years they paid a full year’s levy” in this context simply acknowledges that the first period might be a partial period. The next following year would be the year after 31 [15] May 1986, i.e. the year ended 31 March 1987. In context it is the next year after the first partial year of business. In the present case, the reference to the next following
31 March after the demand in February 2015 is a reference to 31 March 2015.
6 Although the passage cited refers to 31 May the legislation refers to 15 May. Further, in terms
of the definition of “year” in the Income Tax Act 1976, year was 1 April to the following 31
March.
[24] On that basis I do not consider the interpretation raised by the defendant to be reasonably arguable. Accordingly there is no basis to grant the application.
[25] On the related point, this is not a case of the plaintiff having interest on interest. The plaintiff is entitled to interest on the agreed sum paid to her of
$339,150 which was due on demand until the agreed sums were paid in full on 24
August 2015. The plaintiff seeks interest for a lesser period from the issue of the proceeding to 24 August 2015.
[26] However, even if I am wrong on the interpretation issue, I consider there are other factors relevant which lead me to the same conclusion that it is not in the interests of justice to allow the withdrawal of the admission at this stage.
[27] The terms of the admission of claim were negotiated between counsel after the issue of these proceedings. The exchange of correspondence annexed to counsel for the plaintiff ’s submissions discloses that while the defendant initially opposed it, the plaintiff was seeking:
(1) $323,000;
(2) $16,150 – being the interest incurred on the debt for the period ended
31 March 2015;
(3) interest on the total debt until payment is received; and
(4) costs.
[28] The plaintiff ’s solicitor set those terms out in an email of 17 August. They were included in the admission of the cause of action prepared by the solicitors. On the basis of the defendants’ agreement to those terms the plaintiff’s solicitor undertook:
to hold the signed admission of cause of action in escrow and not file it …
– before 15 September 2015; and
– without giving you 5 days notice of my intention to file the admission of cause of action.
[29] The plaintiff’s solicitor’s email of 17 August went on to state:
4.If the above is completed by 9am tomorrow then the matter can be adjourned for settlement to take place. The adjournment is on the basis that payment of the full judgment debt will be required before
15 September 2015. If payment is not received before 15 September
2015, then we will file the admission of cause of action in the High
Court and obtain Summary Judgment.
5. Please note the adjournment period is for 4 weeks as you requested
…
[30] Counsel for the defendant signed the admission and confirmed in an email:
Attached is the signed Admission for you to hold on the terms and conditions set out in your earlier email. I will post the original to you.
[31] I accept the submissions made by counsel for the plaintiff that, even though the exact sum claimed for interest under the deed was not referred to in the statement of claim, it was nevertheless negotiated as a term of judgment not being entered on
18 August when the application for summary judgment was first called. There was no mistake of fact or law in the terms of the admission. The $16,150 was payable. The defendants have been represented by counsel throughout. They had time to take advice before confirming the admission and subsequently paying the total sum including the year’s interest of $16,150.
[32] It cannot be said the plaintiff has acted fraudulently or wilfully or with reckless disregard of the defendants’ rights. Nor is the plaintiff acting contrary to any duty in seeking to enforce her rights under the admission.7
[33] There was no unfairness in the settlement. At the very least it is clearly arguable that interest for the year is properly payable. The defendants obtained the benefit of avoiding judgment for the full sum and a further four week period to make payment in consideration for entering the admission on the terms required by the
plaintiff.
7 High Court Rules, r 15.16(5).
[34] For those reasons the defendants’ application to withdraw the admission of claim is dismissed. If necessary the plaintiff may file the admission of claim and seal judgment in its terms (after providing a credit for the payment of $339,150).
Costs
[35] The plaintiff has succeeded on this application. The plaintiff seeks costs on an increased or uplifted basis. While the defendant has failed on the application to set aside I am not satisfied that the defendants’ argument was so without merit or justification as to warrant an increased cost award. The fact the defendants have failed to pay the existing costs order does not support an uplift either. If the defendants continue to fail to pay the further interest and the cost awards the plaintiff has her remedies.
[36] Costs to the plaintiff on a 2B basis in the sum of $4,906.00. That award is in addition to the costs previously awarded by the Court.
Venning J
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