Tokley v Robinson HC Hamilton Civ-2009-419-136

[2011] NZHC 197

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2009-419-136

BETWEEN  GEORGINA MARY TOKLEY FREDERICK JAMES TOKLEY Plaintiffs

ANDCHRISTOPHER MICHAEL LLOYD ROBINSON

First Defendant

ANDJAYNE ROBINSON Second Defendant

Hearing:         6-9 September and 13 December 2010

Counsel:         WC Pyke for Plaintiff

RJ Hooker and T Tenille-Homes for First Defendant
No appearance for Second Defendant

Judgment:      10 March 2011 at 2:30 PM

JUDGMENT OF RODNEY HANSEN J

This judgment was delivered by me on 10 March 2011 at 2.30 p.m., pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ………………………….

Solicitors:           Norris Ward McKinnon, Private Bag 3098, Hamilton 3244 for Plaintiff

Vallant Hooker & Partners, P O Box 47088, Auckland 1144, for First Defendant

GEORGINA MARY TOKLEY V CHRISTOPHER MICHAEL LLOYD ROBINSON HC HAM CIV-2009-419-

136 10 March 2011

Introduction

[1]      The plaintiff (Georgina Tokley) is the mother of the second defendant (Jayne Robinson).  In February she and her late husband (Frederick Tokley) paid Jayne and her then husband, the first defendant (Chris Robinson), $280,000 to help them buy a farm at Te Akau, near Raglan.   The money came from the proceeds of sale of a property at Karaka owned by Mr and Mrs Tokley.  Mrs Tokley says the money was a loan to the couple.

[2]      Jayne and Chris have separated and the farm has been sold.  Jayne agrees that the  money should  be  repaid  from  the  proceeds  of  sale.    She  has  consented  to judgment.  Chris, however, disputes liability.  He says the money was not lent.  He also says he was led to believe Jayne had a half-interest in the Karaka property and half the money was hers.  He believes the other half was a gift from his parents-in- law.  If, contrary to his belief, Jayne did not have a half-interest in the money, he says the full amount was given to them by the Tokleys.

[3]      There  is  a  loan  document  signed  by Chris  and  Jayne  and  an  associated tenancy agreement giving Mr and Mrs Tokley the right to occupy a cottage on the farm.    Chris  says  that  because of literacy difficulties,  he signed  the documents without reading them or understanding what they said.  A plea of non est factum is raised.   If there was a loan evidenced by the agreements, Chris says the Tokleys acquiesced in non-payment or are estopped from recovering the money.

Purchase of farm property

[4]      The price of the Te Akau farm was $871,500.   This included $121,500 for stock.  Chris and Jayne were able to contribute $51,500.  It is not clear where this came from, although there seems to be agreement that some came from the sale of stock owned by Chris.   The balance of the purchase price - $820,000 - had to be obtained from other sources.

[5]      At the time they committed to the purchase of the Te Akau property, the Tokleys and Chris and Jayne agreed that the Tokleys would contribute the proceeds of sale of the property they owned at Karaka.  It was anticipated that it would sell for

$320,000.  It did not sell as readily as expected.  The sale price was $295,000 and settlement did not take place until after the purchase of the Te Akau farm was settled.   Chris and Jayne were able to arrange bridging finance of $320,000 with Westpac who made a first mortgage advance of $500,000.   On settlement of the Karaka property, the Tokleys were able to contribute $280,000.   The shortfall of

$40,000 was met by an overdraft from Westpac.

[6]      There were two houses on the Te Akau farm.   The Tokleys committed to putting the Karaka money into the property on the understanding that they would have the right to live in a small house referred to as “the cottage”.

The agreements

[7]      There are two instruments relating to these arrangements.   Both are dated

18 December 1994.  One purports to record a loan.  It reads as follows:

THIS AGREEMENT made the Eighteenth day of December One thousand nine hundred and ninety-four

BETWEEN                 FREDERICK  JAMES  TOKLEY  of  Ngaruawahia, Retired and GEORGINA MARY TOKLEY his wife (hereinafter called “the lendor”) of the one part

AND  CHRISTOPHER MICHAEL LLOYD ROBINSON Farmer,  and  JAYNE  ROBINSON  Horse  Trainer, both of Te Akau (hereinafter called “the borrowers”) of the other part

IN CONSIDERATION of the sum of Two hundred and eighty six thousand dollars

(the receipt whereof is hereby acknowledged) paid, lent and advanced to the borrower by the Lendor WITNESSES AS FOLLOWS:

1. THAT the said sum of Two hundred and eighty six thousand dollars shall be payable either:

(a)          Upon the sale of the farm property situated at R.D.1 Te

Akau South Road, Ngaruawahia.

(b)           Upon  the  termination  of  a  Deed  of  Partnership  made between the Borrower and known as the  ROBINSON PARTNERSHIP.

(c)           Upon the Borrower ceasing to jointly occupy the farm property situated at R.D.1 Te Akau South Road, Ngaruawahia.

2.THE Borrower shall pay one percent interest on the said principal sum to the Lendor in consideration of the Borrower entering into a Tenancy Agreement with the Lendor bearing the date the 18th day of December 1994.

3.NOTWITHSTANDING anything expressed or implied without prejudice to any other remedies which the Lendor may have by law or pursuant to this Agreement if the Borrower shall make a default in payment of any moneys owing hereunder when the same becomes payable or in performance or observance of any convenants or agreements herein expressed or implied then thereafter to call up demand payment of and recovery the whole of the principal sum for the time being owing hereunder.

4.THAT the Borrower will at any time before the said principal sum  as  aforesaid  has  been  paid  in  full,  if  the  payments  as aforesaid are in arrears, the Borrower shall have the right at any time to pay to the Lendor the said principal sum then remaining owing.

This  agreement  is  signed  only by Chris  and  Jayne.    There  is  no  provision  for execution by Mr and Mrs Tokley.

[8]      The  other  agreement  is  on  the  standard  form  for  residential  tenancies approved by the Real Estate Institute of New Zealand and the Auckland District Law Society.   The Robinsons are named as landlords and the Tokleys as tenants.   The following is inserted as a special condition:

That the Landlords and the Tenants doth mutually agree that this tenancy shall ennure whilst both the Landlords jointly reside  on the property of which the tenanted premises form part and in the event that the parties do not so jointly reside then the Landlords shall pay to the tenant the sums specified in a Deed of Acknowledgement of Debt bearing date the day of 18th December 1994.

All parties signed this agreement.

[9]      There is controversy as to the circumstances in which these agreements were signed.  Mrs Tokley and Jayne Robinson say they were both signed at the office of

Nigel Cooke, solicitor, on Sunday, 18 December 1994.  Mr Cooke had acted for Mr and Mrs Tokley when they bought the Karaka property but they had instructed another firm of solicitors, Rice Craig Solicitors, of Papakura to act on the sale.  It appears then that Mr Cooke was acting for the Robinsons.

[10]     Mrs Robinson said they saw Mr Cooke on a Sunday because it was the only day she and Chris were free of work commitments and because Mr Cooke was going away on holiday.  She and Mrs Tokley recall that Mr Cooke read the essential terms of the agreements to them before they signed.  It appears that Mr Cooke’s secretary or a legal executive witnessed the Robinsons’ signatures on the loan document.

[11]     Mr Robinson said the parties never went to Mr Cooke’s offices together and the documents were not signed in his presence.   He said he could not recall the circumstances in which he put his signature to the documents but he is clear that he did not read either document before he signed.  He has learning disabilities which make it difficult for him to read and comprehend written materials.  All he can recall is “talk about a tenancy agreement” and Jayne telling him “what [the documents] were and [that] I just needed to sign them”.  Otherwise, he professes no recollection of the circumstances in which the documents were signed.

[12]     I  have  no  hesitation  in  accepting  the  evidence  of  Mrs  Tokley  and Mrs Robinson as to the circumstances in which the documents were signed.   I am satisfied  that  both  documents  were  signed  by  all  parties  at  the  same  time  at Mr Cooke’s offices.  I do not accept Mr Robinson’s evidence that he did not know what he was signing.   The documents are evidence of a very simple arrangement which, for reasons I will further explain, I am satisfied were understood and agreed to by all parties before the agreements were signed.  In short, that arrangement was that the Tokleys would lend their daughter and then son-in-law the proceeds of sale of the Karaka property (expected to yield $286,000) to enable them to buy the farm. In return they would have the right to live in the cottage on the farm rent-free.

[13]     On the facts as I have found them, the plea of non est factum cannot succeed. Drawing on the discussion of Tipping J in Bradley West Solicitors Nominee Co Ltd v Keeman[1] the elements which the defence would have to establish are:[2]

[1] Bradley West Solicitors Nominee Co Ltd v Keeman [1994] 2 NZLR 111 (HC) at 120 - 121.

[2] See Hung v Yu HC Auckland CP13/99, 9 February 2000 at [42].

1Mr Robinson must have signed the document believing it to have a particular character or effect.

2The  document  must  in  reality  have  a  radically  different character or effect thus creating a wholly different result from that which was understood by Mr Robinson.

3Mr Robinson’s mistaken belief must have resulted from an erroneous explanation or description of the document given to him by someone else.

4Mr Robinson must be able to show that, notwithstanding his error, he acted with all reasonable care in the circumstances.

[14]     I do not accept that Mr Robinson signed the documents believing them to have a wholly different character or effect from what they actually had.  There was no  mistaken  belief  or  erroneous  explanation  or  description.    The  circumstances which might have supported a plea of non est factum simply do not exist.

[15]     In light of these findings, it is unnecessary for me to review the evidence concerning Mr Robinson’s reading difficulties.  It included expert evidence called by the defence, to which Mr Pyke objected as irrelevant and unlikely to provide substantial help in understanding other evidence in the proceeding.[3]   I accept that Mr Robinson has reading difficulties but I reject the suggestion that they led him to sign the documents under a material misapprehension as to their meaning and effect.  I am satisfied that, based on prior discussions with his wife and the Tokleys and what was said at Mr Cooke’s office, he knew full well what the documents were intended

to record.

[3] Evidence Act 2006, s 25(1).

[16]     The drafter of the loan agreement (presumably Mr Cooke) appears to have intended it to take effect as a deed of acknowledgement of debt.  That is how it is described in the tenancy agreement and there appears to have been no provision for the lenders to sign it.  However, the witness who attested the signatures of Mr and Mrs Robinson did not add his or her place of abode and calling or description as required by s 4(1) of the Property Law Act 1952.  In other respects, too, there are indications that it may not have been intended to take effect as a deed.  In the recitals it is described  as  an  agreement  expressed to  be made between  the lenders and borrowers.   Whatever the intentions of the drafter, the failure to comply with the formal requirements and to show an intention to be bound by deed, prevent the

document taking effect as a deed: see Morley v Spencer.[4]

[4] Morley v Spencer [1994] 1 NZLR 27 (CA).

[17]     Although  not  a  deed,  and  not  signed  by  Mr  and  Mrs  Tokley,  the  loan agreement read together with the tenancy agreement may be nevertheless evidence of the agreement reached by the parties.   The tenancy agreement, signed by all parties, incorporates the loan agreement reference and appears to evince an intention to be bound by the terms recorded in the two documents.

[18]     Mr   Pyke   submitted   that,   read   together,   the   documents   rebutted   the presumption  of  gift  relied  on  by  Mr  Robinson.    Although  doubts  have  been expressed as to the continuing application of the presumption when property is transferred by parents to a child,[5] I proceed on the basis that there must be evidence showing that there was no intention on the part of Mr and Mrs Tokley to benefit their daughter and son-in-law by way of gift.

[5] See, for example, the discussion in Young v Young [2000] NZFLR 128 (FC) at 131 – 134 and N v N [Relationship property: loan] [2010] NZFLR 161 (HC) at [46].

[19]     In closing submissions Ms Tenille-Homes submitted that the document could not be relied on for this purpose as it had been drawn up by the Robinsons’ solicitor. She also referred to Mrs Tokley’s statement in evidence that “I never thought I

would need a loan because that was family” as showing that the Tokleys had no

interest in signing a loan document.   She contended they were concerned only to secure a tenancy.

[20]     That is not my interpretation of the evidence.   I consider it probable that Mr Cooke   intended   that   the   loan   document   would   operate   as   a   deed   of acknowledgement of debt.   That is why he described it as such in the tenancy agreement and made no provision for Mr and Mrs Tokley to be parties to it.  The time pressures which attended the execution of the documents are likely to explain why, in other respects, the instrument was drawn as a simple agreement.   I am satisfied, moreover, that  the documents gave effect to the joint intention of the parties.

Earlier and subsequent conduct

[21]     For the purpose of determining the intention of the parties (and assessing their credibility), I have been assisted by evidence of the parties both before and after the execution of the documents.  It is permissible to have regard to such conduct for the  purpose  of  determining  whether  or  not  a  loan  agreement  was  concluded.[6]

Friends of Chris and Jayne Robinson were able to give helpful evidence in this regard.

[6] Fletcher Challenge Energy Ltd v Electricity Corp of New Zealand Ltd v [2002] 2 NZLR 433 (CA).

[22]     Michelle Paterson knew both Chris and Jayne from when they were single. She and her husband had remained friendly with them both.  Mrs Paterson said that when Chris and Jayne were thinking about buying the Te Akau property, they told her that Jayne’s parents were going to help them out.  They told her that Mr and Mrs Tokley intended to sell their Karaka property and lend Chris and Jayne the money so they could purchase the farm.  They explained to her that a condition of the loan was that the Tokleys could stay in the cottage rent-free until they died or the property was sold.  Mrs Paterson said both Chris and Jayne were present when they talked about this.  Both together and separately they confirmed on later occasions that a loan had

been made that would have to be repaid.

[23]     Mrs Paterson was clear in her recollection that the loan was discussed before the farm was bought because she and her husband had borrowed money off her husband’s parents for the same purpose. She described it as “a copycat-type thing”.

[24]     Aimee Scott worked for Chris and Jayne Robinson off and on for about ten years.  She lived on the farm when she was working there.  She overheard or was part of numerous conversations regarding family financial arrangements.   She understood from those conversations that Mr and Mrs Tokley had lent Chris and Jayne money to help them purchase the farm on the basis that they could live on the farm rent-free and would get their money back if it was ever sold.  She said Chris and Jayne often talked about these matters with her.

[25]     Aimee’s mother, Katherine Needham, met Chris and Jayne through Aimee and became friendly with them.  The two families were both involved in eventing horses.   She was present at the farm one weekend when there was a discussion regarding family arrangements.  She understood from the conversation that Mr and Mrs Tokley were going to sell the property they occupied on the farm and put the proceeds  into  Chris  and  Jayne’s  property.    After  Chris  and  Jayne  separated, Mrs Scott said Chris told her that if he and Jayne had to sell the farm, they would have to pay back Mr and Mrs Tokley.

[26]     Following the separation, Chris Robinson instructed his solicitors to write to his wife.  The letter, of 22 February 2008, reads in part:

I am informed that there is an 85 acre property currently being marketed.  I have not seen the agreement but Christopher states that there was a loan from  your  parents,  when  you  acquired  the  property  and  that  the  first

$200,000.00 from the sale proceeds is to be paid back to your parents. There is a mortgage of approximately $180,000.00 to be repaid and the writer’s

understanding is that the property is being marketed at $800,000.00.

[27]     Mr Robinson said the letter was written after a meeting with Jayne.  He said she had been “hammering me” about repaying the money she and her parents had put into the farm and making him feel guilty for leaving her and the children.  He said Jayne convinced him that, to be fair, “we should all get $100,000 each” – “all” being the Tokleys and himself and Jayne.  He said his solicitor did not send him a

copy of the letter before it was sent so he did not realise how it had been worded.  He said it did not reflect his instructions.

[28]     I prefer Mrs Robinson’s account of what happened.   She said they in fact discussed the matter after the letter had been sent.   She reminded Chris that her parents had actually loaned them $280,000.   He argued for a three-way division which, based on a valuation of $800,000 and deducting outstanding indebtedness, would see the three parties ending up with $200,000 each.   She said his attitude changed soon afterwards and, in subsequent conversations, he said he would not agree to any money being paid to Mr and Mrs Tokley.

[29]     Mr Robinson denied being a party to any conversations in which liability to repay the money was acknowledged.  He also pointed to actions by Jayne and the Tokleys which were inconsistent with the existence of a loan.   The financial statements of the Robinson farming partnership showed the funds provided by the Tokleys as money introduced by Jayne.  In applications for further finance, there was no disclosure of a loan from the Tokleys.  There is also reliance on the acquiescence of the Tokleys to the sale of the farm cottage and their relocation to a converted wool shed.   This was a one of a number of steps taken to sell off parts of the farm to enable the Robinsons to retire debt.

[30]     I accept Mrs Robinson’s explanation for omitting reference to the loan in accounts and loan applications.  She was concerned that disclosure of the debt would have eroded the couple’s equity position and would likely have deterred potential lenders.  Partly owing to adverse conditions for sheep farming, the Robinsons had struggled to keep their head above water financially.  They met these difficulties by selling off parts of the property and further borrowings including, at one stage, borrowing from Mr Robinson’s parents.

[31]     Mrs Tokley said she and her husband were appreciative of the difficulties faced by Jayne and Chris.   They went along with the sale of the cottage and the move to the woolshed in order to assist them to extricate themselves from their financial difficulties.   Mrs Tokley said that if she and her husband had demanded

repayment of their loan, Chris and Jayne would have been compelled to sell the farm.

[32]     I am left in no doubt that the signed documents gave effect to the joint intention of the parties and that Mr Robinson was well aware that the $280,000 was lent to him and Jayne on the terms recorded.

Amount of loan

[33]     Chris Robinson’s fallback position is that, if there was a loan, it was not for the  sum  of  $280,000  but  for  half  that  sum.    That  is  because  he  claims  Jayne Robinson had a half-interest in the Karaka property.    The documentation notwithstanding,  he  says  half  the  loan  money  was  Jayne’s  contribution  to  the purchase and is not, therefore, repayable.

[34]     Mr Robinson and his parents all said Jayne told them around the time of the marriage that she had a 50 per cent interest in the Karaka property.  Chris said this satisfied him that their respective contributions to the farm purchase would be about equal, as he had stock and savings of roughly equivalent worth.   As evidence supporting his belief, he pointed to regular monthly transfers of $450 which were made from Jayne and his joint account after they married and before the purchase of the farm.  These transfers were described in bank statements as “TFR TO F AND G TOKLEY ASB MTGE”.  Chris said these payments could be explained only on the basis that Jayne had a beneficial interest in the property.

[35]     Mrs Tokley adamantly denied this.   She said that after they married and before the farm purchase, Chris and Jayne were living with her and her husband at Karaka paying board which she recalled was $450 per month.   She thought this might explain the payments.

[36]     Jayne also denied any interest in the Karaka property.  She also believed the automatic bank transfers to be board.   Jayne also refuted Chris’ claim that her alleged half interest in the Karaka property represented her contribution to the purchase of the farm.  She had been in business as a horse trainer operating from her

parents’ house – indeed, it had been bought with that in mind – and she said she contributed   substantial   assets   associated   with   the   business   to   the   marriage partnership.   She claimed her income from the business paid the outgoings on the farm and kept the family afloat when the farm itself proved to be uneconomic.

[37]     I do not accept that Jayne Robinson had any interest in the Karaka property. There is no apparent reason why her parents would have effectively gifted her such an interest.   There is no suggestion that she contributed anything to the purchase whereas  they  utilised  their  life’s  savings.     There  clearly  was  some  sort  of arrangement whereby Jayne and Chris compensated the Tokleys for the use of their property.  The payments for the ASB mortgage appear to be part of that, more than likely in lieu of board as both Mrs Tokley and Jayne said.  They were, in any event, only made for two months.   Whatever the explanation, they provide no basis for establishing a claim to an interest in the property.  I am satisfied that conversations which might have suggested that Jayne had an interest in the property were not accurately recalled or were misconstrued.

Estoppel

[38]     In support of his claim that Mr and Mrs Tokley are estopped from recovering the loan, Mr Robinson relied on:

The fact that the loan document was signed only by Chris and Jayne and the absence  of any reference to the loan in other records, including the farm

partnership accounts.

The Tokleys’ failure to seek repayment as parts of the farm were sold off and

their equity eroded.

The Tokleys’ failure  to  seek  security  by  way  of  mortgage  or  caveat,  in contrast to the steps taken by Chris’ parents, who required a second mortgage when they lent money to Chris and Jayne in 1997.

The Tokleys’ failure to protest when the cottage was sold and they were

required to relocate to less satisfactory accommodation.

[39]     As Mr Pyke submitted, what is being argued is an implied abandonment of the loan contract by the second of two methods identified by Lord Brandon in Paal Wilson & Co A/S v Blumenthall[7] in which he said:[8]

The concept of the implied abandonment of a contract as a result of the conduct of the parties to it is well established in law: see Chitty on Contracts (23rd  ed (1968), vol. 1, p. 577, para. 1231, and cases there cited).  Where A seeks to prove that he and B have abandoned a contract in this way, there are two ways in which A can put his case.  The first way is by showing that the conduct of each party, as evinced to the other party and acted on by him, leads necessarily to the inference of an implied agreement between them to abandon the contract.  The second method is by showing that the conduct of B, as evinced towards A, has been such as to lead A reasonably to believe that B has abandoned the contract, even though it has not in fact been B’s intention to do so, and that A has significantly altered his position in reliance on that belief.  The first method involves actual abandonment by both A and B.  The second method involves the creation by B of a situation in which he is stopped from asserting, as against A, that he, B, has not abandoned the contract (Pearl Mill Co Ltd v Ivy Tannery Co Ltd [1919] 1 K.B. 78.”

[7] Paal Wilson & Co A/S v Blumenthal [1983] 1 AC 854 (HL).

[8] Ibid, at 914.

[40]     The evidence does not indicate abandonment of the loan contract by either of the available means.  It might be thought that the Tokleys’ continued support of their daughter and son-in-law to the detriment of their own position went beyond the demands of family loyalty.  They may have been well advised to take a leaf out  of Chris’ parents’ book.  But in doing everything they could to help Jayne and Chris through their difficulties, there is nothing to indicate that the Tokleys led them to believe that they had abandoned their rights to repayment.  Jayne’s evidence is, of course, to the contrary and so are the actions taken by Chris after separation.

Acquiescence

[41]     Relying on substantially the same facts and  circumstances, Mr Robinson claimed that Mr and Mrs Tokley acquiesced to the non-payment of the alleged loan.

Ms Tenille-Homes pointed out in closing submissions that even after Chris and Jayne separated in September 2007, the Tokleys did not seek repayment.  A letter of demand was not sent until 22 July 2008.

[42]     The case for acquiescence is also without foundation on the facts.  Mr and Mrs Tokley did not acquiesce in a violation of their rights.   In remaining on the property and electing not to demand repayment or seek security, the Tokleys did not act inconsistently with the loan and tenancy agreements.  They demanded repayment promptly after vacating the property.   Moreover, Chris has not shown that any inaction on the part of the Tokleys made it inequitable for them to enforce the debt.

Result

[43]     The plaintiff succeeds.  She is entitled to judgment in the sum of $280,000, together with interest in accordance with the loan agreement at the rate of 1 per cent per annum from 18 December 1994 until repayment of the principal sum.

[44]     The plaintiff is entitled to costs.   If the parties are unable to agree, I will consider memoranda.