Ussher v Boag
[2014] NZHC 1895
•12 August 2014
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
CIV-2013-470-586 [2014] NZHC 1895
BETWEEN BRUCE USSHER
Appellant
AND
KERRY ELIZABETH BOAG Respondent
Hearing: 15 May 2015 Appearances:
S W Hughes QC for Appellant
M H Leaf for RespondentJudgment:
12 August 2014
JUDGMENT OF KEANE J
This judgment was delivered by me on 12 August 2014 at 1pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Young Carrington, New Plymouth
Fenton McFadden, Te Puke
USSHER v BOAG [2014] NZHC 1895 [12 August 2014]
[1] On 24 October 2013, in the District Court, Tauranga, Judge Marshall declined to strike out Kerry Boag’s claim against Bruce Ussher for $186,126.40, in which she contends that, as sole trustee of the Lady Elizabeth Enterprise Trust, in breach of trust he withdrew that sum in cash from the trust’s bank account on 29 March 2005; that he has not accounted to her for it as the sole beneficiary; and that he is answerable under eight distinct heads of claim.
[2] The Judge did not accept, as Mr Ussher contended, that he could not have caused Ms Boag any loss because, after he drew down the funds on 29 March 2005, they remained intact until 2 April 2005, when she agreed with Raureti Korako, who then had the cash and against whom she already has judgment, to invest that sum with an incorporation, Ngati Pakua Ki Te Waka UruAo, at 300 per cent interest each year payable at 25 per cent a month.
[3] The Judge held that, but for the withdrawal Mr Ussher made, Mr Korako could not have obtained the sum Ms Boag then invested; and that Mr Ussher could be answerable for having acted dishonestly in concert with Mr Korako. It is Ms Boag’s case that, as both Mr Ussher and Mr Korako knew, she was then mentally unwell.
[4] Nor did the Judge accept that Ms Boag’s claim, which she filed in the District Court on 4 April 2011, just over six years after she agreed to invest with the incorporation, was statute barred. As to her claim for fraudulent breach of fiduciary duty, and analogous causes of action in equity, he held that there was no limitation. As to her causes of action in tort, he held that the six year limitation period did not begin to run until her loss had accrued, after her demand on 22 June 2005 for the return of her investment proved futile. All were within time.
[5] On this appeal Mr Ussher contends that the Judge was wrong in each respect and that he stands no differently from the four others whom Ms Boag also sued originally, but against whom she has discontinued, or in respect of whom her claim has been struck out. The issue on this appeal then, whether in the two respects the subject of this appeal the Judge made any error of discretion: whether he took into
account any irrelevant factor, or failed to take into account any relevant factor, or exercised his discretion so unreasonably as to be plainly wrong.1
[6] This issue, in the two ways in which it arises on this appeal, must be set against the wider narrative in Ms Boag’s unusually detailed draft statement of claim in which she first sued not just Mr Ussher and Mr Korako, but the four others who no longer figure. That narrative extends between 1996 – 2005, throughout which Ms Boag alleges, she suffered depression and was vulnerable to undue influence.
Wider narrative
[7] In 1996 Ms Boag, who was living as she does still in Tauranga, alleges that she first met John Buchanan, whom she originally sued as second defendant, and his wife, through a church association, when he was in business in Mt Maunganui.
[8] In January 2000, Ms Boag alleges, she told Mr Buchanan she had $20,000 to invest. He introduced her to a man called Don Rae, whom he said was well placed to help her. As a result, on 13 January 2000, she paid $19,986.54 into a bank account in the name of a trust to be set up by Mr Rae, the Lady Elizabeth Family Trust, in return for an acknowledgement of the debt by deed.
[9] The trust was not set up until after 27 January 2000. She was the sole discretionary beneficiary. Her sister was the sole trustee. Relying on advice from Mr Rae and Mr Buchanan, Ms Boag alleges, she did not register the trust with the Inland Revenue Department or pay income tax. She understood that she had no duty to do so as a result of the operation of Maori sovereignty and of the common law.
[10] In 2002, Ms Boag alleges, she lodged two further sums with the trust,
$34,271 in April 2002, and $65,000 in July 2002 after selling a Taupo property on Mr Buchanan’s advice, each time receiving a further deed acknowledging the further debt.
[11] On 27 June 2003, Ms Boag alleges, Mr Buchanan withdrew $40,000 from the trust in her presence. On his advice, she invested it in a unit trust that immediately
1 Kacem v Bashir [2011] 2 NZLR 1 (SC).
went into statutory management. That money was lost to her for three years. As a result, she became more unwell. Also, on the advice of Mr Rae and Mr Buchanan, though she was a beneficiary she did not disclose to Welfare and Income New Zealand income from a business venture in which the trust had been involved since November 2001. That too, she alleges, was exacerbating.
[12] In January 2005, Ms Boag alleges, she registered the trust with the IRD, after taking legal and accounting advice. That caused a rift with Mr Buchanan. Mr Rae advised her to establish a new trust under God’s law to replace the registered trust. On 21 January 2005 Mr Rae had her execute a new trust deed (of which there is now no copy extant), creating the trust in issue; the Lady Elizabeth Enterprise Trust, naming Mr Ussher as sole trustee and herself as sole beneficiary.
[13] Ms Boag alleges that she did not know Mr Ussher. She appointed him trustee on Mr Rae’s advice. She then also paid Mr Rae $2,000 to resolve any issues with WINZ and the IRD. In February 2005 she closed down the original trust’s bank account and on 3 March 2005, on Mr Rae’s advice, opened a Taranaki Savings Bank account for the new trust and on 9 March 2005 deposited to its account $181,126.40.
[14] On 16 March 2005, without her knowing Ms Boag alleges, Mr Ussher attempted to withdraw that full sum and credit it to his own bank account, or take it in cash. On 22 March 2005, when the bank advised Ms Boag of this, she said he did not have that authority. The bank froze the account. On the bank’s advice she complained to the police.
[15] Late that night, Ms Boag alleges, Mr Buchanan telephoned her and said she had to travel to New Plymouth with him in the morning; Mr Rae had been wrongfully taken into custody and she had to draw down the new trust’s fund. She said she was not physically well enough to travel, but he said he would collect her at
7 am.
[16] On the following day, Ms Boag alleges, Mr Buchanan collected her and took her to Hamilton. Then Mr Rae’s wife then took her to New Plymouth. At the TSB Bank, New Plymouth, she met Mr Ussher and Terrence Healion, originally the third
defendant, neither of whom she had met before. They pressed her to draw down the trust fund and went into the bank with her to do so. However, the bank said that they lacked sufficient documents.
[17] That day, Ms Boag alleges also, at a meeting with Mr Ussher, Mr Healion, Mr Korako, the fourth defendant, Allan Berryman, and perhaps others, she was pressed as well to withdraw her police complaint about Mr Ussher and Mr Rae. Then or later, however, she was also told that Mr Rae was a fraudster and encouraged to invest the trust fund on the advice of Mr Korako.
[18] On 24 March 2005, Ms Boag alleges, she woke with chest pain. Mr Berryman took her to New Plymouth Hospital, where she remained for two days. After that she at first stayed with Mr and Mrs Healion. On 27 March 2005 Mr Korako collected her. On 28 March 2008 Mr Ussher and Mr Healion took her to the ANZ Bank, New Plymouth, to obtain the documents needed to draw down the trust fund.
[19] The bank, she alleges, did not have the documents called for and so that day Mr Ussher drove her back to her home in Tauranga and on 29 March 2005 took her into the ANZ Bank, Tauranga, to get the documents needed there. He then immediately returned to New Plymouth and drew down the complete fund,
$186,126.40.
[20] Mr Ussher, Ms Boag then alleges, handed the drawn down fund to Mr
Korako, who telephoned her on 1 April 2005 to say that he had it. On 2 April 2005
Mr Korako visited her and they counted the cash together. She then allowed Mr Korako to retain the fund and entered into the investment agreement with the incorporation on which Mr Ussher relies as a complete answer to her case against him.
[21] On 22 June 2005, Ms Boag alleges, she demanded that Mr Korako and Mr Healion return the fund to her and, in a letter dated 29 June 2005, promised to do so on 5 July 2005. He did not deliver on his promise. The Papamoa police contacted Mr Ussher on Ms Boag’s behalf, and she alleges, he agreed to see that the fund was
repaid on 19 July 2005. But he then said that he was not willing to do that unless the police officer first involved was present, and that officer was on leave. He also told the police to contact Mr Korako.
[22] Mr Korako, Ms Boag alleges, undertook this time to repay her on 24 July
2005, at the police station, as long as his lawyer was present. His lawyer later said that the payment would be by bank cheque. On 16 August 2005, however, Mr Korako had still not made good and his lawyer said Mr Korako first wanted a $900 fee. On 24 August 2005 Mr Korako asked for two further payments coming to $350.
[23] On 26 August 2005, Ms Boag alleges, she waived interest under the agreement, as long as the principal was returned to her. On 30 August 2005 she agreed to the deductions Mr Korako wanted. These concessions proved unavailing.
Strike out and dismissal principles
[24] The District Court has the ability, under rule 2.50 of the District Courts Rules
2009, to strike out a pleading in whole or part or to stay or dismiss the proceeding either generally or as to any claim to relief, if a pleading or claim for relief or the proceeding discloses no reasonable cause of action, is frivolous or vexatious, or is an abuse of that Court’s process.
[25] This rule is indistinguishable in principle from rule 15.1 of this Court’s Rules; and as to the first of those grounds, untenability, the Judge set out the principles that apply:2
A striking-out application proceeds on the assumption that the facts pleaded in the statement of claim are true. That is so even though they are not or may not be admitted. It is well settled that before the Court may strike out proceedings the causes of action must be so clearly untenable that they cannot possibly succeed … ; the jurisdiction is one to be exercised sparingly and only in a clear case where the Court is satisfied it has the requisite material …; but the fact that applications to strike out raise difficult questions of law, and require extensive argument does not exclude jurisdiction … .
2 Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267.
[26] To strike out or dismiss for untenability is a measure of last resort. It is not to be resorted to where there may be a cause of action, which has been insufficiently or inaccurately pleaded. A strike or dismissal is only justified when there is no cause of action disclosed, however pleaded.3
[27] Where, as is the case here, a strike out or dismissal application is also founded on the ground that one or more causes of action is time barred, there is this distinct threshold:4
… in order to succeed in striking out a cause of action as statute-barred, the defendant must satisfy the Court that the plaintiff’s cause of action is so clearly statute-barred that the plaintiff’s claim can properly be regarded as frivolous, vexatious or an abuse of process. If the defendant demonstrate that the plaintiff’s proceeding was commenced after the period allowed for the particular cause of action by the Limitation Act, the defendant will be entitled to an order striking out that cause of action unless the plaintiff shows that there is an arguable case for an extension or postponement which would bring the claim back within time.
[28] In logic, it seems to me, this second question is better resolved first. The dates of the critical events are undisputed. The issue is one of law. If Mr Ussher were to succeed on this point, he would succeed completely. The causation point needs only to be considered if Ms Boag’s claim, in whole or part, was brought within time.
Limitation issue
[29] Mr Ussher’s argument that Ms Boag’s claim against him is time barred applies only to those of her causes of action in tort. Her causes of action alleging a fraudulent breach of trust, however expressed, are not subject to any limitation.5 Nor
is there any limitation on equitable claims,6 subject to the Court’s ability to impose
by analogy a time bar on a claim for equitable relief,7 ‘when the fiduciary claim
parallels the statute-barred claim so closely that it would be inequitable to allow the
statutory bar to be outflanked by the fiduciary claim’.8
3 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [31].
4 Trustees Executors Ltd v Murray [2007] NZSC 27; [2007] 3 NZLR 721 (SC) at [33].
5 Limitation Act 1950, s 21(1).
6 Price v Smith [2004] 1 NZLR 354 (CA) at [20].
7 Limitation Act 1950, s 4(9).
8 Johns v Johns [2004] 3 NZLR 202 (CA) at [80].
[30] In this case that last possibility does not arise. Ms Boag’s primary claim is that Mr Ussher was party to a fraud on her, which involved on his part a deliberate breach of his duty as trustee. Whether her causes of action in tort, which fasten in their various ways on the same complaint, may be time barred is incidental. But as to those, Mr Ussher is no better placed.
[31] Ms Boag’s claims in tort had to be brought within six years after the date on which those causes of action accrued.9 But that is not absolute. If Ms Boag was under a disability, as she contends she was, the limitation period runs from the date on which her disability ceased.10 If any cause of action was concealed from her by fraud, as she may say it was, time runs from the date when she discovered the fraud.11
[32] The more immediate issue is when her causes of action in tort accrued. Mr Ussher contends that this must have been on 2 April 2005, the date on which she invested with the incorporation, because she never recovered the money invested. I do not agree. However ill advised that investment was, she obtained a chose in action, which she was entitled to treat as viable until Mr Korako and others failed to respond to her 22 June 2005 demands for repayment.
[33] In the result, I conclude, Mr Ussher has not demonstrated, as he has to do, that Ms Ussher’s claim is time barred in the primary sense and I have no need to consider whether the limitation period ought to be extended on the ground of disability or fraud.
Causation issue
[34] The critical issue is then whether the Judge was right to hold that Ms Boag’s causes of action against Mr Ussher, however expressed, are untenable because his part in withdrawing the trust fund ceased to have any causative significance immediately Ms Boag herself decided to invest with the incorporation on 2 April
2005, when the sum withdrawn remained intact.
9 Limitation Act 1950, s 4(1)(a).
10 Section 4.
11 Section 28.
[35] The Judge held that Ms Boag was entitled to hold Mr Ussher accountable for
‘acting in concert with Mr Korako to defraud … (her) … by … breaching his fiduciary duties to Ms Boag as the sole trustee’. He held that but for Mr Ussher drawing down the fund Mr Korako would never have received the funds and Ms Boag would never have been exposed to the invidious investment she contends Mr Korako and others induced her to make.
[36] If Ms Boag alleged only that Mr Ussher was negligent in breach of his duty as a trustee, as she alleges in one of her causes of action, she would have to demonstrate, as with any unintentional tort, that there was a sufficient causal nexus between his negligence and her loss, which was also reasonably foreseeable.12
[37] But most of Ms Boag’s causes of action allege, or derive from, her central allegation that in withdrawing the money Mr Ussher was in fraudulent breach of his fiduciary duty. Apart from her cause of action on that express basis, and those in equitable fraud and undue influence, her other causes of action alleging intentional related torts, come down to much the same thing. In those cases she is entitled to contend that she would have suffered no loss but for Mr Ussher’s breach.
[38] In Canson Enterprises Ltd v Boughton & Co, in a passage set out in the Guardian Trust case, McLachlin J said, in a case more analogous to this than that case was, ‘where the trustee’s breach permits the wrongful … acts of third parties, thus establishing a direct link between the breach and the loss, the resulting loss will be recoverable’.13 That, essentially, is what Ms Boag contends.
[39] On Ms Boag’s case as pleaded, therefore, the Judge was entitled to hold to be tenable the majority of Ms Boag’s causes of action founded on an intentional and dishonest breach of trust on Mr Ussher’s part. Whether he was right to hold to be tenable her cause of action in negligence, which must pass a more demanding causation and remoteness threshold, is more debatable. But that, I consider, is better
resolved by the Judge at trial.
12 Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 64 at 688.
13 Canson Enterprises Ltd v Boughton & Co (1991) 85 DLR (4th) 129 at [164].
Conclusion
[40] In the result, I find, the Judge was entitled to hold that Ms Boag’s claim against Mr Ussher stands apart from those she brought against the others she sued originally, against whom she discontinued or as to whom her claim has been struck out.
[41] Mr Ussher was the sole trustee of the trust of which Ms Boag was sole beneficiary, and she is entitled to contend that he drew down the trust fund in intentional breach of trust and exposed her to the loss she has suffered. But for his breach she would have suffered no loss. Her causes of action are not untenable. The Judge was also entitled to find that her causes of action are not time barred, either because they are not limited as to time or are within time.
[42] I dismiss Mr Ussher’s appeal. Ms Boag is entitled to costs in scale 2B, which are to be approved by the Registrar as are her disbursements.
P.J. Keane J
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