Waller v Crerar HC Christchurch Ap.42/00

[2001] NZHC 502

IN THE HIGH COURT OF NEW ZEALAND
CHRISTCHURCH REGISTRY AP.42/00

BETWEEN ROBIN VESSEY WALLER of Christchurch, Estimator
Appellant

AND FRASER VENNING CRERAR of Rangiora, Solicitors
Respondent

Hearing: 12 June 2001

Counsel: D. M. Lester for Appellant
D. H. Hicks for Respondent

Judgment: 15 June 2001

JUDGMENT OF FRASER J.

[1] This is an appeal from a decision of the District Court giving judgment for the respondent in an action for damages brought by the appellant.

[2] The background to the case is matrimonial property litigation between the appellant and his former wife: Waller v Hider [1997] NZFLR 936 (HC) and Waller vHider [1998] 1 NZLR 412 (CA).

[3] The circumstances so far as relevant may be summarised as follows. Early in 1992 the appellant and his wife, Ms Hider, purchased a small block of farmland at Mt Thomas taking title as tenants in common in equal shares. The purchase price and expenses totalling $136,000 were funded as to $50,000 by an advance on first mortgage and as to the balance of $86,000 by a payment by the appellant. Although the classification of these funds, for the purposes of Matrimonial Property Act 1976, had earlier been the subject of dispute, the appellant contending that they were his separate property, it was accepted by Mr Lester that they were matrimonial property. The wife executed a deed of acknowledgement of debt to the appellant in the sum of $43,000, the deed reciting that this was “to enable her to make an equal cash contribution”. The debt was acknowledged to be due on demand. Mr R. D. Williams of the respondent firm acted for the appellant and Ms Hider in connection with the purchase and deed of acknowledgement of debt.

[4] The deed of acknowledgement was envisaged as an interim measure to be followed with a Matrimonial Property Agreement once a house had been built on the property. On two earlier occasions in respect of other properties there had been formal agreements complying with the requirements of s.21 of the Matrimonial Property Act and dealing with the financial contributions made by the parties. In the event, however, in respect of the Mt Thomas land the intended house was not built and no Matrimonial Property Act Agreement was completed.

[5] In the latter part of 1993 the appellant and Ms Hider separated and eventually the appellant commenced proceedings under the Matrimonial Property Act. The principal item of contention was the Mt Thomas property. At the hearing in the Family Court the appellant, although maintaining that the fund from which the advance was made was separate property, took the position that the deed of acknowledgement of debt was void in that it did not comply with s.21 of the Act. His primary claim was that the whole of the Mt Thomas land was his separate property.

[6] The Family Court accepted the contention that the deed of acknowledgement was void and, although no application to that effect was made by the appellant, determined that it should not be validated pursuant to s.21(9).

[7] Although the avoidance of the deed disposed of that issue, the Court also recorded that the debt was deductible pursuant to s.20(5) and, in effect, that meant that the debt was an asset of the appellant which in itself is matrimonial property and that accordingly, as the debt was deductible, the asset and the debt cancelled each other out.

[8] On the primary issue, contrary to the appellant’s submission, the Court held that the Mt Thomas land was matrimonial property and apportioned it as to 60 per cent to the appellant and 40 per cent to Ms Hider.

[9] The appellant appealed to the High Court principally on the issue of the classification of the Mt Thomas property and the apportionment made by the Family Court. In respect of those matters the appeal was dismissed. Leave to appeal to the Court of Appeal was refused by the High Court and the Court of Appeal.

[10] Subsequently, the appellant commenced proceedings in the District Court against the respondent solicitors alleging breach of contract and breach of duty of care on Mr Williams’ part in that, (as pleaded in the amended statement of claim):

“. . . the acknowledgement of debt . . . was legally ineffective and unenforceable meaning the plaintiff lost his right as a creditor as the acknowledgement of debt did not comply with s.21 of the Matrimonial Property Act 1976 and was therefore void.”

It was further alleged that the respondent was in breach of its fiduciary duty to the appellant in that, (as pleaded in the amended statement of claim), it:

[a] Failed to obtain the plaintiff’s informed consent to the defendant acting in the conflict of interest situation.

[b] Failed to advise the plaintiff to seek independent legal advice.

[11] The appellant sought to recover his loss in respect of the debt the subject of the deed of acknowledgement (reduced at the hearing from $43,000 to $25,850 to allow for the 60:40 apportionment made by the Court), general damages for distress and anxiety and damages in respect of the legal fees incurred in the Matrimonial Property litigation.

[12] The District Court Judge recorded in his judgment that in so far as there were conflicts in the evidence he much preferred the evidence for the defence.

[13] The District Court found:

[a] That no breach of contract or breach of duty of care or of fiduciary duty had been established.

[b] That the fund from which the appellant’s payment was made was matrimonial property, not separate property, and that accordingly, the appellant had suffered no loss as a result of the avoidance of the deed of acknowledgement of debt.

[c] That even if a deed complying with the requirements of s.21 had been completed and it merely contained the same terms as the deed of acknowledgement of debt, the position would have been the same.

[d] To achieve what the appellant wanted it would have been necessary not only to give the advance the character of separate property but to provide that it would be a personal debt and not deductible in any division of matrimonial property.

[e] The Judge concluded that the wife would not have entered into such an agreement and observed that in any case, even if she had, it could have been reviewed by the Court.

[14] On the appeal it was argued for the appellant:

[a] That the District Court Judge erred in finding that there was no breach of duty in contract or tort or breach of fiduciary duty.

[b] That there was no basis in the evidence for his finding that Ms Hider would not have entered into a s.21 agreement to give effect to the true intention of the parties at the time.

[c] That the status of the fund was irrelevant to the basic issue, the approach taken by the District Court was too technical, the parties wanted to create an enforceable debt and a prudent solicitor would not have dealt with a debt in a s.21 agreement without making it separate property.

The appellant sought a reversal of the District Court judgment on the issue of liability with judgment for the appellant for $25,850 in respect of the loss resulting from the avoidance of the deed of acknowledgement of debt and some reasonable allowance or contribution at the Court’s discretion towards the legal fees incurred in respect of the matrimonial property litigation.

[15] The District Court Judge’s observation that, even if liability were established, the circumstances were not such that an award of damages for mental stress could be made, was not challenged.

[16] Mr Hicks made submissions in support of the District Court judgment.

[17] The relevant authorities were cited to and discussed by the District Court Judge in his judgment. There was no dispute as to the law applicable. It was accepted that the case involves an application of established principles to the particular facts of the case.

[18] It is my view that even if the appellant could show that the respondent was in breach of its duties as pleaded, he cannot succeed in his claim because the District Court Judge correctly found that he has suffered no loss as a result of the avoidance of the deed.

[19] The District Court Judge put it this way in his judgment:

“70. It follows that the $86,000 was matrimonial property prior to its application to the purchase of the Mt Thomas Road farm and was not, at material times, the separate property of the plaintiff. Accordingly, the avoidance of the Deed did not alter that position and the plaintiff has suffered no loss as a result of the avoidance of that Deed. At material times, the $86,000 simply was not the plaintiffs separate property.

71. The plaintiff seems to be maintaining that his then wife would have signed a valid matrimonial property deed or agreement which not only preserved as separate property the advance of $43,000 but would have provided that it would be her personal debt and not deductible in any division of matrimonial property. That seems to be nothing more [than] conjecture. I accept the evidence of the wife before me that she would not have entered into such a matrimonial property agreement. In any case such a s.21 Agreement could have been reviewed by the Court.

72. I am conscious of the submission that with the benefit of independent advice, the husband and wife would have entered into a valid deed of matrimonial property on the same terms as the deed of acknowledgement of debt. However, it seems to me, as is submitted by Mr Hicks, that a document in the same terms as the Deed, but complying with the formalities of section 21(4) to (6) of the Matrimonial Property Act 1976, might not have given the plaintiff any greater protection for his alleged separate property. It would have been to the same effect as the deed of acknowledgement of debt; and that, properly construed, did not create separate property rights in the debt.

73. Frankly, when I stand back and look at the situation overall, I think it most unlikely that Ms Hider would have executed the type of further matrimonial property deed envisaged by the plaintiff. Also, I consider that this case and, probably, much of the matrimonial property litigation has ensued because the plaintiff is a person who will not take “no’ for an answer. Without going into the detail on this point in Mr Hicks’ final submissions, I think it is most unlikely that Ms Hider, properly and independently advised, would have signed any deed or agreement in terms of the Matrimonial Property Act 1976 which created separate property rights for the plaintiff in respect of the so-called advance of $43,000. Is she had declined to execute such a document then the funds in the plaintiff’s bank account would have remained matrimonial property. That was exactly the result reached in the matrimonial property litigation. Whether or not the plaintiff paid that money towards the purchase of the Mt Thomas farm would not have affected the classification of the money in the bank account.”

[20] Mr Lester challenged the basis of these findings. First he contended that Ms Hider’s evidence in the course of her cross-examination was that in substance she was prepared to agree to a debt to the appellant of $43,000 and that the form of the agreement was not important. She was asked with reference to the deed of acknowledgement of debt:

“Q. Would you accept that practically the form of that agreement wasn’t important.

A. I would agree.

Q. And so if it had been suggested that that $43,000 be recorded in a Matrimonial Property Act agreement it wouldn’t have worried you.

A. It wasn’t an issue because we were in the process of selling our home and we anticipated an early sale and that issue would have been resolved at that time.

Q. But at the end of the day how it was written up wasn’t of significance to you.

A. No it wasn’t.”

[21] Secondly, Mr Lester argued that the status of the funds was not an issue between the parties at the time, she was happy to create the debt and had the acknowledgement been included in a binding Matrimonial Property Act Agreement then that would be the beginning and the end of matrimonial property issues in relation to the debt.

[22] While the answers referred to provide a basis for Mr Lester’s contentions, I think Mr Hicks is right when he says that they related to her attitude at the time she signed the acknowledgement, without the benefit of independent legal advice. He submitted and I agree, that it is another matter altogether to say that, after receiving proper advice, she would have signed an agreement which not merely acknowledged the debt, but categorised it as a personal debt, not deductible in a division of matrimonial property, and which would have the effect of converting matrimonial property to separate property.

[23] In my view the District Court Judge’s conclusion that she would not have signed such an agreement was not lightly reached, is cogent and should be upheld.

[24] For these reasons the appeal is dismissed.

[25] The appellant is to pay the respondent’s costs on the basis of Category 2 Band B.