Young v Hunt
[2019] NZHC 2822
•1 November 2019
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE
CIV-2019-454-24
[2019] NZHC 2822
BETWEEN THOMAS CHARLTON YOUNG as trustee of the Twiss Family Grandchildren’s Trust First plaintiff
THOMAS CHARLTON YOUNG as
beneficiary of the Twiss Family Grandchildren’s Trust
Second plaintiffAND
JENNIFER HUNT
Defendant
Hearing: 17 October 2019 Appearances:
P Reardon for plaintiffs Defendant in person
Judgment:
1 November 2019
Reissued:
7 November 2019
REASONS FOR JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
Introduction
[1] This is a summary judgment application. The claimant is Mr Thomas Young (Mr Young). He sues in two capacities. First, as the sole trustee of the Twiss Family Grandchildren’s Trust. Second, as a beneficiary of the Trust. As a beneficiary, he sues not only on his own behalf but on behalf of the other beneficiary, his brother, Mr Simon Young. There is evidence before the Court that he has his brother’s authority to do so. This is unusual, but I can see no obvious impediment to Mr Young suing on his brother’s behalf. What it means is that Mr Young would hold any judgment he might obtain on trust for his brother as to his brother’s interest. The defendant is Mrs Jennifer
YOUNG v HUNT [2019] NZHC 2822 [1 November 2019]
Hunt. She is the widow of a former trustee of the Trust, Mr John Hunt, who, it is alleged, stole trust funds.
[2] At the conclusion of the hearing on 17 October 2019, I entered summary judgment for Mr Young against Mrs Hunt in the sum of $146,175 and made other orders sought by him. I adjourned his application for summary judgment on terms. I indicated that I would give my reasons in writing in due course, and I now do so.
Background
[3] The Trust was settled on 1 April 1991. The settlor was Mr David Barnes. Originally, there were three trustees, Mrs Margaret Twiss and her children, Mr Richard Twiss and Mrs Edith Young. The principal object of the trust was to make provision for Mrs Margaret Twiss’ grandchildren. Only Mrs Young had children. Her children are Mr Young and Mr Simon Young, the claimant and his brother. Several classes of discretionary beneficiaries were identified in the trust deed, but it is unnecessary to consider these here because the date of distribution has come and gone and Mr Young and Mr Simon Young are the final beneficiaries.
[4] The trustees changed from time to time over the years but during the period of time that is important in this case — between June 2011 and July 2015 — the trustees were Mr Young and Mr Hunt. Over that time, it is alleged, Mr Hunt took for his own benefit a total of $181,175 from the trust fund. Of that sum, $146,175 was deposited to an ANZ account owned jointly by Mr and Mrs Hunt (the ANZ 18 account). The balance was deposited to an ANZ account owned solely by Mr Hunt (the ANZ 01 account).
[5] In his statement of claim, Mr Young sues Mrs Hunt for recovery of the full amount of those funds. He pleads five causes of action. By notice of application dated 8 April 2019, supported by affidavits sworn by himself and an accountant, Mr John Fluker, he seeks summary judgment pursuant to pt 12 of the High Court Rules 2016. The defendant has filed a notice of opposition dated 27 August 2019 supported by an affidavit sworn by herself.
[6] For the purposes of his summary judgment application, Mr Young in his capacity as the trustee of the Trust relies on his first cause of action, unjust enrichment, and limits his claim to the $146,175 paid into the joint account owned by Mr and Mrs Hunt — the ANZ 18 account. In his capacity as a beneficiary (on behalf of himself and his brother) he relies on a proprietary tracing remedy and seeks a declaratory order and other orders that will enable him to trace the funds paid by Mr Hunt into his own account — the ANZ 01 account.
The affidavit evidence
[7] Mr Young’s own affidavit does little more than describe the background to the claim in general terms. He exhibits a copy of a document signed by his brother and dated 19 December 2018 authorising him to act for him in this proceeding. Mr Fluker’s affidavit contains a comprehensive analysis of the Trust’s bank records.
[8] In her affidavit, Mrs Hunt corrects Mr Fluker as to the ownership of the joint account. He had believed it to be an account owned by her, but it is plain from her evidence that it was a joint account owned by Mr Hunt and her up until Mr Hunt’s death on 13 July 2015 when she became the sole owner by survivorship. At some later stage the bank transferred the account into her name, though of course that did not affect its ownership. Apart from that, Mrs Hunt says that on her husband’s death she was devastated to find that their financial position was parlous. She says that she has had to sell the family home, is now living in rented accommodation and that her only income is her pension. She says that she was completely unaware that her husband had stolen any money from the Trust, having assumed that all money coming into the household during his lifetime was as a result of earnings or the realisation of investments. She describes their marriage as a “traditional” one in which Mr Hunt had responsibility for financial matters. She levels criticism at Mr Young, saying that as a trustee he was careless or negligent in relation to the Trust’s affairs. Finally, she says that she does not think that her husband stole as much money as is alleged.
Mr Young’s two causes of action
[9] Mr Reardon advanced the two causes of action on which Mr Young relies — in different capacities — for the purposes of summary judgment carefully and
thoroughly. Although, when she came to talk about the case, the defendant did not challenge the bases on which the claims were advanced, it is important to outline these.
Unjust enrichment
[10] In relation to the first plaintiff’s claim, Mr Reardon’s starting point was Laws of New Zealand, which describes unjust enrichment as a restitutionary remedy the object of which is “to deprive the recipient of a gain that the law deems he or she should not keep because he or she will be unjustly enriched.1
[11] He referred me to the English Court of Appeal’s judgment in Boake Allen Ltd v Commissioner for H M Revenue and Customs, where the Court referred to the underlying principle of an unjust enrichment claim as being:2
… not a claim for compensation for loss, but for recovery of a benefit unjustly gained and retained by the person enriched at the expense of the claimant.
[12] Returning to Laws of New Zealand, Mr Reardon relied on the author’s analysis of the elements of unjust enrichment:3
(1)Proof of the defendant’s enrichment by receipt of a benefit;
(2)A corresponding deprivation by the plaintiff;
(3)The absence of any juristic reason for the enrichment.
[13] Mr Reardon then referred me to a recent example of the application of these principles in this Court by Associate Judge Smith in Wellington Tenths Trust v Skiffington and the judge’s adoption in that case of the analysis set out in Equity and Trusts in New Zealand, which I too adopt:4
Unjust enrichment refers to an event whereby a defendant is unjustly enriched at the plaintiff’s expense, the response to which is restitution of the enrichment to the plaintiff. What makes an enrichment unjust, in the sense that it requires restitution, has been the subject of much debate and disagreement. Traditionally, accepted instances of unjust enrichment include a mistake made by the plaintiff, lack of capacity on the part of the plaintiff, compulsion of the plaintiff, and a failure of consideration for which the transfer is made. All of
1 Peter Twist Laws of New Zealand Restitution (online ed) at [1].
2 Boake Allen Ltd v Commissioner for HM Revenue and Customs [2006] EWCA Civ 25 at [175].
3 Laws of New Zealand, above n 1, at [9].
4 Wellington Tenths Trust v Skiffington [2018] NZHC 1261 at [144], citing Andrew Butler (ed)
Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, 2009) at [42.2.2].
these grounds suggest that unjust enrichment is concerned with otherwise effective transfers that should nevertheless be reversed because the plaintiff’s consent was, although objectively manifest, in some way substantively defective or absent.
Liability for unjust enrichment does not depend on the commission of a wrong. It is not concerned with the quality of the defendant’s conscience or his conduct. The right to restitution is triggered by the receipt of an enrichment in circumstances that put it within one of the unjust categories. Liability to make restitution is therefore strict.
[14] Having regard to Mrs Hunt’s position that she was unaware of her husband’s defalcations and the fact that, whilst $146,175 was paid into a joint account (and therefore received by both her and her husband), the balance was paid into an account in which Mrs Hunt had no interest, Mr Reardon submitted that the unchallenged position was that Mrs Hunt received $146,175 and was enriched by that amount to the detriment of the trustees as the legal owners of the trust fund.
[15]Mr Reardon continued:
4.12In the present case, the absence of a juristic reason for the enrichment is also established. Neither the defendant or her husband were beneficiaries of the … Trust. The only conceivable basis on which such a payment might have been lawfully made by the Trust to Mrs Hunt, or to Mr Hunt, was if either of them had performed services at the request of the Trust. That would involve the production of an invoice by the defendant for each of the payments (the GST legislation requires every invoice for services to be in writing and include GST). Mrs Hunt does not raise that defence.
4.13The plaintiff seeks summary judgment against the defendant in the sum of $146,175.00, together with interest from the date of death of Mr Hunt, 13 July 2015, being the date that Mrs Hunt became the sole owner of the joint bank account, by survivorship.
[16] Mr Reardon also helpfully analysed the first cause of action through the lens of the traditional quasi contractual claim for money had and received. However, the view I take is that unjust enrichment is now sufficiently firmly established as a part of New Zealand law that it is unnecessary in a case such as the present to reinforce an unjust enrichment analysis by reference to any other basis of analysis.
[17]Mr Reardon then turned to the points raised by Mrs Hunt.
[18] It will be recalled that the first point Mrs Hunt made was that she was ignorant as to her husband’s actions. As already said, the plaintiff accepts that for the purposes of this summary judgment application.
[19] However, as Mr Reardon submitted, the commentators and the cases are clear that knowledge is not a necessary component of this cause of action.
[20] Mr Reardon referred me in particular to the Canadian case of International Longshore & Warehouse Union v Ford, which, as he said, is comparable with the present case.5 Mr Ford was the secretary-treasurer of a local branch of the International Longshore & Warehouse Union. That organisation’s arrangements with its bankers required that cheques bear two authorised signatures. Over time a practice developed whereby Mr Ford would arrange for another authorised signatory to sign a series of blank cheques so that he would have funds available to him as need arose. Using these cheques, Mr Ford misappropriated CAD 1.69 million to feed his drug and gambling addictions. He paid close to CAD 900,000 into a joint bank account owned by himself and his wife, which became intermingled with their own funds and was used for general household expenditure. Mr Ford’s wife knew nothing of her husband’s defalcations. When the Union sued Mrs Ford, one of the defences she raised was her own lack of knowledge.
[21] The British Columbian Court of Appeal addressed this argument between [32] and [39] of the judgment. At [36], the Court held:
… that money deposited into a joint account is money “received” by all account holders for the purposes of money had and received.
[22] And, at [39]:
In summary, it is my conclusion that the cause of action for money had and received is available in circumstances where the money was paid into the joint account, regardless of the lack of knowledge of the innocent joint account holder.
5 International Longshore & Warehouse Union v Ford 2016 BCCA 226.
[23] I am satisfied that the principle identified in International Longshore & Warehouse Union v Ford properly reflects the law in this country and applies to the circumstances of this case.
[24] The second point raised by Mrs Hunt was the accusation that Mr Young, as a trustee during the period of time over which Mr Hunt stole from the trust account, was careless or negligent.
[25] As Mr Reardon submitted, this proposition must come down to a suggestion that Mr Young did not take sufficient interest in the Trust’s affairs and had he done so this would have prevented or reduced the loss.
[26]In responding to this, Mr Reardon said:
[Mr Young] has done nothing wrong. He has not contributed to the theft in any way. This was not a trading trust. It was the passive accountholder of money in a bank account. In the absence of any resolutions to assist the beneficiaries, there was nothing for Mr Young to do. If he had a fault, it perhaps lay in trusting his fellow trustee to be honest.
[27] As he submitted, in International Longshore & Warehouse Union v Ford, the British Columbian Court of Appeal dismissed a similar defence, that is to say, that the Union had enabled Mr Ford to carry out his thefts by not maintaining a proper level of supervision. At [41] of the judgment, the Court said:
In my view, this “carelessness” defence cannot succeed. First, it must be recalled that this cause of action is nearly always based on conduct of the plaintiff that is said to be mistaken. In cases of money had and received by mistake, the plaintiff nearly always bears some degree of fault, but is entitled to the return of the money because it would generally be against conscience to permit the recipient to keep money he or she was never entitled to. There is no authority for the proposition that carelessness precludes a payor from reclaiming mistakenly paid money. On the contrary, the authorities indicate that such carelessness is not a factor.
[28]Similar observations were made by the English Court of Appeal in
Credit Suisse (Monaco) SA v Attar in relation to evidence of Monegasque law.6
6 Credit Suisse (Monaco) SA v Attar [2004] EWHC 374 (Comm) at [93].
[29] Mrs Hunt also says that she does not believe that the amount stolen by her husband was as much as alleged. There is no evidential foundation for this. It would appear to be no more than an intuitive belief on Mrs Hunt’s part. It can have little weight when compared with the careful analysis offered by Mr Fluker. I accept Mr Fluker’s analysis.
[30] Finally, although Mrs Young has not pleaded or otherwise raised a change of position defence, Mr Reardon analysed whether such a defence might be raised against Mr Young here.
[31] The defence of change of position is a common law defence but in New Zealand it broadly corresponds to s 74B of the Property Law Act 2007, which applies in respect of relief sought for payments made under mistake of law or fact.
[32] For present purposes it is only necessary to identify the broad elements of the defence as established by the House of Lords in Lipkan Gorman v Karpnale Ltd.7 These can be described as:
(a)an exceptional (or material) expenditure;
(b)incurred in reliance upon a payment; and
(c)in good faith.
[33] In this case there is no evidence whatsoever of an exceptional expenditure of a qualifying nature. On the contrary, it is clear from Mrs Hunt’s own evidence that the money received into the joint account was simply employed by Mr Hunt and her in the normal course of things. As Lord Goff stressed in Lipkan Gorman v Karpnale Ltd:8
… the mere fact that the defendant has spent the money, in whole or in part, does not of itself render it inequitable that he should be called upon to repay, because the expenditure might in any event have been incurred by him in the ordinary course of things.
7 Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 (HL) at 578–580 per Lord Goff.
8 At 580.
[34] In my view, even if it had been pleaded, there is no basis upon which Mrs Hunt would be entitled to rely on a change of position defence.
[35] In the end I am left without any real doubt or uncertainty that Mr Young has established that Mrs Hunt is not able to make out any viable defence to his claim in his capacity as a trustee or in other words that there is no real question to be tried.9 Mr Young is entitled to judgment for the amount transferred by Mr Hunt to the joint account.
Proprietary tracing
[36] This is the claim made by Mr Young on his own behalf and on behalf of his brother as beneficiaries. As already recorded, the distribution date for this trust occurred on 1 August 2016 when the survivor of Mrs Margaret Twiss and Mr Richard Twiss died. Accordingly, Mr Young and his brother as the final beneficiaries became the owners — legal and equitable — of the trust fund from that date. Mr Young relies on the collective proprietary entitlement of himself and his brother as the final beneficiaries to trace and recover the monies owned by them.
[37] Mr Reardon referred me to the House of Lords’ decision in Foskett v McKeown.10 There, the House of Lords was dealing with insurance monies. A Mr Murphy took out an insurance policy for £1,000,000 on his life. Mr Murphy arranged for the payment of five annual premiums. Two of these he paid from his own resources. Two were paid out of money he had misappropriated from the plaintiffs. The source of the fifth premium was apparently never ascertained with certainty. Mr Murphy was a property developer, developing property in Portugal. His business operated on the basis of agreements for the sale of these properties that required purchasers to pay the purchase price to Mr Murphy’s partner to hold on trust pending the transfer of the property in question. It was from these trust funds that Mr Murphy paid at least two of the premiums. The plaintiffs in the case were purchasers who had transferred purchase money to be held on trust. The issue before the House of Lords was whether these purchasers from whom trust money had been stolen were entitled
9 See Krukziener v Hanover Finance Ltd [2008] NZCA 189.
10 Foskett v McKeown [2001] 1 AC 102 (HL).
to a proportionate share in the proceeds of the insurance monies paid out upon Mr Murphy committing suicide in 1991.
[38] Mr Reardon referred me in particular to the following passage from the speech of Lord Browne-Wilkinson:11
The crucial factor in this case is to appreciate that the purchasers are claiming a proprietary interest in the policy monies and that such proprietary interest is not dependent on any discretion vested in the court. Nor is the purchasers’ claim based on unjust enrichment. It is based on the assertion by the purchasers of their equitable proprietary interest in identified property.
The first step is to identify the interest of the purchasers: It is their absolute equitable interest in the monys originally held by Mr Deasy on the express trusts of the purchasers trust deed. This case does not involve any question of resulting or constructive trusts. The only trusts at issue are the express trusts of the purchasers trust deed. Under those express trusts the purchasers were entitled to equitable interests in the original monies paid to Mr Deasy by the purchasers. Like any other equitable proprietary interest, those equitable proprietary interests under the purchasers trust deed which originally existed in the monys paid to Mr Deasy now exist in any of the property which, in law, now represents the original trust assets. Those equitable interests under the purchasers trust deed are also enforceable against whoever for the time being holds those assets other than someone who is bona fide purchaser for value of the legal interests without notice or a person who claims through such a purchaser. No question of a bona fide purchaser arises in the present case: the children [of Mr Murphy] are mere volunteers under the policy trust. Therefore the critical question is whether the assets now subject to the express trusts of the purchasers trust deed comprise any part of the policy monys, a question which depend on rules of tracing. If, as a result of tracing, it can be said that certain of the policy monys are now what represent part of the assets subject to the trusts of the purchasers trust deed, then as a matter of English property law the purchasers have an absolute interest in such monys. There is no discretion vested in the court. There is no room for any consideration whether, in the circumstances of this particular case, it is in a moral sense “equitable” for the purchasers to be so entitled. The rules establishing equitable proprietary interests and their enforceability against certain parties have been developed over the centuries and are an integral part of the property law of England. It is a fundamental error to think that, because certain property rights are equitable rather than legal, such rights are in some way discretionary. This case does not depend on whether it is fair, just and reasonable to give the purchasers an interest as a result of which the court in its discretion provides a remedy. It is a case of hard-nosed property rights.
[39] As Mr Reardon submitted, Mr Young and his brother, as the absolute owners of the $146,175 that is the subject of their application for summary judgment, can trace and recover the stolen monies directly into the ANZ-18 account, which has been
11 At 108–109.
owned by Mrs Hunt since Mr Hunt’s death. Equally, as he went on to submit, Mr Young and his brother can trace the balance of the money stolen by Mr Hunt into his ANZ 01 account.
[40] As Mr Reardon submitted, Mrs Hunt has not in her affidavit disclosed what if any money she received from Mr Hunt’s estate. In relation to any such money, Mrs Hunt will of course be treated by the law as a volunteer and is in a comparable position to Mr Murphy’s children in Foskett v McKeown. Mr Young and his brother wish to establish whether they are able to trace the monies stolen from them and to that end they seek orders for discovery and the disclosure of information that, in my judgement, they are entitled to.
Result
[41]For those reasons, I make the following orders:
(a)The first plaintiff — Mr Thomas Young in his capacity as the trustee of the Twiss Family Grandchilds’ Trust — is entitled to summary judgment against the defendant, Mrs Jennifer Hunt, in the sum of
$146,175, together with interest on that sum from 13 July 2015.
(b)The second plaintiff — Mr Thomas Young in his capacity as a final beneficiary of the Twiss Family Grandchilds’ Trust, on his own behalf and on behalf of Mr Simon Young as the other final beneficiary — is entitled to a declaration that they are the beneficial owners of the sum of $181,175 received by the late Mr John Hunt and Mrs Jennifer Hunt into the two bank accounts referred to in this judgment.
(c)By 20 February 2020, the defendant is to provide particular discovery to the second plaintiff of the following documents:
(i)The estate accounts for the late Mr John Hunt who died on or about 13 July 2015, leaving a will; and
(ii)All bank statements of the late Mr John Hunt or the defendant, Mrs Jennifer Hunt, or both of them, for the period 1 May 2011 to 31 March 2019.
(d)Pursuant to r 8.38 of the High Court Rules, I order that by 20 February 2020 the defendant, Mrs Jennifer Hunt, file and serve:
(i)A sworn statement of her assets and liabilities; and
(ii)A sworn statement addressing any payments made out of the two bank accounts referred to in this judgment of $500 or greater, identifying the document or documents on which any such payment was based (such as invoices or agreements) and the name of the person or persons to whom any such payment was made.
[42] In the meantime, the plaintiffs’ summary judgment application is adjourned. Such adjournment is for the purpose of enabling the second plaintiff to obtain and review the above material in order to establish whether he may proceed with his application in respect of the $35,000 paid by the late Mr John Hunt to his own account.
Costs
[43] The plaintiffs are entitled to their costs on a 2B basis together with such disbursements as may be allowed by the Registrar.
Associate Judge Johnston
Solicitors:
Breaden McCardle Lawyers, Paraparaumu for plaintiffs
0