IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-002363
CIV-2013-404-001616 [2013] NZHC 2578

BETWEEN	JOHN MATTHEW KIRBY Plaintiff

AND	NERISSA CAROLINE KIRBY Defendant

Hearing:	1 October 2013

Appearances:	M Dillon for Plaintiff
P F Gorringe for Defendant

Judgment:	3 October 2013

JUDGMENT OF VENNING J

This judgment was delivered by me on 3 October 2013 at 3.30 pm, pursuant to Rule 11.5 of the High
Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:	Turner Hopkins, Auckland
Bogers Scott Shortland, Hamilton
Copy to:	P F Gorringe, Hamilton

KIRBY v KIRBY [2013] NZHC 2578 [3 October 2013]

Introduction

[1]       In  CIV-2013-404-2363  the  plaintiff  seeks  summary judgment  against  the defendant.  In CIV-2013-404-1616 the plaintiff applies for orders sustaining caveats.

[2]       The plaintiff is a retired builder.   The defendant is his daughter.   She is a property investor.  The plaintiff’s claim is pursued on his behalf by his son, Douglas, who holds his power of attorney.

[3]       Between 2004 and 2007 the plaintiff advanced a total of $471,000 to the defendant.  The first advance was for $144,000.  Each fresh advance was recorded in handwriting on the deed.  The deed provided, inter alia, the loan was repayable on 30 days’ notice and also that, on request, the defendant would grant a mortgage over a property at Grey Street, Hamilton to secure her borrowing.

[4]       In 2008 the defendant sold the Grey Street property.  Subsequently, with her partner and her other brother Geoffrey and his wife, the defendant bought a number of other properties. The plaintiff has lodged caveats against those other properties.

[5]       The plaintiff, through his attorney Douglas, has called up the principal and interest owing by the defendant.   As the defendant has failed to pay the plaintiff seeks summary judgment for both principal and interest.

The defendant’s position

[6]       The defendant says the plaintiff has no caveatable interest in the properties over which he has lodged caveats.

[7]       While the defendant accepts she owes her father the $471,000, together with accrued interest, she says that the plaintiff told her she did not need to pay interest until she was able to and repayment of the principal was not required as it was to be set off against her share of his estate.

The caveat proceedings

[8]       The onus is on the plaintiff to make out an arguable case to an interest in the properties over which he has lodged the caveats.

[9]       The relevant clause in the deed reads:

1.3       The Borrower, [the defendant], shall on demand, grant to the Lender [the plaintiff] a mortgage to secure such loan, or however much shall remain outstanding from time to time, to be registered over all the land contained in the first schedule to this Deed, such mortgage shall be upon the terms and conditions set forth herein and otherwise be upon the Law Society Mortgage Form attached hereto marked “A” and initialled by the parties.

[10]     The  land  identified  in  the  first  schedule  to  the  deed  is  the  Grey  Street property.  While Grey Street was sold in 2008 the plaintiff argues that, prior to the sale the plaintiff had made demand for the mortgage but that, rather than providing the mortgage as required, the defendant sold the property.

[11]     The plaintiff argues that he acquired an equitable mortgage over the Grey Street property upon making demand for the mortgage in accordance with the deed,1 that upon sale the equitable mortgage was converted into an equitable charge over the defendant’s interest in the net proceeds of sale2  and that those net proceeds are traceable to the properties the defendant purchased after she sold the Grey Street property.   The plaintiff argues that the equitable property interest in the proceeds (being the equitable charge) may amount to a sufficient basis for tracing.3

[12]     The  plaintiff’s  case  to  sustain  the  caveats  is  based  on  tracing  the  sale proceeds of Grey Street into the properties subsequently purchased by the defendant to support an equitable interest in those properties.

[13]     If, as is the defendant’s case, the defendant’s interest in the further properties was not funded using the proceeds of sale of the Grey Street property, then the chain of reasoning the plaintiff relies on to support the caveats is broken and the claim to
support the caveats must fail.

1	Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington,
2003) at [2.2.3]; and Philpott v NZI Bank Ltd (1989) 1 NZ ConvC 190,246.
2	Hope v Hope [1977] 1 NZLR 582;  Re Tamaki Manufacturing Limited (1998) 18 NZTC 13,550.
3	Equity and Trusts in New Zealand at [32.1.6[–[32.2.2].

[14]     The evidence does not support the plaintiff’s case even to the extent of an arguable case.  Ms Bogers, the defendant’s solicitor, has sworn an affidavit deposing to the circumstances of the sale of the Grey Street property.   She also annexed a
number of documents relating to the sale to her affidavit.

          First, the agreement for the sale of the Grey Street property dated 21 October

2008.	The property sold for $380,000 with possession on 30 November

2008.

          Next  a  fax  transmission  from  Ms  Bogers’ firm  to  the ANZ  Bank  of  1
December  2008  confirming  the  credit  to  the  Rodd  and  Riss  Trust  bank account with that bank of $380,000.

          Next, a reporting letter of 2 December 2008 to the defendant confirming inter alia that:

Deductions from Sale Price

From your sale figure of $380,000 the following items were debited or deducted:-

1.  The amount required to be paid to ANZ Bank to enable us to uplift a discharge of the mortgage registered against your title and the title documents  themselves  so  that  settlement  could  be  carried  out  -
$380,000.

          Finally, a statement of account to the defendant and her co-trustee and owner of Grey Street recording inter alia the disbursement of the sale proceeds as to: ANZ – repay mortgage $380,000.

[15]     Despite those documents, Mr Dillon did not accept the defendant had not received any equity from the sale of Grey Street.   He submitted that further information was required to confirm that the bank took the entire proceeds of sale. He referred to a letter obtained from the ANZ Bank on 26 September 2013 which said:

Further to your query I can confirm that a property at 634 Grey Street, Hamilton owned by the Rodd & Riss Trust was sold on 28/11/2008.

The Bank agreed to discharge the mortgage held over said property only on the basis that full proceeds of $380,000 were paid into the account [details] in the name of PC RM Properties ltd.  Lending was repaid under the cross guarantee held between entities.

[16]     Mr Dillon submitted that letter suggested the moneys from Grey Street had been advanced to the company PCRM Properties Ltd and that it was a matter for exploration at a substantive hearing as to how much was ultimately applied to the purchase of the properties subject to the caveats.

[17]     However, the first difficulty for the plaintiff with that argument is that the properties over which the caveats are lodged were all owned by PCRM Properties Limited prior to the sale of Grey Street in 2008.  The moneys going into the account of that company could not have been applied by that company towards the purchase of the property.  At most, on the plaintiff’s argument, the moneys may have reduced the  company’s  borrowings  from  the  ANZ  Bank  and  thereby  increased  that company’s equity in the property.

[18]     There is a further difficulty for the plaintiff.   The properties are no longer owned by PCRM Properties Limited.  They were transferred in 2009 and 2010 to the defendant, her partner Mr Budd, her brother Geoffrey and sister-in-law.   So that, even if the company had benefited from the application of funds from the sale of Grey Street, there is no evidence to suggest that the defendant (and her partner investors) benefited from the proceeds of sale so as to support the caveats on the basis advanced by the plaintiff.

[19]     Next,  I  note  that  Ms  Bogers  has  confirmed  in  correspondence  that  the defendants (and other investors) purchased the property with funds which the defendant  and  the  other  investors  had  borrowed  from  the  bank  and  that  the borrowing was secured against those properties.  That evidence is consistent with the record disclosed on the titles.

[20]     On the evidence, it is not possible for the plaintiff to trace the proceeds of the sale of Grey Street into the defendant’s interest in the properties over which he has lodged caveats.   The documents annexed to Ms Bogers’ affidavit were created in
2008.   They are clear on their face and, in the absence of any evidence of fraud,

which is not suggested, there is no basis to go behind the documents which are confirmed by Ms Boger’s evidence.  The recent letter from the bank confirms that the defendant did not personally receive any of the proceeds of sale.   They were applied to satisfy the cross linked guarantees.

[21]     I am satisfied that the net proceeds of sale of Grey Street were applied to repay existing borrowing from the ANZ Bank and that none of the proceeds of Grey Street were applied to the subsequent purchase of the properties that the caveats remain over.

[22]     The application to sustain the caveats is dismissed.  The caveats registered by the plaintiff are to lapse.

The summary judgment application

[23]     I turn to the plaintiff’s claim for summary judgment, which is based on the deed completed by the plaintiff and defendant.  The onus is on the plaintiff to satisfy the Court the defendant has no arguable defence.

[24]     The  deed  was  prepared  in  draft  form  by  the  defendant’s  solicitor.    The plaintiff and defendant then inserted in handwriting the various sums advanced by the plaintiff to the defendant from time to time.  The original advance in 2004 was for $144,000 but there were subsequent advances recorded as follows:

(original advance)	$144,000

2 December 2004	$60,000

14 March 2005	$126,000

15 June 2005	$55,000

25 October 2005	$12,000

29 November 2006	$33,000

5 July 2007	$25,000

14 December 2007	$16,000

Total:	$471,000

[25]     The operative provisions of the deed provide:

1.1       The parties herein agree that the aforesaid loan ... shall be charged at the current bank floating interest rate which interest shall be payable on the 20th  of each month to an account nominated by the Lender. [Plaintiff].

1.2       The aforesaid loan shall be repayable in full upon the giving of 30 days written notice to the Borrower.

[26]     The plaintiff, through Douglas as his attorney, made demand (by solicitor’s letter) for repayment on 19 October 2012.  The demand was for both the principal advances of $471,000 together with interest of $108,043.69.

[27]     Demand having been made then, in accordance with the deed, repayment was due 30 days later, by 18 November 2012.

[28]     The defendant opposes summary judgment on the basis that the plaintiff had, from time to time, represented to her that he would not require repayment of the loan while he was alive and instead, that ultimately the loan would be set off against the defendant’s share in his estate.

[29]     Further,  the  defendant  says  that  from  August  2008  the  plaintiff  waived payment  of  interest  except  to  the  extent  the  defendant  was  able  to  pay.    The defendant says she relied on those representations.   The defendant’s opposition is thus based on promissory estoppel, both in relation to repayment of the principal and also repayment of the interest.

[30]     Counsel are agreed on the applicable principles relating to such a promissory estoppel:4

It is well settled that where one party has by words or conduct made to the other a clear and unequivocal promise or assurance intended to affect the relations between them and to be acted on accordingly, then once the other party has taken him at his word and acted on it, the one who gave the promise or assurance is bound by that assurance unless and until he has given the promissee a reasonable opportunity of resuming his position.

4	Burbery Mortgage Finance & Savings Ltd v Hindsbank Holdings Ltd CA175/87, 21 November
1988 per Richardson J at 3-4;   and Krukziener v Hanover Finance Ltd [2008] NZCA 187 at
[37]–[38].

[31]     The  representation  must  be  sufficiently  unequivocal  to  justify  the  other party’s reliance on it.5    Evidence that the plaintiff represented to the defendant she would not have to pay the principal is limited.   Mr Gorringe sought to make something out of the strong relationship between the plaintiff and the defendant and referred to the defendant’s affidavit in which she said from the start the plaintiff had explained that the loan was effectively her quarter-share of his estate and the loan
would be paid by being set off against her share in the estate after his death.

[32]     The defendant also refers to a memorandum of wishes attached to a will the plaintiff made in 2008 which noted the loan to the defendant and recorded the plaintiff’s wish that, on his death, the defendant was to continue to have the use of the funds and that any debt due to his estate be forgiven to the extent necessary against her share and that any balance left was to continue to be available for the defendant until funds were required for distribution by the estate.

[33]     However, there are a number of difficulties with the defendant’s position. First, her suggestion that from the outset the plaintiff advised her that she would not be required to repay the loan contradicts the express clause in the agreement which provided repayment was due on 30 days notice of demand.

[34]     Next, the 2008 will and accompanying memorandum of wishes is no longer operative.  The plaintiff made a further will in May 2012 in which, while providing for the defendant to have a quarter-share in his estate, he directs that any moneys still owed by her at the time of his death be recovered and repaid in full, including interest due and to form part of the residuary estate.  Mr Gorringe sought to submit that that was consistent with an interpretation that the plaintiff did not intend to call up the loan prior to death.  However, given that the operative will was executed in
2012, after the plaintiff had chosen to appoint Douglas as power of attorney in place of the defendant and had, on Douglas’ evidence, instructed him to recover the sums, it is more likely to be no more than a recognition by the plaintiff of his failing health and the reality that the defendant might not have been able to repay the loan, despite
demand having been made, prior to the plaintiff’s death.

5	Commonwealth of Australia v Verwayen (1990) 170 CLR 394 (HCA) at 445;   Lim v Ward
McCulloch Solicitors Nominees Ltd (1999) 8 NZCLC 261,922 (CA).

[35]     Further, it is clear that at the time of making the will on 11 May 2012, the plaintiff and the defendant’s relationship was strained.  In an email authored by the defendant on 17 May she told her brother Douglas:

As you know I visited Dad on Sunday [13 May].  After an hour of listening to a litany of mis-represented facts I walked out on him, tired of trying to defend myself against the allegations.

That is consistent with Douglas’ evidence the plaintiff asked him to recover the money from the defendant.

[36]     Next, on 14 May 2012 the plaintiff’s solicitor, Mr Wayne Thompson wrote to

him regarding various legal matters recording inter alia:

You wished to change your Enduring Powers of Attorney and remove your existing attorney Nerissa.  I discussed with you the nature of the Enduring Powers.  You wished Douglas to take this role.  You indicated you were not happy with Nerissa holding the Powers especially in light of the money she owed you.  You had contacted me in 2010 about the debt by Nerissa and I had given you advice then as to what you needed to do to protect your loan.
...

[37]     Douglas’ evidence that the plaintiff had tried to contact the defendant about the loans on numerous occasions but that she was not responsive is consistent with the above, in particular the discussion Douglas says he had with his father on 19
November 2011.   Douglas made notes of the conversation.   Further the fact that, even on the defendant’s calculation, she would have to repay $120,000 to the estate is inconsistent with her suggestion that the loans were able to be satisfied by being set off against her share of the estate.

[38]     Further, the defendant has not provided any particulars to show she has relied on any representation by the plaintiff concerning repayment.   All she says is the general statement:

I have relied on what [the plaintiff] told me regarding repayment, then about cessation of interest payments.    I structured my business finances accordingly.

[39]     The evidence of any particular reliance is lacking.  The plaintiff’s statement

is a bare assertion without elaboration or detail.  She does not even try to provide any

detail of how she may have structured her business finances in reliance on the alleged promises, nor has she put any documents relating to it into evidence.

[40]     The defendant’s case seems to be that she has found herself in difficulty as a result of global economic conditions but there is no proper evidence of any change in position on her behalf in direct reliance on the representation she relies on.

[41]   Mr Gorringe submitted that the defendant carried on with her business involvement and property dealing.   But the evidence discloses that the sales of properties the defendant had an interest in have only led to a very limited return to the defendant.   On her own evidence the major contributors to the property investments she has made over recent years were her brother Geoffrey and his wife.

[42]     Next, and in any event, even if it was arguable the plaintiff had, at an earlier stage, told the defendant that he did not intend to call up the loan prior to his death, that could not be binding if the plaintiff ’s circumstances changed, as they have in this case.   As the Court of Appeal confirmed in  Burbery Mortgage Finance  & Savings Ltd the plaintiff will not remain bound by the promise provided he gives the defendant a reasonable opportunity to resume her position.  In the present case, for example, the deed provided for repayment within 30 days of demand.  The demand was made in October 2012.  The loan principal remains still outstanding almost a year later. The defendant has had ample time to “resume” her position.

[43]     The short point is that, even if the plaintiff made a general statement to the effect the loan would be paid or accounted for on his death, if the plaintiff’s position and needs changed he was always entitled to make demand for repayment.  That is what the plaintiff, through his attorney, has done.

[44]     Mr Gorringe submitted, somewhat faintly, that the plaintiff had not resumed his position, rather Douglas acting as his power of attorney had purported to resume the plaintiff’s position.  But anything done by a person holding a power of attorney on behalf of the donor has the same effect as if it had been done by the donor
provided it is within the existing terms of the power of attorney.6

6	Property Law Act 2007, s 19(1).

Interest

[45]     The position is essentially the same in relation to the claim for interest.   In contrast to the express provision in the agreement providing for interest to be paid monthly, the defendant’s evidence about the release of her obligation to pay interest is vague.

[46]     Geoffrey Kirby has given evidence in support of the defendant to the effect that he raised the matter with the plaintiff and asked, on the defendant’s behalf, if she could stop paying the interest payments.  He says that the plaintiff agreed that the defendant could stop making interest payments in August 2008 and she could resume payments when her financial position improved.  The defendant says that in August
2008 the plaintiff phoned her and advised that she could stop the interest payments until such time as she was in a position to resume them.  She says that unfortunately she has not been in a position to resume them.

[47]     The defendant did not pay interest from September 2008 until February 2009. From February 2009 the defendant paid limited sums of about $1,000 for most months although she missed payments in November 2009 and May 2011.   There have been no payments of interest at all since June 2011.

[48]     The short point in relation to the interest is that, even on the defendant’s case she accepts the interest was accruing while not paid.  Again, even to the extent that there was a representation that the defendant’s obligation to pay interest was suspended, the plaintiff was always able to give notice requiring the defendant to resume making the interest payments and to make up the missed payments.   Such notice was given in October 2012.  The defendant has had almost a year to address the position since then but has failed to make any payment.

Result/orders

[49]     The plaintiff satisfies the Court that there is no arguable defence to the claim for the principal and the balance of the accrued interest.  The defendant cannot make out an arguable case for an enforceable estoppel.

[50]     Judgment  for the plaintiff against  the defendant  in  the sum  of $471,000 together  with  interest  to  26  March  2013  in  the  sum  of  $123,724.07,  in  total
$594,724.07 as at 26 March 2013.

[51]     Interest is to continue to accrue on the sum of $471,000 from that date.  The plaintiff is to have judgment for interest on the sum of $471,000 from 27 March
2013 to the date of judgment to be calculated at the rate of the current ASB Bank floating interest rate from time to time.

Costs

[52]     The plaintiff has succeeded on the application for summary judgment but failed  on  the  application  relating  to  the  caveat.    Both  applications  were  heard together.  Given that outcome and the family background to this matter I make no
order in relation to costs.

Venning J