IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE	
CIV-2023-454-73
[2024] NZHC 709	

BETWEEN	RICHARD MCNAUGHTON
Plaintiff	
AND	JANET MCNAUGHTON
First Defendant

JAMES MCNAUGHTON
Second Defendant	

Hearing:	5 February 2024	
Appearances:	Plaintiff In Person
G Mason for Defendants	
Judgment:	9 April 2024	

JUDGMENT OF ASSOCIATE JUDGE SKELTON
[Defendants’ summary judgment; summary judgment on defendants’ counterclaim]

TABLE OF CONTENTS

Background	[2]

Legal Principles	[12]
Leave to apply for summary judgment	[12]
Summary judgment	[18]
Strike out	[23]

Issues to be determined	[26]

Leave to apply for summary judgment	[27]

MCNAUGHTON v MCNAUGHTON [2024] NZHC 709 [9 April 2024]

Did the settlement agreement become unconditional and is it supported by
consideration?	[32]

Mistake — fifth cause of action	[44]
Misrepresentation — seventh cause of action	[56] Section 9 of the Fair Trading Act 1986, misleading and deceptive conduct —
eighth cause of action	[66]

Breach of settlement agreement — tenth cause of action	[70]

Claims carried over from the “26” proceeding — first, second, third and fourth causes of action	[80]

General damages — ninth cause of action		[98] Summary as to defendants’ application for summary judgment and strike out [100] Defendants’ counterclaim — specific performance	[103]
Result	[108]

[1]	Before me are applications by the first and second defendants for orders:

(a)	striking out all causes of action in the plaintiff’s statement of claim dated 6 September 2023 and the amended statement of claim  dated  24 October 2023;

(b)	striking out particular paragraphs of the statement of claim and amended statement of claim;

(c)	for summary judgment for the defendants on the plaintiff’s statement of claim;

(d)	for summary judgment for the defendants on their counterclaim;

(e)	for leave to apply for summary judgment.

Background

[2]	The plaintiff previously issued proceedings against his parents, the first and second defendants in CIV-2022-454-26 (the “26” proceeding).

[3]	The “26” proceeding related to a residential property in the Wairarapa which the first and second defendants had purchased from the plaintiff, and subsequently sold. In the proceedings, the plaintiff alleged that his parents held the property on trust, and he and his ex-wife were beneficiaries of the trust. He asserted that as trustees his parents had failed to provide information and were in breach of fiduciary duty. Further, they were estopped from departing from what was alleged to have been said in an email the first defendant wrote on 29 December 2020 about the basis of the purchase of the property.

[4]	The plaintiff applied unsuccessfully for summary judgment in the “26” proceeding.1

[5]	A judicial settlement conference was held on 18 August 2023. Following the judicial settlement conference, the parties recorded a conditional settlement agreement in a brief handwritten agreement. Further terms were recorded in a minute dictated at the conclusion of the conference by Associate Judge Lester dated 18 August 2023 (Minute No 1).2

[6]	The settlement agreement recorded:

18/8/2023

We Jim and Janet McNaughton agree that an independent accountant be appointed to deal with tax* arising from the profit identified by Ash Short of
$308,002. The balance of that net of tax and accountants’ costs be divided 40% to Janet and Jim and 60% to Richard with the balance of the $350,000 plus interest held by Fitzherbert Rowe being released immediately to Janet and Jim.

This is conditional upon Veronica agreeing that she will bring no claim whatsoever against Janet and Jim in respect of 48 Pownall St or otherwise.

1	McNaughton v McNaughton [2022] NZHC 376.
2	McNaughton v McNaughton HC Palmerston North CIV-2022-454-26, 18 August 2023 (Minute of Associate Judge Lester) [Minute No 1].

[Signatures of Janet and Jim McNaughton] I Richard McNaughton accept this offer. [Signature of Richard McNaughton]

* including GST

The interest on the $350,000 to be pro-rata’d between the $308,002 and the balance.

[Initials of James, Janet and Richard McNaughton]

[7]	Minute No 1 recorded:3

[3]	The parties have asked me to record that insofar as the agreement concerns the role of an independent accountant finalising tax issues arising from the development of 48A Pownall Street, Masterton that in the event they cannot agree the identity of the independent accountant to carry out that exercise within 15 working days, the parties agree that the accountant will be appointed by the President of the local District Law Society. The parties have also asked me to record that the parties agree to co-operate in the exercise to be undertaken by the independent accountant, including providing all records that may be required or any other evidence requested.

[4]	The brief handwritten agreement does not expressly include the parties will take all reasonable steps to give effect to the terms of the settlement but again, the parties have asked me to confirm that in this Minute. The intent is that the parties will work towards giving effect to the agreement with a view to it becoming final.

[5]	The plaintiff is requested to provide an update to the defendants’ counsel as to progress in satisfying the condition in say, four weeks’ time.

[6]	The parties have also asked me to record that in the event that the cash settlement reached at the JSC does not become unconditional, that nonetheless they agree that the process for the independent accountant to finalise the tax position arising from the development, is a separate and distinct stand-alone part of their settlement which is not conditional and will be completed nonetheless.

(emphasis original)

[8]	Subsequently, there was some controversy regarding completion of the condition, which required the plaintiff’s ex-wife, Veronica, to agree that she would not make any claim against the defendants in respect of 48A Pownall St or otherwise. The parties filed separate memoranda. The outcome was recorded in a further minute of

3	Minute No 1, above n 2.

Associate Judge Lester dated 28 August 2023 (Minute No 2). The relevant paragraphs of that minute are set out below: 4

[3]	In this proceeding, Richard claimed his parents (the defendants), agreed to hold a property on trust for him. It was common ground that if Richard’s claim was correct then his interest in the property would be relationship property in which his ex-wife would have an interest. Richard’s ex-wife is not a party to this proceeding and was not present at the JSC.

[4]	Mr Mason, counsel for the defendants, was concerned to ensure that if the defendants settled with Richard, there was no prospect of another claim by Richard’s ex-wife. Accordingly, the condition attaching to the settlement agreement was that Richard’s ex-wife confirm that she would not bring such a claim against the defendants.

[5]	After the agreement had been signed the issue was raised of how the consent of Richard’s ex-wife was to be obtained. Richard said he wanted to arrange that contact.

[6]	However, on Saturday 19 August 2023 there was email correspondence between Richard and Mr Mason. In the course of that email correspondence, Mr Mason in an email said:

We have a deal. All that remains is to write to Christine Batt and seek Veronica’s acceptance of it. Is there any reason I should not do that?

[7]	Veronica is Richard’s ex-wife and Ms Batt is her solicitor.

[8]	Richard replied:

Veronica wants me to walk from all RP and is making claims under s18A. I am not prepared to do that, so it’s unlikely there will be a deal to conclude in this instance.

[9]	Richard’s reply continued but did not take issue with Mr Mason’s suggestion that he contact Ms Batt, that is, there was no response to Mr Mason saying: “Is there any reason I should not do that?”.

[10]	Mr Mason then contacted Ms Batt with a deed which recorded that Veronica would not bring a claim against the defendants in relation to the property said to be held in trust.

[11]	Richard has taken issue with Mr Mason contacting Ms Batt given that at the JSC Richard said he would make contact. Mr Mason responds that having the next day specifically sought that Richard advise if there was any reason why Mr Mason should not contact Ms Batt, no issue was raised.

[12]	Richard characterises his advice at the JSC that he would contact  Ms Batt as an unwritten term of the settlement agreement. The settlement agreement was silent on who would contact Ms Batt.

[13]	It is common ground that how the mechanics of obtaining Veronica’s consent was to occur was discussed at the conclusion of the JSC and after the

4	McNaughton v McNaughton HC Palmerston North CIV-2022-454-26, 28 August 2023 (Minute of Associate Judge Lester) [Minute No 2].

agreement had been signed. When Mr Mason said: “Is there any reason I should not do that?” Richard did not say that what Mr Mason was proposing was either a breach of the agreement  or otherwise take issue with what     Mr Mason proposed. Richard in response says that he never gave an instruction that Mr Mason should make contact.

[14]	The fact is that whether Veronica via her solicitor was contacted by Mr Mason or Richard, that contact had to occur and occur promptly.

[15]	I agree with Mr Mason that the condition attaching to the agreement reached at the JSC has been satisfied and that this proceeding is at an end. The parties’ rights are now contained in the settlement agreement.

[16]	If Richard believes he has  some  basis  to  bring  a  claim  against Mr Mason arising from the circumstances set out in this [his] memorandum of 24 August 2023, that is a matter for him to consider but is a matter outside of this proceeding. However, it is hard to see how who sought Veronica’s consent would make any difference given Veronica’s lawyer was always going to want to know the circumstances of the settlement and Veronica’s consent needed to be sought reasonably promptly. Other than that observation, I say no more on that issue. This proceeding is at an end.

(emphasis original)

[9]	The plaintiff purported to  cancel  the  settlement  agreement  by  email  on  31 August 2023. On the same day, the defendants rejected the purported cancellation and affirmed the settlement agreement.

[10]	On 6 September 2023, the plaintiff issued the current proceeding. The causes of action pleaded in the statement of claim as amended are:

(a)	creation of a trust;

(b)	estoppel;

(c)	knowing receipt;

(d)	breach of fiduciary duty;

(e)	mistake;

(f)	no consideration for settlement agreement;

(g)	misrepresentation;

(h)	misleading and deceptive conduct in breach of s 9 of the Fair Trading Act 1986;

(i)	general damages;

(j)	breach of conditional settlement agreement.

[11]	The defendants have counterclaimed seeking  specific  performance  of  the 18 August 2023 settlement agreement.

Legal Principles

Leave to apply for summary judgment

[12]	Rule 12.4(2) of the High Court Rules 2016 provides:

An application by a plaintiff may be made either at the time the statement of claim is served on the defendant, or later with the leave of the court.

[13]	Rule 12.4(3) of the High Court Rules provides:

An application by a defendant may be made either at the time the statement of defence is served on the plaintiff, or later with the leave of the court.

[14]	No guidelines are laid down in the High Court Rules for the granting of leave, the question is a discretionary one and it is up to the party applying for leave to show why it should be granted.5

[15]	It is recognised that there are three factors that should be considered in relation to the issue of leave:6

(a)	The explanation for the delay;

(b)	Are the merits of the applicant’s case for the relief sought particularly strong and therefore deserving of determination at a later time by the Court than is prescribed by the rules?

5	Tip Top Icecream Ltd v Polarland Ltd (2002) 7 NZBLC 103, 564 at [27].
6	Fowler v Selwyn District Council [2021] NZHC 2218 at [12] citing Tip Top Icecream Ltd v Polarland Ltd, above n 5 at [28].

(c)	The risk of miscarriage of justice in determining the application for summary judgment at a later point in time.

[16]	The Court of Appeal has emphasised that leave should not be treated as a mere formality and should be addressed as a prior step to the consideration of the summary judgment application itself:7
We add that it is important that leave be dealt with as a prior step to the merits of an application for which leave is required. The criteria for granting leave need to be addressed, even if the merits of the substantive application are, themselves, an important aspect of the leave decision.

[17]	In Waihopai Valley Vineyard Ltd v Savvy Vineyards 3550 Ltd, Andrews J held that the Court should not grant leave to apply for summary judgment out of time unless doing so will have the effect of avoiding prolonged proceedings.8

Summary judgment

[18]	Rule 12.2 of the High Court Rules provides that:

(1)	The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.

(2)	The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.

[19]	The principles that govern summary judgment applications by plaintiffs are now very well settled. In Krukziener v Hanover Finance Ltd, the Court of Appeal summarised the principles as follows:9
The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3. The court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated:  MacLean v Stewart (1997)   11 PRNZ 66 (CA). The court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as, for example,

7	Stephens v Barron [2014] NZCA 82, (2014) 21 PRNZ 734 at [13].
8	Waihopai Valley Vineyard Ltd v Savvy Vineyards 3550 Ltd [2015] NZHC 592, (2015) 22 PRNZ 724 at [34]–[35].
9	Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26]–[27].

where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent,  or  is  inherently  improbable: Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341. In the end the court’s assessment of the evidence is a matter of judgment. The court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corporation Ltd v Patel (1987) 1 PRNZ 84 (CA).

Under r 141A of the High Court Rules the defendant need not file a statement of defence. The onus remains on the plaintiff, and summary judgment will be denied if on the hearing of the application it appears that there is an issue worthy of trial.

[20]	In Stephens v Barron, the Court of Appeal summarised the long-standing Court of Appeal authority on defendants seeking summary judgment, Westpac Banking Corp v NM Kembla New Zealand Ltd,10 as follows:11

[9]   …  This  Court’s   decision  in  Westpac   Banking  Corp  v  M  M  Kembla   New Zealand Ltd makes it clear that a defendant seeking summary judgment has a considerable burden to discharge. Elias CJ delivering the judgment of the Court, made the following points:

(a)	The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually this will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claim.

(b)	An application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment able to be properly arrived at only after a full hearing of the evidence.

(c)	The Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment is not to be arrived at on a fine balance of the available evidence as would be appropriate at a trial.

(d)	The residual discretion of the Court to refuse summary judgment would be properly invoked to avoid the oppression that would otherwise result if an application by a defendant for summary judgment would pre-empt a plaintiff exercising the right to amend the pleadings.

(e)	Summary judgment should not be applied for unless the substantive merits of the case are clear and capable of summary disposal.

10	Westpac Banking Corp v M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).
11	Stephens v Barron, above n 7, at [9] (footnotes omitted).

[21]	A defendant’s application for summary judgment is similar to a striking out application in that the defendant has to show that the plaintiff cannot succeed. The difference between the two types of application is that an application for summary judgment allows for affidavit evidence to be provided. It will therefore be possible to obtain judgment on the basis of material other than that contained in the pleadings.12 However, the two types of application are not necessarily interchangeable. If the dispute is essentially a legal question, striking out is likely to be the appropriate course of action.13

[22]	Further, summary judgment may be given where the interpretation of a contract is an issue.14

Strike out

[23]	With regard to the defendants’ applications for strike out,  r 15.1  of  the  High Court Rules relevantly provides that:

15.1	Dismissing or staying all or part of proceeding

(1)	The court may strike out all or part of a pleading if it—

(a)	discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or

…

(d)	is otherwise an abuse of the process of the court.

[24]	McGechan on Procedure summarises the established criteria for striking out on the basis of no reasonably arguable cause of action as follows:15

The established criteria for striking out was summarised by the Court of Appeal in
A-G v Prince [1998] 1 NZLR 262, (1997) 16 FRNZ 258, [1998] NZFLR 145 (CA) at
267, and endorsed by the Supreme Court in Couch v A-G [2008] NZSC 45 at [33], per Elias CJ and Anderson J:

12	Jessica Gorman and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR 12.2.07(1)].
13	Body Corporate 207624 v North Shore City Council [2012] NZSC 83, [2013] 2 NZLR 297 at [4].
14	Jowada Holdings Ltd v Cullen Investments Ltd CA 248/02, 5 June 2003 at [29]; Tegal Foods Ltd v Neal [2018] NZHC 1921 at [40] (footnotes omitted).
15	McGechan on Procedure, above n 12, at [HR15.1.02].

(a)	Pleaded facts, whether or not admitted, are assumed to be true. This does not extend to pleaded allegations which are entirely speculative and without foundation.

(b)	The cause of action or defence must be clearly untenable. In Couch Elias CJ and Anderson J, at [33], said: “It is inappropriate to strike out a claim summarily unless the court can be certain that it cannot succeed.”

(c)	The jurisdiction is to be exercised sparingly, and only in clear cases. This reflects the Court’s reluctance to terminate a claim or defence short of trial.

(d)	The jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument.

(e)	The court should be particularly slow to strike out a claim in any developing area of law… .

[25]	With regard to evidence on strike out applications, the Court of Appeal stated in Attorney-General v McVeagh:16

The Court is entitled to receive affidavit evidence on a striking out application, and will do so in a proper case. It will not attempt to resolve genuinely disputed issues of fact and therefore will generally limit evidence to that which is undisputed. Normally it will not consider evidence inconsistent with the pleading, for a striking out application is dealt with on the footing that the pleaded facts can be proved … . But there may be a case where an essential factual allegation is so demonstrably contrary to indisputable fact that the matter ought not to be allowed to proceed further.

Issues to be determined

[26]	Taking into account the background and applicable legal principles, I consider that the following issues require determination:

(a)	whether leave should be granted to the defendants to apply for summary judgment as defendants and counterclaim plaintiffs;

(b)	whether the settlement agreement signed on 18 August 2023 became unconditional and whether it was supported by consideration;

16	Attorney-General v McVeagh [1995] 1 NZLR 588 CA at 566.

(c)	if the settlement agreement was binding, whether the agreement has been cancelled (or should be cancelled) on the basis of mistake or misrepresentation?

(d)	whether the eighth cause of action for misleading and deceptive conduct under s 9 of the Fair Trading Act 1986 is tenable?

(e)	if the agreement is unconditional and enforceable, whether the following causes of action have been compromised and are barred by settlement of the “26” proceeding:

(i)	first cause of action — creation of a trust;

(ii)	second cause of action — estoppel;

(iii)	third cause of action — knowing receipt;

(iv)	fourth cause of action — breach of fiduciary duty;

(f)	whether the tenth cause of action for breach of the settlement agreement is tenable?

(g)	whether the ninth cause of action for general damages is tenable?

Leave to apply for summary judgment

[27]	As discussed above at [15], the issues to consider in determining whether leave should be granted are:

(a)	delay;

(b)	the merits of the defendants’ case; and

(c)	the risk of miscarriage of justice.

[28]	The  defendants  filed  their  statement   of  defence  and   counterclaim   on 18 October 2023. The application for strike out and summary judgment was filed on

20 October 2023. The plaintiff has not raised any real prejudice arising from this minimal delay. I do not consider that it is a basis for declining leave in this case.

[29]	The merits of the defendants’ case are bound up with consideration of the defendants’ substantive applications for summary judgment. For the reasons set out below, I consider that the merits of the defendants’ applications are strong and therefore deserving of determination at this stage.

[30]	It is not apparent that there is any risk of miscarriage of justice in determining the defendants’ applications for summary judgment at this stage.

[31]	Accordingly, I grant leave for the defendants to bring their applications for summary judgment as defendants and as counterclaim plaintiffs.

Did the settlement agreement become unconditional and is it supported by consideration?

[32]	In Minute No 2, Associate Judge Lester found, after consideration of the parties’ submissions, that:17

[15] I agree with Mr Mason that the condition attaching to the agreement reached at the JSC has been satisfied and that this proceeding is at an end. The parties’ rights are now contained in the settlement agreement.

[33]	At the hearing of the defendants’ applications on 5 February 2024, the plaintiff made an oral application under r 1.7 of the High Court Rules for recall of Minute No 2. The parties subsequently filed written submissions on the issue. The plaintiff’s contention appears to be that the condition in the settlement agreement was not satisfied because his ex-wife’s consent was itself “conditional on the proceeding CIV-2022-054-26 being dismissed or discontinued on the basis that all issues are resolved by 1 December 2023”, and this condition was not satisfied. However, the plaintiff’s contention is misconceived. The “26” proceeding was dismissed on the basis that all issues were resolved well in advance of 1 December 2023 as recorded in Minute No 2.

17	Minute No 2, above n 4.

[34]	In my minute dated 13 February 2024 (Minute No 3), I found that I was unable to determine the plaintiff’s application for recall.18 An application for recall cannot be made in a different proceeding from the proceeding in which the judgment or minute was issued and/or applications for recall should be heard by the original judge.19

[35]	Subsequently, the plaintiff made an application in the “26” proceeding for recall of Minute No 2. Associate Judge Lester dismissed the application in his further minute dated 27 February 2024 (Minute No 4).20

[36]	Associate Judge Lester found at [15] of Minute No 2 (reiterated in Minute  No 4) that the settlement agreement became unconditional, the proceeding is at an end (that is, it is dismissed) and the parties’ rights and obligations in relation to the matters raised in the proceeding are now contained in the settlement agreement.

[37]	The minute has not been recalled nor otherwise challenged.21 That is the end of the matter. The issue raised by the plaintiff regarding how the condition was satisfied is considered below in the section on the plaintiff’s tenth cause of action alleging breach of the settlement agreement.

[38]	The next issue is raised in the plaintiff’s sixth cause of action. The issue is whether the settlement agreement is “unenforceable and void ab initio” because it was not supported by consideration.

[39]	The plaintiff submits that the allocation of 40 per cent of the profit on the property at 48A Pownall Street to the defendants in the settlement agreement was for their time and use of monies in completing the build of the property. The plaintiff submits that this allocation is not supported by good consideration and amounts to past consideration because the defendants were under a pre-existing duty to return any

18	McNaughton v McNaughton, HC Palmerston North CIV-2023-454-73, 13 February 2024 (Associate Judge Skelton) [Minute No 3].
19	Minute No 3, citing O’Neill v Toogood [2017] NZHC 795 at [50]–[52]; Jessica Gorman and others McGechan on Procedure (looseleaf ed Brookers) at [HR11.9.01(9)], at [7].
20	McNaughton v McNaughton, HC Palmerston North CIV-2022-454-26, 27 February 2024 (Associate Judge Lester) [Minute No 4].
21	Sharma v Wati [2022] NZHC 772 at [29].

gains to the plaintiff and his ex-wife, and the defendants had already completed the build.

[40]	However, in my view, consideration for the settlement agreement is provided by the mutual compromise.

[41]	As stated in Burrows, Finn and Todd on the Law of Contract in New Zealand:22

In the modern law, the consideration in such cases is said to be the surrender, not of a legal right, which may or may not exist and whose existence, at the time of the compromise, remains untested, but the claim to such right.

This attitude is sensible. It is true that if the claim is baseless, the claimant may appear to have got something for nothing. Contrariwise, if a claimant settles a good claim for less than its true value he or she may appear to have given up something for nothing, but this is to ignore the cost, both monetary and emotional, of litigation. It is in the public interest to encourage reasonable settlements. Indeed, the legal system could not operate at all if the vast majority of civil disputes were not settled out of court.

This important rule, however, has to be surrounded by certain safeguards. A plaintiff who relies upon the surrender of a claim to support a contract must prove, at the least, that he or she has an honest belief in the chance of its success. This is perhaps based on public policy rather than the doctrine of consideration, for it is arguable that it is a factual benefit to the promisor to be relieved even of an ill-founded claim.

(footnotes omitted, emphasis original)

[42]	In this case there is no doubt that the plaintiff honestly believed that his claim would succeed, including that the defendants were required to account for 100 per cent of the profit. However, the plaintiff has compromised his claim on the basis that the identified profit would be allocated 60 per cent to the plaintiff and 40 per cent to the defendants. The defendants agreed to that allocation to be relieved of the plaintiff’s claim.

[43]	I find that the defendants have discharged the onus of establishing on the balance of probabilities that the plaintiff cannot succeed on his sixth cause of action. Further, I am satisfied that the cause of action is untenable and discloses no reasonably arguable cause of action and should be struck out.

22	Steven Todd and Matthew Barber,  Burrows,  Finn  and  Todd  on  the  Law  of  Contract  in  New Zealand, 7th ed, Lexis Nexis, Wellington, 2022) at 115.

Mistake — fifth cause of action

[44]	The plaintiff’s fifth cause of  action is a  claim  for unilateral  mistake under  s 24(1)(a)(i) of the Contract and Commercial Law Act 2017.

[45]	The alleged mistake is pleaded as:

[32]	Richard became factually mistaken about what was being agreed to on 18 August 2023 when he signed the conditional settlement agreement drafted by Mr Mason. …

[33]	Richard knew that because the “Brightline” did not apply, this meant that no tax would be payable on any gains. He entered into the conditional settlement agreement as a beneficiary of a trust and nothing else. The sale of 48A Pownall Street was not caught by the Brightline, as the rollover provisions in the Income Tax Act 2007 applied to a trust when 48A Pownall Street was transferred into Janet and James’s names as trustees on 22 October 2020.

[46]	The plaintiff also pleads that the defendants were aware of his mistake in the transaction. In his 1 November 2023 affidavit, the plaintiff says:

The defendants’ counsel used the word “Brightline” during negotiations and knew I was operating under the belief that I was contracting with them as trustees and that this was essential to me.

[47]	The plaintiff’s alleged mistake seems to be that he believed that, as part of the settlement, the defendants accepted they were trustees and entered into the settlement agreement in that capacity.

[48]	The first difficulty with the plaintiff’s cause of action for mistake is that it appears to be a mistake in the interpretation of the settlement agreement. Section 25 of the Contract and Commercial Law Act provides that such a mistake is not actionable.23

[49]	The plaintiff alleges that he became mistaken about what was being agreed to on 18 August 2023 when he signed the agreement drafted by Mr Mason. The plaintiff read the document and allegedly understood that the defendants were entering into the settlement agreement as trustees, and he as a beneficiary of the trust. But that is not

23	Contract and Commercial Law Act 2017, s 25; Shotter v Westpac Banking Corp [1988] 2 NZLR 316; Paulger v Butland Industries Ltd [1989] 3 NZLR 549.

what the settlement agreement says. This seems to be a mistake in the interpretation of the document. The plaintiff confirmed that there was an interpretation issue when he emailed the independent accountant agreed to by the parties on 30 August 2023 and stated:

Your appointment is now on hold as it is clear the parties have interpretation issues as to how they settled matters at a judicial settlement conference on  18 August 2023. I am currently away at the moment, where an application will now need to be filed in Court dealing with how Mr Mason and his clients are trying to interpret the settlement agreement.

[50]	Even if the plaintiff’s alleged mistake is not a mistake in interpretation, it is difficult to see how the plaintiff could have had a mistaken belief that the defendants were entering into the agreement as trustees, with himself as a beneficiary of the trust. It is also difficult to see how the existence of this alleged mistake was known to the defendants. The defendants denied that they were trustees throughout the “26” proceeding which was the subject of the judicial settlement conference. There is nothing in the pleadings and affidavit evidence before the Court that provides a plausible foundation for the plaintiff believing the defendants had abandoned their position and accepted they were trustees as part of the settlement. Nor is there any plausible foundation for the contention that the defendants knew that the plaintiff was operating under the mistaken belief that they were entering into the settlement agreement as trustees.

[51]	The plaintiff’s main contention in his pleading and affidavit evidence is that the defendants’ counsel’s use of the word “Brightline” during negotiations indicated that the defendants knew he was operating under the belief that he was contracting with the defendants as trustees and that this was essential to him. It is apparent that the use of the word “Brightline” was a reference to the bright-line property rule in respect of tax on sales of residential property. There was (and remains) an issue as to whether the sale of the property by the defendants was taxable.

[52]	The parties agreed to refer outstanding tax issues, including the “Brightline” issue, to an independent accountant for determination. Any tax, and the accountant’s costs, would be deducted from the profit and the balance would then be distributed in the agreed proportions. As recorded in Minute No 1, the parties agreed to co-operate

in the exercise to be undertaken by the independent accountant, including providing all records that may be required or any other evidence requested.24

[53]	The plaintiff initially cooperated in the appointment of the independent accountant and clearly understood that the “Brightline” tax issue was a live issue to be determined by the independent accountant. In an email to counsel for the defendants on 28 August 2023, in response to a proposal that Stephen Scott be appointed as the accountant under the agreement, the plaintiff stated: 25

I am happy for Stephen to be appointed to review if the Brightline Test has been triggered with respect to 48A Pownall Street (pending approval of what his fee is). There is no issue with respect to G.S.T. on the sale of 48A Pownall Street, so Stephen would not be required to look into that.

[54]	The use of the word “Brightline” in negotiations does not indicate that the defendants accepted they were trustees and were entering into the settlement agreement as trustees, nor that the defendants knew that the plaintiff was operating under the belief that he was contracting with them as trustees. The reference to “Brightline” was simply referring to a tax issue which was unresolved and which the parties agreed to refer to an independent accountant for determination.

[55]	I find that the alleged mistake is as to the interpretation of the settlement agreement, and therefore is barred under s 25 of the Contract and Commercial Law Act. Alternatively, I find there is no plausible factual basis for the claim. The defendants have discharged the onus of establishing on the balance of probabilities that the plaintiff cannot succeed on his fifth cause of action for mistake. Further, I am satisfied that the cause of action is untenable and discloses no reasonably arguable cause of action and should be struck out.

Misrepresentation — seventh cause of action

[56]	The misrepresentation alleged in the statement of claim is:

24 Minute No 1, above n 2.
25     The plaintiff contends that emails between the parties after 18 August 2023 were part of a chain  of without prejudice communications and are privileged. However, as submitted by Mr Mason, the correspondence is not marked without prejudice and was for the purpose of giving effect to the conditional settlement agreement already in place, rather than being an attempt to reach an agreement, so s 57 of the Evidence Act 2006 does not apply.

[34] Counsel [for the defendants] when acting for Janet and James, used the word “Brightline” during negotiations. The word “Tax issues” was then substituted in the conditional settlement agreement which had the intention to, and actually did mislead and deceive Richard. This was a misrepresentation inducing the agreement under s 35 of the Contract and Commercial Law Act 2017 (whether innocent or fraudulent), and counsel’s conduct also amounted to misleading and deceptive conduct under s 9 of the Fair Trading Act 1986.

[57]	The plaintiff also pleads in his amended statement of claim that:

Richard’s reliance in entering into the conditional settlement agreement was on the basis that he was settling his dispute with Janet and James in regard to 48A Pownall Street as trustees of the Trust that completed 48A Pownall Street, Masterton. This was because of the discussion that took place and is referred to above in [the statement of claim].

At no time did Janet and James qualify their position that they were not entering into an agreement with Richard as Trustees, nor did counsel acting for Janet and James qualify his client’s position at the time and prior to the conditional settlement agreement being signed, despite discussion that the agreement was conditional on Richard’s ex-wife agreeing to make no claims against Janet and James as Trustees.

[58]	There is also a very brief allegation in the amended statement of claim that “[t]he gains on 48A Pownall Street were represented as $308,002 by Janet and James.
… this figure is incorrect and was a fraudulent misrepresentation.”

[59]	As submitted by Mr Mason, there is no basis put forward in the pleading for alleging that the figure is false or a fraudulent misrepresentation. The figure, recorded as $308,002.56, comes from an accountant’s report annexed to an affidavit of Janet McNaughton sworn on 21 December 2022 in the “26” proceeding.

[60]	The plaintiff submits that, prior to the judicial settlement conference in the “26” proceeding, a request was made to the defendants for full discovery of the invoices for the costs to complete the property which had been provided to the accountant and which underpin his report. However, even if discovery was not completed prior to the judicial settlement conference, that does not provide a sufficient foundation for an allegation of fraudulent misrepresentation. Moreover, even though the plaintiff seems to have been concerned about the veracity of the information provided to the accountant, he still decided to enter into the settlement agreement based on the derived profit figure of $308,002. Therefore, it is difficult to see how he was induced to enter into the settlement agreement by any misrepresentation in this regard. The plaintiff

also used this profit figure in his draft “Deed of Settlement” which he forwarded to the defendants’ counsel on 30 August 2023.

[61]	Allegations of fraud must be pleaded with care and particularity. General allegations, however strong the words may appear to be, are insufficient to amount to a proper allegation of fraud.26 In my view, the plaintiff’s general allegation of fraudulent misrepresentation has not been pleaded with sufficient particularity to provide the foundation for a cause of action.

[62]	With regard to the defendants’ counsel’s use of the word “Brightline” during negotiations, and then the use of the word “tax” in the settlement agreement, it is not clear how the plaintiff contends this amounts to a misrepresentation. As discussed above, the reference to “Brightline” is a reference to the bright-line property rule regarding tax on sales of residential properties. The reference to “tax” in the settlement agreement is clearly referring to the same issue, albeit that it is clarified to include GST. The plaintiff confirmed in subsequent email correspondence that he understood that the word “tax” in the settlement agreement was referring to the “Brightline” tax issue and GST. 27 There was no misunderstanding in this regard.

[63]	The plaintiff also contends that the misrepresentation arises from discussions during the judicial settlement conference regarding the 29 December 2020 email from the first defendant and whether the defendants were trustees. However, the issue of whether the defendants were trustees was one of the main issues in dispute, and it would be expected that it would be discussed at the judicial settlement conference. But there is nothing in the pleadings and affidavit evidence before the Court that provides a plausible foundation for the plaintiff’s allegation that the defendants represented to the plaintiff that they accepted they were trustees and were entering into the settlement agreement as trustees. The use of the word “Brightline” by the defendants’ counsel in negotiations does not indicate that the defendants accepted they were trustees. Nor does the use of the generic word “tax” in the settlement agreement indicate that the defendants accepted they were trustees and were entering into the settlement agreement in that capacity.

26	Schmidt v Pepper New Zealand (Custodians) Limited [2012] NZCA 565 at [15].
27	See [53] above.

[64]	The plaintiff also alleges that that there was a misrepresentation because the defendants (and their counsel) did not “qualify” their position that they were not entering into the agreement with the plaintiff as trustees. The general rule is that mere silence is not a misrepresentation.28 The defendants may have been required to “qualify” their position if their conduct gave rise to some plausible basis for the plaintiff believing that the defendants had accepted they were trustees and were entering into the settlement agreement as such.29 However, as discussed above, there is no plausible basis for this belief.

[65]	For the reasons set out above, I find that the defendants have discharged the onus of establishing on the balance of probabilities that the plaintiff cannot succeed on his seventh cause of action for misrepresentation. Further, I am satisfied that the cause of action is untenable and discloses no reasonably arguable cause of action and should be struck out.

Section 9 of the Fair Trading Act 1986, misleading and deceptive conduct — eighth cause of action

[66]	The plaintiff’s allegations of misleading and deceptive conduct under s 9 of the Fair Trading Act are:

Counsel [for the defendants] when acting for Janet and James, used the word “Brightline” during negotiations. The word “Tax issues” was then substituted in the conditional settlement agreement which had the intention to, and actually did mislead and deceive Richard. This was a misrepresentation inducing agreement under s 35 of the Contract and Commercial Law Act 2017, and counsel’s conduct amounted to misleading and deceptive conduct under s 9 of the Fair Trading Act 1986.

[67]	Even if the defendants and/or counsel for the defendants were “in trade” for the purposes of s 9 of the Fair Trading Act (and I make no finding on this issue), I am satisfied that use of the word “Brightline” in negotiations and the substitution of the word “tax” in the settlement agreement did not amount to misleading and deceptive conduct. “Brightline” refers to the bright-line property rule regarding tax on sales of residential property. The reference to “tax” in the settlement agreement is clearly referring to the same issue, albeit that it is clarified to include GST. A reasonable

28	Steven Todd and Matthew Barber, above n 22, at 367.
29	At 374–377.

person in the plaintiff’s shoes could not have been misled or deceived about what is being referred to. Subsequent email correspondence and memoranda to the Court confirm that the plaintiff understood what these words referred to. He was not misled or deceived. There is an indication in the pleadings that the conduct was misleading and deceptive because “[c]ounsel knew that Richard did not agree to tax liabilities coming off the $308,002.00 before division from what was said at the JSC”. However, it is difficult to see how there was any misleading and deceptive conduct by counsel for the defendants and/or the defendants in this regard. The settlement agreement which the plaintiff reviewed, accepted and signed plainly states:

We Jim and Janet McNaughton agree that an independent accountant be appointed to deal with tax* arising from the profit identified by Ash Short of $308,002. The balance of that net of tax and accountants’ costs be divided 40% to Janet and Jim and 60% to Richard with the balance of the $350,000 plus interest held by Fitzherbert Rowe being released immediately to Janet and Jim.

* including GST

[68]	Again, a reasonable person in the plaintiff’s shoes could not have been misled or deceived about the process, specifically that any tax and accountant’s costs where to be deducted from the identified profit of $308,002 before division. If the plaintiff did not agree to any tax liabilities coming off the $308,002 before division then he should not have signed the settlement agreement.

[69]	For the reasons set out above, I find that the defendants have discharged the onus of establishing on the balance of probabilities that the plaintiff cannot succeed on his cause of action for breach of s 9 of the Fair Trading Act. Further, I am satisfied that the cause of action is untenable and discloses no reasonably arguable cause of action and should be struck out.

Breach of settlement agreement — tenth cause of action

[70]	The plaintiff alleges that the defendants breached the conditional settlement agreement by counsel for the defendants contacting the plaintiff’s ex-wife’s lawyer in relation to the condition in the settlement agreement.

[71]	The plaintiff contends that it was either an “unwritten term” of the settlement agreement that the defendants were not to contact his ex-wife’s lawyer, or it was an implied term. The plaintiff’s pleading here appears to conflict with part of the relief sought under the fifth cause of action for mistake, where the plaintiff seeks variation of the settlement agreement to include “the term (expressed or implied)” that counsel for Janet and James were not to contact his ex-wife’s solicitor. The settlement agreement would not require variation if there was already an express oral term or implied term as contended by the plaintiff as the basis for the tenth cause of action.

[72]	The issues raised under the tenth cause of action have previously been the subject of consideration by the Court in the “26” proceeding. The plaintiff raised the issue with the Court in his memoranda dated 24 August 2023 and 27 August 2023. In Minute No 2, Associate Judge Lester records:30

[5]	After the agreement had been signed the issue was raised of how the consent of Richard’s ex-wife was to be obtained. Richard said he wanted to arrange that contact.

[6]	However, on Saturday 19 August 2023 there was email correspondence between Richard and Mr  Mason.  In  the  course  of  that  email  correspondence, Mr Mason in an email said:

We have a deal. All that remains is to write to Christine Batt and seek Veronica’s acceptance of it. Is there any reason I should not do that?

[7]	Veronica is Richard’s ex-wife and Ms Batt is her solicitor.

[8]	Richard replied:

Veronica wants me to walk from all RP and is making claims under s18A. I am not prepared to do that, so it’s unlikely there will be a deal to conclude in this instance.

[9]	Richard’s reply continued but did not take issue with Mr Mason’s suggestion that he contact Ms Batt, that is, there was no response to Mr Mason saying: “Is there any reason I should not do that?”.

[10]	Mr Mason then contacted Ms Batt with a deed which recorded that Veronica would not bring a claim against the defendants in relation to the property said to be held in trust.

30	Minute No 2, above n 4.

[11]	Richard has taken issue with Mr Mason contacting Ms Batt [the plaintiff’s ex-wife’s lawyer] given that at the  JSC  Richard  said  he  would  make  contact.  Mr Mason responds that having the next day specifically sought that Richard advise if there was any reason why Mr Mason should not contact Ms Batt, no issue was raised.

[12]	Richard characterises his advice at the JSC that he would contact  Ms Batt as an unwritten term of the settlement agreement. The settlement agreement was silent on who would contact Ms Batt.

[13]	It is common ground that how the mechanics of obtaining Veronica’s consent was occur was discussed at the conclusion of the JSC and after the agreement had been signed. When Mr Mason said: “Is there any reason I should not do that?” Richard did not say that what Mr Mason was proposing was either a breach of the agreement  or otherwise take issue with what     Mr Mason proposed. Richard is response says that he never gave an instruction that Mr Mason could make contact.

[14]	The fact is that whether Veronica via her solicitor was contacted by Mr Mason or Richard, that contact had to occur and occur promptly.

[15]	I agree with Mr Mason that the condition attaching to the agreement reached at the JSC has been satisfied and that this proceeding is at an end. The parties’ rights are now contained in the settlement agreement.

[16]	If Richard believes he has  some  basis  to  bring  a  claim  against Mr Mason arising from the circumstances set out in this [his] memorandum of 24 August 2023, that is a matter for him to consider but is a matter outside of this proceeding. Other than that observation, I say no more on that issue. This proceeding is at an end.

[73]	The mechanics of obtaining the plaintiff’s ex-wife’s consent was discussed at the conclusion of the conference and after the settlement agreement had been signed. It is not apparent from Minute No 2 that the discussion involved any agreement on the part of the defendants that they would not contact the plaintiff’s ex-wife’s lawyer. The parties requested Associate Judge Lester to record additional terms of the settlement agreement which he did in Minute No 1. The additional terms did not include any term that the defendants were not to contact the plaintiff’s ex-wife’s lawyer.31 If the parties had agreed to this term in the post-contract discussion, then it seems to me that the parties, in particular the plaintiff, would have requested that it be recorded as one of the additional terms.

31 Minute No 1, above n 2, at [5] recorded that the plaintiff was to provide an update to the defendants’ counsel as to progress in satisfying the condition within four weeks. While this indicates that the plaintiff was going to contact his ex-wife’s lawyer, it is clearly not a term prohibiting the defendants or their counsel from contacting the plaintiff’s ex-wife’s lawyer.

[74]	With regard to an implied term, in Bathurst Resources Ltd v L & N Holdings Ltd, the Supreme Court held: 32

[116]	To conclude, the principal points that govern the implication of terms are as follows:

(a)	The legal test for the implication of a term is a standard of strict necessity, a high hurdle to overcome.

(b)	The starting point is the words of the contract. If a contract does not provide for an eventuality, the usual inference is that no contractual provision was made for it.

(c)	While the task of implication only begins when the court finds that the text of the contract does not provide for the eventuality, the implication of a term is nevertheless part of the construction of the written contract as whole. An unexpressed term can only be implied if the court finds that the term would spell out what the contract, read against the relevant background, must be understood to mean.

(d)	As with the task of interpreting a contract, the inquiry for the court when considering the implication of a term is an objective inquiry – it is the understanding of the notional reasonable person with all of the background knowledge reasonably available to the parties at the time of the contract that is the focus of this assessment. The court is tasked with the role of constructing the understanding of that reasonable person.

(e)	Thus, the implication of a term does not depend upon proof of the parties’ actual intentions, nor does it require the court to speculate on how the actual parties would have wanted the contract to regulate the eventuality if confronted with it prior to contracting.

(f)	The BP Refinery conditions are a useful tool to test whether the proposed implied term is strictly necessary to spell out what the contract, read against the relevant background, must be understood to mean. Whilst conditions (4) and (5) must always be met before a term will be implied, conditions (1)–
(3) can be viewed as analytical tools which overlap and are not cumulative. The business efficacy and the “so obvious that ‘it goes without saying’” conditions are both ways, useful in their own right, of testing whether the implication of a term is strictly necessary to give effect to what the contract, objectively interpreted by the court, must be understood to mean.

32	Bathurst Resources Ltd v L&M Coal Holdings Ltd 2021 NZSC 85, [2021] NZLR 696 at [116] (footnotes omitted).

[75]	In my view the proposed implied term is not strictly necessary to spell out what the contract, read against the relevant background, must be understood to mean. Associate Judge Lester recorded in Minute No 2 that:33

The fact is that whether Veronica via her solicitor was contacted by Mr Mason or Richard, that contact had to occur and occur promptly.

…

… it is hard to see how who sought Veronica’s consent would make any difference given Veronica’s lawyer was always going to want to know the circumstances of the settlement and Veronica’s consent needed to be sought reasonably promptly. …

[76]	It is apparent that, on an objective view, the proposed implied term is not necessary to give business efficacy to the settlement agreement, nor “so obvious that ‘it goes without saying’”.

[77]	Moreover, if there was an express oral term of the contract or an implied term as contended by the plaintiff, and it was essential to him as he now submits, then it would be expected that the plaintiff  would  have  immediately  taken  issue  with  Mr Mason’s subsequent email asking if there was any reason why he (Mr Mason) should not contact the plaintiff’s ex-wife’s lawyer. However, as recorded in Minute No 2, the plaintiff did not take issue with what Mr Mason proposed, and Mr Mason went ahead and contacted the plaintiff’s ex-wife’s lawyer.

[78]	Taking into account the contemporaneous minutes referred to above, I am not satisfied that it was either an express oral term of the settlement agreement, nor an implied term, that the defendants would not contact the plaintiff’s ex-wife’s lawyer.

[79]	I find that the defendants have discharged the onus of establishing on the balance of probabilities that the plaintiff cannot succeed on his tenth cause of action for breach of the settlement agreement. Further, I am satisfied that the cause of action is untenable and discloses no reasonably arguable cause of action and should be struck out.

33	Minute No 2, above n 4, at [14] and [16].

Claims carried over from the “26” proceeding — first, second, third and fourth causes of action

[80]	As recorded in Minute No 2, the condition in the settlement agreement was satisfied, the “26” proceeding brought to an end (that is, dismissed), and “[t]he parties’ rights are now contained in the settlement agreement”.34 I have found that the settlement agreement was supported by consideration and cannot be set aside. I have also found that the plaintiff’s claims to cancel the settlement agreement on the basis of mistake or misrepresentation or breach of contract cannot succeed and disclose no reasonably arguable cause of action.

[81]	The defendants rejected the plaintiff’s purported cancellation and affirmed the settlement agreement. Therefore, the settlement agreement remains on foot and binding on the parties.

[82]	The plaintiff has pleaded four causes of action in the present proceeding which the defendants submit derive directly from the “26” proceeding. They submit that the settlement agreement is a bar to those causes of action being re-litigated, and it is an abuse of process to attempt to pursue them.

[83]	The relevant causes of action are the first cause of action “Creation of a Trust”, second cause of action “Estoppel”, third cause of action “Knowing Receipt” and fourth cause of action “Fiduciary Duty”.

[84]	The first cause of action for “Creation of a Trust” is essentially the same as the first cause of action pleaded in the “26” proceeding. The only difference between them is that 48A Pownall Street has been sold and the argument now is over sale proceeds rather than the property itself.

[85]	The second cause of action for “Estoppel” closely parallels the fourth cause of action in the “26” proceeding.

[86]	The third cause of action is “Knowing Receipt”. The cause of action is based on the matters pleaded at paragraph 14 of the plaintiff’s statement of claim. I agree

34	Minute No 2, above n 4, at [15].

with Mr Mason’s submission that the factual allegations on which this cause of action are based are not in respect of wrongdoing by a stranger to the alleged trust, but in respect of wrongdoing by the alleged trustees.35 Therefore, the “knowing receipt” cause of action is essentially a repeat of the first cause of action for breach of trust.

[87]	The fourth cause of action for “Fiduciary Duty” closely parallels the third cause of action in the “26” proceeding.

[88]	The plaintiff is attempting to pursue causes of action in this proceeding which are the same as, or similar to, and based on the same events as, causes of action advanced in the “26” proceeding. Associate Judge Lester found in Minute No 2 and Minute No 4 that the settlement agreement brought the “26” proceeding to an end (that is, it is dismissed) and that the rights and obligations of the parties are “now contained in the settlement agreement”. This means that the causes of action in the “26” proceeding have been compromised and brought to an end by the settlement agreement, and that the settlement agreement now governs the parties’ rights and obligations in respect of those causes of action.

[89]	I do not consider that the first, second, third and fourth causes of action in this proceeding can succeed because the settlement agreement,  as  confirmed  by  Minute No 2, acts as a bar to these causes of action being raised against the defendants. I consider that the attempt to pursue these causes of action is an abuse of process.36

[90]	For the reasons set out above, I find that the defendants have discharged the onus of establishing on the balance of probabilities that the plaintiff cannot succeed on the first, second, third and fourth causes of action because they are barred. Further, I am satisfied that these causes of action are an abuse of process and should be struck out.

35 Andrew Butler and others Equity and Trusts in New Zealand (2nd ed, Thompson Reuters, Wellington, 2009 at 577.
36 To the extent that the first, second, third and fourth causes of action in the current proceeding are similar to, rather than identical to, causes of action settled in the “26” proceeding, they are based on the same events and could and should have been brought in the “26” proceeding and are barred by the abuse of process rule in Henderson v Henderson (1843) 3 Hare, 100, 115. See also Commissioner of  Inland  Revenue  v  Bhanabhai  [2007]  2  NZLR  478  at  [60]–[61]  (CA);  De Gregorio v Surridge [2019] NZHC 1802 at [148]–[155].

[91]	There is no claim for fraud pleaded in the current proceedings. However, the plaintiff has raised allegations of land transfer fraud against the defendants in his submissions. The plaintiff refers to the meaning of fraud in s 6 of the Land Transfer Act 2017 and submits:

The question for the Court to consider, and is of dispute in this case: is whether the transfer of 48A Pownall Street into the defendants’ names was valid land transfer and on a lawful basis given the promises the defendants made at the time, along with the defendants’ email 29 December 2020, and what they have argued subsequently, which is that the plaintiff and Ms McNaughton did not have an unregistered equitable interest in 48A Pownall Street. If that does not meet the elements of s 6 of the Land Transfer Act 2017, then what does?

[92]	It is not clear from the plaintiff’s submissions what remedy the plaintiff would be seeking for the alleged land transfer fraud.

[93]	In Schmidt v Pepper New Zealand (Custodians) Limited, the Court of Appeal held that: 37

[15]	Allegations of fraud or dishonesty are very serious. They must be pleaded with care and particularity. As the authors of Bullen & Leake & Jacobs Precedents of Pleadings emphasise, counsel must not draft any originating process or pleading containing an allegation of fraud unless they have reasonably credible material which, as it stands, establishes a prima facie case of fraud – that is, material of such a character which would lead to the conclusion that serious allegations could properly be based upon it. Fraud cannot be left to be inferred from the facts – fraudulent conduct must be distinctly alleged and as distinctly proved. General allegations, however strong the words may be appear to be, are insufficient to amount to a proper allegation of fraud.

[16]	While these principles have been articulated in authoritative discussions of duties imposed upon counsel, they apply with equal rigour to those who represent themselves. Those who seek to portray themselves as well acquainted with the law and its processes cannot shelter behind the barrier of unfamiliarity when it suits. They must satisfy the same exacting standard when preparing their own pleadings. The obligation exists for the benefit of defendants – to allow them to be fully aware of, and able to address, a serious allegation – and for the Court which will be called upon to decide it.

[94]	A plaintiff may amend his or her claim so as to remedy defects in the pleading relied on by the defendant on an application for summary judgment or strike out.38

37	Schmidt v Pepper New Zealand (Custodians) Limited, above n 26, at [15]–[16] (footnotes omitted).
38	McGechan on Procedure, above n 12, [12.2.07(1)] and [15.1.08(1)]

However, the party should have the amendment formulated for the Court to consider in the course of argument.39

[95]	Here, the plaintiff is purporting to raise a new claim for fraud. The allegations of fraud are not pleaded or particularised at all and consist of general allegations raised in the plaintiff’s submissions. The defendants have maintained throughout that the arrangement between them and the plaintiff was simply a family arrangement, and denied they were trustees and the plaintiff a beneficiary of the trust. Even if they are wrong on these matters (and I make no finding in this regard), this falls well short of fraud. The plaintiff’s allegations of fraud seem to me to be largely based on inference.

[96]	Accordingly, I am satisfied that the plaintiff’s allegations of fraud in his submissions disclose no reasonably arguable cause of action as they are without adequate foundation.

[97]	Further, the plaintiff’s allegations of land transfer fraud are based on the same events as relied on by the plaintiff to found his causes of action in the “26” proceeding, which was settled. Any claim for land transfer fraud could and should have been brought in the “26” proceeding. Therefore, any claim for land transfer fraud in the current proceeding would be barred by the abuse of process rule in Henderson v Henderson.40

General damages — ninth cause of action

[98]	This purported cause of action is simply a claim for relief, being general damages, arising out of the alleged breaches by the defendants in respect of the other causes of action discussed above.

[99]	If summary judgment is granted to the defendants and/or the plaintiff’s causes of action are struck out, this claim for damages falls away.

39 At [15.1.08(2)].
40 Henderson v Henderson (1843) 3 Hare 100, 115; Commissioner of Inland Revenue v Bhanabhai [2007] 2 NZLR 478 at [60]–[61] (CA); De Gregorio v Surridge [2019] NZHC 1802 at [148]– [155].

Summary as to defendants’ application for summary judgment and strike out

[100]	For the reasons set out above, the defendants have satisfied me that the plaintiff’s claims cannot succeed. Accordingly, the defendants are entitled to summary judgment against the plaintiff on the plaintiff’s claims.

[101]	Further, I am satisfied that the plaintiff’s claims are untenable and disclose no reasonably arguable cause of action and should be struck out.

[102]	In the circumstances, I do not need to deal with the defendants’ additional application for strike out of specific paragraphs of the plaintiff’s statement of claim and amended statement of claim on the basis that they are in breach of r 7.79(6) of the High Court Rules.

Defendants’ counterclaim — specific performance

[103]	The defendants seek summary judgment on their counterclaim for specific performance to give effect to the settlement agreement dated 18 August 2023 incorporating the additional terms in Minute No 1.

[104]	I have found above that the settlement agreement remains on foot and binding on the parties. There is no basis for cancellation of the settlement agreement or for the agreement to be otherwise set aside.

[105]	It is apparent that the plaintiff has breached the settlement agreement in that he has wrongly purported to cancel the settlement agreement and, by instructing the agreed independent accountant that his appointment is on hold, he has failed to co-operate in the exercise to be undertaken by the independent accountant and to take all reasonable steps to give effect to the terms of the settlement agreement.

[106]	In my view, there is sufficient definition of what has to be done by the parties in the settlement agreement such that the parties can comply with an order for specific performance. I also accept that there is a risk for the defendants that damages for breach of the settlement agreement would not be an adequate remedy in this case. It

is not clear how damages would be assessed.	Further, it is not apparent that the plaintiff would be able to pay a substantial award of damages.

[107]	In the circumstances, I consider that it is appropriate for an order to be made by way of summary judgment against the plaintiff for specific performance of the settlement agreement.

Result

[108]	An order is made that all the causes of action in the plaintiff’s statement of claim dated 6 September 2023 and first amended statement of claim dated 24 October 2023 are struck out.

[109]	Summary judgment is granted for the defendants against the plaintiff on the plaintiff’s claims in his statement of claim dated 6 September 2023 and his first amended statement of claim dated 24 October 2023.

[110]	Summary judgment is granted against the plaintiff on the defendants’ counterclaim for specific performance of the settlement agreement dated 18 August 2023 including the additional terms of the agreement set out in the minute of Associate Judge Lester dated 18 August 2023.

[111]	As to costs, my preliminary view is that the defendants are entitled to costs on a 2B basis and reasonable disbursements. If any party disagrees with this approach, then that party may file a memorandum, with any memorandum in response from the other party to be filed within a further 10 working days. Any memoranda are to be limited to 3 pages (excluding costs schedules). Costs will then be determined on the papers. Otherwise, it is expected that the parties will agree costs based on my preliminary view.

Associate Judge Skelton

Solicitors:
Cullinane Steele Ltd, Levin for Defendants