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High Court of New Zealand Decisions |
Last Updated: 8 December 2014
NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO 11D OF THE FAMILY COURTS ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE HTTP://WWW.JUSTICE.GOVT.NZ/ COURTS/FAMILY-COURT/LEGISLATION/RESTRICTIONS-ON- PUBLICATIONS.
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2011-485-2595 [2014] NZHC 2929
|
IN THE MATTER OF
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an appeal under s 72 of the District Courts
Act 1947
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BETWEEN
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EBS Appellant
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AND
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CAS Respondent
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UNDER the Property (Relationships) Act 1976 and the Contractual Remedies Act
1979
BETWEEN EBS Plaintiff
AND CAS Defendant
UNDER the Family Proceedings Act 1980 and the
Fair Trading Act 1986
BETWEEN EBS Applicant
AND CAS
First Respondent
MICAL SHANE JERVIS TREADWELL, JAMES PETER WOODS, CAS and EBS as trustees of the CA & EBS FAMILY TRUST
Second Respondents
EBS v CAS [2014] NZHC 2929 [24 November 2014]
BRYAN GEORGE POCOCK, TREADWELLS TRUSTEES NO 2
LIMITED and CAS as trustees of the CAS FAMILY TRUST
Third Respondents
MICAL SHANE JERVIS TREADWELL, BRYAN GEORGE POCOCK and CAS as trustees of the CAS COMMERCIAL TRUST
Fourth Respondents
POCOCK HUDSON LIMITED Fifth Respondent
CIV-2011-485-2559
UNDER the Trustee Act 1956 and the Declaratory
Judgments Act 1908
BETWEEN EBS Plaintiff
AND CAS
First Defendant
MICAL SHANE JERVIS TREADWELL Second Defendant
MICAL SHANE JERVIS TREADWELL, JAMES PETER WOODS, CAS and EBS as trustees of the CA & EBS FAMILY TRUST
Third Defendants
BRYAN GEORGE POCOCK, TREADWELLS TRUSTEES NO 2
LIMITED and CAS as trustees of the CAS FAMILY TRUST
Fourth Defendants
MICAL SHANE JERVIS TREADWELL, BRYAN GEORGE POCOCK and CAS as trustees of the CAS COMMERCIAL TRUST
Fifth Defendants
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Hearing:
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29 October 2014
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Counsel:
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H B Rennie QC and A R Davie for CAS I R Millard QC and J J Delany for
EBS
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Judgment:
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24 November 2014
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RESERVED JUDGMENT OF DOBSON J
Contents
This judgment
....................................................................................................................................
[1] History of the proceedings
................................................................................................................
[3] The new causes of
action.................................................................................................................
[17] Res judicata
.....................................................................................................................................
[25] The rule in Henderson v Henderson
...............................................................................................
[54] No tenable cause of action
..............................................................................................................
[64] Abuse of process
..............................................................................................................................
[77] Standing back
..................................................................................................................................
[83] Costs
.................................................................................................................................................
[90]
This judgment
[1] This judgment arises in long-running proceedings involving
relationship property and quasi relationship property
claims by the applicant
(EBS) pursued against her former husband (CAS). The remaining respondents, who
took no part in the present
hearing, are professional trustees of various trusts
under the effective influence of CAS, and accounting advisers retained by him
and those trusts.
[2] This judgment determines applications on behalf of CAS for
defendant’s summary judgment in relation to two new causes
of action
pleaded on behalf of EBS in an amended statement of claim filed in June 2014, or
alternatively for an order either striking
out or staying those causes of
action.
History of the proceedings
[3] EBS commenced a range of claims in 2009 and 2010 seeking maintenance and awards out of property over which she asserted claims. Claims were initially filed in the Family Court, but in November 2011 those proceedings were transferred
to the High Court. Companion proceedings under the Trustee Act 1956 in
relation to duties owed by the trustees of the respondent
trusts were put on
hold by me in orders in February 2012.
[4] CAS is in business in Wellington as a property developer, and has
structured those activities through trusts, including
relevantly the CAS
Commercial Trust, the trustees of which are the fourth respondents (the
commercial trust). The activities of
the commercial trust have been carried out
by a series of companies, legal ownership of which is vested in the trustees of
the commercial
trust.
[5] In the third quarter of 2010, the parties agreed to mediate EBS’s claims as filed and foreshadowed at that time. The solicitors then acting for EBS pressed for full disclosure of the assets and liabilities of entities including the commercial trust. A day or two before the mediation was scheduled in October 2010, solicitors for CAS provided a breakdown of the position of various companies that carried out property development activities on behalf of the commercial trust. Information had
been provided by Pocock Hudson Limited,1 the Wellington chartered
accountants
who act for CAS and trading entities under his control.
[6] The stance adopted on behalf of CAS was that any settlement was to be concluded on the basis of values as at the date of separation. Although the parties did not agree on the effective date of their separation, CAS was treating 31 March
2009 as an approximation for the date of separation. Consistently with
that, the information provided reflected the net equity position
as at 31 March
2009.
[7] The mediation took place over two days with EBS being represented
by her then solicitor and Mr Hussey, a forensic accountant
with expertise in
relationship property disputes. At the conclusion of the mediation, the
parties completed a handwritten heads
of agreement, the terms of which purported
to record their settlement of the claims EBS had against CAS (the HoA).
[8] Shortly after the HoA had been completed, EBS complained that she
had been pressured to compromise her claims, that she
had insufficient
information to
1 That company has been added as a further defendant in the latest statement of claim.
make a fully informed decision, and that CAS ought to make further provision
for her. In December 2010, CAS moved to register the
terms agreed in the HoA as
a relationship property agreement in the Family Court under the Property
(Relationships) Act 1976 (the
Act). EBS opposed that application on the
grounds that the HoA was void because:
(a) it was made without timely full and proper disclosure from CAS; (b) EBS’s agreement was obtained under duress;
(c) it was subject to further disclosure from CAS which had not been
provided;
(d) it was not an agreement in terms of s 21 of the Act;
(e) it was based on CAS’s insufficient and/or incorrect
disclosure and information as to the true nature and extent of
all the
relationship and trust property; and
(f) to give effect to the HoA would cause EBS serious injustice,
requiring the Court to set it aside.
[9] In a memorandum to the Court on 17 December 2012, counsel for
EBS
summarised the “essential issues of fact and law” as
follows:
• Is the document an agreement pursuant to s 21A of the
Act?
• Can the document have effect, wholly or in part?
• Does the document prevent EBS from
pursuing her claim against the CAS Trust,2 and the commercial
trust under s 182 of the Family Proceedings Act 1980?
[10] It is the third stated issue that is most relevant to CAS’s
applications.
[11] In light of the impact on other issues in the various proceedings, I
directed a
separate determination of EBS’s claim that the HoA should be set aside.
On 16 April
2013, I heard argument on separate questions as to the status, scope and
effect of the
HoA.
[12] The HoA did not comply with the requirements as to form provided by
s 21F of the Act. Although it was common ground that
the solicitors
representing the parties witnessed their signatures on the HoA, the certificate
contemplated by s 21F was not endorsed
confirming the provision of legal
advice to each party. The agreement was therefore void for non-compliance.
However, s
21H provides that even though an agreement is void for non-compliance
with a requirement of s 21F, the Court may declare that the
agreement has
effect, wholly or in part or for any particular purpose, if it is satisfied that
the non-compliance has not materially
prejudiced the interests of any party to
the agreement.
[13] In settling the issues to be argued at the hearing on 16 April 2013,
EBS’s stance in relation to the HoA changed.
The challenge to the HoA was
not pursued, and instead the argument advanced on behalf of EBS was that the HoA
did not settle a range
of claims that were still open to her. EBS requested
that the status of the HoA be confirmed, subject to treating its terms as
settling
only certain claims under the Act so as to enable her to pursue further
claims under other heads.
[14] Accordingly, effectively by consent, I confirmed the binding status of the HoA pursuant to s 21H in a judgment on 20 May 2013,3 subject to deleting a provision that would have required differences about implementation of its terms to be referred back to the mediator as an arbitrator. As part of that decision, I
concluded that the non-compliance with s 21F did not materially
prejudice the interests of EBS.
[15] My judgment of 20 May 2013 determined that the HoA had settled all
claims that EBS might bring other than claims under s
182 of the Family
Proceedings Act (the FPA) and the prospect of applications to amend the
terms of spousal maintenance
or child support in light of any material changes
in circumstances since completion of the HoA.
[16] In June 2013, EBS sought to transfer back to the Family Court what
remained of her claims against CAS. It was clearly implicit
from the terms of
her affidavit in support of that application that she treated the claim under s
182 of the FPA as the only relevant
outstanding matter.4 The
judgment of Williams J declining that application (it having been opposed by
CAS and other respondents) recorded:5
The applicant says all that effectively remains in any substantive sense is
the s 182 application and the respondent’s costs
application – the
latter having only been pursued after the transfer application was made.
[...]
The new causes of action
[17] Thereafter, and with the benefit of fresh advice from newly retained counsel, EBS pursued further initiatives. On 18 June 2014, her solicitors filed an amended statement of claim. It contained new causes of action relying on alleged inadequacies in the disclosure provided before and at the mediation. It alleged that the terms of a representation as to the worth of the commercial trust at $7.5 million conveyed implicitly that that value as at 31 March 2009 would not be materially different at the date of the mediation. EBS also pleaded that financial statements to
31 March 2010 were in existence for a company carrying out certain property developments for the commercial trust, but were not disclosed. It was pleaded that those financial statements were dated 30 September 2010, and that they reflected an improved financial position so that the net worth of the commercial trust at the time of the mediation was between $12.7 and $15.9 million.
[18] The HoA had included an acknowledgement that the net equity
in the commercial trust as at 31 March 2009 was approximately
$7.5 million.
EBS alleged that that acknowledgement had been added after the rest of the
document had been drafted.
[19] EBS alleged that CAS’s failure to provide proper disclosure
was wilful and a contumelious disregard of her right to
total disclosure. On
that basis, EBS claimed damages of $1 million and exemplary damages of
$250,000.
[20] A second new cause of action, pleaded as an alternative to the claim
for misrepresentation, was that the same circumstances
constituted deceit by CAS
and the same relief was sought.
[21] CAS’s response to the new causes of action was to apply, in
July 2014, to strike them out or have them stayed. In
August 2014, a separate
application was made for defendant’s summary judgment in relation to the
two new causes of action.
Ultimately both forms of challenge were argued
together.
[22] The application for strike out or stay relied on grounds
that:
• the new causes of action were res judicata;
[23] The grounds for the defendant’s summary judgment application were that neither of the new causes of action could succeed. Further, that in the exercise of the Court’s inherent jurisdiction summary judgment should be granted to prevent abuse of process.
[24] EBS also sought further discovery from CAS. That application came
after extensive exchanges and earlier arguments about
the scope of
CAS’s discovery obligations. In addition, she made application for
non-party discovery against the BNZ, which
provides banking facilities for CAS
and all of his entities. Discovery by the BNZ was provided shortly before the
present hearing.
Res judicata
[25] The first ground of attack on the new causes of action was under the
rubric of res judicata. Mr Rennie QC treated that
principle as including three
potentially relevant rules, namely cause of action estoppel, issue estoppel and
the rule in Henderson v Henderson.6
[26] A cause of action estoppel requires there to have been a final
judgment between identical parties dealing with identical
subject
matter.7 In the present context, I take that form of estoppel
as requiring the same cause of action to be raised in the second attempt.
That
is not the case here so cause of action estoppel could not apply.
[27] Issue estoppel can be raised in relation to something less than a cause of action, but still requires a relatively strict analysis of the commonality of the features as between the first occasion on which the issue was addressed, and the second occasion on which a party seeks to contest it in Court again. Relevantly here, the issue would have to be the subject of specific pleading, it has to have been addressed in a final judgment, it has to arise again between the same parties litigating in the
same capacity, and in respect of the same issue.8 Mr Rennie
argued for the requisite
commonality between the grounds EBS raised for avoiding the HoA (relevantly
that there had been material non-disclosure or misrepresentation),
and the
allegations to that same effect in the new causes of action.
[28] Mr Rennie acknowledged that a relatively high threshold has to be
achieved to prevent a claim proceeding on the basis of
issue estoppel. He cited
the Supreme
6 Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100, 67 All ER 313 (Ch).
7 Joseph Lynch Land Co Ltd v Lynch [1995] 1 NZLR 37 (CA) at 41.
8 See, for example, Laws of New Zealand (online ed) Estoppel at [3]; Shiels v Blakeley [1986]
2 NZLR 262 (CA) at 267.
Court’s reasoning in Arbuthnot v Chief Executive of Department of
Work and Income as recognising that a cautious and flexible approach
should be adopted to the doctrine, with care being required so as
not to
allow the doctrine, which is designed to prevent injustice to one litigant, from
causing a greater injustice to the other.9 As Mr Millard QC
emphasised, issue estoppel should be applied cautiously so as not to exclude the
truth.10
[29] I discern from the various authorities cited, particularly those summarised in Arbuthnot, that issue estoppel will not automatically avail a party seeking to halt a claim and that a case-specific form of discretionary assessment is required. That involves balancing the interests of achieving finality in litigation and preventing harassment of a defendant with repeated claims on the one hand, against the risk of creating injustice by preventing a claimant from pursuing a substantive determination on the ground that the issue has previously been rejected. The need for such discretionary reflection is consistent with the approach adopted in the rule in
Henderson v Henderson.11
[30] If I am wrong in treating the law as allowing the two stage analysis
which I consider best fits the competing positions here,
then the analysis of
the elements for an issue estoppel would require the application of a somewhat
stricter standard that reflected
that overriding concern that is so
quintessentially infused in equitable doctrines, where issue estoppel has its
origins.
[31] Two considerations arise. The first is whether the somewhat different context in which EBS first complained of inadequate disclosure at the time of the HoA qualifies it as the same issue as is now alleged. On the first occasion, alleged inadequacies in the information provided in relation to the commercial trust was one of a number of factors that EBS sought to rely on to deny that she should be bound
by the terms of the HoA as settling relevant
claims.
9 Arbuthnot v Chief Executive of Department of Work and Income [2007] NZSC 55, [2008]
1 NZLR 13 at [29]–[31].
10 For example, X v Y [1996] 2 NZLR 196 (HC) at 217.
[32] EBS now
claims that CAS deliberately misrepresented the state of his knowledge as to the
net value of the commercial trust
at the time of the mediation, and also alleges
that he misled her as to what that value or net equity was at the time by
implicitly
relating it to a net equity figure some 18 months prior to the
mediation. EBS seeks to make out such misrepresentations as being
sufficiently
material to the contract recorded in the HoA as to justify an award of damages
for her having been induced to enter
into it on a false understanding as to the
facts.
[33] Mr Millard argued that misrepresentation or non-disclosure is now
alleged in a materially different legal context. He characterised
the original
allegations as but one component of a range of arguments for avoidance of the
HoA when assessed under the provisions
of the Act. He suggested that had the
argument been run originally, there was a prospect that, on a contractual law
analysis, EBS
may have made out material misrepresentations but that they were
not sufficiently material to warrant cancellation of the contract.
[34] In oral argument, Mr Millard also emphasised an additional
difficulty in achieving a setting aside of the HoA because
of the fact that it
was partly performed by CAS who had adhered to all the obligations he assumed
under the HoA in the years since
its completion. That was one of the arguments
raised by CAS against the challenge to its enforceability.
[35] On a contract law analysis, Mr Millard argued that
misrepresentations that are not sufficiently material to warrant cancellation
might well be sufficient to justify relief by way of damages under the
Contractual Remedies Act 1979. Accordingly, from EBS’s
perspective, the
allegations have a different legal purpose and arguably that takes them outside
the proper scope of issue estoppel.
[36] That argument does not adequately deal with the relationship between s 21J of the Act and other challenges to a contract that can be made under statute, common law or equity. The essence of the section is that a Court may set aside an agreement if it is satisfied that giving effect to the agreement would cause serious injustice. However, subs (3) provides that the section does not limit or affect any enactment or
rule of law or of equity that makes a contract void or unenforceable on any
other ground.
[37] In her notice of opposition to registration of the HoA, EBS alleged material non-disclosure and that the HoA should be set aside on the basis that giving effect to the HoA would cause serious injustice. EBS’s allegation of material non-disclosure would have been central to any finding that the agreement should be set aside. Indeed, the learned author notes in Fisher on Matrimonial and Relationship
Property:12
... any matter which would be regarded as vitiating consent to a contract at
common law or equity will qualify here. Examples arise
in misrepresentation,
mistake, duress, undue influence and unconscionable bargain... Thus a party
who fails to disclose material
assets or who encourages agreement with threats
of violence is likely to find the agreement set aside under s 21J(4)(c), quite
apart
from the consequences at common law and equity. The Courts have, in
particular, treated non-disclosure or misrepresentation as
particularly worthy
of scrutiny when considering applications to set aside on the grounds of
unfairness; if material non- disclosure
or misrepresentation is established
(being an important moral consideration, namely dishonesty or improper conduct
as between spouses
partners) it is virtually axiomatic that the agreement will
be set aside if the application to set aside the agreement is filed reasonably
promptly after it has been signed.
[38] It is difficult to contemplate a situation in which a finding of non-disclosure of between $5-8 million in the value of assets to which the claimant asserted that her claims should relate would not lead to the conclusion that the agreement should be set aside on the basis of serious injustice. The courts are vigilant in relationship property disputes in ensuring that there has been total disclosure and co-operation between the parties as to the identity and character of all property that might possibly
be relevant to claims.13 Rigorous enforcement of the obligation
of full disclosure is
warranted because routinely one party is in control of all information about
potentially relevant property, to the exclusion of the
other.
[39] It also seems likely that a court would not be dissuaded from
setting aside an agreement such as the HoA on account
of part-performance
of the obligations
13 See, for example, M v B [2006] 3 NZLR 660 (CA) at [49].
assumed under it, when credit could readily be given for the extent to which
existing commitments have been honoured.
[40] It follows that the allegation of material non-disclosure arises in
the same factual context, and has in effect the same
legal purpose now as it did
in EBS’s initial opposition to registration of the HoA.
[41] The second consideration is whether there has been a determination of the issue. Mr Rennie treated the issue of material non-disclosure inducing the HoA as having been determined the first time that it was alleged, by EBS’s abandonment of those allegations in the course of the argument before me in April 2013. My judgment made a number of references to EBS’s change of stance from one of challenging the enforceability of the HoA to seeking its confirmation on terms, and
explicitly recorded:14
EBS has abandoned a previous claim that the HoA should be set aside on the
grounds of material non-disclosure.
[42] Mr Rennie submitted that the law treats abandonment of a claim (or an allegation) as the equivalent of an adverse determination on the point, citing Russell v Taxation Review Authority.15 That case involved tax litigation over a contended tax avoidance arrangement. The taxpayer (Mr Russell) had objected to Judge Barber sitting as the Taxation Review Authority to determine his objection proceedings because Judge Barber had previously made adverse comments in forceful terms in relation to the same template structure as devised by Mr Russell, when dealing with the use of the same structure by another taxpayer. The Judge had declined an
application to recuse himself and determined the objection against Mr Russell. On an initial appeal to the High Court, counsel for Mr Russell formally abandoned one ground of appeal which contended that the Judge should have disqualified himself. In the High Court, Wylie J tested Mr Russell’s counsel on the consequences of abandonment and, with the benefit of instructions, counsel confirmed the
abandonment of the ground that criticised Judge Barber for not having
recused
14 EBS v CAS, above n 3, at [76]. See also [2], [3], [36], [38]–[40].
15 Russell v Taxation Review Authority [2011] NZCA 158, [2011] NZAR 310 at [27] and [30].
himself. The High Court judgment recorded the exchanges and also recorded
that that ground of appeal was dismissed.
[43] An attempt to resurrect that ground on further appeal to the Court
of Appeal was opposed on the basis of a cause of action
estoppel. Although the
Court of Appeal recognised that an estoppel was technically available, it
preferred to deal with that ground
of appeal on its merits.
[44] Mr Millard submitted that the circumstances in Russell were
distinguishable because there was a more precise coincidence of the issue that
had been abandoned, the consequences of its abandonment
were addressed with Mr
Russell before he was committed to it, and its importance was appropriately
reflected in a formal dismissal
of the ground of appeal. Arguably the earlier
allegations of misrepresentation or non-disclosure by CAS did not assume the
same
level of importance, and were not relied upon in the same context, so as to
make an analogy with the situation in Russell appropriate.
[45] Mr Rennie also relied on SCF Finance Co Ltd v Masri.16
In that litigation, a bank had obtained a Mareva injunction freezing the
content of various bank accounts deemed to be under the
control of Mrs
Masri’s husband. Mrs Masri made application to set the injunction
aside so far as it related to one
account held in her name. Having observed
the response of the Judge dealing with the case, to the credibility of her
husband’s
evidence, Mrs Masri decided not to proceed with her own
application. She purported to do so on terms that did not concede the issue
of
ownership of the account in her name, but counsel for the bank asserted at the
time that the bank would be entitled to raise issue
estoppel against her, should
she subsequently claim ownership of the particular bank account.
[46] Subsequently, the bank pursued a garnishee application to access the funds in the account in Mrs Masri’s name, and she attempted to resist that on the ground that the bank account was owned by her. The English Court of Appeal upheld the
application of the res judicata rule to prevent her contending
in the garnishee
16 SCF Finance Co Ltd v Masri (No 3) [1987] QB 1028, 2 WLR 81 (CA).
proceedings that the account in her name belonged to her. Recognition of
issue estoppel was expressed in relatively broad terms:17
The principle of the decision of this court in Khan’s
case18 is, in our judgment, applicable to this case: a
litigant who has had an opportunity of proving a fact in support of his claim or
defence and has chosen not to rely on it is not permitted afterwards to put it
before another tribunal. In this case Mrs Masri had
her opportunity to
establish the case on which her application was based; and she chose not to
establish her alleged ownership of
the dollar account. Her counsel on her
instructions acknowledged that her application must be dismissed. His attempt
to reserve
the issue was, in our judgment, ineffective.
[47] Again, Mr Millard submitted that the circumstances in SCF Finance
were distinguishable because Mrs Masri had attempted, on the second
occasion, to raise her claim to ownership in precisely the same
context, against
the same party, and for the same purpose. She had abandoned her attempt to
advance the argument on the first occasion
after she had been put on notice that
it would subsequently be held against her. Accordingly, the consequence of
abandoning her
claim to ownership at that point was that she had forgone the
prospect of resisting the bank’s initiatives in respect of the
account on
the basis that it was her property.
[48] There was no equivalent focus in this case on the subsequent
consequences for EBS’s claims of inadequate disclosure
or
misrepresentation when the attempt to set aside the effect of the HoA was
abandoned. There is no evidence of a warning to EBS
at the time that she was,
in effect, making an irreversible election to abandon the complaint of material
non-disclosure, and could
not thereafter attempt to raise it again. However,
EBS has been competently advised throughout so it would be unjust to CAS not
to
attribute to her the legal consequences of deliberate steps taken on
advice.
[49] From my supervision of the proceedings throughout the relevant period, I am satisfied that had EBS sought to reserve an entitlement to resurrect allegations of inadequate disclosure or misrepresentation inducing the HoA when her attempt to have the HoA set aside was abandoned, any such reservation would have been
stoutly opposed by CAS. He has consistently sought a single
determination of all
17 At 1049.
18 Khan v Goleccha International Ltd [1980] 1 WLR 1482 (CA).
issues, opposed the separate determination of questions relating to the
status of the HoA, and would reasonably have taken from EBS’s
abandonment
of her attempt to avoid the HoA that EBS no longer alleged
inadequate disclosure or misrepresentation.
[50] In the circumstances of this case, it should not be necessary for
EBS to have been explicitly put on notice as to the consequences
of abandoning
the allegation of misrepresentation, before her abandonment can be
treated as an adverse determination
on the point for the purposes of an
issue estoppel. To the extent that that difference can be made out between the
present circumstances
and the facts in Russell and in SCF Finance
Ltd, I am not persuaded that it is material.
[51] Mr Millard also invited analogy with a decision of the English
Court of Appeal in Ako v Rothschild Asset Management Ltd as an
example of an abandonment not being sufficient to constitute an adverse
determination.19 In that case, an original claim to the Employment
Tribunal had been withdrawn, in circumstances where the claimant intended to
re-cast
the complaint and file it again in wider terms. There was no power for
the Tribunal to accept a discontinuance. As a matter of
process, the original
claim was treated as being dismissed on account of the applicant’s
withdrawal without any consideration
of its merits.
[52] The Court of Appeal’s confirmation that no estoppel arose in
those circumstances turned on the procedural limitations
for the Tribunal where,
had the claim been pursued in court, there would simply have been a
discontinuance which could not found
any claim of estoppel. Those different
circumstances prevent the case being a useful analogy for EBS.
[53] Accordingly, the elements for an issue estoppel are made out. I defer an overall consideration of whether the discretion should be exercised until I have
analysed the further
arguments.
19 Ako v Rothschild Asset Management Ltd [ [2002] EWCA Civ 236; 2002] 2 All ER 693 (CA).
The rule in Henderson v Henderson
[54] In the event that I am wrong to find that an issue estoppel arises, it is appropriate to review whether the rule in Henderson v Henderson would apply. A current formulation of this long-standing rule is that it is an abuse of process to commence a proceeding, although not estopped by the principles of either cause of action estoppel or issue estoppel, where the plaintiff seeks to rely on issues or facts
that could and ought to have been raised in a previous proceeding.20
There is clearly
scope for an analogy that the same constraint should apply to an added cause
of action in existing proceedings.
[55] Our Court of Appeal has more than once adopted the observations of
Lord
Bingham from Johnson v Gore Wood & Co (a firm), which included the
following:21
... there will rarely be a finding of abuse unless the later proceeding
involves what the court regards as unjust harassment of a
party. It is,
however, wrong to hold that because a matter could have been raised in earlier
proceedings it should have been, so
as to render the raising of it in later
proceedings necessarily abusive. That is to adopt too dogmatic an approach to
what should
in my opinion be a broad, merits-based judgment which
takes account of the public and private interests involved and also
takes
account of all the facts of the case, focusing attention on the crucial question
whether, in all the circumstances, a party
is misusing or abusing the process of
the court by seeking to raise before it the issue which could have been raised
before.
[56] CAS complains, with some justification, that he is being unjustly harassed by having to respond in 2014 to a criticism of the mediation process undertaken in
2010, which criticism was abandoned in 2013 in an earlier hearing about the
status of the HoA arising from the mediation. The costs
in defending the
settlement have been increased by successive discovery applications, and
pursuit of different or inconsistent
initiatives in the litigation by
EBS.
[57] The House of Lords’ approach invites a broad merits-based assessment of the consequences for both sides of either allowing the claims in the two new causes of action to run to trial, or preventing EBS having her day in Court on them. One way
of evaluating the merits is to ask, in all the circumstances, whether
EBS could have
20 Beattie v Premier Events Group Ltd [2014] NZCA 184, (2014) 21 PRNZ 826 at [45].
21 Johnson v Gore Wood & Co (a firm), above n 11, at 31. Cited in Beattie v Premier Events Group
Ltd, above n 20, at [44] and in Commissioner of Inland Revenue v Bhanabhai [2007] 2 NZLR
478 (CA) at [60].
pursued the claim now being advanced at an earlier stage, and if so whether
she should reasonably be expected to have done so. That
evaluation encroaches
on the tenability of the proposed cause of action, which I consider
next.
[58] Under this head, there were no material arguments advanced for EBS
as to why she could not have pursued claims for damages
as a result of
misrepresentations inducing her entry into the HoA at an earlier point, before
she abandoned the claim that previously
invoked these allegations. I consider
she could have done so.
[59] As to whether EBS should reasonably be expected to have done so, EBS
was in the not unusual position of a claimant who neither
understood nor had
access to all of the details of relatively complex and sophisticated structures
deployed by CAS to carry out business
ventures that were directly or indirectly
under his control. Some allowance should be made for claimants in that position
to take
some time to rationalise the most positive form in which to advance
relationship property type claims.
[60] On the other hand, at least on CAS’s view of his
responsibilities, these had been settled by the HoA and he was performing
his
periodic obligations under it. If EBS wanted to challenge the finality of the
settlement they had agreed, then the circumstances
implied an obligation to do
so promptly and efficiently. Nearly three years after the HoA was executed, EBS
abandoned her challenge
to its enforceability. She thereafter took steps to
transfer her remaining claim to the Family Court on the basis that it was
confined
to a claim under s 182 of the FPA.
[61] Balancing the competing interests, I am satisfied that it is reasonable to expect EBS to have persisted with the allegations of misrepresentations or non-disclosure inducing the mediation, for all forms of relief she might claim in relation to such allegations when they were live, rather than abandoning them three years after the mediation and resurrecting them a further year later.
[62] Although the words of Casey J in New Zealand Social
Credit Political League Inc v O’Brien reflected a materially
different factual context, they are still apposite here:22
... if there was anything in the present proceedings, they should have been
brought years ago, not kept as the third shot in the locker
after the first two
had missed their target.
[63] Accordingly, I am satisfied that the legal elements required
for relief in CAS’s favour on the Henderson v Henderson ground
for a strike out, are made out. As with issue estoppel, I defer a consideration
of the residual discretion until I have reviewed
the remaining
issues.
No tenable cause of action
[64] Mr Rennie also sought summary judgment on the basis that there was
no tenable cause of action. That argument doubled as
one of the grounds for
strike out or stay under r 15.1 of the High Court Rules. The essence of Mr
Rennie’s point was that
the alleged misrepresentations have to depend on
“context” where no explicit misrepresentation is pleaded. Rather,
it
is alleged that in the context of the mediation the indication of net equity
in the commercial trust as at 31 March 2009 conveyed
an unspoken additional
representation to the effect that the trust’s net equity as at the date of
the mediation would not be
substantially different. No such criticism was
pleaded in the grounds for avoiding the HoA.
[65] Mr Rennie argued that on uncontroverted affidavit evidence, and further evidence that he submitted could not tenably be challenged, there is no scope for any such implied representation. Rather, the stance of CAS before the mediation, including the disclosure of information provided shortly beforehand, and throughout the mediation, was that he was only prepared to negotiate on the basis of the net equity of the commercial trust as at 31 March 2009. Arguably, it would be inconsistent with that stance to make any implied representation as to values or net
equity in the commercial trust at any different
date.
22 New Zealand Social Credit Political League Inc v O’Brien [1984] 1 NZLR 84 (CA) at 100.
[66] Mr Rennie argued that a recent affidavit from Mr Hussey, the forensic accountant present throughout the mediation for EBS, was consistent with Mr Hussey appreciating that CAS would only negotiate on the position as at
31 March 2009.
[67] Mr Rennie also argued that there is no evidence that the net equity
figure cited as at 31 March 2009 was wrong, and that
subsequent expert analysis
on behalf of CAS confirmed its validity.
[68] Mr Millard argued that it was impossible to characterise the
claim as untenable without the competing versions of
the relevant conduct at
the mediation being tested. He took different points from Mr Hussey’s
affidavit, such as that disclosure
of an $18 million profit in the year to 31
March 2010 would have been a “game changer” in EBS’s
negotiating stance.
Further, that negotiating points made by and on behalf of
CAS included the current difficulties being experienced at the time, in
selling
apartments in the relevant developments. Arguably, that implicitly recognised
some relevance in the current value of the
assets.
[69] Mr Millard cited credibility issues that could not be determined on
affidavits, such as claims by CAS during the mediation
that he was under
financial pressure to an extent that any settlement concluded would require the
consent of the BNZ, whereas discovery
from the BNZ showed that there was no
record of the BNZ being asked for its consent to the terms of the settlement
recorded in the
HoA.
[70] The new causes of action were pleaded on the basis that financial statements for the commercial trust had been finalised before the mediation, because the relevant financial statements are dated 30 September 2010. Since the pleading in reliance on that dating was filed, CAS has filed further affidavit evidence deposing that the date is in error. He claims that the relevant financial statements were not in fact finalised until some time after the mediation in October 2010, and that time records for the personnel at his accountants, Pocock Hudson, confirm that whilst preparatory work was done up to the end of September 2010, the work on finalising the financial statements occurred later in the year.
[71] Mr Millard’s rejoinder is that, irrespective of the point that
had been reached in the preparation of formal financial
statements at the time
the mediation occurred, it is untenable for CAS to claim he did not have a
reasonable feel for the relative
state of its financial health at that time.
CAS could not credibly ignore an awareness of the number of units in the
relevant property
development that had been sold, or the fact that bank
borrowing had been repaid. Arguably, CAS must have had an overall impression
that the net equity position in the commercial trust was substantially more
healthy than had been the case at 31 March 2009.
[72] During argument, I raised with Mr Millard a conceptual difficulty
that may arise in pursuing what is, in effect, a contractual
remedies claim for
damages for misrepresentations inducing a contract to settle relationship
property claims. The outcome achieved
does not reflect an objectively
quantifiable acknowledgement of rights and obligations. Unlike a commercial
contract for, say, the
sale of a building, the combination of rights and
entitlements being compromised by EBS were not a reflection of any definitive
quantification.
Unlike a purchaser claiming damages for a misrepresentation as
to, say, the net rentals being received for a building, EBS would
face real
difficulties in claiming that CAS would necessarily have agreed to pay a
substantially greater amount to her, if the assets
in respect of which she
asserted claims were treated (at a materially different date) as being worth
significantly more than the
figures adopted for the purposes of the negotiations
that occurred.
[73] To quantify contractual damages on the basis Mr Millard
foreshadowed, EBS
would likely have to make out:
(a) that the assets in respect of which she was making claims were worth
substantially more than the values attributed to them at
the
mediation;
(b) that the higher valuation pertained at a date that was relevant to the legal basis for her claims; and
(c) that CAS would have been persuaded to change the negotiating stance
he adopted, to an extent that that different date and
higher values were
accepted as an appropriate basis for agreeing a larger settlement.
[74] The affidavit evidence thus far is certainly inconsistent
with that last proposition. It may well be that EBS’s
claim would need
to be formulated as one for the loss of a chance to negotiate for a higher sum
on account of the withholding of
information.
[75] This conceptual difficulty is perhaps why the more usual consequence
of finding that a misrepresentation had induced a relationship
property
settlement is that it is set aside, rather than being enforced subject to an
imposed adjustment. It is far cleaner for
both parties to effectively
“start again”.
[76] There are numerous and potentially significant hurdles confronting
EBS in making out the factual allegations as pleaded,
and as foreshadowed in Mr
Millard’s submissions. However, those difficulties do not reach the point
where the cause of action
can be dismissed as untenable. Rather, the
circumstances in which they are currently pursued give rise to a potential basis
for
a claim for increased costs on CAS’s behalf, if the claims are pursued
given the very protracted history, and they are ultimately
unsuccessful.
Abuse of process
[77] An alternative ground advanced on behalf of CAS for striking out or
to stay the new causes of action is that the circumstances
in which they have
been pleaded in the long-running litigation constitute an abuse of process by
EBS.
[78] Prior to the amended statement of claim being filed, a forensic accountant retained on behalf of EBS since Mr Hussey ceased his involvement, Mr Purcell, was in touch with Pocock Hudson as CAS’s accountants, ostensibly to access further discoverable documents. He was directed to deal with a Mr Tong at that firm who had authority to provide access to documents, but was not otherwise involved in the
provision of relevant advice to CAS. As reported by Mr Tong to CAS,23
when Mr Purcell attended at Pocock Hudson’s offices in April 2014,
instead of seeking more discoverable information, Mr Purcell
presented Mr Tong
with a purportedly “without prejudice” proposal. The essence of the
matters conveyed by Mr Purcell
was, in effect, that an amended statement of
claim would add claims against Pocock Hudson, which would proceed unless Pocock
Hudson
persuaded CAS to agree to make additional provision for EBS.
[79] Irrespective of whether Mr Purcell left some scope for his
initiatives to be misinterpreted, the conduct was ill-advised.
As an accountant
in the circumstances that pertained, he had no entitlement to assert any
form of without prejudice privilege
in relation to the communications. As an
expert witness, he ought not to have initiated unstructured attempts to procure
a settlement.
[80] Mr Purcell’s conduct leaves EBS vulnerable to criticism
for resurrecting factual claims that were previously
abandoned as against CAS,
and adding claims against Pocock Hudson for the collateral purpose of pressuring
CAS to make further provision
for her.
[81] As Mr Rennie emphasised, the pressure to procure further payment from CAS has occurred after a sequence of different initiatives on behalf of EBS, some of which have been inconsistent. New claims were raised nearly four years after the parties committed to a settlement and CAS has honoured the not insignificant obligations he assumed in the HoA, which are now substantially performed. Claims for damages on the basis of alleged misrepresentation inducing EBS’s entry into the HoA would constitute a unilateral re-opening of a compromise where the parties’ agreement did not necessarily reflect the strict position at law. How could the Court assume that CAS would have agreed to pay any substantially larger sums to EBS, had the mediation occurred on the basis of additional, more current, figures when CAS’s stance in negotiating with EBS was consistently on terms that he would only
deal on the net equity of the commercial trust as at 31 March
2009?
23 As recounted in CAS’s affidavit sworn on 24 July 2014 at 11–14.
[82] Although it is clearly an undesirable component of the
conduct of the litigation for EBS, I am not persuaded
that resort to
an unsuccessful effort to pressure CAS to increase the provision made for her
constitutes an abuse of process
that would justify staying the new causes of
action, or striking them out. Beyond prolonging a final resolution and
incurring more
costs, no irreparable harm has been caused to the interests of
CAS or the other respondents in the litigation. Again, the appropriate
remedy
to address this conduct in the broader context in which it has arisen lies in
the Court’s discretion on costs, once
the substantive rights have been
determined.
Standing back
[83] My analysis on issue estoppel and the rule in Henderson v
Henderson did not include an overall assessment of the justice of the case.
It is clear that that consideration should be undertaken before
relief under
either of those headings is granted. In some factual situations, the overall
justice might sufficiently be reflected
in the consideration of the elements
required to make it out. In the present circumstances, I prefer to treat an
assessment of
the overall justice as a residual consideration, particularly
where the argument has extended to a consideration of the tenability
of the new
causes of action in considering the application for defendant’s summary
judgment. In these circumstances, the broadest
possible assessment of the
merits of the parties’ respective positions should be weighed in a
decision reflecting the overall
justice of the case.
[84] To summarise, CAS has made out the elements of issue estoppel. He
can also make out the elements for the new claims
to be halted on
Henderson v Henderson grounds. Would that reflect the overall justice
of the situation between the parties where it would prevent causes of action
from
proceeding, thereby creating a risk that it prevents the dispute being
resolved in accordance with the truth?
[85] I have reflected on the protracted history of the proceedings and the voluminous affidavit evidence, and have had the benefit of competent and focused argument on both sides. Ultimately, I cannot dismiss the prospect that EBS was induced to complete the HoA in the belief that the net equity in the assets against
which she was asserting her claim was in the region of $7.5 million, whether
valued at 31 March 2009 or when the mediation occurred
in October 2010. Nor
can I entirely dismiss as untenable the claim that the conduct and/or omissions
of CAS and those supporting
him in dealing with the claims contributed to such a
belief on EBS’s part. EBS has not had an opportunity to advance those
claims on tested evidence. Whilst the prospect remains that she might make out
those factual propositions, the largest single consideration
in assessing the
overall justice of the situation is the importance of her being deprived of the
chance of doing so by the prior
history of the litigation. On standing back,
that is the determinative factor in my assessment.
[86] Ranged against that factor is the very protracted history of the
litigious steps that EBS has forced CAS to take in responding
to her claims, the
substantial costs involved as a result of what have been materially inconsistent
initiatives on her behalf, and
the recent instance of abuse of process in Mr
Purcell advancing improper collateral purposes for the pleading of new causes of
action
and joinder of an additional defendant. Should EBS proceed to trial and
fail, these features provide grounds for claims for increased
costs.
[87] The other factor which might not ordinarily affect an
assessment of the overall justice of the situation, but which
I have regard to
here, is the conceptual impediment to EBS’s claim for damages. Having
elected to confirm the enforceability
of the HoA, her claim can only be for
damages. An inability to establish that she would have procured a settlement
with CAS on
materially better terms (as distinct from making out a legal
basis for a claim to a larger sum) represents a meaningful
hurdle to a
positive outcome for her. Cumulatively, the difficulties I have reviewed are
not sufficient for CAS to succeed on defendant’s
summary judgment, and
they are also not enough (but by a relatively fine margin) to affect the overall
justice sufficiently to prevent
EBS having her day in court.
[88] If the two stage process I have adopted of analysing the elements for an issue estoppel or application of the rule in Henderson v Henderson, and then reflecting on a residual discretion, is wrong when considering issue estoppel, then the standard by which I assess the presence of the elements for that ground for strike out would need
to be adjusted. Although a combined analysis incorporating overall justice
considerations in assessing whether the elements for
an issue estoppel are
present is somewhat unwieldy, I am satisfied it would yield the same result. My
conclusion would be that CAS
could not make out the necessary elements for issue
estoppel to the requisite standard to justify striking out the new causes of
action.
[89] Accordingly, the applications for strike out or stay of the new
causes of action, and for defendant’s summary judgment,
are
dismissed.
Costs
[90] In the circumstances as reviewed, I am not prepared to determine
costs on this application on a self-contained basis reflecting
the immediate
outcome. It is more appropriate that costs be reserved, pending the
substantive determination of the issues raised
by the two causes of action that
have been the subject of challenge.
[91] Counsel are to confer on the next steps in the proceedings. I
invite a memorandum or, if necessary, separate memoranda addressing
proposals
for timetabling orders.
Dobson J
Solicitors:
Greg Kelly Law Limited, Wellington for EBS Treadwells, Wellington for CAS
Kennedys, Auckland for Mr Treadwell and Treadwells Trustees No 2 Limited
Oakley Moran, Wellington for remaining trustees
Gilbert Walker, Auckland for Pocock Hudson Limited
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