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Court of Appeal of New Zealand |
Last Updated: 18 January 2019
IN THE COURT OF APPEAL OF NEW ZEALAND CA286/99
BETWEEN R D HAINES Appellant
AND L V CARTER Respondent
Hearing: 20 November 2000
Coram: McGrath J Doogue J Young J
Appearances: G J Judd QC and M J McCartney for Appellant
R B Stewart QC for the Respondent
Judgment: 19 December 2000
JUDGMENT OF THE COURT DELIVERED BY YOUNG J
Table of Contents
Paragraph Number
Introduction ...................................................................................[1] Factual background .......................................................................[2] Comments on the mediation process ............................................[7] Terms of the agreement...............................................................[11] The subsequent decisions of the mediators and Mr Goodall ......[22] Implementation of the agreement by Mr Haines -
March 1999/May 1999 ................................................................[27] Challenges raised by Mr Haines to the effectiveness of
11 March 1999 agreement...........................................................[35] The course of the proceedings in the High Court .......................[43] The first hearing before Randerson J ..........................................[68] The first judgment of Randerson J ..............................................[72] Application by Mr Haines for the recall of the first judgment....[76] The final judgment of Randerson J .............................................[82] The summary judgment process in this case...............................[90] Grounds of appeal .......................................................................[98] Mr Haines’ first contention: he can avoid the 11 March 1999 agreement pursuant to the alleged condition subsequent ..........[100]
Mr Haines’ second contention: he is entitled to avoid the
contract for duress .....................................................................[107] Mr Haines’ third contention: clause 2.17 on its true
construction and/or as it ought to be rectified provides an
arguable defence........................................................................[121] Mr Haines’ fourth contention: there was insufficient
proof of default..........................................................................[131] Mr Haines’ fifth contention: the contract was vitiated by
fraud ..........................................................................................[135] Mr Haines’ sixth contention: in the exercise in the discretion
of the court, summary judgment ought to have been
refused
.......................................................................................[137]
Disposition
................................................................................[138]
Introduction
[1] This is an appeal by Rodney David Haines from a judgment delivered by Randerson J on 26 November 1999 in which he ordered Mr Haines to pay Lynn Valerie Carter $1,500,000 together with interest at 10.5% calculated from 14 May
1999 and costs.
Factual background
[2] Mr Haines and Ms Carter met in 1991. They lived together between
1993 and February 1999. There was a substantial
business component
to their relationship. Both had been involved in the house removal business
before they met and they had,
through their companies, been in competition with
each other. They merged their businesses in 1997. The merged group of
companies
has been referred to in the case as the “Haines Group”.
Ms Carter was the sole director of the principal operating companies
in the
Haines Group.
[3] On the break-up of the personal relationship in mid-February 1999
(on the evidence of Ms Carter) or late February (on the
evidence of Mr Haines),
it was seen as necessary for Mr Haines and Ms Carter to divide up their
assets.
[4] Mr Haines and Ms Carter were not able to agree between themselves on a division of assets. So they decided to bring in outside assistance in the form of mediators. The mediators they chose were Mr Keith Goodall, an accountant who
had been closely associated with both Mr Haines and Ms Carter, Mr Max Carter
(who is Ms Carter’s father but whose involvement
in this process was at
the suggestion of Mr Haines) and Mr Anthony Lendrum, a barrister who had
previously acted for Mr Haines.
[5] The mediation process started at 11.00 a.m. on Tuesday, 2 March
1999 and continued for the rest of that week. By late
on Friday 5 March 1999,
substantial progress had been made and the mediators had prepared a draft
agreement. This draft formed
the basis of further discussions on Monday 8
March. Mr Haines took home with him that night a copy of the draft agreement as
it
then stood. On the following day, 9 March, there were further negotiations
with both Mr Haines and Ms Carter seeking and obtaining
changes to the draft
agreement. The mediation process continued on 10 March with Mr Haines
requiring further changes which Ms
Carter accepted. She then signed the
agreement. Mr Haines wanted more time to think about the proposed agreement.
So there was
no finality achieved that night. Then, on 11 March, Mr Haines made
some final changes to the agreement (which were endorsed on it
in handwriting)
and then signed it. Ms Carter accepted the alterations by initialling
them.
[6] There is one point in relation to this process which we should
note. On
10 March 1999, Mr Lendrum sent a fax to Mr Goodall in these
terms:-
Rod Haines has raised with you and with me the issue of the legal advice
provided to the mediation in respect of defacto [sic] property
law.
I am happy to accompany Rod to visit a barrister of his choice and explain
to that persona [sic] and Rod the statement I made with respect
to the law applying in defacto [sic] property disputes. Given that I am
prepared to do this, and happily, I can see no reason why the agreement needs to
be altered
in anyway.
Comments on the mediation process
[7] In the course of his argument to us, Mr Judd QC, counsel for Mr Haines, characterised the mediation as “irregular”.
[8] We agree that the mediation process was unusual in a number of
respects: its proximity in point of time to the issues giving
rise to the
underlying dispute (the mediation starting within weeks or days of the
breakdown in the personal relationship
between Mr Haines and Ms Carter); the
absence of legal representation for the parties; and the identity of the
mediators, one of
whom was Ms Carter’s father.
[9] That said, the mediation process was as designed by the parties.
The involvement of Mr Max Carter as a mediator was proposed
by Mr Haines. The
involvement of Mr Goodall avoided the necessity for outside accountancy advice
to be retained on each side.
The non-involvement of independent lawyers for
the parties was deliberate. Plainly the parties chose decision-makers who were
familiar to them both and a process that was informal. No doubt this produced a
speedier and cheaper process for all involved.
[10] Against that background, we are unimpressed and uninfluenced by the
complaints made by Mr Judd about the process.
Terms of the agreement
[11] The agreement itself is dated 11 March 1999.
[12] The recitals record that the parties (that is Mr Haines and Ms Carter):- [W]ish to record in this document the agreement they have reached at
mediation as to the division of their various assets.
[13] We refer first to a number of uncontroversial
provisions.
[14] Clause 2.1 identified property which Ms Carter was to retain “as her sole and separate property”. Clause 2.2 contained an acknowledgement of Mr Haines that he would make no further claim against certain trusts associated with Ms Carter. There were corresponding provisions in clause 2.3 (which specified the assets which Mr Haines was to retain as his sole and separate property) and clause 2.4 (pursuant to which Ms Carter acknowledged that she had no further claims against certain trusts associated with Mr Haines). Clause 2.5 provided Mr Haines and Ms Carter were to
execute all documentation required to give effect to the terms of the
agreement; this to occur within 4 working days of the documents
being presented
to them for this purpose.
[15] We now turn to the provisions of the agreement which are principally
in issue in this case:
2.6 In consideration for the ownership and/or changes of
ownership confirmed or created in this agreement Rod will
pay to Lynne the sum
of One Million Seven Hundred Thousand Dollars ($1,700,000.00) by 9 March 2000
provided only that if settlement
is not made at that time then Rod shall pay to
Lynne interest on any outstanding balance at the rate equivalent to the BNZ
prime
first mortgage rate plus 4%.
Subject only to
The mediators determinating what adjustment if any should be made to that sum
in respect of:
(a) Any interest The Haines Group may have in Retrac Limited;
and/or
(b) Whether $100,000.00 is due to Rod in respect of the
refurbishment of the vessel AMITY.
2.7 Rod and Lynne will provide all further evidence they wish to put before the mediators in respect of the adjustment set out in
2.6 above by filing the same at the offices of Keith Goodall no later than 1
pm on Wednesday, 31 March 1999 and both undertake to
place no obstruction in the
path of the other in the obtaining of any such evidence.
2.8 It is agreed that the mediators will then review the claims made by Rod and Lynne in respect of the adjustment and provide a final determination of Lynne’s entitlement and the sum Rod is to pay Lynne (the final adjusted sum) as soon thereafter as is reasonably practicable but in any event within 14 days of 31
March 1999; such sum being accepted by and binding on the parties as a final
determination of Rod’s liability to Lynne.
2.9 Rod will make payment to Lynne of the final adjusted sum in the
following manner:
(a) The parties agree that Albert Fanshawe 62 Limited
(hereinafter referred to as “AF62”) is the registered
proprietor of the Russell property and that neither party has any interest in
the Russell property.
(b) The parties confirm with this agreement that Lynne is currently the
owner of all the shares in AF62 and that Rod has no interest
equitable or
otherwise in the shares in AF62.
(c) That Lynne agrees to sell and Rod agrees to buy all the shares in AF62
for the sum of $1,420,000 or such lesser amount as is
required in terms of the
final adjusted sum on or before 9 March 2000.
(d) Lynne shall execute a transfer of the said shares in AF62 within seven
(7) days of the execution of this agreement; that transfer
to be held in escrow
by Anthony Lendrum, Barrister of Auckland pending completion of the settlement
set out in this agreement.
(e) If Rod does not complete settlement by 9 March 2000 (time being of the
essence) or such earlier time as the parties agree
then the agreement for
the sale and purchase of the shares in AF62 shall be at an end.
(f) Rod and Lynne will make further submissions to the mediators by 31
March 1999 in respect of any balance security required;
it being accepted by
both parties that in the event of there being no agreement within their
submissions as to that security then
such security will be determined by Keith
Goodall taking into account the needs of both parties and The Haines
Group.
2.10 Rod and Lynne shall not perform any act or cause any act to be
performed from the date of this agreement which may result
in a liability
arising to any person or entity set out in Clauses 2.1 to 2.4 hereof and in
particular in respect of any Haines Group
liability to the BNZ or any associated
banking entity. If either breaches the provisions of this clause then that
party will be
liable in damages to the other and the other may bring a claim
against them in that regard. This mutual indemnity shall enure for
seven (7)
years from the date of this agreement.
2.11 Rod will continue to make all payments he or his business entities and/or trusts presently make in respect of any property that is the separate property of Lynne or has by operation of this agreement become the separate property of Lynne as defined in Clauses 2.1 and 2.2 hereof such payments to be:
(a) Fully defined and recorded by Lynne and the Haines Group and
provided to the mediators by 17 March 1999 for record purposes;
and
(b) Made in full pending settlement being completed at which
time Lynne shall be solely responsible for all such payments
provided only that
should Rod default on any such payments then the final adjusted sum due and
owing shall be deemed to be payable
immediately and any late payment of the same
shall carry penalty interest at the BNZ prime first mortgage rate plus
4%.
2.12 Lynne will continue to use her best endeavours and lead the Haines
Group negotiations with the Group Bankers BNZ and any
ancillary financial
institution but will do so on the basis that Rod will be fully informed of all
representations to be made to
those Bankers in advance of any such
representations. This clause is to be read in conjunction with Clause
2.10 hereof.
2.13 Lynne will continue to use her best endeavours and assist Rod with
any negotiations in respect of the Te Toki Farms and RH
Holdings development at
North Mall, Hamilton and will do so on the basis that Rod will be fully informed
of any representations with
respect to such leases or any other issues in
connection with that development.
2.14 Rod agrees that to enable Lynne to complete her obligations in
respect of Clauses 2.12 and 2.13 she shall be entitled to the
entry and use of
all facilities available at the Haines Group Head Offices situate at Whenuapai,
Auckland provided only that:
(a) No files or copies of files shall be removed from the
Haines Group offices; and
(b) Any files or copies of files presently held by Lynne shall be
returned to those offices upon execution of this agreement.
(c) Lynne shall retain all files and records pertaining to entities she
retains ownership of.
2.15 Rod and Lynne agree that Lynne shall perform the obligations set out in Clauses 2.12-2.14 above by such period as Rod requires or Lynne wishes at which time either Rod shall provide Lynne with a written notice of termination of the said obligations or Lynne shall provide Rod with six (6) months written notice of her intention to cease performing these obligations. During the period that Lynne performs these obligations she shall continue to receive her current salary
calculated on a days worked basis together with reimbursement. Lynne
further agrees that in the event of Rod terminating her
said obligations then
Lynne will take no act nor make any claim against any company in the Haines
Group or any person associated
herewith.
2.16 That Rod acknowledges that Lynne’s ability to perform her
obligations set out in the previous clauses may be impaired
from time to time by
Lynne’s ill health and that any inability of Lynne to perform those
obligations will not alter the terms
of this settlement and will create no
penalty for Lynne PROVIDED HOWEVER that Rod and Lynne expressly acknowledge and
agree that
the agreement incorporated in this document and the obligations
arising therefrom will be completed by them both in all good faith.
2.17 If either Rod or Lynne can provide evidence within six (6) months of
the date of this agreement sufficient to satisfy the
mediators that the other
has breached his or her obligation to the other to the extent that the other has
suffered possible financial
loss in excess of $50,000.00 then the mediators
agree that in this event only they will reconvene the mediation for the sole
purpose
of resolving this issue. At the conclusion of such reconvened mediation
the mediators will issue Rod and Lynne with any further
final adjusted sum as
is necessary.
2.18 Lynne agrees that she will not for a period of five (5) years from 9
March 1999 either alone, in partnership or as an employee
or agent carry on the
business of house removals PROVIDED THAT nothing in this clause shall prevent
Lynne from purchasing buildings
for relocation to properties owned by her or any
of her associated entities.
[16] There then followed a number of general terms to which we need not
refer save to note that clause 9 provided that Mr Haines
and Ms Carter
confirmed:-
[T]hat they have reached the agreement contained in this mediation in all
good faith and that neither has sought or required independent
legal advice in
respect of this agreement and that this agreement records their full and final
agreement on all matters and issues
of property between them.
[17] We should explain the relationship between clauses 2.6 and
2.9.
[18] The most important of the obligations of Mr Haines under the agreement was to make payment to Ms Carter on or before 9 March 2000. The amount to be paid was provisionally fixed at $1,700,000 but this figure was subject to adjustment under
clause 2.6 (a) and (b) with the extent of the adjustment to be determined by
the mediators.
[19] Albert Fanshawe 62 Ltd (referred to in the agreement and, therefore,
conveniently in the judgment as “AF62”) owned
a house at Russell and
the scheme of the agreement was that the shares in the company (and thus, in
effect, the house at Russell)
were eventually to go to Mr Haines. Pending
settlement, the shares in AF62 were to provide partial security for Ms Carter as
to
her eventual entitlement under the agreement, identified provisionally
pursuant to clause 2.6 as $1,700,000 but subject to adjustment
in accordance
with that clause.
[20] The shares in AF62 did not provide adequate security for a payment
as large as $1,700,000. So Mr Goodall was to specify
what additional security
was to be provided by Mr Haines under clause 2.9(f). As a matter of common
sense, this decision could only
sensibly be made after the determination by the
mediators of the extent of the adjustments required under clause
2.6.
[21] So, in effect, the mediators were arbitrators as to the clause 2.6
adjustments and Mr Goodall was an arbitrator in relation
to the security
issue.
The subsequent decisions of the mediators and Mr Goodall
[22] Ms Carter made her submissions to the mediators as to the
adjustments issue on 31 March 1999. Mr Haines sought and obtained
an extension
of time for his submissions which were eventually made on 7 April. There were
then meetings between the mediators
and the parties.
[23] The mediators delivered their decision on the adjustments issue on
14 April
1999. They reduced the payment Mr Haines was required to make from $1,700,000 to $1,500,000. Mr Goodall also decided (pursuant to clause 2.9 (f)) that Mr Haines should provide security in the sum of $700,000 over a property in which he resided at 38 Pohutakawa Road, Auckland. Further, the mediators also issued a document headed “Further Directions Of The Mediators Made As To Implementation Of The Agreement And At The Direct Request Of Rod And Lynne”.
[24] This last document referred to costs which were to be met by Mr
Haines pursuant to clause 2.11 of the agreement in the
following way:-
The mediators agree that the following costs shall be paid:
Burwood Trust
BNZF loan Rates Insurance
Retrac Water Insurance Maintenance
Interest (difference between income & expenditure) Rates
AF62 Ltd Interest Power/Phone Insurance
Contents insurance
[25] There was some debate before us as to the status of the
document and whether the mediators were empowered to
make such a decision.
Certainly, the wording of clause 2.1 did not confer upon the mediators the power
to decide what payments
Mr Haines was to make under clause 2.11. However,
the process contemplated that these payments would be “[f]ully
defined and recorded by [Ms Carter] and the Haines Group and provided to the
mediators by 17 March 1999 for record purposes”.
In the proceedings
before Randerson J, Mr Judd did not raise any issue as to this document
and, more significantly,
as will later appear, Ms Carter’s
contention that there had been default by Mr Haines under clause 2.11 was not
denied until
very late in the piece.
[26] For reasons which we give later in this judgment (see paragraphs 131-134), we see no need to reach any final conclusions as to the status of this document – essentially because it was not disputed by Mr Haines in the High Court that he was subject to a requirement to make certain payments and that some, at least, of those payments were not made.
Implementation of the agreement by Mr Haines – March 1999/May
1999
[27] In the period between 11 March and mid-May 1999, Mr Haines took many
steps which could be regarded as involving implementation
of the
agreement.
[28] He told Ms Carter’s personal assistant (Ngaere Tomkins) in
mid-March that he owned all the shares in the companies
and that he had settled
with Ms Carter. He also asked her to change the telephone account and power
account for the house at Russell
out of Ms Carter’s name. These accounts
were put into his name.
[29] Arrangements were put in place for the release to Ms
Carter of files associated with assets which were to become
her separate
property. Although there was some irascibility and dispute over this, these
arrangements were nonetheless implemented,
at least substantially.
[30] Mr Haines made submissions to the mediators on 7 April on the further adjustments issue. He also participated in discussions with the mediators prior to the release of their 14 April 1999 decision as to adjustments.
[31] On 8 April 1999, Mr Haines wrote to a solicitor, Simon Palmer, saying: Would you please arrange to have all shares held by Lynne personally
or by Lynne’s trusts transferred into my name.
The mediation agreement was signed on 4 March [sic] therefore we would
assume that the transfers should be effective on that date.
[32] On or about 14 April, Ms Carter handed over her resignations as
director of the companies which were to vest in Mr Haines
and she also executed
share transfers in those companies. On 7 and 16 May 1999, Mr Haines had Ms
Carter removed as a bank account
signatory for companies in the Haines
Group.
[33] Mr Judd QC in his submissions sought to play down the significance of these steps. He said that for reasons associated primarily with her health, Ms Carter did not wish to retain an interest in the businesses which she and Mr Haines had operated together prior to February 1999. So he said that it was always a common position that those businesses would vest in Mr Haines and the only issue which had
to be decided between the parties was what corresponding financial
adjustments should be made in the final settlement between them.
[34] It is certainly the case that Ms Carter for health, and perhaps
other reasons, did not wish to operate the Haines Group after
the break-up of
her personal relationship with Mr Haines. But the fact remains that up until
11 March 1999, Ms Carter was in a
position of considerable strength
vis-à-vis Mr Haines. She had legal control of the core operating
companies making up the Haines Group. No doubt the High Court would have
intervened to prevent her using that control to act oppressively
vis-à-vis Mr Haines. However, in her reply affidavit
(to which Mr Haines never responded), she was able to point to what she
considered
to be irregularities in some of Mr Haines’ commercial conduct
involving these companies. So it is difficult to see how
Mr Haines
could have obtained control of these companies in the short to medium term
otherwise than by agreement with Ms
Carter. There is certainly nothing in the
affidavits to suggest that Ms Carter was prepared to allow him to regain control
of the
companies first and negotiate later as to the terms.
Challenges raised by Mr Haines to the effectiveness of 11 March
1999 agreement
[35] The first formal indication from Mr Haines that he regarded the
agreement as not being binding according to its terms came
on 23 April 1999.
On that day, Mr Haines’ counsel, Mr Judd, wrote to Mr Anthony Lendrum. Mr
Judd asserted that the letter
by Mr Lendrum to Mr Goodall dated 10 March (see
paragraph 6 above):-
[I]s seen as making the agreement subject to Rod obtaining legal advice on
the issues which were of concern to him.
[36] This assertion came to be developed into the argument that the
agreement was subject to a condition entitling Mr Haines to
obtain legal advice
and to avoid the agreement if, having received that advice, he was not
satisfied with the agreement.
[37] We note, as well, that Mr Haines had already begun to default on his obligations under the agreement. We say this because Ms Carter, in her affidavits in the High Court, produced two schedules showing defaults made by Mr Haines in relation to the clause 2.11 payments. These schedules show defaults which go back
to March 1999. Mr Haines has never directly challenged Ms Carter’s
evidence as to these defaults.
[38] These defaults were the subject of complaint by the solicitor acting for Ms Carter which were recorded in a letter to Mr Haines of 13 May 1999. This letter indicated that unless the payments which were then in default were made by 4.00 p.m. Friday 14 May, proceedings would be issued for the recovery of all money owed in terms of the agreement. The letter also noted that a first mortgage over
38 Pohutakawa Road, Whenuapai had been prepared to give effect to the
security decision which had been made by Mr Goodall. Mr Haines
was invited to
execute the mortgage or alternatively pay the $700,000 which would
otherwise have been secured by it.
[39] Mr Haines’ response was very provocative. He
transferred title to the property at Pohutakawa Road to
trustees. As
well, his solicitors responded to Ms Carter’s solicitor by asserting
that the 11 March agreement was
subject to a condition subsequent permitting Mr
Haines to avoid it:-
[I]n the event that it and the subsequent decisions of the mediators were underpinned by an incorrect approach to the legal position.
After referring to errors on the part of the mediators, the letter then went on:- The present position is that our client could avoid the agreement of 11
March in pursuance of the condition subsequent but would prefer not
to take that extreme step until he has received reasons from the mediators.
On the one hand those reasons may show that there are
errors in addition to the
obvious one referred to ... . On the other, the reasons might persuade him
that, notwithstanding errors
underpinning what occurred, the overall outcome is
fair and acceptable, with the result that he would then be prepared to elect to
affirm the agreement and accept those ‘decisions’ which were
within the mediators’ mandate.
We suggest, therefore, the best way of approaching this difficult situation is for your client to join with ours in requesting the mediators to provide reasons justifying the figure of $1,700,000 in clause 2.6 of the agreement of 11 March, and the ‘decisions’ which they subsequently made.
[40] Ms Carter’s solicitor replied. He indicated that she intended
to enforce the agreement as it stood (subject to the
adjustments made by the
mediators).
[41] Mr Haines’ solicitors then responded by letter of 1 June
asserting that not only could the agreement be avoided on
the basis that it was
subject to a condition subsequent but also that it was voidable for duress. The
letter went on:-
Our client did not accept the figure of $1.7m could possibly be
accurate but was placed in a position where he had no option
but to accept it.
The best he could do was to seek the reservation represented by the
condition subsequent. The duress
consists of your client’s communicating
with the bank in a manner which was disrupting Haines Group business at a
critical
time and her threats to continue to do so, and her threats to
communicate with the Inland Revenue Department in a way which would
have
disrupted extremely sensitive negotiations. . Your client indicated that these
threats would be implemented if our client
did not make an agreement with her on
the terms acceptable to her.
[42] The result was that Ms Carter commenced proceedings for
summary judgment.
The course of the proceedings in the High Court
[43] The application for summary judgment was filed on 4 June
1999. The plaintiff’s affidavit in support was
filed on 28
June.
[44] Notice of opposition was filed on 15 July. The notice of opposition
identified the two grounds for avoidance already referred
to in the
correspondence, that is the alleged condition subsequent and duress. It
also alleged two further grounds,
namely that:-
The plaintiff breached clause 2.7 by placing obstructions in the path of the
defendant in the obtaining of evidence relating to the
adjustment set out in
clause 2.6, thereby preventing the mediators from providing a final
determination which fairly weighed the
interests of the parties
and:-
Pursuant to clause 2.17 the defendant has provided evidence within 6 months of the date of the agreement which ought to be sufficient to
satisfy the mediators that the plaintiff has breached her obligation to the
defendant to the extent that the defendant has suffered
financial loss in excess
of $50,000, so that even if the agreement remains on foot, the amount payable to
the defendant by the plaintiff
more than extinguishes any liability which
the defendant may have to the plaintiff.
[45] The first of these additional defences has not been taken any
further in the course of the case and did not really surface
in argument before
us and certainly not as a discrete possible defence. So we say no more about
it. The second of the new grounds,
however, requires some brief
discussion.
[46] It is apparent from a letter of 12 July 1999 which Mr Haines sent the mediators and from the terms of his affidavit of 14 July 1999 that the arguments which Mr Haines wished to raise with the mediators under clause 2.17 related to his concerns as to how the initial figure of $1,700,000 and the adjusted figure of
$1,500,000 were arrived at. In other words, with the exception of the
argument (which has not been pursued) that Ms Carter had breached
clause 2.7, it
has not been suggested by Mr Haines that Ms Carter has been in breach of her
obligations under the 11 March 1999 agreement.
Rather he has sought to use
clause 2.17 to re-open the appropriateness of the agreement of 11 March 1999 and
the mediators’
decisions as to the adjustments.
[47] In his affidavit of 14 July 1999, Mr Haines also set out his duress
defence.
[48] He referred to the banking arrangements between Haines House Haulage
Ltd (which was one of the companies in the Haines Group)
and the Bank of New
Zealand. As at February 1999, the company was substantially in excess of that
limit. According to Mr Haines:-
The plaintiff was threatening me that if I did not do what she wanted, she would go to the bank and undermine the situation with the bank. She said that she would tell the bank that North Mall [a development undertaken by two of the companies in the Haines Group] was not going to go as predicted, that Haines did not have the ability to meet the cashflow forecasts. She actually did purport to cancel signing authorities to prevent cheques being drawn but, in the event, because the bank did not receive a requested written instruction, this did not proceed.
[49] As well, Mr Haines said that Ms Carter threatened to make things
difficult for him with the Inland Revenue Department. As
to this he
said:-
The Haines Group has been under investigation by the IRD since
1991. A tremendous amount of time and effort has been put in by myself and
my primary adviser my accountant Keith Goodall
to resolve the matters in
issue. By the time we are speaking of (end of February, beginning of March
1999), those negotiations
had reached a critical stage. The IRD was probably
prepared to accept that all underlying tax had been paid and that it would be
appropriate to put an application to the Minister for relief in respect of
penalties, for one of the companies. The plaintiff
was fully aware of the
negotiations which had been taking place. She was fully aware of the critical
point which had been reached.
During this period following her departure from
the house on 27 February, and her demands for me to enter into agreement, she
was
threatening to contact the IRD to convey information which could have
undermined the negotiations. Even though in my opinion
the information when
properly explained and understood ought not to have caused problems, the reality
was that it would at the very
least cause the IRD to put any proposed agreement
on hold whilst these further matters were investigated. The plaintiff told me
that she had formulated a box of information, including files from the office,
and had put them in Mr Bruce Stewart’s office,
to be given to the IRD if I
did not enter into the agreement which she wanted.
[50] Later in his affidavit he referred to the process by which he and Ms
Carter agreed to the mediators findings:-
The reason why I said that I would accept the mediators’ findings was
because of the threats that she was making as to what
she would do if there was
not a settlement (as mentioned above). By saying that I would accept the
mediators’ findings, I was
able to say to her, and did say to her, that
she should not continue with her threats, nor take the course of action that she
was
threatening, because I had said that I would accept the mediators’
findings.
[51] Mr Haines also asserted that in the course of the
negotiations, and in particular on 10 March, Ms Carter had
said to him that if
he did not sign by 5.00 pm that day she would deliver the files to the
IRD.
[52] Mr Haines’ affidavit was supported by an affidavit from Kathleen Ann Niblett who is his secretary. She referred to Ms Carter threatening to go to the Inland Revenue Department if Mr Haines did not go along with her requirements.
She also referred to some angry discussions over a cheque in which she
alleged that Ms Carter had made graphic comments as to what
would happen to Mr
Haines as a “white boy” when he was in jail as a result of the
information she was going to give to
the Inland Revenue.
[53] Ms Carter then swore a further affidavit of 16 August 1999. [54] In this affidavit she responded to the allegations of duress.
[55] She pointed out that in early 1999, the Haines House Haulage Ltd
overdraft was in fact $1.4 million as against the $200,000
limit. She says that
it was common ground between her (as the financial controller of the Haines
Group) and the bank that there
had been significant differences between
projections as to the North Mall project and the actualities. She then went on
to say:-
What I said to the defendant in connection with the BNZ was that if we did
not reach a satisfactory agreement then I would no longer
manage the North Mall
project for him and he would be left to deal with the BNZ on his own. That
would certainly have caused
the defendant some difficulties in that hitherto the
BNZ had dealt with me and relied significantly on information which
I
had provided. There was never any suggestion of my taking any steps to incite
the BNZ to take any precipitate action.
[56] Ms Carter did acknowledge making remarks in the period
between mid February 1999 and 11 March 1999 which could
have been taken as
threats to refer certain information to the Inland Revenue Department. She,
however, asserted a context rather
different from that alleged by Mr Haines and
Ms Niblett.
[57] She said that she believed from late 1998 that Mr Haines was engaged
in cash transactions. She said that this provided
the background for
her telling both Mr Goodall and Mr Haines:-
[O]f my concern over the cash transactions and the likelihood that the defendant had been stripping assets and diverting income from the joint venture companies. I made reference to the cash transactions which I had discovered. Given these concerns I said I was not going to tolerate a long drawn out contest and that if there were to be delays I was going to get auditors in to audit the companies. The defendant resisted an audit saying that it was unnecessary and that a busy body
auditor might unnecessarily feel obliged to refer transactions which he did
not fully understand to the IRD. Mr Goodall said that
an auditor was obliged by
law to refer matters of concern to the IRD. I said I had no concerns in that
regard and that I
wanted a prompt and fair division. I was not going to
be kept at bay whilst the defendant went on doing as he pleased. I did
say
that if the defendant had concerns about the IRD then that was his problem and
it should not stand in the way of a fair division
of our interests.
...
The defendant maintained that he had nothing to be concerned about with the
IRD and that he had undergone and survived
a comprehensive audit
by the IRD.
[58] She accepted that in another discussion (which we take to be the
discussion referred to by Ms Niblett) she had expressed
dissatisfaction
to Mr Haines and Ms Niblett about a GST input credit claim and a related
cheque cancellation and, in particular,
had told him that what was going on was
fraudulent, that he was a crook and that he belonged in jail. She said that
this discussion
did not involve a threat by her to give information to the
Inland Revenue Department and, on her evidence generally, the observations
which
she made were not referable to the negotiations which led to the mediation and
later settlement.
[59] Her affidavit indicates that there were further discussions between
her and the defendant about the Inland Revenue Department
but that Mr Haines had
always been dismissive of the possibility that there would be any risk to
himself arising out of Inland Revenue
Department inquiries and had asserted that
there were no problems or issues associated with those inquiries that caused him
any concern.
[60] She concluded on this topic by saying:-
I did not threaten to convey any specific information to the IRD and I have
no idea what information the defendant is referring to
when he says that I
threatened to convey information to the IRD. I did say that the IRD might show
more than just a passing interest
in the cash transactions should an audit
reveal irregularities – but the defendant asserted that he had no concerns
about any
transactions or the IRD.
I had never formulated any information for the IRD and neither did I say to the defendant that I had formulated such information. I did not give, or even say that I had given, any files, papers, documents or
information to Bruce Stewart for the purpose of forwarding them to the IRD.
I did not give Bruce Stewart any documents or information
that could possibly
relate to the IRD issues.
[61] In the same affidavit Ms Carter set out the particulars of why she
claimed that Mr Haines must be taken to have affirmed
the contract and could not
now seek to rescind it.
[62] She pointed to a number of steps taken by Mr Haines which she said amounted to affirmation. We have referred to a number of these steps already (see paragraphs 27-32 above). She also noted significant changes in the way in which the Haines Group operates and is controlled. As well, she referred to some correspondence between Mr Haines and Martelli McKegg Wells and Cormack. On
15 July 1999, that firm wrote to Haines House Removals Ltd concerning an
alleged debt of $20,415.83. On 29 July, Mr Haines replied.
In this letter he
said:-
We are in receipt of your letter of 15 July. This company did not order or
receive any goods from your client.
The account was opened by Lynne Carter, who whilst a director at the time
improperly ordered goods for her personal use, these goods
were not for the
benefit of the company. and the account was opened without the knowledge of
the other shareholder [sic]. As a joint shareholder and now the sole
director of that company I do not accept that charge.
You have my authority to uplift items supplied, or sue the person
responsible. That person is Lynne Valerie Carter of 35 Beach Road
Milford, this
is also the address from where the goods can be uplifted
[sic].
[63] Ms Carter concluded this part of her affidavit by
saying:-
The contradictory conduct of the defendant purporting to reject the
settlement agreement but at the same time retaining the benefits
which the
agreement conferred on him was raised with the defendant’s advisors on 21
June 1999. Despite this issue being squarely
raised at that time the defendant
made no mention of the matter in his reply affidavit sworn on 14
July.
[64] When the litigation was reviewed before a Master in August 1999, Mr Haines was allowed two weeks to make any application for leave to file any reply affidavits. He did not take up that opportunity (in that no application for leave was ever made)
and he has not, at any time, filed any affidavit in which he has responded to the evidence of Ms Carter as to affirmation. He did, however, without leave, file two further affidavits prior to the first of the hearings before Randerson J in November
1999.
[65] The first of these additional affidavits accompanied a statement of
defence and counterclaim which was filed on 23 September
1999. In this
affidavit he said:-
I verify the correctness of the facts and allegations appearing in the
statement of defence and counterclaim filed herein [with certain
corrections
which are immaterial in this context].
[66] The second of the additional affidavits accompanied an amended
statement of defence and counterclaim filed on Thursday 28
October 1999.
Pursuant to the pleading, he sought rectification of the mediation agreement.
He adverted to this pleading in
the accompanying affidavit in which he said,
inter alia:-
I make this affidavit in order to put before the court the amended statement
of defence and counterclaim by me. My statement of
defence and counterclaim
has been amended to seek rectification of the mediation agreement to reflect the
parties’ intention
that the mediation could be re-opened if on inspection
of records it becomes apparent that the mediator had proceeded on the basis
of
incorrect information.
I verify the correctness of the facts and allegations appearing in the
amended statement of defence and counterclaim filed in the
court and dated 28
October 1999.
[67] The reason for the attempt to raise an argument as to rectification
is that the actual wording of clause 2.17 is not consistent
with the contention
that it permits a general re-opening of the agreement. The evidence in support
of the rectification argument
was confined to Mr Haines’ formal
verification of the pleading.
The first hearing before Randerson J
[68] The summary judgment application first came before Randerson
J on
3 November 1999. In the course of the hearing the issue whether Mr Haines should be granted leave to rely on the rectification point was argued and reserved by the judge.
[69] At the end of the hearing on 3 November, the judge raised with Mr
Judd whether there had been a default under clause 2.11
so as to trigger the
obligation to make payment in full. This prompted Mr Judd (who had not
previously mentioned this issue at all)
to file a memorandum for the judge the
following day. In this memorandum he noted:-
The defendant’s position is that he denies that he has failed to make
payments which he should have made, saying that the regular
monthly payments
which he has made, and benefits which the plaintiff has taken ... more than
cover any payments he ought to have
made.
The double negative (“he denies that he has failed ...”) obscures
the point which was actually being made. There was
no denial that there had
been defaults. Rather it was being argued that payments made by Mr Haines
exceeded the amount by which
he was in default so that he could rely on a
set-off.
[70] There was, in fact, evidence from Mr Haines in his first affidavit
which referred to other payments which he claimed that
he or his companies had
made to or for the benefit of Ms Carter. He did not say in his affidavit what
the relevance of this evidence
was. Ms Carter, in her response on 16 August
1999, had noted the absence of any indication in his affidavit of the relevance
of
the evidence. She had also analysed the payments which had been made
against what she said were the payments required under clause
2.11. She accepted
that some of the payments which were in arrears in mid-May had been paid but
noted that there had been other defaults
with the result that the total in
default by 15 July was $31,494.92.
[71] Mr Stewart QC, for Ms Carter, responded to Mr Judd’s memorandum by protesting about the late raising of this issue. He then went on to note that the obligation under the agreement of 11 March 1999 was to make particular payments and was not an obligation which could be discharged by Mr Haines making other payments. He argued that, in any event, the payments relied upon by Mr Haines, when truly analysed, did not amount to a complete set-off for the defaults proved by Ms Carter. In this respect he was able to rely on Ms Carter’s affidavit of 16 August
1999 to which Mr Haines had not responded.
The first judgment of Randerson J
[72] Randerson J delivered his first judgment on 10 November
1999.
[73] The judge found substantially in favour of Ms Carter. He
rejected as untenable the argument that there
was a condition
subsequent as pleaded by Mr Haines. He, likewise, rejected the defence of
duress essentially because he was
of the opinion that Mr Haines must be taken to
have affirmed the contract. In reaching this view, he was critical of Mr
Haines
for not responding to Ms Carter’s reply affidavit. He
said:-
While I accept that the legal onus of proving there is no defence to the
claim remains on Ms Carter as the plaintiff, where
affirmation is
raised there is an evidential onus on the defendant to show that he continued to
be affected by the threat after
the date of the agreement.
He also concluded that Ms Carter had adequately proved that Mr Haines was in
default and had thereby accelerated the payment due under
clause
2.6.
[74] The one area of the case where his findings did not favour Ms Carter
was in relation to his construction of clause 2.17 of
the agreement. He
concluded:-
[T]hat clause 2.17 was not intended to cover breaches of obligation pursuant
to the settlement agreement. Rather it was intended
to refer to other breaches
of obligation which had not been discovered at the time the agreement was signed
on 11 March but came
to light in the six month period thereafter.
He went on to say that:-
[C]lause 2.17 was not intended to permit any general re-opening of matters
determined or already taken into account in the course
of the mediation which
led to the settlement agreement or in relation to the matters reserved for the
mediators’ subsequent
determination. The wording of clause 2.17 itself
limits any reconsideration to breach of obligation by one party to the other
to
the extent the other has suffered possible financial loss in excess of $50,000
and provides specifically that the mediation
will be reconvened for the
“sole purpose of resolving this issue”.
He then adverted to the possible consequences of his preferred interpretation of clause 2.17:-
It is impossible for me to assess whether and if so to what extent, the
issues raised by Mr Haines in his letter of 12 July or new
matters would amount
to a re-opening of matters already taken into account or determined ... . I
conclude that Mr Haines is entitled
to have the mediators review the matters
raised in his letter of 12 July and any other material provided to them within
six months
from the date of the agreement to determine whether the evidence is
sufficient to satisfy them that there has been any breach of
obligation by Ms
Carter to Mr Haines not previously taken into account or determined and which
gives rise to possible financial loss
in excess of $50,000. The mediators
would then determine whether there was a need to make any adjustments to the
final settlement
figure which may be appropriate. This issue has the potential
to affect the quantum of the claim but not the issue of Mr Haines’
liability to Ms Carter.
[75] In the result, the judge entered summary judgment against Mr Haines
on the issue of liability. He adjourned, however, the
application for summary
judgment until Wednesday 24 November with a view to deciding what should occur
as to quantum given his conclusion
as to the meaning of clause 2.17.
Application by Mr Haines for the recall of the first
judgment
[76] Mr Haines then invited the judge to recall his judgment.
[77] The grounds for this application were that the judge had not dealt
with the issue of rectification (which had been reserved
in the course of
argument) and generally because Mr Haines contended that the judge was wrong in
his construction of clause 2.17,
his willingness to grant summary judgment as to
liability and his conclusions as to duress.
[78] This was supported by affidavits from Mr Haines, Ms Niblett and a Ms
Alice
Bremner.
[79] In his affidavit, Mr Haines said:-
The plaintiff’s affidavit in reply deposed that I had done various things subsequent to the making of the settlement agreement which were alleged to amount to affirmation of the agreement. Whilst not necessarily accepting everything the plaintiff says in that regard, it is correct that I carried out acts in implementation of the settlement agreement.
The plaintiff’s affidavit did not say that the circumstances which
caused me to sign the agreement under duress had ceased to
exist. Had the
plaintiff in her affidavit given evidence that those circumstances had ceased to
exist I would have sought the Court’s
leave to file a further affidavit to
dispute those assertions and to provide evidence that the threats continued
after the agreement
had been signed. The threats did continue and in fact
continued even after the summary judgment proceeding had been commenced.
They were repeated as recently as 29 October 1999.
...
I thought the threats would stop after I signed the agreement, but they did
not. When I discussed the letter from Mr Lendrum to
Mr Goodall dated 10 March
1999 with her, and told her that as a result of the advice I had received
there was concern that
Mr Lendrum had not got it right in respect of
the division of property she went “right off her tree” and said
that if I tried to do anything about it she would go to the IRD.
...
My decision to avoid the agreement for duress was made because by this time I
realised that whatever I did she was not going to stop
threatening me, and I
realised I had to stand up to her at some point, and not to give in to her
blackmail. As a consequence I
instructed my legal advisers to avoid the
agreement.
[80] Mr Haines and Ms Bremner also referred to an incident which was said
to have occurred on 29 October 1999 at a restaurant
in Auckland in which it was
alleged that Ms Carter confronted Mr Haines and generally harassed
him. Ms Niblett, in her
affidavit, alleged that a pattern of generally
threatening and harassing behaviour by Ms Carter had continued after March
1999.
[81] There is a real sense in which the affidavit by Mr Haines was an attempt by him to engage in dialogue with the judge, that is by referring to particular conclusions which the judge had reached in the first judgment, and commenting adversely on them with a view, no doubt, to prompting a reconsideration by the judge of those conclusions. This is not appropriate behaviour by a litigant. Moreover we simply do not understand why these affidavits were not filed prior to the hearing on 3 November. We see no legitimate basis upon which the contents of these affidavits can now be taken into account on behalf of Mr Haines.
The final judgment of Randerson J
[82] Against that background the case came before Randerson J
again on
24 November 1999 for further argument. There then followed
Randerson J’s judgment of 26 November 1999.
[83] The judge declined to recall his judgment as to duress or to take
into account the further affidavits. He noted:-
The defendant had ample opportunity to adduce that evidence prior to the last
hearing if he had wished to do so.
He adhered to his view that Ms Carter’s reply affidavit had resulted in
there being an evidential onus on Mr Haines:-
to place some credible evidence before the Court tending to show (to the
point of a tenable case) that he remained under the alleged
threats and that the
allegedly affirming conduct was explicable on that basis.
[84] He declined to alter his conclusions on the interpretation of clause
2.17. He was of the view that the case called for an
interpretation of that
clause which was fully argued before him. He noted that although reference had
been made to Boat Park Ltd v Hutchinson [1999] 2 NZLR 74, Mr Judd
had not provided details of any evidence which was not before the court which
might have been relevant to the interpretation
of clause 2.17.
[85] He recalled his judgment to deal with the rectification issue which
he had overlooked. He dealt with that by declining leave
for the rectification
defence to be raised. He was in any event satisfied on the evidence that there
was no defence to the claim
based on rectification.
[86] Randerson J then had to address what if any relief Ms Carter should
be granted.
[87] Given the judge’s broad interpretation of clause 2.17, it
could not be said that
Mr Haines did not have arguments as to an entitlement to seek further adjustments
under that clause. In his first judgment, Randerson J had assumed that
adjustments under clause 2.17 would have to be factored through
into the sum
which was payable under clause 2.11 if default occurred. In his judgment of 26
November, however, the judge concluded
that the contractual entitlement of Ms
Carter upon default was to accelerated payment of the “final adjusted
sum” fixed
under clause 2.6, namely $1.5 million.
[88] As will become apparent, we are of the view that clause 2.17 is to be construed in accordance with the natural and ordinary meaning of the words which appear in it and is therefore confined to breaches of obligation under the 11 March
1999 agreement. That being the case there is no point to be served by
discussing the judge’s reasoning on the inter-relationship
between clauses
2.17 and 2.11.
[89] The judge entered judgment in favour of Ms Carter in the sum of
$1.5 million.
The summary judgment process in this case
[90] Where summary judgment is sought, the plaintiff can be expected to
refer (sometimes very briefly) to the background to the
claim and to assert,
often enough in general terms, that there is no defence. Where the claim is to
be defended, the defendant is
likely to respond with an affidavit (or
affidavits) setting out what is said to be the arguable defence or defences. A
simple assertion
by the defendant that he believes he has an arguable defence on
a particular ground is unlikely to cut much ice unless the defendant
provides a
reasonable level of detail in support of that defence.
[91] Where affidavits have been filed on behalf of the defendant, the
plaintiff may then respond. The rules contemplate that
the exchange of
affidavits will usually stop at this point. But sometimes a plaintiff will
raise issues in reply affidavits which,
sensibly, call for a response from the
defendant.
[92] In this case, the reply affidavit of Ms Carter raised a serious issue as to affirmation in relation to the duress defence.
[93] Randerson J was unimpressed by the failure of Mr Haines to respond
to Ms Carter’s reply affidavit. Reading between
the lines of his first
judgment, he seems rather to have thought that Mr Haines did not respond because
he could not, in fact, give
a sensible and credible response.
[94] Before us, and to some extent in his application for the recall of
the first judgment, Mr Judd QC was critical of this approach.
This was for a
number of reasons which included the complaint that this approach was
inconsistent with the orthodox process under
which plaintiff’s reply
affidavits are not, themselves, subject to further reply by a
defendant.
[95] Given the actual course of events, this is not a very meritorious
argument. Ms Carter’s reply affidavit was not the
last of the affidavits
filed before the summary judgment proceedings were heard. Mr Haines, in fact,
filed without leave two further
affidavits. The first accompanied the statement
of defence and counterclaim in which he asserted that the pleadings were (with
certain
limited exceptions) true. Further, when the amended pleadings were filed
at the end of October there was the additional affidavit,
to which we have
already referred, in which Mr Haines asserted, without elaboration, that clause
2.17 of the agreement ought to rectified.
So, in a context where Mr Haines
produced two further affidavits, neither of which addressed the issue of
affirmation, his failure
to reply to Ms Carter’s affirmation evidence was
all the more striking.
[96] Mr Judd suggested that, in other respects, the summary judgment process had miscarried. In his contention, clause 2.17 raises difficult issues of construction which could only fairly be resolved with all the background contextual evidence available. He said that that, in itself, made the case unsuitable for summary judgment given the Boat Park case. Further, he contended generally that providing Mr Haines had asserted on oath facts which, if true, would or might provide a defence, that also should be an end to any claim for summary judgment. It will be recalled, for instance, that the assertion that the agreement ought to be rectified was entirely unsubstantiated by detail. Yet Mr Judd’s position was that, subject to leave being available to allow that defence to be raised, that assertion itself meant that the High Court and this Court must assume that it was reasonably arguable that the
agreement ought to be rectified as Mr Haines contended. Further, he also
argued that given what Mr Haines had said in his affidavit
as to duress, the
High Court and this Court had to accept that it was reasonably arguable that Mr
Haines had, indeed, been driven
to enter the agreement of 11 March 1999 by
reason of the threats which he alleged had been made against him by Ms Carter.
He said
that the judge, in his approach to the affirmation issue, had in effect
imposed an onus on the defendant contrary to the rules which
govern summary
judgment cases. He complained about the way in which issues which were raised
late in the piece, or affidavits filed
on the eve of and after the first
hearing, were rejected by the judge – an approach which he said was
contrary to the justice
of the case.
[97] The law relating to the summary judgment procedure has been stated
by this court on a number of occasions, see for instance
the well-known and much
cited decisions Pemberton v Chappell [1986] NZCA 112; [1987] 1 NZLR 1 and Bilbie
Dymock Corporation Ltd v Patel (1987) 1 PRNZ 84. Nonetheless, it
seems to us to be desirable to reiterate a number of the general principles
associated with summary judgment;
this given the arguments which have been put
to us on behalf of the appellant:-
1. The process of summary judgment is intended to be summary. So the Courts are entitled to expect a defendant who wishes to maintain that there is an arguable defence will identify that defence in accordance with the ordinary rules and will give appropriate particulars of it and a reasonable level of circumstantial detail. We do not suggest that summary judgment cases are to be dealt with on the basis that the rules provide a procedural straitjacket. Common sense, flexibility and a sense of justice are required. But the situation which developed in this case was very unsatisfactory. Late affidavits were filed without leave. A defence based on a rectification argument was raised at the last minute. After the hearing had concluded, the defendant raised a new argument as to default. Then after the first judgment the defendant filed, without leave, affidavits which should obviously have been filed before the first hearing. The way Mr Haines has sought to litigate this case is totally inconsistent with the principles which underlie summary judgment.
2. A bald assertion that there is a defence but without any
elaboration or detail is unlikely to be seen as raising an
arguable
defence for the purposes of resisting summary judgment. So the assertion
by Mr Haines that he was entitled to rectification
of clause 2.17 of the
agreement (which in substance was the only evidence advanced as to that) simply
did not meet the threshold.
3. The courts are entitled, in the summary judgment context, to be
sceptical of defences which emerge at the last minute or,
indeed, after a
hearing has commenced. This is particularly so if the result of the late
defence being allowed to be raised will
be the necessity for an adjournment.
For the judge to have allowed Mr Haines to rely on the rectification defence
which surfaced
for the first time a few days before hearing would necessarily
have involved the adjournment of the hearing so as to give Ms Carter
a chance to
respond.
4. So where a defence is raised at the last minute and is
unsubstantiated by the defendant except in the most general of terms,
and in
circumstances where an adjournment would be necessary if leave to rely on the
defence is to be granted, protection of the
integrity of the process will often
require the Judge to act robustly.
5. Likewise, where a plaintiff has gone on oath and given chapter and verse as to why a particular defence is not sustainable, a failure by the defendant to respond on oath will, almost invariably, result in the conclusion that there is, in fact, no answer to what the plaintiff has said. In that way, the plaintiff will be held to have discharged the onus of proof, see for instance MacLean v Stewart (1997) 11 PRNZ 66. Whether this situation is properly described as involving an evidential onus on a defendant (as Randerson J suggested) is obviously open to question. Indeed, in light of what was said in MacLean v Stewart at 69, the term “evidential onus” is best avoided. We note, in passing, the remarks made by this court in Westpac Banking Corporation and Another v M M Kembla NZ Ltd (unreported, CA 50-51/00, judgment delivered 9 November 2000 at para 64). But, in any event, Mr Haines, who chose not to respond to the affirmation evidence of Ms Carter, is not well
placed to criticise the judge’s conclusion that there was, indeed, no
answer to that evidence.
Grounds of appeal
[98] Mr Judd, for the appellant, challenged the judgment on a number of
grounds. We have, to some extent, for the ease
of discussion,
re-ordered some of the arguments which Mr Judd advanced.
[99] In the balance of this judgment we propose to address the six
contentions which Mr Judd made on behalf of Mr Haines as to
reasons why summary
judgment ought to have been refused or this appeal ought to be
allowed:-
2. Mr Haines is entitled to avoid the contract for duress.
4. There was insufficient proof of default.
5. The agreement was vitiated by fraud.
Mr Haines’ first contention : he can avoid the 11 March 1999
agreement pursuant to the alleged condition subsequent
[100] Mr Judd’s argument as to the existence (or genuinely arguable existence) of a condition subsequent as pleaded, focused heavily on a letter of 10 March 1999 from Mr Lendrum to Mr Goodall. He contended that unless Mr Haines was to have the right to review the agreement on the basis of legal advice to be received subsequently, there was no point to the letter.
[101] We agree that on the view of the case which we prefer, there was not
a great deal of point to the letter. But we do not
see how the letter can be
talked up to render largely pointless the process upon which the parties were
then embarked and ineffectual
the agreement which was later to be
reached.
[102] The alleged condition subsequent can hardly be seriously contended to
be an implied term of the agreement. It is flatly
inconsistent with the
finality expressly stipulated for in the agreement which provided, and we
repeat:-
Rod and Lynne confirm that they have reached the agreement contained in
this mediation in all good faith and that neither
has sought or
required independent legal advice in respect of this agreement and that this
agreement records their full
and final agreement on all matters and issues
of property between them.
[103] Likewise, it could hardly seriously be suggested that the condition
subsequent forms part of a contract collateral to the
agreement. Again it is
inconsistent with the finality clause in the agreement to which we have just
referred. Moreover, neither
Mr Lendrum nor Mr Goodall can be regarded as being
Ms Carter’s agent. So there is no principled basis upon which Ms Carter
could be regarded as having been bound by anything that might be thought to have
been implicit in what Mr Lendrum and Mr Goodall
said.
[104] Further, the term contended for by Mr Judd is a commercial nonsense.
Under the terms of the agreement, Mr Haines was in a
position to cement his
position of control in the companies. He proceeded to do so after the
agreement was signed. Why should
Ms Carter be taken to have agreed to an
arrangement under which Mr Haines could take out of the dispute everything which
he sought
but then, in effect at his election, decline to perform the financial
obligations which he had undertaken to her?
[105] To put what is essentially the point just mentioned another way, we cannot regard Mr Haines’ actions in taking immediate control of the companies as being consistent with an honestly held view that the agreement was, in effect, in a state of suspense or avoidable by him pending the receipt of further legal advice.
[106] So, in general agreement, therefore, with the approach taken by
Randerson J, we are of the view that Mr Haines has not raised
an arguable
defence in this respect
Mr Haines’ second contention: he is entitled to avoid the contract
for duress
[107] The principles of duress derive in part from the old common law rules
for the avoidance of deeds and parole contracts entered
into under duress of the
person (see for instance Skeate v Beale [1841] EngR 142; (1841) 11 Ad & E 903,
113 ER 688), and in part from the principles developed in respect of the
common law claim for money had and received (for which duress
of goods and
other forms of pressure short of duress to the person sufficed eg Maskell
v Horner [1915] 3 KB 106). What is not so widely recognised is that
the courts exercising equitable jurisdiction also developed principles according
to which
contracts obtained by what was sometimes described as duress, and in
other cases, coercion or pressure, could be set aside,
see for instance
Williams v Bailey (1866) LR 1 HL 200.
[108] Duress necessarily involves the illegitimate application of pressure
by threats. The illegitimacy of the pressure may lie
in the illegality of the
actions threatened or, alternatively, may be associated with the illegitimacy of
the particular threats
in the context in which they were made.
[109] It will be recalled that the pressure complained of by Mr Haines was
said to consist of threats by Ms Carter to cause trouble
for him with the Inland
Revenue Department and the Haines Groups’ bank. Threats to report a person
to a law enforcement agency
unless that person submits to a particular bargain
is conduct which could amount to the crime of blackmail and is thus
illegitimate.
Threats to inflict gratuitous harm may also be an illegitimate
form of pressure. So the pressure complained of by Mr Haines could
amount to
duress.
[110] We have reservations whether there could be much in the complaint made by Mr Haines about the threats allegedly made by Ms Carter to cause trouble with the bank. Ms Carter customarily dealt with the bank. There was a significant overdraft problem and the bank knew that there had been variance between projections and actuality. Comments to this effect made by Ms Carter in a situation where it was
her position that Mr Haines would have some practical difficulties dealing
with the bank without her assistance, do not appear to
be duress but simply
statements of the obvious. We are, however, prepared to accept that there was
an arguable case for the view
that Ms Carter had made threats to sour the
relationship between the Haines Group and the Bank of New Zealand.
[111] The more significant issue relates to the threats to cause
trouble for Mr Haines with the Inland Revenue Department.
Randerson J
accepted the possibility that threats, broadly as alleged by Mr Haines, had
been made. He was right to do so on
the evidence which we have
reviewed.
[112] The fact that threats capable of amounting to duress have been made
in the course of the negotiating process does not, without
more, mean that the
bargain reached as a result of that process can be avoided for duress. Many of
the cases indicate that a plea
of duress is available only when there has been
“coercion of the will” or “vitiation of consent”, see
for
example the remarks of Lord Scarman in Pao On v Lau Yiu Long
[1979] UKPC 2; [1980] AC 614 at 635 and the cases reviewed by Tipping J in Shivas v
Bank of New Zealand [1989] NZHC 862; [1990] 2 NZLR 327 at 342 et seq. Statements
to this effect in the cases, however, do not mean that the party affected by
duress must have been psychologically crippled
by reason of pressure before
relief can be available. As Lord Scarman put it in Universe Tankships Inc of
Monrovia v International Transport Workers Federation [1983] 1 AC 366
at 400:-
Compulsion is variously described in the authorities as coercion or the
vitiation of consent. The classic case of duress is, however,
not the lack of
will to submit but the victim’s intentional submission arising from the
realisation that there is no other
practical choice open to him.
[113] The point Lord Scarman was making is, at least in part, a causation issue. At the very least, a party alleging duress must show that the duress alleged was at least an appreciable factor in influencing that party to enter into the bargain in question, see Barton v Armstrong [1976] AC 104. Further, the courts do look for a significant degree of actual coerciveness, a level of coerciveness which is sometimes described as having left the victim with no practical choice but to submit.
[114] In this case, the judge did not address in a definitive
way whether he considered that there was an arguable
case for the view that
the pressure complained of by Mr Haines had been an appreciable factor
in inducing him to sign
the agreement of 11 March 1999 and had been
sufficiently coercive, in fact, to amount to duress. He was, at best for Mr
Haines,
very sceptical on these points. The judge decided the case in
accordance with the principles of affirmation.
[115] We are content to deal with this case on the same basis as the judge
did – in other words, by reference to the issue
of affirmation. We should
say, however, that considerations associated with the affirmation evidence
given by Ms Carter
are closely connected to the question whether the threats
alleged by Mr Haines had any significant impact on his decisions to execute
the
agreement of 11 March 1999 and whether they were sufficiently coercive to be
regarded as duress.
[116] The avoidance of a contract which has been partially
performed raises particular difficulties. The situation usually
arises where
it is alleged that a contract has been entered into as a result of
misrepresentation. Such a case is now dealt with
under the Contractual Remedies
Act 1979. But because that Act does not apply to contracts entered into by
duress, we are required
to consider this issue in accordance with common law and
equitable principles related to rescission, see Meagher Gummow &
Lehane, Equity 3rd edit at para 2401 et seq. What is important in
this context, is that in duress cases, the courts will not regard as affirmation
(or as conduct precluding
rescission) steps taken by the victim while
still under the influence of pressure from the other party, see for instance
the discussion in North Ocean Shipping Co Ltd v Hyundai Construction
Co Ltd [1979] 1 QB 705. The argument for Mr Haines is that steps which
he took to implement the agreement should not be regarded as affirmation because
he was still, at the material time, acting under duress or, in any event, there
is at least a reasonable argument available on the
facts to this
effect.
[117] We are of the view that, on the evidence before the High Court, Ms Carter established that Mr Haines did not have an arguable defence based on duress. We say this for the following reasons:-
1. The negotiation process, via mediation, provided an improbable
context in which duress could be applied. Participating
in the process were Mr
Goodall, who was Mr Haines’ accountant, Mr Lendrum who was a
lawyer and Mr Max Carter, who
is Ms Carter’s father and was nominated as
a mediator by Mr Haines. They were people familiar to Mr Haines whom he
respected
and trusted.
2. Even on Mr Haines’ own evidence, he did not see the pressure
as particularly coercive. He claims that his tax affairs
are characterised by
regularity and that the only effect of the threatened exposures would have been
a deferral of what was thought
to be a then imminent settlement of a dispute
with the Inland Revenue Department which went back to 1991. We see no reason
not to
take him at his word. On this basis, the possible inconvenience
associated with deferral of that settlement would appear to have
been minimal
and hardly likely to result in him committing himself to a payment of $1,700,000
(adjustable for the two factors referred
to in clause 2.6 of the agreement) on
the basis that he had no choice. Similar considerations apply in relation to
the threats to
disrupt banking relationships with the Bank of New Zealand. The
bank appears to have been in possession of all the facts. Any
attempt by Ms
Carter to damage the banking relationship between companies in the Haines Group
and the Bank of New Zealand
would have been very destructive to her own
credibility and financial position. Moreover, while the Haines Group
undoubtedly
had severe cashflow difficulties and there was a significant problem
with the overdraft (which was around $1.2 million over bank
limits) there is no
evidence of any problem which could not be resolved by, if necessary, a
sell-down of assets; this given the wealth
of Mr Haines.
3. We mention these factors because they point to the duress alleged by Mr Haines as involving a comparatively low level of actual coerciveness. In deference to the way in which the judge dealt with the case, we are prepared to assume, without holding, that it was arguably the case that the threats attributed to Ms Carter by Mr Haines amounted to duress and were an appreciable factor for Mr Haines in his decision to enter into the agreement.
The low level of coerciveness alleged by Mr Haines, however, is material in
relation to the affirmation question to which we now turn.
4. Mr Judd contended that steps taken by Mr Haines in the exercise of
his rights under the agreement cannot be treated as affirmation
because it has
not been shown that he was not still acting under duress at the relevant time.
Mr Judd suggested that affirmation
could only have been relied on if Ms Carter
had in some way abandoned the threats which he claims she made. He said that in
the
absence of affidavit evidence to this effect (ie as to the withdrawal of the
threats) there was no adequate evidential basis
for the conclusion
that Mr Haines’ actions which are said to amount to affirmation
were not themselves the result
of the pressure to which he was subject. In
this way his submissions echoed the comments made by Mr Haines in his affidavit
filed
in support of the recall application (see paragraph 79 above).
5. There are many problems with this argument including the obvious
point that Mr Haines did not, prior to the judgment in
which the duress issue
was resolved against him, assert on oath that his enforcement of the contract
was a result of the threats
allegedly made by Ms Carter. So this appeal must be
dealt with on the basis that there is no relevant assertion by Mr Haines on
oath
that the reason he acted on the agreement after it was entered into was as a
result of continuing pressure to which he was subject
from Ms Carter. As well,
the whole argument is rather odd because the reality must be that Mr
Haines moved to take
control of the Haines Group and otherwise
implemented the agreement because it was in his own interests to do so. In any
event, the argument as a whole has no merit when assessed in terms of the
actions which Mr Haines did take to which we now refer.
6. Right from the outset Mr Haines felt able to ignore those parts of the agreement which did not suit him. In particular, he did not make payments as required under clause 2.11 with defaults in terms of his obligations under this clause starting in March 1999. This does not point to him acting under duress at that time.
7. On 23 April 1999, Mr Haines was well on the way to taking complete
control of the Haines Group. Yet at that time he does
not appear to have felt
under any significant pressure. We say that, because on 23 April he put
forward, via Mr Judd, the contention
that the agreement was avoidable. We think
that this points to the pressure of which he complains as being of no practical
coercive
effect on 23 April. It rather appears as though Mr Haines had simply
changed his mind about the merits of the settlement - a change
of heart which
might be explicable by reason of the fact that he was by then in control of the
Haines Group companies.
8. Given that Mr Haines felt able to assert that the agreement was
voidable on
23 April and to default on payments required under the agreement from March,
there seems to us to be no evidential basis upon which
it could be sensibly
suggested that he was acting under duress when he moved to implement the
agreement and take control of the Haines
companies in early April
1999.
9. Despite having asserted that he was not necessarily bound by the
agreement in Mr Judd’s letter of 23 April 1999, Mr
Haines continued to
enforce those parts of the agreement which suited him in the period 23 April to
mid May.
10. In mid-May 1999, Mr Haines responded to the request from Ms
Carter’s solicitors for security over the Pohutakawa Road
property by
placing that property in the names of trustees. This was an extremely
provocative and high-handed action which might
be thought to have been likely to
trigger a serious reaction from Ms Carter (if he thought she was of a mind to
act in that way).
Whatever else this transaction might say about Mr Haines, it
was not the act of a man who was still dominated by pressure
emanating from Ms Carter.
[118] Since mid-May 1999, Mr Haines has continued to operate the businesses to Ms Carter’s complete exclusion. We accept that the dynamics of the situation are such that if rescission was warranted, it might not be altogether easy to fix the terms upon which it should occur. Ms Carter did not wish to retain the businesses, as at
March 1999, and it is unlikely that she would have agreed to go back into the
businesses on an interim basis, pending the outcome
of her summary judgment
proceedings, even if invited to do so by Mr Haines. So this makes us cautious
about criticising Mr Haines
over this aspect of his conduct.
[119] Mr Haines, by his insistence on performance of those aspects
of the agreement of 11 March 1999 which suited him
while, at the same time,
declining to comply with his financial obligations under that agreement to Ms
Carter, must be treated as
having affirmed the contract. He did not, prior to
the first judgment, give evidence on oath explaining this conduct.
Although
we regard his affidavit in support of the recall application
as too late to be relevant in terms of our consideration
of the case,
it is fair to say, that in our view, it does not really make any sense when
viewed against the detail of what happened
in the relevant period.
[120] So, in agreement with Randerson J, we see no arguable defence based
on duress given the undenied and unexplained affirmation
evidence of Ms
Carter.
Mr Haines’ third contention: clause 2.17 on its true construction
and/or as it ought to be rectified provides an arguable defence
[121] It follows from what we have said earlier in this judgment that we are of the view that the attempt by Mr Haines to raise in the High Court, at the very last minute, the argument based on rectification was too late and the judge was perfectly entitled to refuse leave for him to do so. Further, and this is an inter-connected point, we are of the view that the evidential foundation for the contention that clause
2.17 ought to be rectified was altogether too frail to warrant the
withholding of summary judgment even if leave to raise the defence
had been
given.
[122] In this court, Mr Haines and his counsel sought to adduce further evidence addressed to the rectification issue. The evidence consisted of a letter from Mr Goodall in which statements of fact were made which, if sworn, could have been deployed in support of the contention that there was an arguable case for the view that clause 2.17 should be rectified broadly as Mr Haines contends. We declined leave to adduce this evidence. It was addressed to an issue which the judge himself had refused Mr Haines leave to raise in the High Court. The manner in which the
issue was raised before us was reminiscent of the way in which Mr Haines had
conducted his defence in the High Court, that is attempting
to put up a new
argument on the eve of the hearing and in circumstances where, if
leave to do so was permitted, an
adjournment to allow Ms Carter an
opportunity to respond would probably have been necessary. Moreover, the
evidence was, in no sense,
new.
[123] The one area of the case in which we differ from the
assessment of
Randerson J is as to the meaning of clause 2.17. [124] The clause itself provides:-
If either Rod or Lynne can provide evidence within six (6) months of the date
of this agreement sufficient to satisfy the mediators
that the other has
breached his or her obligation to the other to the extent that the other has
suffered possible financial loss
in excess of $50,000.00 then the mediators
agree that in this event only they will reconvene the mediation for the sole
purpose of
resolving this issue. At the conclusion of such reconvened
mediation the mediators will issue Rod and Lynne with any further final
adjusted
sum as is necessary.
[125] The mediation encompassed consideration of the obligations between
the parties and their associated entities (companies and
trusts). But the
parties’ obligations, in that sense, provided only a subset of the
ultimate question which had to be addressed
– a question which also
involved issues of ownership, value and the Lankow v Rose [1995] 1
NZLR 277 principles. The language of clause 2.17, on its natural and ordinary
meaning, does not appear to contemplate a general re-opening
of the settlement.
Moreover, any such re-opening would be inconsistent with the finality provisions
in the agreement, the very limited
and specific areas in which adjustment was to
be permitted, and the commercial dynamics of the situation in which Ms Carter
was to
surrender her advantageous position, vis-à-vis the
operating companies in the Haines Group.
[126] We prefer the view that clause 2.17 relates to breach of obligations under the agreement itself.
[127] The reason why Randerson J did not adopt this interpretation was
because of the six month time limit within the clause. He
noted that many of
the obligations imposed by the agreement would last longer than 6 months and
could therefore be breached after
the expiry of that time period. Having noted
that, the judge went on:-
The period of six months available to the parties to provide evidence of
breach in terms of clause 2.17 is inconsistent with it
being interpreted as
applying to any breach of obligation under the agreement. The commencing words
of clause 2.17 also suggest
that it was intended that either party would have a
strictly limited period to produce evidence of breach not available at the time
of the agreement.
We, however, do not see this as material. We are of the view that the time
limit in clause 2.17 was intended to facilitate a determination
of issues raised
under it in time for any necessary adjustments to be decided upon prior to the
settlement date under the agreement.
Clause 2.17 does not provided an
exclusive method by which complaints about breaches of the agreement can be
remedied – rather
it simply provides a mechanism by which a party
complaining of breaches could seek a remedy which, if granted, could
be
incorporated in the settlement intended to occur on 9 March 2000.
[128] Finally we note that Mr Judd argued in front of us, as he argued in
front of Randerson J, that clause 2.17 could not
fairly be interpreted
in the summary judgment proceedings because of the possibility that contextual
evidence might be material
to the true interpretation of the clause. In
agreement with Randerson J we see no reason why the clause should not be
able to be interpreted within the summary judgment proceedings. If Mr
Haines wished to rely on contextual evidence he should
have placed such evidence
before the judge.
[129] Because it is not now contended that Ms Carter has been materially in
breach of the agreement of 11 March 1999, our conclusion
as to the meaning of
clause 2.17 means that there is no defence available to Mr Haines under this
head of the argument.
[130] We mention one other point connected with the rectification argument. Randerson J considered that a rectification claim might still be open to Mr Haines.
We are not required, on this appeal, to address this issue. Our view of the
contract differs from that adopted by Randerson J.
We rather think that any
attempt by Mr Haines to persevere with the rectification argument would, in
fact, be precluded by this judgment.
Whether this is so or not, however, can
only be determined conclusively if Mr Haines seeks to prosecute that
claim.
Mr Haines’ fourth contention: there was insufficient proof of
default
[131] This issue did not surface until it was raised by the judge at the
conclusion of the argument at the first hearing. For
five months the case had
been conducted on the footing that Ms Carter was asserting that there had been
defaults which, pursuant
to clause 2.11, had the effect of accelerating the
clause 2.6 payment. This was asserted in correspondence by Ms Carter’s
solicitor, without response or denial by Mr Haines' solicitors. It was asserted
on oath by her in her first affidavit. The notice
of opposition filed by Mr
Haines did not raise any dispute as to this issue. Nor did Mr Haines in his
main affidavit in response
directly challenge Ms Carter’s
contention (although he did suggest that he had made other payments to or for
her account).
The point was not raised by Mr Judd when the summary judgment
application was first heard before Randerson J.
[132] When Mr Judd did raise the issue, in the interval after the first
hearing before Randerson J, he took only the limited point
that payments made by
Mr Haines, in other respects, exceeded the payments in respect of which Mr
Haines was said to be in default.
As we have noted, that argument failed
before Randerson J on two grounds: the first that given the nature of clause
2.11, set-off
arguments were not available and, secondly, that , in any event,
the payments sought to be invoked by Mr Haines were not sufficient
in amount,
even if a set-off was allowed, to extinguish the defaults. These conclusions
were not specifically challenged before
us and in any event they are plainly
right.
[133] In this court, Mr Judd sought to dissect the agreement, the subsequent “decisions” of the mediators, and the correspondence and the affidavits with a view to showing that, contrary to the way in which the case was conducted in the High Court, there were no proved defaults at all.
[134] We see nothing in these arguments. If there was any merit
in these arguments they should have been deployed in
the High Court when they
could have been answered within the confines of the summary judgment
application. We are not disposed
to permit these arguments to be raised before
us.
Mr Haines’ fifth contention: the contract was vitiated by
fraud
[135] In this court, Mr Judd sought to contend that fraud, on the part of
Ms Carter, provided a further possible ground of defence.
[136] This contention was recognised in the written submissions filed by Mr
Judd as depending upon the court agreeing to
receive a further
affidavit from the appellant. In the end the application to produce that
affidavit was not pursued with the
result that this ground of appeal need not be
further addressed.
Mr Haines’ sixth contention: in the exercise in the discretion of
the court, summary judgment ought to have been refused
[137] This is another argument which surfaced in this court and which was
not advanced to Randerson J. That, itself, is
a sufficient ground,
we think, for dismissing it. However, it is right to say, that having
listened to everything which Mr
Judd had to say in support of this argument (and
all his other arguments), we were left firmly of the view that this was a case
which
was ideally suited for the summary judgment procedure.
Disposition
[138] The appeal is dismissed.
[139] The appellant is ordered to pay the respondent costs in the sum of
$5,000 together with disbursements and reasonable travelling
expenses, if
necessary, to be fixed by the Registrar.
Solicitors
Murdoch Hall and Co, Auckland for Appellant
K P McDonald Takapuna for Respondent
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