Shea v Ward [2001] NZCA 346; (2001) 20 FRNZ 662 (13 August 2001)

Last Updated: 12 December 2011

IN THE COURT OF APPEAL OF NEW ZEALAND CA 239/00
CA 240/00

BETWEEN RONALD THOMAS SHEA

Appellant

AND BONITA JOY WARD

Respondent

Hearing: 18 July 2001

Coram: Thomas J
Fisher J
Chambers J

Appearances: L H Pratley for the Appellant
K D O’Brien for the Respondent

Judgment: 13 August 2001

____________________________________________________________________

JUDGMENT OF THE COURT DELIVERED BY CHAMBERS J

____________________________________________________________________

Table of Contents

Paragraph

Number

Division of proceeds on sale of the parties’ home [1]

Issues on the appeal [9]

Further evidence [15]

The 24 November 1997 agreement [18]

The period of Mr Shea’s exclusive occupation [29]

The state of the house at settlement [32]

Accounting between the parties [35]

Result [42]

Division of proceeds on sale of the parties’ home

[1] Ronald Shea and Bonita Ward started living together in November 1992. In November 1993, they jointly purchased a property in Newlands, Wellington, for $175,000. All but $10,000 of the purchase price was borrowed. The National Bank of New Zealand lent them $140,000. The Fire Fighters Credit Union lent them $25,000. The property comprised three units. One was a 3 bedroom unit in which Mr Shea and Ms Ward themselves lived. The other two units were one bedroom units. They let these out to tenants.
[2] In 1996, Ms Ward was made redundant. She received redundancy pay from her former employer, the New Zealand Fire Commission. She used part of that redundancy pay to pay off the balance of the loan owing to the credit union. She paid $35,000 by way of principal reduction on the National Bank loan. She used some of it to effect repairs to the property. At this stage, the parties’ relationship was somewhat shaky. Ms Ward was concerned that, if she applied a large part of her redundancy payment to reducing their joint loan, she should get back on the sale of the property any contribution she made before any surplus was divided between them. She says she raised this with Mr Shea, who agreed that that was fair. At that time, they did not get round to recording their understanding in writing. That was done on 24 November 1997. The circumstances as to the recording of their agreed position at that time are in dispute. That is one of the matters to be resolved on this appeal.
[3] In August 1998, the parties separated. Ms Ward left their home. Mr Shea continued living there. Ms Ward wanted to sell the property. Mr Shea hoped to buy out her interest but he was unable to raise the money. Eventually, the property was sold pursuant to court order. Capital Projects (1998) Limited was the purchaser.
[4] There was a hiccup about settlement. On the proposed settlement day, Capital Projects complained that the vendors were failing to give vacant possession. One of the tenants had not vacated. As well, some of Mr Shea’s furniture remained in the property. He had also left behind a lot of rubbish. The real estate agent who had arranged the sale of the property said in an affidavit that ‘the house and garage were left in a disgusting mess, as were the sleepout and office under the garage’. Capital Projects demanded a reduction of $1000 in the purchase price because of the breach. The solicitor acting for the vendors agreed to that reduction so that settlement could take place.
[5] Settlement took place on 12 November 1999, a few days late. A number of people had to be paid immediately from the settlement proceeds. There is no dispute as to the propriety of the payments that were then made. The balance of the settlement proceeds, namely the sum of $126,247.38, was paid into an interest bearing account in the High Court. That was because Mr Shea and Ms Ward could not agree on how it should be distributed between them. Ms Ward then brought an application for determination of that question.
[6] That application came up for substantive resolution before John Hansen J on 9 October last year. Mr Pratley appeared for Mr Shea. He had not previously been Mr Shea’s legal adviser. Mr Shea’s then solicitor was in Australia on holiday. His previous counsel had had to withdraw on medical grounds. Mr Pratley appeared - on whose instructions is not quite clear - to seek an adjournment. The judge refused that application for adjournment. That refusal is the subject of the first appeal before us.
[7] Having refused the adjournment, John Hansen J then went on to consider Ms Ward’s application. Mr Pratley applied for and was granted leave to withdraw. Mr Shea was not present. That is because, he says, he had been told by his previous counsel that there was no need for him to appear.
[8] John Hansen J ordered Mr Shea to pay Ms Ward $95,747.25. He explained in his judgment how that sum was made up. The balance of the sum remaining in the High Court trust account after that payment to Ms Ward was then to be divided equally between Mr Shea and Ms Ward. The effect of the judgment was that Ms Ward ended up with $110,997.32 and Ms Shea with $15,250.06. Mr Shea has appealed against that judgment too.

Issues on the appeal

[9] A number of issues raised in Mr Shea’s points on appeal were ultimately resolved by agreement following discussion between bench and bar. Mr O’Brien, for Ms Ward, properly admitted that there were some errors in the judge’s calculations. (The correction of those errors is reflected in the figures given in the later section of this judgment entitled ‘Accounting between the parties’.) Essentially, by the end of counsel’s submissions, we were down to four issues requiring determination.
[10] The first was whether Mr Shea should be granted leave to adduce further evidence. Mr Shea swore an affidavit. In it he provided information which formed the basis of Mr Pratley’s submission as to why we should in our discretion admit further relevant evidence. In addition, Mr Shea provided in his affidavit some of the additional evidence he wished to put before the court on substantive matters.
[11] The second issue was whether the court should give effect to the parties’ agreement of 24 November 1997. Mr Pratley, now Mr Shea’s solicitor and counsel, submitted that Mr Shea had signed that agreement under duress. The agreement had provided that on sale of the property Ms Ward was to receive the first $60,000 after which the balance would be equally divided. In view of the duress Mr Shea’s case was that he should not be bound by that. Mr Shea accepted, however, that if the agreement were avoided, Ms Ward would still be entitled to a lesser amount before division of the balance.
[12] The third issue was whether Mr Shea had proved that he had met any outgoings on the mortgage or paid rates or effected repairs while he was in exclusive occupation of their home. He claimed a credit for such payments.
[13] The fourth issue was whether the $1000 deducted in respect of the state of the house at settlement should be shared between the parties or should be visited exclusively on Mr Shea.
[14] We deal with each of those issues in turn.

Further evidence

[15] At the start of the oral hearing, we accepted Mr Shea’s affidavit containing the additional evidence he sought to adduce on a provisional basis. While Ms Ward formally opposed the introduction of any new evidence, her real concern focused on a particular exhibit to Mr Shea’s affidavit. That exhibit purported to be a letter written by her. She claimed it was a fabrication. In the end, we do not need to resolve that question because the letter is not relevant to any issue we have to determine. Presumably the reason Ms Ward did not forcefully dispute the balance of the additional evidence is that it added nothing. Our answers to the issues in this case would be identical whether the additional evidence is taken into account or not. So too the accounting between the parties is unaffected by the receipt of the additional evidence.
[16] In these circumstances, out of a sense of fairness to Mr Shea, we have considered his affidavit. As a consequence, we feel satisfied in dismissing the appeal against the judge’s refusal to grant an adjournment. Mr Shea has now had the opportunity of presenting his case fully before us. We have read and considered all the evidence he wanted to advance. We have heard his counsel’s submissions. The only thing he has not had an opportunity to do is cross-examine Ms Ward. Ms Ward had been advised prior to the High Court hearing that she was required for cross-examination. As it turned out, there was no one available to cross-examine her. Mr Pratley, before us, initially submitted that the case should be sent back to the High Court for re-determination. One of the grounds on which he sought a rehearing was that it would permit cross-examination of Ms Ward. We pointed out to Mr Pratley that, given the small amount of money involved and the excessive delays there had been, we should try to resolve the dispute once and for all. Mr Pratley saw the merit in that. We asked Mr Pratley on what topic or topics he wanted to cross-examine Ms Ward. He said it was with respect to the 24 November 1997 agreement. For the reasons we shall give in the next section of this judgment, we are satisfied that both parties have somewhat misconceived the nature and importance of that agreement. Any cross-examination as to the circumstances in which Mr Shea came to sign that document was very unlikely to lead to a final result.
[17] Mr Pratley submitted at one stage that ‘it was crucial for [Mr Shea] to be available for cross-examination’. Mr O’Brien has at no stage sought to cross-examine Mr Shea. The court cannot force a party to cross-examine any particular witness. Nor, of course, can a party insist on being cross-examined.

The 24 November 1997 agreement

[18] Mr O’Brien submitted before John Hansen J, and again before us, that Ms Ward was entitled to the first $60,000 of the proceeds of sale. This argument was based on an alleged agreement dated 24 November 1997. The agreement was in these terms:

‘I, Ronald Thomas SHEA being 50% owner of the property at 15 Glanmire Road, Newlands, do hereby acknowledge that Bonita Joy WARD the other 50% owner of the property at 15 Glanmire Road, Newlands contributed an extra $60,000.00 towards this property.

‘This being the case if the property is ever sold, Bonita Joy WARD should receive firstly $60,000.00, and 50% of the remaining sale price of the property.

‘I am of sound mind and body when writing this agreement.’

[19] Both Mr Shea and Ms Ward signed the document. The manager of NZ Post Limited at Johnsonville witnessed their signatures. The issue before the judge, apparently developed at some length by Mr Pratley when he was making submissions in support of his application for adjournment, was whether that agreement was voidable on the grounds of duress. The judge concluded on this topic (judgment No. 2, para [4]):

‘Nothing has been put before me and nothing in the papers would support such an allegation. Accordingly, I am satisfied that [Ms Ward] is entitled to that $60,000.’

[20] We have re-examined the evidence in respect of this issue, including the additional evidence Mr Shea sought to have admitted before us. We are satisfied that Mr Shea has not discharged the onus falling on him to prove that he was induced to enter into the agreement by duress. It must be remembered that Mr Shea and Ms Ward, when they bought the property, had scarcely any money of their own to put into it. Virtually every dollar of the purchase price was borrowed. Then Ms Ward got her redundancy payment in late 1996. By this stage, the parties’ relationship was shaky. Ms Ward was reluctant to put her redundancy money into reducing their loans on the house without an acknowledgement from Mr Shea that, if they separated, she would get her money back before any 50/50 split. She raised that topic with Mr Shea and says that he agreed. She says that at that stage they ‘never got round to entering into any written agreement’. What followed almost a year later was the written agreement which we have already quoted.
[21] Mr Shea says that the circumstances surrounding the 24 November 1997 agreement were these. Earlier that month, Ms Ward made a false complaint to the police alleging that he had assaulted her. He was very concerned about that complaint, he says, because, shortly after their relationship had started, he had been convicted of assaulting someone – who is not clear – and he had received what he termed ‘a final warning’ from the District Court Judge who dealt with him. From that he inferred that, were he to be convicted again of assault, he could expect to be sentenced to imprisonment. Ms Ward knew about that ‘final warning’, he says, because she was in the public gallery of the Wellington District Court when it had been given.
[22] According to Mr Shea, on 24 November 1997, Ms Ward produced the agreement and asked him to sign it. She told him, he says, that if he did so she would withdraw the complaint. He did sign it. It is common ground that Ms Ward did subsequently withdraw the complaint. She insists that the two events were not linked.
[23] While the matter is not clear-cut, we have reached the view that the 24 November agreement was not voidable for duress for these reasons.
[24] First, we are satisfied that the agreement simply reflected the understanding the parties had reached back in November 1996 when Ms Ward received her redundancy payment and was contemplating applying it to reduction of property loans and maintenance. That she should get back as a first charge any amount so applied seems to have been acknowledged by Mr Shea at that time. There is no dispute about that. What then happened in November 1997 was the formal recording of the understanding and its quantification.
[25] Secondly, what was agreed formally in November 1997 seems fair. That fairness militates against a finding against duress. We say that in light of the following facts. Both parties were and are agreed that, despite their joint ownership of the property, each was and is entitled to get back as a first charge any special contribution made towards the property. Mr Shea has never asserted that the parties must share equally in the balance sum currently held in the High Court trust account. He has always accepted that Ms Ward was entitled to something prior to equal division because of her special contributions to the property. His concern was and is simply as to quantum. He accepted, for instance, that she had paid $35,000 in reduction of the sum owing to the National Bank and that she was entitled to a pre-division credit in that amount. He also accepted that Ms Ward was entitled to credit for $5543 in respect of repairs she had paid for on the property. Those repairs had been done at the end of 1996. The payments were made between November 1996 and January 1997. Both those sums were part of the $60,000 calculation, Ms Ward said.
[26] The real dispute was with respect to payments totalling $21,405.97 which indisputably Ms Ward paid to the New Zealand Fire Fighters Credit Union at the end of 1996. Mr Shea disputes that these were payments in respect of the property. But clearly they were. It is common ground that the parties borrowed $25,000 from the credit union to buy the property. It is also clear that this repayment cleared the parties’ debts to the credit union. It may be that the credit union had not taken a mortgage over the property. The evidence on that topic is not complete. But even if that is the case, Ms Ward’s repayment of the credit union debt was, without doubt, a contribution to the property as it meant that the credit union would never have a claim against their assets, including their Newlands property. Ms Ward settled that debt. If that sum is added onto the amount which Mr Shea admits was a special contribution by Ms Ward, the total is over $60,000. Ms Ward’s quantification at $60,000 was, if anything, generous to Mr Shea. There was no unfairness in the written agreement.
[27] If Mr Shea had been successful in having the agreement set aside for duress, the end result would have been, from his point of view, no better and indeed might have been worse. This is a case where Mr Shea has acknowledged a trust arising from the special contributions made by Ms Ward. It is possible that, on a calculation of the actual contributions made up to November 1997, Ms Ward would have been entitled to a greater contribution than the $60,000 agreed.
[28] On this issue, we are satisfied that the court should give effect to the 24 November agreement.

The period of Mr Shea’s exclusive occupation

[29] It is common ground that Ms Ward left the property on 1 August 1998 and that from that date until 11 November 1999 Mr Shea was in exclusive occupation of the 3 bedroom unit. Mr Shea accepts that he should pay a notional rent for the time he was in sole occupation of the home. The judge found that $9250 was a fair notional rent for that period. Mr Shea accepts that figure. Mr Shea argued that, because he had agreed to pay a notional rent, he should get credit for any mortgage, rates or repair payments made by him during that period. Ms Ward accepted the proposition in principle but said that no credit was due to Mr Shea, for the following reasons:

• [a] No such payments have been satisfactorily proved.
• [b] Even if some mortgage payments have been proved, one cannot work out whether they were payments of principal or interest and almost certainly they were interest. Only principal repayments should be credited.
• [c] Even if some payments had been proved, there should be offset against them rent which Mr Shea received from the tenants of the other two units, which rent Mr Shea has refused to disclose to Ms Ward despite being asked to account to her.

[30] We can dispose of rates and repairs immediately. There is simply no evidence that Mr Shea did pay the rates with respect to the 15 month period. Mr Pratley accepted that was so. We note that on settlement on 12 November 1999 arrears of rates had to be paid to the Wellington City Council. Based on what Mr Pratley told us from the bar were the rates for this property, it would appear that the rates for the previous year and a bit had not been paid. Likewise, there is no evidence as to the payment of repairs.
[31] There is some evidence that something was paid to the National Bank in the 15 month period, but the evidence, even as now supplemented, is too vague to allow any positive conclusion to be drawn. As well, we think there is much in Mr O’Brien’s point that, if mortgage payments are to be credited, then allowance should be given for rents received by Mr Shea, for which he has not accounted. Ms Ward repeatedly asked him to provide details as to rents received and to give a full accounting. Even now Mr Shea has not done that. Given that Ms Ward does not intend to sue in respect of these outstanding matters, we consider that it would not be fair to give any credit on account of possible mortgage payments.

The state of the house at settlement

[32] Settlement of the sale to Capital Projects was delayed for a number of reasons. One was that at settlement date Mr Shea’s furniture, rubbish and debris remained on the property. This was a breach of the agreement for sale and purchase. Capital Projects offered to settle that dispute by accepting a reduction of $1000 in the purchase price. Ian Martin, one of Mr O’Brien’s partners in the firm of Rowse Partners, agreed to that reduction. Ms Ward’s argument was that she should not be visited with the consequences of that breach. Mr Shea was in exclusive occupation. He was the one who had failed properly to vacate. The judge said on this point (judgment No. 2, para [10]):

‘I have seen the photographs of the way the property was left. This would leave a total deduction of $2000 for that. It is a very modest sum given the situation relating to the state of the property.’

[33] Mr O’Brien readily accepted that the figure of $2000 was wrong. It should have been $1000.
[34] The basis for the payment lies in the parties’ reasonable expectations: see Lankow v Rose [1995] 1 NZLR 277 (CA). Ms Ward could reasonably have expected that, were her former de facto partner to act in a way which decreased the value of their home while he was in exclusive occupation and the partnership’s notional tenant, he should compensate the partnership for such loss.

Accounting between the parties

[35] We now undertake an accounting between the parties in light of what they have agreed and we have found:

Amount received from Capital Projects on settlement		$234,136.08
Plus Notional rent payable by Mr Shea	$ 9,250.00
Sum payable by Mr Shea in respect of vacant possession dispute with Capital Projects	$ 1,000.00 _________ $10,250.00	$244,386.08
Less
National Bank mortgage	$81,864.29
Wellington City Council rates	$ 1,025.51
Real Estate agent’s commission	$ 1,449.49
Legal fees and disbursements on sale of property	$ 1,007.00 __________ $85,346.29
TOTAL		$159,039.79 =========

[36] That is the figure which should have been available for distribution between the parties. All those figures are agreed between the parties save for the $1000 which we have found properly payable by Mr Shea. (The amount received on settlement would have been $1000 higher but for his wrongful actions.) The four liabilities specified are all agreed to be shared liabilities.
[37] In accordance with the parties’ agreement, Ms Ward was entitled to the first $60,000 of the net sale price. If that sum is taken off $159,039.79, one is left with the sum of $99,039.79 to be equally divided between the parties. Ms Ward’s share of that would be $49,519.89. If that sum is then added to the $60,000 to which she is entitled, one gets a total of $109,519.89. That is how much she is due from the pot sitting in the High Court trust account. If she receives that sum, that leaves $16,727.49 available to Mr Shea. That is, of course, much less than his half share of $49,519.89. That is because he failed to meet a number of his personal debts. These debts either were met from the settlement proceeds or alternatively have not so far been met at all. We list Mr Shea’s personal debts:

National Bank	$13,763.81
National Finance Ltd	$ 4,134.35
Extra legal fees incurred on the release of a caveat and in dealing with vacant possession argument	$ 1,500.00
Pre-trial costs owing to Ms Ward	$ 3,144.25
Notional rent	$ 9,250.00
Compensation payable because of failure to give vacant possession	$ 1,000.00 _________
TOTAL	$32,792.41 ========

[38] If that sum is deducted from his half share entitlement of $49,519.89, one is left with $16,727.48, which is his share of the High Court pot.
[39] To put it another way, had Mr Shea met these liabilities himself when he should have, the amount of money sitting in the High Court trust account would have been greater by the sum of $32,792.41, in which event Mr Shea would have been entitled to the same half share as Ms Ward, namely $49,519.89.
[40] Of the figures listed in Mr Shea’s liability schedule, the only one in contention was the $1000.
[41] Interest will have been earned on the sum deposited. Ms Ward is entitled to almost 87% of the pot. Mr Shea’s share is just over 13%. Accordingly, Ms Ward should get 87% of any interest earned and Mr Shea 13%.

Result

[42] We dismiss the appeal against the refusal to grant an adjournment.
[43] On the substantive appeal, we acknowledge that Mr Pratley did identify some errors in the judge’s calculations. He has been successful in increasing Mr Shea’s share of the pot from $15,250.32 to $16,727.49. That is a very slight increase. Essentially, in terms of overall result, Mr Shea failed on the appeal. John Hansen J ordered Mr Shea to pay costs and disbursements totalling $2535. As we understand it, those costs have not yet been paid. That costs order will stand. We order Mr Shea to pay Ms Ward a further $3500 with respect to costs in this court.
[44] Accordingly, we direct the registrar of the High Court to pay from the trust account to:

• [a] Mr Shea the sum of $10,692.49 plus 13% of any interest earned;
• [b] Ms Ward the sum of $115,554.89 plus 87% of any interest earned.

[45] Obviously these orders are subject to any withholding tax that the bank or the registrar may, by law, be required to deduct. Also, appropriate adjustments will need to be made if, contrary to our understanding, Mr Shea has already paid the costs ordered in the High Court.

Solicitors:
Lance Pratley Law, Wellington, for Appellant
Rowse Partners, Wellington, for Respondent