McNeill v Gould CA75/01 [2001] NZCA 404; (2002) 4 NZ ConvC 193,557 (10 December 2001)

Last Updated: 7 February 2019

IN THE COURT OF APPEAL OF NEW ZEALAND

CA 75/01

	BETWEEN	ELIZABETH JANE McNEILL
		Appellant

	AND	JOHN MARTYN GOULD
		Respondent

Hearing:	4 December 2001
Coram:	Blanchard J Robertson J Hammond J
Appearances:	A K G Morgan for Appellant E J Forster for Respondent
Judgment:	10 December 2001

JUDGMENT OF THE COURT DELIVERED BY HAMMOND J

Introduction

[1] The appellant, Elizabeth McNeill, and the respondent, John Gould, were in a de facto relationship for some five years. After that relationship came to an end, Mr Gould sought to recover a sum of $415,000 from Ms McNeill. He said that sum had been “loaned” to her in the course of the relationship. Ms McNeill resisted the claim on the footing that the monies were a gift; or that the advance (if such it was) was statute barred.
[2] Heron J found for Mr Gould, and entered judgment for that sum, together with interest at 5% from the date of formal demand for repayment, and costs. Ms McNeill now appeals to this Court.

The uncontested facts

[3] Mr Gould was a semi-retired farmer with substantial assets. He was married, with children. He lived with his family, in Auckland. But Mr Gould still had farming interests in the Gisborne area. Because of those interests he visited the Ministry of Agriculture & Fisheries in Hastings from time to time in 1990-1992. Ms McNeill was a widow, and working for that department. She had her own home, which she had purchased out of assets deriving from her late husband’s farming estate.
[4] This couple formed a close – the Judge thought “passionate” – relationship. Mr Gould decided to separate from his wife of long standing. He did so; and concluded a matrimonial settlement with her in 1992. The Judge found that Mr Gould and Ms McNeill “were committed to not only living together but ultimately remarrying when Mr Gould was free to do so”.
[5] It was common ground that Mr Gould conferred on Ms McNeill by way of gift a luxury car valued at a little under $100,000; shares worth $15,000 to $20,000; expensive jewellery; he paid for certain overseas trips for her and members of her family; and he paid for “substantial furnishings and improvements” to a property where the couple subsequently lived. It is this property – which the couple called “Beaujolais” – which eventually formed the subject matter of this proceeding when the relationship came to an end.
[6] Mr Gould and Ms McNeill had decided to purchase a home in Havelock North, Hawkes Bay, for a sum of $405,000. It was common ground that the purchase would be in Ms McNeill’s sole name, but Mr Gould would provide all the funding. The Judge found – and there was ample evidence for this holding – that title would be taken in this manner because “there should be no link back to [Mr Gould] because of concerns he had arising from matrimonial property claims that would follow his separation, and possibly claims from his children in respect of his estate should anything happen to him”.
[7] Mr Gould paid the deposit of $25,000 on Beaujolais on 11 February 1992; and on 26 February 1992 he contributed all the balance of the settlement monies for the purchase, through his solicitors. But title was in fact taken in Ms McNeill’s (sole) name.
[8] The couple thereafter resided in Beaujolais until December 1997. By that time the property had distinctly escalated in value (although there had been substantial improvements, which were all paid for by Mr Gould). Beaujolais in fact sold for $650,000 in June of 1998, and Mr Gould has received no part of the net sale proceeds of $628,978.58.

The claim

[9] After the couple separated Mr Gould claimed the return of the $415,000 he had contributed towards the purchase of Beaujolais. The balance over the adjusted purchase price of $405,000 had gone, in cash, to Ms McNeill. Mr Gould said that the sum of $415,000 was a “loan”. He made no demand for the resulting profit, or any part of what he acknowledged to have been the various gifts of the personal property on his part.
[10] When that initiative was resisted, formal demand for the $415,000 was made of Ms McNeill by Mr Gould on 18 February 1999. A Statement of Claim was issued on 27 April 1999, some seven years after the substantial part of the advance was actually made in March of 1992.
[11] As originally formulated the claim was framed as one for an alleged liquidated debt; or money had and received; or unjustifiable enrichment; or a constructive or resulting trust. By trial, the claim had settled very much into a contest as to whether the $415,000 was a loan and if so, on what terms; or a gift; and, if a loan, whether a limitation defence applied.

The judgment in the High Court

[12] Heron J traversed the history of the dealings of the parties and the advice given by a firm of solicitors in Hastings (Messrs Kelly McNeil) leading up to the settlement of the purchase of Beaujolais. It is quite plain from those dealings and advices that Mr Gould wished the acquisition of this property, and the basis on which it was being acquired, to be kept confidential from his Auckland family. It was common ground that the property would be taken in Ms McNeill’s name, with Mr Gould providing the wherewithal. He was advised by Kelly McNeil that, in the particular circumstances, and as the Judge put it “the money should be left by way of an undocumented loan, recorded only by cheque and receipt” and with no Deed of Acknowledgement of Debt. Mr Gould was advised of the gift duty implications should he subsequently elect to begin “gifting off” that advance. He caused his Auckland solicitors to prepare a codicil to his Will relieving Ms McNeill of “all loans which I have made to her in my lifetime and which have not been repaid at my death”.
[13] Unsurprisingly, against that background, and particularly the express concern of Mr Gould that he did not at that time wish to pay the gift duty which would have been payable, the Judge had no difficulty in holding that “at the time the substantial balance of the monies was paid, there was no unequivocal intention to immediately gift the monies although there may have been a future intention to gift them outright [at some time]”.
[14] Having found that there was not a present gift, but a loan of the monies, the Judge then turned his attention to the terms of that loan.
[15] Mr Gould’s pleading was that the loan “included the express or implied terms that:

9.1 The advance would be treated as a loan but that at the plaintiff’s discretion he could enter into a gifting regime, effectively forgiving repayment of components of the loan over time.

9.2 Should the plaintiff and defendant separate that the defendant would repay the balance of the loan to the plaintiff after a reasonable time.”
[16] The Judge considered the law to be well settled. He referred to the decision of the majority in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 52 A.L.J. R. 20.

Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express. In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract (per Lord Simon at p26. Lords Wilberforce and Morris delivered a joint dissenting judgment).

[17] The Judge took the view that in the circumstances of this case these tests had been met. He said, “it seems to me that a bystander to this arrangement had it been clear that it was a loan at the outset, would have stipulated that it could not be called up unless and until the parties separated, and thereafter for a reasonable time”. And, “it is I think, very difficult in the circumstances of this case, to resist the plaintiff’s allegation that the monies were not payable on demand, but only if the parties in fact separated”.
[18] That view having been taken by the Judge of the terms of the loan, it followed that the limitation defence could not apply, and that judgment must run for Mr Gould.

The first ground of appeal: gift not loan

[19] In this Court, Mr Morgan persisted with the argument that the money transaction with respect to Beaujolais was by way of gift rather than loan.
[20] It is trite that a gift is effected by the present transfer of the relevant property, with a concomitant intention that it shall thenceforth belong, permanently, to the person to whom it is transferred.
[21] The principal evidence relied on in the Court below, and again before us for such a conclusion, was that the house was to be Ms McNeill’s from the outset and was subsequently confirmed to be hers. But it does not follow from those facts that there was a gift of the monies. The second factor was the other gifts which were made by Mr Gould to Ms McNeill. Again, it does not follow that because those other items (and some of which were subsequent to the house purchase) were acknowledged to have been gifts, so too with the house monies.
[22] What was required to be considered was the particular item in dispute: Beaujolais. And with all respect to Mr Morgan’s endeavours to persuade us otherwise, there was ample evidence in the evidence which was traversed before Heron J, and noted by him, to support the Judge’s holding that Mr Gould was quite deliberately not making a gift of the monies at the time they were transmitted for the purchase of Beaujolais. His concern to avoid the substantial gift duty which would thereby have been payable is probably, taken by itself, enough to deflect this argument. But when there is added to that the other evidence before the Judge, there is no force whatsoever in this head of the appeal. It is dismissed.

Second ground of appeal: the terms of the loan

[23] It is convenient to begin with some brief observations on the law. Counsel rightly acknowledged from the outset that this appeal is overwhelmingly concerned with the facts. But we think it appropriate to emphasise our appreciation of the appropriate question to be asked in this case.
[24] As a general proposition, implied terms in contracts may be divided into three groups. First, there are terms implied in law. These are terms imported by operation of law, although the parties may not have intended to include them. Then there are terms which a Court will imply by custom. The third group is terms implied in fact. These are terms which, although not expressly set out in the contract, are something which the parties must have contemplated as having effect. It is that third subset which is in issue in this case.
[25] The BP Refinery case which was cited by Heron J has to be approached with a good deal of caution in a case such as the present. That case concerned the suggested implication of a term in a rating agreement to make it accord with a refinery construction agreement. Patently, a stringent approach was required in such a context, where a great deal of care had already been taken over complicated documents.
[26] We think it more appropriate to adopt, in the context of this case, the formulation of the learned editors of Chitty on Contract, Vol. 1, para. 13-004 viz.,

[A] Court will be prepared to imply a term if there arises from the language of the contract itself, and the circumstances under which it is entered into, an inference that the parties must have intended the stipulation in question. An implication of this nature may be made in two situations: first, where it is necessary to give business efficacy to the contract, and secondly, where the term implied represents the obvious, but unexpressed, intention of the parties. These two criteria often overlap and, in many cases, have been applied cumulatively, although it is submitted that they are, in fact, alternative grounds. Both, however, depend on the presumed intention of the parties. (Emphasis added).

[27] Treitel, The Law of Contract (9^th ed.) at p185 et seq takes the same view as Chitty, viz; that the tests are “alternative”.
[28] The way Chitty has formulated the test is important. Implicit in it is the proposition that the Court cannot simply add to the contract for the parties. The Court must be able to clearly infer “that the parties must have intended the stipulation in question”.
[29] Once that inference has been arrived at by a trial Judge it is reviewable on appeal, but subject to the usual appellate principles. The judgment will not be set aside unless the appellant satisfies the Court that the Judge was wrong, although in cases of inferences the appellate Court is routinely in as good a position to decide as the trial Judge. (See, Powell & White v Streatham Manor Nursing Home [1935] AC243 (HL); and Hutton v Palmer [1992] NZLR 260 (CA)).
[30] In practice, the reasons that many cases fail where alleged implied terms are advanced generally fall into two categories:

• (a) the parties may not know of the matter to be implied; or
• (b) it is not clear that both parties would in fact have agreed to the stipulation which is sought to be implied.

[31] In this case the issue was, can it be said with the requisite degree of confidence what both parties would have said as to the circumstances under which the loan was repayable? There is nothing in the contract itself which assists on this point; the implication, if it is to be had, comes entirely from context. In our view, the Judge was right to say that in this instance, the context yielded that degree of certitude. First, there is some indication in the correspondence that the advising solicitors thought that the time at which the loan might be called up, was on separation. Our attention was drawn to a letter from the appellant’s solicitor, to the respondent, which stated: “should you [both parties] separate and [Mr Gould] ... decide to call it [the advance] up”. That evidence does not rise to the level of an express term of the contract. But it has some force in identifying an (perhaps “the”) event which would trigger repayment. Secondly, this whole transaction was inextricably anchored to the parties setting up a new life in Beaujolais. There were substantial advantages to both parties in the transaction being set up in the manner in which the Judge found it was (for instance, the security of a home for Ms McNeill; and at least temporary avoidance of detection of what was afoot for Mr Gould). Then there was the shared commitment to the new wine which Beaujolais promised to both parties. Thirdly, what the parties would have said, for this was very much a joint venture, was that neither of them would have wished for a premature, or early call on the loan. If such a suggestion had been made at the time the arrangements were being entered into and the monies advanced, they would both surely have expostulated: “But, this advance is to subsist during the relationship, subject only to any gifting off, as discussed with the lawyers”. The calling up of the loan while Mr Gould was still living in the home with Ms McNeill would have been quite inconsistent with the idea that the home was being provided to her for them to live in together. In those circumstances, we think it was entirely open to the Judge to hold, as he did “that the loan was not immediately on demand but would fall due only after the advent of circumstances relevant to the parties”. The principal circumstance would be the failure of the relationship.
[32] In the result, not only was the inference one which was open to the Judge; it is the inference this Court would take from the context of the transaction as to what was obviously intended. In the result, this ground of appeal too, is dismissed.

The limitation point

[33] That point having been reached, it is unnecessary for us to consider the submissions made by Mr Forster on the limitation point. In fairness to him however, we note that he submitted in the High Court, and he would, if necessary, have relied on the point in this Court, that his client was not necessarily precluded by the general proposition set out in DFC New Zealand Ltd v McKenzie [1993] 2 NZLR 576, that for limitation purposes time commences to run forthwith on a loan which, on the face of it, is of indeterminate term.
[34] As we apprehend Mr Forster’s argument, this point very much coalesces with that made on the implication point itself. Mr Forster referred us to that passage in McKenzie at p582, line 34, wherein Tipping J said: “in the case of a loan repayable on demand the liability to repay arises without demand unless the parties have expressly or by clear and necessary implication made it apparent that they intended the obligation not to arise unless and until demand is made”. (Emphasis added). The same argument was made here that, by implication, there was a deferral of time. But in the result the point is now academic in this case.

Conclusion

[35] The appeal is dismissed.
[36] In this Court, the respondent will have costs of $3,000 together with his disbursements, if necessary as fixed by the Registrar. The disbursements are to include the travel and accommodation costs of counsel.

Solicitors:
Kelly McNeil, Hastings for Appellant
Holderness Mansfield, Hastings for Respondent