Rea v Waller & anor [2006] NZCA 3 (22 February 2006)

Last Updated: 25 March 2006

IN THE COURT OF APPEAL OF NEW ZEALAND

CA232/05

BETWEEN VIOLET ELLEN REA
Applicant

AND JOHN ANTHONY WALLER AND RICHARD DALE AGNEW
Respondents

Hearing: 13 February 2006

Court: Anderson P, Hammond and Ellen France JJ

Counsel: C A McLorinan for Applicant
M J Tingey for Respondents

Judgment: 22 February 2006

JUDGMENT OF THE COURT

A The application for special leave is dismissed.

B Costs to the respondents of $1,500 along with usual disbursements.
____________________________________________________________________

REASONS

(Given by Ellen France J)

[1]	This is an application under r 29(4) of the Court of Appeal (Civil) Rules 2005 for special leave to appeal out of time against a judgment of Associate Judge Lang (as he then was) granting summary judgment to the respondents.

Background

[2]	Mr Waller and Mr Agnew, the respondents, were appointed under the Corporations (Investigation and Management) Order (No.2) 2003 as statutory managers of several entities. The entities included the International Investment Unit Trust (ITUT), the Timberland Trust, and Donald Morris Rea.
[3]	Donald Rea is the son of the applicant, Mrs Violet Rea. Mrs Rea is settlor and a trustee of the trust known as the VET Trust.
[4]	In a judgment dated 10 August 2004, Associate Judge Lang granted an application for summary judgment by the statutory managers against Mrs Rea in relation to funds received by the VET Trust. Orders were made under s 54 of the Corporations (Investigation and Management) Act 1989 that funds held by Mrs Rea that came from the VET Trust’s bank account were to be transferred to the statutory managers. To the extent those funds were less than $1,224,753.94, Mrs Rea was ordered to pay the value of the shortfall to the statutory managers.

Principles relevant to this application

[5]	An application under r 29(4) requires a determination of the overall interests of justice (Havanaco Ltd v Stewart [2005] NZCA 158; (2005) 17 PRNZ 622). This Court in Reid v Tararua District Council CA72/05 20 June 2005 identified the following factors as relevant in that determination:

a) The delay in bringing the appeal;
b) The reason for that delay;
c) Whether subsequent events justify the grant of leave;
d) The merits of the proposed appeal; and
e) Any prejudice to the respondents.

[6]	The application for leave is opposed on the grounds these factors all count against the applicant.

Delay in bringing appeal

[7]	The application for special leave was filed on 21 October 2005, over a year after the appeal ought to have been brought.

Reason for delay

[8]	The applicant filed an affidavit dated 20 October 2005 in support of her application for leave. Mrs Rea gives the following reasons for the delay in bringing the appeal:
8.1	She initially relied on Donald Rea, her son, for advice and has been "unduly influenced" by her son.
8.2	Mrs Rea sought legal advice in March 2005 by which time the appeal was already out of time and her efforts were focused on other litigation including a challenge to a bankruptcy petition and an unsuccessful attempt to have the summary judgment set aside. The latter judgment of Associate Judge Sargisson was delivered on 27 September 2005.
8.3	Mrs Rea is legally aided and awaited approval from the Legal Services Agency before making the leave application.
[9]	The applicant also argues that the statutory managers have in effect been on notice that the matter has been in dispute since March 2005.
[10]	The respondents dispute there is any proper explanation for delay and do not accept they have been on notice the matter was in dispute since March this year. Indeed, the respondents point out that the applicant’s opposition in related proceedings for a writ of sale was on a basis unrelated to the validity of the summary judgment.
[11]	There has been considerable delay in making this application. Mrs Rea does not adequately account for that delay. While there is some evidence before the Court from a solicitor and other members of her family suggesting she was susceptible to influence from her son, Donald, she does not say she was suborned by him. Certainly, there is no suggestion he influenced her initial decision not to appeal. Even if it was possible to excuse the initial period of delay prior to Mrs Rea obtaining legal advice in March 2005, there is no adequate explanation for the delay after that. For example, there would not have been any particular additional cost or complexity in filing the application for leave to appeal at the time other proceedings were commenced.

Effect of subsequent events

[12]	We agree with the respondents that this is not a case where there are any subsequent events which warrant leave being granted. The most that can be said is that this application was brought after other avenues of redress were exhausted.

Merits of proposed appeal

[13]	The application for summary judgment was made under s 54 of the Corporations (Investigation and Management) Act 1989. Section 54(1) provides for a power to trace property improperly disposed of. It applies where,
(a)	Any property has been acquired by a person in circumstances which cause it to be just and equitable that that person should hold it upon trust for any corporation that has been declared to be subject to statutory management; or
(b)	Any property has been improperly disposed of, whether or not the property has become subject to a trust, ..
[14]	In those cases, s 54(1) states that the Court has discretion to make an order,
(c)	That the property be transferred or delivered to the statutory manager:
(d)	That any person who acquired or received the property, or his or her administrator, shall pay to the statutory manager a sum not exceeding the value of that property.
[15]	Judgment was entered against Mrs Rea on the basis the VET Trust received the funds in circumstances where no consideration was provided for their acquisition and no real explanation given to justify the advances made. Certainly, the entities in statutory management received no benefit.
[16]	The Associate Judge therefore accepted the statutory managers’ claim that the trustees of the VET Trust acquired the funds in circumstances making it just and equitable that they hold the funds in trust for the entities from whom they were acquired, all of those entities being in statutory management.
[17]	Mrs Rea accepted she received the funds although she said she was told they were legitimate. She also said she was told she could do what she liked with the money. She gave some to her family, some to families in need, and some to meet her own living expenses and to attend a family wedding.
[18]	The Judge’s conclusion after considering what Mrs Rea had said was as follows:

[23] In those circumstancess, and to the extent that any of the funds remain intact, it is just and equitable that Mrs Rea should hold them in trust for the entities in statutory management. To the extent that the funds have been disposed of by Mrs Rea, I am therefore satisfied that they were disposed of improperly, because they ought not to have been disbursed in the manner described by Mrs Rea. Subject to any other matters raised by Mrs Rea I am satisfied that jurisdiction exists under both s 54(1)(a) and (b) to make orders under s 54(1)(c) and (d) of the Act.

[19]	Mrs Rea’s defences to the application for the summary judgment were a protest to jurisdiction and a claim documents had not been properly served. Plainly, none of those matters raised arguable defences and neither are pursued.
[20]	Against this background, four proposed grounds of appeal were initially advanced, namely,

a) Associate Judge Lang erred in finding against Mrs Rea personally as the only contact that she had with the funds was as a trustee; or
b) If the Judge was able to find against Mrs Rea personally, the Judge was in error in ordering that she repay the funds; and
c) Associate Judge Lang erred in finding that the trustees were required to provide consideration for the funds received; and
d) Associate Judge Lang erred in finding that the funds of the VET Trust were improperly disbursed.

[21]	The focus of the oral argument for the applicant was, however, more refined. In particular, Ms McLorinan was critical of the absence of any reasoning by the Associate Judge in terms of whether or not any of Mrs Rea’s activities were consistent with the trust deed for the VET Trust. However, it was plain, and is not disputed, that Mrs Rea received the funds. Those funds had been wrongly transferred to the VET Trust and Mrs Rea has spent a considerable portion of those funds. As the Judge found, this is the classic case for tracing.
[22]	The other aspect emphasised by Ms McLorinan was the approach to the discretion. Here, the argument is that there was material before the Judge which should have prompted him to give Mrs Rea a chance to air matters at a substantive hearing. Specifically, the possibility Mrs Rea had been the subject of undue influence should have been apparent because it would have been plain she would not have understood the nature of her obligations.
[23]	As this is a challenge to the exercise of a discretion, the applicant would have to be able to show the decision was plainly wrong. Given the absence of any real explanation for receipt of the funds and the inadequate account given for their dissipation, it cannot be said the Judge has erred at all.

Prejudice to respondents

[24]	The funds Mrs Rea has been ordered to pay to the respondents will be distributed to some 300 beneficiaries of the ITUT as provided for by Williams J in Re International Investment Unit Trust [2005] 1 NZLR 270 (HC).
[25]	The respondents say further delay in payment by Mrs Rea is prejudicing the 300 beneficiaries.
[26]	The applicant seeks to downplay any prejudice by pointing to the likelihood that not all of the funds will be recovered.
[27]	Whatever the final position for the beneficiaries, their interests add to the need for finality.

Overall justice

[28]	It is argued justice favours the grant of leave so that Mrs Rea, who is 76 years old, does not run the risk of losing her house in repayment towards the judgment.
[29]	The relevant factors taken overall, however, do not favour granting this application. The lengthy delay is not excusable, the proposed appeal has no merit, and any further delay would affect third parties.

Result

[30]	Accordingly, we dismiss the application for special leave.

Costs

[31]	We award costs of $1,500 to the respondents, along with usual disbursements.

Solicitors:
Till Henderson King, New Plymouth, for Applicant
Bell Gully, Auckland, for Respondents