Moir and ors v Moir [2007] NZCA 228 (7 June 2007)

Last Updated: 18 June 2007

IN THE COURT OF APPEAL OF NEW ZEALAND

CA119/06
[2007] NZCA 228

BETWEEN COLIN HARLEY MOIR AND HUGH CLIFFORD MATTHEWS
First Appellants

AND ROSS SPENCER MOIR
Second Appellant

AND ANNABEL LOUISE MOIR
Respondent

Hearing: 14 May 2007

Court: Arnold, Gendall and Harrison JJ

Counsel: M W Vickerman and B M Nathan for Appellants
D H Hicks and I M Mitchell for Respondent

Judgment: 7 June 2007 at 4 pm

JUDGMENT OF THE COURT

A The appeal is dismissed.
B The appellants must pay to the respondent costs in the sum of $6,000 plus usual disbursements. We certify for second counsel.

____________________________________________________________________

REASONS OF THE COURT

(Given by Harrison J)

Introduction

[1]

The trustees of the Ace Investments Trust and Mr Ross Moir appeal against a decision of Fogarty J delivered in the High Court at Christchurch on 22 May 2006 declaring that Ace and Annabel Moir, Mr Moir’s former wife, held ownership of a residential property in Parnell, Auckland, in trust in equal shares. Consequential orders made are no longer in issue following sale of the property and retention of the proceeds for distribution pending determination of this appeal.

[2]

Fogarty J’s decision is based on a series of factual findings, following a comprehensive review of the evidence, which Ace and Mr Moir challenge on appeal. They face a major hurdle in satisfying this Court on appeal that the Judge’s findings, which were based largely on his assessment of the parties’ reliability and credibility, were wrong. In this context, while an appeal is by way of rehearing, it is not ‘a general factual retrial’ and a factual finding will not be reversed in the absence of ‘compelling grounds’: Rae v International Insurance Brokers Ltd [1998] 3 NZLR 190 at 198 per Tipping J.

Background

[3]	The relevant and uncontested background facts are as follows:

(1) Mr Moir is, as the Judge described him, ‘a very experienced property developer and rentier in Christchurch [where] he had constructed about 1200 townhouses’: at [2] of the judgment. His first marriage was dissolved in 1977. He settled the Ace Trust for the benefit of his children in September 1982. He and Anneabel Moir were married in 1988;
(2) Mr Moir had been interested for some years in a property at Burrows Avenue, Parnell. It comprised a large section and dwelling house. His plan was to subdivide off and sell the house. The proceeds from the sale were to be applied towards the costs of constructing four townhouses on the remaining land;
(3) Mr and Mrs Moir agreed to maintain their financial interests independently. He had previously assisted her in developing properties in Christchurch through which she had progressively acquired a cash equity of $179,732. Mr Moir arranged to purchase Burrows Avenue in December 1989 for $385,000 with Ace and Mrs Moir taking title in the proportions of three-fifths and two-fifths respectively;
(4) Mrs Moir’s equity of $179,732 represented about 38% of the purchase price. Ace’s contribution of $205,000 was initially funded by way of Mr Moir’s overdraft. He later arranged a term loan of $160,000 from Westpac. The parties agreed to develop the property in partnership and to adjust their shares when the total costs of development were settled. Their interests would then be fixed in the same proportions as their respective financial contributions to the total net cost;
(5) Mr Moir was responsible for developing Burrows Avenue. Work started almost immediately after purchase. On 26 March 1993 the parties sold the original dwelling for $290,000. Four new townhouses were substantially completed by July 1993, when they were tenanted. There were later additions to decks and carports were built;
(6) Mr Moir on Ace’s behalf and Mrs Moir assumed separate responsibility for managing the leases of two each of the four townhouses. During the marriage at least Ace and Mrs Moir each retained in their separate accounts the rental from two of the properties;
(7) Since separating in 1998 the Moirs have become, as Fogarty J observed, ‘embroiled in litigation under the Property (Relationships) Act 1976’: at [8]. The Family Court in Christchurch has given a number of decisions, including one that Mrs Moir’s share in Burrows Avenue is separate property.

[4]	Accounts were prepared for the partnership between Ace and Mrs Moir by a Christchurch accountant, Mr Denton Taylor, for the financial years ended 31 March 1990, 1991, 1992 and 1993 (no accounts were kept for subsequent years). The accounts recorded equal sharing of net income and losses between Ace and Mrs Moir and a broad equality of capital contributions. From about 1994 to 1998 Ace’s own accounts did not list its share in Burrows Avenue as an asset. Instead it was treated for accounting purposes as belonging to Mr Moir. The share was transferred back to Ace sometime before accounts were prepared for 31 March 1998 but legal title remained unchanged throughout. Fogarty J noted the coincidence of this latter event with the marital breakdown and rejected Mr Moir’s explanation that the original accounting transfer was a mistake: at [23].
[5]	Mrs Moir issued this proceeding in 2004. She sought orders for sale of Burrows Avenue and equal division of the proceeds on the ground that she and Ace held title in equal shares. Ace countered that the respective ratios were 76%/24% in its favour. On the eve of trial in May 2006 Mrs Moir filed an amended statement of claim pleading that, notwithstanding the definition of the legal interests of the parties on the title, they have ‘agreed in a settled account that their respective contributions towards the property have been equal’; that such account is contained in annual financial statements prepared for the partnership up to and including the year ended 31 March 1994; and that her beneficial interest is therefore a one-half share. Fogarty J treated this as a ‘subsidiary contention’ to Mrs Moir’s primary claim based upon equality of contributions: at [10].
[6]	The evidence established that, while he was neither a trustee nor beneficiary, Mr Moir controlled Ace. As the Judge found, Mr Moir was ‘the moving force behind the Burrows Avenue venture’, all costs being paid by him or from cash under his control: at [53]. Mrs Moir joined Mr Moir as a second defendant because she sought an issue estoppel against him. He was in substance if not in name Mrs Moir’s primary protagonist in this proceeding.
[7]	There is no evidence that the trustees exercised any degree of independence or authority in relation to the development project. They did not give evidence at trial and on appeal were represented by Mr Moir’s solicitors and counsel. The trustees’ endorsement of Mr Moir’s conduct and the steps taken by him in defence of Mrs Moir’s claim amounted to a ratification of his actions as agent for and with the authority of the trust in all aspects of the Burrows Avenue development. Mr Vickerman, who appeared for both in this Court, did not suggest otherwise.

Decision

[8]	Mr Vickerman has challenged the evidential bases for each of the findings of fact made by Fogarty J in determining Mrs Moir’s claim in three sequential stages. We propose to consider the appeal in the same order.

(1) Accounts

[9]	First, Fogarty J found that Mrs Moir made four payments at Mr Taylor’s request into Mr Moir’s account (Ace did not have a separate bank account) between 2 November 1993 and 14 November 1995 following her initial cash contribution of $179,732: at [25]. The total of $249,483 was identical to the sum recorded in Ace’s 1998 accounts as the amount of its contribution. This coincidence led Fogarty J to draw the irresistible inference that Mrs Moir’s funds were paid for the purpose of balancing capital contributions: at [18] and [25]. On the face of the accounts the combined sum of $498,966 represented the total capital cost of purchasing and developing the land and buildings. There is no challenge to the Judge’s finding that Mr Taylor acted throughout in preparing accounts on Mr Moir’s instructions: at [22].
[10]	Mr Vickerman submits the Judge was ‘distracted by the apparent symmetry of the arithmetic’ between the identical sums of $249,483 in concluding that the two owners made equal capital contributions. As a result, he submits, the Judge failed to analyse whether Mrs Moir’s five payments were all made in fact for that purpose. He says some were for the unrelated purpose of repaying loans advanced by Mr Moir to finance separate developments by Mrs Moir at Great North Road and Tutanekai Street in Auckland. He focuses on the last two of the five payments of $32,629.04 and $20,846.31 made on 16 November 1994 and 14 November 1995 respectively.
[11]	Fogarty J rejected Mr Moir’s evidence that Mrs Moir made these two payments in settlement of loan obligations to him arising from the Great North Road project: at [16] and [17]. Mr Moir relied on handwritten notes on deposit slips as part of an unsuccessful attempt to distance himself from the accounts: at [24]. It is plain from reading the judgment as a whole that Fogarty J did not regard Mr Moir as a reliable witness. He preferred Mrs Moir’s evidence that the $32,717.91 was realised from her share of the proceeds of sale of a section at Great North Road. At trial she denied Mr Vickerman’s proposition that the two payments were made to settle advances from Mr Moir. While Mr Vickerman cross-examined Mrs Moir extensively, he did not challenge her denial on this point further.
[12]	Nevertheless, in this Court Mr Vickerman mounted a detailed attack on Mrs Moir’s evidence relating to both payments. He refers to what he says is her handwritten notation on Mr Moir’s Westpac bank statement dated 16 November 1994 of the words ‘Glendenning cheque from A Moir – 701 Great North Road section’ beside a deposit entry for $32,717.91. He says it supports a proposition that she paid the $32,629.04 in discharging her indebtedness on the Great North Road development.
[13]	Apart from the fact that the two sums are different, at trial Mr Vickerman did not suggest to Mrs Moir that she wrote the notation or that it confirmed the construction he now advances. He did not tax her on the subject at all. Other than in exceptional circumstances, counsel should not expect an appellate Court to accept a reconstructed factual thesis which was never tested in cross-examination of the appropriate witness when the opportunity arose at trial. The High Court is the forum for exploring and determining all factual contests. A failure to put to a witness material contradictory to his or her evidence-in-chief in circumstances where opposing counsel is asking the trial Judge to disbelieve or reject that evidence may imply an acceptance of it: Browne v Dunn (1893) 6 R 57 (HL) at 76-77.
[14]	In any event, assuming Mrs Moir wrote them, the words on Mr Moir’s bank statement are on their face and without explanatory evidence equally consistent with (a) her evidence that she acquired the $32,717.91 (not $32,629.04) from the sale of the Great North Road property; and (b) an inference that the notation records the source and not the purpose.
[15]	Mr Vickerman also submits that it would not have been possible for Mr Taylor to tell Mrs Moir in November 1995 that she needed to make the final payment of $20,846.31 to equalise Ace’s capital contribution. He says Mr Taylor did not have the necessary information for that purpose and neither did Mr Moir, if only because all costs were not then known. However, neither Ace nor Mr Moir called Mr Taylor at trial to provide the factual foundation for this submission, and Fogarty J was entitled to draw the adverse inference that Mr Taylor’s evidence would not have assisted Ace.
[16]	Also none of this was suggested to Mrs Moir in cross-examination, and Mr Vickerman’s submission runs counter to his own proposition to Mrs Moir that in November 1994, a year earlier, there was no need for additional cash to complete the Burrows Avenue development. His premise could only have been that the project was substantially completed by then, in which case Mr Moir would have known all costs. Mr Moir said he gave all his primary documents to Mr Taylor to finalise accounts. Mr Taylor’s request of Mrs Moir is consistent with Mr Moir’s evidence because he was, in November 1995, preparing accounts for Ace and Mr Moir. Mr Moir’s 1994 accounts had included Burrows Avenue as an asset valued at $249,483; the same figure was included in the 1995 accounts. This submission is without foundation.
[17]	Mr Vickerman submits further that Mrs Moir’s evidence of reliance on Mr Taylor’s requests was hearsay and should not be admitted. Fogarty J accepted Mrs Moir’s evidence that she made the last two payments in response to Mr Taylor’s requests. The relationship between Messrs Moir and Taylor is relevant in this context. Mr Taylor prepared all accounts for the trust, the partnership, and Mr and Mrs Moir individually. At trial Mr Moir acknowledged that he alone gave instructions to Mr Taylor; that Mr Taylor prepared draft accounts based on primary documents or materials provided by Mr Moir; that Mr Taylor submitted the drafts to Mr Moir for approval before finalising them; and that Mr Taylor had maintained to him that the accounts are correct.
[18]	In these circumstances Mrs Moir’s evidence about the content of Mr Taylor’s requests was not of a hearsay nature. Mr Taylor was acting on Ace’s instructions through Mr Moir’s agency when communicating with Mrs Moir. And the evidence of her discussions with Mr Taylor was not tendered to establish the accuracy of the amounts requested by Mr Taylor, but rather to show they were represented to her by the trust’s agent as the monies required to meet her capital obligations. We add that the transcript does not record an objection by Mr Vickerman to the admissibility of Mrs Moir’s evidence on this point.
[19]	We are not persuaded that Fogarty J erred in finding that Mrs Moir paid a total of $249,483 into Mr Moir’s bank account progressively from 1989 to 1995 at Mr Taylor’s request, acting on Mr Moir’s instructions on Ace’s behalf, for the purpose of equalising her capital contribution with the trust towards total development costs for Burrows Avenue of $498,966.
[20]	Like Fogarty J, we also consider it relevant that from 1994, following completion of the four new dwellings, Mr Moir (on Ace’s behalf) and Mrs Moir split responsibility between them for collecting and receiving rentals. As Mr Hicks submits, there was an equality of division of income at its source; each retained the rental from two units. Mr Taylor’s accounts record of equal sharing of profits and losses is consistent with this agreement.
[21]	The only inference to be drawn from the totality of the evidence is that at least from 1994 and at latest November 1995 onwards Mrs Moir and Ace, acting through Mr Moir’s agency, treated each other as equal partners in Burrows Avenue; and that it was not until separation in 1997 that Mr Moir attempted to portray the legal relationship as one of inequality.

(2) Development Costs

[22]	Second, while accepting that the development costs for Burrows Avenue were higher than those stated in the accounts, Fogarty J concluded that it was ‘not possible now to verify the cost ... with any reliable degree of estimate’: at [37]. This finding was made in the context of Mr Moir’s challenge to the accuracy of his own or Ace’s accounts, for the purpose of proving that the trust’s actual capital contribution was significantly higher than Mrs Moir’s. The Judge rejected Mr Moir’s attempts to distance himself from the accounts, and to characterise them as inaccurate: at [24]. He was not prepared to speculate on the amount of the increase.
[23]	Fogarty J rejected Mr Moir’s estimate at trial that the development costs were $683,184. In a series of affidavits sworn in the Family Court between 13 December 1999 and 2 December 2002 Mr Moir’s estimates of this expenditure had escalated progressively from $490,070 to $574,378 and finally to $665,262. In this proceeding Mr Moir originally estimated the costs at $824,283. Finally at trial he assessed the figure of $683,184: at [28]. Mr Vickerman properly concedes that Mr Moir’s estimates did not and could not provide a reliable basis for a finding on actual development costs.
[24]	Mr Vickerman relies instead on evidence from an appropriately qualified quantity surveyor, Mr Richard Hiles-Smith. By undertaking a re-constructive exercise, Mr Hiles-Smith estimated the development costs would have been $842,000. He adopted a methodology based upon notional costs of materials and quantities used in the contract. He accepted that the files of invoices, quotations and receipts provided by Mr Moir could not confirm the cost.
[25]	Fogarty J placed little weight on Mr Hiles-Smith’s assessment. He accepted its validity according to ‘the assumptions upon which it was formed ... but that was not how these units were built’; they were constructed in a very different fashion ‘by a man extremely experienced in building low cost residential housing’: at [32]. The Judge gave examples of Mr Moir’s practices of using cash to pay for labour and services, of avoiding commercial cartage costs and hunting out bargains without putting a price on his time.
[26]	We agree that Mr Hiles-Smith’s opinion was necessarily of limited if any assistance. He undertook a retrospective review of the project, many years after its completion, based upon an orthodox methodology. As the Judge noted, Mr Moir’s modus operandi was the antithesis of orthodoxy. Mr Hiles-Smith was prepared to make some allowances for this factor. But in the end his analysis proceeded on such a different premise from the actual development that it did not provide meaningful assistance.
[27]	Furthermore, in cross-examination by Mr Hicks, Mr Hiles-Smith acknowledged that, first, his assessment was based on labour costs at a rate of $24 hourly whereas Mr Moir engaged significant student labour paid in cash at the rate of $10 hourly and, second, he worked on prices from 1994 whereas most of the work was carried out between 1990 and 1993 when construction costs were lower.
[28]	The question considered by Fogarty J was of an intensely factual nature: what were the actual costs of the development? The best evidence is found in the contemporaneous documents collated by Mr Moir and provided to his accountant in 1994 and 1995. As noted, Mrs Moir confirmed in answer to a question from Mr Vickerman that the development was substantially complete by July 1994 except for some decking and carports. Mr Moir’s conduct in providing the documents to his accountant and Mr Taylor’s subsequent requests to Mrs Moir are consistent with finality of chargeable expenditure by at least mid 1995.
[29]	Mr Vickerman submits the Judge should have fixed a figure somewhere in between Mr Moir’s final estimate of $683,184 and Mr Hiles-Smith’s figure of $842,000. However, in the absence of a proper factual foundation, the Judge would have been guessing or speculating. In our view he was entitled to adopt as the best evidence the figure in the accounts which was in effect Mr Moir’s own affirmation of chargeable development costs for equal division between the parties.
[30]	The inference to be drawn from Mr Moir’s expenditure of funds on miscellaneous building work for carports and decks after mid 1994 is that his services were given gratuitously and that he did not intend to charge the partnership for the cost of materials. We endorse the Judge’s conclusion that payments made by Mr Moir which were not reflected in the accounts either by way of advances to or capital expenditure on Ace’s behalf were intended to be to the advantage of either the trust or Mrs Moir: at [39]. They were in the nature of unconditional gifts to which Mr Moir attempted to attribute a different legal character following separation.
[31]	We endorse the Judge’s factual conclusions on the accounts and development costs which he summarised in this way: at [40]:

I am left with these conclusions. First, it is now essentially speculation as to the extent that the net costs of the four developments exceeded $498,966. Second, that the best evidence of the respective contributions of the plaintiff on the one hand and the first defendant trustees on the other is the 1998 accounts of the first defendants recording a contribution of $249,483 and the evidence of five payments by the plaintiff totalling the same sum, exactly. There would have been other expenditure and that would have been by Mr Moir. At the time he did not try to recover it from either the plaintiff or the first defendant. There must have been some good reasons at the time why he did not introduce the expenditure into the Ace Trust accounts by way of an advance. Had he done so, the trust would have been able to record a higher cost and thus get the benefits of higher annual depreciation expenditure as a deduction against rental income and thus paid less tax. But, had he done so, that would have immediately raised issues as to the relative contribution between the plaintiff and the trust, given that from the outset the partnership accounts show an equal partnership. Only since the collapse of the marriage has the second defendant seen the matter differently. He has then embarked on efforts to show that the expenditure was much higher and that the accounts are wrong. He has not been supported by the trustees of the children’s trust until the commencement of these proceedings in 2004. Counsel for the first defendant said that the trustees had no opportunity to do so until these proceedings.
(3) Settled Accounts

[32]

Third, Fogarty J considered at length an argument, which was at the forefront of Mr Hicks’ submissions at trial, that it was now a matter of settled account, based upon Mr Taylor’s documents, that the parties equally contributed to the cost of Burrows Avenue. The Judge surveyed the leading authorities and the evidence: at [41]-[51], finding that acquiescence and laches made it unjust to reopen the accounts and concluding in these terms: at [54]:

I am quite satisfied that it would be unjust to grant [Mr Colin Moir and Mr Matthews] the relief they seek, namely a readjustment of the shares to the proportion of 76/24. Both [Mrs Moir] and [Mr Colin Moir and Mr Matthews] agree that the share shown on the title was to be adjusted based on their respective contributions to the development of the property. In my judgment, however, the contributions were swiftly adjusted almost from the outset, as Mr Taylor was instructed to draw up the accounts on an equal sharing bass. They were finally adjusted and settled when Mr Taylor asked Mrs Moir to pay the final sum of $20,846.31. That payment completed the adjustment process agreed from the outset. By that date [Mr Moir] apparently was the co-owner in equity rather than [Mr Colin Moir and Mr Matthews]. That payment by Mrs Moir settled her capital account with her co-owner, be it the trust or her husband...

[33]

The Judge’s legal analysis and conclusion were the subject of a detailed challenge in Mr Vickerman’s written submissions. The finding of a settled account was made to accommodate a late amendment to Mrs Moir’s statement of claim which reoriented the focus of her case. However, given our satisfaction that by December 1995 Ace and Mrs Moir had each made their agreed equal contributions to the capital costs of the Burrows Avenue project, it is unnecessary to consider this issue further.

Result

[34]	Ace and Mr Moir have fallen well short of satisfying us that the evidence accepted by the Judge was inconsistent with facts incontrovertibly established or was patently improbable or that there are compelling grounds for reversing any of his findings. The appeal by the trustees of the Ace Investments Trust and Mr Moir against Fogarty J’s judgment dated 22 May 2006 is dismissed.
[35]	Mrs Moir is entitled to costs which we fix at $6,000 together with usual disbursements. We certify for two counsel.

Solicitors:
White Fox & Jones, Christchurch, for Appellants
Cunningham Taylor, Christchurch, for Respondent