Johnston v Schurr [2012] NZCA 363; [2012] NZFLR 753 (9 August 2012)

Last Updated: 16 August 2012

IN THE COURT OF APPEAL OF NEW ZEALAND

CA616/2010 [2012] NZCA 363

BETWEEN NEIL STUART JOHNSTON Appellant

AND CHRISTOPHER FREDERICK SCHURR First Respondent

AND DEEM & SHEARER Second Respondent

Hearing: 13 and 14 June 2012

Court: Arnold, Stevens and Miller JJ

Counsel: C R Carruthers QC and E J Hudson for Appellant B A Corkill QC and P J Mooney for First Respondent J M Morrison for Second Respondent

Judgment: 9 August 2012 at 2.30 pm

JUDGMENT OF THE COURT

A The application for leave to amend the statement of claim is dismissed.

B The appeal is dismissed.

100. The appellant must pay each respondent costs for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT
(Given by Miller J)

Table of Contents

Para No
Introduction [1]
The narrative [10]
The statutory scheme [43]
The claim [62]
The High Court judgment [73]
The claim against Mr Schurr
The private law action for damages for breach of statutory duty [79]
The appeal [83]
No cause of action available for breach of statutory duty [86]
No statutory duty to seek additional powers [90]
The proposed claim in negligence against Mr Schurr [99]
The claim against Deem & Shearer
The appeal [106]
Deem & Shearer not responsible for settling relationship property
post injury [107]
Decision [114]

Introduction

[1] On 6 January 1999 the appellant, Neil Johnston, suffered serious brain injuries in a motorcycle crash. He was negotiating a relationship property settlement with his estranged wife Christine Johnston at the time, and they had reached substantive agreement. His lawyers were drafting the necessary relationship property agreement. Mr Johnston’s injuries left him incapable of signing the agreement or making decisions about property.
[2] Some eight months later the Family Court appointed the first respondent, Christopher Schurr, manager of Mr Johnston’s property under the Protection of Personal and Property Rights Act 1988 (“the PPPR Act”). The appointment was made on an interim basis initially.
[3] The second respondents, a firm of solicitors, had acted for Mr Johnston in the relationship property negotiations, but when he could no longer give instructions they acted for his brother, Ian Johnston, who sought the order appointing Mr Schurr property manager. The Court appointed another lawyer, Shaun Gifford, to represent Mr Johnston (whom we will call Neil when necessary to distinguish him from other family members).
[4] Because Mr Schurr, an accountant, had acted for Mr and Mrs Johnston in their farming business, his Court-conferred powers expressly excluded the power to settle relationship property. No one suggested that it was necessary to settle swiftly; Mr Johnston’s family preferred to defer the property settlement, hoping he would recover, and Mrs Johnston acquiesced.
[5] As time passed it seemed that Mr Schurr’s appointment would become permanent, for medical advisors believed Mr Johnston was permanently disabled. But in 2002 he began a remarkable recovery and soon regained the capacity to manage his affairs. On his own application the Family Court discharged Mr Schurr as property manager on 19 December 2003.
[6] In 2004 Mr Johnston finally reached a settlement with his now former wife. It cost him substantially more than the 1998 settlement would have done, principally as a result of a dramatic increase in the value of their farm. For this he blames the respondents. He says that they ought to have ensured that relationship property was settled early in 2000.
[7] Mr Johnston sued for damages, against Mr Schurr for breach of statutory duty as his property manager under the PPPR Act, and against Deem & Shearer in negligence. He failed in the High Court, where Duffy J held that the PPPR Act admits no claim for breach of statutory duty and, further, that Deem & Shearer did not act for him, and owed him no duty of care, at the relevant times.[1]
[8] From that judgment Mr Johnston now appeals. He also seeks leave to amend the statement of claim to add a cause of action in negligence against Mr Schurr.
[9] It appears that no previous case has decided whether a property manager appointed under the PPPR Act may be held liable in damages for breach of duties imposed by the Act, or whether a lawyer retains a duty of care to a now-incapable client for whom a property manager has been appointed under the Act.

The narrative

[10] After a 21-year marriage, Neil and Christine Johnston separated in 1996. Until then they had worked their 128 ha family farm at Mangorei Rd, New Plymouth, in partnership.[2] Mrs Johnston moved to a house they owned at Karina Rd, New Plymouth, while the three children of the marriage remained at the farm with Mr Johnston. The partnership continued, but Mrs Johnston no longer had access to its bank account.
[11] In 1998 Mr Johnston decided it was time to settle relationship property. He sought the assistance of Mr Schurr, who had provided accounting services to the partnership for many years, and Geoffrey Shearer of Deem & Shearer, whom he had known since they went to school together. Thus prepared, he opened negotiations with his wife.
[12] On 23 July 1998 Mr Schurr wrote to Mr and Mrs Johnston suggesting that relationship property be settled by assigning to her assets or cash to a value of $398,000.[3] Mr Johnston would retain the farm, the government valuation of which ($1.1m) Mr Schurr had discounted to $800,000 for a sharemilking agreement that still had four years to run, resulting in total assets of $1.59m. Liabilities, being debts owed to the couple’s family trusts and Mr Johnston’s parents, were $766,000. (There was no non-family debt.) The net assets of $824,000 included life insurance policies, the surrender value of which was $80,000, and a Ford Telstar that Mrs Johnston would retain, the value of which seemed to be its historic cost, $28,000. Mr Schurr claimed that he was not taking sides, but he advised Mrs Johnston that the values were fair and the offer generous. He observed that she was being offered a little less than 50 per cent of the net assets, but legal proceedings were unlikely to achieve an equal split, in his opinion.
[13] Subsequent negotiations established that the life insurance policies carried a higher surrender value, resulting in total assets of $1.65m, and it was agreed that the net assets would be divided equally. Mrs Johnston’s solicitors, Govett Quilliam, also challenged Mr Schurr’s valuation of the farm. Mr Johnston responded by speaking to Mrs Johnston, insisting that he would not budge. She conceded. On 21 December her solicitors wrote to Deem & Shearer advising that Mrs Johnston believed “agreement regarding final settlement has now been reached” and inviting Deem & Shearer to forward a matrimonial property agreement.
[14] That agreement, which we will call the 1998 draft agreement, was sent to Govett Quilliam on 11 January 1999. It would result in Mrs Johnston receiving assets and cash to a value of $443,000.
[15] In the meantime, on 6 January, a driver had turned into the path of Mr Johnston’s motorcycle, inflicting grievous injuries upon him. Among other things he was left with serious cognitive defects in attention, concentration, executive functioning and memory, and he was very prone to emotional distress. The 1998 draft agreement could not be executed, for Mr Johnston was incapable of entering a contract and no one was authorised to do so on his behalf.
[16] It slowly became apparent that Mr Johnston would not recover easily, if at all, and was likely to require long-term care. After two weeks in hospital he was transferred to Phoenix House, a rehabilitation facility in Hamilton. There he remained for six months, returning to the farm in about September 1999. He could reside there only with 24-hour care from live-in caregivers. But by April 2000 he could retain awareness of a major issue, particularly one that held emotional significance for him, and possessed sufficient capacity to state that he wanted such issue resolved.
[17] Immediately after the crash Mr Johnston’s family arranged to keep the farm partnership running. His parents and his brothers, Ian and Roger, were involved. So were Mrs Johnston, who remained a partner in the farming partnership and now took responsibility for keeping its books of account, and Mr Schurr. Mrs Johnston assumed responsibility for the children, who now lived with her.
[18] Mr Johnston maintains that Mrs Johnston remained willing to settle on the 1998 terms during this period, but that is hotly disputed. She was initially willing to settle, but not necessarily on the same terms. On 22 March 1999 her solicitor wrote to her, recording his earlier “discomfort in that Mr Johnston was intimidating you to take a significantly lesser sum” than her entitlement in law. He invited her to advise whether her views about settlement had changed. She was also told that the draft 1998 agreement did not bind her. In evidence at trial she stated that her attitude had indeed changed: Mr Johnston had exhibited hostility and aggression in negotiations and had worn her down, but after his crash the pressure to settle disappeared and when she resumed doing the partnership books, which Mr Johnston had controlled since 1996, she found that he and the partnership held funds that he had not disclosed during negotiations.
[19] At a meeting on 9 July 1999, members of the Johnston family, Mrs Johnston, Mr Schurr and Mr Shearer agreed that it was best to defer the relationship property settlement and that a welfare guardian and a property manager should be appointed.
[20] On 30 July 1999 the necessary applications were made to the Family Court under the PPPR Act. Ian Johnston moved for orders appointing Roger Johnston as welfare guardian, Mr Schurr as property manager and Mr Shearer as counsel for Neil. Mr Shearer acted for Ian on the application. In his affidavit Ian explained that Christine and Neil were estranged and a relationship property agreement was in negotiation at the time of the crash, so a property manager was needed to protect Neil’s interests notwithstanding that Mrs Johnston was an experienced farm manager. In an accompanying memorandum Mr Shearer explained that he had been acting for Neil until the crash. He did not suggest that relationship property had to be resolved soon. Rather, he emphasised that it was in Neil’s long term interests that the farm be retained as it would aid in his rehabilitation, perhaps recognising the possibility that a settlement might necessitate sale. He noted that Mr Schurr might not be ideal as “permanent property manager” because the ultimate resolution of relationship property posed a conflict of interest, but submitted that Mr Schurr was ideally placed to act on an interim basis.
[21] Judge Fitzgerald responded with a minute asking that Mr Shearer file a memorandum detailing which powers Mr Schurr would have over what property, and directing that counsel be appointed for Neil. Mr Shearer filed a memorandum in response, suggesting that powers to settle relationship property be excluded, on the basis that a settlement, while important, could be put aside for the time being. He stated that Neil’s off-farm earnings had recently supported the farm’s economic viability and restructuring of finances was becoming critical to ensure an ongoing income.
[22] It appears that the Registrar also appointed Mr Shearer as counsel for Neil, for Mr Shearer filed a second memorandum, as counsel for the subject person. The Judge responded that he had intended to appoint counsel who was independent of Deem & Shearer. He directed that counsel be appointed at once, and ordered that counsel should advise within 72 hours whether the application was supported. He added that on the evidence before him he was not satisfied that the Court had jurisdiction to appoint a welfare guardian.
[23] Mr Gifford was promptly appointed as counsel for Neil. He supported Mr Schurr’s appointment, reasoning that it was temporary, and drew the Court’s attention to Mr Schurr’s conflict of interest if the appointment were made permanent. He did not suggest that the relationship property settlement required immediate attention.
[24] On 19 August 1999 the Court appointed Mr Schurr property manager for three months, conferring upon him all of the powers that had been sought. As noted, those powers did not extend to settling relationship property. We record that Mr Johnston alleges no breach of duty regarding these initial orders. He complains rather that they were not changed later.
[25] The application for appointment of a welfare guardian was deferred. It was later withdrawn, because Neil had shown some improvement on his return to the farm and had executed (on 20 August) a power of attorney in favour of Roger Johnston, which was thought to be sufficient.
[26] On 12 October 1999 a new solicitor for Mrs Johnston, Paul Carrington of Reeves Middleton Young, wrote to Mr Schurr outlining his understanding of the couple’s relationship property position. We will call this the Carrington letter. He updated some values in the draft 1998 agreement. Notably, he included the farm at its latest government valuation, $980,000, asserting that the valuation should not be discounted for the sharemilking agreement, and he valued the Telstar at its market value of $15,000. He calculated Mrs Johnston’s half share of the net assets at $531,000. Mr Carrington invited Mr Schurr to respond if he disagreed with the calculations but did not propose any course of action. Perhaps for that reason, Mr Schurr ignored the letter. Mr Johnston now relies upon the Carrington letter to argue that settlement could have been achieved at the figure nominated by Mr Carrington, if not at the 1998 level.
[27] On 10 December 1999 Ms Harrop of Deem & Shearer, for Ian Johnston, and Mr Gifford filed a joint memorandum seeking a six-month extension to Mr Schurr’s appointment. They had previously discussed having the order discharged and relying on a power of attorney in Mr Schurr’s favour, but it seems that medical advice led them to decide a manager was still needed. They attached to their memorandum a report confirming that Mr Johnston wholly lacked competence to manage his affairs. They again drew the Court’s attention to Mr Schurr’s conflict of interest and noted that he had not been given power to deal with relationship property issues. They envisaged that those issues would be “put to one side over the next six months as Neil works towards recovery and control of his affairs.” In response to a minute issued by the Court, counsel filed (on 24 January 2000) documents evidencing the consent of interested parties, including Ian, Roger, Mr and Mrs Johnston senior, and Christine Johnston.
[28] Mrs Johnston agreed to a six-month extension but wanted to resolve relationship property “in the not too distant future”, as Mr Shearer later put it. On 17 January 2000 she had left a message for Mr Shearer indicating that she would consent to Mr Schurr’s further appointment. However, she also expressed concern about delay in settling relationship property, and worried about money for the children, two of whom would be at university that year. She had been expecting an offer. When told why Mr Schurr had not been given power to settle, she observed that the same conflict would affect Mr Shearer.
[29] By minute of 8 February 2000 the Court appointed Mr Schurr manager for a term of six months, again excluding the power to settle relationship property. It continued Mr Gifford’s appointment during that term.
[30] During this period Mr Johnston appears to have expressed concern about relationship property and a desire to see it settled. However, he also feared that he would not be able to pay Mrs Johnston out, so would have to leave the farm. On 14 April 2000 Mr Johnston’s carers met Mr Shearer. Minutes record that Mr Shearer had “stalled” relationship property issues awaiting improvement in Mr Johnston’s condition; however, Mr Johnston was too brain-damaged to make informed decisions and was unlikely to improve much; further, he was thought to need an outcome about the farm. The minutes record that Mr Shearer agreed that he would proceed to settle Mr Johnston’s affairs, with the goal of letting him stay on the farm, although the possibility of getting a smaller landholding was raised.
[31] By 14 June 2000 Mrs Johnston had decided that she did not want to do anything about relationship property until the sharemilking agreement expired. A file note of that date records her objection to Mr Shearer acting for Mr Johnston. Mr Shearer promptly acknowledged that his firm should bow out and wrote to Mr Carrington on 7 July confirming that. In that letter he suggested that relationship property issues be deferred until January 2002.
[32] In the meantime Mr Schurr had asked AMP about surrendering some of Mr Schurr’s six life insurance policies. Four policies are in issue. One of them insured the life of Mr Johnston’s mother: it had a net surrender value as at July 2000 of $98,000 and a sum insured of $335,000. The others insured Mr Johnston’s life, and their aggregate net surrender value at that time was $48,000.
[33] A consultant psychiatrist, Dr Hosford, opined in a letter of 25 July that Mr Johnston still lacked the ability to manage his own property affairs or to grant a power of attorney. While he had a reasonable understanding of his property issues, he would make decisions to avoid stress, he did not understand the options available to him, and he would be very susceptible to influence. He was unlikely ever to recover full competence.
[34] On 3 August 2000 Mr Schurr sought an order extending his appointment until 31 January 2002. He advised that his existing powers were adequate although they excluded power to settle relationship property, explaining that he now understood Mrs Johnston wanted to delay settlement until the sharemilking contract expired on 31 May 2001. He attached correspondence between solicitors, including Mr Shearer’s letter of 7 July. Once again, family members and Mrs Johnston consented. The order was duly granted.
[35] In January 2001 Mr Schurr arranged to have the four insurance policies referred to above at [32] surrendered, including the policy on the life of Mrs Johnston senior. The amount received was $144,000.
[36] The Court further extended Mr Schurr’s appointment on 10 October 2002, this time for three years, which term would co-incide with the end of a new sharemilking agreement. Again, family members consented. Mr Schurr had sought the extension in January 2002 following a report from Dr Hosford indicating that Mr Johnston’s prognosis had not improved. Mr Schurr swore an affidavit in which he explained that Mrs Johnston did not seek settlement in the next three years and everyone benefited from delay. From Mr Johnston’s perspective delay allowed him to remain on the farm, which mattered greatly to him. Any suggestion that the farm might have to be sold upset him. Mr Schurr explained that the partnership could afford to buy a smallholding, which would give Mr Johnston an interest in life. The Court also directed that Mr Gifford prepare a report, which was filed on 30 May 2002. He reported that Mr Johnston wanted more information about the farm and how it was being operated, and that Mr Schurr had agreed to visit Mr Johnston each month with a written report. Mr Schurr later wrote to Mrs Johnston saying that Mr Gifford had “made matters really difficult”.
[37] Contrary to all expectations, Mr Johnston made a dramatic recovery with the aid of his present wife, Marilyn, and changes of medication. By November 2002 there were some indications that he was back to his old self. Over succeeding months tension developed as Mr Johnston sought to resume control over his affairs and Mr Schurr resisted, citing his own responsibilities to the Court. During this process Mr Johnston instructed Catherine Quin, solicitor.
[38] The relationship property settlement now resumed prominence. On 2 October 2003 Mr Schurr wrote to Mr Johnston recording a settlement offer from Mrs Johnston. She offered to settle for $1m, including the Karina Rd house.
[39] On 16 November 2003 Mr Johnston moved for an order discharging Mr Schurr, who accepted by that time that his appointment should end. The application attached unequivocal medical evidence that Mr Johnston had recovered fully.
[40] The Court’s involvement did not end with the discharge on 19 December 2003, however. Mr Schurr failed to file statements about his administration, as the PPPR Act requires. Mr Johnston complained, and the Court had to insist. Indeed, by letter of 7 April 2004 the registrar asked the Crown Solicitor at New Plymouth to take enforcement action. Mr Johnston also appears to have experienced difficulty recovering records from Mr Schurr.
[41] Mr and Mrs Johnston eventually entered a relationship property agreement in 2004. Although the assets had not changed much, their values had, as had the context: notably, Mr Johnston accused Mrs Johnston of exploiting his disability to take partnership income and assets to which she was not entitled. Mrs Johnston ultimately received the Karina Rd property, the Telstar, an AMP policy, all income she had received from the partnership since January 1999 (some $158,000) and $640,000, a total of some $1.2m.
[42] Values used in the 1998 draft agreement, the Carrington letter and the 2004 settlement can be compared as follows. (The 2004 values were mostly not specified in the agreement; they have been derived from a report compiled by John Dobson, an expert witness for the appellant):

	1998 draft agreement	Carrington letter	2004 settlement
Farm	800,000	980,000	2,355,000
AMP shares	193,200	159,891	35,000
Karina Rd	200,000	169,000	280,000
1997 Telstar	28,000	15,000	11,000
Other vehicles and plant	100,000	170,791 (book value)	4,000
Life insurance policies	140,000	140,000	13,000
Cash at bank	180,000	180,000	303,000
Livestock	10,000	10,000 (subject to valuation)	Nil
Less debt	765,478	763,370	784,000
Net assets before division	885,722	1,061,312	2,217,000

The statutory scheme

[43] The PPPR Act provides for the protection and promotion of the personal and property rights of persons who lack full ability to manage their own affairs. It establishes jurisdiction over such persons and allows the Family Court to make personal orders and appoint welfare guardians, and to make property orders and appoint property managers.
[44] Personal orders include arrangements for care and treatment, extending to institutional care.[4] The PPPR Act confers upon welfare guardians all such powers as are reasonably necessary to make and implement decisions for the subject person, with certain exceptions: notably, welfare guardians cannot decide whether the subject person will marry or divorce.[5] Property orders appoint a property manager and give that person specified powers over identified property.
[45] Personal orders are made under pt I, while property orders are made under pt III. Each part contains its own criteria for action, and the PPPR Act does not insist that a personal order accompany a property order. Where both are made, the personal order takes precedence: the exercise of a property manager’s rights and powers under pt III is subject to the terms of a personal order.[6] A welfare guardian may also be given power over property of modest value where it is not thought appropriate to make a property order.[7]
[46] Under pt III every person is deemed competent to manage his or her own property affairs until the contrary is proved. The Family Court receives jurisdiction over any property owned by a person who, in the Court’s opinion, lacks the competence, wholly or in part, to manage his or her own affairs concerning that property.[8] On application the Court may appoint one or more suitable persons to act as manager of the subject person’s property.[9] The Court’s primary objective when deploying this jurisdiction is to make the least restrictive intervention possible in the management of the subject person’s affairs, having regard to his or her degree of incompetence, and to enable or encourage the person to exercise and develop such competence as he or she possesses.[10]
[47] Those who may invoke the Court’s jurisdiction under pt III include a relative, various health professionals, a trustee corporation and a welfare guardian appointed under the Act.[11] They also include “any other person, with leave of the Court.”[12] Mr Johnston argues that Mr Schurr ought to have used this latter provision, after appointment, to seek additional powers or the appointment of a co-manager to settle relationship property.
[48] Trustee corporations, including the Public Trust, may apply on their own initiative or on request by the subject person.[13] For small estates, applications may be made to trustee corporations. In such cases the trustee corporation may accept the application if satisfied that the subject person is not wholly competent and it is in the best interests of that person that a manager acts. The trustee corporation then becomes manager of the specified property on filing the application in the Family Court.[14]
[49] Confronted with an application for appointment of a property manager, the Court must first decide whether the subject person lacks competence. If so, it must decide whether to appoint a manager and, if it does, in relation to what property.[15] It may appoint one or more suitable persons to act as manager of the subject person’s property or any specified part of it. It must be satisfied that the proposed appointee can perform the manager’s duties satisfactorily, having regard to the needs of the subject person and their relationship to one another, and will act in the best interests of the subject person. It must consider any likely conflict of interest between the proposed appointee and the subject person.[16]
[50] Property affected by an order does not vest in the manager, but the manager may possess and manage it[17] and the subject person cannot exercise personally any power that the Court has vested in the manager over such property.[18] The subject person retains the legal capacity to exercise powers not vested in the manager, and to manage property not subject to the order, although he or she may not in fact be able to do so through mental incapacity.[19]
[51] The legislation envisages that the Court will carefully circumscribe the subject person’s legal incapacity. If the Court appoints a manager “it shall determine which of the rights and powers specified in clause 1 of Schedule 1 to this Act the manager is to have in respect of that property, what other rights and powers (if any) the manager is to have in respect of that property, and what restrictions (if any) are to be imposed on the exercise of any such rights and powers”.[20] So the Court may exclude some of the first schedule powers and may also confer additional powers. The manager has “all such rights and powers as the Court may confer on the manager in the property order, subject to any restrictions specified by the Court in the order”.[21]
[52] The first schedule lists certain powers of managers and provides that a manager may exercise them, subject to the terms of the property order. They deal with taking possession of the property, spending money in respect of it, vesting money, carrying out and performing contracts, carrying on any trade or business of the subject person, and so on. Importantly for present purposes, cls 1(k) and (l) respectively provide that the manager may apply to the Court under the Property (Relationships) Act 1976 and enter into an agreement under pt 6 of that Act in the name and on behalf of the subject person.
[53] We pause to note that because these specific powers were excluded in this case, Mr Johnston throughout remained legally capable of entering a relationship property settlement or pursuing relationship property proceedings, for the necessary powers had not been granted to Mr Schurr. It is common ground, however, that he was in fact incapable of doing these things at any time between 6 January 1999 and October 2002, when medical reports were again prepared in connection with Mr Schurr’s reappointment. (For our purposes we need not determine just when Mr Johnston recovered competency in fact, since it was apparent by October 2002 that Mrs Johnston did not wish to settle until the new sharemilking agreement expired and we did not understand Mr Carruthers QC, who appeared in this Court for Mr Johnston, to suggest that she still remained willing to settle on the 1998 or Carrington letter terms.)
[54] Part IV deals with managers. The “first and paramount consideration” of a manager shall be to use the property to promote and protect the best interests of the subject person, while seeking at all times to encourage that person to develop and exercise such competence as he or she possesses:

36 Functions and duties of manager

(1) In managing any property under this Act, the first and paramount consideration of a manager shall be to use the property in the promotion and protection of the best interests of the person for whom the manager is acting, while seeking at all times to encourage that person to develop and exercise such competence as that person has to manage his or her own affairs in relation to his or her property.

(2) Without limiting the generality of subsection (1) of this section, so far as is practicable in the circumstances and to encourage the person for whom the manager is acting to develop and exercise such competence as that person has to manage his or her own affairs in relation to his or her property, the manager may allow that person to have control of and deal with any part of the property.

[55] The manager must, so far as practicable, consult with the subject person and such other persons as are, in the manager’s opinion, interested in the subject person’s welfare and competent to advise about the property.[22] The manager may also follow the subject person’s advice, and in such case the Act affords the manager some protection from liability. Section 43(2) provides:

43 Manager's duty to consult

...

(2) The manager may follow any advice given to the manager by the person for whom the manager is acting or by any other person referred to in subsection (1) of this section, and shall not be liable for anything done or omitted by the manager in following that advice, unless done or omitted in bad faith or without reasonable care.

...

[56] In each year the manager must prepare a statement in a prescribed form and file it in the Family Court.[23] That statement requires, generally speaking, a description of the subject property and its condition and value, together with a statement of liabilities and accounts detailing revenue and payments.[24] The registrar must draw delay in filing a manager’s statement to the attention of a judge, who may direct that the manager remedy the default. Where the manager is not a trustee corporation, the Court registrar must copy the statement to the Public Trust, which is to examine it and report upon its correctness and, if it is not correct, in what respects it is deficient.[25] The Public Trust enjoys access to the manager’s books and other documents for that purpose. It will be seen that the Public Trust has two roles under the Act: it may act as manager, and it reviews the work of Court-appointed property managers who are not trustee corporations.
[57] Section 49, to which we must return, limits the civil liability of a manager for acts or omissions in the exercise of powers conferred by or under the Act:

49 Liability of manager

(1) Subject to subsection (2) of this section, no action shall lie against a manager in respect of anything done or omitted to be done by the manager in the exercise of the powers conferred by or under this Act, unless it is shown that the manager acted in bad faith or without reasonable care.

(2) A manager shall be personally liable in respect of any contract or arrangement entered into with, or liability incurred to, any person if the manager does not, before entering into the contract or arrangement or incurring the liability, disclose to that person that the manager is acting in that capacity.

[58] Part VI deals with procedure. Any application for a personal or property order must be served on the subject person, any person with whom that person lives, and the proposed welfare guardian or property manager.[26] Applications for the appointment of welfare guardians and property managers may be joined and heard together.[27]
[59] The Court must appoint counsel to represent the subject person unless satisfied that he or she has his or her own counsel.[28] The duties of appointed counsel are set out in s 65(2):

65 Appointment of barrister or solicitor by Court or Registrar

...

(2) So far as may be practicable, it shall be the duty of the barrister or solicitor appointed under subsection (1) of this section to—

(a) contact the person in respect of whom the application is made, explain to that person the nature and purpose of the application, and ascertain and give effect to that person’s wishes in respect of the application; and

(b) evaluate the solutions for the problem for which an order is sought submitted by other parties to the proceedings, taking account of the need to find a solution that—

(i) makes the least restrictive intervention possible in the life of the person in respect of whom the application is made, having regard to the degree of incapacity or incompetence of that person; and

(ii) enables or encourages the person in respect of whom the application is made to develop and exercise such capacity or competence that the person may have to the greatest extent possible.

...

[60] The subject person may attend the hearing, be heard in person or through counsel and call witnesses.[29] The Court may commission medical or other reports, and it may also appoint counsel to assist it.[30]
[61] The Court must review personal and property orders from time to time. When making a property order it must specify a date, not later than three years from the date of the order, by which the manager must seek a review.[31] An earlier review may be held on application by the subject person or other interested person.[32] On any such application ss 63–65 and 74–81 apply so far as applicable and with any necessary modifications.[33] Accordingly, on an application for review counsel may again be appointed to represent the subject person. The subject person may also apply at any time for a review of particular decisions made by a property manager or welfare guardian.[34]

The claim

[62] The second amended statement of claim, which was filed during the trial, pleads two causes of action, one against each defendant.
[63] As against Mr Schurr, the claim pleads the following duties:

18.1 To use the property of the Plaintiff in the promotion and protection of the best interests of the Plaintiff (Section 36).

18.2 To encourage the Plaintiff to develop and exercise such competence as the Plaintiff had to manage his affairs in relation to his property (Section 36).

18.3 Insofar as practicable, to allow the Plaintiff to have control with and deal with any part of his property (Section 36).

18.4 In the management of the Plaintiff’s property under a duty as far as was practicable to consult with the Plaintiff (Section 43).

18.5 In the management of the Plaintiff’s property under a duty:

(a) To at all times to act in good faith.

(b) To act with reasonable care (Section 49).

It will be seen that the claim pleads that Mr Schurr had to use the property in Mr Johnston’s best interests, but it also pleads a duty to act honestly and with reasonable care in managing the property. The latter allegation evidently anticipates a defence founded on s 49.

[64] The claim also pleads that Mr Schurr assumed responsibility to have a co-manager appointed, as a result of his knowledge of Mr Johnston’s affairs and wishes, and that he was at all times in a relationship of proximity with Mr Johnston.
[65] With respect to breaches of duty, the claim pleads that:

[Mr Schurr] as the Plaintiff’s Property Manager breached the duties which he owed under the Act [and/or at common law] to the Plaintiff, the particulars of which are set out at paragraph 23 hereof.

The italicised words are the further amendment which Mr Carruthers sought to make in this Court. Their objective is that of introducing a parallel cause of action in negligence. We deal with the amendment at [99] below.

[66] Detailed particulars are given in paragraph 23. Those relating to relationship property are that Mr Schurr failed to take steps to appoint a co-manager under the PPPR Act, or a solicitor, to settle relationship property issues or take proceedings under the Property (Relationships) Act; failed to get Mr Johnston’s instructions about the 1998 relationship property negotiations; failed, with knowledge of Mrs Johnston’s position in those negotiations, to take steps to negotiate a settlement; failed after his appointment in August 1999 to take instructions from Mr Johnston about Mr Schurr’s discussions with Mrs Johnston affecting her attitude to settlement; and failed, with knowledge of Mr Johnston’s desire to retain the farm property, to take steps to retain the property before its value – and with it Mrs Johnston’s entitlement – rose “by reason of normal market forces”.
[67] The claim also alleges that Mr Schurr surrendered the four insurance policies without consulting Mr Johnston and without ascertaining why the policies were taken out, what Mr Johnston’s future insurance requirements were, whether the premiums could be funded or the investment value of the policies. Further, he consulted Mrs Johnston about the decision and had regard to her position, so placed himself in a conflict of interest.
[68] It is said that Mr Schurr ought to have known that it was in Mr Johnston’s best interests to get relationship property settled, and that the property was likely to grow in value as time went on.
[69] In argument Mr Carruthers confirmed that Mr Johnston does not allege a breach of duty before Mr Schurr’s appointment. Further, he accepts that it was reasonable to defer settling relationship property during Mr Schurr’s initial three-month appointment. In other words, the alleged breach of duty begins with the application that led to Mr Schurr’s reappointment on 8 February 2000.
[70] Mr Johnston frames his damages claim on the premise that he and Mrs Johnston would have settled using the 1998 draft agreement or Carrington letter values. Either way, he claims to have lost the opportunity to settle for less than he eventually agreed to pay in 2004. He claims an opportunity cost of $780,000 at December 1998, alternatively $603,000 as at October 1999. He also claims $144,500 for premature surrender of the life policies.
[71] As against Deem & Shearer, Mr Johnston claims that he retained the firm to act for him on relationship property issues, resulting in the 1998 draft agreement. He recognises that after the crash he could not execute a relationship property agreement, but he pleads that the firm assumed an obligation to ensure that a co-manager was appointed under the PPPR Act or that proceedings were brought under the Property (Relationships) Act. Such obligation is said to arise from the retainer, the firm acting on the application for appointment of a welfare guardian and property manager and its resulting knowledge that the Court had made orders excluding powers over relationship property, and the firm continuing post-crash to communicate with Mrs Johnston’s lawyers about relationship property. However, the claim does not specify whether the duty arises in contract (under the retainer) or in tort. It is said that Mr Johnston often conveyed to the firm his desire to settle relationship property, but nothing was done; on the contrary, the firm failed to alert the Family Court to the need for orders that would permit settlement.
[72] Damages claimed against Deem & Shearer comprise the same opportunity cost of $780,000 claimed against Mr Schurr and general damages of $50,000.

The High Court judgment

[73] Duffy J reviewed the background, and observed that the 2004 property division was in the same proportions as the 1998 draft agreement but the values of the assets had increased along with the farming partnership’s debts. After separation Mr Johnston assumed sole responsibility for the partnership’s liabilities, which had risen to $1.2m.[35] In the result, she found, “the division arrived at in 2004 was far more onerous for him than the division in the draft 1998 agreement.”[36] She accepted that an opportunity to achieve a better settlement had been lost:[37]

The failure to ensure that someone had responsibility for managing the relationship property issues is unfortunate. The appointment of Mr Schurr as a temporary property manager made sense as the accountancy role he had performed for Mr Johnston and the partnership for many years meant that he was very familiar with the property and business affairs of Mr Johnston. Mr Schurr had been unwilling to take responsibility for resolving the relationship property issues because he considered this would place him in a conflict of interest with Mrs Johnston, who was an equal partner in the partnership. This stance is understandable. But it had the unfortunate result that no one was made responsible for determining how the relationship property issues were to be resolved. Whilst the management regime that was first adopted as a temporary measure made sense, it was allowed to remain in place for the duration of the time Mr Johnston was subject to the PPPR Act. But since most of Mr Johnston’s property was relationship property, it also meant that his interests in this property remained intermingled with Mrs Johnston’s interests. Because no one assumed legal responsibility for resolving the relationship property issues, the opportunity to make other choices and so arrive at other outcomes was lost.

[74] In reaching that conclusion, the Judge found on the facts that as at 6 January 1999 execution of the draft 1998 agreement was no more than a formality. She further rejected the defendants’ claim that Mrs Johnston was unwilling to settle after the crash. It was true that Mr Johston’s condition and initially poor prognosis for recovery counted against buying Mrs Johnston out at that time, but “there is correspondence which suggests to me that in 1999, had someone pushed the issue of resolving the relationship property, Mrs Johnston would have entered into a settlement. The opportunity was there, but it was not taken.”[38] Whether such settlement would have been financially viable for Mr Johnston was “another issue”.[39]
[75] These factual findings favoured Mr Johnston, but the Judge could find neither defendant liable for his loss: the PPPR Act admits no claim for breach of a property manager’s duties under the Act; the retainer for Deem & Shearer did not extend to acting for Mr Johnston after he was made subject to the PPPR Act; and after the crash Deem & Shearer were not subject to a duty of care requiring them to advance a property settlement.
[76] In relation to Mr Schurr, the Judge observed that the claim fell into two parts: those allegations about non-resolution of relationship property, and those about Mr Schurr’s handling of other property (the insurance policies). So far as the first part was concerned, Mr Schurr had no power to resolve relationship property so could not be in breach of duty. Any claim must concern his failure to have the Court confer power to settle upon him or a co-manager. But nothing in the PPPR Act specifically allows a property manager to seek additional powers. Further, the PPPR Act’s purpose of keeping a check on property managers and its provisions for doing just that together suggested that the Court need not read a duty to seek such powers into the PPPR Act. On the rare occasions when protections fail, “there may be good reason for holding property managers accountable for allowing themselves to be appointed without having all the powers they need to effectively administer an affected person’s property”, but in such cases a claim in negligence should provide a sufficient remedy.[40] Negligence was not pleaded in this case.
[77] So far as the second part, the surrender of insurance policies, was concerned, the Judge concluded for similar reasons that no claim was possible. She added that the PPPR Act provides a remedy in s 37, but only the Public Trust may pursue it.
[78] Turning to Deem & Shearer, the Judge could identify no evidence that suggested the firm had assumed responsibility for settling relationship property post-crash. The retainer did not extend to completing the settlement without further instructions, and the crash brought the retainer to an end, since Mr Johnston could no longer give instructions. Continued contact between the firm and Mr Johnston did not create a duty. The firm did not act for him after his crash. Rather, they represented Ian Johnston when he moved for (and later renewed) orders under the PPPR Act. The Family Court had appointed Mr Gifford to represent Mr Johnston, advising him and giving effect to his wishes. It refused to appoint Mr Shearer in that capacity. The firm could do nothing to have a co-manager appointed. It would have been necessary to involve the Family Court.

The claim against Mr Schurr

The private law action for damages for breach of statutory duty

[79] New Zealand law recognises a private law action in which a plaintiff may recover damages for breach of statutory duty, but not every statutory duty may be enforced in that way. The authorities establish that statutory duties fall into four categories. Delivering the leading speech in X (Minors) v Bedfordshire County Council, Lord Browne Wilkinson held:[41]

The question is whether, if Parliament has imposed a statutory duty on an authority to carry out a particular function, a plaintiff who has suffered damage in consequence of the authority’s performance or non-performance of that function has a right of action in damages against the authority....

Private law claims for damages can be classified into four different categories, viz: (A) actions for breach of statutory duty simpliciter (i.e. irrespective of carelessness); (B) actions based solely on the careless performance of a statutory duty in the absence of any other common law right of action; (C) actions based on a common law duty of care arising either from the imposition of the statutory duty or from the performance of it; and (D) misfeasance in public office, i.e. the failure to exercise, or the exercise of, statutory powers either with the intention to injure the plaintiff or in the knowledge that the conduct is unlawful.

[80] Lord Browne-Wilkinson explained that breach of a statutory duty ordinarily confers no private law cause of action even if the breach was careless. But it may do so “if it can be shown, as a matter of construction of the statute, that the statutory duty was imposed for the protection of a limited class of the public and that Parliament intended to confer on members of that class a private right of action for breach of the duty”.[42] No general rule determines whether a statute creates such right of action,[43] but indicia include the presence or absence of any other enforcement mechanism, the purpose of the legislation, the size of the protected class and the nature of the duty (notably, is it limited and specific, or of a general administrative nature? Does it involve the exercise of administrative discretions?).[44]
[81] Category A claims depend neither on breach of any common law right nor on the defendant’s carelessness. Category B claims (involving the careless performance of a statutory duty) lead to a cause of action only if the legislation contemplates a cause of action for breach of duty (as in category A), or the defendant has breached a common law duty of care and so is liable in negligence (category C).[45] In the latter case, “the question whether there is such a common law duty and if so its ambit, must be profoundly influenced by the statutory framework...”.[46]
[82] X (Minors) v Bedfordshire County Council was followed in Attorney-General v Carter.[47] Tipping J, for this Court, held that the law recognises no cause of action for negligent breach of a statutory duty; if the statute creates a duty to take care, a breach causes a breach of statutory duty simpliciter, not a negligent breach of such duty. Such approach is:[48]

...consistent with, indeed the logical culmination of, a developing trend to place increasing emphasis on the terms of relevant legislation when, in a common law negligence case, that legislation is central to the relationship between the parties. The trend of authority has also regarded the legislative environment as informing the duty of care question rather than as providing an alternative basis upon which a claim for negligence might be maintained.

The appeal

[83] As noted at [65]–[66], the second amended statement of claim alleges that Mr Schurr breached the duties he owed under the PPPR Act in certain specified respects, notably by failing to take appropriate or any steps to secure a relationship property settlement by having a co-manager or solicitor appointed for that purpose under the PPPR Act and by failing to take instructions. It was common ground in the High Court and in this Court that the claim is not framed as a claim in negligence. Under the taxonomy adopted in X (Minors) v Bedfordshire County Council, it is an action for breach of statutory duty simpliciter (category A). We recognise that Mr Johnston relies upon lack of reasonable care to avoid the limitation on liability in s 49 of the PPPR Act, and in argument Mr Carruthers submitted that the PPPR Act creates a duty to act with reasonable care when managing the subject person’s property. But to the extent that the pleading alleges lack of care, it is founded on the careless performance of a statutory duty (category B); it does not invoke any other common law cause of action, such as negligence.
[84] That being so, the question is whether, as a matter of construction, the legislation was enacted to protect a limited class of persons and Parliament intended to confer on that class a private right of action for breach of the duty.[49]
[85] Mr Carruthers sought to derive an overriding duty from s 36, which provides that a manager’s first and paramount consideration is that of using the property to promote and protect the subject person’s interests. He submitted that in this case the duty required Mr Schurr to pursue an amendment to his powers or the appointment of a co-manager to ensure that relationship property was settled, and suggested that Mr Schurr could have employed s 26(i) to request such powers. Counsel also emphasised the duty to consult in s 43. He submitted that s 49 and s 43(2) would not be necessary unless the legislature intended that managers should be liable in cases not covered by the exemption.[50] While the Public Trust has enforcement powers under s 37, they find their context in the idea of security for the manager’s obligations and co-exist with a private right of action where the manager has acted carelessly or in bad faith. In such cases a private law remedy supports the statutory purpose.

No cause of action available for breach of statutory duty

[86] We accept that the PPPR Act was passed for the benefit of an ascertainable class, namely those who through mental disability cannot manage their affairs. But we are not persuaded that the Judge erred in her conclusion that the PPPR Act admits no action for breach of statutory duty, for several reasons.
[87] First, such action could not be brought for breach of statutory duty simpliciter, for s 49 precludes any action against the manager unless the act or omission was done without reasonable care or in bad faith. Put another way, the statute expressly excludes any category A claim. The legislature may have chosen to protect managers in that way because they may be unpaid volunteers or family members and theirs is a difficult role, requiring them to balance the subject person’s wishes and interests in light of his or her degree of competence, or because there are other remedies available to the Public Trust.
[88] Second, s 49 establishes that any action for breach of statutory duty must allege that something was done or omitted without reasonable care or in bad faith. To prove a want of reasonable care the plaintiff must establish the standard of care required of a manager in the circumstances. Such action would seem to add nothing to an action in negligence, in which the legislative context would inform the duty of care question.[51]
[89] Third, the statute contains its own enforcement mechanisms. Managers must file reports or risk criminal penalties, and the Public Trust may audit their reports and enforce managers’ duties. The Family Court has a supervisory role, and it will review appointments or decisions from time to time or on application. We accept Mr Carruthers’ submission that the Public Trust’s powers under s 37 supply an imperfect remedy, in that they attach only to managers who are not trustee corporations. But the remedy available against managers who are not trustee corporations is broad: s 37 allows the Public Trust to file civil proceedings “for any breach of duty”.

No statutory duty to seek additional powers

[90] Much of the argument before us addressed the question whether Mr Schurr breached his statutory duty by failing to ensure that a relationship property settlement was pursued. It is strictly unnecessary to deal with this point, since we have concluded that no cause of action lies for breach of statutory duty in any event, but in deference to counsels’ arguments we will explain why we are satisfied that Mr Schurr did not breach any statutory duty in this respect.
[91] To begin with, the PPPR Act does not confer upon a manager all of the subject person’s powers over his or her property.[52] Rather, the Family Court decides which powers the manager will have over what property. The statute does not permit, let alone oblige, the manager to exercise a power that the Court has decided not to confer, and a duty to do so cannot be read into s 36, which defines the manager’s objective when using the powers that the Court did confer. The section speaks of managing and using the property, but the manager may do (or omit to do) those things only to the extent that the Court has conferred power to do them. In this case, the Family Court expressly excluded the power to settle relationship property.
[92] Of course the Court excluded such power not because Mr Johnston was competent to exercise it himself, nor because it was irrelevant, but because Mr Schurr acknowledged a conflict of interest. In these circumstances, Mr Johnston says that the Act required Mr Schurr to seek such powers. Since he faced a conflict, that would mean having a co-manager appointed. We understood Mr Carruthers to abandon the notion that it would suffice to have a lawyer appointed to negotiate the settlement on Mr Schurr’s behalf: that could not relieve Mr Schurr of his conflict of interest since he would remain the decisionmaker.
[93] As noted at [47] above, Mr Carruthers argued that Mr Schurr ought to have sought leave under s 26(i) to apply for additional powers. However, s 26 identifies those who may invoke the Court’s jurisdiction in the first place. It deals with the initial appointment, about which there is no complaint in this case. The Court’s jurisdiction having been invoked and a manager appointed, the appropriate course if further powers are wanted is an application for review under s 87. The manager may apply at any time for such review, and does not need leave.
[94] Part VI, dealing with procedure, contemplates an inquiry into the extent of the manager’s powers. That part, including ss 63–65, applies to any review, as well as the original application.[53] The manager normally brings a review application because a property order must require the manager to seek such review by a specified date, being a date not less than three years after the order was made.[54] As noted above, the Court must appoint counsel for the subject person unless he or she has his or her own counsel, and appointed counsel must evaluate the solutions proposed by other parties, taking into account the need to find the least restrictive solution. The Court’s power to vary the property order necessarily extends to altering powers previously conferred on the manager.[55]
[95] Any duty of inquiry and recommendation is intimately connected with the application process, so it must apply principally to the person who asks the Family Court for orders appointing a property manager. The applicant need not be the manager or proposed manager. As in this case, the applicant may be a family member or welfare guardian who comes to the Court seeking assistance. The legislation does not clearly contemplate, and Mr Johnston does not suggest, that the applicant attracts any actionable duty to identify for the Court and seek all powers that might be necessary. On the contrary, the legislation contemplates that the Court will inquire into the matter as it did in this case, involving the subject person so far as appropriate, holding if it thinks fit a pre-hearing conference to seek agreement on the problem and its solution, and appointing if it thinks fit counsel to assist the Court.[56] Unlike a property manager or welfare guardian, an applicant gains no express exemption from liability under the PPPR Act, presumably because the legislature thought such exemption unnecessary.
[96] It follows that any actionable duty of inquiry and recommendation on a review must derive from the manager’s powers rather than his or her status as applicant on any review. But for the reasons given above, the manager possesses only such powers as the Family Court has chosen to confer. The Court did not confer any power of inquiry and recommendation on Mr Schurr.
[97] Further, such duty arising could not be confined to forming an independent view about what the Court needs to know. Having regard to the statutory object of interfering in the subject person’s autonomy as little as possible, such duty presumably must extend to consulting the subject person and communicating such views to the Court. Any such duty must largely replicate that of the subject person’s appointed counsel, to whom the statute assigns responsibility for contacting the subject person, explaining the application, and ascertaining and giving effect to that person’s wishes. If Mr Johnston wanted to settle relationship property, it was for his counsel to ascertain that and promote his wishes. We recognise that counsel’s appointment is not normally co-extensive with that of the manager. It may subsist only while an application is pending (although Mr Gifford’s appointment in this case was continued for six months after Mr Schurr’s reappointment in February 2000, coinciding with the period during which Mrs Johnston’s willingness to settle finally dissipated). But the subject person and other interested persons may trigger a review at any time.
[98] We conclude that the PPPR Act does not impose upon a property manager an actionable statutory duty to seek the additional power to settle relationship property. That being so, no action for breach of statutory duty is available in the circumstances of this case.

The proposed claim in negligence against Mr Schurr

[99] Mr Carruthers argued that the amendment to introduce a cause of action in negligence allows the Court to determine the real controversy, and causes no prejudice since Mr Johnston pursued the same particulars at trial and the evidence examined whether Mr Schurr exercised reasonable care.
[100] Mr Corkill QC, for Mr Schurr, resisted amendment, arguing that although the particulars are unchanged, the amendment introduces questions of proximity and policy and standard of care. There was no expert evidence about matters such as the usual role of the Public Trust in practice, and what a property manager could reasonably be expected to do in these unusual circumstances. No explanation has been given for the failure to plead negligence in the first place.
[101] For the purposes of this discussion, we accept that a property manager may be sued in negligence for breaches of duties imposed under the PPPR Act. So, for example, a duty of care may arise in relation to powers that the Family Court conferred on the manager, such as those that Mr Schurr used to surrender the insurance policies. That view is consistent with B v Attorney-General, which concerned a duty of care stemming from legislation which contained a provision identical to s 49 of the PPPR Act,[57] and Attorney-General v Prince and Gardner.[58]
[102] As noted at [66] above, the second amended statement of claim frames the alleged breaches of duty as failures to use Mr Johnston’s property to promote and protect his best interests. Mr Johnston called 14 witnesses, including a number of experts. Two lawyers were called, primarily on factual matters. An accountant, an actuary and a valuer quantified damages. There were medical experts. None of these people squarely addressed the standard of care required of a property manager, although some did comment upon Mr Schurr’s performance. The only defence evidence was given by Mr Schurr and the former Mrs Johnston. Generally, their evidence-in-chief explained why nothing was done to resolve relationship property and addressed the prospects for settlement after 6 January 1999.
[103] In the absence of any previous decisions, the standard of care required of a property manager is not settled. Nor is the standard of care self-evident: it must depend heavily upon the context, which includes the subject person’s degree of competence, the nature of the property under management, the Family Court’s reasons for appointing a given manager, the manager’s skills, the appointment or involvement of others to assist the manager, and the scope of the manager’s powers. The evidence addresses some of these matters, but not all, and it does not deal directly with the appropriate standard of care in this case. Further, the defence called no evidence about it, but plainly would have been wise to do so had negligence been pleaded. In these circumstances, we can neither find that the evidence is adequate nor resist Mr Corkill’s submission that Mr Schurr would likely suffer prejudice by the amendment.
[104] The application for leave to amend the second amended statement of claim is dismissed.
[105] Even if we had been minded to grant leave to amend, any claim in negligence would have faced formidable obstacles on the facts. The Court and Mr Gifford knew that relationship property remained to be settled, and that Mr Schurr could not attend to it. It is very debateable whether any duty to inquire and recommend could exist in these circumstances. With respect to insurances, the claim would almost certainly fail; Mr Schurr did evaluate the policies as investments, the plaintiff’s witness agreed that their merit as such depended on one’s view of risk, and at the time it was not thought that Mr Johnston would recover sufficiently to buy the farm. The claim is informed by hindsight.

The claim against Deem & Shearer

The appeal

[106] This aspect of the appeal is brought on two bases: that the contract of retainer that Deem & Shearer had before Mr Johnston’s crash did not end, since he retained legal capacity except to the extent that the PPPR Act removed it, and that the firm assumed responsibility for relationship property by continuing to act in relation to his affairs. The Judge’s findings to the contrary are said to be inconsistent with the evidence.

Deem & Shearer not responsible for settling relationship property post injury

[107] Deem & Shearer were retained in 1998 to negotiate the relationship property settlement, but it is not in dispute that as at the date of Mr Johnston’s crash they had done everything required of them. Immediately after his crash they could do nothing more, for Mr Johnston was incapable of making an informed decision to execute the relationship property agreement they had drafted or of giving instructions about it. That remained the case until October 2002 at the earliest. His property was placed in Mr Schurr’s hands. Settlement was excluded from Mr Schurr’s powers, but not because Mr Johnston remained capable of dealing with it. On the facts, it cannot be said that he retained competence to instruct lawyers about his property.
[108] In the circumstances the firm’s retainer could not continue, and we are satisfied that it did not. A bill rendered in September 1999 indicates that post-crash the firm had worked with family members about managing Mr Johnstons’s affairs and acted in the PPPR application. They also took instructions from Mr Schurr to recover the value of the motorcyle damaged in the crash. These matters, rather than continued instructions from Neil, explained Mr Shearer’s continuing involvement.
[109] Mr Shearer sought appointment as Neil’s counsel, but that was vetoed by the Family Court. Thereafter Mr Gifford represented Neil on each extension.
[110] We accept that from time to time Mr Johnston may have conveyed to Mr Shearer, among others, his desire to resolve relationship property, but it cannot be said that Mr Shearer was under a duty to treat that as an instruction, let alone act on it. On medical advice Mr Johnston was considered incapable of managing his affairs, and Mr Gifford was his appointed counsel at that time. Messrs Schurr and Shearer did draw the issue to Mr Gifford’s (and the Court’s) attention. To the extent that Mr Johnston could express a desire to settle, it was Mr Gifford’s function to verify that and ask the Court to give effect to his wishes. In this case it would have been necessary to have a co-manager appointed to negotiate the settlement. Mr Shearer could not have made such application. He acted for Ian Johnston, whose instructions, in which the wider family concurred, were that it was in Neil’s interests to defer the settlement. And while Neil may have wanted to settle, that process carried financial risks that he was incapable of evaluating. In particular, there was some risk that, having settled relationship property and without any off-farm income, he would be unable to stay on the farm in the long term.
[111] Counsel closely examined the question whether it was possible at all times for Mr Johnston to both pay his wife her share of relationship property and remain on the farm. Mr Schurr’s evidence was that without off-farm income the farm was not viable, for it experienced cash losses in each year apart from 1998 and had to service interest from reserves. Mr Carruthers pointed to non-farming income and accident compensation payments, which partially offset those losses, and further emphasised that Mr Schurr had begun to charge interest on the loan of $343,000 from the couple’s family trust, the Beechwood trust. It is not self-evidently correct that Mr Schurr was wrong to charge interest on that loan; after all, the couple had separated and the trust was intended to fund the childrens’ education. Two of the children had reached the age where payments for tertiary study would be required. However, we need not decide whether the farm would have been viable after settlement. The important point for present purposes is that even if Mr Johnston could retain the farm after paying his wife, Mr Shearer owed no duty to bring that about. His client at the time, Ian Johnston, representing the family, preferred to delay the settlement.
[112] Not until April 2000 can it be said that Mr Shearer assumed any responsibility to deal with relationship property. At the meeting of 14 April 2000 he agreed to take the matter in hand, but again he was not acting on instructions from Neil. He seems to have assumed that the Johnston family would go along with the caregivers’ wishes. In any event, Mrs Johnston almost immediately put a stop to Mr Shearer’s involvement by invoking his conflict of interest. At about the same time she made it clear that she did not want a settlement in the short term; she preferred to wait until the sharemilking contract was at an end. That ruled out a swift settlement.
[113] There is much to be said, in our opinion, for Mr Morrison’s submission that before his crash Mr Johnston had managed to negotiate an advantageous settlement through Mrs Johnston’s reluctant acquiescence, which swiftly dissipated. After 6 January 1999 she had no need to defer to him, and she was soon better informed about the partnership’s financial affairs. For some time matters were reasonably put on hold while Mr Johnston’s prospects of recovery were assessed. When it seemed apparent that he would not recover, she preferred to wait until the sharemilking contract was at an end. For all of these reasons, there was, post crash, no real possibility of a settlement on either the 1998 or the Carrington letter terms. Care must also be taken to avoid hindsight bias; in particular, it cannot be said that anyone ought to have anticipated that property values would rise to the levels reached in 2004, or that, having failed to improve in the first year, Mr Johnston would ultimately recover his independence.

Decision

[114] The application for leave to amend the statement of claim is dismissed, and the appeal is dismissed.
[115] The appellant must pay each respondent costs for a standard appeal on a band A basis and usual disbursements.

Solicitors:
Kit Clews, Hamilton for Appellant
Mooney & Webb, New Plymouth for First Respondent
Govett Quilliam, New Plymouth for Second Respondent

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[1] Johnston v Schurr [2011] NZFLR 114 (HC).

[2] Various figures are given in the record; we have taken this one from a statement dated 20 April 2004 and filed by Mr Schurr under s 45 of the Protection of the Personal Property Rights Act 1988 (PPPR Act).
[3] Values used in this judgment have been rounded to the nearest $1,000.

[4] Section 10.

[5] Section 18(1)(a).

[6] Section 42.

[7] Section 11.
[8] Section 25.

[9] Section 31.

[10] Section 28.

[11] Section 26.

[12] Section 26(i).

[13] Sections 32 and 26(e).

[14] Section 33.

[15] Section 29.

[16] Section 31.

[17] Section 35.

[18] Section 53.

[19] John Burrows, Jeremy Finn and Stephen Todd Law of Contract in New Zealand (4th ed, LexisNexis, Wellington, 2012) at [14.3.1].

[20] Section 29(3).

[21] Section 38(1).

[22] Section 43(1).

[23] Section 45.
[24] Protection of Personal and Property Rights Regulations 1988, regs 3 and 4.

[25] Section 46.
[26] Section 63.
[27] Section 64.
[28] Section 65.
[29] Sections 74 and 75.
[30] Section 76.

[31] Section 31(8).

[32] Section 87(2).

[33] Section 88.

[34] Section 89.

[35] The source of this figure is unclear.
[36] Johnston v Schurr, above n 1, at [14].

[37] At [15].
[38] At [16].

[39] Ibid.
[40] At [66].
[41] X (Minors) v Bedfordshire County Council [1995] 2 AC 633 (HL) at 730-731.

[42] At 731.

[43] Prof Burrows describes this as “one of the law’s less certain areas”. See Stephen Todd (ed) The Law of Torts in New Zealand (5th ed, Brookers, Wellington, 2009) at [8.2.05].
[44] X (Minors) v Bedfordshire County Council at 731.

[45] At 732.

[46] At 739.
[47] Attorney-General v Carter [2003] 2 NZLR 160 (CA).

[48] At [43].

[49] X (Minors) v Bedfordshire County Council, above n 41, at 731.

[50] Smaill v Buller District Council [1998] 1 NZLR 190 (HC).

[51] See [101] below.

[52] The PPPR Act does provide in s 39 that when appointed manager the Public Trust may exercise all of the powers in sch 1, in addition to any powers conferred by the Court.

[53] Section 88 so provides for review applications.

[54] Section 31(8). Others may apply for review under s 87.

[55] Section 87(6).

[56] Sections 65 to 73. In this respect the legislation is analogous to the adoption legislation in issue in Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA).

[57] B v Attorney-General [2004] 3 NZLR 145 (PC) at [29]. We observe that many statutes contain similar provisions: Law Commission Crown Liability and Judicial Immunity: A response to Baigent’s case and Harvey v Derrick (NZLC R37, 1997) at Appendix C.
[58] Attorney-General v Prince and Gardner, above n 56.