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Court of Appeal of New Zealand |
Last Updated: 18 December 2014
JUDGMENT OF THE COURT
(a) The judgment entered in favour of the sixth respondents is reduced by $2,500.
(b) The judgment entered in favour of the fourth respondents is reduced by $47,387.
(c) The judgment entered in favour of the third respondents is reduced by $4,767.48.
E In all other respects the decision of the High Court is confirmed.
____________________________________________________________________
REASONS OF THE COURT
(Given by French J)
Table of Contents
Para No
Introduction [1]
Background [4]
The High Court [18]
Grounds of appeal [25]
Application to adduce email
evidence [28]
The existence
of a fiduciary relationship [35]
The reliability of Mr
Anderson’s evidence [39]
Source documents [41]
Mr Anderson’s
methodology [47]
Errors
alleged in the High Court [67]
Additional errors alleged in
this Court [74]
Hale claim [82]
McEntyre claim [84]
Williams claim [89]
Silke claim [92]
Conclusion on alleged
errors [99]
Unfair
process [100]
Did the Judge
reverse the onus of proof? [104]
Outcome [109]
Non-publication order [115]
Introduction
[1] Mr and Mrs Mount (the Mounts) are accused of failing to account for monies paid to them by each of the respondents. Associate Judge Matthews granted the respondents summary judgment against the Mounts and their company, the second appellant, for breach of fiduciary duty.[1]
[2] The Mounts now appeal that decision.
[3] The key issue raised by the appeal is whether the case was amenable to summary judgment, involving as it did an allegation of serious dishonesty supported solely by evidence from a forensic accountant. In particular:
- (a) In the absence of any evidence from the individual claimants, was the Judge entitled to find the Mounts owed a fiduciary duty?
- (b) Were there significant shortcomings in the evidence of the forensic accountant rendering the evidence unreliable?
- (c) Did the Judge reverse the onus of proof?
Background
[4] Between 1988 and 2010 the Mounts were in business as investment advisers, trading in partnership under the name Independent Financial Consultants. The second appellant, Independent Financial Consultants Ltd, is owned entirely by the Mounts, who are also the sole directors.
[5] Despite being ostensibly different legal entities, Independent Financial Consultants and Independent Financial Consultants Ltd in practice traded as one entity. For convenience, unless the context otherwise requires, references in this judgment to “the Mounts” should therefore be read as including Independent Financial Consultants Ltd.
[6] There are 20 respondents. Each is a former client of the Mounts and engaged the Mounts to provide financial advisory investment services, investment planning and funds management services. Each respondent also paid monies to the Mounts to invest for that respondent’s benefit.
[7] The respondents issued proceedings in the High Court, alleging that the Mounts had acted dishonestly. They claimed, among other things, that the Mounts had misrepresented the amounts invested on each respondent’s behalf by overstating the sums actually invested, that certain of the funds invested were missing, that the values of investments were overstated resulting in the claiming of fees to which the Mounts were not entitled and that in some cases the investments were sold without authorisation and the proceeds retained by the Mounts for their own personal benefit.
[8] The statement of claim pleads three causes of action:
- (a) breach of fiduciary duty;
- (b) breach of contract; and
- (c) breach of s 9 of the Fair Trading Act 1986.
[9] After filing their statement of claim, the respondents obtained leave to apply for summary judgment.[2]
[10] The application for summary judgment rested entirely on the affidavit evidence of an independent forensic accountant, Mr Anderson.
[11] Mr Anderson deposed that because the Mounts’ records were inaccurate and inconsistent, it was necessary for him to reconstruct the Mounts’ trust account ledger for each respondent back to July 1999, using what he described as source documents. The reconstructions are contained in schedules B1 to B20 to his main affidavit.[3] Mr Anderson explained that he could only go as far back as July 1999 because the main source documents relied upon (the records held by the relevant broker) only go back to that date.
[12] The assessment in the relevant B schedule for each respondent starts with an opening balance. In the case of some respondents, the opening balance is the initial investment they made with the Mounts. In other cases, where the respondent in question invested with the Mounts prior to July 1999 or where there are insufficient records of the initial investment, the opening balance has been established by working back through the reconstructed ledger and calculating the minimum operating balance that would have been required to complete reported transactions.
[13] After the opening balance, each ledger shows actual purchases of securities and monies credited and debited to the account, arriving at a figure which it is claimed has not in the case of any respondent ever been paid to that respondent.
[14] The B schedules are thus schedules of the claimed actual loss for each respondent.
[15] In addition to the B schedules, Mr Anderson also prepared a series of C schedules, detailing 489 instances where on his analysis the Mounts misled the respondents by providing false information about their respective investments.
[16] The C schedules formed the basis of the claim under the Fair Trading Act.
[17] The Mounts strongly opposed the application for summary judgment. They filed affidavit evidence denying any wrongdoing as well as expert evidence critiquing Mr Anderson’s methodology.
The High Court decision
[18] In his decision, Associate Judge Matthews found that the Mounts owed each of the respondents a fiduciary duty to:[4]
- (a) exercise the due care, skill and diligence expected of a competent and professional financial investment adviser/funds manager;
- (b) not use the respondents’ monies or monies worth for the benefit of the Mounts or for the benefit of third parties; and
- (c) act honestly in their dealings with the respondents and not misappropriate the respondents’ monies.
[19] The Judge also found the Mounts had breached those fiduciary duties and that as a consequence each of the respondents had suffered the losses itemised in the B schedules. The Judge said Mr Anderson’s evidence of the reconstructed trust accounts was “compelling” and that the Mounts had failed to lay a sufficient evidentiary foundation for a defence based on the proposition that the B schedules were wrong.[5]
[20] In addition to the schedule B losses, the Judge said the respondents were entitled to be fully refunded the portfolio monitoring review fees the Mounts had charged them, as well as the forensic accounting costs incurred in order to bring the proceeding.[6]
[21] Given the findings reached in relation to the cause of action based on fiduciary duty, the Judge said it was unnecessary for him to consider the claim in contract.[7]
[22] As regards the claim under the Fair Trading Act, Associate Judge Matthews said he was not satisfied on the evidence before him that the respondents’ losses had been caused by any misleading or deceptive conduct on the part of the Mounts, as distinct from the unauthorised taking of money.[8]
[23] Nor was the Judge prepared on a summary judgment application to award general, punitive or exemplary damages, which had been claimed in respect of each cause of action. In the Judge’s view, such awards would require an assessment of the individual claims, something that could only be done at trial with evidence from each individual claimant.[9]
[24] The upshot of the hearing in the High Court was therefore that the Judge:[10]
- (a) entered summary judgment on the fiduciary duty cause of action for each of the respondents against the Mounts in accordance with that respondent’s B schedule ledger;[11]
- (b) awarded each of the respondents interest calculated on a simple basis at Judicature Act 1908 rates;
- (c) dismissed the application for summary judgment on the contract and Fair Trading Act causes of action;
- (d) adjourned the respondents’ claim for general, exemplary and punitive damages on the fiduciary duty cause of action to trial; and
- (e) reserved costs.
Grounds of appeal
[25] Independent Financial Consultants Ltd is now defunct and did not appear at the hearing. The appeal in respect of Independent Financial Consultants Ltd is therefore dismissed for want of prosecution.
[26] Mr Mount, who appeared on behalf of himself and Mrs Mount, advanced a number of grounds of appeal. These can be conveniently summarised as follows:
- (a) In a summary judgment context, it was not possible for the Judge to find the existence of a fiduciary relationship.
- (b) The Judge was wrong to rely on the Anderson reconstruction evidence because:
- (i) Mr Anderson did not have all the necessary source documents;
- (ii) his methodology was flawed; and
- (iii) the evidence contained demonstrable errors.
- (c) The Mounts were unfairly disadvantaged as a result of the respondents changing their focus from the C schedules to the B schedules.
- (d) The Judge reversed the onus of proof by requiring the Mounts to prove they had a tenable defence, rather than requiring the respondents to prove they did not.
[27] Before addressing each ground of appeal, we first turn to an application made by Mr Mount to adduce further evidence.
Application to adduce email evidence
[28] Prior to the appeal hearing, Mr Mount filed an application seeking leave to adduce further evidence. The further evidence comprises copies of an email exchange between the Mounts’ expert witness (Ms Kelly), Mr Anderson and the respondents’ solicitors.
[29] Mr Mount contended that the Judge had refused to allow the production of the correspondence in the High Court. There is no record of any such ruling. Mr Mount said it was given orally on the day of the hearing. If that is correct, then this would appear to be an appeal point, rather than an application to adduce further evidence.
[30] The email exchange includes a request by Ms Kelly for the source data used by Mr Anderson in preparing the B schedule for one of the respondents and a refusal of that request.
[31] Although Mr Mount did not clearly articulate this, we assume the reason he wanted the email exchange included was because of a comment by the Judge that neither Ms Kelly nor Mr Mount had taken the opportunity to look at the source documents relied on by Mr Anderson.[12]
[32] However, the email exchange also includes the reasons why Ms Kelly’s request was refused, including that the source documents were already held by the Mounts’ solicitors.
[33] In our view, the email exchange is of no consequence and the application is accordingly dismissed.
[34] During the course of the hearing, including in reply, Mr Mount also handed up a number of documents that were not in the case on appeal. His purpose in doing so was to attempt to identify errors in Mr Anderson’s calculations in addition to errors that were established at the High Court hearing. With one exception, Mr Ballantyne was able to address the documents on their merits at the appeal hearing without having to take instructions. The approach we have taken to these documents is detailed later in the judgment.
The existence of a fiduciary relationship
[35] Mr Mount contended that a finding that parties are in a fiduciary relationship is a finding that can only properly be made following trial. In his submission, it required a detailed examination of all the facts that was not possible at the summary judgment stage, especially in a case where none of the claimants themselves gave evidence.
[36] We accept that on the facts of this case the scope of the fiduciary duty may differ from client to client and be informed by individual contractual arrangements. However in our view it is untenable to suggest that having received the respondents’ money and having been given the authority to deal with it on the respondents’ behalf, the Mounts did not owe at least a basic fiduciary duty to each respondent to account for that money, and to use it for the respondents’ benefit in accordance with the respondents’ instructions.
[37] Indeed, this was conceded by the Mounts’ counsel in the High Court. He is recorded as having accepted that there was a fiduciary duty to each respondent to hold and apply that respondent’s money for the respondent’s purposes and benefit.[13]
[38] In our view, this ground of appeal is without merit. The Judge was right to find that the Mounts owed a fiduciary duty in the terms described.
The reliability of Mr Anderson’s evidence
[39] As mentioned, the application for summary judgment rested entirely on Mr Anderson’s evidence.
[40] On appeal, Mr Mount submitted that the Judge was wrong to place the weight he did on Mr Anderson’s evidence and that correctly analysed the evidence could not have satisfied the Judge there was no arguable defence to the respondents’ claims. There were, according to Mr Mount, serious shortcomings in Mr Anderson’s evidence, namely the lack of some of the necessary source documents, flaws in the methodology and errors in the calculations.
Source documents
[41] It was a major plank of Mr Mount’s argument that the evidence was reconstruction opinion evidence and that some necessary source documents were not used.
[42] According to Mr Anderson, his reconstruction of the trust ledgers was based upon the following documents:
- (a) Records held by the respondents (which the respondents had received from the Mounts), including dividend and interest advice statements, correspondence, and portfolio monitoring review reports. These were incomplete and varied from respondent to respondent.
- (b) The respondents’ bank statements and Inland Revenue Department tax returns and related records where available.
- (c) Documents discovered by the Mounts, including documents obtained from the police, who conducted a criminal investigation into the Mounts’ activities.
- (d) A complete set of transaction ledger statements in respect of each respondent dating back to 1999 held by the only investment broker used by the Mounts, First NZ Capital Securities Ltd (First NZ Capital).
- (e) A complete set of securities transactions statements obtained from the Computershare Investor Services Ltd (Computershare) share registry in respect of each respondent, which cross-matched the statements obtained from the broker.
[43] When pressed by us to identify any other source documents that would have impacted on the accuracy of the reconstruction, Mr Mount struggled to do so. He was critical of Mr Anderson’s failure to check the United Kingdom and Australian share registries, but was unable to point to any specific examples where this would have impacted on the B schedule balances.[14] Mr Mount himself told us that all overseas acquisitions or sales including off-market transactions on behalf of clients would have been processed through the Mounts’ trust account and that the trust account records were made available to Mr Anderson. Moreover, as Mr Ballantyne pointed out, if off-market purchases were made they would still be present at the close of business and they are not.
[44] For completeness, we record that Mr Mount drew our attention to an entry in the reconstruction ledger for Mr and Mrs Williams that states “Axa per Merediths report” next to the figure $22,930.26. Mr Mount submitted this was an example of Mr Anderson relying on a third party report, Mr Meredith being an investment adviser who undertook a report for Mr and Mrs Williams.
[45] However, Mr Mount did not suggest that the statement or the figure in the ledger was wrong. In similar vein, he was critical of Mr Anderson for making an assumption in connection with the claim made by Mr and Mrs McEntyre, but then accepted that the assumption was correct. In those circumstances, we see no basis for appellate intervention.
[46] In our view, Mr Mount’s claims about the general lack of source documents are simply assertions and have no substance.
Mr Anderson’s methodology
[47] In opposing the application for summary judgment, the Mounts filed an affidavit sworn by a forensic accountant, Ms Kelly. Ms Kelly was critical of some aspects of the methodology used by Mr Anderson in his reconstruction exercise.
[48] Mr Mount submitted that Ms Kelly’s evidence raises serious questions about the reconstruction exercise and means the Judge cannot have been satisfied there was no tenable defence.
[49] Insofar as some of the concerns raised by Ms Kelly relate to the C schedules, it is not necessary for us to consider them. On appeal, our sole focus is on the B schedules. For completeness, we also record that it has not been necessary for us to consider an issue raised by Ms Kelly about Mr Anderson’s calculation of compound interest. The Judge declined to award the respondents compound interest and there has been no cross-appeal against that decision.
[50] We have reviewed Ms Kelly’s evidence relating to the B schedules and for the reasons given by the Judge (which we set out below) we consider any concerns about methodology were all satisfactorily answered.
[51] The first concern raised by Ms Kelly related to the alleged absence of any reference to source documents for individual transactions. However for the reasons already discussed, we are satisfied that the documents used by Mr Anderson were extensive and that there is no evidentiary foundation for the proposition that the documents he relied upon were unreliable or incomplete to any relevant extent. This also disposes of a related concern raised by Ms Kelly about the lack of documentary support for the calculation of potential income.
[52] Secondly, Ms Kelly was critical of the absence of any details regarding the source of the First NZ Capital documents, which she opined meant she was unable to place reliance on them.
[53] The Judge found that this criticism was met by an affidavit from a director and compliance officer at First NZ Capital, Mr Bodman, who verified the accuracy and completeness of the documents (the Bodman affidavit).[15]
[54] On appeal, Mr Mount submitted that the Judge was wrong to rely on the Bodman affidavit because it had been excluded from evidence. However, what was excluded was a further affidavit sworn by Mr Anderson, which the Judge considered had been filed too late. A copy of the Bodman affidavit was exhibited to the excluded affidavit but that does not mean the Bodman affidavit itself was excluded. The Bodman affidavit had in fact been filed earlier in the proceedings in connection with a freezing order application and was already on the Court file. In our view, the Judge was clearly entitled to have regard to it.
[55] A third criticism made by Ms Kelly was the absence of details of transactions not captured by Computershare, raising the possibility that some transactions may not have been identified. However neither Ms Kelly nor Mr Mount identified any further transactions beyond those listed by Mr Anderson. Like Associate Judge Matthews, we are satisfied that Mr Anderson’s evidence was comprehensive, thoroughly analysed, and carefully cross-checked.[16]
[56] A related criticism made by Ms Kelly concerned the absence of any explanation as to how all transactions were captured in the reconstruction. As a result, she suggested there was a possibility some transactions may have been omitted, although she was unable to identify any missing transactions. In our view, this criticism is unfounded. As the Judge pointed out, Mr Anderson’s evidence in fact contained a detailed explanation as to how each closing balance was calculated and verified.[17] In addition, the B schedule for each respondent shows the securities that remained at the end of the Mounts’ activities. The First NZ Capital statements show transfers both ways (to and from the Mounts), and the Computershare records of transfers were used as a cross-check.
[57] Ms Kelly also contended that Mr Anderson used incomplete records to calculate the opening balances and/or the units sold and purchased. As already mentioned, in the case of some of the respondents, Mr Anderson was required to reconstruct a minimum opening balance by reference to the cost of early transactions. It is most unlikely that the Mounts would have purchased securities for any respondent without having sufficient funds from that respondent to do so. If in fact the Mounts were holding more money than the cost of those early transactions, then more monies should have been there at the end of the Mounts’ activities, which in turn would mean the claim of that individual respondent against the Mounts would be greater. To reconstruct the opening balance in the way that Mr Anderson has done is conservative and may be to the Mounts’ advantage.
[58] We agree with the Judge that the opening balances were assessed as rigorously as possible on the records and sufficiently rigorously for the purposes of a summary judgment application.[18] We note too that Ms Kelly did not actually assert that any particular opening balance was wrong.
[59] Another concern raised by Ms Kelly related to the risk that income earned by the respondents that was paid to an account other than the Mounts’ trust account has been included in the reconstruction, resulting in the balance of the reconstructed ledger account being overstated.
[60] In an affidavit sworn in reply to Ms Kelly’s affidavit, Mr Anderson confirmed that in order to capture interest and dividend payments, he relied on a number of documents including dividend payment splits, interest splits, tax return summaries, reports to shareholders and the Mounts’ own reports to their clients. It is not disputed that payments were sometimes made to the respondents directly (rather than via the Mounts), but Mr Anderson said that where that had occurred he had not included it in the reconstructed trust ledger because it was never a trust ledger activity. Mr Anderson further confirmed that he had fully reconciled the unit holdings.
[61] Like Associate Judge Matthews, we are satisfied that Mr Anderson has answered the concern raised.[19]
[62] Another criticism made by Ms Kelly was that only the portfolio monitoring review charges had been included in the reconstructed ledger and as a result the fees were likely to be understated. However, if any other fees were charged and deducted from funds held in the trust account, the Mounts would hold the relevant records. Mr Anderson’s uncontested assertion was that there was no such evidence.
[63] Finally, in her evidence about methodology, Ms Kelly stated that if Mr Anderson were correct, a sum equivalent to that alleged to have been misappropriated should be able to be identified as moving out of the trust account and into the control of the Mounts. In her view, the absence of any such evidence significantly weakened Mr Anderson’s conclusions.
[64] However, this criticism overlooks that in his first affidavit Mr Anderson undertook an analysis of the Mounts’ personal records, which had been obtained through Court-ordered discovery. Mr Anderson’s analysis established that large advances well exceeding the Mounts’ declared income were made to a company called Bio Paints Ltd, of which Mr Mount is the sole director and shareholder. Between 2003 and 2011, Mr Mount advanced a total of $3,685,000 to Bio Paints. Mr Anderson’s uncontested evidence was that there was no other discovered documentation to suggest the Mounts had other assets or income capable of supporting the advances.
[65] In addition, Mr Anderson stated in his reply affidavit that he had undertaken a further analysis of withdrawals (excluding portfolio monitoring review fees) from the Mounts’ trust account between 1 November 2003 and 8 September 2010 to their personal accounts. The total amount withdrawn closely equates to the sum Mr Anderson has calculated is owed to the respondents as a result of the trust ledger reconstructions in the B schedules.
[66] We agree with Associate Judge Matthews that Ms Kelly’s concerns about methodology have all been dealt with adequately by Mr Anderson.
Errors alleged in the High Court
[67] In her evidence, Ms Kelly identified three alleged errors in Mr Anderson’s calculations.
[68] The first alleged error was based on the description of a fee in a portfolio monitoring review report. Ms Kelly suggested the description indicated that fees in addition to the portfolio monitoring review charges may have been deducted from funds held in the trust account. Mr Anderson did not include any additional fees in his reconstruction. However, there is no evidence of any relevant source document and, as already mentioned, Mr Anderson’s uncontested evidence was that there are no instances of a respondent having been invoiced for additional fees over and above the portfolio monitoring review charges.
[69] The second alleged error was an error of $94.72 in Mr Anderson’s exchange rate calculation. The error arose because Mr Anderson was unaware that several cheques in foreign currency were not banked until nine days after they were dated, leading to the difference in the exchange rate. Ms Kelly was in possession of documents the Mounts should have discovered but which for some reason were not made available to Mr Anderson. Mr Anderson acknowledged the error in his affidavit in reply and made an adjustment accordingly.
[70] The third alleged error was an omitted payment of $15,000 in the reconstructed ledger for Mr and Mrs Ashley. A cheque for $30,000 was drawn on the Mounts’ trust account, payable to the Ashleys’ daughter. This cheque was captured in the reconstructed ledger. However, Ms Kelly contended that several months later a second cheque for $15,000 was deposited by the Mounts into the daughter’s account, a payment that had not been included by Mr Anderson.
[71] In response, Mr Anderson deposed that this transaction was never reported to the Ashleys by the Mounts and he was unaware of any evidence showing the payment was made from the trust account. Nevertheless he was prepared to amend his reconstruction of their ledger and reduced the final balance by $15,000.
[72] In the High Court, it was argued that the possibility of this uncaptured transaction and the error in the conversion rate must for summary judgment purposes cast doubt on the accuracy of the B schedules generally. Associate Judge Matthews rejected that argument.[20] He held that in context both were minor matters. In his view, having regard to the overall evidence of the way in which the trust account reconstructions were undertaken, which included obtaining and examining source documentation from reliable audited sources as well as cross-checking between all sources, the two issues could not realistically be seen to cast an element of doubt on the overall accuracy of the B schedules.
[73] We agree.
Additional errors alleged in this Court
[74] On appeal, Mr Mount endeavoured to establish additional errors. He did so by handing up documents that were not part of the case on appeal and that he had not previously discussed with Mr Ballantyne. Furthermore, the issues Mr Mount was seeking to raise had not been raised in argument in the High Court. Mr Mount contended that all the documents he was handing up had been discovered, although that too is disputed by the respondents.
[75] Although taken by surprise, Mr Ballantyne was (with one exception) able to address the merits of the documents without needing to take instructions. In a few instances, he responsibly acknowledged that the documents did affect the quantification of the claim in question.
[76] The one exception was documentation handed up during Mr Mount’s reply relating to the respondent Ms Silke. Mr Ballantyne needed to take instructions and accordingly at the conclusion of the hearing we granted him leave to file a memorandum in response.
[77] It was our expectation that the memorandum would address the Silke documentation and state with reasons whether in the view of the respondents it impacted on the calculation.
[78] Instead Mr Ballantyne filed a memorandum submitting that all the documentation handed up by Mr Mount had been handed up too late and should be removed from the file.
[79] We invited Mr Ballantyne to reconsider his position. He did so and filed a further memorandum responding to the substance of the Silke documentation while still maintaining his objection.
[80] We accept that Mr Mount’s conduct in handing up the additional documentation and raising new issues was highly irregular. Such conduct will not usually be tolerated by this Court. However in this case, having regard to the nature of the documents (financial records) and the fact that on any view of it the entry of summary judgment by the Judge was a robust decision, we are not prepared to ignore the documents. We therefore grant leave for the financial records evidence to be adduced.
[81] We now turn to address the additional matters raised by Mr Mount in this Court as evidencing demonstrable errors in the reconstructed ledgers.
Hale claim
[82] Mr Mount handed up documentation showing that the Bank of New Zealand had charged an entry fee on an investment that had not been taken into account in the reconstructed ledger for the sixth respondents, Dr Hale and Dr Palmer.
[83] In light of the documentation, Mr Ballantyne conceded that their claim should be reduced by the amount of the entry fee, namely $2,500.
McEntyre claim
[84] The reconstructed trust ledger for the respondents Mr and Mrs McEntyre shows an entry for “Funds ex AXA investments” of $47,387.
[85] There is no dispute the asset was realised but there is no source document showing receipt of the funds into the trust account. Significantly, the trust account’s bank statements for the relevant period contain no reference to the funds, prompting Mr Mount to contend that they must have been paid directly to the McEntyres and therefore should not have been included in the claim.
[86] Mr Mount accepted this was the first time he had raised the issue, but submitted that was because the Judge only allowed him to address issues relating to the C schedules.
[87] For reasons discussed below, we do not accept that explanation for the belated raising of this matter. However on the face of it there is a discrepancy in the documentation that it is not possible for us to resolve in a summary judgment context. The McEntyres did not provide an affidavit.
[88] We have concluded that the just course of action is to reduce the amount of the judgment entered in favour of the McEntyres by $47,387. The potential error does not taint the rest of Mr Anderson’s analysis for the McEntyres.
Williams claim
[89] Mr Mount raised an issue concerning the payment of portfolio monitoring review charges.
[90] Mr Anderson prepared a schedule for each respondent (the D schedules) detailing portfolio monitoring review fees charged by the Mounts. The schedules note whether the fees were paid directly by the client or deducted from monies held in the client’s trust account. The relevant D schedule shows $4,767.48 as having been deducted from the trust account for Mr and Mrs Williams. However, the deduction has not been taken into account in their reconstructed trust ledger (the relevant B schedule).
[91] Mr Ballantyne conceded this was an error and that the amount of the Williams’ claim should therefore be reduced by $4,767.48.
Silke claim
[92] Mr Mount handed up copies of five invoices for portfolio monitoring review fees totalling $11,569.30 that the Mounts had charged Ms Silke.[21] These invoices appear not to have been captured in the reconstructed ledger. In addition, Mr Mount also provided documentation showing several withdrawals from Ms Silke’s trust account with the Mounts to her personal account. The withdrawals amount in total to $30,263.46. They too do not feature in the reconstructed ledger.
[93] The combined total of the invoices and the withdrawals exceeds the total of Ms Silke’s claim under the relevant B schedule.
[94] Mr Mount told us that these documents had been made available to Mr Anderson through the discovery process. However Mr Ballantyne later disputed that. Mr Ballantyne provided us with a copy of an affidavit of documents sworn by Mr Mount on 6 May 2011. It includes an assertion to the effect that documents relating to Ms Silke’s claim were no longer in the control of the Mounts but were with the police and not available for inspection.
[95] Since the hearing, the documents handed up by Mr Mount have been reviewed by the respondents in conjunction with Mr Anderson. The outcome is detailed in the second memorandum filed by Mr Ballantyne following the hearing.
[96] The memorandum states that if the material handed up were to be taken into account, it would increase the calculated opening balance for Ms Silke by $54,637.29 because of the additional transactions evidenced by the invoices. Accordingly, although there are additional debits as a result of the invoices and the withdrawals, the net effect is actually to increase Ms Silke’s claim, not reduce it.
[97] This was not disputed by Mr Mount in a reply memorandum.
[98] We have considered whether we should increase the amount of the Silke judgment in light of Mr Ballantyne’s memorandum. However, in the absence of a cross-appeal, and having regard to the fact that a significant proportion of the increase is comprised of interest, we decline to do so.
Conclusion on alleged errors
[99] The arithmetical errors identified by Mr Mount in this Court and the High Court are limited to only a few respondents and the amounts are relatively modest. In our view, the errors do not detract from the cogency of Mr Anderson’s evidence. Our confidence in the integrity and rigour of the process adopted by Mr Anderson was further reinforced by the post-hearing exchanges between the parties regarding the Silke claim. Those post-hearing exchanges also served to reinforce our view that Mr Mount’s criticisms are without substance.
Unfair process
[100] Mr Mount submitted that before the hearing in the High Court, the respondents’ focus had always been on the C schedules, not the B schedules. The Court had ordered his reply evidence to be limited to issues relating to the C schedules,[22] and he had prepared for the High Court hearing on the basis that it would be about those schedules. However, at the hearing, the respondents changed tack and the focus switched to the B schedules instead.
[101] In Mr Mount’s submission, he was unfairly prejudiced as a result of the change.
[102] However Mr Mount was unable to identify what more he would have done had he known the emphasis would be on the B schedules. We are satisfied that Mr Mount was given ample opportunity to address the issues raised by the B schedules. In the course of the proceedings he filed several affidavits. It was only his last affidavit that was limited by the Court to C schedule issues.
[103] This ground of appeal also has no merit.
Did the Judge reverse the onus of proof?
[104] Mr Mount submitted that Associate Judge Matthews reversed the onus of proof. In Mr Mount’s submission, the Judge required the Mounts to prove they had a tenable defence whereas it was for the respondents to prove they did not.
[105] However, that is an oversimplification of the correct legal position. The onus was on the respondents, but once the Judge had found that Mr Anderson’s evidence was sufficient to establish there was no tenable defence, an evidential onus passed to the Mounts.[23] If the Mounts then wished to defeat the application for summary judgment, they were required to put sufficient evidence before the Court so the Court could not be satisfied of the absence of a tenable defence.
[106] The Judge found the Mounts’ response wanting and was satisfied based on Mr Anderson’s evidence that they had no defence.
[107] We are satisfied that the Judge’s approach was in accordance with orthodox summary judgment principles.
[108] Ultimately, Mr Mount was reduced to arguing that because the allegations were allegations of dishonesty, that of itself precluded summary judgment. We accept that it is relatively unusual for summary judgment to be entered on a claim based on breach of fiduciary duty and that the Judge’s decision can fairly be described as robust. However, there is no absolute prohibition on summary judgment being entered in such cases if the evidence justifies it. We are satisfied that the evidence in this case did justify it.
Outcome
[109] The application for leave to adduce the email evidence is dismissed.
[110] The application for leave to adduce the financial records evidence is granted.
[111] The appeal in respect of Independent Financial Consultants Ltd is dismissed for want of prosecution.
[112] The appeal in respect of Mr and Mrs Mount is allowed to the following extent:
- (a) The judgment entered in favour of Dr Hale and Dr Palmer is reduced by $2,500.
- (b) The judgment entered in favour of Mr and Mrs McEntyre is reduced by $47,387.
- (c) The judgment entered in favour of Mr and Mrs Williams is reduced by $4,767.48.
[113] In all other respects the decision of the High Court is confirmed.
[114] Although Mr and Mrs Mount have enjoyed some measure of success on this appeal, it is very limited and arose out of arguments that were raised for the first time at the appeal hearing. We are therefore satisfied that the respondents are entitled to costs. We accordingly order that Mr and Mrs Mount pay the respondents costs for a standard appeal on a band A basis and usual disbursements.
Non-publication order
[115] There have been a number of decisions issued in the course of these proceedings, including a decision of this Court. At each stage, suppression orders have been made. That was because Mr Mount was facing related criminal charges in the District Court.
[116] At the appeal hearing before us, Mr Mount accepted that the continuation of a non-publication order could not be justified having regard to the fact that the then pending criminal trial was to be before a judge alone.
[117] After the appeal hearing, Mr Mount was convicted of all charges. That prompted a request from the respondents for the non-publication order made in the High Court to be lifted. We acceded to that request and issued a minute accordingly.[24] We now confirm that the non-publication order and an ancillary order prohibiting a search of the Court file without the approval of a judge are revoked.
Solicitors:
C & F Legal Ltd,
Nelson for Respondents
[1] Hannay v Mount [2013] NZHC 3497.
[2] Hannay v Mount [2013] NZHC 2168; aff’d [2013] NZHC 2677 [Review decision]. Leave was required because the application was not filed at the same time as the statement of claim: High Court Rules, r 12.4(2).
[3] Each B schedule relates to one of the 20 respondents.
[4] Hannay v Mount, above n 1, at [93] and [199(a)].
[5] At [195]–[196].
[6] At [217].
[7] At [200].
[8] At [85].
[9] At [86].
[10] At [220]–[225].
[11] The final awards made in fact differed from the original B schedules in relation to two of the respondents. The Mounts’ expert witness, Ms Kelly, identified an error in the relevant B schedule ledger reconstruction for the Ashleys and one in the reconstruction for the Gregorys. Mr Anderson amended those reconstructions accordingly and annexed the new versions as schedules I and J to his affidavit in reply. Associate Judge Matthews entered summary judgment for the Ashleys and the Gregorys in accordance with the amended reconstructions: at [199(b)]. The two errors identified by Ms Kelly are discussed below at [69]–[72].
[12] Hannay v Mount, above n 1, at [176].
[13] At [91].
[14] The one specific example Mr Mount gave us related to the claim of Mr and Mrs Penney but it was a C schedule issue.
[15] At [127]–[128].
[16] Hannay v Mount, above n 1, at [131].
[17] At [135].
[18] At [139].
[19] At [149].
[20] At [175].
[21] This figure differs from the total specified in Mr Ballantyne’s second post-hearing memorandum, calculated by Mr Anderson. It appears Mr Anderson has made an arithmetical error in the amount of $2,168.01.
[22] Review decision, above n 2, at [69]–[76].
[23] Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162 at [26].
[24] Mount v Hannay CA39/2014, 5 November 2014.
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URL: http://www.nzlii.org/nz/cases/NZCA/2014/600.html