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Court of Appeal of New Zealand |
Last Updated: 20 December 2019
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BETWEEN |
PETER JAMES TAYLOR Appellant |
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AND |
ASTERON LIFE LIMITED Respondent |
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Court: |
Kós P, Cooper and Collins JJ |
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A C Beck for Appellant C M Meechan QC and A Borchardt for Respondent |
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Judgment: (On the papers) |
20 December 2019 at 10 am |
JUDGMENT OF THE COURT
____________________________________________________________________
REASONS OF THE COURT
(Given by Cooper J)
[1] The appellant Mr Taylor has applied for a stay of execution of the judgment of the High Court delivered on 7 May 2019[1] and of the subsequent judgment on interest and costs.[2] The application is opposed by the respondent (Asteron). We have dealt with the application on the papers at the request of Asteron and in the absence of any opposition from the appellant.
[2] In the substantive decision, Cooke J dismissed claims by Mr Taylor seeking a declaration that he was entitled to continuing benefits under an income protection insurance policy, and an order for the payment of arrears said to be due under the policy.[3] In the same judgment, the High Court allowed Asteron’s counter‑claim, holding that Mr Taylor had breached his obligation of good faith by misrepresenting the amount of time he had spent working while receiving payments under the policy.[4] It held that he was liable to repay the sum of $371,286.70.[5]
[3] In the subsequent costs judgment, the Judge held that Asteron was, in addition, entitled to interest in the amount of $128,153.66 to the date of judgment (28 June 2019).[6] With costs and disbursements, the net judgment debt is now approximately $666,000. Mr Taylor filed an appeal against the High Court judgment on 5 June 2019 and subsequently appealed against the costs judgment. Both appeals are to be heard together.
[4] Mr Taylor made an application for an order staying execution of the High Court judgments. His application was opposed and it was declined by the trial Judge.[7] The present application is advanced on the same basis as in the High Court, but it is supported by a further affidavit sworn by Mr Taylor on 4 October 2019.
[5] In the meantime, Asteron has issued a bankruptcy notice in the High Court at Dunedin, and Mr Taylor has filed an application to set that aside.
Background
[6] For present purposes, it is sufficient to state the background briefly. Mr Taylor was in business on his own account as an insurance broker and took out an income protection insurance policy. In July 2010, he made a claim under the policy as a consequence of significant medical problems. Asteron accepted that Mr Taylor was covered under the policy and paid benefits under it until September 2014 when it suspended payments.
[7] Mr Taylor commenced proceedings in the High Court, seeking a declaration that he was entitled to continuing benefits under the policy and sought judgment for claimed arrears.[8] Asteron denied that Mr Taylor was entitled to any payment and sought restitution of payments previously made. That stance was adopted on the basis that in his claim form and subsequent progress reports Mr Taylor reported that he was not working, or only undertaking very limited work, when that was not true and he was working more extensively. It was said that he breached his duty of utmost good faith in making his claim. For his part, Mr Taylor defended the counter‑claim alleging a change of position.
High Court judgment
[8] The Judge accepted that Mr Taylor was suffering from a sickness as defined in the policy, which potentially qualified him for either a total disability benefit or a partial disability benefit as those terms were defined.[9]
[9] To qualify for a total disability benefit, the policy required Mr Taylor to have been unable to work in his usual occupation for more than 10 hours per week.[10] Mr Taylor claimed that he met that requirement, but the Judge found to the contrary.[11] He relied on correspondence and telephone records and oral evidence of three former employees of Mr Taylor. The Judge considered the evidence established that Mr Taylor had been working extensively in the business at the relevant times.[12] He specifically recorded his conclusion that Mr Taylor’s evidence, and his answers in cross‑examination, were generally unreliable and at times not credible.[13]
[10] The Judge then addressed whether Mr Taylor was nevertheless entitled to a partial disability benefit under the policy. On the basis of the evidence, the High Court found that all amounts due were fully set-off by an abatement (required by the policy) from the prescribed benefit.[14] That meant no amounts were due to Mr Taylor. As the Judge put it, to the extent that his illness had affected his ability to work, it had not adversely affected his income in a way covered by the policy.[15] Consequently, Mr Taylor’s claim had to be dismissed.
[11] Turning to the counter‑claim, the Judge held that Mr Taylor had incorrectly advised Asteron about the extent of work he had carried out in reports he provided in August, September, October and November 2010 and subsequently between January 2011 and April 2014.[16] He observed:
[81] Given the findings I have already made earlier in this judgment, it is clear that what Mr Taylor was saying in the forms is false. Whatever the impact his conditions had had upon him, he returned to work in 2010 working approximately four hours per day at home or in the office, and generally overseeing the overall business operation. He also engaged in other activities associated with other business ventures.
[82] I found Mr Taylor’s evidence suggesting otherwise to be unreliable, and at times untruthful. I am very conscious of the need to avoid making findings that a person has acted dishonestly, and that clear evidence must be provided before reaching that conclusion. But I do not see how Mr Taylor’s inaccurate statements about his work could have been the consequence of error. I find that they deliberately misrepresented the amount of work he was engaged in and amounted to a breach of Mr Taylor’s duties under the contract.
(Footnote omitted.)
[12] The Judge concluded that Mr Taylor had made deliberately false misstatements, which were plainly material.[17] Asteron was entitled to repayment of the sums that it had paid out under the policy, since Mr Taylor had never been entitled to receive the payments. He rejected the alteration of position defence advanced by Mr Taylor, who claimed that he received the insurance payments in good faith, that he had altered his position in reliance on the validity of the payments, and that it would be inequitable to grant relief as sought by Asteron.[18] The Judge took the view that, as Mr Taylor had induced Asteron to make the payments to him, it would not be equitable to require payment even if there had been a change of position.[19]
[13] But the Judge also dealt with the substance of the expenditure said to constitute Mr Taylor’s change of position. These were expenditure on the building of a holiday house, on the purchase of two expensive motor vehicles,[20] and on overseas holidays.[21] The Judge rejected Mr Taylor’s claims that any of this expenditure was attributable to the receipt of payments from Asteron.[22] In the result, Mr Taylor’s defence of change of position was rejected, the Judge reiterating that he had not acted in good faith.[23]
The application for stay — High Court
[14] The Judge dismissed Mr Taylor’s application for stay of execution, rejecting assertions of fact in Mr Taylor’s affidavits which were inconsistent with the Court’s factual findings. The Judge highlighted three matters in particular, observing that:[24]
(a) Mr Taylor’s broking business was undertaken in his own name, and it was his income from that business in the form of profits which was insured with Asteron. The business was not owned by a company, and neither was there any evidence (or even a suggestion) that the business was owned by a trust. This would have been inconsistent with Mr Taylor’s very claim that he was insuring his own income from the business.
(b) The accounts for that business signed off by Mr Taylor’s accountants (or at least the accurate ones, as a false set of accounts had earlier been discovered) show that Mr Taylor earned operating profits $149,025 in 2010, $163,830 in 2011, $155,407 in 2012, $150,561 in 2013, and $166,013 in 2014. These amounts are over and above the amounts that Mr Taylor received from Asteron under the insurance policy. The statements in his affidavits are a repetition of the false assertions he made to induce Asteron to pay out on the policy to him, and his evidence to the Court found to be unreliable and at times untrue.
(c) Mr Taylor has then received significant sale proceeds from the sale of the business. It would appear that the sale and purchase agreement is in the name of Mr Taylor’s company, rather than his personal name. To achieve that he must have transferred his business to that company in a way not explained. He would have been entitled to the value of the business so transferred to his company. The further assertion that the business is actually owned by a trust is inconsistent with the foundation of Mr Taylor’s claims in this litigation, and there is no evidential basis for it.
(Footnotes omitted.)
[15] The Judge then noted Mr Taylor’s acquisition of significant assets, including a reference to a Maserati which the Judge found had been purchased after Asteron ceased making its payments under the policy.[25]
[16] The Judge also noted what he described as a complete absence of detailed or accurate financial information or explanation as to the legal structures used that would allow the Court to accept that he had insufficient money to meet the judgments, or to provide security for a stay.[26] The Judge considered in the circumstances that the absence of security was fatal.[27] He also commented adversely on the appeal’s prospect of success.[28]
Application for stay — this Court
[17] In advancing the application in this Court, Mr Beck referred to various errors which he claimed the Judge made in the substantive judgment, and in dismissing the application for stay. He submitted that there will be substantial prejudice if the judgments are enforced before the appeal is determined by this Court because the appeal would be rendered nugatory. On the other hand, no substantial prejudice would flow to Asteron if the stay were granted. Mr Beck also argued that there are important questions of law involved not previously considered by this Court and the balance of convenience favours the granting of the stay. The absence of security ought not to be emphasised to the exclusion of other factors which the Court is required to take into account in a balancing exercise. That is particularly important in circumstances where the appeal would provide an opportunity for Mr Taylor to challenge findings of dishonesty which have been made against him when they were not pleaded or put to him when giving evidence.
[18] In his affidavit of 4 October, Mr Taylor deposed that after he became ill in 2009 he was no longer able to carry on the business activities he had previously engaged in and ceased drawing any salary from the business. He rejected “the suggestion” that he made false assertions regarding his income, claiming that all statements he made regarding his earnings were supported by financial statements in evidence in the High Court and which had been prepared by accountants with whom he had a long‑standing relationship. He asserted that his tax returns for the years 2010–2015 consistently show either a loss or a nil assessment. His living expenses from that time onwards were met by the insurance payments and out of his wife’s salary and savings. In March 2014, his broking business was sold to the company Peter J Taylor and Associates Ltd. That occurred well before any suggestion of a legal dispute with Asteron. In 2018 the company had sold the business to Crombie Lockwood.
[19] Under the heading “Assets”, Mr Taylor stated:
My wife and I currently live in a property at [address]. This property is owned by a trust. A copy of the certificate of title is attached marked “J”. The trust was established in May 1988, and the current trustees are myself, my wife, Keogh McCormack Trustees Ltd and Van Aart Sycamore Trustees Ltd.
My wife and I are able to occupy the property for our lifetimes. The house is not an asset that belongs to me or that can be used by me to provide security. All I am entitled to is a right of occupation. I do not own any other property.
The respondent has claimed that I own a Maserati, and this appears to have been accepted by Cooke J. This is not correct. The vehicle that is referred to was purchased by my wife in 2018, and is only driven by her. I have not driven for at least 5 years because of the medication I am required to take. This was confirmed by Mr Hodgson in 2011. His letter is attached marked “K”. An email confirming the purchase of the vehicle by my wife is attached marked “L”.
Although the broking business was sold in 2018, the purchase price was not paid to me, but to the trust who owned the business. The purchase price was an indicative figure only, and was subject to an earnout period of 2 years.
The income of the business has been severely impacted by the litigation tactics pursued by the respondent and a number of other circumstances, notably business migration, reputational damage, and the terms of the judgment given by the court.
Only a deposit was paid in respect of the purchase price, and that was paid to the trust. Attached marked “M” is an email from Crombie Lockwood that explains what has taken place subsequent to the conclusion of the agreement for sale of the business.
As the email shows, further amounts payable under the agreement have not been paid to date, but that is not the main point. The point is that I personally have not received any money from the sale. I am one of the trustees of the trust, but I have no control of the decisions made by the trustees.
The trust was established many years ago in accordance with professional advice and normal business practices. The business was sold to the trust on the same basis. I reject the assertion that I have made efforts to “alienate assets and allocate income” to my wife in a way that is somehow improper. My wife was paid for work she did for the business.
I have received some funds from the trust to enable me to meet some of the huge expenses I have faced over the past three years, but any advances from the trust are made by decision of the trustees in accordance with the duties resting on them — I have no right to receive any income that might accrue to the trust.
[20] Later in the affidavit, Mr Taylor said that he is not in a position to pay the judgment debt and he does not have assets to serve as security for the payment.
[21] For Asteron Ms Meechan QC invited the Court to be sceptical about Mr Taylor’s claim not to be in a position to provide security. She referred to evidence that Mr Taylor sold his brokerage business to Peter J Taylor and Associates Ltd after Asteron began to press him for information in relation to his income stream. She complained of a lack of direct information about the nature of the transaction by which Mr Taylor sold his brokerage business to the company and referred to a concession made by his accountant, Mr Rewcastle, at the High Court trial that the “restructuring” was in train in mid‑2015. This is to be contrasted with an unsigned statement from Mr Rewcastle, attached to Mr Taylor’s 4 October affidavit, asserting that a decision to sell the business to the company was made in 2013, but arrangements were not put in place until 31 March 2014.
[22] Ms Meechan further submitted that at some point after May 2014, it appears that Mr Taylor would have sold his business for over $750,000. The company that then acquired the business, of which Mr Taylor remained a director and shareholder, then sold it to Crombie Lockwood in 2018. An initial payment of approximately $1.5 million was made on 4 July 2018 to the solicitor of Peter J Taylor and Associates Ltd, a sum representing 60 per cent of the estimated purchase price. This is the money that Mr Taylor claimed in his affidavit was paid to the trust. Ms Meechan also pointed out that Mr Taylor and his wife are both trustees of the trust that owns the property where they live. Although Mr Taylor claimed in his affidavit that the Maserati was purchased by his wife and attached an email from a car dealer addressed to “Rhona” and confirming that “you purchased your 2016 Maserati Quattroporte GTS ... off us on the 2nd of February 2018”, Ms Meechan noted that in the High Court Mr Taylor gave evidence the car was purchased by the trust of which he and his wife are beneficiaries.
[23] Ms Meechan complained about a lack of evidence in relation to the financial position of the trusts and the absence of evidence to suggest that the trusts might not be persuaded to exercise their discretion in favour of payments to Mr Taylor to ease his present difficulties. She further referred to evidence given by Mr Hussey in the trial in relation to other business interests which Mr Taylor had, including vineyards in Central Otago, apartments in luxury resorts in Queenstown and forestry blocks. According to Mr Hussey in his evidence at the trial, Mr Taylor appeared to have transferred his shareholding in a number of these companies to his wife in March 2017, nearly three years after Asteron asked for details of income earned, and a year after Asteron counter-claimed for return of benefits paid.
Assessment
[24] The principles to be applied when determining an application for a stay of execution of a judgment are stated in this Court’s judgment in Keung v GBR Investment Ltd:[29]
In determining whether or not to grant a stay, the Court must weigh the factors “in the balance” between the successful litigant’s rights to the fruits of a judgment and “the need to preserve the position in case the appeal is successful”. Factors to be taken into account in this balancing exercise include:
(a) whether the appeal may be rendered nugatory by the lack of a stay;
(b) the bona fides of the applicant as to the prosecution of the appeal;
(c) whether the successful party will be injuriously affected by the stay;
(d) the effect on third parties;
(e) the novelty and importance of questions involved;
(f) the public interest in the proceeding; and
(g) the overall balance of convenience.
That list does not include the apparent strength of the appeal but that has been treated as an additional factor.
(Footnotes omitted.)
[25] The Court noted that generally a stay on payment of a judgment sum will only be granted on provision of security. The issue was whether there was anything in the present case in terms of the factors outlined above to warrant a departure from that general rule.[30] We apply the same approach here.
[26] The principal argument raised in support of the application is that unless a stay is granted, Asteron’s bankruptcy proceedings will likely have the effect that Mr Taylor will not be able to exercise his right of appeal and he will be deprived of an opportunity to restore his reputation which has been damaged as a result of the High Court’s adverse credibility findings. However, the adverse credibility findings were such that, as Ms Meechan submitted, a degree of scepticism must be applied to Mr Taylor’s assertion about his inability to pay the judgment sum or provide security. Given the High Court’s findings, it might have been expected that Mr Taylor would provide the primary evidence which establishes the assertions he makes about the nature of the trust, its ownership of the property in which he lives and the proceeds of sale of his business. The context includes evidence that the trustees have apparently been prepared to agree to discretionary spending on motor vehicles and holidays. So why would that be contemplated but expenditure for provision of security for an appeal not be countenanced? It is also not very convincing for Mr Taylor to stand by an assertion that the Maserati was purchased by his wife, when in the High Court he gave evidence that the car was owned by the trust.
[27] As noted, in declining the application for a stay, the High Court referred to a “complete absence of detailed or accurate financial information, or explanation as to the legal structures used, that would allow the Court to accept that Mr Taylor has no money to meet the judgment, or to provide as security for a stay”.[31] That observation was a further reason for Mr Taylor to give detailed information to this Court dealing with those matters. We are not satisfied that the information now provided significantly adds to the information that was before the High Court. It remains the position that there is no full explanation of the way Mr Taylor has structured his financial affairs.
[28] There does not appear to be evidence about the nature of the trusts of which Mr Taylor is a beneficiary, or the terms on which the trustees are able to approve discretionary payments to the beneficiaries. This Court has not been provided with the primary documents related to the sale of Mr Taylor’s brokerage business to the company of which he was a principal, nor the subsequent sale to Crombie Lockwood. In all the circumstances, we are not prepared to find that in the absence of a stay Mr Taylor will not be able to pursue the appeal.
[29] We are not in a position to question whether the appeal has been pursued in good faith, but we do consider that prejudice would possibly arise to Asteron if the judgment debt is not paid, or security is not provided, pending disposition of the appeal. Mr Beck essentially contended that Asteron as a large corporate is in a position to wait for payment. That might be so, but that is not an answer to the fact that as a successful litigant it is entitled to payment or the provision of appropriate security. Again, these considerations assume more importance in the context of the strong adverse credibility findings in the High Court.
[30] On that issue, we do not accept Mr Beck’s criticism of the High Court Judge for making adverse credibility findings when the findings were allegedly not put to Mr Taylor. The nature of the issues raised in the litigation required Mr Taylor to give credible evidence about, for example, his hours of work during the period for which he was making a claim under the policy. The Judge thought his evidence on that issue was contrary to contemporaneous documentary evidence, and also contrary to the evidence of his own employees. It is difficult to see why the Judge should be criticised for making an adverse finding about Mr Taylor’s credibility in those circumstances. It will be open of course for Mr Taylor to demonstrate that the Judge’s reasoning was wrong at the hearing of the appeal, but we observe that the appeal, on the face of it, faces considerable obstacles in terms of the factual findings made in the High Court. In other words, our assessment of the strength of the appeal does not persuade us that there should be a stay without the grant of security.
[31] Nor have we been persuaded that the importance of the legal issues that might be engaged by the appeal is such as to justify the grant of a stay. We accept that the appeal is likely to address the appropriate source of the legal rules for the cancellation of insurance contracts on the grounds of a breach of the duty of good faith and whether they are to be approached on the basis of the common law or governed by the Contract and Commercial Law Act 2017. We apprehend, however, that whichever approach is taken is not likely to be material to the outcome of the appeal.
[32] Overall, we are also satisfied that in the absence of security the overall balance of convenience favours refusal of the application.
Result
[33] The application for a stay of execution is declined.
[34] Costs are reserved.
[1] Taylor v Asteron Life Ltd [2019] NZHC 978 [High Court judgment].
[2] Taylor v Asteron Life Ltd [2019] NZHC 1489 [costs judgment].
[3] High Court judgment, above n 1, at [2] and [124].
[4] At [96].
[5] At [125].
[6] Costs judgment, above n 2, at [4].
[7] Taylor v Asteron Life Ltd [2019] NZHC 2459 [stay judgment].
[8] High Court judgment, above n 1, at [2].
[9] At [36].
[10] At [38].
[11] At [47].
[12] At [45]–[46].
[13] At [46].
[14] At [60].
[15] At [61].
[16] At [81].
[17] At [108].
[18] At [109].
[19] At [110].
[20] A new 2010 Mercedes Benz SL400 Coupe and a used 2012 Mercedes Benz C63 Coupe costing respectively $185,534.24 and $194,157.70.
[21] At [112].
[22] At [123].
[23] At [123].
[24] Stay judgment, above n 7, at [13].
[25] At [14]; and High Court judgment, above n 1, at [119].
[26] Stay judgment, above n 7, at [15].
[27] At [16].
[28] At [17].
[29] Keung v GBR Investment Ltd [2010] NZCA 396, [2012] NZAR 17 at [11].
[30] At [12].
[31] Stay judgment, above n 7, at [15].
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