Ross v McKay [2014] NZHC 2694 (22 October 2014)

Last Updated: 17 November 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-1690 [2014] NZHC 2694

BETWEEN	JOHN PATRICK ROSS Plaintiff
AND	COLIN CHARLES McKAY, ROGER DAVID McCANN, DAVID JOHN CLARK of WILSON McKAY, sued as a firm Defendants

Hearing:	22 October 2014
Appearances:	J B Samuel for the Plaintiff R Scott for the Defendants E Sweet for Mrs Josephine Mary Gates, interested party
Judgment:	22 October 2014

_{ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL}

Solicitors:

Jennifer G Connell & Associates (J B Samuel), Auckland, for Plaintiff

McElroys (Rebecca Scott), Auckland, for Defendants

Kirkland Morrison O’Callahan (Emma Sweet) Auckland, for interested party

ROSS v WILSON McKAY, sued as a firm [2014] NZHC 2694 [22 October 2014]

[1] In December 2001 Mr Ross entered into a contracting-out agreement under Part 6 of the Property (Relationships) Act 1976 with Mrs Gates. They were in a relationship. I use that term neutrally. There are issues as to whether their relationship was a de facto relationship within s 2D of the Property (Relationships) Act when it began and the quality of that relationship in December 2001. Under their agreement Mr Ross and Mrs Gates agreed to keep their respective property separate. Their relationship came to an end in July 2011.

[2] Mr Ross now regrets entering into that agreement. He has applied in the Family Court to have the agreement declared void under s 21F of the Property (Relationships) Act, and to have it set aside on account of serious injustice under s

21J. He alleges that he did not receive adequate independent advice from Wilson McKay when he entered into the agreement. In this proceeding he sues Wilson McKay for negligence in the advice they gave him. His claim is for breach of contract and in tort.

[3] There are three main matters in this hearing:

(a) Mr Ross has applied for summary judgment as to liability;

(b) Wilson McKay has applied to strike out for abuse of process because

Mr Ross’ claim is statute-barred; and

(c) Mrs Gates has applied to take part in the proceeding as an intervener.

Background

[4] The relationship between Mr Ross and Mrs Gates began in 1996. On

1 August 2001, the Property (Relationships) Amendment Act 2001 came into force. That amendment to what was then called the Matrimonial Property Act 1976 extended the community property régime to de facto relationships. The rules for division of relationship property owned by de facto partners under the amendment Act correspond broadly to the rules for division of property owned by married couples. While the amendment Act came into force on 1 August 2001, the division

rules only came into effect on 1 February 2002. Part 6 of the principal Act, which deals with contracting-out agreements, was amended with effect from 1 August

2001. Part 6 is relevant because it applies to the agreement between Mr Ross and

Mrs Gates. I will describe the agreement of December 2001 later.

[5] At the same time as Mrs Gates and Mr Ross entered into the agreement, Mrs Gates was arranging other asset protection measures. Assets in her own name were to be transferred into a family trust on terms that there would be a debt owing back to her. Mr Samuel makes the point that her properties had not been transferred into the family trust at the date Mr Ross signed the agreement. Those transfers were made later, in January 2002.

[6] The relationship between Mr Ross and Mrs Gates continued until July 2011. Mr Ross began this proceeding on 8 July 2014. As already mentioned, he has applied to the Family Court to have the agreement declared void for non-compliance with s 21F and set aside under s 21J for serious injustice. His ground under s 21F is that he received inadequate independent advice. I was informed that his application in the Family Court is within time under s 24(1)(c) of the Property (Relationships) Act. Limitation does not seem to be an issue in that court, although it is for his claim against Wilson McKay in this court.

The agreement

[7] The agreement Mr Ross and Mrs Gates made on 21 December 2001 records that the parties had just commenced living in a de facto relationship; their objectives were that they wished to identify assets that are now, in the future, and always will be the separate property of each of them; and they contracted out of the Property (Relationships) Act and any amendments. The agreement contains terms typically found in property relationship agreements under which parties agree to keep their assets separate. Schedules to the agreement show assets they wished to keep separate. Mr Ross’ schedule lists a BNZ investment account holding approximately

$150,000. Mrs Gates’ assets listed in her schedule are more extensive. In particular, she lists a debt payable by the Gates Family Trust. That debt is said to comprise the values of various properties she owned and, taking into account a mortgage, gives a

net sum owing of $2,837,128.96. There are also a debt owed by Duncan Gates, her jewellery, personal belongings and household contents, a BMW motor car, a Bayliner runabout, an interest in a life insurance policy and personal bank accounts. All up, her assets seem to be in the order of $3m – some 20 times more than Mr Ross’ assets.

[8] Under the agreement they have agreed that those assets will remain separate property. The agreement makes no provision for owning property jointly. It does not provide for any of their assets to be relationship property. There is provision for what is to happen in the case of intermingling of separate property. The agreement is to apply in all circumstances including bankruptcy, taking of property in execution by creditors, marriage, separation, reconciliation and death. The agreement is binding on their administrators, executors and assigns.

[9] They have both signed the agreement. For each of them a lawyer has given a certificate under s 21F of the Property (Relationships) Act that he or she has given the client an explanation as to the effects and implications of the agreement.

[10] The case for Mr Ross is that Wilson McKay gave him inadequate advice. The matter Mr Samuel focused on most strongly was that Wilson McKay had not carried out sufficient enquiries into the assets of Mrs Gates. Mr Samuels’ argument is that whereas the agreement showed assets of Mrs Gates being debts owed by her family trust, the true situation was that at the time of the agreement Mrs Gates still owned those assets. In Mr Samuels’ submission, the failure by Wilson McKay to ascertain that information was important because it prevented Wilson McKay giving adequate advice to Mr Ross as to the effects and implications of the agreement.

[11] There is no allegation that before the division rules came into effect on

1 February 2002, Mr Ross had any claim against Mrs Gates of the sort recognised in cases such as Gillies v Keogh¹ and Lankow v Rose.² The legal position appears to be that until the new division rules came into force, Mr Ross did not have any rights or

_{a claim to an interest in any assets of Mrs Gates. Under the new division rules,}

¹ _{Gillies v Keogh [1989] NZCA 168; [1989] 2 NZLR 327 (CA).}

² Lankow v Rose [1995] 1 NZLR 277 (CA).

Mr Ross was unlikely to have a claim until the de facto relationship had run for three years.³ If the de facto relationship lasted for three years or longer, Mr Ross’ potential claim but for the agreement would be a claim to an interest in the family home. The family home would qualify as relationship property under s 8(1)(a) of the Property (Relationships) Act by reason of its use, even though only Mrs Gates held legal title to it. The notional family home was the property at Victoria Avenue,

Remuera. By transferring it into the family trust, Mrs Gates prevented that property becoming relationship property because it was no longer owned by either of the de facto partners. That becomes relevant to causation issues which I will consider later.

[12] Another of the assets transferred into the family trust is a property at Taupo. Mr Samuels contended that that might also be eligible as a family home, but it is my understanding that only one property can be the family home under s 8(1)(a) of the Property (Relationships) Act.⁴

[13] Under the agreement, Mr Ross lost the ability to claim an interest in the Victoria Avenue property as the family home. It is not clear that his claim would extend more widely than that. At this stage there is not enough evidence to show that any of the other assets transferred into the family trust would have been relationship property, as Mrs Gates owned them in her own right up until that stage.

Mrs Gates as an interested person

[14] Before I come to the summary judgment application and the strike-out application, I deal with the position of Mrs Gates. Today, Ms Sweet has appeared for her. Mrs Gates has applied to participate in the proceeding as an intervener. In discussion with counsel, it became clear that Mrs Gates’ purpose is to obtain information in this proceeding as to the inadequacy or otherwise of the advice given by Wilson McKay. That is relevant to the matters in issue in Mr Ross’ application to

_{have the agreement of 21 December 2001 declared void under s 21F. There is an}

³ Under s 2E, a de facto relationship of short duration is for less than three years’ living together, subject to the court ordering a longer period. Under s 14A, there are restrictions on division of relationship property for de facto relationships of short duration.

⁴ Robert Fisher (ed) Fisher on Matrimonial and Relationship Property (looseleaf ed, LexisNexis)

at [12.2]

overlap of issues in this proceeding and the Family Court proceeding: the adequacy of the advice that Mr Ross received is common to both.

[15] Ms Sweet is entitled to attend court today as of right because this is a summary judgment application which is being heard in open court. I gather that Mrs Gates has not until now had the opportunity to examine the court file. Ordinarily the court is reluctant to give access to the court file to non-parties during interlocutory stages of a proceeding. The basis for that is r 3.16(a) of the High Court Rules – that is, that the orderly and fair administration of justice requires that the parties be able to conduct the proceeding outside the glare of publicity up until the substantive hearing stage.

[16] In this case, however, I see advantages for the fair and orderly administration of justice by allowing Mrs Gates’ lawyers to have access to the file in this proceeding. There is an overlap of issues in this proceeding and in the Family Court. The adequacy of the advice Mr Ross received is of key importance in both proceedings. It is desirable to avoid any inconsistency of decision on a common question between the two courts and the two proceedings. The aim of avoiding inconsistency can be promoted if Mrs Gates is allowed to inspect the file in this proceeding so that she can obtain information as to the advice Mr Ross received and the position he is taking in this court. That would ensure a consistent approach taken by Mr Ross in both this court and the Family Court.

[17] I bear in mind, first, that Mr Ross has put the advice he received in issue in both proceedings, and therefore cannot claim privilege for the advice he received from Wilson McKay.⁵ Second, under s 50 of the Evidence Act 2006, the finding of one court on the adequacy of advice would not be binding in the other proceeding - there are different parties. Mr Samuel suggested that steps might be taken to have Wilson McKay made a party to the proceeding in the Family Court. That is a matter more for the Family Court to determine, but for my part I am somewhat surprised at the submission that lawyers for one side could be made parties to a proceeding

seeking to set aside an agreement made under Part 6 of the Property (Relationships)

_Act.

⁵ Evidence Act 2006, s 65(3)(a) and (b).

[18] Accordingly, I make orders that Mrs Gates may inspect the court file and take copies of documents in the court file including affidavits, pleadings and copies of decisions, on terms that she is to use those documents only for the purpose of the proceeding now pending in the Family Court but not for any other purpose. That restriction will last until this proceeding reaches the substantive hearing stage. It is not necessary to make any further order on her application.

Wilson McKay’s strike-out application

[19] Wilson McKay has applied to strike out, relying on an affirmative defence that the present proceeding is out of time. It alleges that the proceeding is therefore an abuse of process. In taking that approach, it is following the judgment of Tipping J in Murray v Morel & Co Limited.⁶ That gives useful guidance as to the approach a court should take when a defendant applies to strike out by relying on a limitation defence. The court is not striking out because of an absence of a cause of action. It is instead concerned with whether the defendant has shown that there is no basis for the proceeding to continue even if the plaintiff does have a sound cause of action.

[20] In Murray v Morel, Tipping J referred to his earlier decision in Matai Industries Ltd v Jensen⁷ and to the decision of the English Court of Appeal in Ronex Properties Ltd v John Laing Construction Ltd.⁸ In Murray, Tipping J said:⁹

I consider the proper approach, based essentially on Matai, is that in order to succeed in striking out a cause of action as statute-barred, the defendant must satisfy the court that the plaintiff’s cause of action is so clearly statute-barred that the plaintiff’s claim can properly be regarded as frivolous, vexatious or an abuse of process. If the defendant demonstrates that the plaintiff’s proceeding was commenced after the period allowed for the particular cause of action by the Limitation Act, the defendant will be entitled to an order striking out that cause of action unless the plaintiff shows that there is an arguable case for an extension or postponement which would bring the claim back within time.

In the end the judge must assess whether, in such a case,. the plaintiff has presented enough by way of pleadings and particulars (and evidence, if the plaintiff elects to produce evidence) to persuade the court that what might have looked like a claim which was clearly subject to a statute bar is not,

⁶ _{Murray v Morel & Co Ltd [2007] NZSC 27, [2007] 3 NZLR 721.}

⁷ _{Matai Industries Ltd v Jensen [1988] NZHC 205; [1989] 1 NZLR 525 (HC).}

⁸ _{Ronex Properties Ltd v John Laing Construction Ltd [1983] QB 398 (CA).}

⁹ At [33] and [34].

after all, to be viewed in that way, because of a fairly arguable claim for extension or postponement. If the plaintiff demonstrates that to be so, the court cannot say that the plaintiff’s claim is frivolous, vexatious or an abuse of process. The plaintiff must, however, produce something by way of pleadings, particulars and, if so advised, evidence, in order to give an air of reality to the contention that the plaintiff is entitled to an extension or postponement which will bring the claim back within time.

[21] Accordingly, applying the approach of Tipping J, I enquire:

(a) Has Wilson McKay satisfied me that Mr Ross’ causes of action are so clearly statute-barred that his claim can be properly regarded as an abuse of process?

(b) If I am so satisfied, has Mr Ross shown an arguable case that, notwithstanding that the case is out of time, there is an argument as to extension or postponement so as to bring the case back within time?

[22] So far as limitation issues are concerned, the key events are these:

(a) The agreement was made on 21 December 2001. That was when

Wilson McKay advised Mr Ross.

(b) The amendments applying the property division rules under the

Property (Relationships) Act to de facto couples came into force on

1 February 2002.

(c) The parties’ relationship ended in July 2011.

(d) Mr Ross began this proceeding in July 2014.

[23] At the time that Wilson McKay acted for Mr Ross, the relevant limitation statute was the Limitation Act 1950. That was repealed by the Limitation Act 2010. I will first consider the limitation question as the law stood immediately before the Limitation Act 2010 came into force. I will then consider the changes made to the

1950 Act by the 2010 Act.

[24] Under s 4(1)(a) of the Limitation Act 1950, the limitation period for actions founded on simple contract or on tort was six years from the date on which the cause of action accrued. The question here is when the cause of action accrued.

[25] It was common ground that for a claim for breach of contract, the cause of action arises at the date of breach. That was 21 December 2001. The time for a claim for breach of contract ran for six years from 21 December 2001. That period expired on 20 December 2007. Under the Limitation Act 1950, as it stood before the

2010 Act, Mr Ross’ claim for breach of contract is statute-barred.

[26] The cause of action for negligence is more complex. Mr Samuel submitted that the cause of action accrued in July 2011 when Mr Ross sought legal advice following his break-up with Mrs Gates. Wilson McKay submitted that the cause of action arose in December 2001 or, at the latest, on 1 February 2002 when the amendments to the division rules in the Property (Relationships) Act came into effect. The difference between the parties goes to whether the cause of action arose when the damage became reasonably discoverable, or whether it ran from an earlier time based on occurrence rather than knowledge. For his argument as to reasonable discoverability, Mr Samuel endeavoured to draw an analogy with cases of latent defects in buildings. The case law has developed the principle that for claims for latent defects in buildings, the cause of action arises once the defects become apparent. The basis for that approach is the decision of the Privy Council in

Invercargill City Council v Hamlin.¹⁰

[27] It is necessary, however, to have regard to the Supreme Court’s decision in Murray v Morel. That decision dealt with limitation not only on strike-out principles but also on the matter of reasonable discoverability. The Supreme Court rejected the argument that there was a general principle of reasonable discoverability under the Limitation Act 1950, under which time ran only once damage had been discovered. It acknowledged that there were exceptional cases. Tipping J looked closely at the decision of the Privy Council in Invercargill City Council v Hamlin. He noted that that decision was based on damage accruing in latent defects cases only once the

_{value of the building declined, and the value declining only on defects being}

¹⁰ Invercargill City Council v Hamlin [1994] 3 NZLR 513 (CA); [1996] 1 NZLR 513 (PC);

discovered. He reconciled that with the traditional approach that time runs from occurrence, not from knowledge. He also distinguished other cases as being exceptional such as S v G¹¹ and G D Searle & Co v Gunn.¹² Those are cases of bodily injury or of sexual abuse which raised special considerations.

[28] Murray v Morel reverted to the traditional position, that under the Limitation Act 1950 where accrual of a cause of action turns on damage, it is occurrence rather than knowledge that counts. Tipping J put it this way:¹³

Save when the Limitation Act itself makes knowledge or reasonable discoverability relevant, the plaintiff’s state of knowledge has no bearing on limitation issues. Accrual is an occurrence-based, not a knowledge-based, concept. The Limitation Act as a whole is structured around that fundamental starting point. The periods of time selected for various purposes must have been chosen on that understanding. The circumstances of postponement and extension have themselves been similarly framed.

[29] The question here is: “When did Mr Ross suffer his damage?” Not, “When did he realise that he had suffered loss?”

[30] The decision of the Supreme Court in Davys Burton v Thom gives guidance.¹⁴

That was a case involving an agreement under the Matrimonial Property Act. The plaintiff in that case sued his lawyer for negligence in acting on a pre-nuptial agreement. The agreement had been validly executed by the client in front of his solicitor. The wife had signed the agreement in America. The lawyer in America who witnessed her signature refused to give the certificate as to independent advice, apparently considering that she was not qualified to give the advice. The plaintiff relied on the validity of the agreement but found out too late that the wife was not bound by the agreement and she was able to make a claim against him notwithstanding the agreement. The Supreme Court held that the client’s cause of action accrued when the parties entered into the agreement, not when the Family

_{Court held that the agreement was invalid.}

¹¹ _{S v G [1995] 3 NZLR 681 (CA).}

¹² _{G D Searle & Co v Gunn [1996] 2 NZLR 129 (CA).}

¹³ _{Murray v Morel, above n 6, at [69].}

¹⁴ Davys Burton v Thom [2008] NZSC 65, [2009] 1 NZLR 437.

[31] This case is different because Mrs Gates contends that the agreement with Mr Ross was valid, not the other way round. Nevertheless I draw guidance from the Supreme Court’s decision. It is a matter of ascertaining whether Mr Ross suffered damage when he entered into the agreement. Before then, he had what Mr Samuel called an inchoate right to a share of relationship property. It was inchoate because the division rules under the Property (Relationships) Act had still to come into force. It was also inchoate in that the three years for the relationship needed to be satisfied. It was only a matter of time before the new division rules would come into force. Under his agreement, Mr Ross surrendered any right to make a claim for a share of relationship property for assets which were defined as separate property of Mrs Gates. That surrender of the right to make a claim was damage under the approach taken by the Supreme Court in Davys Burton v Thom. In that case the

Chief Justice said:¹⁵

The present case is therefore comparable to cases such as Iron Trade Mutual Insurance Co Ltd v J K Buckenham Ltd and Bell v Peter Browne & Co, D W Moore, and Knapp v Ecclesiastical Insurance Group plc. They are cases where the plaintiff, through the negligence of the defendant, did not obtain the rights he should have obtained or had imposed on him liabilities or obligations that should not have been imposed.

[32] This case is not so much liability or obligations, but a disability that was imposed upon Mr Ross. Further on, the Chief Justice said:¹⁶

In all these cases, immediate quantifiable damage arose even though further damage arising from the flawed transactions remained contingent.

The term “immediate quantifiable damage” was used elsewhere in the decision.

[33] Applying that approach, I find that Mr Ross suffered immediate quantifiable damage when he entered into the agreement by giving away the right to a share of those assets of Mrs Gates that would constitute relationship property but for the agreement. That was immediate in the sense that he had given it away irrevocably. It was quantifiable - for example, it may be possible to assess the value of the Victoria Avenue property and calculate a half share of it – and there may be loss of

_{opportunity to sue for that assessed value.}

¹⁵ _{At [20].}

¹⁶ At [21].

[34] It was noted in Davys Burton v Thom that any evidential and practical difficulties in calculating damages should not divert from the fact that, as a matter of principle, damage has still been suffered.¹⁷

[35] The decisions of the Supreme Court in Murray v Morel and Davys Burton v Thom are obviously binding. They direct that in this case I must find that any cause of action in negligence accrued when Mr Ross entered into the agreement and not later. Accordingly, as with the cause of action in contract, the cause of action became statute-barred in December 2007.

[36] Ms Scott also referred to the decision of the Court of Appeal in Davys Burton v Thom.¹⁸ The policy reasons and the reference to Murray v Morel in that decision support the approach I have taken.

[37] That deals with the matter under the Limitation Act 1950 as it stood before the changes made by the Limitation Act 2010. I now consider the effect of the Limitation Act 2010. Under s 59 of that Act, despite the repeal of the Limitation Act, any cause of action that existed before 1 January 2011 continued to be governed by the Limitation Act 1950. The 2010 Act also amended the 1950 Act. It inserted s

2A:¹⁹

(1) This section applies to an action, cause of action, or right of action—

(a) based on an act or omission before 1 January 2011; and

(b) to which this Act applied immediately before its repeal by section 57 of the Limitation Act 2010.

(2) Section 59 of the Limitation Act 2010 requires the action, cause of action, or right of action, despite the repeal of this Act and unless the parties agree otherwise, to be dealt with or continue to be dealt with under this Act as in force at the time of its repeal.

(3) Nothing in section 59 of the Limitation Act 2010 prevents any provision of this Act as in force at the time of its repeal from being applied, after 31 December 2010, and by analogy, to any claim for equitable relief—

_{(a) based on an act or omission before 1 January 2011; and}

¹⁷ _{At [16].}

¹⁸ _{Davys Burton v Thom [2007] NZCA 215, [2008] 1 NZLR 193 at [74] and [75].}

¹⁹ Inserted by Limitation Act 2010, s 61.

(b) to which this Act immediately before its repeal did not apply directly .

(4) Nothing in this Act as in force at the time of its repeal applies to an action, cause of action, or right of action based on an act or omission after

31 December 2010.

[38] That reinforced s 59 of the 2010 Act by making it clear that the limitation provisions of the 1950 Act would continue to apply to proceedings based on an act or omission before 1 January 2011.

[39] Section 62 of the 2010 Act introduced new longstop provisions in ss 23A and

23B of the 1950 Act:

Longstop period of limitation

23A Actions to which longstop period of limitation applies

(1) Section 23B applies to an action based on an act or omission before

1 January 2011 and to which this Act applied immediately before its repeal by section 57 of the Limitation Act 2010 so long as that action is neither—

(a) an action to which section 7(1) or 21(1)(a) or (b) applies; nor

(b) an action commenced before 1 January 2011.

(2) Sections 23B to 23D also apply, in accordance with section 29, to arbitrations.

23B Longstop period of limitation

(1) No action to which this section applies may be brought after the last to end of the following periods:

(a) 5 years ending on the close of 31 December 2015:

(b) 15 years after the date of the act or omission on which the action is based.

(2) That period of limitation applies to the action in addition to every other period of limitation that applies to the action.

(3) This section is, in accordance with section 3, subject to Part 2, which provides for the extension of that period of limitation in the case of disability, acknowledgment, part payment, fraud, and mistake.

[40] Before I consider those provisions, I come back to s 57 of the 2010 Act, the repeal provision:

The Limitation Act 1950 (1950 No 65) is repealed—

(a) immediately after it is amended by sections 61 and 62; and

(b) subject to the saving in section 59.

The effect of that is that the Limitation Act 1950 continues to apply to causes of action based on acts or omissions before 1 January 2011. But in applying the 1950

Act, the amendments made by ss 61 and 62 of the 2010 Act also apply. In short, the longstop provisions I am about to refer to apply to acts or omissions before 1 January

2011. The purpose of these longstop provisions is to introduce an additional limitation period that did not exist before. It addresses the fact that in many cases there may be a significant lapse in time between acts or omissions which might give rise to liability and the occurrence of damage. Land subsidence claims are a typical example.²⁰ In enacting these longstop provisions, Parliament was concerned to set in place a defined limitation period for those cases where damage might occur many years after the acts or omissions giving rise to a liability. It fixed those periods as being the last to end of five years up to 31 December 2015, or 15 years after the date

of the act or omission on which the claim is based.

[41] Section 23B(2) is pivotal. That makes it clear that these longstop provisions are in addition to every other period of limitation that applies to the claim. That means that if a cause of action has already expired, these longstop provisions are irrelevant. Section 23B does not allow causes of action that have already expired to be revived. As Ms Scott submitted, that would cut against the principle of avoiding retrospectivity. Section 23B establishes additional limitation periods for causes of action that have still to accrue. Accordingly, the changes made by the Limitation Act

2010 do not alter the fact that Mr Ross’ cause of action had already expired before

the Limitation Act 2010 came into force.

[42] Overall I am satisfied that Mr Ross’ claim is statute-barred. Wilson McKay has satisfied me that there is a clear case that the limitation period applies. Mr Ross has not been able to satisfy me that he has any reasonable argument for an extension or postponement of the limitation period. That means that I must make an order

_{striking out the statement of claim as an abuse of process. I now strike it out.}

²⁰ See for example Attorney-General v Whangarei City Council [1987] NZCA 102; [1987] 2 NZLR 150 (CA).

Summary judgment application

[43] Because I have struck out the claim as being statute-barred, what I am about to say on the summary judgment application is obiter, but I offer some comments. Mr Ross has applied for summary judgment on liability only. He has tried to split the case up so that he can obtain an immediate finding that Wilson McKay was in breach of duty when it advised him, and he seeks the determination of other issues later. He puts all other issues in the quantum box. He has in mind, I gather, that if he can obtain a finding on a summary judgment hearing that Wilson McKay was in breach of duty, he could use that in the Family Court. It would not be binding on the Family Court because Mrs Gates is not a party to this proceeding. Under s 50 of the Evidence Act, that would mean that Mrs Gates could resist any such findings of this court being applied in the Family Court (to the extent that the Family Court will apply the Evidence Act under its own evidence rules).

[44] There are difficulties with this case as a summary judgment application. The first is that the court is being asked to make findings of liability in a case for professional negligence. The next is the difficulty in splitting the case up in the way that Mr Ross proposes. Finally, there are the difficulties that the court faces in trying to make clear determinations where there is a contest between the parties as to facts.

[45] Plaintiffs’ applications for summary judgment in negligence cases are rare. Successful claims are even rarer. One case is Economy Services Ltd v Smith & Hughes.²¹ McGechan J’s judgment contains helpful guidance for claims of

professional negligence in summary judgment cases:²²

Given the usual nature of negligence cases, and a fortiori professional negligence cases, in reality the required degree of satisfaction as to absence of defence is not easily achievable. Frequently, there will be differences over matters of primary fact with decisions required on credibility. Any motor vehicle collision case furnishes an example. Frequently there will be disputed factual questions relevant to foreseeability, standard of care, and remoteness. Often factual questions bearing on contributory negligence will arise. In the particular professional negligence area, particularly if matters

actually reach the litigation stage, there may well be a sharp conflict as to both the events which occurred and the professional standards involved.

[46] This case typifies the difficulties that arise in trying to decide a summary judgment application in a professional negligence claim. There are differences between the parties as to the content of the advice. Mr Ross contends that he was not warned of the need to make further enquiry as to the assets owned by Mrs Gates. On the other hand, the lawyer who gave the advice contends that she did warn him that he should make further enquiry.

[47] Mr Ross presents himself now as a person who would not have entered into the property relationship agreement if he had received adequate advice at the time. On the other hand, the lawyer presents Mr Ross as a person who was intent on signing the agreement regardless of her advice. Her file note, made at the time, tends to reflect that.

[48] Neither side has adduced any evidence from an independent expert lawyer as to the steps that a prudent lawyer would have taken when presented with the circumstances as they stood in December 2001. Both sides cited authorities. Wilson McKay referred to the principles set out in Fisher on Matrimonial and Relationship

Property.²³ Mr Samuel referred to the Court of Appeal’s decision in Coxhead v

Coxhead.²⁴ While I do not take any issue with those, I would have difficulty on the present state of the evidence in assessing quite what a lawyer, presented with this agreement in December 2001, ought to have done. I bear in mind the difficulties of establishing whether the parties were in a de facto relationship as defined in s 2D of the Property (Relationships) Act. Whereas there is now a significant body of case law as to the meaning of “living as a couple”, there was no case law under the Property (Relationships) Act at that time, other than decisions on “living as a couple” made in the context of other legislation.

[49] Another difficulty is the attack made on Wilson McKay for not having obtained property searches of the properties listed in Mrs Gates’ schedule of separate property. The argument goes that these were still in Mrs Gates’ name at the time of

the agreement. Seemingly, this was meant to make a difference because the assets at that stage had not been transferred into the family trust. It is not apparent that Mr Ross had any rights in respect of those assets at the time of the agreement. There was nothing he could do to stop Mrs Gates transferring those assets into a family trust ahead of the property division rules coming into effect on 1 February 2002. Mrs Gates had taken a “belt and braces” approach to asset protection. She wanted to be protected not only by a property relationship agreement, but she took steps independently of that agreement to make sure that assets that might otherwise be considered relationship property were placed out of the reach of Mr Ross.

[50] Also relevant is Mr Ross’ knowledge when he went to see Wilson McKay. He has not addressed that in full in his evidence. Clearly he must have known that Mrs Gates had assets. That was apparent from the agreement, even though the agreement showed that they had been transferred into a trust. The fact that the transfer had not occurred at that stage seems to make little difference. Certainly, Mr Ross must have appreciated that Mrs Gates had assets in which he had no interest, and he was aware of Mrs Gates’ intention that he should not have an interest in them.

[51] In the light of that, there are clearly causation questions as to whether, even if Mr Ross had decided not to enter into the agreement, he could have improved his position in any material way. Not only is his knowledge relevant, there is also the counterfactual as to what would have happened if he had decided not to enter into the agreement. There are a range of possible answers. One answer is that Mrs Gates may have said that the relationship would not continue. Another response might be an attempt to re-negotiate the agreement. But these are all conjectures and unknowable at this stage.

[52] A further factor inclining me against giving any determinations on liability at this stage is that there is a clear need for both Mr Ross and the lawyer to be given the opportunity to give oral evidence and be subject to cross-examination. The state of evidence at present is not enough for me to conclude that Mr Ross was let down by the advice he received from Wilson McKay. That decision could be made only after hearing evidence in person, from both Mr Ross and the lawyer.

[53] Another factor is the pending proceeding in the Family Court. I explored with counsel the ramifications of potential findings in the Family Court on the application by Mr Ross to have the agreement set aside there. That court will need to decide the adequacy of the advice Mr Ross received. If the Family Court decides that Mr Ross did not receive adequate advice, it may declare the agreement void under s 21F. In that case, Mr Ross’ rights are determined without regard to the agreement. Assuming that Mrs Gates had independently put the assets out of reach of Mr Ross, it is unlikely that his position would be improved significantly. The alternative is if the Family Court finds that Mr Ross did receive adequate advice from Wilson McKay. On that finding Mr Ross will continue to be bound by the agreement, but he would not have a case against Wilson McKay for inadequate advice.

[54] It seems that Mr Ross’ application for summary judgment on liability tries to pre-empt the Family Court’s decision. The safer course would be the alternative – either for this court to await determinations in the Family Court or (and this would depend on an appropriate order in the Family Court under s 38A of the Property (Relationships) Act) for the Family Court proceeding to be transferred to this court so that both matters can be heard together.

[55] In summary, the state of evidence at present is not such that I can make clear findings that Wilson McKay has no defence to the claim that it acted in breach of its duty of care to its client in giving him advice required for the property relationship agreement. If the case had survived the strike-out application, I would still have declined to make an order for summary judgment in favour of Mr Ross.

Costs

[56] I order costs to Wilson McKay under category 2 band B. I record that this hearing has taken one day.

Associate Judge R M Bell