Simpson v Sax [2015] NZHC 1466 (26 June 2015)

Last Updated: 16 July 2015

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV-2013-470-493 [2015] NZHC 1466

BETWEEN	LUKE ANDREW SIMPSON Plaintiff
AND	JANINE DAVINA SAX First Defendant LUKE ANDREW SIMPSON AND JANINE DAVINA SAX as trustees of the LUKE AND JANINE SIMPSON FAMILY TRUST Second Defendant

Hearing:	28 and 29 May 2015
Counsel:	E M Eggleston for Plaintiff P F Gorringe for First Defendant
Judgment:	26 June 2015

_{JUDGMENT OF BREWER J}

This judgment was delivered by me on 26 June 2015 at 4:30 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors: Holland Beckett (Tauranga) for Plaintiff

Gina Jansen (Hamilton) for First Defendant

SIMPSON v SAX [2015] NZHC 1466 [26 June 2015]

Introduction

[1] Mr Simpson and Ms Sax were married in March 2009, having lived together for a short time. In early 2011, they separated. In 2013, they were divorced. They have no children together.

[2] Their relationship is acrimonious, and that acrimony has sparked many Court proceedings, including this one. It is a great shame; particularly since the sums of money at issue in this case are not large. A simple agreement to share equally the funds now held on trust for them would have saved legal fees, time and stress. But they cannot bring themselves to agree on anything, and so I must decide the issues they place before the Court in this proceeding.

[3] This case concerns the use of a house purchased by their Family Trust (“the

Trust”) for them to live in. The price was $481,000. The Trust funded the purchase:

(a) By a loan of $356,000 from Mr Simpson. This was evidenced by a Deed of Acknowledgement of Debt. The debt was payable upon demand and “[p]ending demand being made the Debt Shall be free of interest”.¹

(b) By a loan of $100,000 from a Trust established by Ms Sax’s father.

This debt was evidenced by an identical Deed of Acknowledgement of Debt.

(c) By a wedding gift of $25,000 from Ms Sax’s father’s Trust.

[4] The trustees of the Trust were Mr Simpson, Ms Sax and GTA Trustees Ltd (in the person of Mr Grace). Mr Simpson and Ms Sax were discretionary beneficiaries of the Trust.

[5] At the time the house was bought by the Trust in July 2009, it was tenanted at a rental of $450 per week. In September 2009, Mr Simpson and Ms Sax moved in,

_{and lived there rent free until they separated in February or March 2011 (the parties}

¹ Deed of Acknowledgment of Debt dated 17 July 2009, cl 3.

do not agree on the date). After the separation, Ms Sax continued living in the house for a while before going overseas temporarily. Mr Simpson, without her knowledge, then moved in, and remained there for the rest of the time it was owned by the Trust. Mr Simpson bought the house from the Trust on 1 November 2013.

[6] Mr Simpson claims that:

(a) Ms Sax owes the Trust $18,900 for rent for the period 26 February

2011 – 16 December 2011 (42 weeks x $450).

(b) The Trust owes him interest on his loan of $7,315 (7 June 2013 –

1 November 2013 at 5 per cent per annum).

(c) The Trust owes him $9,395.78 “plus interest” being payments he

made in respect of the house. [7] Ms Sax claims that:

(a) Mr Simpson owes the Trust $43,965 for occupation rent for the period

17 December 2011 – 1 November 2013 (97.7 weeks x $450).

(b) Mr Simpson owes the Trust $16,800 for wrongfully causing tenants of the property to break a 12 months fixed tenancy after two months of occupation; and Mr Simpson owes her $1,050 because, as a result of his wrongful actions, the Tenancy Tribunal ordered her to refund the tenants’ bond.

(c) Mr Simpson owes her $8,366 because his occupation of the Trust’s house from 25 April 2012 – 1 November 2013 forced her to find alternative accommodation and make rent payments of that amount.

(d) The Trust owes her $6,780 being payments she made in respect of the house.

[8] Mr Simpson pleads that Ms Sax should get nothing. Ms Sax pleads that

Mr Simpson should get nothing.

[9] GTA Trustees Ltd retired as a trustee of the Trust on 27 February 2012 leaving Mr Simpson and Ms Sax as the only trustees.²

Issues

[10] I find the issues to be:

(a) Is Mr Simpson entitled to claim occupation rent from Ms Sax? (b) Is Ms Sax entitled to claim occupation rent from Mr Simpson? (c) Is Mr Simpson liable:

(i) To pay damages to the Trust for loss of rental payments from the broken 12 months tenancy agreement?

(ii) To pay Ms Sax $1,050 for the bond refund? (d) Does the Trust owe Mr Simpson interest on his loan?

(e) Does the Trust owe either, or both, the monies they claim for reimbursement of payments made in respect of the house?

Is Mr Simpson entitled to claim occupation rent from Ms Sax?

[11] After Mr Simpson walked out, Ms Sax remained in the house. She occupied the trust property from 26 February 2011³ to 16 December 2011. During her period of occupation, Ms Sax took in tenants between 20 April 2011 and 3 June 2011. They

_{paid rent, which she collected and kept.}

² The Trust is not separately represented. I contemplated ensuring that it was. I decided not to because there simply is not enough money in this case to justify it, the other parties are effectively the only interested parties, and each opposes the other’s claims against the Trust.

³ I am satisfied, on the balance of probabilities, that Mr Simpson left on this date and not, as

Ms Sax believes, on the later date in March.

[12] Ms Sax’s argument is that she should not pay rent because she occupied the property with the express or implied consent of all the trustees, she was not paying rent beforehand and no demand for rent was made by the trustees.

[13] Mr Simpson says his lawyers demanded Ms Sax pay rent by letters dated

29 April 2011 and 24 May 2011, but that was his personal position, not the Trust’s. The Trust deed provides that all powers and discretions of the Trust shall be exercised with the unanimous approval of the Trustees.⁴

[14] Mr Simpson frames his claim for occupation rent in two ways:

(a) A derivative action by Mr Simpson as beneficiary on behalf of the

Trust against Ms Sax as occupier; or

(b) An action by Mr Simpson against Ms Sax for breach of Trust.

[15] These relatively straightforward facts give rise to complicated issues of law. In deciding this occupation rent claim, I am required to consider the following questions:

(a) Did Mr Simpson and Ms Sax have the right to occupy the property?

(b) Can Mr Simpson bring a derivative action on behalf of the Trust to claim occupation rent?

(c) Did Ms Sax in breach of her duties to the Trust improperly profit from her position as a trustee?

(d) Is there another basis upon which Ms Sax could be required to pay occupation rent to Mr Simpson?

4. Deed of Trust Establishing Trust Deed for the Luke Simpson and Janine Simpson Family Trust, cl 12.6.

Did Mr Simpson and Ms Sax have the right to occupy the property?

[16] Mr Simpson and Ms Sax were married on 29 March 2009. The Trust was established shortly afterwards on 17 July 2009 and purchased the home on 27 July

2009. The purchase was facilitated with funds provided by both Mr Simpson and Ms Sax’s father’s trust. Part of the money provided by Mr Sax’s trust was a wedding gift. Prior to the purchase, the property had been rented out to tenants. The property continued to be rented out by the Trust until September 2009 when Ms Sax and Mr Simpson took over the occupation of the property. I conclude from this series of events that the trustees all understood that the property was being acquired to be Ms Sax and Mr Simpson’s matrimonial home.

[17] The Trust Deed gives the Trustees the power to “sell, lend, lease or license to any Beneficiary or allow any Beneficiary to occupy or use any property of the Trust Fund on any terms”.⁵ There is no record of a unanimous trustees’ resolution permitting Mr Simpson and Ms Sax to occupy the property. Despite this, I find that the circumstances surrounding the creation of the Trust and the acquisition of the property establish that the Trustees unanimously resolved to grant Mr Simpson and

Ms Sax the right to occupy the property rent-free. There is no evidence before me that this resolution was unanimously rescinded before the sale of the property to Mr Simpson on 1 November 2013.

[18] Accordingly, I find that Mr Simpson and Ms Sax had the right to occupy the property.

Can Mr Simpson bring a derivative claim on behalf of the Trust to claim occupation rent?

[19] The first way in which Mr Simpson pleads his claim is by way of derivative action against Ms Sax for occupation rent on behalf of the Trust in his position as a

_{discretionary beneficiary.}

⁵ Clause 13.1.

[20] The Court of Appeal recently considered the law of derivative actions brought by beneficiaries in its decision in Cowan v Martin:⁶

[53] Our understanding of the relevant law is as follows:

(a) Where a claim is based on a duty owed to a trust, a beneficiary of the trust does not have a separate cause of action in their own right against the third party wrongdoer. The beneficiary cannot supplant the trustee and bring a separate action.⁷

(b) A beneficiary may bring a derivative action; that is, an action in right of the trust and in the room of the trustee.⁸

(c) A beneficiary may only bring a derivative action in special circumstances.⁹

[21] “Special circumstances” are “circumstances which embrace a failure, excusable or inexcusable, by the trustees in the performance of the duty owed by the trustees to the beneficiary to protect the trust estate or to protect the interests of the beneficiary in the trust estate”.¹⁰ Examples include where the trustee “has unreasonably refused to sue on behalf of the trust or has committed some other breach of his duties to the beneficiaries”.¹¹

[22] I find that “special circumstances” do not exist in this case. There is no record in the evidence before me of Mr Simpson ever trying to bring this matter before the trustees of the Trust. The two demands for occupation rent were made by Mr Simpson himself, not by the Trust. I do not think it appropriate for me to find that the trustees failed to protect the beneficiaries’ interests or unreasonably refused to sue on behalf of the Trust in circumstances where a beneficiary, who is also a trustee, has made no attempt to raise this matter with the other trustees. I acknowledge that Mr Simpson might have thought Ms Sax would have frustrated any attempt on the part of the Trust to charge occupation rent; but I do not think it is

_{appropriate to allow a derivative action to be brought on behalf of the Trust when the}

⁶ _{Cowan v Martin [2014] NZCA 593.}

⁷ _{Nimmo v Westpac Banking Corp [1993] 3 NZLR 218 (HC).}

⁸ _{Parker-Tweedale v Dunbar Bank plc (No 1) [1991] Ch 12 (CA) at 19.}

⁹ Parker-Tweedale v Dunbar Bank plc (No 1), above n 8, at 19; Hayim v Citibank NA [1987] AC

_{730 (PC) at 748.}

¹⁰ _{Hayim v Citibank NA, above n 9, at 748.}

¹¹ Parker-Tweedale v Dunbar Bank plc (No 1), above n 8, at 19.

trustees have been given no chance to, and have demonstrated no inability to, perform their duties under the Trust deed.

[23] But all of this is moot. Even if “special circumstances” existed, the Trust is not able to recover occupation rent from Ms Sax. It authorised her to occupy the property rent-free. A trust cannot claim occupation rent from a discretionary beneficiary where it has allowed the discretionary beneficiary to have free use of the property and has not revoked that permission.¹²

Did Ms Sax, in breach of her duties to the Trust, improperly profit from her position as a trustee?

[24] Mr Simpson alternatively frames his action as a breach of trust claim. His counsel relies on the well-established rule that a trustee is under a duty not to profit from his trusteeship.¹³ Mr Simpson’s allegation is that Ms Sax, by occupying the property for herself and collecting rent, abused her position as trustee for private gain. I see no merit in this argument. Ms Sax had a right conferred upon her by the Trust to occupy the trust property rent-free. She exercised that right. She has not

taken advantage of her position as Trustee.

[25] Mr Simpson is, however, correct to argue that Ms Sax profited from her position as trustee when she rented out the remaining rooms in the house and kept the rent for herself during her occupation of the property. Ms Sax acknowledges that she is under an obligation to account to the Trust for this money that she received. But Mr Simpson indicated to me that if occupation rent is awarded he will take no issue with Ms Sax’s receipt of these monies. I turn, therefore, to consider whether there is another basis upon which Ms Sax could be required to pay occupation rent to Mr Simpson.

Is there another basis upon which Ms Sax could be required to pay occupation rent to Mr Simpson?

[26] The concept of “occupation rent” developed out of jurisprudence relating to

_{disputes between co-owners. The Court, as part of its equitable jurisdiction, can}

¹² _{See, for example, Lyttle v Casey [2014] NZHC 3142.}

¹³ Boardman v Phipps [1966] UKHL 2; [1967] 2 AC 46; [1966] 3 All ER 721 (HL) at 756.

consider whether the circumstances of the sole occupation of one co-owner during the course of the co-ownership gives rise to liability to pay occupation rent. The doctrine has historically been applied in situations where a married or de facto couple own property jointly and then the relationship has broken down. The general rule is that if the co-owner in sole occupation of the premises did so to the “exclusion” of one or more of the other co-owners for whatever purpose or by whatever means then occupation rent should be paid if it would do equity between

the parties.¹⁴

[27] The test for “exclusion” requires the Court to ask whether in the circumstances it is reasonable for the co-owner to exercise his right as a co-owner to take occupation of the property.¹⁵ Where there is a matrimonial home and the marriage has broken down, the party who leaves the property will, in most cases, be regarded as excluded.¹⁶ But this principle does not apply where the co-owner not in occupation was in a position to enjoy his right to occupy but chose not to do so voluntarily.¹⁷

[28] In Dennis v McDonald, Purchas J explained that the payment of occupation rent is based on an understanding that the co-owners of a property are trustees to each other’s beneficial interest in the property. Through this equitable principle the trustee is compensating a beneficiary for the trustee’s exclusive enjoyment of the trust property attributable to the trustee’s act of exclusion where the exclusion is inconsistent with the discharge in due order of the trust.¹⁸

[29] This principle has been extended to beneficiaries of a fixed trust. A beneficiary can bring a claim against another beneficiary for occupation rent where both beneficiaries are entitled to occupy the trust property and the other beneficiary

_{remains in occupation of trust property to the exclusion of him.}¹⁹ _{One New Zealand}

¹⁴ Dennis v McDonald [1981] 2 All ER 632 at 638. The decision was approved on appeal in Dennis v McDonald [1982] 2 WLR 275.

¹⁵ Re Barcham [2008] EWHC 1505 (Ch), [2009] 1 All ER 145 at 160; Dyas v Elliot HC Auckland

_{CIV-2008-404-1021, 16 April 2010 at [16].}

¹⁶ _{Re Pavlou (a bankruptcy) [1993] 3 All ER 955 at 959 (per Millet J).}

¹⁷ _{Dennis v McDonald, above n 14, at 638.}

¹⁸ _Above.

¹⁹ Stack v Dowden [2007] UKHL 7, [2007] 2 AC 432 at [94] (per Baroness Hale commenting on the position in equity which has now been replaced in the United Kingdom by the Trusts of Land and Appointment of Trustees Act 1996).

example of this is the decision in Surridge v Quinn.²⁰ In that case the plaintiff and the defendant lived in a de facto relationship for six years during which they occupied a house that the plaintiff had previously owned, but which had been settled on trust with the title vested in a friend. The declaration of trust provided that the trustee held 134 shares in the property for the plaintiff and 40 shares for the defendant. The parties’ relationship broke down and the plaintiff moved out of the property. The plaintiff claimed for occupation rent. Neazor J held that the position of the plaintiff and the defendant in respect of the property was exactly analogous with that of co-owners: both were beneficially interested in the express trust which held the property. He therefore applied the equitable principle and held that the beneficial entitlement to the property was split between the parties as tenants in common in the proportions of 75 per cent for the plaintiff and 25 per cent for the defendant. He said that equity entitled the plaintiff to occupation rent at 75 per cent of the market value.

[30] This principle cannot, and should not, be extended to beneficiaries of a discretionary trust by virtue of their position as discretionary beneficiaries alone. It is well-established that a discretionary beneficiary does not have a right to any defined part of the income or capital of the trust fund: his only right is to be considered for the exercise of the trustee’s duties.²¹ Mr Simpson and Ms Sax are discretionary beneficiaries under the Trust. They are not the only discretionary beneficiaries of the Trust, but they are the “principal beneficiaries”.²² Mr Simpson must rely on something more than his position as a discretionary beneficiary to succeed in his claim.

[31] The Trust exercised its discretionary powers to confer upon both Mr Simpson and Ms Sax the right to occupy the trust property rent-free. This gave to both of them a shared possessory interest in the property. Both Mr Simpson and Ms Sax should be able to protect this interest. In my view, by virtue of their shared

_{possessory interest they are in a similar position to co-owners: they have a common}

²⁰ _{Surridge v Quinn HC Wellington CP830/91, 13 May 1993.}

²¹ _{McPhail v Doulton [1970] UKHL 1; [1971] AC 424.}

²² The discretionary beneficiaries of the Trust include Mr Simpson and Ms Sax’s siblings, parents, future children, former partners, any person living with them, as well as any non-profit clubs, institutions, societies, associations or organisations.

interest in the property which gives them a right of occupation. This dispute arose because their relationship broke down. After their separation Ms Sax lived on the property to the exclusion of Mr Simpson’s right to occupy. Mr Simpson ought to be entitled to a remedy.

[32] I find therefore that Mr Simpson is entitled to pursue Ms Sax for occupation rent for the 42 weeks that she occupied the property and excluded him from exercising his right to occupy. I find the weekly rent for the property to be $450. Mr Simpson is entitled to half that amount during the period that he was excluded from occupying the property. Ms Sax must pay Mr Simpson $9,450 in occupation rent.

[33] I stress that I am not extending the equitable principle to circumstances where one beneficiary uses the property of a discretionary trust to the exclusion of another discretionary beneficiary under that Trust. Mr Simpson is entitled to succeed in his claim only because the Trust gave to him a possessory interest in the property which was never rescinded.

Is Ms Sax entitled to claim occupation rent from Mr Simpson?

[34] Ms Sax makes a counterclaim against Mr Simpson for occupation rent. Mr Simpson occupied the property from 17 December 2011 until 11 November

2013, when the house was sold to him. Ms Sax submits that Mr Simpson should pay rent because he assumed occupancy while she was overseas without the consent of the trustees. It is not clear from Ms Sax’s statement of claim or her submissions on what legal basis she makes this claim for occupation rent.

[35] However, based on my reasoning in relation to Mr Simpson’s claim, I find that Ms Sax is entitled to bring her claim against Mr Simpson for occupation rent for the 97.7 weeks that he occupied the property and excluded her from exercising her right to occupy. Accordingly, Mr Simpson must pay Ms Sax $21,982.50 in occupation rent.

[36] It is not appropriate to award Ms Sax compensation for the rent payments she was forced to make during the period 25 April 2012 – 1 November 2013. That would be double counting.

Does Mr Simpson have liability to the Trust and/or Ms Sax arising from the broken 12 months tenancy agreement?

[37] On 13 March 2011, Ms Sax arranged for three people to enter into a

12 month fixed term tenancy agreement to live in the house. She continued to live there also. Ms Sax deposes that Mr Simpson objected to the tenants being on the property, made contact with them and caused them to break their tenancy. The tenants left the property on 3 June 2011. Further, the tenants took Ms Sax to the Tenancy Tribunal. The Tribunal ordered Ms Sax to refund the bond of $1,050

_{immediately and pay the tenants $860.44 calculated:}

One week’s bond	$350.00
Compensation – loss of bargain	$410.00
Compensation – moving costs	$80.00
Filing fee reimbursement	$20.44

This is the factual basis for Ms Sax’s claim against Mr Simpson for loss of income as

a result of the broken tenancy agreement and $1050 for the bond refund.

[38] Mr Simpson denies having anything to do with the actions of the tenants.

[39] Counsel for Ms Sax has not pleaded any legal principles on which this claim is based. I can only assume that this is a claim in tort.

[40] A person is liable in tort for damages where he intentionally induces a breach of contract. The House of Lords set out the ingredients of the tort in OGB Ltd v

_Allan²³ _{which can be summarised as follows:}²⁴

²³ _{OGB Ltd v Allan [2007] UKHL 21, [2008] 1 AC 1.}

²⁴ Cynthia Hawes “Interference with Business Relations” in Stephen Todd (ed) The Law of Torts in

New Zealand (6th ed, Brookers, Wellington, 2013) 667 at 675.

(a) there must be a legally enforceable contract in existence;

(b) the defendant must have engaged in conduct which in fact induced a breach of the contract;

(c) the defendant must have known that his or her conduct would induce the breach; and

(d) the defendant’s conduct inducing the breach must have caused loss or damage to the plaintiff.

[41] The damages for a successful claim of inducing breach of contract are assessed according to tort law principles, not contract principles.²⁵ A successful plaintiff is entitled to a sum that will fairly compensate him for the loss actually sustained in the particular case.²⁶ The assessment of damages will be done on a broad, holistic basis. This is because damages for loss of contractual rights are difficult to measure precisely and often the Court is required to approximate the harm it thinks that the successful plaintiff has suffered. ²⁷

[42] The onus of proof, on the balance of probabilities, is on Ms Sax.

[43] The decision of the Tenancy Tribunal is in evidence before me.²⁸ Section

50(1) of the Evidence Act 2006 prevents evidence of a judgment or a finding of fact in a civil proceeding from being admissible in another civil proceeding to prove the existence of a fact that was in issue in the proceeding in which the judgment was given. But the section only applies to proceedings conducted by a Court.²⁹ It does

_{not apply to judgments or findings of fact made by a tribunal.}³⁰ _{I am not}

²⁵ _{Lumley v Gye [1853] EngR 15; (1853) 118 ER 749 (QB).}

²⁶ Nauru Local Government Council v New Zealand Seamen’s Industrial Union of Workers [1986]

_{1 NZLR 466 (CA) at 472.}

²⁷ _Above.

28. Casebook for hearing on 28/29 May 2015, vol 3 of 4, dated 26 May 2015 at 00345, referred to in evidence.

²⁹ _{Evidence Act 2006, s 4.}

³⁰ This has been acknowledged by the Law Commission in its 2013 review of the Evidence Act

(see Law Commission Review of the Evidence Act 2006 (NZLC R127, 2013) at [9.16]). The Commission recommended that s 50 be extended so that a judgment or finding of fact made by a tribunal is not admissible to prove the existence of a fact that was in issue before the tribunal. This recommendation has been approved by Cabinet (See Cabinet Social Policy Committee “Amendments to the Evidence Act 2006” (12 November 2013) CAB 100/2008/1 at 16). But the law has not yet been amended to include tribunal decisions within the definition of proceedings.

automatically barred from using a decision of the Tenancy Tribunal to prove the existence of a fact that was in issue in the proceeding in which the Tribunal’s decision was given. Accordingly, the admissibility of the Tribunal’s decision is governed by ss 7 and 8 of the Evidence Act.

[44] The decision of the Tribunal is relevant and probative. It goes completely against Ms Sax’s pleading. The hearing before the Tribunal proceeded on the basis that Ms Sax was the landlord and was acting in her personal capacity throughout. The background recorded by the Tribunal relates to complaints the tenants had against Ms Sax. They complained because of disputes they were having with Ms Sax over matters relating to the payment of rent and the bond. The Tribunal decision records that they received a telephone call from Ms Sax’s lawyer telling them that the tenancy had been terminated and that they had to leave the house. It follows that there is no evidence at all that Mr Simpson caused the tenants to break the tenancy agreement.

[45] I find that Mr Simpson is not liable to pay damages to the Trust and Ms Sax is not entitled to $1,050 for the bond refund. Quite apart from anything else, Ms Sax never had the bond and, even if she had, the money was never hers.

Does the Trust owe Mr Simpson interest on his loan?

[46] Mr Simpson, through his solicitor, issued a demand that the Trust repay his loan on 7 June 2013 in the following terms:

My client hereby makes formal demand on the Luke Simpson and Janine Simpson Family Trust for the amount of $356,000 recorded in the Deed of Acknowledgement of Debt dated 17 July 2009.

My client also claims interest in accordance with that Deed.

[47] The Trust paid the debt on 1 November 2013, when Mr Simpson purchased the house. Mr Simpson claims that the Trust should pay interest on the debt at five per cent per annum. He does not plead why that rate should apply.

[48] Section 87 of the Judicature Act 1908 empowers the Court to award interest in any proceedings for the recovery of a debt at up to the interest rate prescribed in

that section, which is currently 7.5 per cent per annum. But s 87 does not apply where the transaction between the parties contains an agreement to pay interest, irrespective of whether the agreed interest is higher or lower than the prescribed rate.³¹ It follows that I may be required to take a two-step approach in order to determine whether the Trust owes Mr Simpson interest on the loan:

(a) I must first interpret the deed to see whether it provides for interest to be paid on the loan.

(b) If the deed properly interpreted does not provide for interest to be paid, then I must consider whether I should exercise my power under s 87 of the Judicature Act to order that the Trust pay Mr Simpson interest on the loan.

[49] A deed is interpreted in accordance with the principles applied to the interpretation of contracts.³² The New Zealand approach to contractual interpretation draws upon the speeches of Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society³³ and Chartbrook Ltd v Persimmon Homes Ltd.³⁴

The New Zealand Supreme Court recently revisited this topic in Firm PI 1 Ltd v Zurich Australian Insurance Ltd in which it confirmed that this is the approach that is applicable in New Zealand.³⁵

[50] Lord Hoffmann described contractual interpretation as “the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.”³⁶ The background includes “absolutely anything which would have affected the way in which the

_{language of the document would have been understood by a reasonable man”}³⁷

³¹ _{Alington Group Architects Ltd v A-G [1998] 2 NZLR 183 (CA) at 188-189.}

³² Gibbons Holdings Ltd v Wholesale Distributors Ltd [2007] NZSC 37; [2008] 1 NZLR 277; Bethell v Rickard

_{[2013] NZCA 68.}

33. Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 WLR 896 (HL).

³⁴ _{Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 3 WLR 267 (HL).}

³⁵ _{Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [60].}

³⁶ _{Investors Compensation Scheme Ltd v West Bromwich Building Society, above n 33, at 912.}

³⁷ At 913.

subject to the requirement that “it should have been reasonably available to the parties”.³⁸ Lord Hoffmann later clarified that this has to be background that a reasonable person would regard as relevant.³⁹

[51] Commenting on the traditional plain meaning approach to interpretation, Lord Hoffmann said: “The ‘rule’ that words should be given their “natural and ordinary meaning” reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents”.⁴⁰ The New Zealand Supreme Court has identified that if the contract has a natural and ordinary meaning that “will be a powerful, albeit not conclusive, indicator of what the parties meant”.⁴¹ But where a Judge concludes from the background “that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had”.⁴² So, where it is clear that “something has gone wrong with the language” and also “clear what a reasonable person would have understood the parties to have meant”, then there is not “a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed”.⁴³ The Supreme Court has reiterated that it has been confirmed that a purposive or contextual interpretation is not dependent on there being an ambiguity in the contractual language.⁴⁴

[52] Mr Simpson’s argument is that, although the deed does not expressly mention an interest rate, properly interpreted an interest rate of five per cent per annum should apply. This is because paragraph (3), which states “pending demand being made the debt shall be interest free”, would not make sense if an interest rate were not provided for.

[53] In addition, Mr Simpson also relies on Ms Sax’s subsequent conduct to

interpret the deed. Subsequent conduct is admissible as an aid to interpretation.⁴⁵

_{Ms Sax accepted that interest was payable on the debt that the Trust entered into with}

³⁸ _{At 912.}

³⁹ _{Bank of Credit and Commerce International SA v Ali [2001] UKHL 8, [2002] 1 AC 251 at [39].}

⁴⁰ _{Investors Compensation Scheme Ltd v West Bromwich Building Society, above n 33, at 913.}

⁴¹ _{Firm PI 1 Ltd v Zurich Australian Insurance Ltd, above n 35, at [63].}

⁴² _{Investors Compensation Scheme Ltd v West Bromwich Building Society, above n 33, at 913.}

⁴³ _{Chartbrook Ltd v Persimmon Homes Ltd, above n 34, at [25].}

⁴⁴ _{Firm PI 1 Ltd v Zurich Australian Insurance Ltd, above n 35, at [61].}

⁴⁵ Gibbons Holdings Ltd v Wholesale Distributors Ltd, above n 32.

the Peter Sax No 2 Trust. Mr Simpson’s argument is based on the fact that the deed of acknowledgment of debt between the Trust and the Peter Sax No 2 Trust contains the exact same terms as the deed entered into between Mr Simpson and the Trust.

[54] Ms Sax argues that interest should not be payable because the deed does not specifically provide that interest is payable.

[55] I agree with Mr Simpson that the deed, properly interpreted, requires the Trust to pay him interest on the loan once demand for payment is made. Looking at the words in the context of the deed, the Trustees and Mr Simpson would not have included a clause that said the loan was interest free pending demand being made if they did not intend that interest would be charged upon the debt being called up. The Trust had the benefit of what was in effect Mr Simpson’s life savings on an interest free basis. A reasonable person with knowledge of the background would have understood the parties to have intended interest to be charged on the debt once it was called in.

[56] In my view, the subsequent conduct evidence is not relevant. The position taken by Ms Sax was not based on her interpretation of the deed but, rather, on her antipathy to Mr Simpson.

[57] The deed does not state the rate at which interest is to be charged. Mr Simpson has asked for five per cent interest. Ms Sax, while opposing the payment of interest, does not appear to oppose this rate.

[58] In these circumstances, I believe it appropriate to draw upon the principles I would apply if I were requiring interest to be paid under s 87 of the Judicature Act. The interest should not be greater than 7.5 per cent per annum and should reflect the interest rates that the debt could have attracted had it been available for commercial investment and the interest costs that would have been avoided had the plaintiff had

the judgment sum available to reduce indebtedness.⁴⁶ An interest rate of 5 per cent

_{per annum fulfils these requirements.}

⁴⁶ McGechan on Procedure (online looseleaf ed, Thompson Reuters, updated 20 April 2015) at [J87.03(5)] citing the following cases as examples: Jowada Holding Ltd v Cullen Investments Ltd HC Auckland CP258/02, 16 July 2003; Eadie v National Bank Ltd HC Auckland CP1290/91, 4 July 2002; and Kirk v Vallant Hooker & Partners [2000] NZCA 351; (2000) 15 PRNZ 9 (CA).

[59] Accordingly, the Trust is to pay Mr Simpson five per cent interest per annum on the loan of $356,000.00 for the period of 7 June 2013 to 1 November 2013 (147 days). This is an amount of $7,168.73.

Does the Trust owe either, or both, the monies they claim for reimbursement of payments made in respect of the house?

Mr Simpson

[60] Counsel for Mr Simpson submits that the Trust owes Mr Simpson $9,284.00 for reimbursement of payments made in respect of the house. This figure is made up as follows:

(a) $2,593.20 for MAS home and contents insurance paid after

26 February 2011.⁴⁷

(b) $6,563.60 for Council rates paid on the property between 26 February

2011 and 29 August 2013.⁴⁸

(c) $992.23 for the plumbing bill paid on 15 February 2013.⁴⁹

(d) Deducted from this is $753.25 for the Middleton Valuation Ltd’s valuation of the home and $111.78 being the GST proportion of the home office claim from Mr Simpson’s company.

[61] Counsel for Mr Simpson identifies that the legal basis for this claim is that these payments were “advances” made to the Trust under the deed. He identifies that recital (a) of the deed provides that the “Creditor has advanced to the Debtors by way of loan the sum of $365,000 and any further advances (“the debt”)”. He further identifies that cl 1 of the Operative Part provides: “The Debtors jointly and severally

_{acknowledged that they are indebted to the Creditor for the amount of the debt”.}

⁴⁷ _{Casebook for hearing on 28/29 May 2015, vol 4 of 4 at 561.}

⁴⁸ _{Affidavit of Luke Andrew Simpson dated 13 April 2015 at 65 -70.}

⁴⁹ Affidavit of Luke Andrew Simpson dated 13 April 2015 at 69

[62] Ms Sax does not appear to challenge these claims in general. But she does question two drawings made by Mr Simpson from the Trust account. These are

$489.38 for Council rates on 29 August 2012 and $4,804.21 paid to his personal account on 28 August 2012. I accept these to be legitimate drawings. The rates payment was a part payment of a total bill of $1372.26 to which Mr Simpson paid

$882.88 from his own account and $489.38 from the trust account. The $4,804.21 was the amount due to Mr Simpson under his relationship property entitlements.⁵⁰

[63] I accept that the trustees of the Trust intended for outgoings and repairs in relation to the house to be paid by the Trust. This is confirmed, for example, in an email by Ms Sax relating to an outstanding plumbing bill where she said, “I have no problem with the trust funds being used to pay for this plumbing bill – that’s

precisely why the account was set up in the first place.”⁵¹ The wording of the deed

clearly anticipates that Mr Simpson could make further advances to the Trust and that the Trust would accept liability for repaying those advances. Accordingly, a reasonable person with knowledge of the background circumstances would have thought that the parties intended, at the time that the deed was signed, that any payment that Mr Simpson made personally for outgoings or repairs would be an advance that Mr Simpson made to the Trust and that the Trust would accept liability for repaying Mr Simpson that money.

[64] Accordingly, Mr Simpson is entitled to be reimbursed $9,284.00 by the Trust.

[65] Mr Simpson seeks interest on the reimbursement sum. Consistent with the terms of the deed, interest is to be paid at a rate of five per cent per annum. I treat

1 September 2013 as the date of demand for the reimbursement amount. Mr Simpson’s statement of claim dated 7 June 2013 does not quantify the reimbursement amounts demanded. But the final payment that Mr Simpson claims is for rates on 29 August 2013. I calculate the interest to be $849.55 (as at 1 July

_2015).

⁵⁰ LAS v JDS [2012] NZFC 3897 at [33]. The $4,804.21 was a debt owed to Mr Simpson by the Trust for advances made during the relationship. Judge Wills held that this debt was a relationship property asset, but that Mr Simpson was entitled to call in the debt after paying to Ms Sax her relationship property entitlement.

⁵¹ Email from Janine Simpson to Valerie Gray dated 5 May 2011, Casebook for hearing on

28/29 May 2015, vol 2 of 4 at 196.

Ms Sax

[66] Ms Sax also seeks reimbursement for payments that she has made in respect of the Trust. She claims that she paid:

(a) $6,000 to insulate the house.

(b) $600 for an electrician to repair damaged wires in May 2011. (c) $180 for plumbing repairs in April 2011.

[67] Counsel for Ms Sax has not made submissions as to the basis in law for making these claims. But the legal basis on which she makes her claim is irrelevant because I am not satisfied that she paid any of the claimed amounts:

(a) It appears that the insulation was installed and paid for while the parties were still living together in the house towards the end of

2010.⁵² Mr Simpson disputes that Ms Sax paid any of the cost. He

disputes the amount claimed. There is no invoice for the installation of the insulation or anything other than Ms Sax’s assertion for me to rely on. In these circumstances, Ms Sax does not discharge her onus of proof.

(b) Ms Sax has provided me with no independent evidence that she paid for the work done to the damaged electrical wiring. Ms Sax has put into evidence two letters sent to her on 21 June 2011 by Bay Electrical

& Security Co (2008) Ltd which confirm that electrical work was carried out on the property.⁵³ But the letters provide no evidence as to the value of the work done and whether Ms Sax paid for it.

_{Accordingly, the onus of proof is not satisfied.}

52. Email and Gmail chat conversations between Luke Simpson and Janine Simpson, Casebook for hearing on 28/29 May 2015, vol 2 of 4 at 133-138.

⁵³ Letters from Michael Heappey to Janine Simpson dated 21 June 2011, Casebook for hearing on

28/29 May 2015, vol 2 of 4 at 211-212.

(c) There is no independent evidence of Ms Sax paying $180 for plumbing repairs. I have been given a copy of an email from Ms Sax to Valerie Gray dated 5 May 2011 in which Ms Sax apologises for failing to pay the plumbing bill and says that she will direct Mr Simpson to pay the bill out of the Trust account.⁵⁴ In an email from Mr Simpson to John Gray dated 28 June 2011 Mr Simpson offers to write a cheque for the outstanding amount on behalf of the Trust.⁵⁵ It appears that when the cheque was made out, it was stopped by Ms Sax. This resulted in a dispute between the parties, requiring police intervention.⁵⁶ It is completely unclear what happened after that and whether the bill was actually paid.

Decision

[68] Mr Simpson and Ms Sax both succeed in their occupation rent claims against one another.

(a) Ms Sax owes Mr Simpson $9,450 in occupation rent.

(b) Mr Simpson owes Ms Sax $21,982.50 in occupation rent.

I set off these amounts against each other and direct Mr Simpson to pay Ms Sax

$12,532.50 in occupation rent.

[69] Mr Simpson is successful in his claims against the Trust. I direct that the

Trust pay Mr Simpson:

(a) $7,168.73 interest on the loan of $356,000.00.

(b) $9,284.00 for outgoings and repairs in respect of the Trust property and interest of $849.55.

⁵⁴ Email from Janine Simpson to Valerie Gray dated 5 May 2011, Casebook for hearing on

_{28/29 May 2015, vol 2 of 4 at 196.}

⁵⁵ Email from Luke Simpson to John Gray dated 28 June 2011, Casebook for hearing on

_{28/29 May 2015, vol 2 of 4 at 215.}

⁵⁶ Police Report dated 21 January 2013, Casebook for hearing on 28/29 May 2015, vol 3 of 4 at

427.

A total of $17,302.28.

[70] Ms Sax is unsuccessful in her claim against Mr Simpson for wrongfully inducing a breach of contract and in her claim against the Trust for reimbursement of payments made in respect of the house.

Costs

[71] Mr Simpson has been successful in all his claims. Ms Sax has been partially successful in hers. There are, however, no winners here. I direct that costs lie where

_{they fall.}

Brewer J