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High Court of New Zealand Decisions |
Last Updated: 10 July 2018
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IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-Ā-TARA ROHE
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CIV-2017-485-180
[2018] NZHC 1261 |
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BETWEEN
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WELLINGTON TENTHS TRUST
Plaintiff
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AND
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LORRAINE JOYCE SKIFFINGTON
First Defendant
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AND
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STRATEGIC DIRECTIONZ LIMITED
Second Defendant
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Hearing:
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19 July 2017
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Appearances:
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C F J Reid for the Plaintiff
J P Temm for the Defendants
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Judgment:
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31 May 2018
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JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by Associate Judge Smith on 31 May 2018 at 2.30pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Counsel: C F J Reid, Wellington J P Temm, Rotorua
WELLINGTON TENTHS TRUST v LORRAINE JOYCE SKIFFINGTON [2018] NZHC 1261 [31 May 2018]
Introduction
[1] I have before me two applications, one by the plaintiff (Tenths) for summary judgment on its first cause of action, against the first defendant (Ms Skiffington), and one by Ms Skiffington and the second defendant (Strategic) for an extension of time to file a statement of defence to the claims made against them in Tenths’ second cause of action.
[2] Ms Skiffington filed a timely notice of opposition to the application for summary judgment against her on the first cause of action, but Tenths did not seek summary judgment on its second cause of action. The defendants failed to file a statement of defence to the allegations in the second cause of action within the permitted period following service of Tenths’ statement of claim on them.
[3] Tenths applied for judgment by default on its second cause of action, and Strategic and Ms Skiffington countered with an application for extension of time to file a defence. Those applications were listed for hearing at the same time as Tenths’ summary judgment application against Ms Skiffington, but it was common ground at the hearing that if an extension of time for Ms Skiffington and Strategic to file a statement of defence to the second cause of action was not granted, Tenths’ application for judgment by default on the second cause of action would need to be referred to a Justice of the Court for determination (the entry of judgment in such circumstances not being within the jurisdiction of an Associate Judge).
[4] The summary judgment application against Ms Skiffington, and the application for an extension of time to file its statement of defence, were fully argued before me on 19 July 2017. At the time of the hearing, it was known that Ms Skiffington was seriously ill. She died on 2 September 2017.
[5] The law provides that Tenths’ claim against Ms Skiffington may continue against the administrator of her estate after her death,1 but no application has yet been made to substitute the administrator of Ms Skiffington’s estate as first defendant in the proceeding. As the matter was fully argued before Ms Skiffington’s death, I propose
1 Law Reform Act 1936, s 3, and r 4.49(1) of the High Court Rules.
to give my decision on both applications, but will refrain from entering judgment on the summary judgment application to allow either party to make an appropriate application to substitute the administrator of Ms Skiffington’s estate as first defendant. Judgment can be entered in accordance with my decision on the summary judgement application as and when the administrator is substituted.
Tenths’ case against Ms Skiffington and Strategic
[6] Tenths’ claims against Ms Skiffington and Strategic were helpfully summarised in a judgment given by Clark J on 18 July 2017 in this proceeding, on an application by Tenths for an interim freezing order in respect of certain assets of Ms Skiffington, Strategic, and Moanatahi Limited, a company of which Ms Skiffington was the sole director and shareholder. Clark J described the background to the proceeding as follows:2
[Tenths] is an ahu whenua trust incorporated pursuant to s 244 of the Te Ture Whenua Māori Act 1993.
...
Ms Skiffington, the first defendant, is a former director of Pipitea Street Developments Ltd (PSDL). Since its incorporation on 9 October 2006 Ms Skiffington has been the director and sole shareholder of [Strategic].
[Tenths] filed this proceeding on 23 March 2017. Two causes of action are pleaded, both in unjust enrichment.
(a) Under its first cause of action [Tenths] seeks judgment against [Ms Skiffington] for unauthorised payments made to PSDL in the amount of $1,687,500.00, interest on the unauthorised payments and an account of profits made by [Ms Skiffington] resulting from the unauthorised payments.
(b) Under its second cause of action [Tenths] seeks judgment against [Ms Skiffington] for unauthorised payments made to her in the amount of $421,875.00 and to [Strategic] in the amount of
$1,380,937.50; and against [Strategic], for unauthorised payments made to [Strategic] in the amount of $1,380,937.50. Interest on the unauthorised payments and an account of profits by both defendants are sought.
[7] The claims against Ms Skiffington and Strategic were filed after the conclusion of a criminal proceeding in 2016. Charges had been brought against Ms Skiffington
2 Wellington Tenths Trust v Skiffington and Strategic Directionz Ltd [2017] NZHC 1646.
and two others, relating to offending which was said to have occurred between 2005 and 2008. One of the Ms Skiffington’s co-accused was Dr Ralph Heberley Ngatata Love (Dr Love), the former chairman of Tenths.
[8] Ms Skiffington was originally charged with a total of eight offences, including charges of obtaining by deception and accepting secret commissions, and being a party to those offences. She also faced two charges of using a document to obtain a pecuniary advantage. The charges against her were scheduled for trial on 7 September 2015.
[9] By July 2015, Ms Skiffington was seriously ill with cancer. She applied for a stay of the criminal charges on the basis that she was unfit to stand trial.
[10] On 7 August 2015, Collins J delivered a judgment on Ms Skiffington’s application to stay the criminal charges.3 His Honour granted the stay application, concluding that it was not possible given the state of Ms Skiffington’s health for her to obtain a fair trial. He accepted that she was suffering from both mental and physical impairment; indeed, she was dying from stage 4 metastatic cancer.
[11] The criminal charges against Dr Love arising out of the same events continued.
[12] In her judgment given in this proceeding on 18 July 2017, Clark J provided the following description of the events leading to Dr Love’s trial and conviction:4
Background to the criminal proceedings
Dr Love was a trustee and the chair of Tenths which owns significant holdings of Maori freehold land in and about the Wellington region. [Tenths] administers the land for the benefit of its beneficiaries all of whom belong to Wellington and Taranaki-based iwi.
The criminal proceeding related to a venture [Tenths] sought to undertake involving the development of land in Pipitea Street, Thorndon. In his capacities as chair and trustee Dr Love maintained a close interest in [Tenths’] affairs and often dealt personally with third parties regarding property development projects. In respect of the Pipitea Street development, however, the developers had become disillusioned with the performance of Dr Love’s son, Matene [to whom the developers had paid, through his company, a fee of
3 The Queen v R L, M L, and S [2015] NZHC 1862.
4 Wellington Tenths Trust v Skiffington and Strategic Directionz Ltd, above n 2, at [6]-[11].
$150,000 for the role he played in introducing them to the Pipitea Street project], and Dr Love required the developers to deal with Ms Skiffington in relation to that project.
Because the Pipitea Street land was a prime site for commercial development it was known by the parties from the early stages of their negotiations that a developer would pay a significant premium — between $1.5 and $3 million
— to gain access to the land. As it happened, the developers offered to pay [Tenths] $3 million (sometimes referred to as the ‘lease premium’) for the right to lease the land on agreed terms. The proposed annual rental, but not the offer to pay $3 million, was disclosed to [the board of Tenths] in various written materials. In particular, at a meeting of trustees on 28 November 2006 the proposed $3 million payment was not mentioned by [Dr Love as] chair nor was it disclosed in [Dr Love’s] Chairman’s Report which included a summary of issues referring to the Pipitea Street development.
At around this time Dr Love and Ms Skiffington had become interested in purchasing what Lang J described as a “substantial residence” on the Plimmerton foreshore. In early November 2006 Ms Skiffington organised with the bank financing arrangements under which the whole of the purchase price would be funded by means of a loan. Around 23 November 2006 PSDL was formed. PSDL was incorporated and controlled by [Ms Skiffington] and her business associate Shaan Stevens, a Wellington accountant.
Then on 22 December 2006 entities associated with the developers entered into a Services Agreement with PSDL under which the $3 million was to be paid in three instalments. In the event by 15 January 2007 the developers had paid $1.5 million (plus GST – total $1,687,500) to PSDL pursuant to the Services Agreement.
As soon as it was received PSDL transferred the sum of $1.4 million into a bank account opened in the joint names of two family trusts which Dr Love and Ms Skiffington had settled a few weeks earlier. Once received into the joint account a total sum of $1.385 million was transferred to the loan account used to purchase the Plimmerton property, in reduction of the mortgage of
$1.8 million. ...
[13] The trustees of the two family trusts established by Ms Skiffington and Dr Love to purchase the Plimmerton property (respectively, The Moana Tahi Trust and the Moana Rua Trust) were duly registered as proprietors of the Plimmerton property following settlement of the purchase.
Dr Love’s conviction and appeal
[14] Dr Love’s trial, on two alternative charges, proceeded in August 2016. The trial was before Lang J, sitting without a jury. His Honour delivered his verdict (the Verdict) on 1 September 2016.
[15] Dr Love was convicted on the first charge of obtaining property by means of deception, contrary to s 240(1) of the Crimes Act 1961. In view of the conviction on that charge, it was not necessary for the Judge to consider an alternative charge of obtaining a secret commission.5
[16] Dr Love was sentenced to two years six months’ imprisonment on the charge of obtaining property by means of deception. He appealed against his conviction and sentence, but his appeal was dismissed in a judgment given by the Court of Appeal on 26 June 2017.6
[17] In its judgment, the Court of Appeal referred to Lang J’s findings that “the pattern of events between November 2006 and January 2007 showed Dr Love and Ms Skiffington’s contrivance of a fraudulent device to divert funds for their own benefit which should otherwise be payable to [Tenths].” The Court referred to Lang J’s reference to the existence of deception and a resulting personal gain, as “hallmarks of dishonesty”.
[18] The Court of Appeal then noted the Judge’s finding in the Verdict that both Dr Love and Ms Skiffington were “at pains” to ensure that the proposal to pay money to [Pipitea Street Development Ltd (PSDL), a company of which Ms Skiffington was a director] was kept secret.
[19] The Court of Appeal said:7
Lang J’s narrative of the relevant events and the documents upon which the charge was based reflects the strength of the Crown’s case. His comprehensive reasons for verdict are a detailed analysis of all the material evidence. The circumstances give rise to a clear inference that Dr Love and Ms Skiffington were guilty of an elaborate deception, primarily of [Tenths] but also the developers. We repeat that Dr Love does not challenge the Judge’s actual findings or his identification or application of the relevant legal principles.
5 Contrary to the Secret Commissions Act 1910.
6 Love v The Queen [2017] NZCA 265.
7 At [25].
Tenths relies on the Verdict in this claim against Ms Skiffington
[20] The Verdict is important in this proceeding, because Tenths relies on numerous findings made by Lang J in the Verdict, in support of its contentions that Ms Skiffington knowingly assisted Dr Love to breach fiduciary duties owed by him as a trustee of Tenths, and that Ms Skiffington was unjustly enriched by certain payments said to have been unlawfully diverted from Tenths to Dr Love and Ms Skiffington (or to entities with which one or both of them was associated).
[21] Tenths relied on only one affidavit in support of its summary judgment application, that of Mr Morris Te Whiti Love, the current chairman of Tenths. It did not provide affidavits from the main witnesses who had given evidence in the criminal proceeding. Instead, it relied on s 47(1) and (3) of the Evidence Act 2006 (the Act). Those subsections provide:
(1) When the fact that a person has committed an offence is relevant to an issue in a civil proceeding, proof that the person has been convicted of that offence is conclusive proof that the person committed the offence.
...
(3) This section applies—
(a) whether or not the person convicted is a party to the proceeding; and
(b) whether or not the person was convicted on a guilty plea.
[22] There is an issue between the parties over the extent to which Tenths is entitled to rely in this proceeding on the Verdict. Ms Skiffington did not participate at all in Dr Love’s criminal trial, and Mr Temm submits that in those circumstances s 47(1) is not engaged, at least on matters concerned with the extent of Ms Skiffington’s knowledge of the activities of Dr Love which were the subject of the criminal charges. In the alternative, Mr Temm submits that it would be unfair to prevent Ms Skiffington from giving evidence which might be contrary to any findings of Lang J in the Verdict in this proceeding. On this alternative argument, he relies on s 47(2) of the Act.
[23] Section 47(2) contains an exception to the general rule in s 47(1). It provides:
(2) Despite subsection (1), if the conviction of a person is proved under that subsection, the Judge may, in exceptional circumstances,—
- (a) permit a party to the proceeding to offer evidence tending to prove that the person convicted did not commit the offence for which the person was convicted; and
(b) if satisfied that it is appropriate to do so, direct that the issue whether the person committed the offence be determined without reference to that subsection.
[24] To the extent s 47(1) is engaged at all, Mr Temm submits that there are exceptional circumstances which justify Ms Skiffington being permitted to offer evidence under s 47(2) of the Evidence Act tending to prove that Dr Love did not commit the offence for which he was convicted.
[25] Later in this judgment, I will return to the findings in the Verdict, and the argument over the application of s 47 of the Evidence Act.
Tenths’ statement of claim and Ms Skiffington’s notice of opposition to the summary judgment application
[26] Tenths first pleads that Ms Skiffington was the former partner and business associate of Dr Love. It then refers to Dr Love’s conviction.
[27] The statement of claim goes on to refer to the following findings from the Verdict:
[28] Tenths then pleads that PSDL and Strategic were both fronts used by Ms Skiffington to receive the lease premium unlawfully diverted from Tenths. It alleges that the $3 million premium was channelled by way of payments under the guise of services and consultancy fees payable by the developers.
[29] The payments to PSDL totalling $1,687,500 ($1.5 million plus GST) were said to have been received by PSDL or its solicitor on the following dates:
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Date
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Amount
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Entity receiving
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11 January 2007
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$35,700
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PSDL
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11 January 2007
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$1,200,000
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PSDL
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11 January 2007
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$150,000
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PSDL
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15 January 2007
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$300,000
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PSDL’s solicitor, I D Hay
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$1,687,500
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[30] Tenths then pleads:
By unlawfully diverting the lease premium from [Tenths], [Dr] Love, with the knowing assistance of [Ms Skiffington], breached his duties as a trustee of [Tenths].
[31] Tenths contends that Ms Skiffington benefitted from the payments received by PSDL, without Tenths’ authorisation or knowledge, and that it would be unjust to allow her to retain them.
[32] Tenths repeats these allegations in its second cause of action, in which it seeks to recover:
(a) from Ms Skiffington, payments totalling $421,875 allegedly received by her between 8 September 2008 and 30 January 2009; and
(b) from Strategic, payments totalling $1,380,937.50 allegedly received by Strategic between 19 June 2008 and 15 April 2010.
[33] The second cause of action simply pleads that it “would be unjust to allow” Ms Skiffington and Strategic to benefit from the unauthorised payments made to them.
Ms Skiffington’s notice of opposition
[34] A notice of opposition was filed for Ms Skiffington on 25 May 2017. While Tenths had not applied for summary judgment on its second cause of action (the cause of action which includes the claims against Strategic), the notice of opposition was purportedly filed on behalf of both Ms Skiffington and Strategic.
[35] The notice of opposition advised that Ms Skiffington was in the final stages of terminal illness, and had been unable at that time to provide a supporting affidavit.
[36] On the merits, the notice of opposition pleaded the defendants’ belief that they had a comprehensive defence to Tenths’ allegations. Specifically, they denied that Ms Skiffington in any way knowingly assisted Dr Love with any fraud against Tenths, and they contended that the Verdict did not make findings of fact, in the absence of Ms Skiffington’s active participation at trial, about her knowledge of or participation in Dr Love’s conduct.
[37] The notice of opposition did not raise any issue of limitation, and nor did Mr Temm rely on any limitation argument in his submissions on the application for summary judgment against Ms Skiffington.8
[38] In a supporting memorandum filed with the notice of opposition, Mr Temm referred to the “complex factual background”, in which Dr Love’s “involvement is integral as [Ms Skiffington and Strategic] worked under his direction while he was Chair of [Tenths].”
[39] Ms Skiffington did later file an affidavit in opposition, sworn on 5 July 2017. She produced as an exhibit to that affidavit an earlier affidavit she had sworn on 28 June 2017 in opposition to the application for the interim freezing order. I will
refer to Ms Skiffington’s evidence, and to that of Mr Morris Love, later in this judgment as necessary.
[40] As is clear from the pleadings described above, and as Mr Temm acknowledged in his submissions, the essential claim against Ms Skiffington is one of knowingly assisting Dr Love to breach fiduciary duties owed by him to Tenths. She is said to have benefitted personally from that knowing assistance, without Tenths’ authorisation or knowledge, in circumstances where it would be unjust to allow her to retain the benefits she received.
The issues on the summary judgment application
[41] On its face, Tenths’ statement of claim appears to be based solely on the equitable doctrine of unjust enrichment, or restitution. However the statement of claim does specifically plead that Ms Skiffington knowingly assisted Dr Love in breaching his duties as a trustee of Tenths by unlawfully diverting the lease premium.
[42] At the hearing, Mr Temm noted that it was not clear from the statement of claim what the nature of the claim is, but that “we now know the claim is knowing assistance.” The argument proceeded on the basis that knowing assistance was one of the bases relied upon on the summary judgment application, Mr Temm taking the position that Tenths could not succeed in any event on that basis, as a claim for knowing (dishonest) assistance is akin to a fraud claim, and as such is not suitable for determination on a summary judgment application.
[43] To establish a case of knowing (dishonest) assistance against Ms Skiffington, Tenths must establish: (i) a breach or breaches by Dr Love of his fiduciary obligations owed to his co-trustees of Tenths and/or to Tenths’ beneficiaries; and (ii) that Ms Skiffington knowingly and dishonestly assisted Dr Love in the commission of the breach or breaches.
[44] The Court of Appeal recently considered the cause of action in dishonest assistance, in McKay & Ors v Sandman.9 There are four components:10
9 McKay & Ors v Sandman [2018] NZCA 103.
10 At [22].
(a) The existence of a trust or fiduciary duty;
(b) A breach of that trust or fiduciary duty by a trustee or fiduciary that results in loss;
(c) Participation by a defendant third party (a stranger to the trust) by assisting in the breach of trust or fiduciary duty; and
(d) Dishonesty on the part of the defendant.
[45] If breach of trust or fiduciary duty by Dr Love and dishonest assistance by Ms Skiffington are both established, there will then be an issue over what remedy is appropriate, and whether part or all of the relief claimed by Tenths should be granted.
[46] It appears that liability for unjust enrichment depends on quite different considerations. The learned authors of Equity and Trusts in New Zealand note that a substantial difference is that liability for unjust enrichment does not depend on the commission of any wrong by the defendant. Unlike claims of dishonest assistance, it is not concerned with the quality of the defendant’s conscience, but simply whether the receipt of the particular “enrichment” puts the case “within one of the unjust categories”.11
[47] Because these issues are being dealt with on a summary judgment application, it is for Tenths to satisfy the Court that Ms Skiffington’s estate has no defence to the claim on the first cause of action.12
[48] As to the application of that standard, the Court of Appeal said in Krukziener v Hanover Finance Ltd:13
the Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated ... The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is
11 Butler & Others, Equity and Trusts in New Zealand (Thomson Reuters, 2nd ed. 2009), at [42.2.2].
12 High Court Rules, r 12.2(1).
13 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26].
inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable ... In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it ...
[49] A defendant opposing a summary judgment application should identify the defences he or she wishes to raise, with a reasonable level of detail.14
[50] In some cases, allegations of fraud have been regarded as unsuitable for determination on a summary judgment application,15 but if the plaintiff’s evidence is sufficiently strong, there is no firm rule preventing the entry of summary judgment in a case in which dishonesty of the defendant is alleged.16
[51] Applying the standard of proof required on a summary judgment application, the issues to be addressed are the following:
(a) Is it reasonably arguable for Ms Skiffington’s estate that Dr Love did not breach fiduciary obligations owed by him to the beneficiaries of Tenths and/or to his co-trustees of Tenths, in relation to the alleged diversion to PSDL of the $1,687,500 paid by the developer to PSDL?
(b) If the answer to issue (1) is “no”, is it reasonably arguable for Ms Skiffington’s estate that she did not dishonestly assist Dr Love in committing the breach or breaches of his fiduciary obligations?
(c) Is it reasonably arguable for Ms Skiffington’s estate that she was not unjustly enriched by payment of all or part of the $1,687,500 paid by the developers to PSDL?
(d) If the answers to issues (1) and (2) are both “no”, or the answer to issue
- (3) is “no”, is Tenths entitled to judgment against Ms Skiffington’s
14 Haines v Carter [2001] 2 NZLR 167 (CA)
15 See, for example Crichton v Digby-Smith High Court Wellington CIV-2004-485-1805, 2 May 2005.
16 See for example Singapore Airlines Ltd v Mistry [2014] NZHC 1682, a case in which the plaintiff obtained summary judgment on a dishonest assistance claim against the director of a travel company that issued tickets on its behalf.
estate for the $1,687,500 claimed, and/or to any of the other relief claimed by it in its statement of claim?
[52] I will address each of those issues in turn.
Summary judgment Issue (1): Is it reasonably arguable for Ms Skiffington’s estate that Dr Love did not breach fiduciary obligations owed by him to the beneficiaries of Tenths and/or to his co-trustees of Tenths, in relation to the alleged diversion to PSDL of the $1,687,500 paid by the developer to PSDL?
[53] In Commissioner of Police v Filer,17 Gilbert J considered that the effect of s 47 of the Evidence Act is that, absent exceptional circumstances under s 47(2), the conviction provides conclusive proof that the person convicted committed the underlying offences. The section has the effect that factual findings that are implicit in the verdict of the tribunal of fact (in this case, Lang J) cannot later be challenged (subject to the Court’s s 47(2) exceptional circumstances jurisdiction). Filer was a decision on an application by the Commissioner of Police for a profit forfeiture order under the Criminal Proceeds (Recovery) Act 2009, following Mr Filer’s conviction and sentence on a charge of manufacturing and supplying methamphetamine. Gilbert J considered that the findings of fact made by the sentencing Judge, Keane J, as to the extent of Mr Filer’s involvement in the manufacture and supply, were essential to the sentencing decision. Those findings were admissible in evidence in the Commissioner’s later civil proceeding for profit forfeiture on the issue of the benefit Mr Filer was likely to have received from the offending. The sentencing findings of Keane J on the extent of Mr Filer’s involvement were considered to be admissible under s 18 of the Evidence Act 2006 (relating to the admissibility of hearsay statements in certain circumstances).
[54] In this case, Dr Love was convicted of obtaining property by means of deception, contrary to s 240 of the Crimes Act 1961. The Crown alleged that Dr Love enabled PSDL to obtain the funds paid by the developers as a premium to obtain the Pipitea Street land by deception, because he led the developers to believe Tenths had approved the arrangements under which payments were to be made to PSDL when that was not the case. In addition, he failed to advise the other trustees of Tenths that
17 Commissioner of Police v Filer [2013] NZHC 3111, at [25].
the developers were prepared to pay Tenths the sum of $3 million to acquire the right to lease the Pipitea Street land. Nor did he tell the other trustees about the arrangement between PSDL and the developers under the Services Agreement. Instead, the Crown alleged, he arranged for funds that ought to have been paid to Tenths to be diverted to PSDL under the Services Agreement. The Crown contended that Dr Love acted in this way with the intention of deceiving both the developers and his fellow Tenths trustees. He was alleged to have acted dishonestly and without claim of right, because he always intended that the funds paid to PSDL would be used to reduce his liability under the Westpac loan obtained for the acquisition of the Plimmerton property.18
[55] In upholding the Crown’s case on the “deception” aspect of the charge, Lang J found that the impression Dr Love created for the developers amounted to a representation that he was acting with the knowledge and authority of Tenths in respect of all aspects of the Pipitea Street project. That representation was clearly false, because the remaining trustees had no idea that the developers had offered to pay the
$3 million lease payment to Tenths. Nor did they know that PSDL had been set up, and that the payments made under the Services Agreement were to be paid to PSDL. Lang J concluded that there could be “little doubt” Dr Love intended to deceive the developers.19
[56] Lang J also found that the information Dr Love provided to his fellow trustees prior to or at a Tenths trustees’ meeting convened on 28 November 2006, amounted to a representation that it comprised the full extent of the offer the developers had made to Tenths. As Lang J found, this was “plainly not the case because it omitted any mention of the developers’ offer to pay $3 million to purchase the right to lease the Pipitea Street land”. His Honour found that Dr Love must have intended to deceive his co-trustees of Tenths because he knew he was not providing them with an accurate description of the developers’ offer.20
[57] And at [124] of the Verdict, Lang J specifically referred to the fiduciary duties owed by Dr Love to the beneficiaries of Tenths and to his co-trustees, to act in the
18 Those elements of the Crown case against Dr Love are taken from the Verdict, at [26]
19 The Verdict, at [117].
20 At [118]-[119].
interest of Tenths. He therefore had a duty to ensure that he provided his co-trustees with full and correct information regarding any agreement he might reach with the developers. His Honour said:21
[124] [Dr Love’s] failure to advise the other trustees regarding the developers’ offer to pay the sum of $3 million amounts to a breach of this duty. It deprived the other trustees of the opportunity to consider whether the offer should be accepted.
...
[58] The Judge went on to say:22
[128] The significance of the information Dr Love omitted to disclose combined with the circumstances in which the omission occurred means it must have been deliberate. The only reasonable inference to draw from this is that Dr Love omitted to advise the other trustees of the true situation because he did not want them to know about it.
[59] It is clear from the foregoing that an important part of the Verdict – and implicit in the Judge’s decision to convict Dr Love – was a finding that Dr Love was guilty of a form of deception involving withholding from his fellow trustees the fact and details of the developers’ offer to pay $3 million for the right to lease the land. That deception involved a breach of Dr Love’s fiduciary obligations owed to both his co-trustees of Tenths and Tenths’ beneficiaries,
[60] In the Court of Appeal, Dr Love did not challenge Lang J’s comprehensive reasons for verdict. The Court of Appeal recorded23 that those findings included the following:
Dr Love omitted to disclose a material factor to [his co-trustees of Tenths] – the existence of the developer’s offer to pay a premium in circumstances where there was a duty of disclosure. The agreement to pay was obviously material to the remaining trustees. They entrusted him with responsibility to negotiate with the developers on [Tenths’] behalf. His duty to ensure they were given full and correct information about any agreement was beyond dispute. His failure to advise them amounted to a breach of his fiduciary obligation.24 The information was of such significance that the omission must
21 At [124].
22 At [128].
23 Love v The Queen, above n 6, at [23].
24 At [123]-[124].
have been deliberate and was only explicable because he did not want the other trustees to know about the payment.
(footnotes omitted)
[61] I do not accept Mr Temm’s submission that s 47(1) is not engaged at all in the present circumstances. An essential part of Lang J’s finding of deception by Dr Love upheld by the Court of Appeal, was that he deceived his fellow trustees of Tenths by deliberately not disclosing to them that the developers were prepared to pay Tenths a premium of $3 million to obtain a lease of the Pipitea Street land on the terms they had proposed. That is precisely the deception that is now alleged to constitute breach by Dr Love of his fiduciary obligations to Tenths, and in those circumstances the effect of s 47(1) is that the finding of Lang J is conclusive proof of both the deception and the breach of fiduciary obligations (unless Ms Skiffington is permitted to give evidence otherwise under s 47(2)(a)).
[62] Section 47(2) requires exceptional circumstances.
[63] The issue of when the Court might find exceptional circumstances, justifying the admission of a defendant’s evidence under s 47(2)(a), was considered by the Supreme Court in Morton v R.25 Although the case was decided under the corresponding provisions of s 49 of the Act, which applies to criminal cases, the same principles will be applicable in this case. In Morton, Young and O’Regan JJ noted that there will be some circumstances in which a Court may have little difficulty in finding exceptional circumstances. A natural starting point might be to consider whether there is reason to think that the conviction was wrongly entered. Determining whether that is so is likely to involve some analysis of the evidence upon which the conviction is based, the reasons, if any, for thinking that such evidence might have been wrong, and new evidence which might have become available since the hearing. A further possible basis for a finding of exceptional circumstances might be the existence of a particular reason which would make it unfair to treat the conviction as conclusive against a particular party.
25 Morton v R [2016] NZSC 51; [2017] 1 NZLR 1.
[64] In my view, there were no exceptional circumstances in this case that might be relevant to Issue (1). I did not understand Mr Temm to argue strongly to the contrary
– his primary submission was essentially that s 47 was not engaged at all, as nothing in the section prevented Ms Skiffington from giving evidence of what she knew (or, more importantly, did not know) about Dr Love’s activities that resulted in his conviction. Of course that is not the issue with which I am concerned under Issue (1).
[65] Ms Skiffington did contend in her affidavit of 28 June 2017 that the Tenths’ board was fully aware of the arrangements involving PSDL, and in particular that PSDL would receive payments direct from the developers for the work it did helping to bring the project to fruition. But I did not understand her to say that the Tenths’ board was made aware that, prior to the board meeting of 28 August 2006 (when the board gave approval in principle to proceed with the project), the developers were then prepared to pay the $3 million to Tenths, and that the lease payments they were proposing to pay Tenths in the early part of the proposed lease term were significantly lower than might otherwise have been the case because of the proposed payment of the $3 million premium. That is the matter that was at the heart of Lang J’s finding that Dr Love deceived his fellow trustees, and I do not think Ms Skiffington’s affidavit addresses it. Indeed, she said that she attended no Tenths’ board meetings, and “I cannot therefore say anything about what the trustees were told about consulting fees or similar”.
[66] It is difficult to conceive of any reason for Dr Love not reporting full details of the developers’ offer to the Tenths’ board meeting of 28 August 2006, other than that he intended to deceive his fellow trustees.
[67] In the circumstances just described, I do not consider it reasonably arguable that, at or before a trial of this proceeding, the Court might find that there are exceptional circumstances such that Ms Skiffington should be permitted under s 47(2) to adduce evidence tending to show that Dr Love did not deliberately deceive his fellow Tenths’ trustees by withholding from them the fact that the developers were prepared to pay the $3 million to Tenths. The conviction therefore provides conclusive proof of those matters under s 47(1), and it is decisive against Ms Skiffington on this part of Tenths’ case against her.
[68] I therefore conclude on Issue (1) that it is not reasonably arguable for Ms Skiffington’s estate that Dr Love did not breach fiduciary obligations owed by him to the beneficiaries of Tenths and/or to his co-trustees of Tenths in relation to the alleged diversion to PSDL of the $1,587,500 paid by the developers to PSDL.
Summary judgment Issue (2): If the answer to Issue (1) is “No”, is it reasonably arguable for Ms Skiffington’s estate that she did not dishonestly assist Dr Love in committing the breach or breaches of his fiduciary obligations?
The legal test for dishonest assistance or receipt
[69] Discussions on the requisite knowledge required for a finding of dishonest assistance, or dishonest receipt, often begin by citing Baden, an English Chancery case on dishonest assistance, where Gibson J referred to the following categories of “knowledge”:26
... (i) actual knowledge; (ii) wilfully shutting one’s eyes to the obvious;
(iii) wilfully and recklessly failing to make such inquiries as an honest
and reasonable man would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man; (v) knowledge of circumstances which would put an honest and reasonable man on inquiry.
[70] The position on the level of knowledge required for a finding of dishonest assistance in New Zealand, was resolved by the Supreme Court in Westpac New Zealand Ltd v MAP & Associates Ltd, where Tipping J, writing for the Court, considered that:27
The key ingredient in the cause of action for dishonest assistance is the need for a dishonest state of mind on the part of the person who assists in the breach of trust. ... such a state of mind may consist in actual knowledge that the transaction is one in which the assistor cannot honestly participate. But it may also consist in what we would describe as a sufficiently strong suspicion of a breach of trust, coupled with a deliberate decision not to make inquiry lest the inquiry result in actual knowledge. For the purpose of this alternative, it is necessary that the strength of the suspicion that a breach of trust is intended makes it dishonest to decide not to make inquiry. That state of mind, which equity equates with actual knowledge, is usually referred to as wilful blindness. It involves shutting one's eyes to the obvious and can thus fairly be equated with the dishonesty involved when there is actual knowledge.
27 Westpac New Zealand Ltd v MAP & Associates Ltd [2011] NZSC 89, [2011] 3 NZLR 751 at [27].
[71] Therefore, the test for dishonest assistance clearly comprises the first three
Baden categories.
[72] More recently, the Court of Appeal has considered in Fletcher v Eden Refuge Trust,28 and in McKay & Ors v Sandman,29 the kind and extent of knowledge required before a third party to a trust can be liable for dishonest assistance.
[73] In the latter case the Court noted30 that the New Zealand approach was conveniently summarised in Fletcher v Eden Refuge Trust as follows:
In New Zealand a dishonest state of mind is determined by the application of an objective standard. A dishonest state of mind consists of actual knowledge that the transaction is one in which the assistor cannot honestly participate or a sufficiently strong suspicion of a breach of trust that it is dishonest not to inquire, coupled with a deliberate decision not to make inquiry lest the inquiry result in actual knowledge.
[74] The question of whether the alleged third party assistor acted dishonestly is specific to the circumstances known to the third party at the time. The Court will also have regard to the third party’s personal attributes, such as his or her experience and intelligence, and the reasons for his or her actions.31
[75] In respect of knowing receipt, there is uncertainty as to whether the Baden categories (iv) and (v) apply. In Equiticorp Industries Ltd v Hawkins, Wylie J considered they did not,32 but the issue is yet to be resolved. There is potentially an argument that knowing receipt would require a lower standard of knowledge than knowing assistance, as a remedy for the passing of trust property at the expense of beneficiaries is at issue in a knowing receipt case.
28 Fletcher & Ors v Eden Refuge Trust [2012] NZCA 124; [2012] 2 NZLR 227.
29 McKay & Ors v Sandman, above n 8.
30 At [27]
32 Equiticorp Industries Ltd v Hawkins [1991] 3 NZLR 700 (HC) at 727 and 728.
The evidence in this case
(1) The Verdict
[76] The principal evidence of Ms Skiffington dishonestly assisting Dr Love to breach his fiduciary obligations, comes in the form of findings in the Verdict.
[77] One of Lang J’s findings in the Verdict, which in my view was implicit in his decision to convict Dr Love on the charge of obtaining property by means of deception, was that Dr Love and Ms Skiffington devised a plan or strategy designed to divert for their own benefit funds that would otherwise be payable to Tenths. His Honour found that the strategy involved an intention to deceive.33
[78] Lang J found that there was dishonest concealment by Dr Love and Ms Skiffington – both “appear to have been at pains to ensure that the proposal that the funds be paid to PSDL be kept secret”.34 His Honour referred to the fact that the draft form of the agreement to lease submitted by the developers’ solicitors on 23 November 2006, which provided that the $3 million payable for the right to obtain a lease would be paid to Tenths, was not provided to Burton and Co, the newly- instructed solicitors for Tenths. Ms Skiffington had received the draft agreement to lease before Burton and Co were instructed, and she participated in the meeting at which they were instructed. Lang J inferred from the failure to provide Tenths’ solicitors with the developers’ proposed form of agreement to lease that Ms Skiffington (and her fellow PSDL director, Mr Stevens, who attended the meeting with Burton and Co with Ms Skiffington) did not want Burton and Co to know that Dr Love had already reached a tentative agreement with Mr Knight, the developers’ solicitor, regarding the amount the developers were prepared to pay Tenths for the right to purchase the lease. Burton and Co were told that the amount to be paid for the lease premium was to be left blank, and they proceeded thereafter on the basis that the lease premium was yet to be determined.
33 Verdict, at [129].
34 Verdict, at [131].
[79] Lang J noted that the important point about the dealings Ms Skiffington and Mr Stevens had with Burton and Co was that they were:35
“obviously anxious that their newly instructed solicitors should not know that the developers had already agreed to pay the sum of $3 million by way of lease premium. Furthermore, they did not tell Ms Shirley [of Burton and Co] that the arrangements called for the sum of $1.5 million to be paid in the near future. This caused Ms Shirley some puzzlement when Mr Knight wrote to her on or about 20 December 2006 suggesting that the developers might caveat the titles to the Pipitea Street land in order to protect themselves in relation to the $1.5 million payment. ...”
[80] Finally, on the issue of dishonest concealment, Lang J referred to an incident in May 2008 when the developers’ solicitors inadvertently sent a draft form of the Services Agreement to Tenths’ solicitors, Gibson Sheat. Ms Skiffington immediately sent an email to Mr Knight referring to the inadvertent sending of the document, saying:36
Please ensure that this is completely gathered back to [the developers’ solicitors’] and is never provided to third parties. It is strictly confidential as you know.
[81] Lang J noted that the incident suggested that Dr Love and Ms Skiffington were anxious, as late as 2008, that the Services Agreement should not be seen by others. His Honour went on to observe that it was difficult to see how Dr Love and Ms Skiffington could have had a valid objection to the document being sent to the solicitor who acted for Tenths.37
[82] The Verdict shows that the dishonest concealment that formed part of the deception perpetrated by Dr Love was assisted by, and at least in part achieved through the instrumentality of, Ms Skiffington.
[83] In its decision on Dr Love’s appeal, the Court of Appeal endorsed that view, finding that the circumstances gave rise to a clear inference that Dr Love and Ms Skiffington were guilty of an elaborate deception, primarily of the Trust but also the developers.38
35 Verdict, at [138].
36 Verdict, at [138].
37 Verdict, at [142].
38 Love v The Queen, above n 6, at [25].
[84] So Ms Skiffington was considered by both Lang J and the Court of Appeal to have been both a participant in an “elaborate deception” of Tenths and the developers. She was also seen to be a beneficiary of that deception (in having her liability on the Westpac loan substantially reduced by the payments received into the Westpac loan account from PSDL). Those findings formed part of the foundation for Dr Love’s conviction, and it is implicit in them that Ms Skiffington dishonestly assisted Dr Love’s breaches of his fiduciary obligations to Tenths’ board of trustees and beneficiaries.
[85] Unless s 47(2) applies, then, Dr Love’s conviction provides conclusive evidence that Ms Skiffington dishonestly assisted Dr Love in breaching the fiduciary duties he owed to those parties.
(2) Mr Morris Love’s evidence – the Services Agreement
[86] Mr Morris Love, the current chairman of Tenths’ board of trustees, produced with his affidavit a copy of the Services Agreement entered into between PSDL as consultant and the developers’ entity, Pipitea Street Limited, as Lessee. The copy produced by Mr Morris Love was undated, but in the Verdict Lang J concluded that the document was in final form by early December 2006 and completed on or about 22 December 2006.
[87] The Services Agreement recorded that Tenths had engaged Ms Skiffington as its nominated advisor to provide Tenths with certain professional and supervisory services in connection with the development, and that the Lessee would pay the professional and supervisory services of Ms Skiffington in that capacity. The operative part of the Services Agreement provided that, in consideration for PSDL providing the professional and supervisory services contemplated by the Services Agreement, the Lessee would pay the following sums:
(a) $1,500,000 plus GST, $300,000 of which would be payable on the execution of the Services Agreement and a further $1,200,000 payable within seven days of execution. Both sums would be immediately and fully refundable in the event settlement did not occur under the Agreement to Lease between the Lessee and Tenths.
(b) A further $1,500,000 plus GST would be paid on the Settlement Date (defined as the date on which the last of certain conditions in the Agreement to Lease were satisfied).
[88] Clause 2.3 of the Services Agreement provided that those payments partly represented a payment for an interest in the land. The Lessee would be entitled to register a caveat to secure its interest in the land, pending settlement under the Agreement to Lease.
[89] Clause 9 of the Services Agreement provided:
9. GENERAL
Confidentiality
9.1 The parties shall keep confidential every aspect of this Agreement. The parties agree that they may disclose details of this Agreement to their respective agents, tenants and professional advisers and consultants but agree that each shall instruct the same to keep confidential every aspect of this Agreement. If either party is required to disclose any details of this Agreement to any persons other than those described above to give effect to this Agreement or for the purposes of complying with any statutory or other obligation, then that party shall request the consent of the other party and the other party shall not unreasonably withhold its consent. Without limiting the foregoing the Lessee specifically acknowledges that the provisions of this Agreement provide benefits which are personal to the Lessee and not available to any other lessee from Tenths Trust of land owned by Tenths Trust and as a consequence disclosure of those benefits contrary to the provisions of this clause is likely to cause Tenths Trust serious financial loss which may not be readily assessable and as a consequence the Lessee acknowledges that any attempted breach of this provision shall entitle Tenths Trust to seek and obtain injunctive relief against it (inter alia). The provisions of this clause shall survive termination of this Agreement.]
(3) Ms Skiffington’s evidence
[90] In her affidavits (sworn on 28 June 2017 and 5 July 2017) Ms Skiffington began by making a number of general points, none of which appears to be relevant to the issue of whether she dishonestly assisted Dr Love to breach fiduciary obligations owed by him to Tenths.39
39 She said that none of the work she carried out was done by her personally – all her work was done either through PSDL or through Strategic. At the hearing Mr Temm acknowledged that if Ms Skiffington is found to have acted dishonestly in assisting Dr Love to breach fiduciary
[91] Ms Skiffington asserted in her 5 July 2017 affidavit that Dr Love’s conviction did not settle evidential matters that related to her. She contended that she stood in a different position from Dr Love vis-à-vis Tenths, and that she owed it no fiduciary obligations. Again I do not consider that it matters that Ms Skiffington may not herself have been in the position of a fiduciary vis-à-vis Tenths – the critical issue is whether she dishonestly assisted Dr Love, who she knew to be in that position, in breaching his fiduciary duty.
[92] Ms Skiffington said that Tenths’ board knew of certain arrangements which had been in place before she began working with the developers, under which Yellowstone, a company owned or controlled by Dr Love’s son Matene, was to be paid
$1.5 million in consultancy fees to bring the Pipitea Street project to fruition. She said that Tenths’ board knew of this arrangement, and agreed to allow Yellowstone to be a consultant as long as his fees were paid by the developers.40
[93] Mr Reid objected to this evidence, submitting that Mr Matene Love was himself convicted of an offence relating to this arrangement, and that the conviction was entered on the basis that Tenths’ board did not know of the arrangements apparently made between Yellowstone and the developers. While there was no evidence of the alleged conviction of Mr Matene Love before the Court, Mr Temm did not object to leave being granted to Tenths to file and serve, by 20 July 2017, the judgment or other formal record of the alleged charges against Mr Matene Love and the alleged conviction. I made a direction accordingly. Tenths did not file any such document, and I will proceed on the basis that the alleged conviction of Mr Matene Love has not been proved by Tenths.
[94] Ms Skiffington said that she became involved in the project at Dr Love’s request. She then became a director of PSDL at the request of Mr Stevens, although (as she put it) she did no formal directorship work at all. Mr Stevens completely
obligations owed by him to Tenths, it would not avail her to say that she did so while acting as a director of PSDL. Secondly, she said that she was never paid by Tenths for her work – all of the monies received by PSDL came from the developers. Thirdly, she said that Tenths received significant and ongoing benefit from the work she carried out.
40 The $1.5 million was never in fact paid to Yellowstone. $150,000 was paid at an earlier time, but the difficulties which arose in the relationship between the developers and Matene (which resulted in Ms Skiffington becoming involved) occurred before the $1.5 million was paid to Yellowstone.
controlled PSDL. Ms Skiffington said that she was never shown any resolutions to support any of the transactions done by PSDL, and did not attend any company meetings, nor was she privy to any of PSDL’s day-to-day business. She said that she did not review its financial statements.
[95] Ms Skiffington described her total focus as working closely with the developers and their solicitors to achieve project on the Pipitea Street development.
[96] Referring to the Services Agreement entered into between the developers’ company and PSDL, Ms Skiffington said that the clear understanding was that she would work for no guaranteed payment. She (or rather, PSDL) would be paid only if it could get the project over the line.
[97] Ms Skiffington produced a copy of a letter dated 15 August 2012 from the developers, addressed to the then-acting chairman of the Tenths board. The letter acknowledged that the developers had become aware of the potential conflicts between Ms Skiffington and Dr Love, and they were accordingly very careful to make sure that the existence of the contracts and payment arrangements were put in front of the Tenths’ Trust at every opportunity. They also pointed out that Ms Skiffington was appointed by Tenths to be a consultant on the basis that remuneration would be paid by the developers (or interests associated with them). The letter said that this was discussed with the trustees very early on in the process and confirmed.
[98] The developers’ letter of 15 August 2012 said that it was made clear in the contract with PSDL that the developers were hoping to work on other projects with Tenths, and that Ms Skiffington’s ongoing consultancy fees would cover these prospective projects. Because of the global financial crisis, many of those anticipated projects did not eventuate.
[99] The developers’ letter of 15 August 2012 expressed the developers’ belief that Ms Skiffington was effectively a “go-between” between Tenths and the developers, and that was accepted by the trustees of Tenths. The existence of the contracts and knowledge of the payments made was said to be known to the accounting firm BDO, to Tenths’ solicitors, and to the quantity surveying firm acting on the project. Also,
the bank and many other people involved in the project were said to know about the fees arrangements. The developers said that there was definitely no attempt to hide the payment, but once they became aware of the relationship between Ms Skiffington and Dr Love they ensured that the contractual arrangements were correctly documented and signed off.
[100] Ms Skiffington said that she never attended any Tenths board meeting and “I cannot therefore say anything about what the trustees were told about consultancy fees or similar.” However, she said that she did believe the trustees knew about the first payment made under the Services Agreement, because every previous payment for consultancy services of the kind PSDL was providing had been structured that way.
[101] Generally, Ms Skiffington contended that the Verdict did not include her “key factual perspectives”. She said that Dr Love’s conviction was “at total odds with my understanding of what transpired throughout the entire period that [Dr Love] was chair of [Tenths].” She repeated her assertion that the Tenths’ trustees of the day did know what was occurring in the development, including that the consultancy fee she was paid would be paid by the developers.
[102] Ms Skiffington challenged the propriety of the opening of the Westpac accounts, into which the money received by PSDL from the developers was later paid. She asserted that Dr Love never opened the Westpac accounts, and deposed to her belief that they were opened by her business associate Mr Stevens, working with an officer of Westpac. She said that it was Mr Stevens who set up the trust structure that became the vehicle for the ownership of the Plimmerton property, and it was only much later that she realised that creating a trust ownership structure to hold the Plimmerton property gave Mr Stevens control over the lending and capital payments. She said that Mr Stevens made himself the managing trustee of the two trusts, through his company, Arahi Trustee Services Limited. That later gave Mr Stevens the ability to steal $500,000 which was intended to pay tax on the money paid by the developers to PSDL. (The alleged theft was said to have been perpetrated by Mr Stevens and/or his company through a complex and fraudulent “money merry-go-round” that Mr Stevens orchestrated together with a company called Tax Planning Services (TPS), a
company associated with the accountants Rowley and Skinner, who were later convicted of fraud.)
[103] Ms Skiffington denied any knowledge of the bank statements relating to the Westpac accounts. She said that the mailing address on the statements was not hers, and nor was it (then) Dr Love’s address. She said that Dr Love never received the bank statements, unless they were handed to him subsequently.
[104] In her 28 June 2017 affidavit, Ms Skiffington acknowledged that, as she and Dr Love intended to live in the Plimmerton property, he did sign some Westpac documents. However, Dr Love had no funds to contribute to the acquisition of the Plimmerton property, which he never regarded as his. Nor did the Moana Rua Trust contribute any funds to the purchase.
[105] Ms Skiffington contended that much of what was later said about the various transactions involving the movement of funds into and out of the Westpac bank accounts operated by her and Dr Love (and/or their respective trusts) occurred without her actual knowledge. She said that she did not even know that the money had come in until 25 May 2007. She had not previously had dealings with Westpac, and did not operate Internet banking. The address for the bank accounts was the address of Mr Stevens’ company. She asserted that she had no knowledge of the various transactions described in the Verdict until they were all laid out by the Serious Fraud Office in 2012. When the extent of these transactions and the involvement of Mr Stevens was established, Ms Skiffington resigned from the board of PSDL.
[106] Ms Skiffington went on to say that neither Dr Love nor she understood why the two trusts were established to acquire the one house (the Plimmerton property). Indeed, she said that she never knew there were two trusts until about 2010. Mr Stevens and the Westpac officer with whom he was working set up the bank accounts in the names of Dr Love and Ms Skiffington (or their trusts), and moved money into and from the accounts without her knowledge, and she accused Mr Stevens and the Westpac officer of working together to create a false welfare statement for Dr Love, so that those responsible for loan approvals within Westpac would approve the $1.8 million advance for the purchase of the Plimmerton property.
[107] Ms Skiffington denied that she or Dr Love directed fraudulent or criminal funds through their bank accounts for the purchase of the Plimmerton property. She accepted that Mr Stevens, working with Messrs Rowley and Skinner and the Westpac bank officer, did move money around, but she said it was all done without any reference to her or Dr Love. That was said to be self-evident from the fact that Mr Stevens stole $500,000 “in the money merry-go-round”.
[108] Ms Skiffington referred to a list of “numerous disputed facts” which she said made the claim unsuitable for summary judgment. One of them was “the knowledge of the trustees of [Tenths]”. She asked for access to all of Tenths’ documents, saying that those documents would defeat Tenths’ unjust enrichment claim. Specifically, she sought all the reports and records of work done by her companies on projects for Tenths over a period of approximately six years.
Discussion and conclusions on summary judgment Issue (2)
[109] The first question is whether Ms Skiffington’s evidence is admissible. It will be admissible if there are exceptional circumstances, and the situation comes within s 47(2) of the Act.
[110] The operation and effect of s 47(2) was considered by the Court of Appeal in X v Attorney-General.41 The Court of Appeal explained that, where the evidence sought to be admitted under s 47(2)(a) is relevant for some purpose other than to prove that the person convicted did not actually commit the offence, it may be appropriate and practicable for permission to be given under paragraph (a) without a direction being given under paragraph (d). However, the position is different when the evidence is sought to be admitted only to prove the convicted person did not commit the offence. If in those circumstances the defendant’s proposed evidence is admitted under s 47(2)(a), the Court should then make a direction under s 47(2). Otherwise, the evidence offered under s 47(2)(a) would have no effect.42
41 X v Attorney-General [2016] NZCA 476.
42 At [27].
[111] I think there is an arguable basis for a finding of exceptional circumstances in this case. Ms Skiffington was unable to participate in the trial of Dr Love, and had no opportunity to respond to the allegations made against her in that trial. She later maintained her innocence on the matters that resulted in Dr Love’s conviction, and the claim against her estate is substantial. In those circumstances I think it would be unfair to Ms Skiffington’s estate to treat Dr Love’s conviction as conclusive against it on the issue of whether Dr Love and Ms Skiffington were party to the elaborate deception found by Lang J.43 Natural justice requires that the evidence she has given tending to show that she was not part of any such elaborate plan of deception should be admitted under s 47(2)(a). No direction is necessary under s 47(2)(b), because Ms Skiffington’s evidence was given in support of her own position in the civil case against her, including her claimed lack of knowledge of any breach by Dr Love of his fiduciary obligations. It was not sought to be admitted only to prove that Dr Love did not commit the offence for which he was convicted.
[112] The result on the admissibility issue is that I will treat relevant parts of the Verdict as admissible evidence, in accordance with Filer, to be read and considered with any contrary evidence provided by Ms Skiffington.
[113] Lang J and the Court of Appeal both clearly considered that there was strong evidence that Ms Skiffington was party to a plan of deception perpetrated on both Tenths and the developers. I agree that the evidence of either actual dishonest knowledge by Ms Skiffington (or at least circumstances which should have given rise to suspicions on her part that would have led an honest person to make enquiries she did not make), is strong. I consider that the following matters in particular point strongly in favour of Tenths on the dishonest knowledge issue.
[114] First, there is the sequence of the events that commenced with a meeting at the offices of the developers’ solicitors on 22 November 2006 and culminated 6 days later with Tenths’ board giving its approval to the proposed Agreement to Lease to the developers without knowledge that the developers would have been prepared to pay Tenths an up-front payment of $3,000,000 plus GST for the right to acquire the lease.
[115] Dr Love and Ms Skiffington were both present at the meeting on 22 November 2006. They were assisted at and immediately after the meeting by Mr Reed QC. At the meeting, Mr Reed asked on Tenth’s behalf for a cash payment of
$3,000,000-$4,000,000 for the transaction to proceed.
[116] Mr Knight wrote to Mr Reed immediately after the meeting, confirming that the developers would be prepared to pay $3,000,000 plus GST in the form of prepaid rental, on the basis that they would be entitled to occupy the land rent-free for the first 3 years. Ms Skiffington received that letter and she faxed a copy of it to Mr Stevens in Wellington that day.
[117] Ms Skiffington and Mr Stevens then instructed Mr Henderson of Gault Mitchell, Solicitors, to send a letter to Mr Knight in a form drafted by Mr Stevens. This letter proposed that the lease premium to be paid by the developers would be
$4,000,000, and it would paid not to Tenths on settlement, but to PSDL. The letter referred to the “extreme sensitivity” of its contents, and required confidentiality. Mr Henderson sent the letter as instructed, on 23 November 2006.
[118] This was the first suggestion following the meeting on 22 November 2006 that any lease premium would be payable to PSDL. Lang L found that Dr Love approved this letter before it was sent.44
[119] Mr Knight wrote back to Mr Henderson the same day, with a copy to Mr Stevens, advising that there was tentative agreement on the commercial terms. A draft Agreement to Lease would follow.
[120] Mr Knight sent the draft Agreement to Lease to Mr Henderson at 5.17pm that day. The draft Agreement to Lease proposed a payment of $3,000,000 plus GST to Tenths, as the purchase price for the right to lease the land. The rent would be reduced to $100,000 per annum for the first 3 years of the lease term.
44 Verdict, paragraph [89].
[121] Mr Henderson promptly sent Ms Skiffington a copy of the draft Agreement to Lease received from Mr Knight. Lang J concluded that she must have shown it immediately to Dr Love.45
[122] Summing up the narrative in the Verdict to there, Ms Skiffington knew on 24 November 2006 that Tenths had initially asked for the lease premium to be paid to it, but on 23 November 2006 asked (in the letter drafted by Mr Stevens) that the premium be paid to PSDL. She also knew that the terms of Mr Stevens’ proposal for payment of the higher figure of $4,000,000 to PSDL had been rejected by the developers – the form of Agreement to Lease received by her from Mr Henderson on 24 November 2006 showed that the lease premium would be payable to Tenths (not PSDL).
[123] The next step is that Tenths moved immediately to change its solicitors that same day (24 November 2006) Ms Skiffington and Mr Stevens instructed Burton & Co to take over from Gault Mitchell. Ms Skiffington did not offer any explanation for the change of solicitors in her evidence in this proceeding. Remarkably, as Lang J noted in the Verdict,46 Ms Skiffington and Mr Stevens did not give Burton & Co a copy of the developers’ draft Agreement to Lease which Ms Skiffington had received earlier in the day. Nor did they advise Burton & Co of the developers’ tentative agreement to pay $3,000,000 to Tenths for the right to acquire the lease. It appears that Burton & Co were told of the possibility that $3,000,000 might be paid by way of lease premium, but they were also told that the amount of the lease premium was to be left blank in the draft Agreement to Lease. Burton & Co thereafter proceeded on the basis that the amount to be paid by way of lease premium was yet to be determined. That remained the position until 21 December 2006, when Burton & Co found out that the Agreement to Lease provided for a consideration of $1.00 for the acquisition of the right to lease the land, “plus such sums as are agreed to be paid to [Tenths] as part
45 Dr Love included the main commercial terms of the draft Agreement to Lease (but not the developers’ willingness to pay a $3,000,000 premium for the right to acquire the lease) in a Risk Management Proposal that he prepared for the Tenths’ board meeting on 28 November 2006. Lang J found that the Risk Management Proposal was probably sent out to Tenths’ board members on 24 November 2006 (Verdict, at [94]).
46 Verdict, at [61].
of the costs of the lessee’s development”. The involvement of Burton & Co ceased at about that point.
[124] Lang J noted in the Verdict that Ms Skiffington and Dr Love were obviously anxious that Burton & Co should not know that the developers had already agreed to pay the sum of $3,000,000 by way of lease premium. Nor did they tell Ms Shirley of Burton & Co that the arrangements later concluded between PSDL and the developers called for the sum of $1.5 million to be paid in the near future. Ms Shirley did not find out about that until Mr Knight wrote to her on or about 20 December 2006 raising the issue of whether the developers might be entitled to register a caveat on the land to protect their interests on payment of the $1.5 million. Ms Shirley advised Ms Skiffington and Mr Stevens on 21 December 2006 that any additional payment should be recorded in the Agreement to Lease. That was the last communication on Burton & Co’s file, and no such amendment was made to the Agreement to Lease.
[125] Ms Skiffington was an experienced solicitor, with considerable experience in development transactions. Those are personal attributes relating specifically to Ms Skiffington that I can have regard to on the knowledge issue.47 Further, in a letter to Mr Knight dated 3 September 2006 she had described herself as Tenths’ “interface” with the developers’ solicitors, and that she would “front and lead” between Tenths and the developers’ solicitors.48 Those factors suggest that Ms Skiffington must have known why Tenths changed its solicitors (apparently abruptly) on 24 November 2006, and why the new solicitors were not given a copy of the Agreement to Lease submitted the previous evening by the developers. I think it was clearly for Ms Skiffington in this proceeding to provide some explanation on those matters, but she did not do so. The obvious inference in those circumstances is the same as that drawn by Lang J and the Court of Appeal – Burton & Co were not to know that the developers were already prepared to commit to paying the full $3,000,000 plus GST to Tenths for the right to acquire the lease.
[126] Ms Skiffington was also clearly on enquiry (if she did not already know) as to how and why Dr Love managed to persuade the Tenths board to forego the up-front
47 Royal Brunei Airlines Sdn Bhd v Tan, above n 29, at 391.
48 Verdict, at [12].
payment of $3,000,000 the developers were prepared to make to Tenths, and to allow that money to be paid to PSDL. But she did not say in her evidence that she questioned Dr Love on that subject, or that he told her that the Tenths board was aware that the developers had offered the $3,000,000 plus GST to Tenths, but had declined that offer in favour of the money going to PSDL.
[127] In my view, those were obvious questions for an experienced solicitor to have asked, and if Dr Love had told Ms Skiffington that he had disclosed to Tenths’ board the fact that the $3,000,000 had been offered to it, it is difficult to imagine that Ms Skiffington would not have said that in her evidence. She did not, and the obvious inference is that she either knew that fact had not been disclosed to the Tenths’ board or she deliberately refrained from making the enquiry lest she might find out that it had not been disclosed.
[128] The second aspect going to the issue of dishonest knowledge on the part of Ms Skiffington relates to the timing of the acquisition of the Plimmerton property by the trusts established by Ms Skiffington and Dr Love. As early as 7 November 2006, Ms Skiffington had applied to Westpac Bank on behalf of herself and Dr Love for a
$1.8 million loan for the purchase, and the agreement to purchase was signed the following day. From that point on, Ms Skiffington and Dr Love knew that they would have a substantial liability to Westpac following settlement of the purchase in December 2006, and Lang J found in the Verdict that they were only prepared to assume liability for the Westpac loan because they knew they would have a source from which they could reduce it considerably in the near future. His Honour upheld a Crown submission that Dr Love in effect obtained the money for PSDL.49
[129] Lang J found that there were other factors indicative of dishonest concealment on the part of Ms Skiffington and Dr Love. His Honour referred to the fact that an early version of the Services Agreement had been drafted by Gault Mitchell, in which Tenths was named as a party. That version was subsequently abandoned, and the Judge found that the Services Agreement eventually signed by PSDL and the developers was probably prepared by Ms Skiffington herself, with input from Mr Stevens.50 His
49 Verdict, at [106] and [111]-[112].
50 Verdict, at [68].
Honour also found that Dr Love participated in the preparation of the Services Agreement. His Honour referred to a note found on Dr Love’s computer reading “we loaned $1,00,000 from PSDL to purchase [the Plimmerton property]”, noting that whoever created that document obviously viewed the funds from PSDL as being for the joint benefit of both Ms Skiffington and Dr Love in relation to the purchase of the Plimmerton property. That contradicted Dr Love’s evidence given at his trial that he always viewed the acquisition of the Plimmerton property as being for the sole benefit of Ms Skiffington.51 It is also inconsistent with Ms Skiffington’s evidence on the point given in this proceeding, which was also to the effect that Dr Love regarded the Plimmerton property as Ms Skiffington’s property.
[130] Next, there was an email from Mr Knight to Ms Skiffington dated 23 March 2007, in which Mr Knight said that the developers wanted to be sure that the funds paid to PSDL were being used by Tenths (less appropriate consultancy fees), or that Tenths authorised them to be paid to PSDL. The email advised that Dr Love had earlier indicated that the funds were to cover treaty claim costs etc. He asked that Ms Skiffington confirm that that was the case.
[131] Lang J considered that this email supported the view that Dr Love had created an environment in which the developers believed they were making payments to PSDL for the benefit of Tenths. In fact it is clear that the payments made by the developers to PSDL before 23 March 2017 had been used substantially for the acquisition of the Plimmerton property.
[132] The last matter to which I refer that might be considered to support a finding of dishonest knowledge on the part of Ms Skiffington, is the evidence of her reaction when a copy of the Services Agreement was inadvertently disclosed in May 2008 to the solicitors then acting for Tenths.52 Lang J concluded that Dr Love and Ms Skiffington were anxious as late as 2008 that the Services Agreement should not be seen by others. His Honour commented, however, that it was difficult to see how they could have had a valid objection to the document being sent to the solicitor who
51 Verdict, at [102] and [105].
52 Referred to at paragraph [76] and [77] of this judgment.
acted for Tenths.53 I agree. It is difficult to see why Dr Love and Ms Skiffington would have been as concerned as they apparently were, if Tenths was fully aware of the payment arrangements made between the developers and PSDL.
[133] It is necessary to consider the extent to which Ms Skiffington’s evidence addressed these issues. Has she addressed them to the point where the Court cannot say that it is clear she has no defence on the dishonest knowledge issue? I do not consider that she has.
[134] The critical issue is whether the Tenths’ board was advised at or before its meeting of 28 November 2006, when it approved the Agreement to Lease in principle, that the developers’ offer was to pay the $3,000,000 lease premium to Tenths, and nothing in Ms Skiffington’s evidence contradicts the finding in the Verdict that the Tenths board was not informed of that fact. If it had been, the situation would likely have been different, as the board had particular needs of its own for which it resolved (at the 28 November 2006 board meeting) to borrow $2,200,000.
[135] The letter of 15 August 2012 from the developers came long after the relevant events, and it contains hearsay evidence that is not admissible and available to displace the s 47(1) presumption that Dr Love did commit the essential elements of the offence for which he was convicted (one of which was failure to disclose to the Tenths’ board that the $3,000,000 lease premium had been offered to it). But quite apart from the issue of admissibility, the 15 August 2012 letter from the developers does not appear to address the issue of whether the Tenths trustees knew that the $3,000,000 had been offered to them. Certainly the letter indicated that the Tenths’ board may have known that payments were made by the developers to Ms Skiffington and/or PSDL for their services, but I do not think that is the issue: the board was entitled to know what was potentially available to Tenths, and nothing said by Ms Skiffington or contained in the developers’ letter contradicts the finding in the Verdict that Dr Love withheld that information from his fellow trustees.
[136] Nor does Ms Skiffington’s evidence sufficiently address that apparent belief of the developers evidenced by Mr Knight’s email to Ms Skiffington of 23 March 2007,
53 Verdict, at [142].
that the payments it had made to PSDL were intended to be in connection with the Agreement to Lease, and to be of benefit to Tenths. On the face of it, payments originally intended by the developers to secure for themselves the right to lease the land from Tenths were diverted to help fund the acquisition of the Plimmerton property by Ms Skiffington and Dr Love.
[137] Ms Skiffington did not answer in her affidavits the evidence of concealment which led Lang J and the Court of Appeal to conclude that she was indeed party (with Dr Love) to an elaborate plan to deceive the Tenths’ board and the developers. She did not explain the change of solicitors to Burton & Co, or say why that firm was not provided with a copy of the Agreement to Lease, or told that the developers had already indicated that they would pay a $3,000,000 lease premium to Tenths. Burton & Co were apparently also kept in the dark on the $1,500,000 payment to be made by the developers under the Services Agreement; again, Ms Skiffington did not say why, although she must have known.
[138] Ms Skiffington’s silence of these issues effectively leaves intact the evidence of the Verdict that she was indeed a party to the withholding from the Tenths’ board of important information it was entitled to have, and that she actively participated in that deceit by keeping important information from the solicitors then instructed to act for Tenths.
[139] I am of course concerned that the summary judgment procedure is not normally suitable for dealing with disputed issues of fact, particularly where dishonesty is alleged against a defendant. But the position here is that Ms Skiffington has not disputed the principal factual findings in the Verdict that underpin Tenths’ case against her on the dishonest knowledge and assistance issue.
[140] Other aspects of Ms Skiffington’s evidence to not affect that position, and do not materially assist Ms Skiffington’s estate. Her evidence that she had no involvement in the running of PSDL was simply not credible, particularly given what appears to have been her central role in drafting the Services Agreement, and what must have been her keen interest in securing the first tranche of $1,500,000 payable by the developers under the Services Agreement. She needed that money to
substantially reduce a very significant debt she and Dr Love had incurred (through their respective trusts) when they purchased the Plimmerton property. Nor was her evidence credible on her claimed lack of understanding of the reasons for the creation of the two trusts, and the appointment of Mr Stevens’ company as managing trustee. Presumably Mr Stevens’ company could not have become the managing trustee of her trust without her agreement, and she was, after all, a qualified solicitor. Her claimed lack of knowledge of the movement of funds into and out of the Westpac account is also difficult to accept. It was she who applied for the Westpac loan in early November 2006, and it appears she was later added as a signatory on Dr Love’s current account with the bank. And as I have said, Ms Skiffington knew she had a very substantial liability to Westpac; she would surely have been very interested to know the extent of that liability from time to time.
[141] In the end I do not think Ms Skiffington’s claimed lack of knowledge of the Westpac transactions matters. She clearly did know on 25 May 2007 (or not long thereafter) that the Westpac liability had been reduced by a transfer of $1,026,000 into the Westpac loan account, substantially from money TPS had paid into the joint account of her and Dr Love on 31 January 2007.
[142] Finally, there is an unresolved question as to whether the Tenths’ board knew of the arrangement apparently made between the developers and Mr Matene Love (or his company Yellowstone), under which Yellowstone would received $1,500,000 for services relating to the Pipitea Street development that were (or may have been) the same as the services PSDL agreed to provide under the Services Agreement. However I do not think the answer to that question could affect my conclusion on the dishonest assistance issue, which is concerned not with what Tenths’ board may have known about the developers’ willingness to pay consultancy fees to parties such as Yellowstone and PSDL, but with the fact that it was not told that the $3,000,000 lease premium had been offered to it.
[143] For all of the foregoing reasons, any answer to Issue (2) is “no” – it is not reasonably arguable for Ms Skiffington’s estate that she did not dishonestly assist Dr Love in committing the breach or breaches of his fiduciary obligations as identified above.
Issue (3): Is it reasonably arguable for Ms Skiffington’s estate that she was not unjustly enriched by payment of all or part of the $1,687,500 paid by the developers to PSDL?
[144] The learned authors of Equity and Trusts in New Zealand describe the concept of unjust enrichment as follows:54
42.2.2 Unjust enrichment
Unjust enrichment refers to an event whereby a defendant is unjustly enriched at the plaintiff’s expense, the response to which is restitution of the enrichment to the plaintiff. What makes an enrichment unjust, in the sense that it requires restitution, has been the subject of much debate and disagreement. Traditionally accepted instances of unjust enrichment include a mistake made by the plaintiff, a lack of capacity on the part of the plaintiff, compulsion of the plaintiff, and a failure of consideration for which the transfer is made. All of these grounds suggest that unjust enrichment is concerned with otherwise effective transfers that should nevertheless be reversed because the plaintiff’s consent was, although objectively manifest, in some way substantively defective or absent.
Liability for unjust enrichment does not depend on the commission of a wrong. It is not concerned with the quality of the defendant’s conscience or his conduct. The right to restitution is triggered by the receipt of an enrichment in circumstances that put it within one of the unjust categories. Liability to make restitution is therefore strict. (Footnotes omitted).
[145] None of the traditional “unjust enrichment” situations there described appear to be relevant in this case, and of course the critically different feature here is that the money obtained by Dr Love and Ms Skiffington (via PSDL) was not Tenths’ money but the developers’ money. Tenths’ real complaint seems to me to be that it was deprived of the opportunity to obtain for itself the $3,000,000 lease premium the developers were prepared to pay, but if it had obtained that premium it would presumably have had to pay for the work managing the project, and providing the “interface” between Tenths and the developers that was provided by PSDL.
[146] I am not satisfied that the unjust enrichment claim is sufficiently clear, either on liability or quantum, to enter summary judgment on that basis. There are questions over whether unjust enrichment is the correct cause of action in circumstances where the alleged enrichment involved receipt by Ms Skiffington of money not owned by Tenths, and there are also issues over the quantum of the claim, and in particular
54 Butler & Others, Equity and Trusts in New Zealand (Thomson Reuters, 2nd ed, 2009), at [42.2.2].
whether Tenths may have derived benefits from the work performed by PSDL or Strategic for the developers, which Ms Skiffington’s estate is entitled to have set off against the claim. In my view those issues make the unjust enrichment claim unsuitable for determination on a summary judgment application. To the extent that Tenths relies on a separate cause of action based on unjust enrichment, or restitution, the claim will need to go to trial. I accordingly answer “yes” on issue (3).
Issue (4): If the answers to issues (1) and (2) are both “no”, or the answer to issue
(3) is “no”, is Tenths entitled to judgment against Ms Skiffington’s estate for the
$1,687,500 claimed, and/or to any of the other relief claimed by it in its statement of claim?
[147] The critical issue here is what loss has been caused to Tenths’ beneficiaries as a result of Dr Love’s breach, assisted by Ms Skiffington, of his fiduciary duties. In Equiticorp Industries Group Ltd v The Crown, Smellie J considered that in cases of accessory liability for dishonest assistance the appropriate remedy is compensation for loss flowing from the trustee’s breach of trust, assessed at the date of trial with the full benefit of hindsight. Foreseeability of loss was not necessary, provided the loss was caused by the breach.55
[148] In this case I do not think it is open to reasonable argument for Ms Skiffington’s estate that Dr Love’s failure to inform his fellow trustees at or before the Tenths board meeting of 28 November 2006 that the developers had offered to pay a $3,000,000 lease premium to Tenths did not cause Tenths any loss. At the same board meeting the Tenths’ trustees resolved to borrow approximately $2,200,000, and on the face of it there would have been no need for Tenths to borrow those funds if it had been told of the $3,000,000 that was available to it from the developers.
[149] But the quantum of Tenths’ loss is not clear. If Tenths had completed an agreement on the basis of the developers paying the lease premium to Tenths, there would likely have been project management costs and other costs associated with the project that Tenths would have had to meet, as I consider it improbable that the
55 Equiticorp Industries Group Ltd v The Crown [1998] 2 NZLR 481 (HC) at 645-661.
developers would have been prepared to pay both a $3,000,000 lease premium to Tenths and the fees it agreed to pay to PSDL.
[150] The issue on the dishonest assistance claim is not the extent to which Dr Love and Ms Skiffington benefited by Dr Love’s breach of trust, but the loss to Tenths caused by the breach. I accept that Tenths must have suffered some loss arising from Dr Love’s breach of trust in concealing the developers’ $3,000,000 lease premium offer from Tenths’ board (whether because Tenths incurred liabilities it would not have incurred if it had known that $3,000,000 was available in cash from the developers, or because it lost the commercial opportunity to negotiate the right to receive at least part of that $3,000,000). But in my view the evidence is insufficiently clear to conclude that Ms Skiffington’s estate has no arguable defence on the quantum of the loss. That has arisen in large part because the case was put forward on the basis that Ms Skiffington had been unjustly enriched by the amounts received by her (via PSDL); but as I have said, that was not the right focus in a dishonest assistance case.
[151] The result is that I am satisfied that Ms Skiffington’s estate has no reasonably arguable defence on liability for dishonest assistance, but that the quantum of Tenths’ loss caused by the dishonest assistance will have to go forward to trial.
Result on the summary judgment application
(a) Tenths is entitled to summary judgment on liability on the claim in its first cause of action that Ms Skiffington dishonestly assisted Dr Love to breach a fiduciary obligation owed by him to his fellow Tenths trustees (and to the beneficiaries of Tenths), to disclose to his fellow Tenths trustees the offer of the developers to pay to Tenths a $3,000,000 premium on the granting of a lease of the Pipitea Street land owned by Tenths (the dishonest assistance claim). Judgment for liability on the dishonest assistance claim may be entered when an order is made substituting the executor or administrator of Ms Skiffington’s estate as first defendant in the proceeding.
(b) Subject to (1) above, Tenths’ application for summary judgment on its first cause of action is refused.
(c) Any statement of defence to:
(i) Tenths’ claims in its first cause of action on which I have not directed that summary judgment may be entered on liability; and
(ii) quantum on the dishonest assistance claim made in the first cause of action;
is to be filed and served by Ms Skiffington’s estate within 30 working days of the delivery of this judgment.
APPLICATION BY STRATEGIC AND MS SKIFFINGTON FOR AN EXTENSION OF TIME TO FILE A STATEMENT OF DEFENCE
[152] Tenths’ second cause of action, against Ms Skiffington and Strategic, simply repeats the allegations in the first cause of action, and contends that it would be unjust to allow Ms Skiffington and Strategic to benefit from the unauthorised payments made to them.
[153] The proceeding was served on Strategic on 21 April 2017, at Strategic’s registered office in Hamilton. The process server has deposed that he handed the documents to Ms Skiffington personally on that date.
[154] In his submissions, Mr Temm advised that Ms Skiffington accepted that the pleadings must have been served at Strategic’s registered office, but the papers have not subsequently been located. He explained that, at the time, Ms Skiffington, Strategic’s director, was undergoing her fourth course of chemotherapy and was completely distracted by her personal health issues. At the same time, counsel for the defendants was overseas. While copies of the Court papers insofar as they related to Ms Skiffington were sent to Mr Temm’s Chambers, the documents for Strategic went to its registered office and did not progress further from there.
[155] It appears that there was a misapprehension on the part of the defendants that summary judgment was being sought against both defendants. On 25 May 2017,
within the period of 25 working days allowed for Strategic and Ms Skiffington to file statements of defence, a notice of opposition to the application for summary judgment was purportedly filed on behalf of both defendants. The notice of opposition stated that Ms Skiffington and Strategic “are opposed to the orders sought for summary judgment in respect of the notice of proceeding and the statement of claim dated 23 March 2017”. It specifically referred to Ms Skiffington’s health position, stating that she was then in the final stages of terminal illness, and was unable to complete an affidavit. The document asserted that both Ms Skiffington and Strategic maintained they had full and comprehensive defences to the allegations against them.
[156] Tenths did not accept the notice of opposition as a statement of defence, and it applied to the Court under Rule 15.9 of the High Court Rules for judgment by default against Ms Skiffington and Strategic on the second cause of action. On 26 June 2017 Strategic filed an application under Rule 1.9 for an order extending the time for it to file a statement of defence. It contended that no true prejudice had been caused by its lateness in filing a statement of defence, as the matter was the subject of a defended summary judgment application against Ms Skiffington. In a notice of opposition to this application, Tenths contended that the defendants have no substantial grounds for defence to the second cause of action following the Verdict and the judgment of the Court of Appeal on the appeal from the Verdict. Tenths also contended that the delay in filing the statement of defence had not been reasonably explained in Ms Skiffington’s affidavits, and that it would suffer irreparable injury if leave were granted given the impending death of Ms Skiffington and the impact that would have on the conduct of the proceeding.
[157] In a memorandum dated 16 June 2017 counsel for Tenths advised that on 30 May Tenths offered the defendants an extension of 5 working days in which to file a defence, but it received no response to that offer. On 31 May 2017 Tenths’ solicitors also emailed counsel for the defendants confirming that the extension of time for filing a defence applied equally to the claims against Ms Skiffington on the second cause of action.
[158] On 31 May 2017 Mr Temm’s personal assistant responded to Tenths’ solicitors, advising that Mr Temm was away from New Zealand and was not anticipated to return
to his Chambers until 7 June 2017. She indicated that she would refer the correspondence on to the defendants for instruction, but noted that they would not be able to comply with the proposed 5 working day timetable. Thereafter, it appears that there was no further communication until Tenths applied for judgment by default and Strategic responded with the application for an extension of time to file a statement of defence.
Statement of defence filed by the defendants
[159] On 29 June 2017 the defendants purported to file a statement of defence. I will treat it as a draft statement of defence, filed provisionally pending determination of the defendants’ application for an extension of time. The draft statement of defence was filed on behalf of both defendants.
[160] In their provisional defence to the second cause of action, the defendants plead that there was no unjust enrichment for Ms Skiffington, as she did not work in her personal capacity at any time in relation to the relevant consultancy agreement dated 4 June 2008. In respect of Strategic, the defence pleaded was that it provided consultancy services as requested over an extended period of several years, and that all payments made to it by the developers’ entity Pipitea Street Ltd under that consultancy agreement, although made as part of a monthly retainer, required project timelines and objectives to be met before payments were made. Further, Strategic alleged that it had changed its position in reliance on the payments that were made to it between 4 June 2008 and 15 April 2010.
[161] In addition, Strategic pleads a limitation defence under the Limitation Act 1950. It said that it had no contractual connection with Tenths, and that it owed no duty of care in tort to Tenths. The cause of action in respect of the 2006 allegations arose at the time payments were made, and, subject to a clear allegation of fraud, which was not alleged, the cause of action against both defendants had expired by 2017 when this proceeding was commenced. Similarly, any cause of action arising from the 4 June 2008 consultancy agreement between Strategic and Pipitea Street Ltd had expired long before this proceeding was filed.
[162] In her affidavit sworn on 28 June 2017, Ms Skiffington said that she was not able to focus on matters involved in the litigation at the time the Court papers were served. She said she had not had the necessary time or energy to enable accurate recall, and it was hard to locate some of the documents given the effluxion of time since the relevant events, and her relocation to Hamilton. She said she had been unable to meet with her legal team, or instruct counsel, as she would have wished.
[163] On the merits of the claims, Ms Skiffington said she did not undertake any work in her personal capacity. She said that all of the payments claimed by Tenths were made by the developers’ entity. She denied any fraud, stating that everything she did was written, recorded and approved first by Dr Love and then by the board of Tenths.
[164] Ms Skiffington stated that she did not have access to all of Tenths documents that she said would be necessary to defeat the unjust enrichment claim. She referred specifically in that context to reports and work done on Tenths’ projects over a period of 6 years, which would justify the payments.
Submissions for the defendants
[165] Mr Temm referred to the notice of opposition filed on behalf of both defendants, within the time allowed for the filing of a statement of defence. The defendants thus did take timely steps to indicate their intention to oppose the claims in full. He also submitted that the delay in taking steps had been adequately explained, and was not of long duration. A statement of defence has now been filed.
[166] Mr Temm submitted that the notice of opposition to summary judgment gave Tenths express notice of the defences being raised, and there would be no prejudice to Tenths if time were extended for the defendants to file a statement of defence. He pointed to the significant consequences that would arise for the defendants if judgment were entered for Tenths on a default basis for the amount claimed in the second cause of action.
[167] On the merits, Mr Temm noted that the second cause of action covered a different time period, and different payments, made two years later. The two causes of action are quite discrete.
Submissions for Tenths
[168] Mr Reid submitted that Ms Skiffington’s evidence of inability to focus on the Court proceeding was insufficient, particularly since she had been aware of Tenths’ claims since late 2016. She elected not to engage with Tenths on the matter until the notice of opposition was filed in this proceeding.
[169] Mr Reid submitted that the relevant rule governing the defendants’ application for an extension of time is r 15.9. Under that rule, the defendants are obliged to show that they have substantial grounds of defence, that their delay in filing a defence has been satisfactorily explained, and that Tenths will not suffer irreparable injury if leave to defend is granted. On the first of those factors, Mr Reid submitted that the defendants have failed to show any substantial defence to the second cause of action. On the second factor (delay satisfactorily explained), Mr Reid pointed to the defendants’ failure to respond to the extension of time of 5 working days offered by Tenths. On the third factor (irreparable damage to Tenths if leave to defend is granted), Mr Reid submitted that there will be injury to Tenths in its ability to conduct this claim. Delay and costs will be added to what would otherwise be a simple claim, particularly if Ms Skiffington died and her estate had to be joined as a party.
Discussion and conclusions
[170] Rule 15.9 of the High Court Rules materially provides:
15.9 Formal proof for other claims
(1) This rule applies if, or to the extent that, the defendant does not file a statement of defence within the number of working days required by the notice of proceeding, and the plaintiff seeks judgment by default for other than a liquidated demand.
(2) The proceeding must be listed for formal proof and no notice is required to be given to the defendant.
(3) After a proceeding is listed for a formal proof hearing, no statement of defence may be filed without the leave of a Judge granted on the
ground that there will or may be a miscarriage of justice if judgment by default is entered, and on such terms as to time or otherwise as the Judge thinks just.
...
[171] Rule 1.19, relied upon by Mr Temm, provides:
1.19 Extending and shortening time
(1) The court may, in its discretion, extend or shorten the time appointed by these rules, or fixed by any order, for doing any act or taking any proceeding or any step in a proceeding, on such terms (if any) as the court thinks just.
(2) The court may order an extension of time although the application for the extension is not made until after the expiration of the time appointed or fixed.
[172] In this case, Tenths applied for judgment by default on its second cause of action before the defendants filed their application for an extension of time to file a statement of defence, and in those circumstances I am satisfied that the relevant rule is r 15.9 (in particular r 15.9(3), which allows the Court to extend the time for a defendant to file a statement of defence in the particular circumstances of failure to file a defence followed by a plaintiff’s application for a default judgment). Rule 1.19 is of more general application, and in my view must yield to the specific rule which is directed to the present situation, namely r 15.9(3).
[173] To obtain leave under r 15.9(3), a defendant must show that there will or may be a miscarriage of justice if judgment by default is entered.
[174] The following considerations are generally considered relevant on the issue of whether there will or may be a miscarriage of justice if a default judgment is entered:56
(a) Whether the defendant has a substantial ground of defence;
(b) Whether the delay is reasonably explained; and
[175] I think considerations (2) and (3) clearly favour the grant of leave. On consideration (2) Ms Skiffington was clearly very ill when the proceeding was served, and it is wholly understandable that she was unable to give proper focus to the Court proceeding when that needed to be done. The situation appears to have been compounded by the fact that Mr Temm was out of New Zealand and not available to assist the defendants for at least part of the relevant time. I take into account also the fact that the period of delay was not excessive given those circumstances, and that the defendants did both file a document (the notice of opposition) within the period allowed by the rules for filing a statement of defence, which clearly stated that they intended to defend the claims.
[176] On the third consideration (prejudice to the plaintiff if leave is granted), I do not consider Tenths advanced any cogent argument. Ms Skiffington’s death would appear if anything to have worked to Tenths’ advantage, in that Ms Skiffington will not be available to give direct evidence for Strategic and for her estate. No other prejudice was identified by Mr Reid in his submissions.
[177] The real issues lie with the first consideration: have the defendants shown that they have substantial grounds of defence to the claims in the second cause of action?
[178] I note at the outset that Tenths itself apparently did not consider that its case on the second cause of action was suitable for summary judgment. Nevertheless, I accept that under r 15.9(3) it was for the defendants to show that they had some substantial and reasonably arguable ground of defence.
[179] In their (provisional) statement of defence filed on 29 June 2017, the defendants plead that Strategic was incorporated to take over from a company (Extendz Ltd) that had previously been the entity through which Ms Skiffington provided consultancy services. Thereafter, the defendants say that Ms Skiffington provided consultancy services through Strategic. The defendants further say that the Services Agreement was a bona fide and genuine contractual arrangement recording
how the consultancy fees on the development would be paid by the developers. They say that the amount to be paid was not determined by them. They deny that PSDL and Strategic were fronts used by Ms Skiffington, and Ms Skiffington denies that the payments were received by her in her personal capacity. The defendants say that all payments in 2008, 2009, and 2010 were paid to Strategic pursuant to a Consultancy Agreement dated 4 June 2008 between Strategic and the developers’ entity, Pipitea Street Ltd (the Consultancy Agreement).
[180] The defendants further say that Tenths’ board was fully aware of Ms Skiffington’s role as a consultant, and it engaged the services of Ms Skiffington, through Strategic, for an extended 6 year period from 2006. During that period, considerable consultancy work was undertaken on numerous projects. The benefit to Tenths from this work was said to be significant.
[181] They deny that Dr Love diverted the lease premium as alleged, or that Ms Skiffington knowingly assisted in that conduct.
[182] On the allegation of unjust enrichment, the defendants deny that any payee was “unjustly enriched”.
[183] Specifically in response to the second cause of action, the defendants plead affirmatively that no unjust enrichment occurred for Ms Skiffington, as she did not work in her personal capacity at any time in relation to the Consultancy Agreement. Strategic pleads that it provided consultancy services as requested over an extended period of several years, and that all payments made to it by Pipitea Street Ltd were payments made as part of a monthly retainer, but required project timelines and objectives to be met before payments could be properly advanced.
[184] Strategic further pleads that it has changed its position in reliance upon the payments made to it between 4 June 2008 and 15 April 2010. However no particulars of the alleged change of position are pleaded.
[185] Finally, the defendants provisionally plead limitation, whether under the Limitation Act 1950 or the Limitation Act 2010. The particulars of this allegation state
that the cause of action in respect of the 2006 allegations arose at the time that the payments were made and, subject to a clear allegation of fraud, which is not alleged, the cause of action had long expired by 2017. In respect of the cause of action arising from the payments made under the Consultancy Agreement, the defendants again say that the claim is statute-barred.
[186] It seems to me that the same factors which I considered relevant in finding that summary judgment should not be entered against Ms Skiffington’s estate on the “pure” unjust enrichment claim (that is, unjust enrichment considered without any element of dishonest assistance to Dr Love in breaching fiduciary obligations owed by him to Tenths), must also apply to the claims in the second cause of action to the extent they are based on “pure” unjust enrichment. There appear to be reasonable legal arguments available to both Ms Skiffington and Strategic on the legal parameters of the doctrine of unjust enrichment (in particular, whether it is an appropriate cause of action in circumstances such as the present, where Tenths is not seeking to recover its own property, but compensation allegedly suffered by it for wrongs allegedly committed by the defendants). There is also the issue of whether Tenths may be obliged to bring to account the benefit of the work performed by PSDL and Strategic in bringing various projects to a conclusion. Limitation may also be arguable for the defendants on the “pure” unjust enrichment claim, particularly if dishonesty does not form part of the case and Tenths would not be able to call in aid s 28 of the Limitation Act 1950.57
[187] For all of those reasons I consider that the defendants have shown that there are, or may be, substantial grounds for a defence to the “pure” unjust enrichment claim.
[188] To the extent that the claims in the second cause of action are based in dishonest assistance by Ms Skiffington, I note first that the payments (totalling $421,875) made by the developers to Ms Skiffington were made between 8 September 2008 and 30 January 2009. Strategic is alleged to have received a total of $1,380,937.50 from the developers (or entities associated with the developers), between 19 June 2008 and 15 April 2010.
57 S 28 generally extends the statutory time limits prescribed under the Act in a number of circumstances, including where the cause of action has been concealed by a defendant’s fraud, and the plaintiff could not with reasonable diligence have become aware of the facts on which its claim is based before the expiry of the time limit for commencing the claim.
[189] I accept that the payments made to Strategic appear to have been made not under the Services Agreement, but under the Consultancy Agreement. The Consultancy Agreement related not only to the Pipitea Street development, with which Tenths’ first cause of action is concerned, but also with a proposed new development called the “Kate Sheppard Development” (a proposed development on a site between Kate Sheppard Place and Lambton Quay in Wellington). The Consultancy Agreement was said to be conditional on the Pipitea Street project between Tenths and the developers commencing no later than 30 June 2008, and the Pipitea Street Trust entering into a joint venture with Tenths in relation to the Kate Sheppard Development.
[190] Under the Consultancy Agreement, Strategic was to undertake certain services, including in respect of Maori protocol and advice regarding dealing with Tenths, presenting information for Tenths’ approvals, providing advice in relation to Maori land law, and acting on that advice where necessary, and negotiating as necessary with Government, and with local, and regional councils.
[191] Strategic was entitled to charge for its services in accordance with a charging regime set out in a schedule to the Consultancy Agreement (which provided for Strategic to receive a sum equal to a percentage of the net profit from the Kate Sheppard Development and any other projects). Strategic was to submit its consultancy charges on a monthly basis, and the charges were to be linked to specific milestones involved in the development and construction of buildings. An annual agreed budget would be set for the consultancy (estimated to be $750,000 per annum), and Strategic’s overhead and expenses would be billed on a monthly basis.
[192] What is not clear on the evidence is whether there was any linkage between the
$3,000,000 lease premium offered by the developers in respect of the Pipitea Street development, and the payments to be made under the Consultancy Agreement. Particularly relevant to that are the facts that the Consultancy Agreement was concerned not just with the Pipitea Street project, but also with the Kate Sheppard Development, and that the Consultancy Agreement appears to have superseded the Services Agreement. There is accordingly a clear issue as to whether Dr Love’s failure to disclose to his fellow trustees that the developers were prepared to pay a $3,000,000 lease premium to obtain an Agreement to Lease the Pipitea Street land caused loss to
Tenths that was causally connected to the payments the developers made to Strategic and Ms Skiffington between June 2008 and April 2010.
[193] Nor is it clear whether the four payments received by Ms Skiffington have any linkage to the offer made by the developers to pay a $3,000,000 lease premium in respect of the Pipitea Street development. The first of the payments was made on 8 September 2008, well after the Consultancy Agreement had been executed, and it may be that some or all of the work was concerned with the proposed Kate Sheppard Development, and had no linkage with the transaction for which the developers offered Tenths the $3,000,000 lease premium. Again, I consider that this factor does or may provide Ms Skiffington’s estate with an arguable defence to the second cause of action.
[194] In all of those circumstances I am satisfied that there will, or may be, a miscarriage of justice if a default judgment is entered against Ms Skiffington and Strategic. Accordingly, leave is granted to Ms Skiffington’s estate and Strategic to file statements of defence to the claims in the second cause of action. They are to file and serve their statements of defence within 30 working days of the delivery of this judgment.
Result on the defendants’ application for leave to defend
[195] I make the following orders:
(a) Leave is granted to Strategic to file a statement of defence to the proceeding, within 30 working days of the date of delivery of this judgment.
(b) Leave is granted to Ms Skiffington’s estate to file a statement of defence to Tenths’ claims in its second cause of action, within 30 working days of the date of delivery of this judgment.
COSTS ON THE TWO APPLICATIONS
[196] Counsel may file memoranda if they cannot agree on costs. Any costs memorandum for Tenths is to be filed and served within 20 working days of the
delivery of this judgment. Any reply memorandum for Strategic and/or Ms Skiffington’s estate is to be filed and served within 15 working days of service of Tenths’ memorandum.
Associate Judge Smith
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URL: http://www.nzlii.org/nz/cases/NZHC/2018/1261.html