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Litt v Litt [2012] NZHC 607 (2 April 2012)

Last Updated: 30 April 2012

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV 2011-419-338 [2012] NZHC 607

BETWEEN SYDNEY BARRY LITT First Plaintiff

AND ROGER BARRY LITT Second Plaintiff

AND COLIN ROY LITT First Defendant

AND HELEN JUNE LITT Second Defendant

AND STUART LINDSAY GORDON Third Defendant

Hearing: 6 December 2011 and 22 and 23 March 2012

Counsel: DG Hayes for plaintiffs

JA MacGillivray for defendants

Judgment: 2 April 2012

JUDGMENT OF ASSOCIATE JUDGE FAIRE

[on applications to strike out, for summary judgment and for solicitor/client

_costs]

This judgment was delivered by me on 2 April 2012 at 1pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date...............

Solicitors: Brook Law, PO Box 9600, Hamilton

Tompkins Wake, PO Box 258, Hamilton 3240

LITT V LITT HC HAM CIV 2011-419-338 [2 April 2012]

The application

[1] The defendants apply for orders:

(a) Striking out the plaintiffs’ statement of claim;

(b) Granting summary judgment against the plaintiffs; and

(c) Ordering solicitor/client costs.

[2] The grounds relied upon in summary are as follows:

(a) The plaintiffs’ claims are frivolous, vexatious and otherwise an abuse of process of the court as they are time-barred by the equitable doctrine of limitation by analogy; and

(b) If the plaintiffs’ claims are not barred by the equitable doctrine of limitation by analogy, the plaintiffs’ claims are nevertheless frivolous, vexatious and otherwise an abuse of process of the court as they are barred by laches.

[3] Additional grounds are recorded in the application that relate specifically to the causes of action involving the second plaintiff. They do not require consideration in this judgment because the second plaintiff ’s claim has been discontinued.

[4] Mr MacGillivray sought to add a further ground in support of the application, namely that the claim of the first plaintiff discloses no reasonably arguable cause of action because, even if accepted in its entirety the plaintiffs’ evidence could not possibly found a claim for constructive trust. Mr Hayes did not oppose my granting leave to have this additional ground considered in this judgment. Accordingly I proceed on the basis that this additional ground is relied upon in support of the application.

[5] I add that as counsel presented argument Mr MacGillivray advised that he did not press the alternative ground that the claim was barred by laches. He acknowledged that that issue could not really be determined on a summary judgment application.

The court’s approach to strike out applications involving limitation defences

[6] Rule 15.1 of the High Court Rules provides that:

15.1 Dismissing or staying all or part of proceeding

(1) The court may strike out all or part of a pleading if it—

(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or

(b) is likely to cause prejudice or delay; or

(c) is frivolous or vexatious; or

(d) is otherwise an abuse of the process of the court.

[7] In Matai Industries Ltd v Jensen1 Tipping J referred to the decision of the

Court of Appeal in England in Ronex Properties Ltd v John Laing Construction Ltd.2

In summary he observed that:

a) A defendant could never apply to strike out a claim against him as disclosing no reasonable cause of action merely because he might have a good limitation defence;

b) A defendant who believes he has a good limitation defence may, however, either plead the defence and seek trial of the defence as a

_{preliminary issue, or, in a clear case, apply to strike out the plaintiff’s}

1 Matai Industries Ltd v Jensen [1989] 1 NZLR 525 (HC).

claim on the grounds that it is frivolous, vexatious and an abuse of process;

c) The onus is on the defendant to show that the plaintiff’s claim is

statute-barred;

d) Evidence can be tendered by affidavit; and

e) The Court should be slow to strike out a claim or cause of action altogether in limine, but, if the position is quite clear, the defendant should not be vexed by having to go to full trial when the answer is obvious and inevitable.

[8] This approach was approved by Tipping J in the Supreme Court in Murray v

Morel & Co Ltd where he said:3

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

[34] In the end the Judge must assess whether, in such a case, the plaintiff has presented enough by way of pleadings and particulars (and evidence, if the plaintiff elects to produce evidence), to persuade the Court that what might have looked like a claim which was clearly subject to a statute bar is not, after all, to be viewed in that way, because of a fairly arguable claim for extension or postponement. If the plaintiff demonstrates that to be so, the Court cannot say that the plaintiff’s claim is frivolous, vexatious or an abuse of process. The plaintiff must, however, produce something by way of pleadings, particulars and, if so advised, evidence, in order to give an air of reality to the contention that the plaintiff is entitled to an extension or postponement which will bring the claim back within time. A plaintiff cannot, as in this case, simply make an unsupported assertion in submissions that s 28 applies. A pleading of fraud should, of course, be made only if it is responsible to do so.

3 Murray v Morel & Co Ltd [2007] NZSC 27, [2007] 3 NZLR 721 at [33]–[34].

[9] No case is advanced by Mr Hayes for an extension or postponement of a limitation period.

The court’s approach to summary judgment application by a defendant

[10] Rule 12.2(2) of the High Court Rules requires that the defendant satisfy the court that none of the causes of action in the plaintiff’s statement of claim can succeed.

[11] Westpac Banking Corp v MM Kembla New Zealand Ltd noted the following when dealing with r 136(2), the predecessor of r 12.2(2):4

[58] The applications for summary judgment were made under R 136(2) of the High Court Rules which permits the Court to give judgment against the plaintiff “if the defendant satisfies the Court that none of the causes of action in the plaintiff’s statement of claim can succeed”.

[59] Since R 136(2) permits summary judgment only where a defendant satisfies the Court that the plaintiff cannot succeed on any of its causes of action, the procedure is not directly equivalent to the plaintiff’s summary judgment provided by R 136(1).

[60] Where a claim is untenable on the pleadings as a matter of law, it will not usually be necessary to have recourse to the summary judgment procedure because a defendant can apply to strike out the claim under R 186. Rather R 136(2) permits a defendant who has a clear answer to the plaintiff which cannot be contradicted to put up the evidence which constitutes the answer so that the proceedings can be summarily dismissed. The difference between an application to strike out the claim and summary judgment is that strike-out is usually determined on the pleadings alone whereas summary judgment requires evidence. Summary judgment is a judgment between the parties on the dispute which operates as issue estoppel, whereas if a pleading is struck out as untenable as a matter of law the plaintiff is not precluded from bringing a further properly constituted claim.

[61] The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually summary judgment for a defendant will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claim. Examples, cited in McGechan on Procedure at HR 136.09A, are

4 Westpac Banking Corp v MM Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).

where the wrong party has proceeded or where the claim is clearly met by qualified privilege.

[62] Application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment only able to be properly arrived at after a full hearing of the evidence. Summary judgment is suitable for cases where abbreviated procedure and affidavit evidence will sufficiently expose the facts and the legal issues. Although a legal point may be as well decided on summary judgment application as at trial if sufficiently clear (Pemberton v Chappell [1987] 1 NZLR 1), novel or developing points of law may require the context provided by trial to provide the Court with sufficient perspective.

[63] Except in clear cases, such as a claim upon a simple debt where it is reasonable to expect proof to be immediately available, it will not be appropriate to decide by summary procedure the sufficiency of the proof of the plaintiff’s claim. That would permit a defendant, perhaps more in possession of the facts than the plaintiff (as is not uncommon where a plaintiff is the victim of deceit), to force on the plaintiff’s case prematurely before completion of discovery or other interlocutory steps and before the plaintiff’s evidence can reasonably be assembled.

[64] The defendant bears the onus of satisfying the Court that none of the claims can succeed. It is not necessary for the plaintiff to put up evidence at all although, if the defendant supplies evidence which would satisfy the Court that the claim cannot succeed, a plaintiff will usually have to respond with credible evidence of its own. Even then it is perhaps unhelpful to describe the effect as one where an onus is transferred. At the end of the day, the Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment made by the Court on interlocutory application is not one to be arrived at on a fine balance of the available evidence, such as is appropriate at trial.

[12] These passages were approved by the Privy Council in Jones v Attorney- General.5

The notice of opposition

[13] The grounds advanced in opposition are set out in the plaintiffs’ notice of opposition. In view of the notice of discontinuance they are now reduced in summary to the following: jones v attorney

(a) There was no contract and there is no basis for concluding that the equitable remedies sought correspond to a remedy in law;

(b) Laches does not apply because the plaintiffs believed for much of the time that the first defendant’s promise to hold the plaintiffs’ share of the property on trust would be honoured; and

(c) The delay will not cause evidential difficulties.

The amended statement of claim

[14] This proceeding was filed on 16 March 2011. The pleading which is under consideration in this application is the first amended statement of claim filed on

27 May 2011.

[15] Two causes of action are now pleaded. The first cause of action seeks a declaration of constructive trust that a property purchased by the first and second defendants in 1994 is held by those defendants on trust as to a one-quarter share of the property for the plaintiffs, which the first plaintiff values at $6,000,000 and therefore, in respect of which, the first plaintiff seeks judgment for $6,000,000.

[16] In the second cause of action the plaintiffs seek a declaration based on a remedial or constructive trust on the basis that the first, second and third defendants hold the subject property as to a 25 per cent share for the plaintiffs. In the alternative, the plaintiffs seek damages for the one-quarter interest in the sum of

$6,000,000. This cause of action is pleaded, no doubt, because of the fact that the subject property was transferred on 10 September 2008 to a trust.

Background

[17] The first plaintiff is the father of the first defendant. The first and second defendants are husband and wife. The third defendant is a trustee with the first and second defendants of the trust that currently owns the property which is the subject

of this proceeding. That property was transferred to the first, second and third defendants on 10 September 2008.

[18] This is not the first litigation that has brought members of the Litt family before the court for the purpose of determining their dispute. In 1999 caveat proceedings were filed by the first defendant’s brother and sister-in-law, Roger Barry Litt and Lynette Ellen Litt. In a reserved judgment delivered on 3 August 1999, Tompkins J sets out the background facts involving the commercial activities in which the family was involved, and in particular leading up to the financing that

occurred at the time the subject property was acquired.6 I adopt that background

summary for the purposes of this application which is as follows:

Some time prior to 1970, Roger and Colin’s father Barry commenced a cartage and farm delivery business. Roger joined the business in 1970. Their brother Michael joined in 1976. In June 1977 Litt Transport Ltd (“the company”) was incorporated. The three brothers, Roger, Colin and Michael, and their two parents Barry and Audrey, were each allocated 3950 B shares. Barry and Audrey were each allocated 50 A shares.

In 1978 Colin commenced to work for the company. Two years later, in

1980, Roger took over the running of the company from his father Barry.

In the mid 1980s a partnership known as Litt Bloodstock was formed, to become engaged in the bloodstock business, the partners being the shareholders in the company. Although the horses in the partnership acquired were in the names of each individual partner, the proceeds from the partnership were paid into the company. In 1991 another partnership named Tranzco-Ord was formed, the partners being Barry, Michael, Colin and Roger. It was involved in the business of transport brokering. That business was wound up in 1998.

In 1994 the company re-financed its borrowings through the AMP. Differences arose between the members of the company concerning their indebtedness and individual borrowings. A meeting was held in October

1996, at which there were present the three brothers, the father Barry, and the company accountant. An effort was made to reach agreement on matters at issue. The accountant prepared a minute that purported to record those agreements, but Roger does not accept that agreements were made in accordance with that minute. On his evidence no concluding agreement was reached.

On 27 February 1998 a further meeting was held at the offices of the solicitors acting for Colin. Present were Barry, Roger, his lawyer Mr O’Shea, Michael, Colin, his wife Helen, and their lawyer Mr Parker. It

6 Litt v Litt HC Hamilton M172/99, 3 August 1999.

appears that an agreement in principle was reached on the issues between them. Following correspondence between the solicitors, an agreement dated

5 June 1998 was signed by the company, the parents Barry and Audrey, Roger and Lynette, Colin and Helen, and Michael, that recorded the terms

upon which agreement had been reached. I refer to this agreement in more detail later.

In January 1999 Colin and Helen issued proceedings seeking summary judgment against Roger and Lynette to require them to perform their obligations under the agreement. Those proceedings have since been discontinued.

On 23 April 1997 Roger and Lynette executed a caveat against land owned by Colin and Helen and situated north of Hamilton on River Road (“the River Road farm”). On 23 June 1999 the Registrar advised Roger and Lynette that there had been lodged for registration a mortgage from Colin and Helen in favour of Mr MJ Jackson, a partner in the firm of solicitors acting for Colin and Helen. As a consequence, the caveat will lapse unless an order of this Court that the caveat not lapse be made and served on the Registrar by 3 August 1999.

[19] The first and second defendants purchased the subject property which is in River Road, north of Hamilton, in 1994. The deposit for that purchase was paid from resources unconnected with Litt Transport Ltd.

[20] The precise funding documents for the balance of the purchase price were not placed before the court. The first plaintiff says that the first defendant told him that he had attended an auction for the River Road property. He said the first defendant asked for assistance to pay for it. He says that he and another son, Roger, went first to Nationwide Finance and were directed by that company to AMP. AMP then made a loan offer. He said that the loan offer was made to all members of the family and it was signed by all members of the family. It was not a company loan.

[21] The first plaintiff then records what seems to be the foundation for the promise at paragraph 13 of his affidavit and says:

Probably three months after the property was purchased and when the loan was in place a further conversation took place between myself and the first defendant where he acknowledged our assistance in financing the property and he said he would make sure the families would all benefit equally from the purchase of the property when it was subdivided.

[22] The first plaintiff further alleges that he, his son Roger and another son, Michael, continued to make mortgage payments on the River Road property at a quarter-share each.

[23] The first plaintiff then returns to the discussion that occurred approximately three months after the purchase and adds:

On the same day myself, Roger and the first defendant were at the company’s offices and I repeated to Roger what the first defendant had told me and said that we were all going to share equally in the property when it was sold. That is what I have always believed based on past experience and I was told by the first defendant. I realised the value of the property would rise as the residential areas got closer to it and it became more saleable as house sections. As I trusted my son at the time I did not see the necessity of enforcing the trust interest he held as time passing was increasing the value of the property and I believed he would honour the trust given him and give us all our shares of the property.

[24] It is appropriate that I refer to the pleadings in respect of the promise that is alleged by the plaintiffs. The amended statement of claim provides:

7. During 1994 the First Defendant advised the Plaintiff, Roger Litt and his brother Michael Terrence Litt that he had successfully bid at auction for the land now comprising the property and was required to purchase it.

8. The Plaintiff, Roger Litt and Michael Terrence Litt (now deceased) and on behalf of their respective wives agreed to contribute to the acquisition of the property by borrowing mortgage finance (along with the First Defendant and Second Defendant) to purchase the property and the Plaintiff, along with the First Defendant and Second Defendant, personally borrowed sufficient funds from Australian Mutual Provident Society (“AMP”) to finance the purchase of the property.

9. It was expressly and/or impliedly understood between the Plaintiff, the First Defendant and the Second Defendant (and Michael Litt) that they would each have an equal share in the property. In particular the history of joint ventures; the explicit promise made by the first defendant to the plaintiff that he would equally share the property with his brothers and father (stated in the presence of the First Defendant); the subsequent confirmation of that promise.

10. From the date of purchase in about June 1994 until about April 1997 the plaintiff (on behalf of the wife and himself) contributed an equal quarter share toward the mortgage payments.

11. The plaintiff is entitled to a quarter share of the property given (a) the First Defendant’s promise to hold a quarter of the property for his benefit and (b) having contributed a quarter of the mortgage payments.

12. The expectation of an interest by the Plaintiffs was reasonable given the explicit and implicit conduct of the parties.

[25] The first defendant’s position is that he does not accept what his father says as to the merits of the claim. What he specifically focuses on is the grounds relied upon for the strike out and summary judgment application. He refers to his father’s knowledge of the proceedings taken in 1999 by the first defendant’s brother, Roger and his wife. Those proceedings were the proceedings before Tompkins J and which were specifically an application that Roger and Lynette Litt’s caveat not lapse. Roger and Lynette Litt had placed a caveat on the title to the River Road property:

claiming a beneficial interest in (the River Road farm) by virtue of an implied trust arising from the payments and assuming of obligations by or on behalf of (Roger and Lynette) to the benefit of (Colin and Helen) the payments and obligations being in respect of the debt secured by Mortgage B207126.4 to the Australian Mutual Provident Society.

[26] Tompkins J declined to find that there was any basis for the implied trust that was claimed in the caveat. The result was that the caveat lapsed.

[27] The first plaintiff acknowledges that he knew of the existence of the caveat proceedings taken by his son, Roger.

[28] Although the grounds referred to in support of the application and which I have summarised in [2](a) and (b) of this application do not require an analysis of the precise merits, it is appropriate that I record that the first and second defendants’ position is that they would have preferred to have purchased the River Road property independently of Litt Transport Ltd and had the ability to do so. However at the time of the purchase they say they were selling a property that was part of the security supporting lending from Countrywide Bank to Litt Transport Ltd. They say the company was not in a position to ask Countrywide Bank to release the first and second defendants’ property as security. In return for the first and second defendants allowing the farm property to be offered as replacement security to Countrywide Bank to support the company’s borrowings, Litt Transport Ltd arranged finance for the purchase of the farm. It was only because of that, that the first and second defendants used Litt Transport Ltd as the vehicle to borrow to buy the farm. This account is not accurate. The borrowers were, in fact, members of the Litt family. It

appears as if the borrowed funds are partly reflected in the shareholders’ current accounts of Litt Transport Ltd as advancers. What is correct in the summary is that members of the Litt family allowed their personal assets to be charged as security for this borrowing.

[29] The first and second defendants further say that the interest charged on the loan was charged against their shareholders’ current account. As part of the settlement agreements reached in 1996 and 1998 between family members, the first and second defendants repaid their current account and paid a quarter of Litt Transport Ltd’s debts. They deny that there was ever any promise to share the proceeds of sale of the River Road farm property. They further deny that other members of the Litt family made any contribution to the acquisition or retention of the River Road farm property.

[30] The summary that I have adopted from the judgment of Tompkins J in the caveat proceedings referred to the differences between family members about their indebtedness and individual borrowings, and the meetings that followed identification of those differences in 1996 and 1998. The first plaintiff acknowledges that there was a settlement agreement entered into on 5 June 1998. The first plaintiff describes the substance and reason for the agreement as follows:

19. On or about 5 June 1998 there was a settlement agreement entered into but no reference was made on that agreement to our interests in the property. This was because we were concerned about the financial state of the company and we did not want to expose that asset to risk. The document refers to the first and second defendants as owning a particular property to allow them to sell parts of it to reduce the mortgage liability. Legally that was correct as they were owners. The rest of the family trusted the first defendant and did not see any issue with this as we all believed he would share the property after our financial problems had passed.

[31] The June 1998 agreement is important in terms of the arrangements that were entered into by the Litt family concerning Litt Transport Ltd and borrowings. In the background section to the agreement three matters are recorded. They are that:

(a) The shareholders of Litt Transport Ltd are the first plaintiff and his wife and their sons, Roger, Colin and Michael;

(b) Litt Transport Ltd is indebted to AMP Services Ltd and to BNZ Finance Ltd; and

(c) The first defendant, Colin Litt, is to transfer his shares in Litt Transport Ltd and accept his share of the indebtedness of the company.

[32] The agreement then provides:

(a) For the transfer of the first defendant’s shares in Litt Transport Ltd to various people and the consideration to be paid;

(b) For the transfer of the first defendant’s current account to his mother

and father as tenants in common in equal shares;

(c) That the first and second defendants are not being responsible for any of the debts of Litt Transport Ltd and taxation on income allocated to them but not received by them from Litt Transport Ltd or from the Litt Bloodstock Partnership; and

(d) That other members of the Litt family are to indemnify the first and second defendants in respect of these debts or claims.

[33] The agreement next provides for the first and second defendants to make a payment to AMP of $211,756.32. That sum is arrived at after taking account of the consideration the first and second defendants were to receive for the first defendant’s shares in Litt Transport Ltd and another adjustment.

[34] The agreement next provides for the first plaintiff and his wife, their sons, Roger and Michael, to obtain from AMP a release of any indebtedness owed to AMP by the first and second defendants and a release of the AMP mortgages over the River Road farm property and lots in a rural residential subdivision.

[35] There was next a requirement for the first and second defendants to transfer to Litt Transport Ltd certain lots in the River Road North subdivision. Provision was

also made for a number of lots in the River Road North farm property to be used for a period of six months as continuing security for the AMP loan. The company, the first plaintiff and his wife, and the sons Roger and Michael were required to take all necessary steps to obtain the release of the mortgage on the sections within six months, including selling the house properties of Roger and his wife and Michael. Provision was made for the liquidation of the bloodstock partnership, payment of

25 per cent of the proceeds to the first defendant and the assignment of a life insurance policy.

[36] The implication here is that the first defendant and his wife were to leave the company and to retain for themselves their assets including, in particular, the River Road farm.

[37] I have already made mention of the caveat proceedings that were taken by the first defendant’s brother and sister-in-law in 1999. There were other proceedings, however, that are summarised in a letter sent by the first and second defendants’ solicitors to the first plaintiff’s solicitors on 23 November 2010 as follows:

7(b) Litt Transport Ltd v CR Litt HC Hamilton CP 66/99 14 March 2000.

Litt Transport Ltd sought summary judgment against Colin Litt for an alleged debt of $293,904.75 said to be owed to the company by members of the partnership of Litt Bloodstock. Colin’s defence was that the sum claimed was taken into account in the 1996 settlement. Summary judgment was declined. A copy of the Judge’s decision is attached. This proceeding was discontinued.

(c) RB, SB and MT Litt v CR & HJ Litt HC Hamilton CIV-2004-419-746

This was a claim for alleged breaches of the 1998 settlement agreement. The limitation period was about to expire at the time the claim was filed. The claims by Roger and Michael Litt were struck out. The claim by Barry Litt was stayed. No further steps have been taken. A copy of the Judge’s minute dated 9 August 2004 is attached.

[38] There is also reference in the papers to a transaction involving a beach property and another property at Taupiri that were transferred to the first defendant. In my view those transactions do not give any particular assistance to the claim made and the defence to it in respect of the River Road property.

[39] I need not make any specific finding on the material on the merits of the plaintiffs’ claim so far as the analysis of the first ground for strike out and summary judgment is concerned. The issue there is solely whether there is an equitable bar by analogy which can apply to the two trust causes of action.

Analysis

[40] It is important that I record that I am not asked, in this application, to determine whether the settlement agreements are in accord and satisfaction that bar the causes of action pleaded in this proceeding.

[41] I deal firstly with the ground that the plaintiffs’ claims are frivolous, vexatious and otherwise an abuse of process as they are time-barred by the equitable doctrine of limitation by analogy.

[42] There is no documentary evidence which is consistent with the imposition of any trust on the registered proprietors of the River Road farm.

[43] The first plaintiff’s claim is expressed by him to be:

(a) An entitlement to benefit equally when the property was subdivided;

and

(b) A promise by the first defendant that the first plaintiff “would be looked after once the property was sold”.

[44] The statement of claim pleads:

(a) A contribution to the acquisition of the property by borrowing mortgage finance;

(b) The history of joint ventures as providing a basis for an explicit promise by the first defendant to the first plaintiff that the plaintiff would share in the property;

(c) Contribution to the mortgage payments made in respect of the River

Road property from 1994 to 1997; and

(d) Subsequent confirmation of the promise to share.

[45] To the pleaded summary I refer to the promises that the first plaintiff claims were made to him and which I have set out in [21] and [23].

[46] A claim of limitation by analogy requires a consideration first of the relevant provisions of the Limitation Act 1950 that apply to the facts of this case.7 Section

4(1) of the Limitation Act 1950 provides:

4 Limitation of actions of contract and tort, and certain other actions

(1) Except as otherwise provided in this Act or in subpart 3 of Part 2 of the Prisoners’ and Victims’ Claims Act 2005, the following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued, that is to say,—

(a) Actions founded on simple contract or on tort: (b) Actions to enforce a recognisance:

(c) Actions to enforce an award, where the submission is not by a deed:

(d) Actions to recover any sum recoverable by virtue of any enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture.

...

Section 4(9) of the Limitation Act 1950 provides:

(9) This section shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any provision thereof may be applied by the Court by analogy in like manner as the corresponding enactment repealed or amended by this Act, or ceasing to have effect by virtue of this Act, has heretofore been applied.

_{Section 21 of the Limitation Act 1950 provides:}

7 See s 59, Limitation Act 2010.

21 Limitation of actions in respect of trust property

(1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action—

(a) In respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or

(b) To recover from the trustee trust property or the proceeds thereof in the possession of the trustee, or previously received by the trustee and converted to his use.

(2) Subject as aforesaid, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of 6 years from the date on which the right of action accrued:

Provided that the right of action shall not be deemed to have accrued to any beneficiary entitled to a future interest in the trust property until the interest fell into possession.

(3) No beneficiary as against whom there would be a good defence under this Act shall derive any greater or other benefit from a judgment or order obtained by any other beneficiary than he could have obtained if he had brought the action and this Act had been pleaded in defence.

[47] The doctrine of limitation by analogy is preserved by s 4(9) of the Limitation Act 1950.8 Courts of equity have, in the absence of specific statutory limitations on equitable causes of action, developed the rule that:9

[W]here the remedy in Equity is correspondent to the remedy at Law, and the latter is subject to a limit in point of time by the Statute of Limitations, a Court of Equity acts by analogy to the statute, and imposes on the remedy it affords the limitation.

[48] In Johns v Johns the Court of Appeal reviewed the application of the doctrine.

[76] The whole subject of limitation by analogy is helpfully reviewed by the authors of Equity and Trusts in New Zealand (2003) (general editor Andrew Butler): see ch 35.1.3. We shall refer to this work hereafter as “Butler”. Examples found in the case law are given and discussed by the authors. They contrast the approach in New Zealand with that taken in Canada. They suggest that the “more reticent approach” taken by the Supreme Court of Canada is to be

8 Johns v Johns [2004] 3 NZLR 202 (CA) at [75].

9 Knox v Gye (1872) LR 5 HL 656 (HL) at 674 per Lord Westbury.

preferred. This is not the occasion to survey the whole field or to come to any final conclusions as to the differences in approach suggested and, to the extent that the differences are material, which is the ultimately preferable approach to take. We add here that there is also a helpful review of the topic and an up-to-date discussion of a number of Australian and English cases in Meagher Gummow & Lehane, Equity – Doctrines and Remedies (4th ed, 2002) ch 34, pp

1009 – 1023.

[77] Butler notes that in Matai Industries Ltd v Jensen the High Court approached the matter primarily by reviewing the allegations in the statement of claim. The authors note that the Judge held that as the negligence claim was statute-barred, so too should be the equitable claims on the basis that “the degree of correspondence” (cf Lord Westbury in Knox v Gye) between the allegations was such that it would be “highly inequitable if the statutory bar could be circumvented simply because essentially the same case was pleaded as an equitable cause of action as well as negligence at common law”.

[78] The authors suggest that in Matai Industries the Court approached the matter without any particularly detailed comparison of the respective heads of liability, to see whether a negligence claim which was barred did contain within it elements of breach of fiduciary duty. As it happens both claims in the present case (breach of trust and breach of fiduciary duty) are equitable in nature and origin. The issue arises because the former is subject to a statutory limitation whereas the latter is not. In principle, however, the question whether there should be limitation by analogy is the same. The equitable bar by analogy depends on a corresponding claim being statute-barred rather than on the historical origin of the allegedly corresponding claim. What matters is that the corresponding claim, whatever its origin, is statute-barred. The analogy is with the statute, rather than with the common law as such. It is the statute not the common law which creates the bar; albeit most statute-barred claims are of common law origin.

[79] In S v G [1995] 3 NZLR 681 (CA) the plaintiff was suing a medical practitioner for several sexual assaults. She had pleaded as causes of action trespass to the person, negligence and breach of fiduciary duty. The Court of Appeal, in a judgment delivered by Gault J, held that as the first two causes of action were statute-barred, the breach of fiduciary duty claim should be barred by analogy. This was on the basis that “the pleaded claims are really alternatives in respect of essentially the same conduct”. But the Court also observed that the obligations imposed on a fiduciary depended on the particular relationship involved and might be very different from obligations in contract and in tort. Butler suggests that the Court thereby left the door open to the possibility of a fiduciary claim surviving, notwithstanding the barring of a common law claim.

[80] That way of putting the matter, understandable as it was in the particular context, tends, with respect, to look at the issue from the wrong end. The fiduciary claim will always prima facie survive the statutory barring of an allied common law or indeed equitable claim.

There will be a bar by analogy only when the fiduciary claim parallels the statute-barred claim so closely that it would be inequitable to allow the statutory bar to be outflanked by the fiduciary claim. In order to determine how close the parallel is the Court must examine not only the underlying facts but also the nature of the relationship between the parties and the policy and purpose of the different causes of action. If there is a sufficient difference in any material respect, the suggested parallel is unlikely to be close enough to make it appropriate in equity to apply an analogous bar.

[81] This, we think, is the point Butler is making at ch 31.1.3(4)(c), (d) and (e), pp 966 – 967 by reference to the decision of Paterson J in Simpson v Elliot (High Court, Auckland, CP 54/99, 14 March 2001) and the decision of the Supreme Court of Canada in M(K) v M(H) (1992) 96 DLR (4th) 289. The judgments in Matai Industries and S v G should not be read as suggesting that the issue can be concluded solely by reference to the degree of concurrence of the factual allegations. That of course must be the first focus because, if there is no sufficient degree of concurrence in that respect, the suggested analogy is likely to fail at that point. If, however, there is factual concurrence in the sense that the different causes of action are simply different ways of putting the same factual complaint, and there are no policy or other reasons militating against it, the case for an analogous bar is likely to have been made out.

[49] As I was considering this matter I became concerned that neither counsel had directly referred to s 21 of the Limitation Act 1950 in their submissions. I accordingly convened an urgent hearing on 23 March 2012 so that counsel could address on the issue.

[50] The first cause of action is pleaded as a constructive trust cause of action. For the purposes of this application I adopt the analysis of such causes of action as undertaken by Tipping J.10 As pleaded, the cause of action is an institutional constructive trust claim. In Basile v Basile Clifford J considered the application of the doctrine of constructive trust to a claim in which the plaintiff sought ownership of a portion of the defendant partnership’s fishing quota. His Honour considered the

requirements for a proper constructive trust claim and said as follows as to its extension beyond de facto property disputes:11

[108] So far, the discussion has concerned the development of the doctrine of constructive trust in de facto property disputes. The principles

10 Lankow v Rose [1995] 1 NZLR 277 (CA) at 294.

11 Basile v Basile HC Wellington CIV-2006-485-425, CIV-2006-485-426, 1 September 2008 at

[108].

developed in Lankow v Rose [1995] 1 NZLR 277 have also been applied in a number of other contexts:

a) In Henri v Public Trustee and Anor HC AK CP235-98 27

September 1998, a daughter sought to enforce a claim to her

parents’ house, on various grounds including that of a constructive trust. Although the Court did not uphold the claim, it did analyse the daughter’s claim by reference to the four requirements set down in Lankow v Rose for a constructive trust.

b) In Stubbs v Holmes [1999] NZFLR 780, parents asserted a claim to property registered in the joint names of their child and their child’s de facto partner. The Court upheld that claim by reference to the principles of constructive trust and estoppel, as outlined by Cooke P and Richardson J respectively in Gillies v Keogh [1989] 2 NZLR 327.

[109] Similar, in that they arise within the family context, are the decisions In the matter of Mona Grace Cameron [2003] NZFLR 457 and McEvoy v McEvoy HC CHCH CIV-2007-409-002946, 13, 22 May

2008.

[110] The doctrine would appear to have been applied only infrequently outside the context of family relationships, and contributions to family property made – or alleged to have been made – in the context of such relationships. An example of an unsuccessful claim for the recognition of a constructive trust in such a context is Rosser v Global Construction Services Ltd AK CIV-2005-404-4899 28 April

2004. That outcome can perhaps be understood by considering whether – outside the family context – a person would be prepared

to make a contribution sufficient to give rise to a constructive trust,

in circumstances where the expectation to beneficial ownership of the property in question could – objectively assessed – be said to be

reasonable.

[111] John, in denying Nino’s claim, did not assert that the doctrine of constructive trust was not, as a matter of principle, available for Nino to rely on. This is a family dispute. Rather John’s argument was very much that the elements of a constructive trust, as outlined in Lankow v Rose, were not established by Nino. I am prepared to consider the case on that basis although, as O’Regan J did in Palu & Anor v Conference of the Methodist Church of New Zealand & Ors HC AK CIV-2001-404-001870 23 July 2003, I express the view that, given the very specific context within which the Court of Appeal was discussing the doctrine of constructive trust in Gillies v Keogh and Lankow v Rose, some reservation must be expressed about the application of that doctrine outside that context.

[51] In Equity and Trusts in New Zealand the authors note that the definition of trust and trustee for the purposes of s 21 of the Limitation Act 1950 have the

extended meaning given to those words and which are contained in the Trustee Act

1956. 12 The authors then provide:

... the basic position is that those fiduciaries who obtain their principal’s property in the course of their fiduciary office hold that property on constructive trust from the moment of receipt ... If they wrongfully purport to assert beneficial title over that property, they will be committing a fraudulent breach of trust. Accordingly, in terms of s 21(1), they will not be able to plead any limitation period as a defence.

[52] Accordingly, unless the statutory bar by analogy can be applied the defendants will not be able to plead the limitation period as a defence.

[53] The first question that must be asked is: is there a corresponding claim to that which is pleaded in this case in equity? That has sometimes been expressed as a consideration of “the degree of concurrence of the factual allegations” which are required. That does not end the matter because one then has to go on to determine whether there are any policy or other reasons militating against applying the statutory bar by analogy to the circumstances of the particular case.

[54] Underlying the plaintiffs’ claim is a claim that in return for providing financial assistance through the borrowing the defendants promised that the plaintiffs and other members of the family “would each have an equal share in the property”.

[55] On its face, this appears to be a promise made that is supported by consideration.

[56] In his written submissions Mr MacGillivray put the position in this way:

Barry Litt’s claim could have been brought in contract: he says that there was an agreement between the parties that the property would be equally shared between himself, Roger Litt, Michael Litt and Colin Litt. Barry Litt says that in consideration for his assistance in the financing of the purchase and in the payment of interest, Colin agreed to him a quarter-share in the River Road farm. Contract law holds people to their bargains. The only possible unconscionable conduct here is the failure to honour an agreement. Either that agreement is binding and there was a claim in contract (now out of time), or there was no agreement, in which case it is not unconscionable

12 A Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at

[38.1.2(4)(b)].

to deny its existence. The remedy available in contract for the breach of such an agreement would be specific performance (conveying a quarter- share) or compensatory damages (one quarter of the value of the property).”

[57] Mr Hayes pointed out that Mr Barry Litt did not use the words “in consideration”. However, what is plain on an examination of the facts is that a request was made to Barry Litt, according to his evidence, to provide financial support by way of assistance with the borrowing to enable the purchase of the farm by the first and second defendants to be completed. Whilst he may not have used the word “consideration” that is exactly what the basis is for advancing the claim to a share in the farm property. Indeed, he pleads:

It was expressly and/or impliedly understood between the plaintiffs, first defendant and second defendants (and Michael Litt) that they would each have an equal share in the property.

Had it not been for the limitation point, the very facts that are relied upon to support the pleaded claim are those very facts that would support a claim in contract. Not only is the contract itself supported by those facts, but so is the remedy sought.

[58] Neither counsel advanced any policy or other reasons to suggest that I should not consider the constructive trust cause of action pleaded in this case as simply a different way of pleading a claim in contract.

[59] The result is that both causes of action are barred by analogy and it is appropriate therefore to strike out the claim and enter judgment against the first plaintiff.

[60] Having found for the defendants in respect of the first ground advanced, it is unnecessary to make to any final determination on the defendants’ second ground that the pleaded case discloses no reasonably arguable cause of action. I make no final determination on that part of the application. It was not the subject of any detailed submission by Mr MacGillivray, whose submissions concentrated on the equitable bar by analogy ground.

Orders

[61] On the defendants’ application for summary judgment I enter judgment for

the defendants.

Costs

[62] I reserve costs. Costs need to be determined both in relation to the first and second plaintiffs’ position. Memoranda shall be filed and served in support, opposition and reply at seven-day intervals. On receipt the Registrar shall refer the

_{file to me to consider the entry of judgment for costs.}

JA Faire

Associate Judge