DEVEREUX v NGAKURU [2016] NZHC 2430

DEVEREUX v NGAKURU [2016] NZHC 2430 [10 October 2016]IN THE HIGH COURT OF NEW ZEALANDWHANGAREI REGISTRYCIV-2016-488-53[2016] NZHC 2430BETWEEN JARED SHANE DEVEREUXMARNIE PETRIA DEVEREUXAS EXECUTORS OF THE ESTATE OFCALLIS PETER NGAKURUPlaintiffsAND APIRANA BUNNY NGAKURUDefendantHearing: 10 October 2016Appearances: A R Gilchrist for PlaintiffsR C Mark for DefendantJudgment: 10 October 2016Reasons: 12 October 2016REASONS FOR JUDGMENT OF ASSOCIATE JUDGE R M BELLReasons for judgment were delivered by me on 12 October 2016 at 3:30pmpursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors:Friedlander & Co Limited, Auckland, for PlaintiffsRichard C Mark, Kerikeri for DefendantCounsel:Andrew R Gilchrist, Auckland, for Plaintiffs[1] After hearing the plaintiffs' application for summary judgment, I advised theparties that I would dismiss the application but give my reasons later. This decision records those reasons.[2] Ngakuru Farms Ltd had a dairy farm at Waimamaku, Northland. It had two directors who were equal shareholders, the brothers Callis Peter Ngakuru and Apirana Bunny Nakuru. Peter died on 15 January 2009. The plaintiffs, his children, are the executors of his estate. Their mother is Carole Devereux, Peter's formerwife.[3] Ngakuru Farms Ltd went into voluntary liquidation on 17 November 2010. At the end of the liquidation in 2012, after creditors had been paid and the liquidators had recovered their remuneration and expenses, the company had oneasset: Bunny's current account debt of $1,306,990. In December 2012 theliquidators made an in specie distribution by assigning the debt to the shareholders,Bunny and the executors of Peter's estate. In this proceeding the plaintiffs, asexecutors of Peter's estate, sue Bunny for $653,495 for the share of the currentaccount assigned to the estate.[4] The plaintiffs' case is straightforward. There is one cause of action. The executors plead the liquidation of the company, Bunny's current account deficit of $1,306,990, the assignment of half the debt to them, the demand for payment, andBunny's failure to pay. They seek judgment for $653,495 plus interest and costs.[5] Bunny raises a single defence. At a meeting in the chapel of the Church of Jesus Christ of Latter-day Saints at Whangarei he agreed with Carole to settle the claim by transferring land to the estate. That is a defence of accord and satisfaction. He says that he has carried out his side of the bargain.[6] To see whether he has an arguable defence, it will be necessary to consider the evidence as to the meeting in the chapel. It is also necessary to go back into earlier history.[7] The principles for plaintiffs' applications for summary judgment are wellestablished. The Court of Appeal re-stated them in Krukziener v Hanover Finance Ltd:1The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3. 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 MacLean v Stewart (1997) 11 PRNZ 66 (CA). 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 inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable, Eng Mee Yong v Letchumanan [1980]AC 331 (PC) at 341. 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: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).[8] In this case, the plaintiffs say that they should succeed because Bunny'sevidence is inherently lacking in credibility under the principle in Eng Mee Yong v Letchumanan.2Background[9] Ngakuru Farms Ltd was originally called T M Ngakuru and Sons Ltd.Thomas Ngakuru, Peter and Bunny's father, founded the company. He died in 1968.Peter and Bunny became equal shareholders. Until 1970, Peter ran the farm. Another brother managed it until 1974. Bunny took over the day-to-day management in 1974. The company owned land but also farmed neighbouring properties owned by Peter and Bunny. The titles show that much of this land wasMāori freehold land but was later made general land by status orders of the MāoriLand Court. Bunny says that when he took over the farm it was run down, and the farm had solvency problems. Peter apparently had no active involvement in the farm or the company from 1974 onwards.1 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].2 Eng Mee Yong v Letchumanan [1980] AC 331 (PC).[10] In 2004 Peter pressed for a division of the farm and the associated land. In October 2005, the brothers entered into a written agreement under which Bunny transferred all his shares to Peter. The company would transfer certain blocks of land to Bunny and would take ownership of other land owned by the two brothers. There were provisions for division of other land owned by them. During 2006 there were transfers of properties to Bunny under the agreement. It is not clear that all the other provisions in the agreement were carried out. The financial statements for thecompany at 31 May 2006, showed Bunny's shareholder's current account at$1,729,060.99 as a result of the transfers to him. From this time onwards, the company appears to have accrued unpaid tax liabilities, although the evidence is not clear how they arose.[11] On 10 December 2008, Bunny and Peter entered into another written agreement which was intended to achieve the dissolution of their asset-owning relationship, with the goal being equal division with liquidation of the company. Among other things, the agreement provided for a subdivision to be completed and for certain land to be transferred to Peter. Not clear everything in the agreement of 2008 was carried out.[12] As part of the background, it is necessary to refer to two blocks of land in identifiers NA602/245 and NA43B/247. The first, an area of about 34 hectares, wasMāori land owned by the brothers registered as joint tenants. The agreements referto it as partnership land. It is accordingly likely that in equity they held it as tenants in common in equal shares. The status order declaring the land to be general land was registered on 20 February 2009. The land in NA43B/247 is about 40 hectares,again owned by the brothers as joint tenants and referred to as "partnership land". Astatus order declaring it to be general land was registered on 17 August 2009.[13] On Peter's death, legal title to these blocks passed to Bunny as survivor. TheOctober 2005 agreement had provided that the land in NA602/245 was to be owned by Ngakuru Farms Ltd under the directorship and sole shareholding of Peter. The agreement of December 2008 provided that Peter was to have the land, but that wasto be subject to rights of access to an urupa for all members of the whānau. Theagreement of December 2008 provided that the land in NA43B/247 was to betransferred to the company so that it could form part of the subdivision of company land. Peter was then to have a lot comprising lot 4 of the subdivision and the land in NA43B/247. The transfers of these blocks had not been carried out when Peter died.[14] The executors' affidavit refers to litigation with Bunny, but details are notgiven. The proceedings included an application to put Ngakuru Farms Ltd intoliquidation. Eventually, after Peter's death, the company went into liquidation inNovember 2010 by shareholders' resolution. The Commissioner of Inland Revenueclaimed in the liquidation for $343,614.31. The liquidators tried to sell land owned by the company, but the highest offer they received was $210,000. The executors of Peter's estate instructed an accountant to review and correct errors in the company's accounts and negotiate a reduction in the company's tax liability with theCommissioner of Inland Revenue. Financial statements for the year ending 31 May 2010 were prepared. Bunny signed these as director on 26 March 2012. These statements showed that the amount he owed the company under his current account was $1,564,250. The negotiations with the Inland Revenue Department were successful. The Commissioner agreed to remove all penalties and to accept$210,000 as settlement of the company's tax liability.[15] The liquidation of the company was completed by the liquidators selling thecompany's land to Peter's whānau for $560,000. The liquidators accepted $300,000in cash, with the balance left in as an interest-free vendor loan. The executors contributed $19,091 towards the costs of the liquidation. The liquidators transferredthe vendor loan back to Peter's executors. The payments by the executors were enough to pay the company's external creditors and the liquidators' fees andexpenses. Bunny did not pay anything towards meeting these debts.[16] The liquidators calculated the amount Bunny owed the company at $1,306.990. In December 2012 Ngakuru Farms Ltd assigned $653,495 of that toPeter's executors. That was by a deed of assignment signed by the liquidators for Ngakuru Farms Ltd as assignor and the executors as assignees. While Bunny was named as a party to the agreement, he did not sign it. The liquidators advised Bunny of the assignment in December 2012 and of his liability to the executors. The executors' lawyer wrote to Bunny making demand on 17 April 2013. Apart from hisdefence of accord and satisfaction, Bunny does not dispute his current account indebtedness, the amount of the debt, or the validity of the assignment to the executorsThe accord and satisfaction defence[17] Bunny's defence is that there was a meeting in late 2009 or early 2010 with Carole Devereux, the executor's mother, in which he agreed to transfer the land inidentifiers NA602/245 and NA43B/247 to the executors in full and final settlement of any claim on the current account.[18] The executors reject that. They acknowledge that there was a meeting in the chapel, but that was on 4 May 2012. They say that in the meeting Bunny agreed tomeet half the costs of paying the company's external creditors and the liquidators'fees and expenses and, if he did that, they would/might make no claim against him on the company current account. The executors in person did not attend the meeting but they acknowledge that Carole attended with their authority to negotiate and enter into an agreement.[19] The parties give contrasting evidence as to the meeting. Bunny says that the meeting at the chapel in Whangarei in late 2009/early 2010 was chaired by a respected member of the Church, Mr Maxwell Horsford (both Bunny and Carole are Mormons). The executors were represented by their mother Carole and her current husband, Colin Devereux. Carole asked for the land in identifiers NA602/245 and NA43B/247 to be transferred to the executors and if that was done that would be accepted in full and final settlement of his debt to the executors as shareholders in the company. He puts the day of the meeting as before the company went into voluntary liquidation on 17 November 2010. The land in NA602/245 was transferred to the executors in April 2010 and the land in 43B/247 was transferred in June 2012. With that he completed his side of the bargain.[20] Mr Horsford confirms Bunny's account. He says that he took notes at themeeting but he has not been able to find them. He says no one drew up a written agreement but everyone shook hands and both sides were very happy with theoutcome. On their account, there was no discussion or agreement for Bunny to pay anything towards the costs of liquidation or to pay off the external creditors of the company.[21] For the plaintiffs, Carole Devereux confirms that there was a meeting, but she says that it was on 4 May 2012. She is able to pinpoint that date by referring to emails sent soon after the meeting. The company was in liquidation. The liquidators had set a deadline for the shareholders to come up with funds to pay the externalcreditors and the liquidators' fees and expenses. If the deadline was not met, theliquidators intended to sell the company land. The sole purpose of meeting with Bunny was to obtain a commitment from him to pay a half share of those debts. In the light of her evidence, Bunny accepts that the meeting took place on 4 May 2012.[22] The executors rely on email correspondence sent after 4 May 2012 to disprove Bunny's defence. I refer to the ones that seem most relevant. On 4 May 2012, the executors' lawyer wrote to the liquidators' lawyer to say that theshareholders had met in Whangarei and agreed to provide in equal shares the funds necessary to pay the outstanding tax and liquidators' expenses and thus enable the distribution of the company's assets. Both sides were approaching their banks toobtain the necessary funds. The email related to a request to defer the sale of the land pending confirmation of finance and the amount required. On 9 May 2012,Carole sent an email to the executors' lawyer. That was in response to emails fromone of the liquidators and from the lawyer, under which the liquidators had granted an extension of time for the shareholders to find funds. Carole's email said:Letter to Steve Dominic.He represents Bunny. Liquidators' letter of 30 April, 14 days' notice.Meeting in Whangarei on Friday 4th May Buzz Horsford, Colin Devereux, Carole Devereux, Bunny Ngakuru. Agreement was reached between the parties – Buzz and Colin witnessed and recorded. Each party would pay 50% of the coy debts Bunny agreed to turn the private block NA43B/247 over to the Estate immediately a condition outstanding from Agreements reached between himself and Peter Ngakuru in 2005 and 2008. The Estate agreed that they would not pursue Bunny privately for their remaining Equity share. The Urupa would be protected by an Encumbrance in lieu of offerRMR (Māori reserve).The Estate has approval for their Loan.Liquidators have agreed to an extension on the sale of the land but still require lodgement of the funds by 14 May.[23] On 15 May 2012 the lawyer acting for Bunny sent an email to the executors'lawyer:We confirm our telephone advice that Bunny Ngakuru has been unable tocome up with the half share of the liquidators' costs and outstanding debts of the company. Bunny's proposal to finance the costs and debts unfortunatelycannot proceed.Bunny has confirmed he is still able to transfer the land in CT.NA43B/247 in consideration of the Estate not pursuing the debt against Bunny. We note he will refer the matter back to your client.[24] The same lawyer emailed again on 16 May 2012:We have spoken further with Bunny who still expects that the transfer to be a consideration of the release by the estate of the debts owing by Bunny. Bunny will instruct us to prepare the A & I documents once we have that agreement and it is documented.[25] An email in reply by the executors' lawyer, dated 16 May 2012 remonstratedwith what was seen as a change of position by Bunny.[26] Carole's account of the 4 May 2012 meeting in her affidavit says that therewas discussion of the blocks of land; Bunny agreed to pay his half share of the liquidation and tax costs. When Bunny raised the subject of the current account, she told him that the current account was in the hands of the liquidators (as it was a company asset) but that she felt sure that if both parties settled the company debts the liquidators would have no reason to proceed with the debt collection and would be able to distribute the remaining assets to the shareholders. In those circumstances, the estate would be unlikely to pursue Bunny. She believed that if the executors ended up with part of the current account they would be very unlikely to attempt to recover it. The question of transferring the land in NA43B/247 wasdealt with separately in the meeting. Carole proposed that that there be anencumbrance to protect the whānau access to the urupa instead of a Māorireservation proposed by Bunny. He agreed to that. She says that towards the end of the meeting, her husband Colin told Bunny that everything discussed was contingent on his paying his share of the debt. Her evidence does not refer to any agreement being recorded in writing. Colin Devereux's evidence corroborates Carole's account.[27] With that evidence, the executors submit that Bunny's evidence has beenshown to be so inconsistent with undisputed facts that his defence can be immediately dismissed. There was an obvious glaring error as to the time of the meeting, not only the year but also the season, and whether the meeting was before or after the company went into liquidation. At the time of the actual meeting, one of the lots had already been transferred. The email correspondence sent shortly after the meeting was said to clearly identify the terms of any agreement reached.Bunny's attempts to propose forgiveness of the debt upon his transferring the land was no more than a "try-on" after he had failed to come up with the funds to pay theexternal creditors and costs of liquidation.[28] In response, Mr Mark submitted for Bunny that he never had the funds to pay the costs of liquidation and the taxes, and he would accordingly never have agreed to pay any share of that debt. The offer to transfer the land in NA43B/247 went beyond promising to perform an existing contractual commitment. Under the agreement of December 2008, Bunny was to transfer that land to the company, and the company in turn was to transfer the land to Peter. Instead, Bunny would transfer the land directly to the executors without going through the company – and that was a potential difficulty, given the liquidation and the risk of the liquidators selling that land to meet claims against the company.Conclusion[29] The weight of the evidence, especially the emails sent after the meeting,favours the executors' case. The evidence in support of Bunny's defence is weak.But in a summary judgment application, it is not enough that the defence looks weak. The court has to be satisfied that it is not even arguable.[30] In my judgment, the merits of the defence can only be decided by the court hearing in person the evidence from those who attended the meeting on 4 May 2012.On the plaintiffs' evidence I am unable to make firm findings as to exactly what was agreed at the meeting. It is, of course, difficult to make definite findings as to what parties orally agreed on the basis of accounts in affidavits made some time afterwards. Similarly, the emails sent after the meeting are not conclusive. None of them is intended to state comprehensively everything that was agreed.[31] While Carole's email does state some terms, she refers to the agreement as "witnessed and recorded", but so far no one has produced a written record ofwhatever was discussed.[32] On both sides' accounts, there was some discussion of Bunny not being suedon his current account, but the parties differ on the circumstances under which the debt would be released. As Carole appreciates in her account, the debt was an asset of the company and at the time of the meeting had not been assigned to the executors. While Carole and Colin Devereux say that any release of the debt was conditional on Bunny first paying those accounts, to rely on that would involve my making a credibility finding in their favour against Bunny, without the evidence being tested in cross-examination.[33] Both sides accept that they made an agreement on 4 May 2012 but they disagree on its terms. If I were to find for the executors, I would have to be able to say what those terms were, especially with regard to any forgiveness of the current account debt. Any attempt to record what the parties agreed would have to address:[a] At the time of the agreement the debt belonged to the company, not the executors who had no authority to bind the liquidators;[b] Whether any forgiveness was to be a release of the debt or a promise not to sue;33 The executors could not release a debt that they did not own, but they could agree not to sue, in case they did become owners. Cancellation of an agreement for breach would not undo a release that had already taken effect, but would free the executors from a covenant not to sue.[c] Whether any forgiveness was to have immediate effect or was deferred;[d] The effect of Bunny's failure to pay any costs (if he did undertake topay them).I suspect that if I were to try that I would set out what I believe the parties ought tohave agreed, rather than what they did agree. Of course it is not the court's job to make the agreement for the parties. Carole's email of 9 May 2012 refers to theagreement as "witnessed and recorded". If the record were to become available,I have no confidence that any reconstruction I might attempt would match what the parties wrote down.[34] Because I cannot confidently make definitive findings as to what was agreed on 4 May 2012, I cannot rule out Bunny's defence. Accordingly the summaryjudgment application is dismissed, but with costs on the application reserved.................Associate Judge R M Bell