TAYLOR v ASTERON LIFE LTD [2019] NZCA 683

TAYLOR v ASTERON LIFE LTD [2019] NZCA 683 [20 December 2019]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA256/2019CA308/2019[2019] NZCA 683BETWEEN PETER JAMES TAYLORAppellantAND ASTERON LIFE LIMITEDRespondentCourt: Kós P, Cooper and Collins JJCounsel: A C Beck for AppellantC M Meechan QC and A Borchardt for RespondentJudgment:(On the papers)20 December 2019 at 10 amJUDGMENT OF THE COURTA The application for a stay of execution is declined.B Costs are reserved.____________________________________________________________________REASONS OF THE COURT(Given by Cooper J)[1] The appellant Mr Taylor has applied for a stay of execution of the judgment ofthe High Court delivered on 7 May 20191 and of the subsequent judgment on interestand costs.2 The application is opposed by the respondent (Asteron). We have dealtwith the application on the papers at the request of Asteron and in the absence of anyopposition from the appellant.1 Taylor v Asteron Life Ltd [2019] NZHC 978 [High Court judgment].2 Taylor v Asteron Life Ltd [2019] NZHC 1489 [costs judgment].[2] In the substantive decision, Cooke J dismissed claims by Mr Taylor seeking adeclaration that he was entitled to continuing benefits under an income protectioninsurance policy, and an order for the payment of arrears said to be due underthe policy.3 In the same judgment, the High Court allowed Asteron's counter-claim,holding that Mr Taylor had breached his obligation of good faith by misrepresentingthe amount of time he had spent working while receiving payments under the policy.4It held that he was liable to repay the sum of $371,286.70.5[3] In the subsequent costs judgment, the Judge held that Asteron was, in addition,entitled to interest in the amount of $128,153.66 to the date of judgment(28 June 2019).6 With costs and disbursements, the net judgment debt is nowapproximately $666,000. Mr Taylor filed an appeal against the High Court judgmenton 5 June 2019 and subsequently appealed against the costs judgment. Both appealsare to be heard together.[4] Mr Taylor made an application for an order staying execution ofthe High Court judgments. His application was opposed and it was declined bythe trial Judge.7 The present application is advanced on the same basis as inthe High Court, but it is supported by a further affidavit sworn by Mr Taylor on4 October 2019.[5] In the meantime, Asteron has issued a bankruptcy notice in the High Court atDunedin, and Mr Taylor has filed an application to set that aside.Background[6] For present purposes, it is sufficient to state the background briefly. Mr Taylorwas in business on his own account as an insurance broker and took out an incomeprotection insurance policy. In July 2010, he made a claim under the policy as aconsequence of significant medical problems. Asteron accepted that Mr Taylor was3 High Court judgment, above n 1, at [2] and [124].4 At [96].5 At [125].6 Costs judgment, above n 2, at [4].7 Taylor v Asteron Life Ltd [2019] NZHC 2459 [stay judgment].covered under the policy and paid benefits under it until September 2014 when itsuspended payments.[7] Mr Taylor commenced proceedings in the High Court, seeking a declarationthat he was entitled to continuing benefits under the policy and sought judgment forclaimed arrears.8 Asteron denied that Mr Taylor was entitled to any payment andsought restitution of payments previously made. That stance was adopted on the basisthat in his claim form and subsequent progress reports Mr Taylor reported that he wasnot working, or only undertaking very limited work, when that was not true and hewas working more extensively. It was said that he breached his duty of utmost goodfaith in making his claim. For his part, Mr Taylor defended the counter-claim alleginga change of position.High Court judgment[8] The Judge accepted that Mr Taylor was suffering from a sickness as defined inthe policy, which potentially qualified him for either a total disability benefit or apartial disability benefit as those terms were defined.9[9] To qualify for a total disability benefit, the policy required Mr Taylor to havebeen unable to work in his usual occupation for more than 10 hours per week.10Mr Taylor claimed that he met that requirement, but the Judge found to the contrary.11He relied on correspondence and telephone records and oral evidence of three formeremployees of Mr Taylor. The Judge considered the evidence established thatMr Taylor had been working extensively in the business at the relevant times.12He specifically recorded his conclusion that Mr Taylor's evidence, and his answers incross-examination, were generally unreliable and at times not credible.13[10] The Judge then addressed whether Mr Taylor was nevertheless entitled to apartial disability benefit under the policy. On the basis of the evidence, the High Court8 High Court judgment, above n 1, at [2].9 At [36].10 At [38].11 At [47].12 At [45]–[46].13 At [46].found that all amounts due were fully set-off by an abatement (required by the policy)from the prescribed benefit.14 That meant no amounts were due to Mr Taylor.As the Judge put it, to the extent that his illness had affected his ability to work, it hadnot adversely affected his income in a way covered by the policy.15Consequently, Mr Taylor's claim had to be dismissed.[11] Turning to the counter-claim, the Judge held that Mr Taylor had incorrectlyadvised Asteron about the extent of work he had carried out in reports he provided inAugust, September, October and November 2010 and subsequently betweenJanuary 2011 and April 2014.16 He observed:[81] Given the findings I have already made earlier in this judgment, it isclear that what Mr Taylor was saying in the forms is false. Whatever theimpact his conditions had had upon him, he returned to work in 2010 workingapproximately four hours per day at home or in the office, and generallyoverseeing the overall business operation. He also engaged in other activitiesassociated with other business ventures.[82] I found Mr Taylor's evidence suggesting otherwise to be unreliable,and at times untruthful. I am very conscious of the need to avoid makingfindings that a person has acted dishonestly, and that clear evidence must beprovided before reaching that conclusion. But I do not see how Mr Taylor'sinaccurate statements about his work could have been the consequence oferror. I find that they deliberately misrepresented the amount of work he wasengaged in and amounted to a breach of Mr Taylor's duties under the contract.(Footnote omitted.)[12] The Judge concluded that Mr Taylor had made deliberately falsemisstatements, which were plainly material.17 Asteron was entitled to repayment ofthe sums that it had paid out under the policy, since Mr Taylor had never been entitledto receive the payments. He rejected the alteration of position defence advanced byMr Taylor, who claimed that he received the insurance payments in good faith, that hehad altered his position in reliance on the validity of the payments, and that it wouldbe inequitable to grant relief as sought by Asteron.18 The Judge took the view that, as14 At [60].15 At [61].16 At [81].17 At [108].18 At [109].Mr Taylor had induced Asteron to make the payments to him, it would not be equitableto require payment even if there had been a change of position.19[13] But the Judge also dealt with the substance of the expenditure said to constituteMr Taylor's change of position. These were expenditure on the building of a holidayhouse, on the purchase of two expensive motor vehicles,20 and on overseas holidays.21The Judge rejected Mr Taylor's claims that any of this expenditure was attributable tothe receipt of payments from Asteron.22 In the result, Mr Taylor's defence of changeof position was rejected, the Judge reiterating that he had not acted in good faith.23The application for stay — High Court[14] The Judge dismissed Mr Taylor's application for stay of execution, rejectingassertions of fact in Mr Taylor's affidavits which were inconsistent with the Court'sfactual findings. The Judge highlighted three matters in particular, observing that:24(a) Mr Taylor's broking business was undertaken in his own name, and it washis income from that business in the form of profits which was insuredwith Asteron. The business was not owned by a company, and neither wasthere any evidence (or even a suggestion) that the business was owned bya trust. This would have been inconsistent with Mr Taylor's very claimthat he was insuring his own income from the business.(b) The accounts for that business signed off by Mr Taylor's accountants(or at least the accurate ones, as a false set of accounts had earlier beendiscovered) show that Mr Taylor earned operating profits $149,025 in2010, $163,830 in 2011, $155,407 in 2012, $150,561 in 2013, and$166,013 in 2014. These amounts are over and above the amounts thatMr Taylor received from Asteron under the insurance policy.The statements in his affidavits are a repetition of the false assertions hemade to induce Asteron to pay out on the policy to him, and his evidenceto the Court found to be unreliable and at times untrue.(c) Mr Taylor has then received significant sale proceeds from the sale ofthe business. It would appear that the sale and purchase agreement is in thename of Mr Taylor's company, rather than his personal name. To achievethat he must have transferred his business to that company in a way notexplained. He would have been entitled to the value of the business so19 At [110].20 A new 2010 Mercedes Benz SL400 Coupe and a used 2012 Mercedes Benz C63 Coupe costingrespectively $185,534.24 and $194,157.70.21 At [112].22 At [123].23 At [123].24 Stay judgment, above n 7, at [13].transferred to his company. The further assertion that the business isactually owned by a trust is inconsistent with the foundation ofMr Taylor's claims in this litigation, and there is no evidential basis for it.(Footnotes omitted.)[15] The Judge then noted Mr Taylor's acquisition of significant assets, including areference to a Maserati which the Judge found had been purchased after Asteronceased making its payments under the policy.25[16] The Judge also noted what he described as a complete absence of detailed oraccurate financial information or explanation as to the legal structures used that wouldallow the Court to accept that he had insufficient money to meet the judgments, or toprovide security for a stay.26 The Judge considered in the circumstances that theabsence of security was fatal.27 He also commented adversely on the appeal's prospectof success.28Application for stay — this Court[17] In advancing the application in this Court, Mr Beck referred to various errorswhich he claimed the Judge made in the substantive judgment, and in dismissingthe application for stay. He submitted that there will be substantial prejudice ifthe judgments are enforced before the appeal is determined by this Court becausethe appeal would be rendered nugatory. On the other hand, no substantial prejudicewould flow to Asteron if the stay were granted. Mr Beck also argued that there areimportant questions of law involved not previously considered by this Court and thebalance of convenience favours the granting of the stay. The absence of security oughtnot to be emphasised to the exclusion of other factors which the Court is required totake into account in a balancing exercise. That is particularly important incircumstances where the appeal would provide an opportunity for Mr Taylor tochallenge findings of dishonesty which have been made against him when they werenot pleaded or put to him when giving evidence.25 At [14]; and High Court judgment, above n 1, at [119].26 Stay judgment, above n 7, at [15].27 At [16].28 At [17].[18] In his affidavit of 4 October, Mr Taylor deposed that after he became ill in 2009he was no longer able to carry on the business activities he had previously engaged inand ceased drawing any salary from the business. He rejected "the suggestion" thathe made false assertions regarding his income, claiming that all statements he maderegarding his earnings were supported by financial statements in evidence inthe High Court and which had been prepared by accountants with whom he had along-standing relationship. He asserted that his tax returns for the years 2010–2015consistently show either a loss or a nil assessment. His living expenses from that timeonwards were met by the insurance payments and out of his wife's salary and savings.In March 2014, his broking business was sold to the company Peter J Taylor andAssociates Ltd. That occurred well before any suggestion of a legal dispute withAsteron. In 2018 the company had sold the business to Crombie Lockwood.[19] Under the heading "Assets", Mr Taylor stated:My wife and I currently live in a property at [address]. This property is ownedby a trust. A copy of the certificate of title is attached marked "J". The trustwas established in May 1988, and the current trustees are myself, my wife,Keogh McCormack Trustees Ltd and Van Aart Sycamore Trustees Ltd.My wife and I are able to occupy the property for our lifetimes. The house isnot an asset that belongs to me or that can be used by me to provide security.All I am entitled to is a right of occupation. I do not own any other property.The respondent has claimed that I own a Maserati, and this appears to havebeen accepted by Cooke J. This is not correct. The vehicle that is referred towas purchased by my wife in 2018, and is only driven by her. I have notdriven for at least 5 years because of the medication I am required to take.This was confirmed by Mr Hodgson in 2011. His letter is attached marked"K". An email confirming the purchase of the vehicle by my wife is attachedmarked "L".Although the broking business was sold in 2018, the purchase price was notpaid to me, but to the trust who owned the business. The purchase price wasan indicative figure only, and was subject to an earnout period of 2 years.The income of the business has been severely impacted by the litigation tacticspursued by the respondent and a number of other circumstances, notablybusiness migration, reputational damage, and the terms of the judgment givenby the court.Only a deposit was paid in respect of the purchase price, and that was paid tothe trust. Attached marked "M" is an email from Crombie Lockwood thatexplains what has taken place subsequent to the conclusion of the agreementfor sale of the business.As the email shows, further amounts payable under the agreement have notbeen paid to date, but that is not the main point. The point is that I personallyhave not received any money from the sale. I am one of the trustees ofthe trust, but I have no control of the decisions made by the trustees.The trust was established many years ago in accordance with professionaladvice and normal business practices. The business was sold to the trust onthe same basis. I reject the assertion that I have made efforts to "alienate assetsand allocate income" to my wife in a way that is somehow improper. My wifewas paid for work she did for the business.I have received some funds from the trust to enable me to meet some of thehuge expenses I have faced over the past three years, but any advances fromthe trust are made by decision of the trustees in accordance with the dutiesresting on them — I have no right to receive any income that might accrue tothe trust.[20] Later in the affidavit, Mr Taylor said that he is not in a position to paythe judgment debt and he does not have assets to serve as security for the payment.[21] For Asteron Ms Meechan QC invited the Court to be sceptical aboutMr Taylor's claim not to be in a position to provide security. She referred to evidencethat Mr Taylor sold his brokerage business to Peter J Taylor and Associates Ltd afterAsteron began to press him for information in relation to his income stream.She complained of a lack of direct information about the nature of the transaction bywhich Mr Taylor sold his brokerage business to the company and referred to aconcession made by his accountant, Mr Rewcastle, at the High Court trial that the"restructuring" was in train in mid-2015. This is to be contrasted with an unsignedstatement from Mr Rewcastle, attached to Mr Taylor's 4 October affidavit, assertingthat a decision to sell the business to the company was made in 2013, but arrangementswere not put in place until 31 March 2014.[22] Ms Meechan further submitted that at some point after May 2014, it appearsthat Mr Taylor would have sold his business for over $750,000. The company thatthen acquired the business, of which Mr Taylor remained a director and shareholder,then sold it to Crombie Lockwood in 2018. An initial payment of approximately$1.5 million was made on 4 July 2018 to the solicitor of Peter J Taylor and AssociatesLtd, a sum representing 60 per cent of the estimated purchase price. This is the moneythat Mr Taylor claimed in his affidavit was paid to the trust. Ms Meechan also pointedout that Mr Taylor and his wife are both trustees of the trust that owns the propertywhere they live. Although Mr Taylor claimed in his affidavit that the Maserati waspurchased by his wife and attached an email from a car dealer addressed to "Rhona"and confirming that "you purchased your 2016 Maserati Quattroporte GTS off uson the 2nd of February 2018", Ms Meechan noted that in the High Court Mr Taylorgave evidence the car was purchased by the trust of which he and his wife arebeneficiaries.[23] Ms Meechan complained about a lack of evidence in relation to the financialposition of the trusts and the absence of evidence to suggest that the trusts might notbe persuaded to exercise their discretion in favour of payments to Mr Taylor to easehis present difficulties. She further referred to evidence given by Mr Hussey inthe trial in relation to other business interests which Mr Taylor had, includingvineyards in Central Otago, apartments in luxury resorts in Queenstown and forestryblocks. According to Mr Hussey in his evidence at the trial, Mr Taylor appeared tohave transferred his shareholding in a number of these companies to his wife inMarch 2017, nearly three years after Asteron asked for details of income earned, anda year after Asteron counter-claimed for return of benefits paid.Assessment[24] The principles to be applied when determining an application for a stay ofexecution of a judgment are stated in this Court's judgment in Keung v GBRInvestment Ltd:29In determining whether or not to grant a stay, the Court must weigh the factors"in the balance" between the successful litigant's rights to the fruits of ajudgment and "the need to preserve the position in case the appeal issuccessful". Factors to be taken into account in this balancing exerciseinclude:(a) whether the appeal may be rendered nugatory by the lack of a stay;(b) the bona fides of the applicant as to the prosecution of the appeal;(c) whether the successful party will be injuriously affected by the stay;(d) the effect on third parties;(e) the novelty and importance of questions involved;29 Keung v GBR Investment Ltd [2010] NZCA 396, [2012] NZAR 17 at [11].(f) the public interest in the proceeding; and(g) the overall balance of convenience.That list does not include the apparent strength of the appeal but that has beentreated as an additional factor.(Footnotes omitted.)[25] The Court noted that generally a stay on payment of a judgment sum will onlybe granted on provision of security. The issue was whether there was anything inthe present case in terms of the factors outlined above to warrant a departure from thatgeneral rule.30 We apply the same approach here.[26] The principal argument raised in support of the application is that unless a stayis granted, Asteron's bankruptcy proceedings will likely have the effect that Mr Taylorwill not be able to exercise his right of appeal and he will be deprived of an opportunityto restore his reputation which has been damaged as a result of the High Court'sadverse credibility findings. However, the adverse credibility findings were such that,as Ms Meechan submitted, a degree of scepticism must be applied to Mr Taylor'sassertion about his inability to pay the judgment sum or provide security.Given the High Court's findings, it might have been expected that Mr Taylor wouldprovide the primary evidence which establishes the assertions he makes about thenature of the trust, its ownership of the property in which he lives and the proceeds ofsale of his business. The context includes evidence that the trustees have apparentlybeen prepared to agree to discretionary spending on motor vehicles and holidays.So why would that be contemplated but expenditure for provision of security for anappeal not be countenanced? It is also not very convincing for Mr Taylor to stand byan assertion that the Maserati was purchased by his wife, when in the High Court hegave evidence that the car was owned by the trust.[27] As noted, in declining the application for a stay, the High Court referred to a"complete absence of detailed or accurate financial information, or explanation as tothe legal structures used, that would allow the Court to accept that Mr Taylor has nomoney to meet the judgment, or to provide as security for a stay".31 That observation30 At [12].31 Stay judgment, above n 7, at [15].was a further reason for Mr Taylor to give detailed information to this Court dealingwith those matters. We are not satisfied that the information now providedsignificantly adds to the information that was before the High Court. It remains theposition that there is no full explanation of the way Mr Taylor has structured hisfinancial affairs.[28] There does not appear to be evidence about the nature of the trusts of whichMr Taylor is a beneficiary, or the terms on which the trustees are able to approvediscretionary payments to the beneficiaries. This Court has not been provided withthe primary documents related to the sale of Mr Taylor's brokerage business tothe company of which he was a principal, nor the subsequent sale to CrombieLockwood. In all the circumstances, we are not prepared to find that in the absenceof a stay Mr Taylor will not be able to pursue the appeal.[29] We are not in a position to question whether the appeal has been pursued ingood faith, but we do consider that prejudice would possibly arise to Asteron ifthe judgment debt is not paid, or security is not provided, pending disposition ofthe appeal. Mr Beck essentially contended that Asteron as a large corporate is in aposition to wait for payment. That might be so, but that is not an answer to the factthat as a successful litigant it is entitled to payment or the provision of appropriatesecurity. Again, these considerations assume more importance in the context of thestrong adverse credibility findings in the High Court.[30] On that issue, we do not accept Mr Beck's criticism of the High Court Judgefor making adverse credibility findings when the findings were allegedly not put toMr Taylor. The nature of the issues raised in the litigation required Mr Taylor to givecredible evidence about, for example, his hours of work during the period for whichhe was making a claim under the policy. The Judge thought his evidence on that issuewas contrary to contemporaneous documentary evidence, and also contrary tothe evidence of his own employees. It is difficult to see why the Judge should becriticised for making an adverse finding about Mr Taylor's credibility in thosecircumstances. It will be open of course for Mr Taylor to demonstrate that the Judge'sreasoning was wrong at the hearing of the appeal, but we observe that the appeal, onthe face of it, faces considerable obstacles in terms of the factual findings made inthe High Court. In other words, our assessment of the strength of the appeal does notpersuade us that there should be a stay without the grant of security.[31] Nor have we been persuaded that the importance of the legal issues that mightbe engaged by the appeal is such as to justify the grant of a stay. We accept thatthe appeal is likely to address the appropriate source of the legal rules for thecancellation of insurance contracts on the grounds of a breach of the duty of good faithand whether they are to be approached on the basis of the common law or governedby the Contract and Commercial Law Act 2017. We apprehend, however, thatwhichever approach is taken is not likely to be material to the outcome of the appeal.[32] Overall, we are also satisfied that in the absence of security the overall balanceof convenience favours refusal of the application.Result[33] The application for a stay of execution is declined.[34] Costs are reserved.