CRAIG v THE NEW ZEALAND GUARDIAN TRUST COMPANY LIMITED [2023] NZHC 2058

CRAIG v THE NEW ZEALAND GUARDIAN TRUST COMPANY LIMITED [2023] NZHC 2058[4 August 2023]IN THE HIGH COURT OF NEW ZEALANDNEW PLYMOUTH REGISTRYI TE KŌTI MATUA O AOTEAROANGĀMOTU ROHECIV-2022-443-65[2023] NZHC 2058BETWEEN RODERICK STUART FRASER CRAIGPlaintiffAND THE NEW ZEALAND GUARDIANTRUST COMPANY LIMITED as executorof the Estate of Max Alexander CraigDefendantJAMES GORDON CRAIGInterested PartyHearing: 6 July 2023Appearances: R T Wilson for PlaintiffS W Hughes KC for the Defendant and Interested PartyJudgment: 4 August 2023JUDGMENT OF ASSOCIATE JUDGE SKELTON[1] This matter relates to the estate of Max Alexander Craig who died on11 December 2021.[2] The plaintiff, Mr Roderick Craig, has brought a claim against the defendant,the New Zealand Guardian Trust Company Ltd, as executor of the deceased's estateunder the Law Reform (Testamentary Promises) Act 1949 (TPA).[3] The deceased left a will and probate of the will was granted on 8 February2022. Under the will:(a) the defendant was appointed executor;(b) various legacies totalling $600,000 were made;(c) the residuary estate being left to the plaintiff's younger brother,Mr James Craig (the interested party); and(d) nothing was left to the plaintiff.[4] The amount of the residuary estate is somewhere in the vicinity ofNZD10,900,000.[5] The defendant and the interested party now apply for summary judgmentagainst the plaintiff under r 12.2(2) of the High Court Rules 2016. For convenience,and where appropriate, I refer to the defendant and the interested party in this judgmentas "the defendants".[6] The defendants also seek leave of the Court to bring the application forsummary judgment under r 12.4(3) of the High Court Rules, as the application wasnot made until after the statements of defence were filed and served.Background[7] The plaintiff alleges that on numerous occasions between 1978 and about 1983,the deceased verbally promised the plaintiff that the plaintiff would inherit his estate.The plaintiff says that the deceased explained that he needed a partner to help him withhis shoe and knitwear retail business in Norfolk Island and he wanted the plaintiff torelocate to Norfolk and become his business partner. The plaintiff alleges the promisemade was in these words, or similar words to the following effect:I will finance you to buy in as my business partner and when I retire you cantake over my share of the business and when I die you will inherit my estate[8] The plaintiff alleges that, in or about February 1981, he provided a service tothe deceased by relocating from Manaia, Taranaki, to Norfolk Island to assist thedeceased with the running of the business. The plaintiff alleges that for approximatelythree years he provided work and services to the deceased by working in the business.[9] The plaintiff says that, prior to relocating to Norfolk Island, he owned andoperated an established panel beating business in Manaia, which he closed when herelocated. He says he was settled and established living in Manaia with his wife andtwo children. He says that he and his family were reluctant to relocate toNorfolk Island, but he was persuaded by the promise made to him by the deceased.[10] The plaintiff alleges that after he relocated to Norfolk Island, his parentsarranged their affairs and estate planning on the basis that the interested party wouldinherit their drycleaning business. The plaintiff alleges that in making this decision,his parents considered they would not need to provide significantly for the plaintiffdue to him inheriting from the deceased.[11] The plaintiff alleges that the deceased treated him badly once he relocated toNorfolk Island. The plaintiff says he was treated more like an employee than abusiness partner. He says he was not properly paid by the deceased for the servicesand only received a basic weekly payment similar to what counter staff were paid.[12] The plaintiff alleges that, as a result of the poor treatment and poor relationshipwith the deceased, he suffered from poor mental health from around 1982 and hismarriage ended about late 1983.[13] On 3 February 1984, the deceased and the plaintiff entered into an agreement(the Agreement). The Agreement recorded:(a) that the deceased and the plaintiff had operated a partnership from the2 March 1981;(b) that the deceased had contributed $300 towards the capital of thepartnership and the plaintiff had contributed $100;(c) the plaintiff had indicated his wish to dissolve the partnership on theterms set out in the Agreement.[14] The Agreement then provided that:1. In consideration of the [deceased] paying to the [plaintiff] the sum of[AUD30,000.00] (the receipt of which sum is hereby acknowledgedby the [plaintiff]) the [plaintiff] does hereby transfer to the [deceased]all his right title and interest in the capital business stock good willand any other assets of the partnership and hereby further releases the[deceased] from all actions demands claims which he may have ormay be entitled to make in respect of the partnership and businessthereof from the date hereof.[15] The plaintiff received the AUD30,000 referred to in the Agreement. Soon aftersigning the Agreement, the plaintiff returned to New Zealand.[16] The plaintiff alleges that the deceased never revoked his promise that theplaintiff would inherit his estate.Legal principles — defendant summary judgment[17] In Stephens v Barron, the Court of Appeal summarised the principles fordefendant summary judgment discussed in Westpac Banking Corp v M M Kembla NZLtd:1[9] This Court's decision in Westpac Banking Corp v M M KemblaNew Zealand Ltd makes it clear that a defendant seeking summary judgmenthas a considerable burden to discharge. Elias CJ delivering the judgment ofthe Court, made the following points:(a) The defendant has the onus of proving, on the balance of probabilities,that the plaintiff cannot succeed. Usually, this will arise when thedefendant can offer evidence which is a complete defence to theplaintiff's claim.(b) An application for summary judgment will be inappropriate wherethere are disputed issues of material fact or where material facts needto ascertained by the Court and cannot confidently be concluded fromaffidavits. It may also be inappropriate where ultimate determinationturns on a judgment able to be properly arrived at only after a fullhearing of the evidence.(c) The Court must be satisfied that none of the claims can succeed. It isnot enough that they are shown to have weaknesses. The assessmentis not to be arrived at on a fine balance of the available evidence aswould be appropriate at trial.(d) The residual discretion of the Court to refuse summary judgmentwould be properly invoked to avoid the oppression which wouldotherwise result if an application by a defendant for summary1 Stephens v Barron [2014] NZCA 82 at [9] citing Westpac Banking Corp v M M Kembla NZ Ltd[2001] 2 NZLR 298 (CA) at [61]–[68].judgment would pre-empt a plaintiff exercising the right to amend thepleadings.(e) Summary judgment should not be applied for, unless the substantivemerits of the case are clear and capable of summary disposal.(footnotes omitted)Leave[18] As noted above, the defendants require the leave of the Court to bring theirapplication for summary judgment under r 12.4(3) of the High Court Rules. The Courtof Appeal has emphasised that leave should not be treated as a formality and shouldbe addressed as a prior step to the merits of an application.2[19] No guidelines are laid down in the High Court Rules for the granting of leave.The question is a discretionary one and it is up to the party applying for leave to showwhy it should be granted.3[20] It is recognised that there are three factors that should be considered in relationto the issue of leave:4(a) the explanation for the delay;(b) the merits of the applicant's case for summary judgment; and(c) the risk of miscarriage of justice in determining the application at a laterpoint in time.[21] In this case, Mr Wilson, for the plaintiff, properly accepts that there is no riskof miscarriage of justice in granting leave.[22] As to delay, Ms Hughes KC, for the defendants, submits that the applicationwas bought only 19 working days after it could have been bought as of right. She says2 Stephens v Barron [2014] NZCA 82 at [13].3 Tip Top Icecream Ltd v Polarland Ltd (2002) 7 NZBLC 103,564 at [27].4 Fowler v Selwyn District Council [2021] NZHC 2218 at [12] citing Tip Top Icecream Ltd vPolarland Ltd, above n 4, at [28].there was no intervening court event or step taken by the plaintiff in that period andno case management conference had been allocated.[23] Ms Hughes submits that the Agreement was not disclosed by the plaintiff until19 December 2022, and this had to be considered before the defences could befinalised. The statement of defence of the interested party was filed on 23 January2023 and the defendant filed its statement of defence on 20 February 2023. Theapplication for summary judgement was filed on 17 March 2023. Ms Hughes submitsthat it was only after both statements of defence had been filed that the defendantscould confer on the summary judgment application.[24] Mr Wilson submits that it has now been accepted by the solicitor for thedefendant, that it would have been possible for the defendant and the interested partyto confer between the end of January 2023 and 20 February 2023.[25] In my view, it is relevant that the Agreement was not disclosed by the plaintiffuntil 19 December 2022. The summer holiday period then intervened. While thedefendant and the interested party could have conferred in relation to the summaryjudgment application prior to the service of the defendant's statement of defence on20 February 2023, the application for summary judgment was filed only 19 workingdays after it could have brought as of right. The delay is minimal, and I do not considerthat it is a basis for declining leave in this case.[26] The issue of the merits of the applicant's case is bound up with considerationof the defendants' substantive application for summary judgment. Although I havedeclined the defendants' substantive application, which I discuss in detail below, Iconsider that the application had sufficient merit to warrant leave being granted.[27] Accordingly, I grant leave for the defendants to bring their application forsummary judgment.Defendants' substantive application for summary judgment[28] The plaintiff's claim is brought under s 3(1) of the TPA which provides:3 Estate of deceased person liable to remunerate persons for workdone under promise of testamentary provision(1) Where in the administration of the estate of any deceased person aclaim is made against the estate founded upon the rendering ofservices to or the performance of work for the deceased in his lifetime,and the claimant proves an express or implied promise by thedeceased to reward him for the services or work by making sometestamentary provision for the claimant, whether or not the provisionwas to be of a specified amount or was to relate to specified real orpersonal property, then, subject to the provisions of this Act, the claimshall, to the extent to which the deceased has failed to make thattestamentary provision or otherwise remunerate the claimant (whetheror not a claim for such remuneration could have been enforced in thelifetime of the deceased), be enforceable against the personalrepresentatives of the deceased in the same manner and to the sameextent as if the promise of the deceased were a promise for paymentby the deceased in his lifetime of such amount as may be reasonable,having regard to all the circumstances of the case, including inparticular the circumstances in which the promise was made and theservices were rendered or the work was performed, the value of theservices or work, the value of the testamentary provision promised,the amount of the estate, and the nature and amounts of the claims ofother persons in respect of the estate, whether as creditors,beneficiaries, wife, husband, civil union partner, children,next-of-kin, or otherwise.[29] Ms Hughes submits that all four of the following elements must be establishedfor the TPA claim to succeed:5(a) the plaintiff must have rendered services or performed work for thedeceased;(b) there must have been an express or implied promise for reward;(c) there must be a nexus between the promise and the reward; and(d) the deceased must have failed to make the testamentary provision orremunerate the claimant.[30] Ms Hughes submits that, without making a formal admission and for thepurposes of the summary judgment application only (with the position reserved for5 Saunders v New Zealand Guardian Trust Company Ltd HC Palmerston North CIV-2008-454-389,12 August 2010 at [10].any trial), the defendants accept that the plaintiff can establish (a) and (b) above.However, the defendants contend that there is no nexus between the promise and thereward sought.[31] Ms Hughes submits that, assuming the promise was made, and the plaintiffrendered services between 1981 and 1984, the payment of wages during that periodand the payment under the Agreement means that there is no nexus between thepromise and the reward sought. Further, the deceased has fully remunerated theclaimant both while he did the work and by the settlement payment at the end.[32] Therefore, the defendants contend that the plaintiff cannot establish elements(c) and (d) above.Nexus argument[33] The defendants' argument in this regard seems to be that there is no nexusbetween the promise and the reward because the plaintiff is seeking $6,000,000 fromthe deceased's estate. This would amount to $2,000,000 per year during the businesspartnership on top of the wages paid to the plaintiff while he was working for thedeceased on Norfolk Island and the sum provided in the Agreement (AUD30,000).The defendants note that the AUD30,000 paid in 1984 would equate to approximatelyAUD108,000 in 2022.[34] Ms Hughes submits that, because of the amounts previously paid for wagesand under the Agreement, there is no nexus between the promise and the rewardsought.[35] Mr Wilson submits that this is really an argument which goes to the separatesubmission by the defendants that the plaintiff has been fully remunerated for theservices provided. I agree.[36] In Jones v Public Trustees,6 the Court of Appeal held in relation to therequirement of nexus:6 Jones v Public Trustees [1962] NZLR 363 (CA) at 364. it is essential that the promise must, either expressly or impliedly, be oneto reward the promisee for services rendered or work done by making sometestamentary provision and not a mere promise to make testamentaryprovision which is not linked with, or founded upon, such services or work.[37] In my view the issue of the nexus (or link) between the promise and the rewardsought requires consideration of the evidence of services or work provided by theplaintiff on the basis of the promise.[38] I agree with Mr Wilson that there is affidavit evidence from the plaintiff beforethe Court which provides evidential foundation for the link between the promise andthe reward. The promise was conditional on the plaintiff relocating to Norfolk Island.The plaintiff did relocate and worked in the deceased's business for three years untilFebruary 1984.[39] I do not consider that the defendants have satisfied the onus on them ofproving, on the balance of probabilities, that the plaintiff cannot succeed at trial inestablishing the nexus between the promise and the reward.The Agreement[40] Ms Hughes submits that the Agreement is a bar to the plaintiff's TPA claim.As I understand the argument, the defendants say that the Agreement operates as a barbecause a payment was made under the Agreement which, together with the wagespaid to the plaintiff, represents full remuneration of the plaintiff in terms of s 3(1) ofthe TPA. Ms Hughes submits:[33] the plain and ordinary meaning of the Retirement Agreement issuch that any testamentary promises claim that may have at that time existedout of any promise, or work in the business was extinguished by the paymentmade. This was the remuneration, such that there is now no unremuneratedsum for which the Plaintiff can claim.[41] I do not understand the defendants to be contending that the Agreement wouldoperate as a bar in the absence of any payment being made under the Agreement.Therefore, the defendants' argument in this regard turns on whether the deceased hasbeen adequately remunerated so that there is now no unremunerated sum for whichthe plaintiff can claim. In my view, determination of the remuneration issue wouldrequire full hearing of the evidence, possibly including expert evidence, as discussedlater in this judgment.[42] The defendants also contend that the effect of the Agreement is that the plaintiffis now estopped from bringing his TPA claim on the basis that:7(a) a belief or expectation on the part of the deceased has been created orencouraged by words or conduct by the plaintiff that the plaintiff hadno claim against the deceased or his estate;(b) that the deceased relied to his detriment on this representation byregulating his affairs on the basis of the Agreement; and(c) it would be unconscionable for the plaintiff to depart from the belief orexpectation created by him.[43] In my view, the estoppel argument cannot properly be determined on asummary judgment application without a full hearing of the evidence. For example,there may need to be further evidence as to the belief or expectation held by thedeceased prior to his death and further evidence as to how the deceased regulated hisaffairs. Further, it seems to me that the issue of whether it would be "unconscionable"for the plaintiff to depart from the belief or expectation would again raise the issue ofwhether the payments made fully remunerated the plaintiff.[44] Apart from the remuneration issue, Mr Wilson raises a number of argumentsas to why the Agreement cannot operate to extinguish the plaintiff's claim including:(a) that when the Agreement was completed the plaintiff had no TPA claimbecause TPA claims arise only on death;(b) the release in the Agreement cannot be of a TPA claim as such claimwas at best a possible future claim against the deceased's estate and7 Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] 3 NZLRT 567 at [44].there is nothing the wording of the Agreement which releases any futureclaims;(c) the release is limited to actions, demands and claims in respect of "thepartnership and business" and a TPA claim is not a claim in respect ofthe partnership and business thereof and is wholly separate to thepartnership obligations between the deceased and plaintiff; and(d) the release is between the plaintiff and the deceased and not betweenthe plaintiff and the administrators of the estate of the deceased.[45] These are contract interpretation or legal issues which could possibly beresolved in the context of a summary judgment application. However, as noted above,and discussed further below, my view is that the remuneration issue requires fullhearing of the evidence. Further, Mr Wilson submits that, even if the points raisedabove are not accepted by the Court, the plaintiff has an arguable case that theAgreement is not binding on him. Mr Wilson submits that the plaintiff has an arguablecase that he can avoid the agreement because it was an unconscionable bargain orbecause he signed it under economic duress.8[46] Mr Wilson submits that there is evidence that the deceased was the dominantpartner, the plaintiff was kept in the dark about the finances of the partnership, and inthe end felt he could no longer work with the deceased and felt he had been driven out.With regard to the Agreement, the plaintiff states in his affidavit:When I was finishing up Max told me that he had appointment set up for us togo into the lawyer to sign a document. He told me I was going to get $30,000.He told me nothing else other than it was to dissolve the partnership. Therewas no negotiation about this, he was just telling me what was going tohappen. I do not know how Max calculated the figure. I accepted the figurebecause I felt I had no choice other than to leave. I could no longer work withMax. I felt he had driven me out. I was not in a position to disagree. I hadno fight left in me.We went to see the lawyer immediately, I can't remember his name but therewas only one lawyer in Norfolk Island at the time. This was the same lawyerthat Lynne [the plaintiff's wife] was using.8 McIntyre v Nemisis DBK Ltd [2009] NZCA 329, [2010] 1 NZLR 463 at [22]; and Gustav & CoLtd v Macfield Ltd [2008] NZSC 47, [2008] 2 NZLR 735 at [6].I cannot remember anything that the lawyer said to me about the document.As far as I can remember the document was either read or explained to me. Iunderstood the basics of it. I had never met the lawyer before. I had noopportunity to get my own legal advice on it.I signed the document. I felt I had no other choice [47] At this stage, the plaintiff could still raise these matters in reply to thedefendants' reliance on the Agreement. I consider that determination of allegationsof unconscionable conduct and economic duress would require full hearing of theevidence and, in particular, cross-examination of the plaintiff.[48] Ms Hughes contended that there would be limitation issues for the plaintiff inthis regard under the Limitation Act 1950 or the Limitation Act 2010. Mr Wilsonsubmitted that the arguments would not be subject to limitation defences. It is notclear to me how issues under the Limitation Act 1950 or the Limitation Act 2010would arise to prevent the plaintiff from raising economic duress or unconscionablebargain in response to the defendants' reliance on the Agreement as a bar to his TPAclaim. However, issues of affirmation or delay may well arise. Again, these issuesare likely to require full hearing of the evidence.[49] In summary, I do not consider that the defendants have satisfied the onus onthem of proving that the plaintiff cannot succeed at trial because the Agreement is abar to his TPA claim.Remuneration[50] As discussed above, the defendants submit that there has been fullremuneration for the services provided by the plaintiff (by the payment of wages andthe payment of the sum under the Agreement) such that there is now no unremuneratedsum for which the plaintiff can claim.[51] Clause 3(1) of the TPA provides that:the claim shall, to the extent to which the deceased has failed to make thattestamentary provision or otherwise remunerate the claimant (whether ornot a claim for such remuneration could have been enforced in the lifetime ofthe deceased), be enforceable against the personal representatives of thedeceased in the same manner and to the same extent as if the promise of thedeceased were a promise for payment by the deceased in his lifetime of suchamount as may be reasonable, having regard to all the circumstances ofthe case, including in particular the circumstances in which the promisewas made and the services were rendered or the work was performed, thevalue of the services or work, the value of the testamentary provisionpromised, the amount of the estate, and the nature and amounts of theclaims of other persons in respect of the estate, whether as creditors,beneficiaries, wife, husband, civil union partner, children, next-of-kin, orotherwise.(emphasis added)[52] Ms Hughes referred to the following sections from Re Welch in which section3(1) was discussed: 9 More significantly for present purposes, in 1961, Parliament discarded theprovision to the effect that, when the promise specified an amount, it wasautomatically that amount for which the claim was enforceable against theestate. Instead, in all cases where a claim lies it is enforceable as if there hasbeen a promise for payment by the deceased in his lifetime of such amount asmay be reasonable, having regard to all the circumstances of the case,including certain listed factors in particular.Among the particular factors listed are the value of the services or work andthe value of the testamentary provision promised (in 1961 the latter wordswere enacted in place of "the value of any real or personal property specifiedin the promise"). So, it is plain, considering s 3(1) as a whole, that whenevera claim to relief is made out under it, the criterion as to the relief to be grantedis reasonableness. That is always the result at which the Court is to aim, nomatter whether the award is of money or of specific property. If the deceasedpromised a certain sum or a certain property, that is relevant consideration butnot necessarily decisive. Their Lordships do not find this approach surprising.To give one hypothetical example, if there were a promise of the whole Estateprompted by gratitude, in perhaps an emotional moment, for a single act ofrescue or kindness, it would not necessarily be reasonable to enforce thatpromise to the full.It is not to be doubted that, for instance, where there have been meritoriousservices and considerable sacrifice on the part of a claimant and the propertypromised had been a central feature in the services or the life of the claimant,the natural order under the Act may be one vesting the property in theclaimant, provided that this does no injustice to any others with meritoriousclaims against the estate. Jones v Public Trustee was such a case. On the otherhand, despite a promise of a specific property, either the limited value of theclaimant's service by comparison or other circumstances of the case mayresult in a lesser or different award, as in Public Trustee v Bick andRe Townley.(in text citations excluded)9 Re Welch [1990] 3 NZLR 1 (PC) at 6.[53] Ms Hughes submits that assuming the promise and the services have beenestablished, then the Court can and should take into account all the circumstances ofthe case in determining the quantum of any award. She submits that there must be anunremunerated outstanding balance and, in this case, there is no unremuneratedbalance.[54] As I understand the defendants' argument, they say that there is nounremunerated balance because, the amounts that the plaintiff received for wageswhile working on Norfolk Island together with the amount paid under the Agreement,meet the requirement of "reasonableness" having regard to all the circumstances ofthe case.[55] Mr Wilson made a number of points in response to this argument as follows:(a) the qualifying services are not just those carried out when the plaintiffwas in Norfolk Island, but also include the relocation from Taranaki toNorfolk Island, involving sacrifice for the plaintiff and his family;(b) there is also the issue of reliance by the parents of the plaintiff whoarranged their affairs on the basis that the plaintiff would inherit fromthe deceased and they would leave their drycleaning business to theinterested party;(c) the plaintiff says the weekly payments he received during his time onNorfolk Island were inadequate remuneration as was the AUD30,000paid to buy out his interest in the partnership;(d) the value of the work and services provided often operates as aneffective cap in testamentary promises cases, but where the estate hassufficient means to meet the claims of all persons that the deceased hasa duty to provide for (as in this case) then the value of the service is lesslikely to operate as a cap; and(e) at trial, the plaintiff may call expert evidence on the issue.[56] Mr Wilson referred to plaintiff's affidavit evidence where he states:I do not believe I was adequately compensated by Max for my work in thebusiness. From the little that I was told by Max about the finances of thebusiness I believe that turnover was about $1.5m per annum in 1981 and thatthis increased to over $2m per annum by the time I left. I was also told thatthe value of stock had increased to over $2m compared to the $1.5m I was toldwe paid to Pines at the outset. A one quarter share of the increase in value ofstock alone would have been $125,000.Throughout the time I worked with Max I was paid a weekly amount of $200and bonuses which were dependent upon sales made. The bonuses rangedfrom around $20 to $80 each week. This was about the same as what counterstaff are paid.[57] Mr Wilson notes that there is no evidence from the defendants directed at theissue of adequacy of the remuneration at this stage.[58] In my view, the issue of the reasonableness of remuneration and whether thereis any unremunerated outstanding balance is a key issue in determining the plaintiff'sTPA claim. This requires consideration of all the circumstances of the case, includingthe value of the services or work provided by the plaintiff. It is apparent from thepoints raised above by Mr Wilson, and the issues raised in the plaintiff's affidavitevidence, that this will require a full hearing of the evidence as to the relevantcircumstances of the case and possibly expert evidence. I do not consider that theremuneration issue can be properly determined in the context of an application forsummary judgment and on the basis of the evidence currently before the Court.Conclusion[59] Overall, for the reasons set out above, the defendants have not established thatthe plaintiff cannot succeed on its claim against the defendant.Result[60] The application by the defendants for summary judgment against the plaintiffis dismissed.[61] My preliminary view is that the plaintiff is entitled to costs on a 2B basis. Ifthe parties are unable to agree on costs, then memoranda may be filed (not exceedingfive pages) and costs will be determined on the papers.[62] The matter is to be included in the next Associate Judge's chambers list inNew Plymouth for directions to be given as to the next steps in the proceeding.Associate Judge SkeltonSolicitors and counsel:A Habershon, Perpetual Guardian, Christchurch for PlaintiffQuin Law, New Plymouth for Defendant and Interested Party