TRAINOR v LEOTUKI [2020] NZHC 2865

TRAINOR v LEOTUKI [2020] NZHC 2865 [2 November 2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-2536[2020] NZHC 2865IN THE MATTER Of an application under sections 339(1)(a),339(4), and 343 of the Property Law Act2007BETWEEN RONGOPAIWAHINE LOIS TRAINOR(formerly known as RAEWYN LOUISETOFILAU and also known as RAEWYNTRAINORPlaintiffAND TIMOTHY JUNIOR LEOTUKIFirst DefendantSTEVE TOFILAUSecond DefendantNICOLAU ALEX TOFILAUThird DefendantHearing: 29 October 2020Counsel: N Woods for PlaintiffU Kuddus for First and Second DefendantsNo appearance for Third DefendantJudgment: 2 November 2020JUDGMENT OF WHATA JThis judgment was delivered by me on 2 November 2020 at 4.00 pm,pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate: .Solicitors: Rice Craig, PapakuraInder Lynch, Papakura[1] This matter comes before me on the Duty Judge list. In his minute of19 October 2020, Woolford J granted leave to the defendants to file further evidence.It was, however, noted Mr Woods wished to object to "the admissibility of the affidavitof Mr Daisley on the basis that he did not obtain or even seek to obtain the plaintiff'swaiver of joint solicitor and client privilege." Woolford J then directed a one-hourhearing to determine issues of admissibility pre-trial, pursuant to r 9.7(5) of the HighCourt Rules 2016. It transpires that Mr Woods filed a notice of objection of muchwider breadth and depth in respect of the proposed briefs of evidence of Mr Daisleyand Mr Steve Tolifau.[2] As indicated to Mr Woods, I did not consider it to be an efficient use of thisCourt's time to address all of the objections, noting that, in respect of matters of detail,the trial Judge was much better placed to address those objections. I note in this regardthat the matter has been set down for hearing on 17 November 2020.[3] In the result, I addressed two related objections based on:(a) privilege; and(b) hearsay.[4] I reserve to the trial Judge the remaining issues.Background[5] The background to this matter is helpfully set out in the judgment of Gault J,dealing with the application for leave by the defendants to appear to defend the claim.That background is as follows:1[1] The plaintiff, Ms Trainor, seeks an order for sale (and associatedorders) of a property at 29 Lever Place, Weymouth, Manukau. Ms Trainor isthe registered proprietor of a one-quarter share of the property. Thedefendants, three of her four sons, are each also registered proprietors of aone-quarter share.1 Trainor v Leotuki [2020] NZHC 1574.[2] The defendants did not file statements of defence and the proceedingwas allocated a formal proof hearing, to take place on 24 June 2020.[3] At the hearing, however, the first and second defendants (Timothy andSteve) appeared in person. Thus, the formal proof hearing became anapplication for leave to defend out of time.Factual background[4] Ms Trainor and her then husband, Mr Tofilau, purchased the propertyin 1975. In about 1983/1984, they separated and Ms Trainor moved toAustralia.[5] On 2 July 2008 Mr Tofilau died. Ms Trainor inherited the property bysurvivorship.[6] On 21 July 2008 Ms Trainor and the four sons entered into anagreement for sale and purchase whereby she agreed to sell a one-quarterinterest in the property to each of them for a total of $273,000, being half themarket value. They each signed a deed of acknowledgement of debtacknowledging an on demand loan in respect of one-quarter of the total price,with provision for interest to be payable if demanded.[7] Timothy and Steve have been living in the property. The thirddefendant, Nicolau, lives in Melbourne.[8] On 4 September 2017, Ms Trainor demanded repayment. Norepayments were made, and proceedings were commenced in the DistrictCourt seeking repayment.[9] On 27 March 2018 the fourth son, Taroi, transferred ownership of hisone-quarter share back to Ms Trainor in satisfaction of his debt.[10] On 25 June 2018 Ms Trainor's solicitor notified the defendants thatshe required interest to be paid from 1 April 2018.[11] Following service of this proceeding in November 2019, the partiesattended a mediation in December 2019 and agreed terms of settlementwhereby the defendants agreed to pay Ms Trainor $200,000 (including GST ifany). However, this was conditional on Timothy and Steve using allreasonable efforts to obtain finance by 28 February 2020. Payment of thesettlement sum was then to occur within a further 21 days.[12] Timothy and Steve did not obtain finance by 28 February 2020. Theysought an extension of time for the finance condition until 16 March 2020. MsTrainor's solicitor agreed to extend time on the condition that interest accruedfrom 20 March 2020 until settlement. At least expressly, that condition wasnot accepted.[13] On 15 April 2020 Ms Trainor's solicitor wrote to the defendants'solicitor seeking information regarding reasonable efforts to obtain financewithin five working days. No response was provided.[14] On 4 May 2020 Ms Trainor's counsel filed a memorandum seeking aformal proof hearing. About the same time, an application for a simplified trialwas also filed in the District Court. Subsequently the defendants' solicitorsought leave to withdraw in the District Court proceeding.[15] On 4 June 2020 Lang J directed that the proceeding be listed for aformal proof hearing on 24 June 2020 and directed the filing of evidence insupport by 17 June 2020. These documents were also served on thedefendants.(footnotes omitted)The proposed evidence[6] The proposed evidence subject to objection are:(a) the brief of evidence of Christopher John Daisley; and(b) the brief of evidence of Steven Tofilau.[7] This evidence, in short, refers to family arrangements which are said to bearon the plaintiff's claim.Mr Steve Tolifau[8] Mr Woods raised objections to parts of the evidence of Mr Steve Tofilau which,he says, amount to hearsay and/or inadmissible opinion evidence, namely:9. In late 2007 my father and brother Taroi mentioned that my motherwished to transfer her half share in the property to myself and my brothers inequal shares. I was pleased to hear that our mother had gifted us the propertyas we felt hard done by with her absence in our formative years and she statedshe was 'pleased to be doing the right thing' given she had contributed littleto our upbringing and virtually nothing to the maintenance or mortgage of theproperty.14. This was because my mother wanted to acknowledge her lack ofcontribution to the property, to her child support payments to our upbringing.She said she wanted to do the right thing by our father.17. but I believe he [Taroi] only did this as my mother was pressuringhim.[9] Annexures L and M (being letters between Mr Daisley and Mr Taroi Tolifau).are also objected to as inadmissible hearsay.[10] I dismiss the objections to the alleged hearsay evidence at paragraph [9] as itrelates to hearsay statements by Mr Tolifau's father and at paragraph [14] as it relatesto Mr Daisley. I exclude, however, the evidence of hearsay statements made byMr Taroi Tofilau.[11] Mr Daisley is a witness. There can be no objection to his evidence about whathe said on hearsay grounds. Furthermore, as Mr Woods concedes, a witness may giveevidence of what Mr Tolifau was told. What he heard is prima facie admissible assuch. In respect of the statements made by the father, to the extent that the defendantsrely on those statements as going to the truth of what is being said, the primary issueis one of threshold reliability – that is, whether the circumstances relating to thestatement provide reasonable assurance that the statement is reliable.2 There is nothingbefore me to suggest that the circumstances of the statements are inherently unreliable.The evidence is that they took place in an ordinary familial context. I note, forcompleteness, that nothing I say here bears on the weight that might be afforded to thehearsay statements. That will be for the Judge hearing the matter, who will have thebenefit of considering the evidence in its full context.[12] The evidence relating to what is said by Mr Taroi Tofilau is highly problematicto the extent that it is being relied upon to prove the truth of what it asserts. There isno evidence before me to suggest he is unavailable to give evidence, or that undueexpense or delay would be caused if he were required to give evidence. I am advisedhe lives in Melbourne and that the defendants say he is unavailable. But no directcontact has been made by counsel with Mr Taroi Tofilau as to his availability, forexample, to give evidence by AVL. Evidence about what he has said does not thereforefall within the qualifying criteria for admissible hearsay evidence per s 18(1)(b) of theEvidence Act 2006. I am fortified in this view because I consider that the plaintiffwould be unfairly prejudiced by the admissibility of Mr Taroi Tofilau's hearsay2 Adams v R [2012] NZCA 386.statements going to the issue of what was agreed unless he is available for cross-examination about those statements.[13] It should be noted that this exclusion only applies insofar as the evidence isbeing used to prove the truth of what it asserts and does not preclude evidence of whatwas heard or seen. For example, what Mr Tolifau may have observed in terms of hismother pressuring Mr Taroi Tofilau, may be admissible. Similarly, subject to issuesof privilege to which I will return to below, the communications between Mr Daisleyand Mr Taroi Tofilau may be adduced as contextual evidence, that is, to help explainMr Daisley's narrative of what occurred.[14] Accordingly, the evidence as it relates to the father is admissible. The evidenceas it relates to Mr Taroi Tofilau is not admissible as evidence of the truth of what he issaid to have asserted. The fact that he has said or communicated something in writingis, however, admissible insofar as it shows that it was said or provides context (but notthe truth of what is asserted) to explain the narrative provided by Mr Tolifau.Mr Christopher John Daisley[15] Mr Woods also objects to the evidence of Mr Daisley on the basis that it issubject to legal/professional privilege. He says that Mr Daisley is a qualified legalexecutive and that his evidence relates to matters subject to communications betweenhim and his clients, being the plaintiff and Mr Tim Tofilau Senior, at a time when theywere still married. He submits that, generally, the effect of privilege is that neither theclient nor the lawyer (without the client's consent) can be compelled to disclose anycommunication between them if their communication was intended to be confidentialand made in the course of professional legal services.[16] Mr Woods then identifies the various paragraphs of the evidence that he saysare subject to legal/professional privilege in respect of Ms Trainor, as follows:9. The title of the property needed updating before anything could bedone. It was still in the name of the Crown and there was an old AGCmortgage registered against it. The property was registered in thenames of Tim Tofilau (Snr) and Raewyn Trainor on 13 December2007. Annexed hereto and marked "B" is a true copy of a historicaltitle search of the property.10. In early 2008, a Transfer to convert ownership to tenants-in-commonand Deeds of Acknowledgement of Debt were prepared. They weresigned on 9 February 2008. It was explained to all parties that Raewyncould not simply transfer her half interest as that would constitute agift and would be subject to gift duty. There needed to be Deeds ofAcknowledgement of Debt from the four boys to Raewyn, eventhough it was understood she never intended to call in the debt. Thiswas explained to Raewyn by me and the sequence of documents wasalso explained carefully. I was very aware that the procedure was noteasy for a lay person to follow. Raewyn confirmed that she wanted totransfer her interest to her four sons and would not call in the debts.[17] Mr Woods also submits that the following parts of the evidence are privilegedcommunication with Mr Taroi Tofilau, and there is no evidence he has waivedprivilege:21. On 5 February 2009 I wrote to Taroi Tofilau asking him to clarify afew questions that were raised by Mr Sanders in his letter and toconfirm Raewyn's intentions in regard to the arrangement we hadstructured. Annexed hereto and marked "F" is a true copy of my email.22. Taroi Tofilau responded in an email to me on 9 February 2009.Annexed hereto and marked "G" is a true copy his email. The emailexplains that Raewyn's decision to transfer her interest in the propertyto her sons in equal shares was 'her decision alone'. The email clarifiesthat Raewyn had decided to do so because she had never contributedanything financially to the property for the duration she had livedthere or any time thereafter.[18] There is no dispute that the impugned parts of the evidence relate to privilegedcommunications. But the defendants submit that Ms Trainor waived privilege by wayof having instituted a civil proceeding against a person who is in possession of theprivileged communication, information, opinion or document with the effect of puttingthe privileged matter in issue in the proceedings. The defendants also emphasise thatMs Trainor initiated proceedings against the defendants who were in possession of theprivileged information, refers to a family arrangement in her evidence (which is thesubject matter of the privileged communications) and pleaded the particulars of thesettlement agreement.[19] Relevant passages of Ms Trainor's evidence include the following statements:7. After Tim's death, it was decided I would 'sell' the property to ourfour adult sons, the three Defendants and their younger brother Taroi.An agreement for sale and purchase was drawn, dated 21st July 2008,a true copy of which is annexed marked "C", by which I agreed to sellto each of the Defendants and their brother a one-quarter interest inLeaver Place for a total sale price of two hundred and seventy-threethousand dollars ($273,000). The price was at clause 15.0 of theagreement "half the value of the property according to an estimatefrom QV valuations dated 7 May 2007." Thus, I was conceding thatour four children – rather than me – should inherit their father's halfinterest in the property so that all they were required to compensateme for was my unrealised half interest.8. The lawyers involved then drew acknowledgements whereby each ofthe Defendants and their brother confirmed a debt to me of sixty-eightthousand two hundred and fifty dollars ($68,250), to tally to the total$273,000 purchase price, repayable upon demand. True copies of theacknowledgements, each dated 21st July 2008, are annexed marked"D", "E", "F" and "G". This documentation was consistent with theterms my sons and I had signed which recorded at clause 16.0 of the21 July 2008 agreement for sale and purchase that "It is the intentionof the parties that the transfer to the Purchasers Timothy JuniorLeotuki, Steve Tofilau, Nicolau Alex Tofilau and Taroi Roy Tofilaushall not be a gift in whole or part"9. Ownership of Leaver Place was then transferred to the Defendants andtheir brother as is confirmed by the historical search of IdentifierNA27A/657, annexed marked "H".10. In or around August 2008, after the property was transferred to theDefendants and their brother, I was removed from Leaver Place byTimothy and Steve with the assistance of the Police. I have beenprevented since from going to or living at the property by Timothyand Steve, who would refuse me access, and be just really nasty.11. In 2017 I instructed a solicitor to assist me to realise what had beenmy interest in Leaver Place. I was born on 27 April 1951, so at thisstage was sixty-six years old. I am employed by New Zealand Rail, asan inspector on Auckland suburban routes. I have worked for NewZealand rail for the last ten years, but have recently been maderedundant. I am temporarily living with family in Thames. However,I will be moving into a rental property in Thames in a weeks' timewhere I will be flatting with two friends, also pensioners. I have a carand some personal effects but no home or assets of value. I need themoney my sons owe me so I will be able to retire with some securityin my old age. I am hoping the repaid debt will allow me to purchasea retirement property, not of course in Auckland, but somewhere withmodest property values.12. By notices to the Defendants and their brother, Taroi, dated 4thSeptember 2017, true copies of such noticed being annexed marked"I", "J", "K" and "L", I required the Defendants and Taroi to repayme the sixty-eight thousand two hundred and fifty dollars ($68,250)each owed me to my solicitor's trust account on my behalf, on orbefore 29th September 2017, such notices being attached to lettersdated 4th September 2017 from my solicitor, copies being annexedmarked "M", "N", "O" and "P".[20] Her statement of claim also alleges:5. Originally the plaintiff with her first husband TIM TOFILAU, thedefendants' father, had purchased Leaver Place from the Crown undera long term agreement dated 15 September 1975.6. In about 1983/1984 the plaintiff and Tim Tofilau separated, theplaintiff leaving Tim Tofilau and the first, second and thirddefendants, and the defendants' younger brother, Taroi Roy Tofilau,living at Leaver Place.7. On 2 July 2008, Tim Tofilau died, and the plaintiff inherited theownership of Leaver Place by survivorship.8. On 21 July 2008 the plaintiff and the first, second and thirddefendants, and the defendants' younger brother Taroi Roy Tofilauentered into an agreement for the sale and purchase by which theplaintiff agreed to sell to each of the defendants and their brother aone-quarter interest in Leaver Place for a total price of two hundredand seventy-three thousand dollars ($273,000). ("The Agreement forSale and Purchase").9. The terms of the Agreement for Sale and Purchase included:(a) The purchase price was recorded as clause 15.0 of the 21July 2008 agreement as payable by each of the defendants andtheir younger brother giving to the plaintiff deedsacknowledging that each owed the plaintiff $68,250 "making$273,000 in total being half the value of the propertyaccording to an estimate from QV valuations dated 7 May2007".(b) at clause 16.0: "It is the intention of the parties that thetransfer to the Purchasers Timothy Junior Leotuki, SteveTolifau, Nicholau Alex Tolifau and Taroi Roy Tolifau shall notbe a gift whether in whole or part "10. Each of the defendants then signed acknowledgements dated 21 July2008 whereby each of the defendants and their brother confirmed adebt to the plaintiff of sixty-eight thousand two hundred and fiftydollars ($68,250), repayable "upon demand", such acknowledgmentseach including a clause whereby: "The Borrower will on the 31st ofMarch in each year become liable to pay to the Lender interest on thesaid loan and further advances from time to time outstanding. Theinterest payable shall not exceed the first mortgage interest ratecharged by the Lender's trading bank from time to time in respect ofresidential loans taking such rate applying at the preceding first dayof October. Interest shall be calculated with quarterly rests on the lastdays of March, June, September and December from the date of theadvance. No interest shall be payable if the Lender shall fail to makewritten demand for payment of interest by 30th June in any year".11. On 30 July 2008 the registered title of Leaver Place was transferredfrom the plaintiff to the first, second and third defendants and theirbrother.12. By notices dated 4th September 2017, the plaintiff by her solicitorrequired the first, second and third defendants and their brother to eachrepay her the sixty-eight thousand two hundred and fifty dollars($68,250) each owed, to her solicitor's trust account, on or before 29thSeptember 2017. No repayments were made.[21] The defendants claim that there was much more to this than a simple debtarrangement. They claim by way of affirmative defence that the parties entered into afamily arrangement that she transfer her interest in the property and that it isunconscionable for the plaintiff to go back on this arrangement. This is denied in fullby the plaintiff in reply to the statement of the defence.Assessment[22] Section 54 provides for privileged communications with legal advisers, itstates:54 Privilege for communications with legal advisers(1) A person who requests or obtains professional legal services from alegal adviser has a privilege in respect of any communication betweenthe person and the legal adviser if the communication was—(a) intended to be confidential; and(b) made in the course of and for the purpose of—(i) the person requesting or obtaining professional legalservices from the legal adviser; or(ii) the legal adviser giving such services to the person.(1A) The privilege applies to a person who requests professional legalservices from a legal adviser whether or not the person actuallyobtains such services.(2) In this section, professional legal services means, in the case of aregistered patent attorney or an overseas practitioner whose functionswholly or partly correspond to those of a registered patent attorney,requesting or obtaining or giving information or advice concerningintellectual property.[23] This privilege is based on the principle that a person must be able to consultwith a lawyer in confidence and is a fundamental condition on which theadministration of justice rests.3[24] Waiver of this is expressly addressed at s 65, which states:65 Waiver(1) A person who has a privilege conferred by any of sections 54 to 60and 64 may waive that privilege either expressly or impliedly.(2) A person who has a privilege waives the privilege if that person, oranyone with the authority of that person, voluntarily produces ordiscloses, or consents to the production or disclosure of, anysignificant part of the privileged communication, information,opinion, or document in circumstances that are inconsistent with aclaim of confidentiality.(3) A person who has a privilege waives the privilege if the person—(a) acts so as to put the privileged communication, information,opinion, or document in issue in a proceeding; or(b) institutes a civil proceeding against a person who is inpossession of the privileged communication, information,opinion, or document the effect of which is to put theprivileged matter in issue in the proceeding.(4) A person who has a privilege in respect of a communication,information, opinion, or document that has been disclosed to anotherperson does not waive the privilege if the disclosure occurredinvoluntarily or mistakenly or otherwise without the consent of theperson who has the privilege.(5) A privilege conferred by section 57 (which relates to settlementnegotiations or mediation) may be waived only by all the persons whohave that privilege.[25] Submissions on the application of ss 54 and 65 was relatively sparse.Mr Woods conceded he was not in a position to submit at length on the operation ofs 65. Mr Kuddus referred to some authorities which tended, however, to be directedto a situation where the party put the privileged advice in issue. I therefore approachthe issue of admissibility in terms of s 65 with some caution. Peters J, in Messengerv Stanaway Real Estate Ltd,4 adopted the approach favoured by Asher J in Body3 See discussion Elisabeth McDonald and Scott Optican (eds) Mahoney on Evidence: Act andAnalysis (Thomson Reuters, Wellington, 2018) at [EV54.01].4 Messenger v Stanaway Real Estate Ltd [2014] NZHC 2103 at [20].Corporate 191561 v Argent House Ltd,5 that is, a clean slate approach, so that theCourt should go no further than the words of the section, without an additional overlayof fairness considerations. On the limited argument before me, I am not sure aboutthat. Given the importance of the principle of confidentiality underpinning privilege,the requirement for fairness ensures that the principle is only infringed when necessaryon justness grounds. So, I approach the issue of waiver in this case on the basis theremust be a pleading that opens up as an element of the cause of action the issue of whatadvice was received, and the pleaded issue must be incapable of fair resolution withoutreference to that advice.6[26] In this regard, Ms Trainor denies the existence of the alleged familyarrangement and, in particular, denies that the defendants entered into the deeds ofacknowledgement for the purpose of managing their exposure to gift duty only. Primafacie then, Ms Trainor has put the privileged communication and/or a privileged matterin issue, insofar as her state of knowledge of the alleged family arrangement isnecessary to resolve the defendants' purported defence. Furthermore, the issue raisedby the defendants cannot be fairly resolved without referring to the privilegedcommunications. As the relevant privileged communications are already in thepossession of the defendants, s 65(3)(a) and/or (b) is engaged.[27] In the end, Mr Woods did not strongly disagree with this analysis. Heacknowledges that Ms Trainor may be cross-examined on her understanding of thefamily arrangement and if she denied there was such an arrangement, the advice shereceived from Mr Daisley would come squarely into focus. Furthermore, the evidenceof Mr Daisley's explanation of the position to the family is admissible in any event.This mitigates the extent of the infringement the principle of confidentiality, given thatthe advice was already known (at least on the defendants' case) by the defendants. Inthis regard, it is not contended that communications directly with the defendants, andthe record of that, are privileged. So, evidence from Mr Daisley may be led about that.[28] As to Mr Taroi Tofilau, there can be no suggestion he has waived privilege,either expressly or by necessary implication. That evidence remains subject to5 Body Corporate 191561 v Argent House Ltd (2008) 19 PRNZ 500 (HC) at [31]-[33].6 See discussion in Shannon v Shannon [2005] 3 NZLR 757 at [33].privilege and is inadmissible. However, to the extent that it is necessary to make senseof the sequence of events, that fact that advice was given, is admissible. Also, as noted,any communication directly with the defendants about what was said is not privileged.Other complaints[29] Mr Woods' other complaints relating to Mr Daisley's evidence are better dealtwith within the context of an assessment of the evidence as a whole by the trial Judge,where relevance and admissibility may be better assessed.Outcome[30] In terms of Mr Tolifau:(a) The evidence as it relates to the father is admissible.(b) The evidence as it relates to Mr Taroi Tofilau is not admissible asevidence of the truth of what he is said to have asserted.(c) Subject to issues of privilege, the fact that Mr Taroi Tofilau has said orcommunicated something in writing is, however, admissible insofar asit shows that it was said or provides context (but not the truth of whatis asserted) to explain the narrative provided by Mr Tolifau.[31] In terms of Mr Daisley:(a) The evidence of privileged communications with Ms Trainor isadmissible.(b) The evidence of privileged communications with Mr Taroi Tofilau isnot admissible.(c) However, to the extent that it is necessary to make sense of the sequenceof events, that fact that advice was given to Mr Taroi Tafilau, isadmissible.(d) Any communication directly with the defendants about what was saidis not privileged and is admissible.[32] The briefs will need to be amended accordingly. I reserve leave to the partiesto come back to me for further assistance if necessary.[33] Costs are reserved.