TJ SWAIN AND MR WARD AS TRUSTEES OF THE TIM SWAIN FAMILY TRUST V TJ SWAIN, ES SWAIN AND HAWKES BAY NOMINEES LIMITED AS TRUSTEES OF THE T&E SWAIN FAMILY TRUST HC PMN CIV-2011-454-717

TJ SWAIN AND MR WARD AS TRUSTEES OF THE TIM SWAIN FAMILY TRUST V TJ SWAIN, ES SWAIN AND HAWKES BAY NOMINEES LIMITED AS TRUSTEES OF THE T&E SWAIN FAMILY TRUST HC PMN CIV-2011-454-717 [14 March 2012]IN THE HIGH COURT OF NEW ZEALANDPALMERSTON NORTH REGISTRYCIV-2011-454-717[2012] NZHC 402BETWEEN TIMOTHY JAMES SWAIN AND MARKRAYMOND WARD AS TRUSTEES OFTHE TIM SWAIN FAMILY TRUSTPlaintiffAND TIMOTHY JAMES SWAIN, EMMASOPHIE SWAIN AND HAWKES BAYNOMINEES LIMITED AS TRUSTEESOF THE T&E SWAIN FAMILY TRUSTFirst DefendantAND TIMOTHY JAMES SWAINSecond DefendantAND EMMA SOPHIE SWAINThird DefendantHearing: 2 March 2012(Heard at Palmerston North)Counsel: G. Mason - Counsel for PlaintiffG. Takarangi - Counsel for Defendant Emma Sophie SwainJudgment: 14 March 2012JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALLThis judgment of Associate Judge Gendall is delivered on 14 March 2012 at 3.30 pm under r 11.5 of the High Court Rules.Solicitors: Grant O'Donnell, Lawyers, PO Box 900, Palmerston NorthGraham Takarangi & Co, Solicitors, PO Box 72, WanganuiIntroduction[1] The plaintiff trust, Tim Swain Family Trust, applies for summary judgment essentially for repayment of what is said to be a loan advance, made by it to the defendant trust, T & E Swain Family Trust.[2] The application is opposed by the defendant trust and Emma Sophie Swain.Background[3] The plaintiff trust was established on 7 June 2002. Until 21 September 2011 Hawkes Bay Nominees Limited was the sole trustee of the plaintiff trust. After that date, Timothy James Swain (Mr Swain) and Mark Raymond Ward became trustees of the plaintiff trust.[4] The defendant trust is a family trust, the trustees of which are Emma Sophie Swain (Mrs Swain), Mr Swain and Hawkes Bay Nominees Ltd. Mrs Swain appears as third defendant in her personal capacity, as does Mr Swain as second defendant.[5] Mr and Mrs Swain began living together in July 2002, were married in June 2003, and separated in August 2008. A judgment of Judge Callinicos in the Palmerston North Family Court on 29 July 2010 decided certain aspects of their relationship property division.[6] The plaintiff trust's primary assets during the period 2002 to 2008 were 4,999shares in Advantage Computers Limited (Advantage Computers), which were sold in 2005. The plaintiff estimates that the trust received in excess of $2 million in dividends and for the sale of the shares during that period.[7] During 2005 and 2006, the plaintiff claims that it made a series of loan advances to the defendant trust, totalling $628,913.87. At the time the loans were allegedly made, Mr Swain was not a trustee of the plaintiff trust, and the defendant trust was not a named beneficiary in the trust deed for the plaintiff trust. Despite not being a trustee, Mr Swain ran the trust throughout the relevant time and controlled its bank account.[8] The plaintiff trust now seeks summary judgment for the recovery of these payments. It lists alternative causes of action first, requiring repayment of loans, secondly, as to moneys had and received, and thirdly it seeks a declaratory judgment seeking directions as to specific amounts being payable to Mr and Mrs Swain personally and the plaintiff trust from the defendant trust.Summary Judgment Principles[9] The application before me is one for summary judgment on which r 12.2(1) High Court Rules applies. Rule 12.2(1) provides:12.2 Judgment when there is no defence or when no cause of action can succeed(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.[10] The principles of summary judgment have been recently summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26]:The 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; (1986) 1 PRNZ 183 (CA), at p 3; p 185. 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; [1979] 3 WLR 373 (PC), at p 341; p 381. 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 vPatel (1987) 1 PRNZ 84 (CA).[11] Therefore, the application for summary judgment can only succeed if I am satisfied that the defendant trust has no arguable defence to the claim either for repayment of the debt, for moneys had and received, or for the declaratory judgment sought.Counsels' Submissions[12] Mrs Swain, in her personal capacity and as trustee for the first defendant,opposes the plaintiff's application as she claims to have an arguable defence to all causes of action.[13] Mrs Swain claims that there were no loans made by the plaintiff trust to the first and third defendants and there are no monies owing to the plaintiff trust. All the funds received by the defendant trust were sourced from Mr Swain himself or Advantage Computers, and were filtered through the plaintiff trust. She contends that the plaintiff trust was only a conduit for the transfer of funds.[14] Mrs Swain relies in part on evidence contained in financial statements insupport of her defence. She states that the defendant trust's financial accounts for theyears ended 2006, 2007, and 2008 have no record of such loans, and these accounts were signed off by all the trustees, including Mr Swain.[15] In response, Mr Swain contends that the amounts recorded in the defendanttrust's financial accounts shown as loans from Mr and Mrs Swain personally were, in reality, loans from the plaintiff trust. He argues that they were not recorded as such because, during the time they were married, Mr and Mrs Swain did not keepseparate track of each other's funds and made joint advances. Mr Swain contends that although he signed off the financial statements for the defendant trust, recordingonly advances from Mr and Mrs Swain personally, they "in no way record the reality as between Emma and me". His submission is essentially that the financial statements are not definitive of the reality of the lending situation between the parties.Discussion[16] There is no argument here that the advances in dispute represent amounts that were transferred from the bank account of the plaintiff trust to the bank account of the defendant trust. It is the status of these payments which is disputed by the parties. The plaintiff contends that the payments are only explicable on the basis that they represent loans advanced to the defendant trust.[17] For the purposes of the present summary judgment application, I need to say at the outset that I am not satisfied that the payments amounted to loan advances. There appear to be no accounts or financial statements completed for the plaintiff trust, the Tim Swain Family Trust during the relevant period which would typically record such loans if indeed they were made. As noted above, there are accounts for the defendant trust for the years ending 31 March 2006 and 31 March 2007, signed off by all the trustees, including Mr Swain, with appropriate resolutions. These accounts show loan advances made from Mr and Mrs Swain personally to the defendant trust, but no loan advances from the plaintiff trust. This suggests that, at the time, Mr Swain was clearly not treating the payments as loans from the plaintiff trust. I am not prepared to accept his submission now that the financial statements do not depict the reality of the financial situation, in the absence of any other documentary evidence of the alleged loans.[18] As I see it, there is no other evidence before the Court that the payments in question were to be treated as loans, such as evidence that the payments were to bear interest or were repayable at a particular date or on demand. Certainly, no interest was paid nor any part repayments made. The first occasion on which repayment was demanded was on the 21st of September 2011, even though the payments dated back to 2005. It may be that the date for repayment could have been delayed for 5 years. The delay that has occurred however would seem to suggest that in reality it was only issues in the relationship property division between Mr and Mrs Swain which prompted the repayment demands to be made here.[19] There is evidence before the Court in the form of an affidavit dated 9 November 2011 from John Anthony McAra (Mr McAra) which also denies the status of the payments as being loan advances to the defendant trust. Mr McAra is asolicitor and director of Hawke's Bay Nominees Limited, it being the sole trustee of the plaintiff trust and one of the trustees of the defendant trust during the relevant period. Significantly, he disputes that the plaintiff trust made any loan advances tothe defendant trust, as the defendant trust's financial statements do not record anydebt owing to the plaintiff trust. Mr McAra notes that the only loan advance from the plaintiff trust that he oversaw in his capacity as director and manager of the trustee company was a loan of $236,346.53 advanced to the defendant in September 2005for the purchase of property in Sydney. That loan is supported by documentation and as I understand the position, it is not relevant to matters before me here. Mr McAra cannot recall any other advances made during the time that he was trustee. Moreover, Hawkes Bay Nominees Limited, in their capacity as a trustee of the defendant trust, never accepted liability for loans or advances from the plaintiff trust.[20] In the absence of complete accounts for the relevant time periods for the plaintiff trust, in my view there is simply insufficient documentary or other evidenceto support the plaintiff's contention that loans were made to the defendant trust. Theinferences that the plaintiff is asking the Court to make would require a careful examination of evidence and witnesses, and therefore this matter in my view is quite unsuitable for a summary judgment application.[21] Additionally, as I see it there are other possible explanations for the payments that would need to be properly addressed:a. The payments might be distributions from the plaintiff trust;b. The payments could be treated as "gifts" to the defendant trust;c. The payments could have taken some other form.[22] As to the first possibility, the defendant trust is not a named beneficiary of the plaintiff trust, as it is not specified in the Trust Deed. However, the Trust Deed, at 9.1, does provide the option for additional discretionary beneficiaries to be added at the behest of the trustee/s. There is no evidence to suggest either that the defendant trust was added as a beneficiary using this mechanism or indeed that this may not have occurred. If evidence that it had been added did exist, it could conceivably provide an arguable defence that the payments were a distribution from the plaintiff trust and not a loan advance.[23] As to the second possibility, Mrs Swain contends that in the absence of documentary evidence that the payments were loans, the Court should infer that they are gifts from the plaintiff trust to the defendant trust. If the defendant trust is not an added discretionary beneficiary, however, this possibility is unlikely given thetrustees' responsibility to preserve the assets of a Trust for the benefit ofbeneficiaries.[24] As to the third possibility, the payments could be accounted for on a number of other bases. They may have been loans made to Mr Swain or his children which were paid through the defendant trust for convenience reasons. Evidence before the Court did seem to suggest that the Swain family's financial arrangements at the timeinvolved a number of payments or income filtering through the two family trusts. Indeed, Judge Callinicos in the Family Court stated at [65] that the accounts do not accurately record what is actually happening. Although there is insufficient evidence before me to reach some definitive conclusion on this, it could be that the disputed payments were part of some wider arrangement. The possibility that this might be the position cannot be discounted here.[25] Additionally, the plaintiffs' claim, in the alternative, that these payments represent monies had and received by the defendant trust. Because the plaintiff trustwas not credited in the defendant trust's 2006 and 2007 financial statements with acurrent account, there was a complete failure of consideration. Thus, it is said a claim for money had and received arose.[26] A claim for money had and received arises where a plaintiff seeks to recover an enrichment, on the basis that there was a total lack of consideration for that enrichment. It is a claim in personam, rather than in rem, thus it is immaterial whether the defendant trust still holds the money.1[27] In this context, a total failure of consideration is distinguishable from consideration in the contractual sense.2 The existence of a valid contract will not automatically defeat a claim for money had and received.3 A claim will succeed if one party is deprived of the full benefit of performance, even if there is consideration in the contractual or promissory sense.41 Martin v Pont [1993] 3 NZLR 25, at 30.2 Ross B Grantham and Charles EF Rickett Enrichment and Restitution in New Zealand, (HartPublishing, Oregon, 2000) at 149. See also Martin v Pont, at 30.3 At 150.4 Goss v Chilcott [1996] 3 NZLR 385 (PC).[28] In the present case, the plaintiff must show that the payments to the defendant trust were conditional on some counter performance on the part of the defendant trust. The plaintiff must demonstrate that their enrichment of the defendant was understood to be conditional on some future event, whether or not contained in contract, and that event has not materialised.5 An action can also arise where money is transferred for a particular purpose, and that purpose was not fulfilled.6[29] Addressing these aspects, in the case before me there is little evidence to support a contention that the payments in question were made to the defendant trust on some condition which has not been fulfilled. The plaintiff has not specified any condition in its submissions, or what act of performance was expected in return for the payments. Although contractual reciprocation is not strictly necessary, there seems to me to be no understanding between the parties here that the defendants'receipt of these payments was conditional on some act on its part. It is suggested that there might possibly have been an informal, non-contractual understanding between the parties that the payments in question were made to the defendant trust on the basis that it would provide something in return, at a future date. However, there is no evidence before me of any transaction of this nature. And, in any event, proof of these matters is required and means that this aspect here is certainly not appropriate for a summary judgment application.Conclusion[30] In summary, there are significant factual disputes in relation to the source and purpose of the funds transferred to the defendant trust. The plaintiffs' principal claim would require the Court to infer that the payments were loan advances from the plaintiff trust. There is insufficient evidence to support such an inference. Further,the intense factual enquiry required for the plaintiff's claim for money had andreceived to succeed must mean that this claim is not appropriate for the present summary judgment application. And finally, the declaration sought by the plaintiff5 B Grantham and Charles EF Rickett Enrichment and Restitution in New Zealand at 152.6 See for instance Martin v Pont [1993] 3 NZLR 250, where the plaintiffs deposited $600,000 into thedefendant firm's trust account for the purpose of investing it in Nathans Finance Ltd. When that eventdid not materialise as the money was misappropriated for another fund, a claim arose for money hadand received.pursuant to the Declaratory Judgments Act 1908 as to who is entitled in the defendant trust's financial statements to the current account is clearly the subject of significant factual dispute and is also not appropriate for summary judgment orders here. In these circumstances I am not satisfied that the plaintiff has done enough here to show that the amounts in question are debts or in some other way are currently owing to the plaintiff, and that there is no arguable defence to the present claims. Summary judgment must therefore be refused.[31] The plaintiffs' present application is dismissed.[32] As to costs, I see no reason why they should not follow the event here in the usual way. Costs are therefore awarded to the defendants on their successful opposition to the present application on a 2B basis plus disbursements as fixed by the Registrar.'Associate Judge D.I. Gendall'