Cowan v Martin

• Jurisdiction: New Zealand
• Judge: French J
• Judgment Date: 04 December 2014
• Neutral Citation: [2014] NZCA 593
• Docket Number: CA418/2013
• Court: Court of Appeal
• Date: 04 December 2014

Between

Jeffrey Peter Cowan and Prudence Jane Cowan

Appellants

and

Julia Martin and Stephen Farrell

Respondents

[2014] NZCA 593

Court:

French, Winkelmann and Asher JJ

CA418/2013

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against the High Court's (HC's) refusal to enter summary judgment — the respondents were suing the appellants for breaches of a sale and purchase agreement for a residential property owned by a family trust — it was common ground for the purposes of the appeal that time under the Limitation Act 1950 had started to run from the date of settlement and the limitation period expired on the 25 November 2011 — the respondents had not been appointed as trustees of the property until January 2012 but argued that they had orally been appointed as trustees prior to issuing proceedings, or in the alternative that they were acting under r4.24 High Court Rules (Persons having same interest) or as agents of the trust — they also said that the statement of claim could be amended — whether the respondents had orally been appointed as trustees — whether it was arguable that the respondents had issued the proceedings as agents for the trust or under r4.24 — whether amending the statement of claim to show that the respondents were suing in their capacity as trustees would amount to correcting a misnomer, not a misidentification.

Counsel:

M T Davies and S R Jacobs for Appellants

J E M Lethbridge and T J P Gavigan for Respondents

A The appeal is dismissed.

B The respondents are to file an amended statement of claim in accordance with this judgment within 15 working days.

C There is no order as to costs.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by French J)

Introduction

1 Mr and Mrs Cowan (the Cowans) appeal a decision of Associate Judge Sargisson made in the High Court at Auckland. 1

2 In the decision, the Associate Judge declined the Cowans' application for a defendant's summary judgment.

3 The appeal raises the following issues:

• (a) Were the proceedings issued in the wrong name or the wrong capacity?

• (b) Is any error in the statement of claim capable of being cured by amendment to avoid summary judgment?

Background

4 The Cowans owned a residential property in Mt Eden, Auckland.

5 On 26 October 2005 they entered into a written agreement to sell the property. The contract showed the purchasers as “Julia Martin and Stephen Farrell” (Martin and Farrell). It did not say “or nominee”.

6 Prior to settlement, solicitors acting for Martin and Farrell advised the Cowans' solicitors that their clients had formed a trust to complete the purchase. The letter, dated 22 November 2005, enclosed a transfer document showing the purchasers as “Stephanie Diana Martin and Colleen Clare Ciobo”. Mesdames Martin and Ciobo were the trustees of the newly formed trust, under which Martin and Farrell were discretionary beneficiaries. The trust was called the Slan Abhaile Family Trust (the family trust).

7 The sale was duly settled on 25 November 2005 and the Mt Eden property was transferred into the names of Stephanie Diana Martin and Colleen Clare Ciobo. The transfer was registered on 2 December 2005.

8 In October 2007, Stephanie Martin resigned as trustee and was replaced by a Dr Malcolm Sturm. The property was then transferred into the names of Dr Sturm and Ms Ciobo.

9 On 27 October 2011, Martin and Farrell issued proceedings in the High Court against the Cowans. The statement of claim alleges that in breach of an express warranty under the agreement for sale and purchase, the Cowans carried out certain defective building work during their period of ownership, causing Martin and Farrell loss or damage in the sum of $225,000.

10 The loss or damage is particularised as follows:

• (a) $15,000 expended to make good unsafe electrical work;

• (b) diminution in the value of the land as a result of an unlawful carport, estimated at $60,000; and

• (c) remedial works to the rear of the property estimated to cost $150,000.

11 The Cowans filed a statement of defence denying the allegations and also pleading that any claim was statute-barred under the Limitation Act 1950, time having started to run from the date the contract was signed, namely 26 October 2005.

12 The Cowans also filed an application for summary judgment. The only grounds identified in the formal notice were that Martin and Farrell's claim could not succeed and “on the grounds appearing” in an affidavit sworn by Mr Cowan.

13 The affidavit in question exhibited a number of documents that had been obtained on discovery relating to the family trust. They included a deed dated 12 January 2012 under which Ms Ciobo and Dr Sturm purported to retire as trustees and appoint Martin and Farrell as substitute trustees. The affidavit also exhibited documentation showing that Martin and Farrell did not become the registered proprietors of the property until 28 February 2012.

14 Martin and Farrell opposed the summary judgment application.

The High Court decision

15 The Associate Judge identified two arguments advanced by the Cowans in support of their application for summary judgment.

16 The first was an argument that because it was the trustees who had owned the property and not Martin and Farrell, Martin and Farrell had no standing to sue. 2 Martin and Farrell could not themselves make a valid claim in contract unless and until they became trustees, which did not happen until January 2012 – that is, after the limitation period had expired.

17 In opposition, Martin and Farrell contended that while a formal deed appointing them as trustees had not been signed until January 2012, they had been orally appointed trustees in October 2011, before they issued the proceedings. The oral appointment was said to be evidenced by a minute dated 25 November 2011. Alternatively, they argued they had been appointed as the trustees' agents for the purpose of commencing the proceedings or that the claim had been brought in a representative capacity.

18 The minute relied upon reads:

MINUTE OF THE MEETING OF

THE TRUSTEES OF THE SLAN ABHAILE FAMILY TRUST

(“the Trust”)

on 25 November 2011

(passed by entry in the Trust's minute book)

PRESENT: Colleen Clare Ciobo, Malcolm Randall Sturm, Stephen Farrell and Julia Martin

RESOLVED:

• 1. Stephen Farrell and Julia Martin entered into a contract for sale and purchase of [the Mt Eden property] (“the Property”) with Jeffrey

  Peter Cowan and Prudence Jane Cowan (“the vendors”) dated 26 October 2005.

• 2. Stephen Farrell and Julia Martin formed a trust to complete the purchase of the Property, the Slan Abhaile Family Trust (“SAFT”), the trustees of which were Stephanie Diana Martin and Colleen Clare Ciobo (“first trustees”).

• 3. The vendors were notified that the first trustees were nominated as purchaser on or about 22 November 2005 and the transfer to the first trustees was registered on 2 December 2005.

• 4. Stephanie Diana Martin resigned as a trustee of SAFT on 1 October 2007 and Malcolm Randall Sturm appointed a trustee and the property transferred to the new trustees pursuant to the resolution of trustees dated 1 October 2007.

• 5. Registration of the transfer of the property from the first trustees to Colleen Clare Ciobo and Malcolm Randall Sturm occurred on 30 November 2007 (“second trustees”).

• 6. The second trustees decided to resign at the time SAFT wished to commence legal proceedings against the vendor.

• 7. Knowing Stephen Farrell and Julia Martin agreed to be appointed as trustees (“third trustees”) the second trustees consented to the third trustees commencing proceedings on behalf of the SAFT and the second trustees hereby ratify that action.

• 8. The third trustees record that they have brought proceedings in the High Court against the vendors for the benefit of SAFT.

• 9. The third trustees indemnify the second trustees for costs and claims that may be made against the second trustees in their capacity as trustees of SAFT.

• 10. It is agreed that the property should be transferred to the third trustees with the consent of Kiwibank and at the cost in all matters of the third trustees.

Signed:

Colleen Clare Ciobo Resigning Trustee

19 The Judge acknowledged that Martin and Farrell's arguments on ownership were problematic. 3 She considered their interpretation of the minute was strained, that a formal deed (in this case the deed ostensibly appointing Martin and Farrell trustees on 12 January 2012) would ordinarily be assumed to reflect the true

position, that as a matter of law an agent cannot bring proceedings for trustees and that it was far from clear that Martin and Farrell had the same interests as the trustees so as to be able to bring a representative claim

20 However, the Judge said those apparent problems were not determinative. 4 In her assessment, the evidence did not establish that Martin and Farrrell ceased to be parties to the agreement in their personal capacities, in that there was no evidence of a novation or assignment to the trustees or any other cancellation of their rights. 5 The possibility that Martin and Farrell might still be parties to the contract with rights to sue for breach of warranty could not therefore be discounted.

21 The second argument identified as being advanced by the Cowans was that even if Martin and Farrell did have rights to sue on the contract in their personal capacities, they had not personally suffered any loss that would result in anything more than nominal damages. 6 In support of that argument, the Cowans relied on a letter written by Martin and Farrell's own solicitors which stated that it was the family trust that had suffered the loss.

22 As regards this second argument, the Judge said that it might well be that Martin and Farrell had not suffered a personal loss. 7 However, she was not prepared to enter summary judgment on that ground. In her view the letter was...