Neil Stuart Johnston v Christopher Frederick Schurr

JurisdictionNew Zealand
CourtSupreme Court
JudgeWilliam Young J
Judgment Date12 June 2015
Neutral Citation[2015] NZSC 82
Date12 June 2015
Docket NumberSC 61/2012

[2015] NZSC 82



Elias CJ, McGrath, William Young, Glazebrook and O'Regan JJ

SC 61/2012

Neil Stuart Johnston
Christopher Frederick Schurr
First Respondent
Deem & Shearer
Second Respondent

C R Carruthers QC, E J Hudson and J S Cooper for Appellant

R J B Fowler QC and P J Mooney for First Respondent

J M Morrison and N Levy for Second Respondent

Appeal against decisions of the High Court (HC) and the Court of Appeal (CA) that the first respondent did not breach statutory duties imposed on him under the Protection of Personal and Property Rights Act 1988 (PPPRA) and that the second defendant firm of solicitors had not been acting for the appellant and thus did not owe him a duty of care — appellant had been finalising an agreement as to the division of relationship property when he had an accident — first respondent was appointed as the manager of his property (including a farm) under the PPPRA but the Court excluded relationship property from the manager's powers — appellant unexpectedly recovered in 2003 and in 2004 he settled with his then wife at a higher amount as by then the farm had appreciated in value — sought damages against the first and second respondents for the difference between the cost to him of the settlement which he eventually reached and the corresponding cost he would have incurred under the settlement proposed before his accident — whether the basis of the first respondent's liability (if any) for a lack of diligence or care was under s49 PPPRA (Liability of manager) or under tort for breach of a statutory duty or negligence — whether the manager had been under a duty to settle the relationship property agreement — whether the contract of retainer with the second respondent had been terminated following the accident — whether the second respondents were liable in negligence for not pursuing a settlement.

Held: Although J had sought to found his claim in tort, either for breach of statutory of duty or (in the CA) in negligence, there was, another basis for a claim. This was grounded in S's dual status (a) by virtue of his appointment as manager, as an officer of the Court and b) by reason of his control of J's property, as a fiduciary for him.

The historical context established that s49 PPPRA was intended to limit what might otherwise be the wider liabilities of managers in relation to losses arising out of their conduct. The supervisory jurisdiction in relation to managers was vested in the HC by s17 Judicature Act 1908 (Jurisdiction as to mentally disordered persons, etc). Section 17 had to be construed as maintaining for the HC the jurisdiction formerly exercised by English judges in the Chancery Courts. The s17 jurisdiction was exercisable in respect of managers under the PPPRA. The combination of the supervisory jurisdiction and s49(1) meant that S was liable if, in the exercise of his powers, he acted in bad faith or without reasonable care and thereby caused J loss.

The existence of the supervisory jurisdiction explained the provisions of the PPPRA which presupposed that managers were liable to make good losses caused by the exercise of their powers and which were relied on as supporting the availability of a claim for breach of statutory duty. These included s49 which was heavily relied on by J to support his argument that a claim for breach of statutory duty lay for breach of the duties imposed by the PPPRA. Given the history, it was more easily read as limiting what might otherwise be a broader liability under the supervisory jurisdiction.

There was no need for a determination in respect of the claims in tort because the availability of claims for breach of statutory duty or negligence would not affect the outcome of the appeal. If there was no claim under the supervisory jurisdiction, there would likewise be no claim in tort. It was not necessary to discuss the legal and pleading issues argued by the parties as to the claims for breach of statutory duty or in negligence.

There was a high level of uncertainty as to the two key premises on which J's case was founded, that is, the willingness of Mrs J to settle on either the basis agreed in 1998 or the terms proposed in the Carrington letter, and the practicality of retaining the farm after a division of relationship property. The case against S was not premised on the assumption that he should have put in place arrangements to enable a division of relationship property through litigation. Rather the basis of the claim was that if Mrs J had been approached appropriately she would have agreed to a settlement on the basis of the 1998 agreement or the Carrington letter.

It was unlikely to say the least that Mrs J, properly advised, would ever have been prepared to revert to the terms agreed in 1998. It was also doubtful that she would have been prepared to settle on the basis suggested in the Carrington letter given that the farm had not then been the subject of an independent valuation. During the first half of 2000, Mrs J reached the point when she was no longer seeking a prompt settlement and from this point on, there was no substantial likelihood at all that she would have agreed to a settlement which did not fairly represent her legal entitlements. Further a settlement of the kind postulated would at least have raised a question mark as to whether the farm would be able to be retained in the medium to long term.

The FC did not confer on S the power to conclude a relationship property agreement as it appeared to have been accepted that the settlement could be put aside for the time being. He could not therefore be said to have relevantly lacked diligence in the performance of the powers which were conferred on him. Whether such powers should have been conferred on some other person was primarily the responsibility of the FC. The FC appointed a lawyer to represent J. S was entitled to take the view that what, if any, orders should be made so as to permit relationship property negotiation was a matter for the FC to determine after hearing from the lawyer appointed to represent J. In this context, the claim against S in substance came down to a complaint about the orders of the FC.

Prior to it becoming apparent around late 2002 or perhaps early 2003 that the appellant might make a full recovery, it was well open to honest and diligently formed opinion that the best course of action was to defer a division of relationship property.

These considerations were also decisive in relation to the claims in tort. Given the relationship property exclusion in respect of S's powers and, importantly, the reason for it, it was untenable to suggest that he had an obligation to engage more forcefully than he did with the question as to whether the Court should make orders addressed to finalisation. The practical effect of the orders made, after hearing from counsel for J, was that finalisation of the relationship property agreement should be deferred. S's statutory duties, if any, did not go beyond acting in accordance with the orders made. And given that the issue had been addressed by the FC there was no tenable basis on which it could be said that he was under a relevant duty of care to the appellant or was in breach of any duty imposed by the PPPRA. Further, S did not set about taking steps to procure or facilitate a settlement, and his actions therefore could not be said to be indicative of an assumption of responsibility to procure a settlement.

A loss of capacity might not result automatically in the termination of a contract of retainer. Given the exclusions in respect of relationship property in the powers conferred on S, the orders made by the FC did not in themselves take away J's legal capacity to enter into a relationship property agreement. So theoretically at least, J could have completed an agreement through his solicitors or possibly by appointing an attorney to do so. These possibilities, however, were more apparent than real.

As there was no substantial likelihood that Mrs J would have been prepared to settle on the terms agreed in 1998, any settlement would have required further negotiation and further input from J. He was in no position to provide further input. Without this, Deem & Shearer were not in a position to advance matters. Even if Mrs J had been prepared to execute the agreement prepared in January 1999, it was difficult to see how the execution formalities prescribed by s21 Relationships (Property) Act 1976 (Spouses or partners may contract out of this Act) could have been satisfied.

It was also not clear that a division of relationship property, even if formally agreed to, could have been implemented without the approval of a manager appointed in respect of the property which was to be affected by it, in particular the assets to be transferred to Mrs J. And once Court orders had been obtained which were premised on the assumption that a division of relationship property was to be deferred, it was entirely unrealistic to think that a division of relationship property could have been agreed to and implemented without the sanction of a manager appointed by the Court for that purpose.

The contract of retainer between J and Deem & Shearer came to an end as a result of the accident because of (a) the appellant's loss of the practical ability to give instructions, and (b) the radically different circumstances then applying which lay outside anything contemplated when the contract of retainer was formed.

The termination of the contract of retainer did not in itself exclude liability in tort for breach of a duty of care associated with an assumption of responsibility on the part of Deem & Shearer towards the appellant. In this respect there were some aspects of Deem & Shearer's conduct which could be relied on as evidencing such an assumption of responsibility. It had to be borne in mind, however, that...

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