Simpson v Sax

• Jurisdiction: New Zealand
• Judge: Brewer J
• Judgment Date: 26 June 2015
• Neutral Citation: [2015] NZHC 1466
• Docket Number: CIV-2013-470-493
• Court: High Court
• Date: 26 June 2015

Between

Luke Andrew Simpson

Plaintiff

and

Janine Davina Sax

First Defendant

Luke Andrew Simpson and Janine Davina Sax as trustees of the Luke and Janine Simpson Family Trust

Second Defendant

[2015] NZHC 1466

CIV-2013-470-493

IN THE HIGH COURT OF NEW ZEALAND

TAURANGA REGISTRY

Claims for occupation rent, interest on loan to a trust and damages for intentional inducement of breach of contract — plaintiff and first defendant were former husband and wife and trustees of the second defendant family trust which owned a property in which they had lived rent free while married — after they separated the defendant wife remained in the property for some months and rented out rooms in the house — after defendant left to go overseas, the plaintiff moved back into the house and remained there for several months — both parties claimed for occupation rent — whether the parties had the right to occupy the property — whether the plaintiff could bring a derivative action on behalf of the trust to claim occupation rent — whether the wife was in breach of her duties to the trust by improperly profiting from her position as a trustee both by her occupation and by collecting rent — whether the decision of the Tenancy Tribunal could be used as evidence notwithstanding s50(1) Evidence Act 2006 (evidence of a judgment or a finding of fact in a civil proceeding not admissible in another civil proceeding to prove the existence of a fact in issue).

Counsel:

E M Eggleston for Plaintiff

P F Gorringe for First Defendant

JUDGMENT OF Brewer J

Introduction

1 Mr Simpson and Ms Sax were married in March 2009, having lived together for a short time. In early 2011, they separated. In 2013, they were divorced. They have no children together.

2 Their relationship is acrimonious, and that acrimony has sparked many Court proceedings, including this one. It is a great shame; particularly since the sums of money at issue in this case are not large. A simple agreement to share equally the funds now held on trust for them would have saved legal fees, time and stress. But they cannot bring themselves to agree on anything, and so I must decide the issues they place before the Court in this proceeding.

3 This case concerns the use of a house purchased by their Family Trust (“the Trust”) for them to live in. The price was $481,000. The Trust funded the purchase:

• (a) By a loan of $356,000 from Mr Simpson. This was evidenced by a Deed of Acknowledgement of Debt. The debt was payable upon demand and “[p]ending demand being made the Debt Shall be free of interest”. 1

• (b) By a loan of $100,000 from a Trust established by Ms Sax's father. This debt was evidenced by an identical Deed of Acknowledgement of Debt.

• (c) By a wedding gift of $25,000 from Ms Sax's father's Trust.

4 The trustees of the Trust were Mr Simpson, Ms Sax and GTA Trustees Ltd (in the person of Mr Grace). Mr Simpson and Ms Sax were discretionary beneficiaries of the Trust.

5 At the time the house was bought by the Trust in July 2009, it was tenanted at a rental of $450 per week. In September 2009, Mr Simpson and Ms Sax moved in, and lived there rent free until they separated in February or March 2011 (the parties

do not agree on the date). After the separation, Ms Sax continued living in the house for a while before going overseas temporarily. Mr Simpson, without her knowledge, then moved in, and remained there for the rest of the time it was owned by the Trust. Mr Simpson bought the house from the Trust on 1 November 2013

6 Mr Simpson claims that:

• (a) Ms Sax owes the Trust $18,900 for rent for the period 26 February 2011 – 16 December 2011 (42 weeks x $450).

• (b) The Trust owes him interest on his loan of $7,315 (7 June 2013 – 1 November 2013 at 5 per cent per annum).

• (c) The Trust owes him $9,395.78 “plus interest” being payments he made in respect of the house.

7 Ms Sax claims that:

• (a) Mr Simpson owes the Trust $43,965 for occupation rent for the period 17 December 2011 – 1 November 2013 (97.7 weeks x $450).

• (b) Mr Simpson owes the Trust $16,800 for wrongfully causing tenants of the property to break a 12 months fixed tenancy after two months of occupation; and Mr Simpson owes her $1,050 because, as a result of his wrongful actions, the Tenancy Tribunal ordered her to refund the tenants' bond.

• (c) Mr Simpson owes her $8,366 because his occupation of the Trust's house from 25 April 2012 – 1 November 2013 forced her to find alternative accommodation and make rent payments of that amount.

• (d) The Trust owes her $6,780 being payments she made in respect of the house.

8 Mr Simpson pleads that Ms Sax should get nothing. Ms Sax pleads that Mr Simpson should get nothing.

9 GTA Trustees Ltd retired as a trustee of the Trust on 27 February 2012 leaving Mr Simpson and Ms Sax as the only trustees. 2

Issues

10 I find the issues to be:

• (a) Is Mr Simpson entitled to claim occupation rent from Ms Sax?

• (b) Is Ms Sax entitled to claim occupation rent from Mr Simpson?

• (c) Is Mr Simpson liable:

  • (i) To pay damages to the Trust for loss of rental payments from the broken 12 months tenancy agreement?

  • (ii) To pay Ms Sax $1,050 for the bond refund?

• (d) Does the Trust owe Mr Simpson interest on his loan?

• (e) Does the Trust owe either, or both, the monies they claim for reimbursement of payments made in respect of the house?

Is Mr Simpson entitled to claim occupation rent from Ms Sax?

11 After Mr Simpson walked out, Ms Sax remained in the house. She occupied the trust property from 26 February 2011 3 to 16 December 2011. During her period of occupation, Ms Sax took in tenants between 20 April 2011 and 3 June 2011. They paid rent, which she collected and kept.

12 Ms Sax's argument is that she should not pay rent because she occupied the property with the express or implied consent of all the trustees, she was not paying rent beforehand and no demand for rent was made by the trustees.

13 Mr Simpson says his lawyers demanded Ms Sax pay rent by letters dated 29 April 2011 and 24 May 2011, but that was his personal position, not the Trust's. The Trust deed provides that all powers and discretions of the Trust shall be exercised with the unanimous approval of the Trustees. 4

14 Mr Simpson frames his claim for occupation rent in two ways:

• (a) A derivative action by Mr Simpson as beneficiary on behalf of the Trust against Ms Sax as occupier; or

• (b) An action by Mr Simpson against Ms Sax for breach of Trust.

15 These relatively straightforward facts give rise to complicated issues of law. In deciding this occupation rent claim, I am required to consider the following questions:

• (a) Did Mr Simpson and Ms Sax have the right to occupy the property?

• (b) Can Mr Simpson bring a derivative action on behalf of the Trust to claim occupation rent?

• (c) Did Ms Sax in breach of her duties to the Trust improperly profit from her position as a trustee?

• (d) Is there another basis upon which Ms Sax could be required to pay occupation rent to Mr Simpson?

Did Mr Simpson and Ms Sax have the right to occupy the property?

16 Mr Simpson and Ms Sax were married on 29 March 2009. The Trust was established shortly afterwards on 17 July 2009 and purchased the home on 27 July 2009. The purchase was facilitated with funds provided by both Mr Simpson and Ms Sax's father's trust. Part of the money provided by Mr Sax's trust was a wedding gift. Prior to the purchase, the property had been rented out to tenants. The property continued to be rented out by the Trust until September 2009 when Ms Sax and Mr Simpson took over the occupation of the property. I conclude from this series of events that the trustees all understood that the property was being acquired to be Ms Sax and Mr Simpson's matrimonial home.

17 The Trust Deed gives the Trustees the power to “sell, lend, lease or license to any Beneficiary or allow any Beneficiary to occupy or use any property of the Trust Fund on any terms”. 5 There is no record of a unanimous trustees' resolution permitting Mr Simpson and Ms Sax to occupy the property. Despite this, I find that the circumstances surrounding the creation of the Trust and the acquisition of the property establish that the Trustees unanimously resolved to grant Mr Simpson and Ms Sax the right to occupy the property rent-free. There is no evidence before me that this resolution was unanimously rescinded before the sale of the property to Mr Simpson on 1 November 2013.

18 Accordingly, I find that Mr Simpson and Ms Sax had the right to occupy the property.

Can Mr Simpson bring a derivative claim on behalf of the Trust to claim occupation rent?

19 The first way in which Mr Simpson pleads his claim is by way of derivative action against Ms Sax for occupation rent on behalf of the Trust in his position as a discretionary beneficiary.

20 The Court of Appeal recently considered the law of derivative actions brought by beneficiaries in its decision in Cowan v Martin: 6

[53] Our understanding of the relevant law is as follows:

• (a) Where a claim is based on a duty owed to a trust, a beneficiary of the trust does not have a separate cause of action in their own right against the third party wrongdoer. The beneficiary cannot supplant the trustee and bring a separate action. 7

• (b) A beneficiary may bring a derivative action; that is, an action in right of the trust and in the room of the trustee. 8

• (c) A beneficiary may only bring a derivative action in special circumstances. 9

21 “Special circumstances” are “circumstances which embrace a failure, excusable or inexcusable, by the trustees in the performance of the duty owed by the trustees to the beneficiary to protect the trust estate or to protect the interests of the beneficiary in the trust estate”. 10...