The Judicial Committee of the Privy Council Decisions

Privy Council Appeal No. 3 of 1995

 

John Michael Collier Appellant

v.

(1) John Neville Creighton and

Beverley Maureen Creighton and

(2) Purnell Johnstone Creighton & Newman Respondents

 

FROM

 

THE COURT OF APPEAL OF NEW ZEALAND

 

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JUDGMENT OF THE LORDS OF THE JUDICIAL

COMMITTEE OF THE PRIVY COUNCIL,

Delivered the 8th May 1996

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Present at the hearing:-

Lord Goff of Chieveley

Lord Griffiths

Lord Jauncey of Tullichettle

Lord Steyn

Lord Hoffmann

  ·[Delivered by Lord Steyn]

 

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1. On an appeal from a judgment of the Court of Appeal of New Zealand the critical question is whether the appellant's claim for breach of fiduciary duty against his solicitor is statute barred.  Reversing the trial judge's decision the Court of Appeal held that the claim was statute barred.  The judgment of the Court of Appeal is reported: Official Assignee of Collier v. Creighton [1993] 2 N.Z.L.R. 534.

 

The uncontested facts

By 1971 the appellant, Mr. John Collier, had employed the solicitors' firm Purnell Johnstone Creighton & Newman, who practise in Christchurch, for about 13 years. He dealt mainly with the first respondent, Mr. John Creighton, a partner in the firm.  Towards the end of 1971 Mr. and Mrs. Creighton were looking for a larger house.  At that time a residential property at 44  Westburn  Terrace  came  on the  market.  On 25th November 1971 the Creightons offered to buy the property for $30,000 with possession on or before 31st March 1972.  Mr. and Mrs. Wilson, the owners of the property, made a counteroffer to sell for $33,500.  Subject to $8000 being left on second mortgage the Creightons accepted the counteroffer.  The Wilsons accepted the proposed variation subject to their solicitors' approval, which had to be communicated by 29th November.  The solicitors' approval was not forthcoming.  On 2nd December Mr. Creighton sent a letter to the Wilsons' solicitors withdrawing the offer to purchase the property.  But Mr. Creighton's letter contained the following additional statement:-

"We understand that the property is not yet sold and confirm that if the property remains unsold after Christmas Mr. and Mrs. Creighton may again be interested."

 

2. The Creightons proceeded to look at other houses but found nothing to their liking.

 

3. In the meantime Mr. Collier and his wife had become interested in moving.  They also became interested in 44 Westburn Terrace. Mr. Creighton only learnt of their interest on 9th December.  On that date Mr. Collier came to see Mr. Creighton.  Mr. Collier handed a completed agreement of sale and purchase of the property at 44 Westburn Terrace to Mr. Creighton.  The price was $35,000, with $24,500 to be paid in cash and the balance to be secured by a second mortgage.  Vacant possession was to be given by 28th January.  The agreement was subject to Mr. Collier raising the necessary finance by 22nd December.  Mr. Collier retained Mr. Creighton to assist in raising the finance and any necessary extension.  Subsequently there was a dispute between Mr. Collier and Mr. Creighton as to what was discussed during this meeting.  To that aspect their Lordships will turn when they consider the findings of the trial judge.  At present it is sufficient to state that no extension was granted and no finance was raised.  The transaction between the Wilsons and Mr. Collier therefore lapsed.

 

4. In January 1972 the Creightons completed renovations to their own house preparatory to putting it on the market.  On 25th January the Creightons completed an agreement to purchase 44 Westburn Terrace for $35,250 to be paid in cash when possession was given, which was to be on 31st March 1972.  The transaction was duly completed.  The Creightons still live there.

 

5. It was common ground that Mr. Collier became aware in January 1972 that the property had been sold.  It was, however, a matter of dispute when Mr. Collier first discovered that the Creightons had bought the property.

 

 

6. In January 1989, 17 years after the Creightons bought the property, Mr. Collier brought proceedings against Mr. Creighton, his wife and his firm.  Mr. Collier unambiguously alleged that Mr. Creighton in his capacity as solicitor defrauded him.  In the alternative he alleged breach of fiduciary duty by Mr. Creighton. Mr. Collier claimed transfer of the property at 44 Westburn Terrace, then valued at about $240,000, and various other forms of consequential relief.   The defendants in the action pleaded that the claims were statute barred and, in any event, disputed liability.

 

The trial

In April 1991 the case was tried by Roper J.  It was a witness action which lasted four days.  The judge gave a reasoned judgment on 7th May 1991.  The two principal witnesses were Mr. Collier and Mr. Creighton but a number of subsidiary witnesses also testified.

 

7. The judge had to resolve issues of primary and secondary fact.  The judge was faced with a conflict about what was said on 9th December by Mr. Creighton to Mr. Collier.  Mr. Collier said that Mr. Creighton did not mention the offer which he (Mr. Creighton) and his wife had made on 25th November 1971 and that he (Mr. Collier) only discovered that the Creightons had bought the property in July or August 1972.  Mr. Creighton said that he told Mr. Collier of his earlier interest in the property, and that he added that he could again be interested in the property.  The judge found that Mr. Creighton did tell Mr. Collier of his earlier interest but that he did not mention his continuing interest.

 

8. The judge categorically rejected Mr. Collier's allegation that Mr. Creighton acted fraudulently and that he deliberately concealed his purchase of the property. He described the allegations as "fanciful" and "bizarre".  On the other hand, the judge found that by not mentioning his continuing interest in the property Mr. Creighton was in breach of his fiduciary duty as Mr. Collier's solicitor.  Moreover, the judge held that it was for Mr. Collier as fiduciary to show that he had used his best endeavours to raise finance for Mr. Collier and that he had failed to do so.

 

9. The judge then turned to the limitation defence.  The issue was whether the claim based on breach of fiduciary duty was barred by section 4(9) of the Limitation Act 1950.  The 6 year limitation had long expired before the commencement of the proceeding unless section 28 of the Act was applicable. Section 28 reads as follows:-

 

"  Postponement of limitation period in case of fraud or mistake - Where, in the case of any action for which a period of limitation is prescribed by this Act, either -

 

(a)The action is based upon the fraud of the defendant or his agent or of any person through whom he claims or his agent; or

 

(b)The right of action is concealed by the fraud of any such person as aforesaid; or

...

 

the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake, as the case may be, or could with reasonable diligence have discovered it."

 

10. The judge found that there was no actual fraud but that paragraph (a) of section 28 covers equitable fraud involving a breach of fiduciary duty.  The issue was therefore whether Mr. Collier (1) had discovered the breach of fiduciary duty or (2) could with reasonable diligence have discovered it.  The judge answered both questions in the negative.  He said:-

"Mr. Creighton and his firm had been the Plaintiff's solicitors for years, they were trusted and the relationship cordial.  Furthermore, it will be apparent from this judgment that the Plaintiff is suspicious and fault finding to a high degree in his dealings with professional advisers but it appears that while he was `shocked' to hear that Mr. Creighton had purchased the property he saw no reason to inquire into the purchase.

 

11. I therefore conclude that the claim is not statute barred."

 

12. The judge then dealt with the question of the appropriate remedy for the particular breach of fiduciary duty.  In the result he rejected Mr. Collier's claim for transfer of the property and instead awarded compensation in the sum of $10,000 to Mr. Collier against Mr. Creighton.  He dismissed the claims against Mrs. Creighton and against Mr. Creighton's firm.

 

The proceedings in the Court of Appeal

Both parties appealed.  As a result of Mr. Collier's subsequent bankruptcy the Official Assignee was given leave to continue the appeal.  Mr. Collier challenged certain factual findings of the judge and contended that the appropriate relief should have been the imposition of a constructive trust over the property in favour of Mr. Collier, an order to account for the proceeds of the sale of the portion sold, occupation rent and further general and exemplary damages.  He also challenged the judgments in favour of Mrs. Creighton and the firm of solicitors. Mr. Creighton cross-appealed against the decision that the claim was not statute barred, against the finding of breach of fiduciary duty and against the award of damages.

 

13. The Court of Appeal upheld the judge's finding that Mr. Creighton was in breach of his fiduciary duty.  The Court of Appeal then turned to the judge's conclusion that the claim was not statute barred.  On this aspect the Court of Appeal disagreed with the reasoning of the trial judge. Gault J., giving the judgment of the court, said:-

"In our view it is clear that the Judge found on the evidence that while Mr. Creighton told Mr. Collier at the time he took his instructions of his previous interest, he did not clearly disclose that he had a continuing interest in the property.  That constituted acceptance in part of the evidence of Mr. Creighton's recollection and rejection of Mr. Collier's evidence that he was not told of the earlier interest.  We have carefully read the relevant passages in the evidence to which we were referred and we are satisfied that the Judge's finding as we construe his judgment was fully open to him.  We would not differ from it.

 

  It follows that if Mr. Collier knew that Mr. Creighton had had an interest in the property at the time he gave his instructions he cannot be heard to say that on subsequently learning that Mr. Creighton was the purchaser he did not have grounds for suspecting that through the relevant period he had had a continuing interest in it.  His evidence of wondering about Mr. Creighton's inability to raise finance for him rather suggests that very suspicion.

...

 

  It is our view however that in this case it is unnecessary to apply the discovery by reasonable diligence limb of the section. We consider that by August 1972 at the latest Mr. Collier had actual knowledge of the facts constituting the cause of action.  He knew of the previous interest.  He knew the property was sold in January 1972 and he learned later that Mr. Creighton was the purchaser.  He therefore knew that at the time of the retainer his solicitor had had an earlier and continuing interest which was not fully disclosed to him.

 

Accordingly we are of the view that the Limitation Act bars the claim and there must be judgment for the respondents on the cross-appeal."

 

14. Gault J. then made certain observations on the question of the appropriate remedy. That aspect of the case was not canvassed in argument before the Board.

 

The grounds of appeal

Mr. Collier, who appeared as a litigant in person, submitted a lengthy written case and presented detailed oral argument.  Their Lordships invited Mr. Collier to address them in the first place on the issue of limitation and it is to that aspect that it is now necessary to turn.

 

15. On examination it appeared that there was no issue of legal principle involved.  It was common ground that the applicable limitation period is 6 years.  Unless there had been a postponement of the limitation period under section 28 the limitation period had obviously long expired before proceedings were started. Section 28 is therefore the governing provision, and the critical words are:-

"the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake, as the case may be, or could with reasonable diligence have discovered it."

 

16. The Court of Appeal observed, and their Lordships respectfully agree, that what must be discovered are all the facts which constitute the cause of action.

 

17. So far there was no issue on the appeal before their Lordships.  But Mr. Collier argued that the Board ought to reverse the findings of the trial judge that Mr. Creighton had not been fraudulent and had not deliberately concealed his purchase of the property in January 1972. If this argument was tenable, Mr. Collier would have been able to say that he was unaware of such fraud until many years later.  But the argument is misconceived.   The trial judge was in the best position to assess the conflicting evidence of the principal contestants: he was best placed to decide what was probable and what was not probable as regards the particular individuals situated in the particular circumstances in which they were.  On this ground alone Mr. Collier's argument must fail.  It is, however, also plain that on the issues of fraud and concealment the Court of Appeal sustained the trial judge's conclusions.  It is therefore a case of concurrent findings of fact.  In these circumstances Mr. Collier's argument must, in any event, founder in the light of the established practice of the Board not to disturb concurrent findings of fact.

 

18. It follows that the appeal must be approached on the basis that Mr. Creighton had committed a breach of fiduciary duty.  Such a breach of duty is within the language of paragraph (a) of section 28, i.e. it is an action based on equitable fraud: [1993] 2 N.Z.L.R. 534, at page 538.  The real issue, as the Court of Appeal observed, is whether Mr. Collier discovered the breach of fiduciary duty more than 6 years before the proceedings were commenced or whether he could with reasonable diligence have discovered it.

 

19. Mr. Collier submitted that the Court of Appeal erred in reversing the trial judge on this aspect.  Specifically, he argued that the Court of Appeal was not entitled to infer that by August 1972 Mr. Collier must have known that in December 1971, when he accepted the retainer, Mr. Creighton had not only a past interest in 44 Westburn Terrace but also a continuing interest.  Their Lordships reject this argument.  Given the facts that Mr. Collier was told of Mr. Creighton's past interest in the property in December 1971, that he became aware that the property was sold in January 1972, and that by at least August 1972 on his own account Mr. Creighton told him that he had bought the property, the natural inference is that Mr. Collier must at least by August 1972 have known that when Mr. Creighton accepted the retainer on 9th December 1971 Mr. Creighton had a continuing interest in the property.  In the circumstances, and absent other information, that would have been the common sense inference.  In agreement with the Court of Appeal their Lordships conclude that by August 1972 at the latest Mr. Collier had actual knowledge of the facts constituting the cause of action.

 

20. Mr. Collier had one last string to his bow.  He pointed out that the trial judge had not been persuaded that Mr. Creighton had used his best endeavours to obtain finance for him.  The respondents to the appeal wished to challenge the judge's findings of fact on this aspect.  Their Lordships find it unnecessary to examine the point.  If there was a failure on the part of Mr. Creighton to raise finance, it is part and parcel of the breach of fiduciary duty which is statute barred.  Moreover, since Mr. Collier knew by August 1972 of Mr. Creighton's continuing interest in the property, in December 1971, he must at the very least have had grounds to suspect that Mr. Creighton had not used his best endeavours to raise finance for him. Moreover Mr. Collier in oral evidence said that when Mr. Creighton told him that he and his wife had bought the property he wondered about Mr. Creighton's inability to raise finance for him.  This evidence reinforces their Lordships' view that there is no substance in this point.

 

 

 

Conclusion

The claim against Mr. Creighton is barred by the Limitation Act.  In these circumstances Mr. Collier accepted that the appeal in respect of Mrs. Creighton and Mr. Creighton's firm must also fail.

 

21. Their Lordships will humbly advise Her Majesty that the appeal ought to be dismissed. There will be no order as to the costs of the appeal before their Lordships' Board.

 

 

© CROWN COPYRIGHT as at the date of judgment.