Right survives loss of remedy

In Stephens v Deans, which is an anonymised appeal from a decision of the Family Court, Anderson J upholds the Family Court decision that a statute barred debt remained a relationship property debt that could properly be deducted from the proceeds of sale of the property.

The debt in question was a vendor loan of $136,440 advanced by the trustees of a trust settled by Ms Stephen’s father (the Trust)

On appeal to the High Court Mr Deans’ position was  that the Trust debt was statute barred by the Limitation Act 2010 so should not be characterised as repayable.  He argued that it would be inequitable for his share to be reduced by half the face value of the loan which has not been called up. As set out at [75]”… it is inequitable to have his share of equity reduced by half of the face value of the loan which has not, and may never be, called up. Mr Deans says that Ms Stephens is now a trustee and beneficiary of the Trust and it is not in her interests to have to pay half the loan. It is said that the effect on her is neutral whereas to Mr Deans it is a significant reduction in equity.”

Regarding the limitation point as noted at [75] to [77]:

[75] On behalf of Mr Deans, Ms Bennett submitted that recovery of the loan by the Trust is barred by limitation. She says it is inequitable to have his share of equity reduced by half of the face value of the loan which has not, and may never be, called up.         Mr Deans says that Ms Stephens is now a trustee and beneficiary of the Trust and it is not in her interests to have to pay half the loan. It is said that the effect on her is neutral whereas to Mr Deans it is a significant reduction in equity.

[76] The loan deed was signed on 10 December 2010 and the provisions of the Limitation Act 1950 therefore apply. That Act prevents any action upon a deed after the expiration of 12 years from the date on which a cause of action accrues. The deed here does not stipulate a date of payment. Instead, cl 2 provides that the borrowers may repay the debt in whole or in part at any time. Where, as here, a contract of a loan is silent about repayment, the right to repayment and commencement of time for limitation purposes starts at the time the money is advanced. However where there is a subsequent demand by the creditor, part repayment and/or acknowledgement of indebtedness by the borrower, the limitation period starts running afresh from the date of that event.

[77] The 12-year limitation period began on 10 December 2010 at the time of the advance. The limitation period had not expired at the date of the hearing on 8 and 9 December 2022. The limitation period has expired now unless there has been an acknowledgement of the debt, after which time would start running afresh under the Limitation Act 2010.

The Court position was that while the statutory limitation can bar the remedy, it does not bar the right. As noted at [78] … Statutory limitations bar the remedy not the right. Even where the Limitation Act operates to bar a remedy, a “debt” still exists. In the context of the definition of “debt” in the Act, I do not accept that this should be interpreted as “a debt enforceable by action.” It is a debt that can be deducted from relationship property under s 20D [of the Property (Relationships) Act 1976].

While the loan was acknowledged during the hearing, this acknowledgement was not in writing and so did not have the effect of setting time running again for the purposes of the Limitation Act 2010. Of relevance is that as noted at [79], this was not a case where there was an argument that the loan was not expected to be repaid:

[79] To the extent that such a conclusion relies upon the particular facts of a given case as to whether the debtor would in fact pay the debt if called upon, the evidence from  Mr Deans is compelling on this point. In answer to questions in cross-examination, he acknowledged the existence of the debt, acknowledged that the debt was owing, and also confirmed that if called upon there is no dispute that the monies should be repaid to the Trust. Ms Stephens also acknowledged that there is a debt back to the Trust in her evidence. Accordingly, this is not a case where there is evidence of an intention not to repay.

To keep up-dated regarding issues with respect to loans join Vicki Ammundsen on 16 June 2025 (or following on demand) in Trust Series 2025 – Trust Loans and Current Accounts.

References

• Stephens v Deans [2024] NZHC 1442
• Limitation Act 2010, s 59.
• Limitation Act 1950, ss 4(2), 47(1)
• DFC New Zealand Ltd v McKenzie [1993] 2 NZLR 576 (HC).
• Able Ventures Ltd v Bolton [2022] NZHC 1957 at [37]
• Securities Commission v Midavia Rail Investments BVBA [2006] 2 NZLR 207 (HC) at [31] and [139].
• Keller v Pittwood (2002) 22 FRNZ 372 (FC) and see Bill Atkin (ed) Fisher on Relationship Property (NZ) (online ed, LexisNexis) at [15.15].