Addleman v Lambie Trustee Limited
[2022] NZHC 2975
•14 November 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2021-404-000104
[2022] NZHC 2975
UNDER Trustee Act 1956, Part 18 of the High Court Rules 2016 and the Court’s inherent
jurisdictionBETWEEN
PRUDENCE ANNE ADDLEMAN
Plaintiff
AND
LAMBIE TRUSTEE LIMITED
First Defendant
ANNETTE MERRYL JAMIESON
Second DefendantPETER ALBERTUS THEODORUS MARIA KEMPS
Third Defendant
Continued: .. /2
Hearing: 18 July 2022 Appearances:
A S Ross QC and R A Rose for the Plaintiff
A R Galbraith QC, J M McGuigan for the First Defendant
A R Galbraith QC, J M McGuigan for the Second Defendant P M Fee and ECR Offner for the Third Defendant
SPH Elliott for the Fourth Defendant
R J Palmer for the Fifth Defendant (attendance excused) I T Ihaka and J L Beverwijk for the Sixth Defendant
N L Walker and N Wilson for the Seventh Defendant
Judgment:
14 November 2022
JUDGMENT OF DUFFY J
…/2
ADDLEMAN v LAMBIE TRUSTEE LIMITED [2022] NZHC 2975 [14 November 2022]
DONALD BOYD HARGRAVE
Fourth Defendant
ROBERT JOB PALMER
Fifth Defendant
EDMONTON CO PTY LIMITED
Sixth Defendant
This judgment was delivered by me on 14 November 2022 at 2.15 pm pursuant to
Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Solicitors:
Bell Gully, AucklandDyer Whitechurch, Auckland Lee Salmon Long, Auckland Fee Langstone, Auckland Russell McVeagh, Wellington
Hornabrook Macdonald, Auckland
A R Galbraith QC, Auckland A R Ross QC, Auckland
R A Rose, Auckland
D A T Chambers QC, Auckland J M McGuigan, Auckland
S P H Elliott, Auckland
[1] The plaintiff in this proceeding, Prudence Addleman, brings claims against present and former trustees of the Lambie Trust for breach of the Lambie Trust deed and breach of fiduciary duties. The first defendant, Lambie Trustee Limited (LTL), is a current trustee who is being sued in this way. The former trustee defendants are the second defendant (Annette Jamieson), the third defendant (Peter Kemps), the fourth defendant (Donald Hargrave) and the fifth defendant (Robert Palmer).
[2] Mrs Addleman also brings claims in knowing receipt of trust money and property against Ms Jamieson in her personal capacity and against the sixth defendant, Edmonton Co Pty Ltd (Edmonton). Ms Jamieson is also being sued in her personal capacity in relation to her exercise of a personally held power to appoint trustees to the Lambie Trust.
[3] In the context of this proceeding Mrs Adleman has filed an interlocutory application for directions regarding the Lambie Trust fund (the directions application). In this application the directions Mrs Addleman seeks include: orders appointing a receiver to administer the Lambie Trust until final determination of this proceeding; or in the alternative, a series of orders which would effectively preclude LTL or Ms Jamieson from taking any action otherwise available to them in relation to decision-making affecting the Lambie Trust.
[4] The directions application is not supported by an undertaking as to damages or the offer of security to cover any loss that may be caused by the making of any of the orders sought in the directions application. Accordingly, LTL and Ms Jamieson now bring an application for orders directing Mrs Addleman to provide an undertaking as to damages and security (the undertaking application). This is one of the applications before me.
[5] The other is an application by Mrs Addleman seeking orders restraining the persons legally representing both LTL and Ms Jamieson from continuing in this role (the restraint application).1
1 The legal representatives are Ms Chambers KC, Ms McGuigan, Ms Nicholson and Dyer Whitechurch (a firm of solicitors).
Further background
[6] LTL is one of the trustees of the Lambie Trust. Ms Jamieson is the sole shareholder and director of LTL. The other trustee, Lambie Independent Trustee Ltd (the Independent Trustee), was appointed on or about 3 November 2021 (after the substantive proceeding was filed).
[7] Mrs Addleman and Ms Jamieson are both discretionary and final beneficiaries of the Lambie Trust. Mrs Addleman’s husband is a discretionary beneficiary. Two registered companies (both controlled by Ms Jamieson) are also final beneficiaries of this trust.
[8] Ms Jamieson was previously a trustee of the Lambie Trust from 1 May 2000 when she replaced her father Alexander Jamieson in this role. She and the other two trustees retired from this role on 20 April 2006 when LTL became the sole trustee.2
[9] The Trust deed vested a power to remove trustees and appoint new trustees in Alexander Jamieson. On his death this power was vested in his administrators, who were Ms Jamieson and her mother. On her mother’s death Ms Jamieson became the sole holder of this power.
[10] Mrs Addleman previously commenced proceedings seeking disclosure of trust documents (the disclosure proceeding). She was unsuccessful before Woolford J.3 On appeal to the Court of Appeal, she was successful in obtaining access to what that Court described in its decision as “the more narrowly confined categories of Trust documents now sought”.4 LTL sought leave to appeal to the Supreme Court. Leave was granted in relation to the disclosure of legal opinions and other advice obtained by the Lambie Trust and funded by the Trust but in other respects leave to appeal was refused.5 Other than in relation to any leave that has been further reserved to
2 At the time Ms Jamieson retired as a trustee, the other trustees who also retried on this day were Peter Kemps (the third defendant) and Donald Hargrave (the fourth defendant). The fifth defendant Robert Palmer was settlor and a trustee from the establishment date (19 March 1990) until his removal on 22 September 1992.
3 Addleman v Lambie Trust Ltd [2017] NZHC 2054.
4 Addleman v Lambie Trust Ltd [2019] NCZA 480 at [31].
5 Lambie Trustee Ltd v Addleman [2020] NZSC 14.
Mrs Addleman to return to Court in relation to further disclosure it seems to me the scope of the disclosure to which she is entitled has been resolved.6
Undertaking as to damages and security
LTL’s ability to bring the application
[11] Before I turn to the substance of the application, there is a preliminary argument raised by Mrs Addleman that I must address. Despite the Independent Trustee being joined in this proceeding as a defendant/trustee on 1 July 2022 Mrs Addleman has taken no steps to join the Independent Trustee as a respondent to the directions application. In turn the Independent Trustee has taken no steps in the undertaking application because as matters stand it would be unaffected by the order sought in the directions application. This is explained below.
[12] Whilst the directions application seeks to appoint a receiver or interim trustees and to remove LTL as a trustee it is difficult to see how a Court hearing that application could make orders affecting the Independent Trustee as a trustee when it was not a party to the directions application, and therefore had no opportunity to be heard on that application. Any order removing or restraining the Independent Trustee as a trustee in such circumstances would be at risk of breaching natural justice because the Independent Trustee would be removed/restrained without the Independent Trustee having the opportunity to be heard on whether that should be done. Indeed, it is difficult to see how the directions application might proceed without the Independent Trustee first being joined as a respondent.
[13] I raise these concerns because one of the grounds Mrs Addleman advances for resisting the provision of an undertaking/security is that the Lambie Trust deed requires the trustees to act unanimously, and there is no unanimous decision by LTL and the Independent Trustee to bring the undertaking application. That application was filed on 17 May 2022, which was at a time when the Independent Trustee was a trustee of the Lambie Trust, but before it was joined as a party to this proceeding. Given the Independent Trustee was not a party to this proceeding when either the
6 See Lambie Trustee Ltd v Addleman [2021] NZSC 54, [2021] 1 NZLR 307.
directions application or the undertaking application was filed it is perhaps understandable it did not file any formal step in the relevant interlocutory applications.
[14] Nonetheless, the Independent Trustee filed a memorandum dated 13 July 2022 indicating its position on the directions application and the undertaking application. It records the Independent Trustee’s view that in principle undertakings and security are standard if not prerequisites for the type of interim relief Mrs Addleman seeks in the directions application. Further the Independent Trustee views the orders sought in the directions application as being unnecessary. The Independent Trustee’s stance is that Mrs Addleman has chosen to proceed with the directions application against one of the trustees of the Lambie Trust. The undertaking application is brought as a way of resisting the directions application and it is appropriate for the trustee affected by the directions application to bring the undertaking application. Put shortly, the Independent Trustee takes the view its omission from the directions proceeding means it has no interest in the undertaking proceeding. This is said presumably because the omission to include the Independent Trustee as a respondent in the directions proceeding means that no orders made in that proceeding can adversely affect the Independent Trustee in its role as a trustee of the Lambie Trust. In any event by its memorandum dated 13 July 2022 the Independent Trustee has essentially indicated to this Court that it supports LTL’s application for orders requiring undertakings/security.
[15] I regard the undertaking application as ancillary to the directions application. The former is brought essentially as a defensive action to the latter. Indeed, LTL and Ms Jamieson could have made their arguments for why an undertaking/security is required simply as part of their arguments opposing the directions application. The absence of an undertaking/security or an insufficient undertaking is a good ground for resisting the making of interim relief, be it an injunction or the type of relief envisaged in the directions applications.
[16] Regarding Mrs Addleman’s argument that the Lambie Trust deed requires several trustees to act unanimously, that is in relation to trust decisions. Whether a trustee remains as a trustee or not, and whether a trustee opposes any move to remove or restrain him or her is a personal decision for that trustee to make. The trustees may have to agree on whether LTL is entitled to be indemnified by the Lambie Trust for
legal costs in opposing the directions application, but that is a step that can come after that application has been determined. By then everyone will have a better idea of the merits of the directions application.
[17] Accordingly, I am not persuaded by Mrs Addleman’s arguments that LTL’s decision to bring the undertaking application is a trust decision that requires unanimity of the trustees before it can be a valid decision.
[18] Further, this is something of a bootstraps argument by Mrs Addleman because she has brought about the circumstance in her directions application where it proceeds against only one trustee when she could have amended the application to include the Independent Trustee as well. In this regard I accept the Independent Trustee’s position that it has no role in the undertaking application (to which as seventh defendant it could have been included as applicant) when the directions to be supported by an undertaking/security cannot affect the Independent Trustee.
[19] I see no reason why LTL should not oppose Court orders that would see it removed or restrained as a trustee of the Lambie Trust.
[20] Ms Jamieson used the power of appointment she holds to appoint LTL as a trustee of the Lambie Trust. I see no reason why she should not be able to resist attempts by others to undo the exercise of her power of appointment.
[21] It follows that I find both LTL and Ms Jamieson can bring the undertaking application.
Analysis
[22] Given my view that the undertaking application is really part and parcel with the directions application I was initially apprehensive about whether it is appropriate for me to order the undertaking. First, I have not had the benefit of hearing the directions application and second, if the directions are not granted the undertaking would be superfluous. However, with the caveat that the judge hearing the directions application may take another view, I am satisfied there is good reason to order
Mrs Addleman to provide an undertaking as to damages to support her directions application.
[23] The arguments Ms Jamieson makes and the authorities she relies on are sufficient to persuade me that the orders Mrs Addleman seeks in the directions application are generally supported by undertakings. Circumstances where undertakings are not required appear to be rare and do not fit with the circumstance of this proceeding.7
[24] Put shortly undertakings are mandatory for the making of interim injunctions;8 in the trust context applications for receivers and freezing orders have been treated as analogous to interim injunction and have required the support of undertakings. In Armani v Armani Walker J held that the appointment of a receiver is akin to the grant of an interim injunction restraining the defendant’s control over assets.9 Whilst the Court has the power to dispense with ordering an undertaking its use of that power is rare.
[25] As mentioned earlier, the absence of an undertaking is a good defence against the granting of an interim injunction. In Unka v Dodd the Court declined to grant an interim injunction because the application was not supported by an undertaking.10 Nor is it typical to grant an interim injunction conditionally on the basis an undertaking will be provided. When that occurs, it is generally in circumstances of urgency where there is a good explanation for the absence of an undertaking. Here there is no urgency. The directions application is proceeding on notice and Mrs Addleman has had ample time to provide an undertaking. There is no reason for her not to do so.
[26] Regarding the provision of security, in this case I have found that LTL is acting in personam and not as a trustee when it opposes the orders sought, which would see it temporarily removed as trustee. In such circumstances arguments regarding damage to the Lambie Trust carry little weight. However, if there is risk to trust property,
7 See Knight v European Language Academy (NZ) Ltd HC Auckland CIV 2008-404-2411, 14 November 2008; and A v Fairfax New Zealand Ltd [2011] NZHC 72.
8 Sanson v Energy Products Ltd HC Auckland CIV 2009-404-5464, 4 December 2009.
9 Armani v Armani [2012] NZHC 3145.
10 Unka v Dodd [2018] NZHC 1665.
which may be the case, it is for the trustees of the Lambie Trust to act in accordance with the trust deed to do what they can to prevent such damage. To date they have taken no such action.
[27] It is not clear to me what the financial damage will be to LTL personally if the orders sought in the directions application are made. Ms Jamieson may suffer financial loss as a beneficiary but that is separate from any loss she might suffer through the exercise of her power to appoint trustees being overridden by Court order. As matters stand, I am not persuaded security is required to support the undertaking. If Ms Jamieson is at risk of loss as a beneficiary (through diminution of the trust funds) it is for the trustees of the Lambie Trust to act to prevent such loss. There is no reason why the trustees should not act on behalf of beneficiaries in this circumstance. The present situation seems to have arisen because for whatever reason the trustees have not made any decision on whether they should act together on behalf of the beneficiaries to protect trust funds by opposing the directions application. I realise the directions application is being brought by a beneficiary, but the fact that beneficiary does not think her application will harm the trust funds does not mean such harm will not eventuate.
[28] Accordingly, I see no basis at present for making an order that Mrs Addleman provide security to support the undertaking. This is because I perceive the opposition to the directions application is being made by LTL and Ms Jamieson in person and not on behalf of the Lambie Trust.
[29] Despite the absence of any undertaking to date, Mrs Addleman has agreed to give an undertaking in a format that is attached to her submissions, provided the Independent Trustee confirms its support of the undertaking application or the Court finds that LTL’s application is valid. The proposed undertaking also records five reservations Mrs Addleman has regarding giving the undertaking. This is all very unusual.
[30] The standard form of an undertaking as to damages follows the language of r 7.54 of the High Court Rules. This provides for an undertaking that the applicant will comply with any order for the payment of damages to compensate the other party
for any damage sustained through the making of an injunction. Here Mrs Addleman seeks orders analogous to an interim injunction. Accordingly, the undertaking she gives should simply state that she will comply with any order for payment of damages to compensate LTL and Ms Jamieson for any damage sustained through the making of the interim relief sought in the directions application. I have confined the description of the parties that might suffer such damage to LTL and Ms Jamieson as they are the parties who are bringing the undertaking application.
[31] It is not for a party seeking interim relief to make conditional offers of an undertaking in a format of her choosing. Especially when that format includes argumentative and somewhat inflammatory statements regarding the conduct of LTL and the Independent Trustee, the latter not even being a party to the directions application.
[32] The undertaking Mrs Addleman offers to give is an undertaking to compensate LTL and the Independent Trustee as trustees of the Lambie Trust. I have approached the undertaking application on the basis it is brought in personam by LTL and by Ms Jamieson, as the person who appointed LTL as trustee.
[33] The interim relief Mrs Addleman seeks may also damage the Lambie Trust funds/property. An undertaking looks to me to be required to protect those funds/property from the risk of such loss. As yet, no such undertaking has been given. Nor have the trustees of the Lambie Trust sought such an undertaking in their capacity as trustees. However, they do not need to. As found by this Court in Legler v Formannoij,11 it is the responsibility of an applicant for interim relief to comply with the requirement for an undertaking as to damages. Failure to do so is good ground for a Court to refuse interim relief. The trustees of the Lambie Trust are entitled in that capacity to say nothing at this point when it comes to the need for an undertaking to protect trust funds/property from damages; they can instead raise this matter as a defensive argument in the directions application in order to resist the directions Mrs Addleman seeks therein.
11 Legler v Formannoij [2022] NZHC 659 at [50]–[60].
[34] Much of the complication that bedevils the undertaking application is brought about by Mrs Addleman not providing an undertaking to support her directions applications and two of the respondents in the directions application actively seeking orders from the Court directing the provision of an undertaking as to damages.12 This is an unusual approach. I consider it would have been better if the whole issue regarding provision of an undertaking had been aired in the context of the directions application. However, as this Court is seized with the undertaking application I have dealt with it in the way I think it best can be dealt with.
The application to restrain
[35] The second application before me is an application by Mrs Addleman to restrain Ms Chambers KC, Ms McGuigan, Ms Nicholson and Dyer Whitechurch (a firm of solicitors) from acting for both Ms Jamieson in her personal capacity and LTL in this proceeding.
Mrs Addleman’s submissions
[36] Mrs Addleman contends it is contrary to r 1.20 of the High Court Rules and established principle (both legal and ethical) for LTL and Ms Jamieson to have the same representation. She argues that LTL and Ms Jamieson do not have the same interest in the proceeding and leave has not been sought let alone granted for them to have the same lawyers acting for them in this proceeding. The application for restraint goes so far as to seek to prevent the existing legal representatives of those parties from acting for any one of them or for any other party in the proceeding.
[37] First, Mrs Addleman submits that LTL, by having the same lawyers as Ms Jamieson, has acted and will continue to act in Ms Jamieson’s personal interests in breach of its fiduciary duties. LTL as trustee has fiduciary duties to beneficiaries and must act even-handedly, with single-minded loyalty and in the best interests of all beneficiaries.
12 Mrs Addleman could, as part of her directions application, have sought an order from the Court that an undertaking be dispensed with. This is rarely done but by taking this step Mrs Addleman would at least have been acting consistently with the obligation an applicant for interim relief bears regarding the provision of an undertaking.
[38] Mrs Addleman contends that LTL’s interest is to act in accordance with its fiduciary duties, in particular to treat Mrs Addleman and Ms Jamieson even-handedly as beneficiaries, which is not a common interest with Ms Jamieson’s personal interests. She argues this position applies irrespective of Ms Jamieson’s personal wishes and LTL’s decision to align itself wholly with Ms Jamieson’s interest in all its decisions to date. For the purpose of this application Mrs Adleman relies on a comment by the Supreme Court in its decision on disclosure of legal advice where it was said:13
[LTL] has aligned itself entirely with Ms Jamieson. Part of its rationale for doing so – that the trust was a sole purpose trust for her benefit – was rejected by the Court of Appeal. The other – that the trust had been solely funded by her – is distinctly questionable. [LTL’s] argument that the joint interest has come to an end rests in part on its possibly inappropriate decision to align itself so closely with the interests of Ms Jamieson.
[39] Mrs Addleman submits that a community of interest cannot exist among parties where one party has a fiduciary duty not to prefer certain parties over others and is required to act even-handedly and impartially. Further, Mrs Addleman submits that by allowing the same lawyers to act the Court would be sanctioning an ongoing breach of fiduciary duty.
[40] Second, Mrs Addleman makes a number of arguments to support her submission that LTL and Ms Jamieson have disparate litigation interests. Mrs Addleman maintains there is a clear conflict between LTL’s interests as trustee and Ms Jamieson’s personal interests including those as a beneficiary, recipient of trust money/property with knowledge that LTL and earlier trustees had transferred the same in breach of trust, director/shareholder of Edmonton Pty Company Ltd and a holder of the personal power of appointment. LTL and Ms Jamieson do not and cannot have the same interest in the subject matter of the breach of trust/knowing receipt.
[41] She further argues that to the extent LTL and the Independent Trustee might decide to take a particular position in the proceeding in the exercise of their powers and performance of their duties as trustees, that does not create a community of interest with Ms Jamieson. Any such position must be maintained in light of LTL and the
13 Lambie Trustee Ltd v Addleman, above n 6, at [97] (emphasis added).
Independent Trustee’s overarching and paramount duties to Mrs Addleman and all beneficiaries.
[42] Mrs Addleman maintains that if she is right about the breaches alleged in her second amended statement of claim LTL and the Independent Trustee will need to sue Ms Jamieson and Edmonton Pty Company Ltd to recover trust assets if they do not voluntarily restore certain assets unlawfully received.
[43] Additionally, Ms Addleman submits that the fiduciary duties Ms Jamieson owes to Mrs Addleman as holder of the personal power of appointment operate independently of the fiduciary duties LTL owes all beneficiaries as trustees. The fact that Ms Jamieson obtained legal advice at least about the Independent Trustee’s appointment and has asserted that advice is personal and privileged is said to highlight the lack of a community of interest between LTL and Ms Jamieson.
[44] Relevantly in this regard the Supreme Court found in the disclosure proceeding that on commencement of that proceeding any joint interest Mrs Addleman and LTL may have held in legal advice would have ended:14
We can conceive of situations of friendly litigation involving a trust in which the joint interest of trustee and beneficiary survives the commencement of proceedings. But trustees are entitled to have a position on disclosure. Where that position is challenged in litigation (whether on a directions application or proceedings by a beneficiary), a conclusion that the beneficiary and the trustee have a joint interest in the maintenance of that may not be self-evident. In the context of this particular dispute, we are of the view that Mrs Addleman’s joint interest in legal advice received by [LTL] would not have persisted if, instead of waiting for Mrs Addleman to commence proceedings, [LTL] had, say in May 2015, sought directions and in doing so had made it clear that it would resist disclosure.
[45] Mrs Addleman’s contention is that “joint interest” in the context of legal privilege is commensurate with common interest in the present context, and as her joint interest (as a beneficiary) with LTL ended with the commencement of proceedings, Ms Jamieson’s (as another beneficiary) must also.
14 At [99].
[46] Mrs Addleman also argues that the Independent Trustee’s separate representation, despite it having the same legal interests as LTL, illustrates that LTL and Ms Jamieson do not have the same interest in the proceeding. So too she argues does the fact that LTL to date has refused to take any action against Ms Jamieson or Edmonton Pty Company Ltd to recover unlawfully dissipated trust property and that it has redacted large swathes of material the Court of Appeal ordered it to disclose on personal grounds.
[47] Third, Mrs Addleman submits it is necessary to restrain the lawyers to ensure that proper administration of justice occurs and is seen to occur from the standpoint of a reasonable, fair-minded observer. Mrs Addleman submits that LTL is not acting objectively and independently from Ms Jamieson and thus justice is not being seen to be done. It is inappropriate for a lawyer to act for both a trustee and beneficiary especially in circumstances where another beneficiary alleges mistreatment and ongoing breaches of fiduciary duty.
[48] Fourth, Mrs Addleman submits that a material issue in the substantive proceeding will be whether Ms Jamieson and Mr Palmer15 knowingly gave false evidence in the disclosure proceeding. Mrs Addleman also seeks to challenge Ms Jamieson’s asserted privilege over redacted parts of legal advice supplied to Mrs Addleman from LTL following the Court of Appeal’s decision in the disclosure proceeding. Mrs Addleman submits that having led the primary evidence that is in question, it is difficult to see how Ms Chambers could cross-examine Mr Kemps (lawyer at the time of the disclosure proceeding) or Mr Palmer and/or lead evidence from LTL or Ms Jamieson in this proceeding.
[49] Finally, regarding the alleged delay by Mrs Addleman in taking this action she submits that can be no more than a factor to be considered in the Court’s exercise of discretion under the inherent jurisdiction. Additionally, she submits that a number of actions on behalf of various defendants have contributed to delay.
15 The named settlor of Lambie Trust and an original trustee.
Applicable law
[50] The jurisdiction to restrain lawyers is found both in the Court’s inherent jurisdiction to regulate its proceedings,16 and in r 1.20 of the High Court Rules 2016. Rule 1.20 relevantly provides:
A lawyer who acts for a party to a proceeding, or is a party to any proceeding, must not, without the leave of the court, act for any other party to the proceeding who does not have the same interest in the subject matter of the proceeding.
[51] This Court has previously held that the words “not having the same interest in the subject matter in the proceeding” are to be interpreted as having adverse interests.17 A unity of interests is not required for a lawyer to act for both parties, and something more than a mere divergence of interests is required before the Court will restrain a lawyer from acting.18
[52] In Accent Management Ltd v Commissioner of Inland Revenue the Court of Appeal recognised that in considering r 1.20 and the inherent jurisdiction more generally the rules of client care may be relevant.19
[53] For there to be a conflict of interest which is in breach of the lawyer’s duty of loyalty, the interests of the respective clients the lawyer purports to act for much be in potential or actual conflict, or be opposed or adverse to one another.20
[54] The classic application of this jurisdiction is where a lawyer purports to act against a former client where, as a result of the relationship, they have obtained knowledge relevant to the proceeding.21 Other common situations include where the lawyer: acts for a party in one proceeding and against them in another;22 has given
16 Black v Taylor [1993] 3 NZLR 403 (CA).
17 Strickland v Drummond [2008] NZCCLR 12 (HC), citing Cottam v Guff Properties Limited HC Christchurch CP349/92, 27 April 1994 and Bishop v Bishop HC Auckland CIV 2002-404-3634, 28 July 2006, at [50]–[51].
18 Strickland v Drummond, above n 17, at [26].
19 Accent Management Ltd v Commissioner of Inland Revenue [2013] NZCA 155 at [52].
20 Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 at 90 (CA); and Russell McVeagh Tower Corporation [1998] 3 NZLR 641 at 647.
21 See Black v Taylor, above n 16; and Torchlight Fund No 1 LP v NZ Credit Funds (GP) Ltd [2014] NZAR 1486 (HC).
22 See Mike Pero Mortgages Ltd v Mike Pero [2015] 3 NZLR 246.
advice now in issue;23 has a personal relationship with a party;24 or has a pecuniary interest in the outcome of the proceeding.25
[55] The Court must exercise this jurisdiction with circumspection.26 It must be vigilant to guard against the misuse of court processes with restraining applications that have a tactical motivation.27 Particular caution will be exercised where the advocacy for disqualification comes from a party that will stand to benefit from such an order.28 In any event the Court will not lightly disqualify counsel and this will only happen where the grounds are strong and clear.29
Analysis
[56] I consider there is a common interest between Ms Jamieson and LTL. It follows that I do not accept r 1.20 is engaged. I accept the submission of Ms Jamieson and LTL that the breach of trust proceeding is hostile litigation30 and accordingly LTL is entitled to defend its conduct. I also accept the arguments for Ms Jamieson and LTL that they have the same interest in the subject matter of the proceeding which is defending allegations of breach of trust which span 30 years plus and which allege a pattern of conduct by Ms Jamieson, whether as sole shareholder and director of LTL, trustee in her personal name, beneficiary, director/shareholder of a beneficiary company or through her power to appoint and remove trustees. Certainly the interests of Ms Jamieson and LTL are not adverse or opposed.
[57] First, the claim clearly falls within the third category in Re Buckton, being a claim brought by the beneficiary challenging the propriety of any action taken by a
23 See Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444; Kooky Garments Ltd v Charlton [1994] 1 NZLR 587 (HC); Deliu v Auckland Standards Committee [2014] NZAR 1473 (HC); Li v Liu [2018] NZCA 528; and Fruit Shippers Ltd v Petrie [2019] NZHC 2694.
24 See Thurlow v Clements [2010] NZAR 172.
25 See Tietjens v Quigley [2016] NZAR 154.
26 See Black v Taylor, above n 16, at 406.
27 Accent Management Ltd v Commissioner of Inland Revenue, above n 19, at [32]; Li v Liu, above n 23, at [23]; and Bishop v Bishop, above n 17.
28 Bishop v Bishop, above n 17, at [61].
29 At [61].
30 See Re Buckton [1907] 2 Ch 406 (Ch) at 414–415.
trustee.31 In this type of case the proceeding is considered ordinary hostile litigation with costs following the event and (usually) not being paid out of the trust estate.32 In this context the trustee’s duty of neutrality does not require it to take no position when its conduct is called into question; it is entitled to defend the claim.33 Therefore Mrs Addleton’s application cannot succeed for the mere fact the lawyers for LTL will be taking a position which defends Ms Jamieson’s conduct (as the director and shareholder of LTL).34 If anything this demonstrates the community of interest.
[58] Second, in bringing this application Mrs Addleman is essentially putting the cart before the horse because the application is premised on the existence of breaches of trust in the past and a refusal on the part of LTL given its shareholder and director to acknowledge those breaches and attempt to remedy them. The allegations Mrs Addleman makes about the conduct of various trustees are unproven. It may well be that they cannot be sustained on proper enquiry by the Court.
[59] Similarly, the reasons Mrs Addleman advances for restraining the subject lawyers from continuing to act for LTL and Ms Jamieson are essentially the same reasons (based on yet unproven factual allegations) that LTL and Ms Jamieson (while a trustee of the Lambie Trust) have acted in breach of the trust deed. Those reasons include that Ms Jamieson and LTL are too closely associated such that the trustee acted/acts in Ms Jamieson’s interests to the detriment of Mrs Addleman. The accessory liability in equity (knowing receipt) also hinges on establishing the breach of trust.
[60] It seems to me in principle that persons who face allegations of breach of trust and accessory liability in equity naturally have a common interest. Additionally, insofar as it is alleged that Ms Jamieson has acted in breach of her powers to remove and appoint trustees the exercise of those powers are inherently linked with the persons she has appointed as trustee (namely LTL). Unless it can be shown LTL has acted in
31 See Pratley v Courteney [2018] NZCA 436 at [19], citing Re Buckton, above n 30, at 414–415; McDonald v Horn [1995] 1 All ER 961 (CA) at 970–971; and Alsop Wilkinson (a firm) v Neary [1996] 1 WLR 1220 (Ch) at 1222.
32 Pratley v Courteney, above n 31, at [19].
33 See Fielden v Christie-Miller [2015] EWHC 2940 (Ch), [2015] WTLR 1689 at [55].
34 This position may however, be relevant to costs.
breach of trust it is difficult to see how any exercise of the power to appoint LTL as a trustee can be said to be a breach of a fiduciary duty Ms Jamieson owes personally to the beneficiaries of the Lambie Trust.35
[61] The situation is similar to Stickland v Drummond, where the defendants made an application for orders that the first plaintiffs should have separate legal representation from the second plaintiffs.36 The Court held that the first and second plaintiffs had a common interest because the second plaintiffs’ relief was contingent on the first plaintiffs’ case:37
[46] … what is essential and gives rise to a unity of interest as opposed to a conflict of interest, is that both the first and second plaintiffs invested in the notes and both suffered loss in the same way. Any recovery by the second plaintiffs must flow from the first plaintiffs establishing their case (or, if the first plaintiffs were not a party, by their giving evidence going to the irregularity of the allotment as witnesses for the second plaintiffs).
[47] The practical reality of the situation is therefore that the first and second plaintiffs are united in their need to show that the allotment was void and irregular as the basis for establishing their loss.
[62] Here, LTL and Ms Jamieson are united in their need to show there was no breach of trust to avoid liability for the other arguments that flow from that proposition. This is also consistent with the analogy drawn by Jagose J in Landmark Property Holdings Ltd v Shen Empire Ltd with qualification for representative proceedings where in assessing the “same interest in the subject matter of the proceeding” (the wording also used in r 1.20) “it is sufficient if the party and those represented ‘have a community of interest in the determination of some substantial issue of law or fact’”.38 Further in Bishop v Bishop the Court noted a factor indicating the commonality of interests was the absence of cross-claims between the first and second defendants, a factor also relevant here.39
35 See Brkic v White [2021] NZCA 670 at [33], citing Lynton Tucker, Nicholas Le Poidevin and James Brightwell Lewin on Trusts (20th ed, Sweet & Maxwell, London, 2020) at [15-047]–[15- 049].
36 Stickland v Drummond, above n 17.
37 Emphasis added.
38 Landmark Property Holdings Ltd v Shen Empire Ltd [2020] NZHC 893 at [10], citing Credit Suisse Private Equity LLC v Houghton [2014] NZSC 37, [2014] 1 NZLR 541 at [2].
39 Bishop v Bishop, above n 17, at [59].
[63] To the extent the claim against Ms Jamieson for breach of personal fiduciary duty relating to the power of appointment relies on a breach of cl 9 of the Trust Deed (rather than a breach of trust by LTL) this does not create an adverse interest. LTL is entitled to defend the legitimacy of its appointment as trustee under cl 9 and thus argue that its distributions were legitimate and not in breach of trust. Accordingly Ms Jamieson and LTL’s positions remain aligned.
[64] I acknowledge the other trustee (the Independent Trustee) has separate representation, but that of itself does not demonstrate that LTL and Ms Jamieson have adverse interests. The Independent Trustee and LTL have the same trustee duties but having been appointed at different times and taken different actions they may not have the same litigation interests. This point underscores the difference between LTL’s interests and its fiduciary duties as trustee, which Mrs Addleman tends to conflate. In any event it is not clear that the Independent Trustee’s interests are adverse or opposed to Ms Jamieson’s so this argument falls at the first hurdle.
[65] Mrs Addleman’s argument as to recovering the trust funds should she be successful does not take her further in this application. It would be farcical for Ms Jamieson as the natural person behind LTL to sue herself (or the company she controls) to recover trust funds and similarly so for a Court to order as such. If Mrs Addleman does successfully establish breach of trust, then the logical solution would be to remove LTL as trustee (which is what Mrs Addleman’s statement of claim presently seeks). That course of action would remove any conflict. Once again, this argument in fact highlights the community of interest between Ms Jamieson and LTL.
[66] Third, I do not consider the interests of justice require me to restrain the lawyers from acting. If for argument’s sake the subject lawyers were restrained and new and separate legal representation obtained for LTL and for Ms Jamieson in her personal capacity, the reality is that as the sole director/shareholder of LTL, Ms Jamieson would be giving directions to legal representatives who would be obliged to follow those instructions. All that any new lawyers instructed to act for LTL could do, if faced with instructions which they considered to be clearly contrary to the way in which a trustee should act, such that the lawyers could not discharge their professional obligations, would be to resign from their role as lawyers. In bringing
this application Mrs Addleman is effectively suggesting that while new lawyers can be relied on to refuse to act on instructions that would clearly be contrary to a trustee’s obligations to the beneficiaries of the Lambie Trust the existing lawyers cannot be relied on to act in that way.
[67] I can see that if Ms Jamieson gave instructions of that nature her present legal advisors would be placed in a conflict of interest, given they act for her and LTL. However, faced with such a conflict they could be expected in my view to act properly and to make it clear to Ms Jamieson that they could no longer act for LTL. The Court of Appeal stated in Li v Liu that the Court must be sure that the threat to the integrity of the judicial process is “real and the intervention is the only appropriate course”.40 As matters stand the breach of trust is only alleged by Mrs Addleman and is the subject of the substantive litigation. There is nothing else that suggests such a conflict would arise. I can see no reason to restrain the present from continuing to represent LTL and Ms Jamieson. The present lawyers involve senior counsel, and the Court is entitled to rely on senior counsel to act in accordance with legal and ethical requirements.
[68] The above argument also demonstrates that if there is, as Mrs Addleman suggests, an appearance of injustice or conflict, that arises not from the present representation but rather the current arrangement of the trust, which is a matter for the substantive hearing. Any change in representation cannot change the fact that Ms Jamieson owns and controls LTL and accordingly instructs its lawyers.
[69] There is a hypothetical risk that if the subject lawyers continue to act for both LTL and Ms Jamieson that at some later point in the proceeding they find they cannot follow Ms Jamieson’s instructions in relation to the conduct of LTL’s defence. Should that happen the securing of separate representation may cause delay. However, it seems to me that is simply a future possibility which could be handled by costs being awarded against Ms Jamieson. By bringing the application to restrain the subject lawyers from continuing to act for both LTL and Ms Jamieson, Mrs Addleman has effectively put Ms Jamieson on notice that if those lawyers continue to act and later in
40 Li v Liu, above n 23, at [36].
the proceeding it is delayed through a forced need then to obtain separate representation for LTL Ms Jamieson should bear the costs of that outcome.
[70] Mrs Addleman has raised the possibility that Ms Chambers will be in conflict having acted in the disclosure proceeding and now Mrs Addleman plans in the present proceeding to contest the credibility of evidence that was given in the disclosure proceeding. However, it is Ms Jamieson’s evidence that would be in issue, not any element of Ms Chambers’ advice. In relation to the redacted legal advice it is the assertion of privilege that is challenged not the content of the advice. These matters do not raise any conflict of interest for Ms Chambers. Accordingly I see no issues relating to the independence and impartiality of Ms Chambers.
[71] Although I do not consider it determinative, I also acknowledge that Ms Jamieson’s right to her choice of lawyer has particular relevance in the circumstances. She has established a working relationship with her present lawyers that facilitates instructions where she has limited use of her arms and lives overseas. Such personal factors are analogous to the Court of Appeal’s recognition that ethnically Chinese and Mandarin-speaking clients’ choice of a firm that was a “cultural and linguistic fit” was “of some moment”.41 There does also appear to be somewhat of a tactical flavour to the application which seeks to inconvenience and impose cost on Ms Jamieson.
[72] In conclusion I am satisfied there is no legal impediment to the present lawyers continuing to act for both LTL and Ms Jamieson.
Result
[73] The application for an undertaking is granted. Mrs Addleman is directed to provide an undertaking in the format set out at [30] herein.
[74]The application for security is declined.
[75]The application for restraint is declined.
41 At [43]. Although in that case the lawyer needed to be restrained, nonetheless.
[76]Leave is reserved to the parties to file memoranda as to costs.
Duffy J
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