Aksinya Enterprises Limited v Bhagirath
[2020] NZHC 2788
•23 October 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2016-404-3158
[2020] NZHC 2788
UNDER the Companies Act 1993 IN THE MATTER
of the liquidation of Aksinya Enterprises Limited (in liquidation)
BETWEEN
AKSINYA ENTERPRISES LIMITED
First Plaintiff
HENRY DAVID LEVIN and VIVIEN
JUDITH MADSEN-RIES as liquidators of Aksinya Enterprises Limited (in liquidation) Second Plaintiffs
AND
SHIV SHARAN TEK SINGH BHAGIRATH
First Defendant
cont …
Hearing: On the papers Counsel:
H McKee and S Farnell for the Plaintiffs R Rao for the Fourth Defendants
J Katz QC assisting the Court
Judgment:
23 October 2020
JUDGMENT OF DUFFY J
This judgment is delivered by me on 23 October 2020 at 11:00am pursuant to r 11.5 of the High Court Rules.
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Registrar / Deputy Registrar
AKSINYA ENTERPRISES LTD v BHAGIRATH [2020] NZHC 2788 [23 October 2020]
AND …/2
SHIV SHARAN TEK SINGH BHAGIRATH and HARSHARAN SINGH
BHAGIRATH and SHARANDEEP SINGH
BHAGIRATH as trustees of the SHIV BHAGIRATH FAMILY TRUST
Second Defendants
GURCHETAN SINGH and SHIVENDER
PAL SINGH as trustees of the SHIV BHAGIRATH FAMILY TRUST
Third Defendants
RADHA MANI SWAMY
Fourth Defendant
[1]In this proceeding the first plaintiff brings:
(a)An interlocutory application for removal of the first defendant (the removal application) in his role as trustee of the Shiv Bhagirath Family Trust (the SBF Trust);
(b)A without notice interlocutory application for an order dispensing with a litigation guardian for the first defendant in the removal application and for directions as to service of that application.
[2] The applications are brought in this proceeding rather than by way of originating application under Part 19 of the High Court Rules because of the common factor in both proceedings: namely, the first defendant has been found to be incapacitated in terms of r 4.29 of the High Court Rules and therefore, unless the court rules otherwise, he is unable to participate in litigation without the appointment of a litigation guardian.
[3] The plaintiffs in this proceeding are a company in liquidation (first plaintiff) and the liquidators of that company (second plaintiffs).
[4] The first defendant owns all the shares in the first plaintiff and was a director until the first plaintiff went into liquidation.
[5] This proceeding has been commenced against the first defendant in his personal capacity and as a trustee together with the other trustees of the SBF Trust, essentially for the purpose of recovering funds/assets of the first plaintiff that have allegedly been wrongly removed from it. This recovery is sought to enable the second plaintiffs to pay creditors of the first defendant.
[6] The proceeding has not been able to be progressed because on 24 May 2019 the first defendant was found, by the court, to be incapacitated and in need of a litigation guardian. On 24 May 2019 the fourth defendant was appointed as his litigation guardian. However, the fourth defendant failed to carry out this role adequately and was removed by the court on 3 February 2020. Since then the
proceeding has been stayed until a replacement litigation guardian for the first defendant is appointed. Finding someone to appoint as litigation guardian has been a difficult task, which is yet to be concluded.
[7] As part of the process of resolving the litigation guardian issue the court directed, pursuant to s 44(1) of the Senior Courts Act 2016, that the first defendant’s lack of capacity be re-assessed by Dr Ian Goodwin who was directed to provide a medical report on that subject to the court.1 Dr Goodwin’s report has confirmed that the first defendant lacks capacity to act for himself. In his report Dr Goodwin concluded that the first defendant lacks capacity to understand and act on legal advice or give sufficient instructions to his lawyer for the purpose of defending this proceeding and considering other alternatives. Such confirmation has two consequences. First, insofar as the plaintiffs bring a claim against the first defendant in person, the proceeding is stayed, until a litigation guardian for him can be appointed. Second, insofar as the plaintiffs bring a claim against the first defendant as one of the trustees of the SBF Trust, that claim also cannot be progressed for the same reason. The second consequence is the reason for the present interlocutory applications.
[8] The first defendant is one of three trustees of the SBF Trust. The other two trustees named in the trust deed are the third defendants. Those persons are also brothers of the first defendant.
[9] The confirmation from Dr Goodwin of the first defendant’s lack of capacity to participate in the litigation informs the court that his ability to function as a trustee of the SBF Trust also requires assessment, and if found to be warranted, his removal as a trustee of the SBF Trust.
[10] The first plaintiff qualifies as a beneficiary under the SBF Trust deed. The deed provides that any company in which the first defendant holds not less than 50 per cent of the issued share capital is a discretionary beneficiary of the SBF Trust. The first defendant owns 100 per cent of the shares of the first plaintiff. This means the first plaintiff has standing to bring the removal application and its associated applications.
1 Dr Ian Goodwin is a specialist psychiatrist.
[11] The second plaintiffs now have control of the first plaintiff. The first plaintiff as a discretionary beneficiary of the SBF Trust considers that it would be best served by the removal of the first defendant as one of the three trustees of the SBF Trust. The removal of the first defendant as a trustee of the SBF Trust will enable the remaining trustees to engage with the plaintiffs in relation to this proceeding and for the claims against the trustees to proceed to a disposition, rather than the present hiatus.
[12] Given the close nexus between this proceeding (in terms of the first defendant’s lack of capacity and its impact on his ability to engage in legal matters) and the removal application, I consider it is appropriate for this application to be dealt with as an interlocutory application in the context of this proceeding rather than by way of commencement of a separate originating application. The court has jurisdiction to act on such an interlocutory application and I consider the circumstances here make it proper for the court to do so.2 In this way unnecessary duplication and therefore cost can be avoided.
[13] Because the first defendant is an incapacitated person in terms of r 4.29 of the High Court Rules, r 4.30 requires the first defendant to have a litigation guardian appointed, unless the court orders otherwise. Generally, a court is reluctant to order that a litigation guardian be dispensed with. However, one occasion where the court does routinely make orders dispensing with the requirement to appoint a litigation guardian is for the purposes of applications to remove an incapacitated trustee and for vesting orders in the remaining or new trustee/s.
[14] The first plaintiff submits that it is clear from Dr Goodwin’s report that the first defendant lacks capacity and it cannot sensibly be suggested that he should remain as a trustee as this would thwart the operation of the SBF Trust. His rights as a beneficiary will not be affected by his removal as a trustee. All that the first plaintiff seeks is to remove the first defendant as a trustee and to vest the SBF Trust’s property in the remaining two trustees. Upon a change of trustee, it follows as a matter of course that trust property is then vested in the remaining as trustees.3 The first plaintiff submits, therefore, that no purpose would be served by appointing a litigation guardian
2 Kain v Hutton CA23/01 and CA246/01, 25 July 2002.
3 Cade v Cade [2016] NZHC 1624 at [18]; Hobbs v Hobbs [2020] NZHC 1564 .
for the first defendant in these circumstances. I agree. I can see no basis for holding a contrary view.
[15] Accordingly, I am satisfied that it is appropriate in the present circumstances for me to order pursuant to r 4.30 that no litigation guardian be appointed for the first defendant for the purpose of the removal application.
[16] I now turn to the directions as to service of the removal application. The first plaintiff proposes to serve the third defendants, who are the other two trustees of the SBF Trust, with the removal application because if granted it will result in them being the only remaining trustees of this trust. I am satisfied that is an appropriate course of action to take. Accordingly, I direct that the third defendants: Gurchetan Singh and Shivender Pal Singh be served personally with the removal application.
[17] The first plaintiff informs me that the final beneficiaries of the SBF Trust are the children of the two settlors, who are the first defendant and Tafaoga Meli. The first plaintiff contends it is not practical to serve all the final beneficiaries because the plaintiffs have limited information about those persons in terms of their identities and their addresses. The first plaintiff accepts that where the removal of a trustee is sought due to lack of capacity the consent of adult beneficiaries to that application is often obtained by the applicant.4 However, it submits such is not possible here because the only adult beneficiaries known to the first plaintiff are the second defendants. Those persons are the sons of the first defendant.
[18] The plaintiffs were not able to personally serve the second defendants in this proceeding, and an order for substituted service had to be obtained for the purposes of serving them with the plaintiffs’ claim in this proceeding. The first plaintiff anticipates that the service difficulties the plaintiffs encountered when commencing this proceeding will be replicated, if it is required to personally serve the second defendants with the removal application. The first plaintiff submits that service on the adult beneficiaries of the SBF Trust is not necessary given that the removal of the first defendant as trustee will not affect the rights of the beneficiaries of this Trust. All that
4 White v White [2020] NZHC 1295; Walker v Walker [2020] NZHC 1443 and Riley v Jeffrey [2020] NZHC 2008.
is sought is to remove a trustee for lack of capacity and to vest the Trust property in the remaining trustees. The first plaintiff submits that the removal application does not involve any disputed questions of fact and it cannot be sensibly suggested that the first defendant should remain as a trustee of the SBF Trust given his clear lack of capacity. Further, once he is removed as a trustee it follows that the trustee property should vest in the remaining trustees.
[19] The first plaintiff identifies other cases where in similar circumstances orders were made dispensing with service on any other person including beneficiaries.5 Accordingly, the first plaintiff seeks an order that service of the removal application on any other person be dispensed with.
[20] I am satisfied that in the circumstances of this case service on persons other than the third defendants (the other trustees), in particular the adult beneficiaries, should be dispensed with. I cannot see how the interests of the adult beneficiaries or persons other than the third defendants can be harmed by the removal of the first defendant as a trustee of the SBF Trust. It seems to me that the only interests the adult beneficiaries might have following the removal of the first defendant as trustee would be in suggesting the addition of a replacement trustee. However, if the adult beneficiaries, on learning that the first defendant has been removed as a trustee, do wish to add a replacement trustee, steps to achieve that outcome can then be initiated by them.
[21] Accordingly, I see nothing that would prejudice the adult beneficiaries if service of the removal application on them is dispensed with. I am satisfied that an order dispensing with service on any other person is appropriate in this case.
[22] Finally, I consider the limited impact of the directions sought by the first plaintiff in the without notice interlocutory application support that application being made on a without notice basis. This will also expedite matters. The first defendant was first found by the court to be incapacitated in May 2019. Since then the SBF Trust has been unable to operate effectively. To require the preliminary matters the without
5 Re Hetrick [2017] NZHC 472 at [8]; Mead v Toner [2019] NZHC 497 at [5]-[8]; Guise v Guise
[2019] NZHC 3387 at [9] and Hobbs v Hobbs [2020] NZHC 1564 at [11].
notice application addresses to be made on notice would unduly delay matters in circumstances where no prejudice can result to the first defendant or any other person by the court proceeding on a without notice basis.
Result
[23] An order is made pursuant to r 4.30 of the High Court Rules that in relation to the removal application there is no need to appoint a litigation guardian for the first defendant.
[24] Service of the removal application is to be made in person on the third defendants, Gurchetan Singh and Shivender Pal Singh. Service on persons other than the third defendants is dispensed with.
Duffy J
Solicitors: Solicitors:
Ms H McKee and S P Farnell, Meredith Connell, Auckland ([email protected] and
[email protected])Mr R Rao and Ms H-J Weiland, Inder Lynch, Manukau ([email protected] and [email protected])
Robert Katz QC, Auckland ([email protected])
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