Andrews v Andrews
[2022] NZHC 1380
•13 June 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-001221
[2022] NZHC 1380
UNDER Part 18 High Court Rules IN THE MATTER OF
An application under the Trusts Act 2019
BETWEEN
STEPHEN ROBERT ANDREWS
Plaintiff
AND
RICHARD JOHN ANDREWS, EVAN WILLIAM ANDREWS and DAVID
BRUCE BELL as trustees of the estate of ROBYN MARGARET ANDREWS
Defendants
Hearing: 30 May 2022 Appearances:
H J Mills for Plaintiff
A C Sorrell and A Borchardt for Defendants
Judgment:
13 June 2022
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by Associate Judge Andrew on 13 June 2022 at 12 noon
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar Date………………………..
ANDREWS v ANDREWS [2022] NZHC 1380 [13 June 2022]
Introduction
[1] This is a further proceeding in which Stephen Andrews challenges the administration of his late mother’s estate by the defendant executors and trustees.
[2] The mother, the late Mrs Robyn Andrews, had three sons: Richard, Stephen and Evan. In her will of March 2017, she left the residue of her estate to be divided equally between Richard, Evan and the Andrews-Runnymede Trust.1 Stephen is a beneficiary of the AR Trust.
[3] The will also provided that any loans Mrs Andrews had made to each of the three sons, and which were still outstanding, should be brought to account and charged against the share of each son in the residuary estate.
[4] Stephen was bankrupted shortly before his mother signed the will. He was discharged from bankruptcy three months before his mother died. In a judgment of 29 November 2021, Gordon J held that the loans expressed in the will to be due by Stephen and entities associated with him are correctly brought to account in calculating a net amount due to him (i.e. to the AR Trust) from the estate notwithstanding Stephen’s discharge from bankruptcy.2 Stephen’s bankruptcy and later discharge from bankruptcy thus have no effect on the terms of the will.
[5] The administration of the estate is largely completed. What remains at issue is the calculation of the debt due to the estate by Stephen. Stephen says that there is an approximate $700,000 difference between the calculation of his expert, Mr Parsons, and the KPMG analysis upon which the defendants rely.
[6] In these proceedings, the defendants seek summary judgment and/or strike out of both causes of action. They contend that Stephen has no standing to challenge the decisions of the trustees’ administration of the estate and that the first cause of action is res judicata. The trustees rely on s 126 of the Trusts Act 2019. They have also brought an application for security for costs.
1 The AR Trust.
2 Re estate of Andrews [2021] NZHC 3179 at [82].
[7] The critical issues I must determine include whether Stephen has standing to bring the proceedings, whether the AR Trust should be joined as a plaintiff, and whether the proceedings should be adjourned to enable Stephen to bring a derivative action in the name of the AR Trust against the defendant trustees.
Factual background
[8] There are three defendant executors and trustees. They include Richard and Evan Andrews and Mr David Bell, the will-maker’s solicitor.
[9] Clause 9 of the will directs the trustees to establish the amount outstanding under loans to each of the three sons, as well as the professional costs incurred by the will-maker in respect of Stephen and interest unpaid by Stephen to the will-maker (the debt).
[10] Clauses 12, 13 and 18 of the will direct that what would otherwise have been the net share of Stephen in the residuary estate (after deduction of the debt) must be distributed to an inheritance trust known as the AR Trust established by the will-maker for that purpose.
[11] Stephen and his two children are the discretionary beneficiaries of the AR Trust, and in Stephen’s case he is also a final beneficiary.
[12] The will-maker declared by cl 15 that the provisions of the will are to benefit the siblings equally and fairly among them, having regard to their different personal circumstances.
[13] In the proceedings before Gordon J, in November 2021,3 the defendant trustees sought directions in relation to the meaning and effect of the will and alternatively a correction to the will to reflect the will-maker’s testamentary intentions.
3 Re estate of Andrews, above n 2.
[14] In an earlier interlocutory judgment in those proceedings, Walker J held that an affidavit from Mr Parsons, filed by Stephen, was not admissible on the application. Her Honour also struck out a number of paragraphs in an affidavit from Stephen.4
[15] In her judgment, Walker J noted that Stephen had commenced the current proceedings to determine quantification of any alleged debt owed. By agreement, these proceedings were held in abeyance pending determination of the application for directions.5
[16] In the subsequent costs judgment of 28 January 2022, Gordon J ordered that Stephen was to pay costs to the trustee defendants, together with disbursements, in the total sum of $18,322.64.6
[17] By letter of 7 December 2021, the defendant executors and trustees invited proposals from Stephen regarding a suitable new trustee for the AR Trust. In the absence of a reply, the defendants say they exercised their power of appointment and chose another trustee.
[18] The trustee of the AR Trust is Antares Trustees (Andrews) Ltd.7 The shareholder of that company is now Comac Ltd. The director of Antares is now Mr Gary Paul Fitzpatrick, a co-founder and director of Comac Ltd and Comac Trustees Ltd.
[19] The trustees say that all the beneficiaries of the estate have now been provided with copies of the KPMG report and the Indepth Forensic Ltd report by Mr Dennis Parsons, commissioned by Stephen. The trustees say that they intend to finalise distribution of the estate using the calculations provided by the KPMG report and rejecting the report by Mr Parsons.
4 Estate of R M Andrews [2021] NZHC 2721.
5 Estate of R M Andrews, above n 4, at [14].
6 Re Estate of Robyn Margaret Andrews [2022] NZHC 51.
7 Antares.
[20] The trustees also say there has been an interim distribution to the AR Trust and the other two beneficiaries of the estate, namely Richard and Evan, partly to cover the new trustee’s costs (i.e. the trustees of the AR Trust).
[21] Stephen says that he has run out of funds to pay for the ongoing litigation. He has made an application for legal aid and the decision is still pending.
The pleadings
[22] In his statement of claim, Stephen says in relation to the KPMG report commissioned by the defendant trustees:
(a)That it miscalculates the debts and interest alleged to be owed by the plaintiff, Stephen;
(b)It fails to take account of the legal standing of Stephen’s loans owing to the estate by virtue of his bankruptcy and subsequent discharge from bankruptcy.8
[23] By way of a first cause of action, Stephen seeks a review of the defendant trustees’ action and/or decision as to the true indebtedness of Stephen to the estate and an order setting aside the decision of the trustees to charge Stephen’s loans against the share of the estate left to the AR Trust. He also seeks an order restraining the defendant trustees from deciding or acting to charge Stephen’s loans to the AR Trust’s share of the estate.9
[24] By way of a second cause of action, Stephen contends that the defendant trustees have breached their duty to him by failing to act in good faith, avoid conflicts of interest and to act impartially between beneficiaries.10 He seeks an order that the defendant trustees should be replaced by an independent trustee or trustees and a direction that the new trustees investigate the indebtedness of Richard to the estate.11
8 Statement of claim, dated 16 June 2021, at [19] and [20].
9 At [21A].
10 At [33].
11 At [34].
Relevant legal principles
Strike out
[25] Rule 15.1 of the High Court Rules 2016 provides that the Court may strike out all or part of a pleading if it:
(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b)is likely to cause prejudice or delay; or
(c)is frivolous or vexatious; or
(d)is otherwise an abuse of the process of the Court.
[26] The relevant principles are well established.12 Pleaded facts, whether or not admitted, are assumed to be true. This does not, however, extend to pleaded allegations which are entirely speculative and without foundation. The cause of action or defence must be clearly untenable.
Summary judgment
[27] Rule 12.2(2) of the High Court Rules provides that the court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[28] The defendant bears the onus of proving on the balance of probabilities that the plaintiff’s claim cannot succeed. The threshold for summary judgment is a high one. Summary judgment will generally only be entered against a plaintiff where there is a complete defence to the plaintiff’s claim, or a clear answer to the claim which cannot be contradicted.13
12 Attorney-General v Prince [1998] 1 NZLR 262, (1997) 16 FRNZ 258, [1998] NZFLR 145 (CA) at 267; Couch v Attorney-General [2008] NZSC 45 at [33].
13 Westpac Banking Corporation v M M Kembla NZ Ltd [2001] 2 NZLR 298, (2000) 14 PRNZ 631 at [60].
Analysis and decision
Issue – Does Stephen have standing?
[29] The issue of whether Stephen has standing is directly answered by the application of s 126 of the Trusts Act 2019.
[30]Section 126 reads:
Court may review trustee’s act, omission, or decision
(1) The court may review the act, omission, or decision (including a proposed act, omission, or decision) of a trustee on the ground that the act, omission, or decision was not or is not reasonably open to the trustee in the circumstances.
(2) The court may undertake a review on the application only of a beneficiary.
(3)The review must be conducted in accordance with section 127.
(4)This section and section 127 do not limit or affect –
(a)the court’s jurisdiction to supervise trusts, including its jurisdiction under the Charitable Trusts Act 1957; or
(b)the Attorney-General’s powers and duties with respect to charitable trusts, including powers and duties under the Charitable Trusts Act 1957.
[31] Section 126(2) is to be interpreted in light of the purpose of the Act (s 3) and its principles (s 4). One of the purposes of the Act is to provide for mechanisms to resolve trust-related disputes. In accordance with s 4, a trust is to be administered in a way that avoids unnecessary cost and complexity.
[32] Section 127 is also relevant. That section provides that an applicant for a review under s 126 must produce evidence that raises a genuine and substantial dispute as to whether the act or decision in question was reasonably open to the trustee in the circumstances.
[33] I find that it is manifestly clear from these provisions that the 2019 Act is a code in relation to the standing issue. The words of s 126(2) are equally clear and unequivocal; only a beneficiary may seek a review of a decision of a trustee. I
acknowledge that the 2019 Act, namely s 8, expressly preserves the inherent jurisdiction of the Court. However, Stephen made no attempt to argue that s 126(2) did not apply; he simply did not address the issue.
[34] Stephen is not a beneficiary under the will. The AR Trust is, but it has not brought the proceedings. I find that accordingly Stephen lacks standing, and on that basis alone the proceedings have no prospect of success. The defendant trustees have established the requisite threshold for both a strike out and summary judgment application.
[35] I also agree with the submission of Mr Sorrell, for the defendant trustees, that on the basis of Stephen’s admission that he is not a beneficiary, summary judgment can be entered against him under rules 15.15 and 15.17 of the High Court Rules. In the memorandum of Mr O’Neill, counsel for Stephen, dated 29 April 2022, it is recorded:
The plaintiff accepts that he is not a beneficiary in his mother’s will. The trust [the AR Trust] is the beneficiary and he is a beneficiary of that trust, together with his children.14
[36] The issue of standing cannot be rectified by an amendment to the pleadings. The naming of Stephen as the plaintiff is not simply a misnomer but a misidentification of the correct plaintiff party.15
Issue – Res judicata
[37] It is equally clear that the first cause of action seeking a review and orders in relation to charging Stephen’s loans against the share of the estate left to the AR Trust cannot succeed. That issue was squarely dealt with by Gordon J after hearing argument from the same parties in these proceedings. Her Honour found against Stephen. The matter is res judicata.16 Stephen is seeking to vex the defendant trustees twice in the same matter. This is a clear case of cause of action estoppel.17
14 Memorandum of counsel in support of opposition to security for costs application and summary judgment application, dated 29 April 2022, at [3.1].
15 Registered Securities Ltd (in liq) v Jensen Davies & Co Ltd [1999] 2 NZLR 686 (CA) at 691.
16 See Craig v Stringer [2020] NZCA 260, (2020) 25 PRNZ 367 at [16]; White v Attorney-General
[2021] NZCA 479 at [22].
17 Craig v Stringer, above n 16, at [16].
Issue – Joinder of the AR Trust trustees
[38] Stephen has made an application dated 23 May 2022 seeking to join Antares, the corporate trustee of the AR Trust, as a second plaintiff. It is contended that the trustees’ presence before the Court is necessary to adjudicate on and settle all questions in the proceedings and that the trustee has standing in the matters before the Court.18
[39] There is no evidence before the Court that Antares consents to being joined as a plaintiff in these proceedings. In the absence of clear consent from a trustee it would be quite wrong to join that trustee as a plaintiff to a proceeding.
[40] Ms Mills indicated that the trustee is considering Stephen’s concerns and it is of course entirely up to the trustee to decide what steps, if any, it might take.
[41]The application for joinder is dismissed.
Issue – Derivative action
[42] In the same application dated 23 May 2022, Stephen has sought in the alternative, leave to file a derivative action in the name of the AR Trust.
[43] This application is equally flawed. The correct defendant party to any derivative action would be the trustee of the AR Trust, namely Antares. Antares has not been named as a party and to my knowledge has not been served with the proceeding.
[44] The threshold for obtaining leave for a beneficiary to bring a derivative action in the name of a trust is a high one. In Cowan v Martin, the Court of Appeal held that a beneficiary may only bring a derivative action in “special circumstances”.19 In Simpson v Sax, Brewer J held:20
[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
18 The application is made in reliance on r 4.56 of the High Court Rules.
19 Cowan v Martin [2014] NZCA 593, [2015] NZAR 1197 at [53].
20 Simpson v Sax [2015] NZHC 1466, [2015] NZAR 1210 at [21].
interests of the beneficiary in the trust estate”.21 Examples include where the trustee “has unreasonably refused to sue on behalf of the trust or has committed some other breach of its duties to the beneficiaries”.22
[45] There is no evidence before the Court as to any special circumstances, and absent the correct party or any relevant decision by the trustee that might be impugned (the trustee is still considering Stephen’s concerns), there is no scope within the context of these proceedings to consider the derivative application.
[46] I also decline to grant any adjournment to Stephen in relation to the derivative application. If there is to be a derivative application, it should be brought against the correct defendant, namely the trustee, and following a determination by that trustee in relation to the matters at issue.
[47] Having concluded that these proceedings cannot succeed, and that the defendant trustees are entitled to summary judgment and/or strike out, it is not necessary for me to determine the application for security for costs. That application is no longer of relevance to these proceedings.
Result
[48] I grant the defendants’ application for summary judgment and the strike out in relation to both causes of action. Stephen does not have standing to bring the proceedings and they cannot succeed.
[49] I dismiss the application by Stephen to join the trustee of the AR Trust as an additional plaintiff. I also decline Stephen’s application for an adjournment in relation to the application for leave to bring a derivative application. The application for leave to bring a derivative application is dismissed, albeit without prejudice to Stephen bringing such an application against the properly named defendant in any subsequent proceeding.
21 Hayim v Citibank [1987] AC 730 (PC) at 748.
22 Parker-Tweedale v Dunbar Bank plc (No 1) [1991] Ch 12 (CA) at 19.
[50] As to costs, I am of the preliminary view, that having succeeded, the defendants are entitled to costs and on a 2B basis plus disbursements. If costs cannot be agreed, then memoranda (no more than three pages) are to be filed and served within 14 days.
Associate Judge P J Andrew
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