Auburn Apartments Limited v Vlasic & Gauld as Trustees of Valchrist Trust HC Auckland CIV-2009-404-3837
[2011] NZHC 126
•22 February 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2009-404-3837
BETWEEN AUBURN APARTMENTS LIMITED Plaintiff
ANDU VLASIC & B J GAULD AS TRUSTEES OF VALCHRIST TRUST
First and Second Defendants
ANDD DILLON Third Defendant
ANDB S GILCHRIST Third Party
Hearing: 10 February 2011
Appearances: Mr D G Collecutt for second defendant
Mr Wadsworth for third defendant
Judgment: 22 February 2011 16:00:00
JUDGMENT OF ASSOCIATE JUDGE DOOGUE
This judgment was delivered by me on
22.02.10 at 4 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Counsel:
D G Collecutt, Barrister, Auckland – by email: [email protected]
Kennedys, 70 Shortland Street, Auckland – by email: [email protected]
Copy: Mr S Judd, Auckland – [email protected]
AUBURN APARTMENTS LIMITED V VLASIC & ORS HC AK CIV-2009-404-3837 22 February 2011
[1] This is an application for particular discovery brought by the third party against the second named first defendant Brian James Gauld.
[2] Mr Gauld was, until his retirement, an accountant. He was a trustee of the Valchrist Trust. The other trustee was Ursula Vlasic, the first named first defendant and the second defendant in this case. Ms Vlasic’s husband is Mr Gilchrist, the third party.
[3] The plaintiff entered into an agreement for sale and purchase on 17 August
2006 to sell Unit 109 and other accessory units in the Maison Apartments. The agreement was signed only by Ms Vlasic. The purchaser was identified in the agreement for sale and purchase as:
Valchrist Trust
Ursula Vlasic and Harts Accountants
[4] Harts Accountants was the name of the firm in which Mr Gauld carried on practice. The agreement was signed was signed for the ―purchaser‖ by Ms Vlasic alone. The third defendant Mr Dillon was nominated as the solicitor to act for the purchasers.
[5] The vendor’s solicitors sought confirmation from Mr Dillon that the signatory was authorised to sign the agreement and that the agreement was valid and binding on the trustees. On 20 April 2007, Mr Dillon confirmed that the agreement was valid and binding on the first defendants. However the defendants did not settle the transaction and the vendor issued these proceedings. The proceedings assert that Ms Vlasic and Mr Gauld as trustees of the Valchrist Trust purchased the property or, in the alternative, that Ms Vlasic in person did so. It is alleged against the third defendant that when he provided the advice that the agreement was valid and binding on the first defendants, he did so negligently.
[6] The plaintiff sought summary judgment but the Court dismissed that application. The main reason was that there were doubts about who, if any of the parties, was bound as purchaser.
[7] In his defence, Mr Dillon says that he sought and received instructions from
Mr Gilchrist, Ms Vlasic’s husband, before writing to the vendor’s solicitors on 20
April 2007. Specifically, the third defendant says that:
On a date between 18 and 20 April 2007 it sought and received instructions from Brent Gilchrist who advised in a telephone conversation that the first defendant had agreed to proceed with the agreement and authorised it to provide the confirmation sought by the plaintiff’s solicitors.
[8] The third defendant, therefore, does not resile from the statements that he made when he wrote to the vendor’s solicitors concerning the contract for sale. Essentially what Mr Dillon, the third defendant, did was communicate to the vendor that the Valchrist Trust was bound notwithstanding that both trustees had not signed the agreement for sale and purchase. This give rise to a dispute between Mr Dillon the solicitor and Mr Gauld the accountant and trustee about what instructions the trustees actually gave. It is Mr Gauld’s position that he did not authorise Mr Dillon to communicate to the vendor’s solicitors that he, Mr Gauld, approved the transaction. He says that he had good reason to withhold his consent to the transaction, and that he did so. The reason was that the agreement for sale and purchase did not contain a provision of the usual kind which limited any liability on the part of the trustees to the extent of the assets of the Trust.
[9] The third defendant, Mr Dillon, will accordingly attempt to show that when Mr Gilchrist confirmed that both trustees approved the contract, his communication was accurate and that Mr Gauld did approve the purchase. Mr Dillon’s case will be supported by any documents which tend to cast doubt upon Mr Gauld’s claim that he was reluctant to approve the agreement because of the absence of the trustees’ limitation of liability provision. I agree that any documents falling into that category would be relevant for the purposes of discovery.
[10] Mr Wadsworth, in his comprehensive submissions for the application for specific discovery, stated that Mr Dillon, in order to succeed on his present
application under r 8 of the High Court Rules and relevant cases, must establish the following:
14.An application for specific discovery is governed by the provisions of High Court Rule 8 and relevant cases. By reference to the provisions of rule 8 Mr Dillon must here satisfy the Court that:
(1) The documents sought in its application are or have been in
Mr Gauld’s control – r 8.18(2) and commentary at HR
18.8.02;
(2) The documents sought in his application are relevant to a matter in question in the proceeding – r 8.18(2) and commentary at HR 18.8.03;
(3) It is apparent from the evidence or the nature of circumstances of the case or from any pleadings that Mr Gauld has not discovered documents that are or have been in his control and which relate to a matter in question in the proceeding – r 8.24.
[11] I interpolate that the matter set out in the second sub-paragraph above is established. It is in the areas described in sub-paragraphs 1 and 3 that the dispute lies.
[12] The scope of the documents on which Mr Dillon now seeks further discovery pursuant to r 8 is summarised by Mr Wadsworth in his submissions as follows:
28.The trustees’ evidence in response to Auburn’s summary judgment application as well as their defence plainly puts in issue Mr Dillon’s authority. As this was not the only transaction where Mr Dillon acted on behalf of the Trust the circumstances surrounding the trustees’ election to proceed with four other significant transactions, where the content of the sale and purchase agreements contradicts the trustees’ evidence in these proceedings, is plainly relevant.
[13] Mr Dillon has deposed that he has acted in 15 separate transactions on the behalf of the Trust. Four of these involved the purchase of real estate. None of those individual agreements for sale and purchase contained a clause limiting the trustees’ liability.
[14] Essentially Mr Dillon relies on inferences being drawn from the past conduct of the trustees to show that in past cases, the trustees, and Mr Gauld in particular, were not actuated by the concerns that Mr Gauld says he had in this case which
induced him to withhold his consent. This inference would therefore make it less unlikely that he would have authorised Mr Gilchrist and Mr Dillon to communicate his acceptance of an agreement which lacked a trustees’ limitation of liability clause.
[15] Against that, Mr Collecutt for Mr Gauld refers to the affidavit that Mr Gauld has given in the proceedings. Mr Gauld expressly says that he does not have any other documents in his power or possession which relate to the proceedings. He says that any such documents he and his former firm (Harts Accountants) had which might have been relevant have already been provided to Mr Dillon’s lawyers via legal representatives.
[16] Rule 8.24 provides as follows:
8.24Order for particular discovery against party after proceeding commenced
If at any stage of the proceeding it appears to a Judge, from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered 1 or more documents or a group of documents that should have been discovered, the Judge may order that party—
(a) to file an affidavit stating—
(i) whether the documents are or have been in the party's control; and
(ii) if they have been but are no longer in the party's control, the party's best knowledge and belief as to when the documents ceased to be in the party's control, and who now has control of them; and
(b) to serve the affidavit on any other party.
[17] Mr Collecutt pointed out that of the four agreements to which the applicant attached significance, the first was not an agreement under which Mr Gauld was a purchaser. The second and third agreements were only signed by Ms Vlasic. I do not overlook that Mr Wadsworth pointed out that whether or not the agreement was signed was not critical because even if Mr Gauld did not sign the agreement for sale and purchase, he would have been exposed to liability as the transferee. While noting that submission, I think nonetheless it can be fairly said that the point at which someone in Mr Gauld’s position would insist on a limitation of liability would
be at the point where an agreement for sale and purchase was signed and that to attempt to limit liability subsequently might not be possible or certainly would not be straightforward.
[18] Mr Collecutt also drew my attention to paragraph 16 of the affidavit which Mr Dillon filed earlier this month where he said that he occasionally dealt with Ursula (Ms Vlasic) but seldom spoke to or wrote to Mr Gauld. He said that his only contact with Mr Gauld was when documents needed to be executed ―such documents having been prepared in accordance with [Mr Gilchrist]’s (or the relevant bank’s) instructions‖.
[19] In this case the Court is required to balance the probative strength of an inference which the applicant says is to be drawn from the past conduct of the trustees, and in particular that of Mr Gauld, against the express averment on oath by Mr Gauld that he knows of no other documents that he ought to discover.
[20] It is implicit in the submissions for Mr Dillon that Mr Gauld’s contention that he would not have authorised an agreement for sale and purchase which did not contain a limitation of trustees’ liability provision is inconsistent with past occasions when he had signed such agreements. However, on closer examination the evidence is not clear on that point. Even if it is assumed that previous patterns of conduct are relevant, that begs the question of whether the Court has grounds for supposing that Mr Gauld has not discovered documents relevant to that issue. It is implicit in the position taken by Mr Dillon that there would have been a paper trail created prior to the trustees entering into agreements. It is also implicit that while there is no actual evidence of Mr Gauld’s pattern of keeping a paper trail, the Court should assume that a chartered accountant and trustee in Mr Gauld’s position would have acted in such a way.
[21] I do not accept that such inferences are able to be drawn on the basis of assumptions about how Mr Gauld might have been expected to act. Certainly they do not carry the Court to the point where it can make the orders sought. In some respects, the impression I have is that Mr Gauld may well have been a passive trustee and that the initiative in generating transactions came from Mr Gilchrist. It is
just as likely as not that Mr Gauld might have been informally advised about aspects of the transactions that a trustee would be interested in — including whether the agreement was prudent from the point of view of what the price of the property was against its apparent market value. No doubt a prudent and cautious trustee would have created some sort of paper trail concerning such transactions in case his conduct was subsequently called into question. But I do not regard it as being so probable that the Court would conclude that that is what Mr Gauld actually did, and that the inference is sufficient to overcome his oath which controverts suggestions that there were other documents that came into existence which he has not disclosed.
[22] I have no other ground to doubt that Mr Gauld is telling the truth and his deposition more than outweighs any probative effect of inferences that the applicant sought to draw from his past conduct.
[23] I consider that the applicant has not established that there are grounds for me to make an order under r 8.24.
[24] The application is dismissed. I do not intend to grant costs to the successful party. That is because there have been numerous breaches of the timetable orders by
the respondent.
J.P. Doogue
Associate Judge
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