Baker and Rameka as Trustees of Thomas Baker Whanau Trust v Waimakuku Whanau Trust Board Incorporated HC Napier CIV-2010-441-581
[2011] NZHC 1329
•26 July 2011
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
CIV-2010-441-581
BETWEEN EDWARD HENRY BAKER AND WHAKAWE CHARLES RAMEKA AS TRUSTEES OF THOMAS BAKER WHANAU TRUST
Applicants
ANDWAIMAKUKU WHANAU TRUST BOARD INCORPORATED Respondent
Hearing: 17 June 2011 (Heard at Napier)
Counsel: E.M. Bate - Counsel for Applicants
P.A. Nee Harland - Counsel for Respondent C. Linkhorn - Counsel for Attorney-General D. Soper - Amicus Curiae
Judgment: 26 July 2011 at 3:30 PM
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
This judgment was delivered by Associate Judge D.I. Gendall on 26 July 2011 at
3.30 pm under r 11.5 of the High Court Rules.
Solicitors: Hansen & Bate Limited, Solicitors, PO Box 235, Hastings P.A. Nee-Harland, Barrister, PO Box, 8025, Havelock North Crown Law, PO Box 2858, Wellington
EH BAKER AND WC RAMEKA AS TRUSTEES OF THOMAS BAKER WHANAU TRUST V WAIMAKUKU WHANAU TRUST BOARD INCORPORATED HC NAP CIV-2010-441-581 26 July 2011
Introduction
[1] The applicants in these proceedings are the trustees of the Thomas Baker Whanau Trust (the TBWT). The TBWT (renamed) was originally established by a Deed of Agreement between Her Majesty the Queen and the respondent the Waimakuku Whanau Trust Board Incorporated (the WW Trust Board) dated 20
December 1995. This followed the settlement of a claim against the Crown under the Treaty of Waitangi Act 1975. As part of this settlement, the Crown was to make an ex gratia compensation payment of $375,000 to the WW Trust Board as trustee at that time to be held on what was effectively the TBWT. Issues have arisen over the management of those funds, and the applicants as new trustees seek directions pursuant to ss 64 and 66 of the Trustee Act 1956 in respect of the TBWT. Section
66(2) provides:
Every such application shall be served upon, and the hearing may be attended by, all persons interested in the application or such of them as the Court thinks expedient.
[2] On the substantive application before the Court, the respondent, the WW Trust Board opposes this Court making the management directions sought by the TBWT. In short, the WW Trust Board has sought to oppose this Court providing those directions as it claims that the TBWT is in possession of funds which do not belong to it. The WW Trust Board’s primary allegation is that the WW Trust Board did not have capacity to negotiate with the Crown which led to the signing of the Deed of Agreement in 1995 and payment of the compensation funds.
[3] In response to the TBWT’s application, the WW Trust Board now applies itself for several interlocutory orders. It is that application by the WW Trust Board which I am to consider here. It is an application for joinder of Mr David Porteous, the WW Trust Board’s former solicitor and council in Chisholm v Waimakuku Whanau Trust Board HC Napier CP27/00, 29 August 2005, and the Attorney- General as parties to these proceedings. In the alternative, leave is sought to file a third party notice joining the two parties to the proceedings. The WW Trust Board’s primary reason for seeking those orders, as submitted by Mr Nee Harland at paragraph 23 of his reply to the TBWT’s synopsis, is:
As matters have transpired it has become increasingly clear that it will be necessary to consider the roles played by Mr Porteous and the Attorney General in terms of whether either or both realized that the [WW Trust Board] lacked capacity.
[4] Leave is also sought to amend the WW Trust Board’s application for interlocutory orders to include the following clause:
e.that the matters to be settled in the process of achieving closure include the issue of whether the settlement deed entered into on the 20th December
1995 contained a rectifiable mistake within the meaning of the Contractual
Mistakes Act 1977.
[5] The WW Trust Board’s application is opposed by the TBWT. The Attorney- General also opposes his joinder to these proceedings or the issuing of a third party notice against him. No response has been received from Mr Porteous.
[6] In the present application, it will be noted that the WW Trust Board also sought orders first, for the first-named applicant Edward Henry Baker to be removed as a trustee of the TBWT and secondly, for the TBWT fund to be transferred to a neutral third party. For jurisdiction reasons, these matters are not to be considered here. I say nothing more regarding these two aspects. They are to be dealt with subsequently by a Judge of this Court.
Background
[7] In brief, the present proceedings relate generally to circumstances concerning certain Māori land originally owned by a Ms Rihi Nene which was left to three of her husband, Mr Thomas Baker’s, issue. I provide a short summary of the relevant background below. A more comprehensive background can be found in my 13 May
2011 decision in this proceeding.
[8] Legislation was passed in 1929 cancelling separate title (which had been originally awarded to Ms Nene in the 1800s) to the land in question. Mr Henry Baker (Thomas Baker’s son, Henry Baker received an interest in the land at issue through his uncle), lodged a claim for compensation with the Waitangi Tribunal in
1990 (Wai 147). Around 1992 the claim came to be managed by the WW Trust
Board, under the chairmanship of a Mr Nigel Baker, Mr Henry Baker’s son.
Eventually, in 1995, compensation was paid by the Crown for its wrongfully extinguishing title to the land by the Deed of Agreement of 20 December 1995 noted above. The WW Trust Board received that compensation as Trustee.
[9] In 2000, several beneficiaries under Wai 147 applied to this Court alleging maladministration of the trust funds by the WW Trust Board following that settlement. The result of those proceedings was a finding that the WW Trust Board had erred and the trustees were held personally liable. In his decision in that case, Durie J found that the fund was to be held for the general benefit of the descendants of Thomas Baker without provision for capital distributions to individual beneficiaries: Chisholm v Waimakuku Whanau Trust Board HC Napier CP27/00, 29
August 2005 at 10. The Thomas Baker Whanau Trust (TBWT) was created (or simply re-named) to hold the proceeds of the judgment.
[10] The WW Trust Board now seeks to attack the December 1995 Deed of
Agreement. As disclosed by its counsel Mr Nee Harland’s submissions here:
25. In particular it will be argued that the Attorney General’s agent, the Treaty of Waitangi Policy Unit, negotiated and formed a contract with the [WW Trust Board] notwithstanding that it lacked the legal capacity to do so. The rules for the WWTB did not allow it to be party to the Wai 147 settlement deed.
…
26. The [WW Trust Board’s] capacity to contract was implicit to the approach taken by [Durie J]. If the [WW Trust Board] lacked capacity as is argued then that would render the settlement deed void. If the Court were to grant the orders sought by the TBWT in effect it would be ratifying what I suggest is a flaw that cannot be cured by simply replacing the dysfunctional entity. The agreement itself would be null and void.
[11] I distil two grounds on which the WW Trust Board seeks to challenge the validity of the Deed. First, by way of mistake (as evidenced by the proposed addition to the present interlocutory application) and secondly, capacity.
Joinder of the Attorney-General and Mr Porteous
[12] The WW Trust Board seeks to join the Attorney-General and Mr David
Porteous as parties to the proceeding under r 4.56(1)(b)(ii) of the High Court Rules.
Alternatively, leave is sought to join these parties by issuing third party notices under r 4.4.
[13] Mr Porteous was the solicitor who organised the incorporation of the WW Trust Board in 1990 and drafted its Trust Deed. Part of the grounds on which the WW Trust Board’s interlocutory orders are sought here are:
f. That David John Porteous acting in his the capacity as counsel for the Waimakuku Whanau Trust Board Incorporated, exceeded his client’s authority by agreeing with the Office of Treaty Settlements to a variation of the class of potential beneficiaries arising by way of a settlement of the Waitangi Tribunal claim lodged by the said Henry Baker of 25 May 1990.
g. That David John Porteous and the Office of Treaty Settlements collectively compiled a Deed of Settlement which contained fundamental mistakes which the Waimakuku Whanau Trust Board Incorporated will seek to rectify under the Contractual Mistakes Act 1977.
[14] Mr Nee Harland, for the WW Trust Board, argues that Mr Porteous could inform the Court as to a range of relevant matters. These are his level of experience with Waitangi Tribunal claims; who gave him authority to deduct legal fees from the settlement funds; why he acceded to the Crown’s request to have Thomas Baker’s name inserted in the Deed of Agreement; and whether at the time or later he realised that the WW Trust Board allegedly could not be a party to the settlement under its rules.
[15] The reasons asserted by the WW Trust Board in its application seeking to join the Attorney-General include the general contention that, if the Deed of Agreement is declared void, then the issue remains as to how to attribute losses alleged to be suffered by the various parties involved. Mr Nee Harland asserts that the Attorney has knowledge of certain things which could be of assistance to the Court here. He argues that the Attorney holds critical information which would demonstrate that the Crown proceeded in December 1995 to conclude a settlement with what he says was a dysfunctional legal entity. According to Mr Nee Harland, it is thought that the Court could also be enlightened on the following matters: whether the Crown’s Treaty Of Waitangi Policy Unit was obliged to check the capacity of a legal entity before paying public funds to it; the state of a check list for effecting Waitangi settlements and whether it may have been followed; an alleged failure to act within
the bounds of authority and a failure to create legal relations with the rightful beneficiary that it is claimed has been determined by appropriate research. Mr Nee Harland argues that this information will put the Court in a position to resolve whether to hold the WW Trust Board to the Deed of Agreement, and how to attribute any losses incurred.
[16] The applications are opposed by both the respondent and the Attorney- General on the basis the grounds under the rules are not satisfied, and further that the applicants are precluded by res judicata and abuse of process from raising these issues which are not, in any event, relevant to the matters before the Court in the substantive application before it.
[17] In light of the WW Trust Board’s proposed course to endeavour to have this Court examine the validity of the Deed of Agreement, I consider it appropriate here to consider first whether the parties ought to be joined or third party notices issued with respect to the TBWT’s applications under the Trustee Act 1956, and secondly, whether the WW Trust Board’s opposition to the TBWT’s application nevertheless renders joinder or a third party notice necessary.
Joinder
[18] On joinder, r 4.56 provides, as relevant:
(1) A Judge may, at any stage of a proceeding, order that—
...................................................
(b) the name of a person be added as a … defendant because—
(i) the person ought to have been joined; or
(ii) the person's presence before the court may be necessary to adjudicate on and settle all questions involved in the proceeding.
(2) An order does not require an application and may be made on terms the court considers just.
[19] The purpose of the rule is to provide for the inclusion of necessary parties:
McGechan on Procedure (online looseleaf ed, Brookers) at [HR4.56.04].
[20] As a preliminary point, Mr Nee Harland argued that as Mr Porteous had not opposed joinder he was, strictly speaking, now joined. While there is a technical argument that this might be the case, I read r 4.56 as being sufficiently broad such that joinder should be considered here in his absence. To allow joinder where it is not appropriate and thereby to improperly put Mr Porteous to the expense of opposing any claims against him at this or “any stage of the proceeding” would be undesirable.
[21] On the WW Trust Board’s broad joinder application, I am satisfied that neither party in question ought to be joined here. Neither party’s presence, in my view, is necessary before this Court to determine whether orders should be made under ss 64 and 66 of the Trustee Act 1956. Neither party has an interest in the orders sought by the TBWT. Nor, as I see it, will either party be of assistance to this Court in determining whether to issue the management directions which are sought by the applicant the TBWT.
[22] With regard to the WW Trust Board’s application proposing interlocutory orders to challenge the validity of the Deed of Agreement, taking Mr Porteous first, the WW Trust Board has not disclosed any claim that the TBWT may have against him. At most, the WW Trust Board has indicated that he may be required as a witness, but nothing more. As noted by Associate Judge Doogue in Timtech Chemicals Limited v QBE Insurance (International) Ltd HC Auckland CIV-2009-
404-2194 21, December 2009 the fact the actions of the intended party for joinder may be under scrutiny or that evidence may be required from that party does not necessarily require their presence before the Court for the purposes of r 4.56.
[23] With regard to the Attorney, again no relief is sought by the TBWT in which the Attorney may be interested. The Crown’s rights or liabilities are not affected by the applicant’s substantive proceeding under the Trustee Act 1956 here. I accept that Mr Nee Harland has argued that if the Deed of Agreement might be declared void then the issue would remain as to how to attribute the losses alleged to be suffered by the various parties involved. However, that is a matter over which this Court has no jurisdiction here.
[24] The Attorney, the TBWT and Mr Soper as amicus all submitted that the WW Trust Board’s claim with regard to its questioned capacity in 1995 to enter into the Deed of Agreement was an abuse of process and otherwise barred by the doctrine of res judicata or issue estoppel, as all issues surrounding the Deed were resolved by Durie J in Chisholm v Waimakuku Whanau Trust Board Inc HC Napier CP27/00, 29
August 2005.
[25] It is clear that the decision of Durie J at [10] addresses the identification of the trust’s beneficiaries and whether the parties were influenced by a mistake in recording the class of beneficiaries. His Honour concluded that there were no mistakes. Durie J further stated at [11]:
...the Crown agreed to the settlement on the basis of representations on behalf of the Trust Board, which I am satisfied were made, that the settlement would be for the benefit of the wider class of beneficiaries and that all who could be affected had agreed on that course. It cannot then be said that there was some mistake. The intention was clear on both sides.
[26] It is less clear, however, whether the issue of capacity was dealt with. It does not appear to have been dealt with expressly, at least. Nevertheless, for two reasons I am satisfied that the possible lack of an express determination is immaterial here. First, as commented by the authors of Laws of New Zealand in the section on Estoppel (online ed) at [20]: (references omitted)
Under issue estoppel, a party is precluded from contending the contrary of any precise point which, having once been distinctly put in issue, has been determined against that party even if the objects of the first and second actions are different. The matter must, however, have been directly at issue in the first action rather than collaterally or incidentally in issue.
[27] Here, I am satisfied that the issue of the WW Trust Board’s entering into the Deed of Agreement with the Crown was determined by Durie J, whether or not the issue of its capacity was expressly raised. I consider that it is reasonable to treat that decision as a final determination of that issue: Joseph Lynch Land Co Ltd v Lynch [1995] 1 NZLR 37 (CA).
[28] And, secondly, lack of express consideration of an issue does not necessarily avail the WW Trust Board here. In Shepherd v Disputes Tribunal [2004] NZAR 219
(HC) an unsuccessful plaintiff before the Disputes Tribunal sought judicial review in this Court of the Tribunal’s decision finding against the plaintiff. The basis of the applicant’s claim for judicial review was that the Tribunal had not considered whether the builder’s work was illegal because of the absence of a building consent. In his decision at [35]-[36] Fogarty J found:
Whenever a party against whom a judgment has been made has failed to raise some question he or she could have raised, the judgment includes a decision on the omitted question. This is because the law imposes a positive obligation on litigants to bring forward their whole case. The law will not hear a litigant to argue later that they have not argued their case or inadvertently or by accident omitted part of their case. This has been the law for a considerable period of time and dates back to the leading case of Henderson (1843) 3 Hare 100 at 114-115.
This may seem hard on litigants. But the reason for the law taking this approach is that there is a greater public interest in decisions being final.
[29] Further, as affirmed by the Supreme Court in Z v Dental Complaints Committee [2008] NZSC 55, [2009] 1 NZLR 1 at [127] (and Elias CJ at [63]), in Johnson v Gore Wood & Co [2002] 2 AC 1 (HC) at 31 Lord Bingham said, in a case where a plaintiff sought to raise an issue that could have been dealt with in earlier litigation, that in deciding whether further proceedings are abusive a court makes:
a broad, merits based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether in all the circumstances a party is misusing or abusing the process of the court.
[30] And, in Hunter v Chief Constable of West Midlands [1982] AC 529 at 536
Lord Diplock referred to the power to strike out for abuse of process as:
…the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people. The circumstances in which abuse of process can arise are very varied; those which give rise to the instant appeal must surely be unique. It would, in my view, be most unwise if this House were to use this occasion to say anything that might be taken as limiting to fixed categories the kinds of circumstances in which the court has a duty (I disavow the word discretion) to exercise this salutary power.
[31] I also add that even if some cause of action might have been disclosed against Mr Porteous, while he was not involved in the proceedings before Durie Japan other than as counsel, that is of no moment. With regard to the doctrine of abuse of
process, mutuality of parties is not required: Chamberlains v Lai [2006] NZSC 70, [2007] 2 NZLR 7 at [60].
[32] In the present case, Mr Nee Harland, in his submissions accepted, at least implicitly, that that issue had fallen within the ambit of Durie J’s decision and counsel, at that time, had failed to raise it. Paragraph 26 of his reply submissions is recorded at [10] above. From that, I consider, the answer is clear. Any claim against the Attorney or Mr Porteous must be barred.
[33] More generally, the current proceedings are an application by the trustees of the TBWT as to the future management of the funds which it holds on trust. Even if the WW Trust Board’s claims may not be strictly barred through the doctrine of res judicata, I am satisfied that they are being brought here as a collateral attack on the TBWT’s application for directions and this must amount to an abuse of process. If the WW Trust Board was allowed to continue in its application to join the Attorney and Mr Porteous, who have no interest in the TBWT’s management of its assets, in my view, that would cause a considerable injustice to all parties including the TBWT.
[34] Accordingly, even if the WW Trust Board could satisfy the requirements of r
4.56, and I am satisified it has failed here to do so, I would not allow joinder as the WW Trust Board is estopped from doing so and joinder would be an abuse of process.
Third Party Notice
[35] Rule 4.4(1) provides:
(1) A defendant may issue a third party notice if the defendant claims any or all of the following:
(a) that the defendant is entitled to a contribution or an indemnity from a person who is not a party to the proceeding (a third party):
(b) that the defendant is entitled to relief or a remedy relating to, or connected with, the subject matter of the proceeding from a third party and the relief or remedy is substantially the same as that claimed by the plaintiff against the defendant:
(c) that a question or issue in the proceeding ought to be determined not only between the plaintiff and the defendant but also between—
(i) the plaintiff, the defendant, and the third party; or
(ii) the defendant and the third party; or
(iii) the plaintiff and the third party:
(d) that there is a question or an issue between the defendant and the third party relating to, or connected with, the subject matter of the proceeding that is substantially the same as a question or an issue arising between the plaintiff and the defendant,
[36] On 11 March 2011, Mr Porteous was served with a copy of the WW Trust Board’s interlocutory application and supporting affidavit. On 22 March 2011 Mr Porteous was served with a third party notice. That notice, I note, was well outside the time required under r 4.4(2)(a). Leave of this Court was, and still is, therefore required.
[37] In considering the present application for leave to issue the third party notices I am of the view that it must fall at the first hurdle: the WW Trust Board is not entitled to any contribution or indemnity from either Mr Porteous or the Attorney if it is unsuccessful in this application. Mr Nee Harland submits at 13 of his reply submissions that:
the WW Trust Board seeks to be indemnified against losses it suffered as a result of it being wrongfully bound to the 1995 deed. It says that the Crown ought to have discovered the incapacity of the WWTB during the mandating stage. As such it owed those who in good faith acted as trustees a duty of care not to allow the settlement to proceed.
[38] However, in my view, there is nothing for which the WW Trust Board could be indemnified in the present case. The WW Trust Board discloses no prospect that it may lose funds (except perhaps costs in the event that they might be awarded) due to the TBWT’s present application under the Trustee Act 1956.
[39] Further, with regard to paragraph r 4.4(1)(c) the authors of McGechan on Procedure record that “it is generally accepted that the defendant must have a right of action against the third party”: at [HR4.4.04]. No such action has been disclosed, nor, as I see it, is one available here.
[40] With respect to both Mr Porteous and the Crown, there are no allegations of impropriety as I see it that are relevant to the TBWT’s present application. Finally, I conclude that, with regard to the WW Trust Board’s present interlocutory applications generally, for the reasons discussed above, any action against either Mr Porteous or the Crown is either estopped or is barred due to abuse of process reasons.
[41] Leave to issue the third party notices is therefore refused.
Contractual Mistakes Act 1956 clause
[42] As recorded above at [3], the WW Trust Board seeks to add a Contractual Mistakes Act 1956 cause of action in its application for a further interlocutory order. The TBWT opposes leave to add this cause of action it says because estoppel per rem judicatam or issue estoppel applies.
[43] As Mr Nee Harland argued before me, I accept that the Contractual Mistakes Act 1956 was not expressly argued before Durie J. Mr Nee Harland submitted at paragraph 16 of his reply submissions:
My client argues that there are good grounds to admit the issue of mistake in a formal sense as it goes to the heart of the validity of the 1995 deed as a whole. It is not a matter affecting simply a term within the deed. To do so would require the Crown to be joined rather than to give evidence. It was clearly involved as a principal to the deed.
[44] However, as discussed above, it is well accepted that an issue does not have to be expressly raised or considered in a prior matter in order for the doctrine of res judicata to operate estopping a party from re-litigating that same matter on the new ground that has been thought of. Here, from Durie J’s discussion, it is clear that His Honour considered whether the Deed was entered into under a mistake (see [25] above).
[45] Further, in my judgment, the present application by TBWT before the Court is not the proper subject for that interlocutory order. Effectively it is a consequential order that is being sought dependent on the joinder application. Accordingly, as
joinder here is refused, I also decline to add the application for the Contractual
Mistakes Act 1956 remedy.
Conclusion
[46] For the reasons outlined above, the applications for joinder, for leave to issue third party notices and for leave to amend the WW Trust Board’s interlocutory application are all unsuccessful and are dismissed.
[47] As to costs on these applications, they are reserved.
‘Associate Judge D.I. Gendall’
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