Baker v Waimakuku Whanau Trust Board Incorporated HC Napier CIV 2000-441-86

[2007] NZHC 1744

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV 2000-441-86

BETWEEN  EDWARD HENRY BAKER AND WHAKAWE CHARLES RAMEKA Judgment Creditors

AND  WINIFRED CHISHOLM AND OTHERS Plaintiffs

AND  WAIMAKUKU WHANAU TRUST BOARD INCORPORATED

First Judgment Debtor

AND  SUZANNE HENRIETTA BAKER, ALBERT THOMAS BAKER, MASON BAKER AND MARIRE BAKER Second Judgment Debtors

AND  NIGEL BAKER

Third Judgment Debtor

Hearing:         22 May 2007

Appearances: E Bate for the plaintiffs and judgment creditors

No appearance for judgment debtors

Judgment:      22 May 2007

(ORAL) JUDGMENT OF STEVENS J

Solicitors/Counsel:

E Bate, PO Box 235, Hastings

BAKER AND RAMEKA AND ANOR V WAIMAKUKU WHANAU TRUST BOARD INC AND ORS HC NAP CIV 2000-441-86  22 May 2007

Introduction

[1]      This is an application by the plaintiffs and the judgment creditors for joinder of the judgment creditors as parties to the proceedings.  There is also an application for an order in respect of the sale by the Sheriff of certain land which has been the subject of a writ of sale.  Details of the land and the particulars of the application in respect of the sale by the Sheriff will be set out below.

[2]      In respect of both these applications, there was an ex parte application for an order abridging the time for filing a notice of opposition.  Such an order was made by Associate Judge Gendall and the applications were set down for a hearing today.

[3]      There was no appearance on behalf of any representative of either the first, second  or third  judgment  debtors.   Mr  Bate appeared  for the  plaintiffs  and  the judgment creditors.  In the absence of any appearance by the judgment debtors or formal notice of opposition, the case proceeded before me today unopposed.  I will deal with the question of service later in this judgment.

Factual background

[4]      The plaintiffs were successful in claims for breach of trust and fiduciary duties against the first, second and third defendants (now the first, second and third judgment  debtors).    The  circumstances  were  described  by  Durie  J  in  his  first judgment as “an unfortunate case of maladministration of trust fund by lay trustees”. This followed the settlement  of a claim against  the Crown under  the Treaty of Waitangi Act 1975 and in respect of which the  first  defendant  Trust Board had received  an  ex  gratia  payment  in  the  sum  of  $375,000  in  terms  of  a  deed  of agreement dated 20 December 1995:   see Chisholm & Ors v Waimakuku Whanau Trust Board Incorporated & Ors HC NAP CP 27/00 29 August 2005, Durie J (the No.1 judgment).

[5]      There is no need for me to canvass the details of the dispute which broadly related to the performance (or lack thereof) of trust and fiduciary obligations by the defendants.  At issue was the contention that the trust was established for the benefit of all of the descendants of Thomas Baker.  All such descendants were said to make up the members of the class of beneficiaries under the trust and it was alleged that the actions of the trustees had benefited only a few of the members of the class, rather than benefiting the whole of the class of beneficiaries.

[6]      The outcome of the claim is best illustrated by referring to the conclusion of

Durie J at 12:

I find that the first and second defendants are personally liable, jointly and severally, to recompense the Trust Board for the distributions made to individual members of the beneficial class and for such other payments as were not clearly for the general benefit of that class.  In terms of the findings already made, there is no liability to personally pay out to the plaintiffs. They are not individual beneficiaries but merely members of a beneficial class.

[7]      Mr Bate, appearing for the plaintiffs, submitted at the hearing before Durie J that further analysis of legal consequences and quantification of compensation would arise following the delivery of judgment.  He also noted that it could be necessary to invoke the Court’s inherent jurisdiction and supervisory role in respect of the trust and the duties of the trustees in order to give effect to the judgment of the Court.

[8]      Such steps were in fact taken by counsel on behalf of the plaintiffs.  Mr Bate sought orders appointing new trustees to represent  all branches of the family of Thomas Baker and this led to a second judgment of Durie J:  see Chisholm & Ors v Waimakuku Whanau Trust Board Incorporated & Ors (No.2) HC NAP CP 27/00

1 May 2006 (the No.2 judgment).

[9]      Orders were made by Durie J and the details are conveniently set out in the

No.2 judgment at [13]:

Accordingly there is an order pursuant to s 51 of the Trustee Act 1956 appointing Edward Henry Baker and Whakawe Charles Rameka as responsible trustees in substitution for the first defendant, the Waimakuku Whanau Trust Board Incorporated, as trustees of the trust established by a Deed of Agreement between Her Majesty the Queen and the first defendant of 20 December 1995, the trust now to be known as the Thomas Baker

Whanau Trust.  Pursuant to s 49 of the Act there is a further order appointing as advisory trustees Ivan Northcroft, Thomas Mill, Wayne John Hesketh, Bill Grace and Peter Karaitiana.

[10]     There were also orders made against the defendants for the payment of the sum  of  $306,522.90  to  the  new  trustees  which  was  named  the  Thomas  Baker Whanau Trust.   Finally, there were orders for payment of interest thereon at 11 percent per annum from 20 December 1995 to 31 July 2002 and thereafter to 29

August 2005 at 7.5 percent per annum.

[11]     The  new  trustees of the  Thomas  Baker  Whanau  Trust  are the  judgment creditors who seek to be joined as parties so that they may take appropriate steps to enforce the judgments of the Court.

[12]     It is to be observed that the judgment creditors are the representatives of the whole of the whanau of Thomas Baker.  This class includes not only the plaintiffs and  the  second  and  third  judgment  debtors,  but  also  any  other  descendants  of Thomas Baker who were not included as plaintiffs or second and third judgment debtors in this proceeding.

Service of the application

[13]     Following the abridging of time for filing a notice of opposition, counsel for the plaintiffs and judgment  creditors arranged for service of the application and supporting documentation.   Service was effected by faxing the documents to the offices of D J Porteous, solicitors, in Hastings.  Mr Porteous is the solicitor on the record.  He has cooperated in relation to service and the Court received a letter from him indicating that, even though he no longer acts for the defendants or any of them, when correspondence or documentation is received he sends copies on to Mr Nigel Baker, the third judgment debtor.  It is appropriate that Mr Porteous take such steps as, in the No.1 judgment, there was a reference to the fact (at 11) that Mr Nigel Baker had previously managed the affairs of the first judgment debtor.   Moreover, the second judgment debtors are members of his family.

[14]     Two affidavits of service were filed.  Furthermore, Mr Bate helpfully made inquiries during the adjournment of Mr Porteous.   I am satisfied that the technical requirements of the High Court Rules (the Rules) regarding service have been met.  I am also satisfied that, as a matter of general fairness, all necessary steps have been taken to bring to the attention of the first, second and third judgment debtors, the hearing of the applications today.

[15]     I am comforted in making this decision by the existence on the Court file of certain correspondence from Mr Nigel Baker.   He faxed to the Court a “notice of response” to the interlocutory application by judgment creditors.  This confirms that he was aware of the applications.

[16]     Mr Nigel Baker also faxed an affidavit to the Court.  Subsequently, Mr Baker was spoken to  by the Deputy Registrar by telephone and he confirmed that the documents which he had  faxed to the Court were on behalf of himself as third judgment debtor (and third defendant).  Mr Baker was advised that originals must be filed – not just faxed copies.  He was instructed that a formal notice of opposition must be filed by the first judgment debtor (the Trust) if it wished to oppose the application for orders sought at today’s hearing.   The Deputy Registrar wisely suggested that Mr Baker obtain legal advice as to whether he needed to take any steps at this stage, particularly as execution of the writ of sale, to which part the present application relates, was against the property of the first judgment  debtor only.

[17]     When the case was called at 10am this morning, arrangements were made for the matter to be called in open court and in the court precincts on two occasions. There was no appearance on behalf of any representative of the first, second and third  judgment  debtors.     Furthermore,  Mr  Bate,  who  knows  the  individuals concerned from the earlier hearing, personally checked in the precincts of the court and reported that he could not find any of them here today.

[18]     In the light of all of the above factors, I conclude that all possible steps have been taken to bring to the attention of the first, second and third judgment debtors, the knowledge of the applications before the Court.

Application for joinder of judgment creditors

[19]     As noted above, the plaintiffs and the judgment creditors have moved for an order that the judgment creditors be joined as parties in order to enable the Court to determine this application.  They have made this application on the basis that they were appointed as trustees of the Thomas Baker Whanau Trust by order of Durie J made on 28 April 2006:  see the No.2 judgment.

[20]     Such an application is made under r 97(1)(b) of the Rules.  This provides:

(1)   The Court may at any stage of a proceeding, either upon or without the application of any party, and on such terms as appear to the Court to be just, order-

…

(b)  That the name of any person who ought to have been joined, or whose presence before the Court may be necessary to enable the Court effectually and completely to adjudicate upon and settle all questions involved in the proceeding be added, whether as plaintiff or defendant.

[21]     The  question  for  determination  is  whether  the  joinder  of  the  judgment creditors is necessary to enable the Court to deal effectually and completely with all aspects of the remaining parts of this litigation.   This would  include, but  is not limited to, the other part of the application before the Court, namely, the orders in respect of the sale by the Sheriff.  Mr Bate submitted that it is likely that there will be further steps required to be taken by the plaintiffs and the judgment creditors in respect of the execution of the judgments against the second and third judgment debtors.  But of immediate concern is the need to ensure that the writ of sale by the Sheriff in respect of the land of the first judgment debtor proceeds in an efficient and effective  manner.   The  judgment  creditors are responsible  for  ensuring  the  sale process goes ahead smoothly.

[22]     With respect to the application for joinder, I have considered the careful and comprehensive  submissions by  Mr  Bate  and  conclude  that  an  order  for  joinder should be made.  The applicants have established that the requirements of r 97 for joinder of the judgment creditors have been met.   I therefore order that Edward Henry Baker and Whakawe Charles Rameka, being the responsible trustees of the

trust established by Deed of Agreement between Her Majesty the Queen and the Waimakuku  Whanau  Trust  Board  Incorporated,  dated  20 December  1995,  and known as Thomas Baker Whanau Trust, be joined to the proceeding as judgment creditors.

Application for order in respect of sale by the Sheriff

[23]     The application made by the plaintiffs and judgment creditors in respect of the proposed sale seeks the following order:

That if the Judgement (sic) Creditors are the highest bidders at the sale of the

First Judgment Debtor’s properties pursuant to the writ of sale issued on

29 March  2007;  being  the  properties  in  certificates  of  title  HBP1/543, HBP3/414, HBP3/415 and HBP3/416 as specified in the notice of issue of writ of sale and seizure of land by Christopher Greaney, Sheriff, High Court, Napier dated 29 March 2007; and are declared by the auctioneer to be the purchasers of any of these properties; they may pay the purchase price by way of set-off against the judgments held by the plaintiffs in this proceeding (except for the deposit which shall be paid in cash).

[24]     Such an application is made under r 599 of the Rules.  This provides:

599 Mode and conditions of sale

(1) All sales under a writ of sale shall be-

(a) By public auction upon the terms and conditions approved by the Registrar; or

(b) With the consent of the parties, or by order of the Court made on the application of either party, by private treaty.

(2) A sale under a writ of sale may, at the discretion of the officer executing the writ, be of all the property seized in one lot or in several lots.

(3) Unless the Court otherwise directs, all sales-

(a) Shall be for cash on delivery, assignment, or transfer; and

(b) Shall be of the estate, right, title, or interest only of the judgment debtor in the chattels or land put up for sale.

[25]     Of  particular  relevance  to  the  present  application  is  r  599(3)(a)  which requires that all sales under a writ of sale shall be for cash on delivery, assignment or transfer, unless the Court otherwise directs.   The present application seeks such a direction.

[26]     Before dealing with the specific application, it is appropriate to set out the chronology of steps taken by the plaintiffs following the delivery of the two judgments of Durie J in the litigation.   The chronology will briefly summarise the steps taken by the plaintiffs in the execution process leading up to the hearing today.

[27]     Following the delivery of the judgments, the plaintiffs sealed formal orders in respect of each judgment.  Subsequently, an order was sealed in respect of costs and disbursements against the defendants, now the judgment debtors.   All such orders were served on all defendants.   Thereafter, the plaintiffs obtained charging orders absolute in respect of all judgment debtors except for two pieces of land owned by the third judgment debtor.   In respect of such land, one charging order nisi was originally sought and made, and then registered on the title.  Subsequently, a further charging order nisi was made and registered against another piece of land of the third judgment debtor.   Charging orders absolute have recently been made in respect of both charging orders nisi by Associate Judge Gendall.

[28]     In respect of the land of the first judgment debtor, an order for a writ of sale was issued by the Court on 27 March 2007.  In the affidavit filed by Edward Henry Baker, one of the judgment creditors, details of all of the properties owned by the first judgment debtor were provided to the Court.  These are as follows:

a)        All the  property comprised  in  certificate of title  HBP1/543  being

Section 1, Survey Office Plan 10143 Hawkes Bay Registry.

b)       All the  property comprised  in  certificate of title  HBP3/414  being

Section 1, Survey Office Plan 10288, Hawkes Bay Registry.

c)        All the  property comprised  in  certificate of title  HBP3/415  being

Section 2, Survey Office Plan 10288, Hawkes Bay Registry.

d)       All the  property comprised  in  certificate of title  HBP3/416  being

Section 3, Survey Office Plan 10288, Hawkes Bay Registry.

[29] The sale process is proceeding. Counsel for the plaintiffs and judgment creditors has filed with the Court particulars and conditions of sale in respect of the forthcoming auction. It is in respect of this auction that the order set out at [23] above is sought.

[30]     In his detailed submissions in support of this application, Mr Bate referred first to r 599(3).  According to his research, there was no authority which dealt with circumstances in which the Court might otherwise direct that a sale be for cash on delivery or transfer as referred to in r 599 of the Rules.  In the absence of authority, I approach the application as a matter of principle, on the basis that the Court has a broad discretion as to when it might be appropriate to otherwise direct.

[31]     Mr Bate also referred to r 592 which deals with disposal of proceeds:  This provides:

Disposal of proceeds

The officer to whom a writ of sale is directed shall, out of the money seized under the writ, or recovered from any person liable on any cheques, bills of exchange, promissory notes, bonds, or other securities seized thereunder,-

(a)   Discharge all claims which by law are entitled to be paid in priority to

the claim of the judgment creditor; and

(b)   Pay the fees and expenses of executing the writ; and

(c)   Pay over to the judgment creditor a sufficient sum to satisfy the amount directed to be levied; and

(d)   Pay any surplus to the judgment debtor.

[32]     Of particular relevance to the proposed auction is the fact that the Sheriff must pay the fees and expenses of executing the writ out of the money seized under the writ.  It is for this reason that it is proposed that, if the judgment creditors are successful at the auction, they will pay the deposit in cash.

[33]     In  further  elaboration  of the  argument  seeking  an  order  under  r  599(3), Mr Bate dealt with the matter on two bases.   First, on an analytical approach, and second dealing with the question of fairness.  As to the first, he submitted that there would be no disadvantage to the auction process if the order were granted enabling the judgment  creditors to  pay the purchase  price  by  way  of set-off against  the judgments held by the plaintiffs.   He submitted that having an extra bidder at the

auction would in fact be an advantage to the auction process.   But to achieve this, there needed to be a direction from the Court, as required by r 599(3).

[34]     I agree that there is no disadvantage.  In fact, there is likely to be a benefit to the auction process if the order sought is made.  Before concluding on this part of the application, I will deal with the question of fairness.

[35] Mr Bate submitted that this was not a case of the judgment creditors seeking to railroad an execution of the sealed orders following judgment. He submitted that the four pieces of land in question (described at [28] above) had been acquired by the first judgment debtor trust for charitable works. This is supported by the No.1 judgment. The Judge stated at 5:

In 1991 Henry and Nigel Baker  were also involved in incorporating the Waimakuku Whanau Trust Board under the Chritable Trusts Act 1957 to provide  work  and  educational  opportunities  for  young  people  of  the Tarawera district.    Various forestry schemes were introduced with government funding.  A former government works depot was acquired as a base.

[36]     Mr Bate further submitted that the judgment creditors as responsible trustees have the requirement under the objects under the Thomas Baker Whanau Trust to benefit all of the descendants of Thomas Baker.  As noted above, all of the judgment debtors, apart from the trust, are included in that  class.   Mr Bate observed that Thomas Baker had farmed originally in Tarawera and there had been an expectation that the base for the trust would be at Tarawera.  For reasons which there is no need to canvass, this hope was not fulfilled.  But the sale of the four pieces of land which are  located on  the  main  road  between  Napier  and  Taupo  would  mean  that  the objectives of the trust, and hence the opportunity to benefit all beneficiaries within the class, would be facilitated.

[37]     In essence, it would mean that the responsible trustees would gain control over the destiny of the assets.  They would be required to conduct the trust for the benefit of all beneficiaries.   This is what the plaintiffs and judgment creditors had contended (successfully before Durie J) should have been done in the first place.

Disposal

[38] I accept the submissions made by Mr Bate. I conclude that, both as a matter of analysis and a matter of fairness, it is appropriate that an order as described at [23] above should be made pursuant to r 599(3) of the Rules in terms of the order sought.

[39]     My reasons for so concluding are that it will benefit the auction process for there to be an extra bidder.   The judgment creditors have no other assets than the judgment  debt.    Accordingly,  the  order  would  enable  them  to  use  part  of  the judgment debt to acquire the properties that would lead to them having control of the assets.  The benefits outlined by Mr Bate would be likely to follow.

[40]     If, however, the judgment creditors are not successful at the auction, then at least the bidding process will have been enhanced.   Competition will have been provided to other bidders and this is essential to a successful auction process.  The trustees will then benefit by being able to enforce the judgment in part against the assets of the first judgment creditor by accessing the cash generated from the sale process.

[41]     For the above reasons, I consider it is appropriate to direct that any sale to the judgment creditors may be for other than cash on transfer.  I exercise such discretion under r 599(3) of the Rules and make the order sought in terms of the application.

Costs

[42]     An application for costs has been made.  I direct that costs in favour of the plaintiffs and judgment creditors be awarded on a 2B basis.   Counsel can file the

necessary documentation with the Registry.

Stevens J