Bourke v Bourke

[2023] NZHC 989

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2021-419-000055

[2023] NZHC 989

BETWEEN

JOHN HENRY BOURKE and FINNZ TRUSTEES (2015) LIMITED AS
TRUSTEES OF THE JHB TRUST
First Plaintiffs

JOHN HENRY BOURKE AND ANDREA MAREE BOURKE AS PARTNERS OF

THE JOHN HENRY AND ANDREA MAREE BOURKE PARTNERSHIP

Second Plaintiffs

AND

MARY LOUISE BOURKE

First Defendant

SIMON REDDING MAKGILL
Second Defendant

LISA JULIE WARE, MATTHEW SIMON MAKGILL, LUCY ANNE YOUNG, MAYUAN SI AND MONIQUE LEIGH MEDLEY-RUSH

Third Defendants

Hearing:	(On the papers)
Judgment:	1 May 2023

JUDGMENT OF VENNING J

Pleadings/inspection

This judgment was delivered by me on 1 May 2023 at 11.30 am, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:Gurnell Harrison Stanley Law/T Rainey, Auckland P Morgan KC/M Jepson, Hamilton

McElroys, Auckland Harkness Henry, Hamilton

JOHN HENRY BOURKE and FINNZ TRUSTEES (2015) LIMITED AS TRUSTEES OF THE JHB TRUST v MARY LOUISE BOURKE [2023] NZHC 989 [1 May 2023]

Parties

[1]                  The first plaintiff trustees form formerly owned a dairy farm at Fencourt Road, Cambridge. The second plaintiffs farmed the property. John Bourke is the son of the first defendant and the late Henry Bourke. Henry died on 8 January 2014 leaving his estate to his three children’s trusts in equal shares – (the first plaintiff and two other trusts, one for each of John’s sisters). The second defendant is a consultant, associated with the third defendant solicitors’ firm based in Cambridge. The first and second defendants are executors of Henry’s estate.

Background

[2]                  In May and June 2015 it was agreed between the family, with the involvement of the second defendant, to incorporate a company Clover4 Limited to purchase the farm from the Trust. The first plaintiff, first defendant and the two trusts of John’s sisters would each hold 25 per cent of the shares. It was intended that that be an interim solution.

[3]                  In the event, the sale was concluded but the parties have fallen out. The plaintiffs claim the sale was at under value. These proceedings were issued in March 2021.

Fixture/procedural background

[4]                  The proceedings are now scheduled for trial on 28 August 2023. The close of pleadings date was 23 December 2021. The plaintiffs’ evidence was due to be exchanged on or before 20 April 2023.

[5]                  Despite the fact the close of pleadings date was over a year ago, the plaintiffs recently filed interlocutory applications seeking leave to file:

(a)an amended statement of claim; and

(b)an application for inspection of the property (by a valuer) now owned by Clover4 Limited.

[6]                  The application for leave to amend the statement of claim was opposed. The application for inspection was not opposed in principle but the parties could not agree costs.

[7]                  In a minute issued on 5 April 2023 Wylie J fixed a timetable for the exchange of submissions in relation to both applications and directed that they be heard on the papers. The parties have exchanged submissions and the Registrar has referred the file to me as duty Judge.

The amended pleading

[8]In the original statement of claim the plaintiffs raised four causes of action:

(a)misrepresentation against the first defendant (although there was a reference to a representation by one of John’s sisters, she is not a party). The claim was only against the first defendant;

(b)breach of contract, a claim by the second plaintiffs against the first defendant;

(c)a claim in negligence against the second and third defendants alleging breach of the duty of care owed to the plaintiffs by the second and third defendants in their capacity as solicitors to the parties;

(d)breach of fiduciary duty alleged against the first and second defendants in their capacity as trustees of the estate.

[9]                  The proposed amended pleading no longer pursues the causes of action in misrepresentation and breach of contract. The proposed amended pleadings allege:

(a)breach of the duty of care owed by the second and third defendants as solicitors;

(b)breach of fiduciary duty against the second and third defendants in their capacity as solicitors;

(c)breach of fiduciary duty owed by the second defendant as trustee; and

(d)breach of fiduciary duty owed by the first defendant as trustee.

[10]              It appears the sole reason for the amendment is that the previous solicitors acting for the plaintiffs terminated the relationship in October 2022 and the new solicitors and counsel now retained consider the claim should be amended. John Bourke has sworn an affidavit in support attaching a draft of the proposed amended claim. He does not provide any other explanation.

[11]              The first defendant submits there has been a complete change between the first claim which proceeded on the basis an agreement was entered into by the trustees because of cashflow difficulties to a case in which it is now asserted that the Trust could in fact refinance. The first defendant is concerned that further discovery will be required and further time will be taken to exchange further evidence.

[12]              The second and third defendants oppose leave being granted in relation to the amended claim in negligence, the new claim for breach of fiduciary duty by the second and third defendants and the specific pleading of breach of fiduciary duty against the second defendant as trustee. They say the defendants will be prejudiced in preparation of their evidence by the introduction of the matters at this late stage, and further, the claim of breach of fiduciary duty by the second and third defendants qua solicitor, is statute barred.

[13]              The plaintiffs submit the supplementary discovery recently provided by them addresses the issues relied on in the amended claim. As to the second and third defendants’ argument the new cause of action is time barred, the plaintiffs submit that the proposed second cause of action for breach of fiduciary duty against the second and third plaintiffs arises out of the same facts and circumstances in the current pleading. It was always alleged the second defendant acted as solicitor for the Trust, and owed a fiduciary duty as a professional trustee. The plaintiffs say the pleading he owed fiduciary duties as solicitor is “encompassed within the allegation that he owed fiduciary duties as professional trustee”.

Analysis

[14]              As an application for leave to take a step after the close of pleadings, r 7.7 applies. Generally an applicant for leave to take steps after the close of pleadings date will have to satisfy the Court it would:1

(a)be in the interests of justice;

(b)not significantly prejudice other parties; or

(c)not cause significant delay.

[15]              A number of factors are relevant. The timing of events is relevant. The application is very late in the piece. The application is made over a year after the close of pleading date, which was agreed by consent. New solicitors and counsel were instructed at the end of November 2022. The application for the amended pleading was not made until early March 2023, only a month or so before the first evidence was required to be exchanged.

[16]              However, on balance I accept that, save for the fresh cause of action, which alleges a breach of fiduciary duty by the second and third defendants in their capacity as solicitors, any prejudice to the defendants can be addressed by further discovery, and providing an extension of time for the defendants to produce their evidence. Two causes of action are removed in the proposed new claim. The second plaintiffs no longer appear to have a claim and should be removed from the pleading. The proposed third and fourth causes of action against the second and first defendants respectively for breach of fiduciary duty as trustee effectively simply separate out the allegations in the existing fourth cause of action for breach of trustees’ fiduciary duty pleaded against both. While the pleading may be further detailed there is sufficient time between now and trial for those matters to be addressed.

[17]              However I accept the submission on behalf of the second and third defendants that the cause of action alleging breach of fiduciary duty as solicitors is a new claim

1      Elders Pastoral Ltd v Marr (1987) PRNZ 383 (CA).

and is different to the existing cause of action. The only pleading against them as solicitors in the existing claim is in negligence for breach of duty of care. While there was a pleading against the second defendant for breach of fiduciary duty that clearly was on the basis of his position as trustee, not qua solicitor.

Result - pleading

[18]              The application for leave to amend the pleading will be granted on terms. Leave is granted to file the amended claim with the exception of the pleading at the second cause of action at paragraphs 41 to 44 of the proposed amended claim. Leave is not granted in relation to those paragraphs.

[19]              The granting of leave is in this case an indulgence. The plaintiffs are to pay the first defendant’s and the second and third defendants’ costs on a 2B basis for that application.

[20]              The plaintiffs are also to file and serve a further affidavit of discovery by Friday, 12 May 2023, addressing the documents referred to in the submissions of the first defendant at paras 21 and 28.

[21]              The time for the defendants to exchange their evidence is extended to 26 June 2023 (on my calculations that is 45 working days in advance of the fixture as opposed to the existing requirement of 60 working days).

Application to inspect

[22]              The application to inspect was an application to allow a valuer to attend at the property now owned by Clover4 Limited to inspect the property to prepare a valuation. The application was made on 15 March. As noted the parties largely agreed the inspection. The matter fell down on the issue of costs.

[23]              Where a non-party to the proceedings is involved any costs of the non-party associated with the application and any inspection are normally payable as a condition of any order, similar to a non-party discovery order.

[24]              Counsel for the plaintiffs notes no order was actually made and makes the point that 50 per cent of the parties with shareholding in Clover4 are parties to the litigation. Nevertheless Clover4 Limited it is a separate corporate entity. It has its own separate identity and is a non-party to these proceedings. It was quite entitled to take separate legal advice about its position even if ultimately no order was made or was necessary.

[25]              I do, however, take into account the connection in awarding costs to scale rather than on a solicitor/client basis.

[26]              The plaintiffs are to pay Clover4 Limited costs on a 2B basis for the attendances associated with the application for inspection. I apprehend there are no additional costs associated with the inspection/valuation itself.

[27]              The ultimate incidence of these costs as between the plaintiff and the defendants is reserved to trial.

Venning J