Burgess v Monk

[2017] NZHC 3255

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

I TE KŌTI MATUA O AOTEAROA

TE ROTORUA-NUI-Ǡ-KAHU ROHE

CIV 2013-463-187 [2017] NZHC 3255

BETWEEN

WARWICK JAMES BURGESS

First Plaintiff

CTE BURGESS LTD Second Plaintiff

AND

PHILLIP CHARLES MONK First Defendant

NEW ZEALAND GUARDIAN TRUST COMPANY LTD

Second Defendant

Other defendants continued overleaf

Hearing:

25, 26, 27, 28, 29 September, 2, 3, 4, 5, 10, 11, 12, 13, 16, 17,

18, 19, 20, 24, 26, 27, 31 October, 1, 2, 3, 6, 7, 9, 10, 13, 14, 15 and 20 November 2017 (at Hamilton)

Counsel:

D G Chesterman, S Carey and E McGill for Plaintiffs
R J Latton, H Ford, G Schumacher and S Laing for First and
Second Defendants
No appearance by, or on behalf of Third Defendant

A S Ross QC and G Beresford for Fourth and Sixth Defendants C T Walker QC and A Lenard for Fifth, Seventh and Eighth Defendants

Judgment:

20 December 2017

JUDGMENT (NO. 6) OF HEATH J

This judgment was delivered by me on 20 December 2017 at 11.30am pursuant to

Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

BURGESS v MONK [2017] NZHC 3255 [20 December 2017]

ANDDAVID TROUNSON Third Defendant

ANDALISDAIR HUGH MORRISON Fourth Defendant

ANDARMER FARMS (N.I.) LTD Fifth Defendant

AND              OʼSULLIVAN CLEMENS

Sixth Defendant

ANDGRAEME WILLIAM ELVIN AND SHARLENE DARRAGH

Seventh Defendants

ANDTIHOI HOLDINGS LIMITED Eighth Defendant

CONTENTS

1.        The story starts in 1936  [1]

2.        Preliminary observations  [16]

3.	An (a)	outline of events 1936-1970	[21]
(b)	The 1970s	[30]
(c)	The 1980s
(i)       The effect of Christian’s death	[37]
(ii)      Estate planning for Molly	[50]
(d)	The 1990s	[56]
(e)	2000–2007	[74]
(f)	2008-2010	[93]

4.        The claims

(a)	The constructive trust claims	[113]
(b)	Trustee duty claims
Nature of the claims	[119]
“Intentional” breaches	[121]
“Negligent” breaches	[123]
(c)	Fiduciary duty claims	[125]
(d)	Breach of 2009 settlement agreement	[128]
(e)	Claim against Mr Monk	[132]
(f)	Claim against Mr Morrison and O’Sullivan Clemens	[134]
(g)	Claim against the Armer interests	[139]

5.        Analysis

(a)       The constructive trust claims

(i)        The Lankow v Rose trust

The nature of the claim  [143] The evidential foundation for the claim        [161] Conclusion  [176]

(ii)       The Lake v Bayliss trust

The nature of the claim  [177] CTE’s claim  [184] Why was the 1980 Agreement signed?          [187] Was the 1980 Agreement enforceable?         [195]

(b)       Claims against Christian’s Trustees and Molly’s Trustees

(i)        The trustee duty claims

The duty to execute the trust  [214] Did Molly’s will create a precatory trust?     [217] Duty of disclosure  [228] Obligation to treat beneficiaries                   [234] “even-handedly”

(ii)      The fiduciary duty claims  [242] Christian’s Trustees’ fiduciary duties            [248] Molly’s Trustees’ fiduciary duties                  [255]

(iii)     The development claim

The nature of the claim  [262] Relevant facts  [270] Mr Burton’s evidence  [292] Relevant legal principles  [296] The role of Christian’s Trustees: 1980/1985  [302] Evaluation of development claim                  [312]

(iv)      The sale at an undervalue claim

The nature of the claim  [321] The valuation issues  [323] Valuation of the Burgess Farm  [328] Warwick’s 2009 “market value” offer           [338] Valuation of the forestry assets  [345] Sale at an under value claim: Conclusions    [356]

(v)      The 2009 settlement agreement claim

Nature of claim  [357] Context  [358] The “implied term” point  [381] The “open market” point  [392]

(c)       Claim against Mr Monk

(i)       The fiduciary duty claim  [406]
(ii)      The negligence claim  [409]

(d)       Claim against Mr Morrison and O’Sullivan Clemens

(i)       Nature of claims  [413] (ii)      Was Mr Morrison a de facto trustee?  [417] (iii)     Other fiduciary obligations  [420]

(e)       Claim against the Armer interests

(i)       Knowing receipt

Nature of claim  [428] Legal principles  [435] Mr Western’s interaction with Mr Armer      [447] Evaluation of “knowing receipt” claim        [482]

(ii)      The “buried or destroyed” claim

The nature of claim  [491] Background  [492] The Armer Farms perspective  [500] Evaluation  [505]

6.	Costs	[508]
7.	Concluding comments	[517]
8.	Result	[524]
9.	Addendum	[528]

The story starts in 1936

[1]      In 1936, William Burgess (William)1  acquired a farm property at Tihoi, on the western side of Lake Taupo (the Burgess Farm).  From a young age, William’s son, Christian Burgess (Christian), worked on that farm for little financial reward.  In addition to the farm work that he undertook, Christian and his wife, Mary Burgess (Molly), established a general store, known as the Trading Post (Trading Post).

[2]      The  Burgess  Farm  and  the  Trading  Post  were  situated  on  contiguous properties, each registered in William’s name.   Christian and Molly opened  the Trading Post in about 1946.  They operated it until Christian’s death in 1980.  Their business partnership was evidenced by a deed signed by Christian and Molly, dated

31 January 1956.

[3]      During the 1940s and 1950s, there was a general understanding within the Burgess family that Christian would, in the fullness of time, acquire the Burgess Farm from his father.  In 1959, that occurred.  With the assistance of a loan from his parents, secured by mortgage over the two properties, Christian bought both the Burgess Farm and the Trading Post.  The debt evidenced by the mortgage was to be discharged through gifting over a number of years. William died on 4 July 1964.

[4]      Christian  and  Molly had  two  sons, Warwick and  Hilton.   In  1962,  after returning from boarding school in Auckland, at the age of 17 years, Warwick worked on the Burgess Farm in much the same way as had his father.  Hilton did not exhibit any real interest in, or aptitude for, farm work.   From the mid-1960s, there was a general family expectation that, in due course, Warwick would take over operation of the Burgess Farm for his own benefit.

[5]      However, that did not happen.   Instead, in 2009, after both Christian and Molly had died, both the Burgess Farm and the Trading Post were sold to a third party, Armer Farms (N.I.) Ltd (Armer Farms).  At the age of 64 years, Warwick was faced with the prospect of receiving only a share of the proceeds of sale of the

properties, as opposed to acquiring the Burgess Farm in his own right.   He was

1      Without intending any disrespect to them, for convenience I shall use the first names of the members of the Burgess family who feature in this proceeding.

aggrieved by that outcome.  This proceeding was borne of Warwick’s desire to right

what he believes is a grave injustice.

[6]      Warwick and CTE Burgess Ltd (CTE), a family company incorporated by his father in 1970,2  sue a number of parties in an endeavour to have the sale to Armer Farms rescinded, or to obtain compensation in a sum of about $15 million for the losses they allege have been suffered.  At the commencement of the trial, allegations of reprehensible conduct, including dishonesty, were made against the trustees of the deceased estates of Warwick’s father and mother, a solicitor who had acted for Christian and Molly, and their personal representatives, over a long period of time, and a director of Armer Farms, Mr Colin Armer.   At the conclusion of evidence, Mr Chesterman,  for  Warwick  and  CTE,  expressly  disavowed  any  allegation  of reprehensible conduct against those parties.  As I said in open Court at that time, the concession was properly made.  There was no evidential foundation to support those allegations.

[7]      As the allegations of reprehensible conduct have been in the public domain, it is important that  I make it clear that they have not been proved.   Expressly,  I exonerate Mr Phillip Monk, New Zealand Guardian Trust Co Ltd (Guardian Trust),3

Mr Alisdair Morrison  and  Mr  Colin Armer from  any suggestion  of dishonest  or reprehensible conduct.   As I am aware that prominent articles were published in regional newspapers to report the allegations, I direct that this judgment shall be published in the Decisions of Public Interest, on the Courts of New Zealand website. It will be uploaded to that site no earlier than 10am on 21 December 2017.

[8]      To establish a proprietary right in the Burgess Farm (including native and exotic trees situated on it), Warwick and CTE bring claims based on alleged constructive trusts against Christian’s personal representatives, Mr Monk and Guardian Trust (Christian’s Trustees).   Molly’s personal representatives, Mr Monk

and Mr Anthony Western (Molly’s Trustees), are also sued on the same basis.

2      Generally, see paras [31]–[41] below.

3      This company was known by various names over the period in issue.  For convenience, I refer to it as Guardian Trust.

[9]      Mr Western   died   on   6   October   2011.      His   personal   representative, Mr Trounson, has been joined.  He has taken no steps to defend the proceeding, on behalf of Mr Western.  Although Guardian Trust was substituted, as one of Molly’s Trustees, on Mr Western’s resignation from that office on 21 December 2009, it is sued solely as one of Christian’s Trustees.    All of the acts or omissions on which Warwick relies to promote his claim against Molly’s Trustees occurred before Mr Western resigned.

[10]     In 1976, Mr Morrison was a solicitor in the Rotorua firm of Urquhart Roe & Partners.  He is sued in respect of his role as legal adviser to Christian and Molly Burgess, Christian’s Trustees and Molly’s Trustees over a period commencing in the mid-1970s and continuing to 2010.4     He is also alleged to have assumed responsibilities as a de facto trustee of the estates of Christian and Molly, or of one or other of the constructive trusts that Warwick and CTE allege existed.

[11]     Mr Morrison is now a partner of O’Sullivan Clemens, whom he joined in

1993.   O’Sullivan Clemens is sued on the basis that it is vicariously liable for actionable acts or omissions made by Mr Morrison while he has been a partner of that firm.  In addition, O’Sullivan Clemens is sued in respect of the role it played in the course of failed negotiations for the sale of the Burgess Farm and the Trading Post to Warwick in 2008 and 2009, in particular their actions in facilitating the sale of the Burgess Farm and Trading Post to Armer Farms in 2009.

[12]     Armer Farms is sued as the purchaser of the Burgess Farm and the Trading Post.   Warwick and CTE allege that Armer Farms (through knowledge acquired during the course of pre-contractual discussions between Mr Armer and Mr Western) knowingly acquired those properties in breach of the constructive trusts they allege were  created  in  their  favour,  and  at  an  undervalue.    Two  associated  interests, Mr Graeme Elvin and Ms Sharlene Darragh, in their capacity as trustees of the FTB

Trust (FTB Trust) and Tihoi Holdings Ltd (Tihoi Holdings) have been sued, as part

4      During the periods relevant to this case, Mr Morrison has been a member of law firms of several names.  Initially, he was with Urquhart Rowe & Partners and its successor partnerships.  After dissolution of Trotter McKechnie Quirke & Morrison, he joined O’Sullivan Clemens, where he remains a partner.

of the rescission claim.5   FTB Trust was nominated as purchaser of the Trading Post, while Tihoi Holdings acquired forestry rights on the Burgess Farm.   Unless the context otherwise requires, I refer to Armer Farms and those parties (collectively) as the Armer interests.

[13]     Whatever  the  outcome  of  this  proceeding,  there  will  be  no  winners. Warwick, now aged 72 years, is angry and bitter about the way in which he has been treated by those whom he believes had control of the Burgess Farm and Trading Post properties since his father’s death in 1980.   The subjects of his antipathy include Christian’s Trustees, Molly’s Trustees and Mr Morrison.  Warwick is convinced that they are responsible for his predicament and must be held accountable.  Warwick has never married, and has no children.     He sees himself as having forgone the opportunity of such relationships in order to secure the Burgess Farm.

[14]     My focus is on the question whether Christian’s Trustees, Molly’s Trustees, Mr Monk, Mr Morrison, O’Sullivan Clemens and the Armer interests have any legal responsibility to Warwick and/or CTE for what occurred.   While it is easy to understand the distress that Warwick feels, and his desire for retribution, this is a Court of law, not a Court of morals.  It is important that courts do “not contribute to the creation of a society bent on litigation, which is premised on the illusion that for every misfortune there is a remedy” against a third party.6   This point was put vividly by Lord Templeman, in the context of a negligence claim:7

The pleading assumes that we are all neighbours now, Pharisess and Samaritans alike, that foreseeability is a reflection of hindsight and that for every mischance in an accident-prone world someone solvent must be liable in damages.

[15]     The costs for all involved have been crippling.  The hearing took 32 sitting days to complete.  For reasons given in three judgments that I delivered in the course of the trial,8 it is likely, as a result of the decisions I have made, that all parties will

be considerably out of pocket. There are no winners in this litigation.

5      See para [430]–[433] below.

6      Gorringe v Calderdale Metropolitan Borough Council [2004] UKHL 15, 1 WLR 1057 at para

[2] (Lord Steyn).

7      CBS Songs Ltd v Amstrad Consumer Electronics Plc [1988] AC 1013 (HL) at 1059.

8      See Burgess v Monk [2017] NZHC 2424 (4 October 2017), Burgess v Monk [2017] NZHC 2618 (25 October 2017) and Burgess v Monk [2017] NZHC 2732 (8 November 2017).

2.       Preliminary observations

[16]     The Fourth Amended Statement of Claim (the Amended Claim), on the basis on which the trial proceeded, is prolix and difficult to understand.9   Many allegations of fact are built on flimsy assumptions rather than sound foundations.  A number of different legal concepts have conflated.  I have experienced difficulties in isolating the precise legal nature of a number of the claims, and in understanding the legal analysis on which they are based.   To say that the claim is over-complicated is a gross under-statement.

[17]     In order to address these problems, I have tried to deconstruct the Amended Claim.   In doing so, I have reformulated many of the claims and recharacterized some of the causes of action to fit within an appropriate legal framework.  While I may not  seem  to  analyse all  of the claims  as  pleaded  or  articulated  in  closing submissions, I believe I have addressed all questions of substance.   Equally importantly, I do not believe my attempts to simplify the claims have caused any prejudice to the defendants.   My restatement of the claims does not involve any amendment that would permit Warwick and CTE to go beyond the pleaded Amended Claim.  I have endeavoured, where possible, to determine the claims on the merits. If this case were to go further, it would be open for the successful parties to argue that my decisions are supportable on other grounds, for example limitation and laches.

[18]     The hearing was estimated to take between five and seven weeks.  In fact, its duration was close to 10 weeks.   Fortunately, counsel agreed to make closing submissions in writing, otherwise a further two weeks would have been required. Given the volume of the evidence that I heard, any attempt to summarise it will necessarily be both incomplete and selective.  Having said that, despite the range of claims  that  have  been  advanced  by Warwick  and  CTE,  much  of  the  narrative, covering a period of nearly 50 years, is not in dispute.

[19]     In making factual findings, I have been conscious of the need for care in determining  questions  of  credibility.     Many  of  the  participants  (for  example,

9      The Fourth Amended Statement of Claim runs to 78 pages and includes 346 paragraphs.

Christian, Molly, Hilton and Mr Western) have died, and are unable to tell their stories.  Although Warwick gives first hand evidence of the events in which he was involved, he did not participate in many exchanges that are evidenced in writing. The need to recount events that occurred over a period of almost half a century would put a strain on any memory.  As a result, my findings of fact have been made primarily on the consistency or inconsistency of the account in question with the contemporary documents.  There are no serious suggestions that any of the important documents have been forged, or otherwise altered with intent to mislead.

[20]     As a lengthy judgment is unavoidable, I indicate the structure I shall follow: (a)       First, I provide an outline of relevant events;

(b)      Secondly, I explain the nature of the claims; and

(c)       Thirdly, I analyse each of the claims in turn.

3.       An outline of events

(a)      1936–1970

[21]     From 1936 until its sale in 2009, the Burgess Farm was operated as a sheep and cattle farm.  In 1936, it consisted of about 1700 hectares, of which about 1000 hectares consisted of a block of land on which native trees stood.   Around 1945, William planted about 22.6 hectares of Douglas fir on the Burgess Farm (the primary Douglas fir plantation).  At about the same time, seven exotic species of trees were planted.10

[22]     Warwick was born in 1945.  At that time, Christian and Molly were working on the Burgess Farm for no meaningful financial reward.   Tihoi was a small and relatively remote community.  Christian and Molly established the Trading Post in

1946, the year before Hilton was born.  It operated as a general store, from which

petrol  could  also  be  acquired.    The  Trading  Post  proved  to  be  a  successful

10     For a summary of the trees staying and lying on the Burgess Farm at the time of the 2009 sale, see para [345] below.

community initiative, and a sound business enterprise.   Income derived from the operation of the Trading Post subsidised the Burgess Farm for many years.

[23]     In  1959, William  sold  the  Burgess  Farm  and  Trading  Post  properties  to Christian.    The  purchase  price  was  £27,120.    William  advanced  that  sum  to Christian, and took a mortgage in that amount over the properties to secure the loan. Over time, the mortgage was discharged through a gifting programme.

[24]     Aged 17 years, Warwick returned to the Burgess Farm in 1962.  He worked there until it was sold in 2009.  During the period between 1964 and 2009, Warwick spent little time away from the Burgess Farm.  He lived with his parents until his father died in 1980.  Thereafter, he lived with (and latterly provided some care for) his mother.  She died in 2007.

[25]     Between 1962 and 1970, Warwick’s primary duties involved maintenance and development of the Burgess Farm.   He also worked regularly in the Trading Post.   During the same period, Hilton made little or no physical or financial contribution to the Burgess Farm.   He took up outside employment opportunities. Given his commitment to the land, and Hilton’s minimal contributions, Warwick asserts that it was understood by all members of the Burgess family, and was an express intention of his parents, that he would eventually “inherit” the Burgess Farm, including all timber.

[26]     In about 1964, Mr Monk met Christian and Molly.  At that time, Mr Monk was working as an accountancy clerk, in a firm at Putaruru.  In 1966, Christian and Molly followed Mr Monk to another accountancy practice, in Rotorua.   In general terms,  Mr  Monk  took  responsibility  for  preparing  the  annual  accounts  for  the Burgess Farm and Trading Post, and the related tax returns.   Over time, the professional relationship developed into one that was both friendly and social.  Mr Monk described Christian as “almost a father figure” to him.

[27]     In the late 1960s, rural accountants were concerned to ensure that farming clients engaged in careful estate planning, in order to minimise or extinguish the amount of estate duty to be paid on the death of the farm owner.  Estate duty was

charged on a percentage of the value of a property, at the date of the owner’s death. Financial advisers were acutely aware that failure to plan could well bring about the undesirable prospect of having to sell a farm to pay death duties.  That could put in jeopardy any intention to pass the farm from one generation to the next.  Depending upon the overall size of the estate of a person who owned a property, duty could be levied up to an amount equivalent to 40 per cent of the value.11

[28]     In the late 1960s, Mr Monk raised the need for estate planning with both Christian and Molly.   Because both the Burgess Farm and the Trading Post had grown significantly in  value, Mr Monk  was  concerned  that  if  Christian  (as  the registered proprietor of the land) died there was a real possibility that the Burgess Farm may need to be sold to pay estate duties.  In the initial phase of estate planning discussions, Christian and Molly consulted with Guardian Trust.   Mr Monk’s role was to explain the tax and financial consequences of various options put to Christian and Molly for consideration.

[29]     In determining what estate plan would best suit their needs, it was necessary for Christian  and  Molly to  make decisions  about  how their property should  be distributed between Warwick and Hilton.  They harboured a preference for Warwick to take over responsibility for the Burgess Farm.  That preference manifested itself in a recognition that Warwick should receive a larger share of the estate, in order to reflect the work that he had (and would in the future) put into the Burgess Farm. But, Christian and Molly also wanted to ensure their two children were treated equitably.  They were mindful of the need to pitch any percentage differential at a level that would disincentivise Hilton from taking any step to challenge a will in Court.

(b)      The 1970s

[30]     By about 1970, Christian and Molly had formed the view that there should be

a 60 per cent/40 per cent split of Christian’s estate, with the larger share going to

Warwick.  The division was directed to the total value of Christian’s notional estate,

11     For a summary of the Estate and Gift Duties Act 1968, see ILM Richardson and RL Congreve, Adams and Richardson’s Law of Estate and Gift Duty (5th ed, Butterworths, Wellington, 1978); in particular, the explanation of the term “dutiable estate”, at para [0/7].

as opposed to the Burgess Farm and other assets.  The proposed division was first recorded in a letter sent by Mr Monk to Christian and Molly in 1970.12   Mr Monk’s evidence was that, by 1976 at the latest, that split had been accepted by Christian, Molly,  Warwick  and  Hilton  as  appropriate.    That  evidence  is  consistent  with Warwick ceasing to undertake significant development work on the Burgess Farm after 1976.

[31]     One element of the estate plan involved the incorporation of CTE.   The possibility  of  transfer  of  the  Burgess  Farm  to  a  company  had  been  raised  by Mr Monk in the late 1960s.  In a comprehensive letter to Christian and Molly, dated

18 January 1970, Mr Monk set out the likely financial and taxation consequences of a company taking over as owner of both the Burgess Farm and the Trading Post.  He also described the position likely to pertain if death duty were charged; on the assumption that Christian were to die while registered proprietor of the land, with Molly  surviving  him  for  at  least  five  years.    As  a  result  of  considering  the information in that letter, and obtaining legal advice from their then-solicitor, Mr Doug Dillon of Urquhart Roe & Partners in Rotorua, Christian and Molly decided to establish a company.  CTE was incorporated in late 1970.

[32]     While the original directors of CTE were Christian, Molly and Warwick, Christian and Molly had complete control over its business affairs.  Each held 50 per cent of the 100 shares that carried voting rights.  Together, they made up a majority of the directors. The non-voting shares were divided into four parts:

(a)       Christian held 3,000 shares; (b) Molly held 3,000 shares;

(c)       Warwick held 2,900 shares; and

(d)      Hilton held 1,000 shares.

12     See also paras [31]–[33] below.

[33]     After its incorporation, CTE “leased” the Burgess Farm from Christian.  No written leases were ever prepared or executed.   A few years later, CTE acquired livestock, through a bailment arrangement.   During the period between 1970 and

1980, Warwick was employed by CTE to work on the Burgess Farm, though he was only allocated a salary in years when CTE was profitable. Although, because he was living on the Burgess Farm, Warwick had relatively few personal living expenses, some were paid out of CTE’s funds.

[34]     In 1936, there were about 1100 hectares of millable native timber on the Burgess  Farm.    More  Douglas  fir,  comprising  about  10  hectares,  was  planted between 1973 and 1976 (the secondary Douglas fir planation).   Warwick was involved in planting those trees.

[35]     Mr Monk gave evidence that, by 1976, there was general consensus that the preferred estate planning option was for CTE to acquire both the Burgess Farm and the Trading Post.  Before that could be done, there was another taxation problem to overcome.  This one involved stamp duties.  Stamp duty was calculated on the sale price of land.  When a sale to closely-held interests was involved, it was necessary to satisfy the Commissioner of Inland Revenue (the Commissioner) that the value of any proposed sale was at a genuine market price.  That was to disincentivise the use of artificially low sale prices to minimise the stamp duty payable.  In addition, the impact, for estate planning purposes, of the partnership between Christian and Molly had to be considered.   Although registered in Christian’s sole name, the Burgess Farm had been treated as a partnership asset of Christian and Molly in relevant financial statements.

[36]     By the time that the proposed sale to CTE was being actioned, Mr Morrison had taken over primary responsibility as the solicitor representing the Burgess family interests.    The  first  meaningful  step  to  implement  the  estate  plan  occurred  on

2 September 1978, when Christian made a will.   The terms of that will provide cogent evidence that, at the time it was executed, Christian contemplated that both the Burgess Farm and the Trading Post would be transferred to CTE before he died.

(c)      The 1980s

(i)       The effect of Christian’s death

[37]     On 9 September 1980, Christian signed an agreement for sale and purchase (the 1980 Agreement).  He purported to do so on his own behalf, as vendor, and on behalf of CTE, as purchaser.   If enforceable, CTE could have sued Christian to require  specific  performance  of  his  obligation  to  transfer  the  titles  to  both  the Burgess Farm and Trading Post properties to CTE for a consideration of $286,702, “or such other sum as may be fixed by special valuation if the same be ordered by the Inland Revenue Department on presentation of this Agreement for stamping.” The purchase price was to be advanced by Christian to CTE, and secured under a mortgage over the Burgess Farm and Trading Post properties.  That mode of finance was consistent with the terms of Christian’s 1978 will, and with the way in which William had sold the Burgess Farm and Trading Post to Christian in 1959.

[38]     In late September 1980, Christian decided to apply for an order under the Matrimonial Property Act 1976, to transfer a one-half share in the Burgess Farm and Trading Post properties to Molly.  Because any order would affect the incidence of existing ownership of the Burgess Farm and Trading Post, this step was inconsistent with a continuing desire to sell the properties to CTE.13   The reason for seeking an order under the Matrimonial Property Act 1976 was to ensure that, if Christian died before Molly, only his one-half share in the property would fall within the dutiable estate.

[39]     In an affidavit sworn in support of the Matrimonial Property Act application on 29 September 1980 (the September 1980 affidavit), just under three weeks after he had signed the 1980 Agreement, Christian deposed:

14.      THAT in 1972 new shop premises were built on the farm property but  on a  different  site.    This  coincided  with  the  formation  of  a  family company C.T.E. Burgess Limited and annexed hereto and marked with the letter  “D”  is  a  search  of  that  company.    That  the  voting  shares  in  the company are now held by my wife and myself equally and the non-voting shares have all been transferred to our two sons in unequal shares.

13     See also, paras [187]–[194] below.

15.      THAT the partnership between my wife and I has been in existence since approximately 1948 and in 1960 when the farm first appears in the balance sheet it was brought into the partnership as my contribution to the partnership.  No change in title was ever made.

16.      THAT all surplus profits from the [Trading Post] have throughout both before and after the transfer of the farm to me been used to develop the farm property.  There has never been any external borrowing to develop the farm.

17.      THAT the company now leases the farmland and the shop premises and owns the business but pays a rental to the partnership which now owns the buildings and the land.

18.      THAT there has never been a formal partnership agreement but the Inland Revenue Department has throughout accepted that there is a partnership.

…

21.      THAT I have entered into an Agreement for Sale and Purchase with St. Paul’s Collegiate School for the sale of 14.4 hectares and annexed hereto and marked with the letter “G” is a copy of that Agreement.

22.      THAT  I  have  similarly  entered  into  an  Agreement  for  Sale  of Purchase with C.T.E. Burgess Limited for the sale of the farm and annexed hereto and marked with the letter “H” is a copy of that Agreement for Sale and Purchase.

23.      THAT I anticipate that on a revaluation at the request of the Inland

Revenue  Department  the  value  of  the  farm  property  will  be  between

$450,000.00 and $500,000.00.  That our other assets consist of a life policy each with the Norwich Union Insurance Office for $3,500.00.   I have approximately $5,500.00 in the National Bank and National Savings and my wife  has  approximately  $3,700.00  in  the  National  Bank  and  National Savings account.

(Emphasis added)

[40]     Warwick  alleges  that  he  did  not  receive  a  copy  of  the  September  1980 affidavit until 2013.14     While the evidence establishes that a copy was sent by a locum acting in the place of Mr Morrison while he was on leave in August 1983, it does not appear that Warwick’s then-solicitor provided a copy of that document to Warwick.  Warwick’s claim that he did not see the September 1980 affidavit until

2013 is relevant to the timing of his present assertion that the 1980 Agreement is

enforceable, and created a constructive trust in favour of CTE.

14     In fact, the latest time at which he received this document was late November 2007.  See para [98](d) below.  The September 1980 affidavit annexed the 1980 Agreement as an exhibit: see para 22 of the September 1980 affidavit, set out at para [39] above.

[41]     Christian  died  on  2  October  1980,  only  a  few  days  after  swearing  the September 1980 affidavit.   Probate of the 1978 will15  was granted in favour of Christian’s Trustees on 7 January 1981. Although the titles to both the Burgess Farm and Trading Post properties were registered in Christian’s sole name, the 1978 will did not refer explicitly to either of them.  Relevantly, cls 2 and 3 of the will provided:

2.        I GIVE to my Trustees UPON TRUST the whole of my interest as mortgagee in any mortgage or mortgages now or hereafter given by C.T.E. Burgess Limited to myself and/or to myself and my wife MARY ALICE BURGESS:

(a)       To hold $30,000 worth thereof if she survives me for a period of one calendar month for my said wife absolutely.

(b)       To pay the net annual income arising therefrom or from any capital representing repayment of the mortgage(s) to my said wife during her life.

(c)       After the death of my wife to hold the capital as well as the income thereof in the following percentages and upon the following trusts absolutely:

(i)       60% to my son WARICK BURGESS

(ii)      40% to my son HILTON BURGESS

3.IF my wife survives me for the period of one calendar month then I GIVE to her the whole of the rest of my property both real and personal whatsoever wheresoever and of what nature or kind soever including any property over which I may have a power of appointment or disposition.

[42]     In the absence of an existing mortgage at the time of Christian’s death, the

Burgess Farm and the Trading Post properties fell into the residuary estate.  Clause

2(c) of the will reflected the 60/40 division of the parents’ property that Christian and Molly had previously agreed.  By virtue of cl 3 of the executed will, if Molly were to survive Christian for a period of more than one calendar month (as she did), she was entitled to the residue.

[43]     Difficulties  arose  because  the  1978  will  contemplated  that  a  sale  of  the

Burgess Farm and Trading Post properties to CTE would have been completed by

the time of Christian’s death.16    As the Matrimonial Property Act 1976 application

15     See para [36] above.

16     The relevant terms of the 2 September 1978 will are set out at para [41] above.

had not been determined by the date of his death, the Burgess Farm and Trading Post properties remained in his sole name, with estate duty to be fixed by reference to the value of those properties.   Although the 1980 Agreement had been signed on 9

September 1980, less than a month before Christian’s death, Christian’s Trustees formed the view, based on legal advice from Mr Morrison, that the 1980 Agreement was not enforceable.

[44]     Christian’s Trustees considered that estate duty could not be paid in full without the properties being sold.  In order to reduce (or extinguish) the amount of duty payable, a decision was made to pursue an application to the High Court for an order that would have the effect of recognising the partnership between Christian and Molly, to  which  Christian had  referred  in his  affidavit of 29 September 1980.17

Molly applied under the Matrimonial Property Act 1963, which at that time (despite

the passage of the 1976 Act) continued to apply when one spouse had died.18   As a result  of  the  1982  judgment  of  the  Court  of Appeal  in  Thompson  &  Preest  v Commissioner of Inland Revenue, the 1963 Act application was not pursued.19   The effect of the Court of Appeal’s decision in Thompson & Preest was to nullify estate duty benefits that advisers thought would flow from a successful 1963 Act application.

[45]     Christian’s Trustees changed tack.  They determined that Molly should make an application under the Declaratory Judgments Act 1908.  The application was filed in January 1982, and supported by an affidavit sworn by Molly on 23 December

1981.  In that proceeding, based on the 1956 partnership agreement,20 Molly sought

an order declaring her to be a 50 per cent owner of the Burgess Farm and Trading Post properties.  That application was granted by Prichard J, on 28 September 1982. As a result, 50 per cent of the Farm was declared to be owned by Christian’s Trustees, with the other half being owned by Molly.

[46]     After that order had been made, the Commissioner embarked on an audit of

Christian’s estate.  That response seems to have been provoked by the impact on the

17     See paras 15 and 18 of Christian’s affidavit, set out at para [39] above.

18     See Poppe v Grose [1982] 1 NZLR 491 (CA).

19     Thompson & Preest v Commissioner of Inland Revenue (1982) 1 NZFLR 302 (CA).

20     See para [2] above.

calculation of estate duty that the novel application under the Declaratory Judgments Act had brought about.   The extent of the estate duty obligation was not resolved until 1984.  Eventually, following a letter from the Commissioner to Guardian Trust dated 31 October 1984, the Commissioner accepted the validity and effect of the High Court’s declaratory order.  A refund of moneys previously paid on account of estate duty was made.

[47]     Nothing much happened for the balance of the 1980s.  Christian’s Trustees made a deliberate decision that, despite having discharged all debts on settlement of the estate duty claims, they would not distribute Christian’s one-half share in the Burgess Farm and Trading Post to Molly until such time as Warwick and Hilton had agreed on how Hilton’s 40 per cent interest would be resolved.  I am satisfied that decision was driven by Molly’s own wishes.  She did not want to receive the other half share in those properties until such time as her sons had agreed on the way in which Hilton’s 40 per cent share would be satisfied.

[48]     Sadly, Hilton was afflicted during his lifetime with mental illness.   While there was no detailed psychiatric evidence before me, my impression is that he suffered from depression and was well aware at times of the need to seek specialist treatment, including on occasion voluntary admissions to mental health institutions. There is also some evidence of attempted self-harm or suicide.

[49]     Mr Monk, in answer to a question from me, acknowledged that there was no realistic prospect that Warwick and Hilton would ever reach agreement on how that would be achieved.  The two sons had different personalities.  They could not see eye to eye.   Although hope sprang eternal, Molly’s attitude to distribution of her husband’s  estate’s  one-half  share  in  the  Burgess  Farm  and  the  Trading  Post inevitably delayed resolution of this issue until her death some 23 years later, in

2007.

(ii)       Estate planning for Molly

[50]     During the 1980s, Mr Monk was also concerned about problems that might be caused if Molly died.  Estate duty was not abolished until the early 1990s.  Even

then, financial advisers were cautious about the possibility of its reintroduction.  If the Burgess Farm and Trading Post had been transferred to Molly, before she died, the estate duty payable could have forced the sale of those assets.

[51]     On 18 August 1981, Molly signed a will.  Mr Monk and Guardian Trust were appointed as her executors and trustees.  The relevance of the 1981 will lies solely in its expression of Molly’s contemporary views about the way in which Christian’s and her proprietary interests should be divided between their sons.

[52]     After identifying specific bequests to be made to her two sons and a grand- daughter, Molly gave specific directions in respect of the balance of her property. Clauses 3 and 4 of that will provided:

3.        I GIVE to my Trustees UPON TRUST my voting shares in C.T.E. Burgess Limited AND I DIRECT my Trustees that within three months of the date of my death they shall make their own enquiry to see whether the rights and interests of any minor shareholder in that Company would be safeguarded  if  the  voting  shares  were  to  be  transferred  to  my  son WARWICK BURGESS, and if my Trustees are satisfied that such rights and interests would be so safe-guarded (my Trustees decision on the matter to be theirs alone and to be final and binding on all interested parties), and if my son WARWICK BURGESS is alive when my Trustees make that decision, my Trustees shall transfer the voting shares to the said WARWICK BURGESS.

4.        I GIVE all the rest of the estate both real and personal of whatsoever kind and wheresoever situate of which I shall be possessed to which I shall be entitled or over which I shall have any disposing power at my death UNTO my Trustees UPON TRUST to sell call in and convert into money such parts of it as shall not consist of money with power to my Trustees to postpone the sale calling in and conversion of any part for so long as my trustees shall think fit notwithstanding that it may be of a terminable or wearing  out  nature  or  may  consist  of  a  hazardous  investment  AND  I DIRECT   my  Trustees  after   payment   of   my  debts  and  funeral  and testamentary expenses and all duties including any duties payable on my death in respect of any gifts or settlements which I may have made in my lifetime  in  exoneration  of  the  donees  devisees  and  legatees  thereof  TO HOLD the residue upon trust and to divide the same into ten equal parts and to hold six of such parts for my son WARWICK BURGESS absolutely and four of such parts for my son HILTON BURGESS absolutely.

[53]     On 19 June 1986, Molly changed her will.   The terms of this will suggest that, as early as 1986, Molly was pessimistic that her sons would reach agreement

during her lifetime.21    This version evidenced a more sophisticated approach to the resolution of the likely impasse between Warwick and Hilton.  Leaving to one side specific bequests of the type made in her earlier will, Molly’s 1986 will recorded:

3.        I  GIVE  free  of  all  duties  to  my  son  HILTON  BURGESS  Fifty Thousand Dollars ($50,000.00) minus Z, where Z represents whichever is the lesser of $50,000.00 or the sum total of all gifts of money which I have made to my said son between the date of this Will and the date of my death.

…

5.        I GIVE to  my son  WARWICK BURGESS all my shares in the company C.T.E. Burgess Limited, the proceeds of any life insurance policy held by me over my life and all my interest in the farm property at Tihoi being 1665.2402 hectares, part Tihoi 3B8A Block all Certificate of Title

26D/1397   (South   Auckland   Registry)   subject   to   all   charges   and encumbrances affecting the same.

6.        I GIVE to my son HILTON BURGESS all my interest in the service station site at Tihoi being 6772 square metres Lot 1 Deposited Plan S.29611

Certificate of Title 26D/595 (South Auckland) subject to all charges and encumbrances affecting the same; and all my interest in the home unit at

Rotorua being first an estate in fee simple as to an undivided one-half share in 1016 square metres Lot 35 Deposited Plan 17800 all Certificate of Title

15C/797 together with Lease S.600099 of Flat 1 Deposited Plan S.17118

situated  on  the  said  Lot  35  which  leasehold  interest  is  described  in Certificate of Title 15B/232, and which freehold and leasehold interests are to be transferred subject to all charges and encumbrances affecting the same.

7.        I GIVE all the rest of my property both real and personal to my sons HILTON BURGESS and WARWICK BURGESS as tenants in common in equal shares.

[54]     Molly’s  1986  will  was  supplemented  by  a  codicil  that  she  signed  on

3 November 1987.  Relevantly, cl 5 of the 1986 will was revoked.  In substitution, Molly made the following testamentary dispositions:

2.        …

I GIVE to my son WARWICK BURGESS all of my shares in the company C.T.E. Burgess Limited and the proceeds of my life insurance policy held over my life.

I GIVE to my son HILTON BURGESS as tenant in common a one- half share of my interest in the part of the farm property situated at Tihoi which part as at the date of execution of this Will is covered in bush; and the balance of my interest in the farm property at Tihoi being all the land in Certificate of Title 26D/1397 (South Auckland

21     Compare with the more mildly expressed concern inherent in cl 3 of her 1981 will, set out at para [52] above.

Registry) to my son WARWICK BURGESS subject to all charges and encumbrances affecting the same.  The trustees are empowered to arrange and carry out such subdivision of the land at Tihoi as may be necessary to properly implement the provisions of this clause.

…

[55]     Molly’s desire, in 1986 and 1987, to provide a more prescriptive method by which the 60/40 division between Warwick and Hilton could be achieved is the best available evidence of her contemporary views.  Molly’s desire to find a resolution to the inevitable impasse that would exist between her children is supported by Mr Monk’s evidence of his discussions with her around this time.   He deposed that Molly  was  not  in  good  health  during  this  period,  and  had  deteriorated  after Christian’s death.  Hilton had filed an application under the Family Protection Act

1955 in the High Court in December 1981, which had increased tensions between the brothers.  By 1984, Hilton had evidenced a preference to subdivide the bush area of the farm, which was not acceptable to Warwick.  A sale by Molly to CTE, leaving to one side the problems inherent in realising Hilton’s 40 per cent shareholding in that company, would reopen possible estate duty problems.   Those complications meant that, apart from her testamentary instruments in 1986 and 1987, no further estate planning steps were taken during the 1980s.

(d)      The 1990s

[56]     The early 1990s continued as the late 1980s had ended.  Warwick and Hilton were unable to reach any agreement as to the way in which their parents’ assets could,  ultimately,  be  divided  so  as  to  achieve  the  desired  60/40  split.    Molly continued to take the position that Christian’s Trustees should not convey their one- half interest in the Burgess Farm and Trading Post to her.

[57]     Mr Western was an old friend of the Burgess family.  Around late 1996 he became  involved  in  attempting  to  facilitate  a  settlement  between  Warwick  and Hilton.    Mr  Monk’s  recollection  is  that  Mr  Western  dealt  primarily  with  Mr Morrison, though he and Mr Western did speak on a number of occasions, when information was being sought from Mr Monk.

[58]     Mr  Monk  and  Mr  Western  had  different  personalities.    Mr  Monk  gave evidence that he “did not think much of Mr Western”.   In particular, Mr Monk considered that Mr Western “did not appear to have a great deal of commercial understanding, and certainly had no understanding of the constraints” under which Christian’s Trustees operated.  Nevertheless, at this time, Mr Monk saw Mr Western as “very motivated” to assist Warwick and Hilton to reach agreement.  As Mr Monk said,  “at  least  [Mr Western]  had Warwick and  Hilton  thinking about  settlement options” and “was genuine in his desire to resolve the longstanding dispute”.

[59]     By March 1997, Molly was becoming frail.  On 25 March 1997, Mr Morrison met with her at Tihoi, in the presence of Mr Western.  Mr Morrison recorded that Molly’s “overriding concern is the state of her health and that she might not last to see various proposals we spoke of being implemented during her lifetime.”  As a result, Mr Morrison drew a handwritten will which Molly executed in his and another’s presence.  Mr Morrison’s note records:

The new Will, although in abbreviated form, sets out what is basically intended and in turn reflects the contents of Tony [Western’s] letter to the client of December last.  [Molly] professed herself to be totally happy with that.

[60]     Molly’s 25 March 1997 will (the handwritten will) stated:

1.        I revoke all previous wills and testamentary dispositions.

2.        I  appoint  Anthony  Richard  Western  of  Tihoi  farmer  and  Philip

Charles Monk of Rotorua, accountant my executors and trustees

3.        I give to my son Warwick James Burgess:

(a)      20% by value of the Douglas fir trees on the Tihoi farm property planted by the late William Burgess

(b)      all  my interest in the Tihoi  farm property,  excluding the separate title comprising the Tihoi trading post

(c)      my shares in C.T.E. Burgess Ltd

4.        I give to my son Hilton Burgess

(a)      80% by value of the Douglas fir trees on the Tihoi farm property planted by the late William Burgess.

(b)       all my interest in the land and buildings comprising the Tihoi trading post, and in the properties at Sumner Street and Wharepaina Crescent, Rotorua.

5.I give all the rest of my estate to my two sons as tenants in common in equal shares.

[61]      Molly had been diagnosed with bowel cancer in the early 1990s.  To be fair to him, Warwick provided care to her during this difficult period.  However, by the end of the 1990s, Warwick was beginning to put Molly under pressure to change her will, in an endeavour to ensure he received the Burgess Farm.   Under cross- examination, Warwick accepted that there was substance in the allegation of influence.  In admitting such conduct had occurred, Warwick exhibited no signs of contrition or embarrassment.  On the totality of the evidence that I heard, I am driven to the conclusion that Warwick was bullying his mother in her late years to ensure that the Burgess Farm was transferred to him.

[62]     Although Molly was frail and upset by both her sons’ inability to reach agreement and Warwick’s attempts to bully, she was made of sterner stuff.  On 12

June 1998, a meeting was held at Mr Monk’s home in Rotorua.   Mr Monk and Mr Morrison attended, together with Molly and her sister, Mrs Olive Montgomery. Two representatives of Guardian Trust were also present.   Neither Warwick nor Hilton had been invited to attend.  Mrs Montgomery was present at Molly’s request, and was aware of the need for confidentiality in relation to what was said at that meeting.

[63]     The list of assets that Mr Monk had prepared on 7 June 1998 was based on values that Mr Western had provided, from inquiries made either by Hilton or Mr Western  in  relation  to  the  contemporary value  of  each  of  Molly’s  assets.    The Burgess Farm and Trading Post were both treated as if they were, as at 7 June 1998, owned by Molly.  That reflected the notion that the one-half share in those properties held by Christian’s Trustees were held at Molly’s direction, and the other half on a constructive trust for her, as a result of the 1982 declaratory order.   Other assets valued for this purpose included two residential properties in Rotorua, at Sumner Street and Wharepaina Crescent, the primary and secondary Douglas fir plantations, and native trees.  No value was ascribed to the shares held by Molly in CTE.

[64]     Mr Morrison recorded what occurred in a file note dated 12 June 1998. Relevantly, he stated:

Introduction by Phil Monk which set the scene.  Along the lines of needing to have all the information and being aware of the value of assets etc. before being able to make any decision.  I spoke for a short time stressing that this was not about what might be in Mrs Burgess’s present Will or in any future Will  she  might  make.    Those  matters  to  be  addressed  by  her  with  her solicitor.

Olive Montgomery disclosed that her sister had shown her a copy of the March 1997 Will and that she “and other members of the family” were aware of its contents.  She indicated that from her perspective Hilton would not be accepting of the split which, on Phil Monk’s figures, would be around 70/30 in Warwick’s  favour.    Olive  Montgomery  was  aware  of  the  60/40  split suggestion which Hilton has continued to allude to.

Olive Montgomery suggested a clause in a Will that said that if the proposed split was not acceptable then it would go to a 55/45 split, presumably in Warwick’s favour.   I did not pursue this matter but observed that such a clause in and of itself would not amount to any stop and would certainly not prevent Family Protection action.  It could even encourage it.

Phil Monk went through the asset list with some deliberation.

Discussion   about   Mrs   Burgess’s   own   situation.      I   mentioned  Tony [Western’s] concerns.  Olive Montgomery was of similar view when it came to the lack of suitability of the accommodation at Tihoi for Molly Burgess. Mrs Burgess by the end of the meeting had stated that she would be going to stay with her friend Shirley Sinton in Edgecumbe.   It’s been arranged that she will make contact with me to let me know when she is going there and I will  go  and  meet  her  concerning Will  requirements  and  other  issues  to resolve matters.  Olive Montgomery was insistent that everything had to be resolved because Molly Burgess had been depressed and it was worrying her.

[65]     In August 1998, Molly was a patient in Tokoroa Hospital.  Mr Morrison made inquiries about her health on 20 August 1998.  In a file note of that date, he recorded that Mrs Montgomery, whom he had telephoned that day, had “expressed the view that [Molly] is perfectly clear of mind even though she is clearly physically ailing. She has had some sort of mild stroke which has affected motor ability on one side”.

[66]     On 24 August 1998, Mr Morrison travelled to Tokoroa Hospital to see Molly, to have a power of attorney for personal care and welfare executed.  That was done. At Molly’s direction, Mr Monk was named as attorney.  At this stage, Molly was about to enter a physiotherapy rehabilitation course.

[67]     After speaking to the Head Nurse in the ward and during a period when Mr Morrison was waiting to see the responsible clinician, Dr Thornton, Warwick arrived, with a friend.  Mr Morrison recorded, in his file note of 24 August 1998:

… I was prepared to leave but [Molly] said she wanted me to see Warwick. I  went  and  got  those  two  persons  in.    [Molly]  specifically  raised  in Warwick’s presence the business about him being so upset at having been “sent from the room” when she made her new will at Tihoi early last year.  I explained the situation and said I was sorry if he was upset about it but I made no apologies because a will is a private matter and no one should be there, other than the person making the will and people specifically invited by her.  I also reiterated that I felt if Warwick was to be present and find out what [Molly] was discussing to go in her will then Hilton Burgess should have been there as well.  [Molly] then asked Warwick if he forgave “the two of us” and he said “no!”

I specifically raised with Warwick Burgess the impending stay of his mother at Cantabria.   He said he had not previously known about it and I was concerned to make sure that, in a semi public setting such as this, he was aware of it and that it was what he medical authorities were recommending.

I had explained before Warwick Burgess arrived to [Molly] that Phil Monk was  going  to  get  updated  valuations  on  various  assets  to  assist  in  any possible review of her will.  I said it was entirely possible, however, that she may decide upon reflection not to alter the terms of the last will made last March.

[68]     In September 1998, Molly reconsidered the terms of her handwritten will.22

What turned out to be her final will was signed on 8 September 1998 (the 1998 will). There is some dispute as to whether the will allowed her executors and trustees to dispose of the Burgess Farm and the Trading Post at their discretion, or created a precatory trust, whereby they were obliged to transfer the assets in accordance with suggestions made by Molly, in her will. This is a legal issue I consider later.23

[69]     Molly revoked all former testamentary dispositions and appointed Mr Monk and Mr Western as her executors and trustees.  With regard to the Burgess Farm and the Trading Post, the 1998 will provided:

3.        IT  has  always  been  my  wish  that  my  two  sons,   WARWICK BURGESS and  HILTON BURGESS should be able to reach agreement as to how their parents’ estates should be divided up or shared between them. Such an agreement has, up until now, proved elusive; although I am greatly encouraged to be told that my sons have recently entered into negotiations

22     See para [60] above.

23     See paras [217]–[227] below.

with an apparent resolve and willingness to arrive at a mutually acceptable solution.  If they reach an agreement of their own free will, and if it differs from what follows in this will, then I am happy with the thought that their agreement can be implemented by way of a Deed of Family Arrangement or similar.

4.        I GIVE the whole of my estate to my trustee UPON TRUST:

(a)       to  pay  out  of  it  my  just  debts  funeral  and  testamentary expenses and all taxes and duties payable in respect of my taxable or dutiable estate.

(b)       to divide the residue (“my residuary estate”) into ten (10) equal parts as to value and to hold six (6) of such parts for my son  WARWICK BURGESS absolutely and four (4) of such parts for my son  HILTON BURGESS absolutely.

5.        WITHOUT imposing any trust or binding obligation on my trustee, I

suggest that in carrying out the trusts and directions of my will my trustee:

(a)      Establish a Forestry Right and a registered easement or easements over all of the bush and forest area at the western end of the Tihoi farm property, these to be in favour of my two sons as tenants in common in equal shares, granting to them in perpetuity all rights to timber, forestry, minerals and exploitation for hydro electric power.

(b)       Use the Douglas Fir plantings on the Tihoi farm property (or the proceeds of sale of them) as the primary vehicle to achieve the division of my residuary estate as provided for in clause 4(b) of my will;

(c)       Transfer  to  my  son   WARWICK  BURGESS,  subject  to subclauses (a) and (b) above, all my interest in the Tihoi farm property (excluding the separate title comprising the Tihoi Trading Post);

(d)       Transfer to my son  WARWICK BURGESS all my shares in the Company CTE BURGESS LIMITED;

(e)       Transfer to my son  HILTON BURGESS all my interest in the land and buildings comprising the Tihoi Trading Post and in the properties at Sumner Street and Wharepaina Crescent, Rotorua.

[70]     Clause 4 of the 1998 will continued to reflect the fundamental principle that Warwick and Hilton share in the estate on a 60/40 basis.   Clause 5 gave Molly’s Trustees power to give effect to that decision.  Molly made “suggestions” about how that might be done.  Attempts to mediate a solution between Warwick and Hilton were made during 1998.  Initially, it was proposed that Mr Dillon, who had acted as

solicitor for Christian and Molly in the 1970s,24 would act as mediator.  Unhappily, he died a few days before the mediation was to take place.

[71]     In  November  and  December  1999,  efforts  were  made  to  procure  the agreement of Christian’s Trustees, Molly, Warwick and Hilton to the appointment of either  Sir Peter Trapski  or  Mr  David  Carden  as  mediators,  in  place  of  the  late Mr Dillon.  Molly, Christian’s Trustees and Hilton all agreed that either of those men would be suitable.   Warwick did not.   Warwick’s intransigence on this issue was conveyed  by  Molly  to  Mr  Morrison  by  telephone,  on  26  November  1999. Mr Morrison recorded that Molly had told him that “she had a very sad heart”. Warwick had refused to open a letter on this topic from Mr Morrison, and had declined to read her copy.  Apparently, Warwick had mentioned something about a valuation of $850,000.  Mr Morrison recorded that Molly had asked him about that, but he knew nothing of it. Mr Morrison concluded his note by writing:

I reminded [Molly] that if she succumbed to Warwick’s pressures and did anything at his behest then a Court would in all likelihood undo that after she was no longer there.

[72]     On 23 December 1999, Mr Monk wrote to Mr Morrison advising that Molly had telephoned him that night.  She had asked Mr Monk to contact Mr Morrison to make a new will.  Mr Monk told Molly that Mr Morrison’s office was closed until 5

January 2000.  Mr Monk continued:

…

At her request I have undertaken to pass on to you her instructions which are are [sic] brief.

They are, excluding the Douglas fir Plantation, 60% of her assets are for

Warwick and 40% for Hilton.  The Douglas fir plantation is to be divided

50/50 between the two sons.

I have taken the step of writing to you following her call to ensure that her wishes are immediately recorded.

[73]     No further attempt to reach a facilitated agreement took place until 2009, some 11 years later.

24     See para [31] above.

(e)      2000-2007

[74]     On 5 January 2000, Mr Monk wrote again to Mr Morrison.   He did so to record another telephone conversation with Molly.  She had telephoned Mr Monk on the evening of 4 January 2000, to talk about her will. Relevantly, Mr Monk wrote:

…

She has advised me that she disclosed her intentions as outlined in my letter to you on December 29 to Warwick.  Apparently he strongly objected to her decision.

She has changed her mind about the division of her assets.  She now wishes to leave all the Tihoi property with the exception of the Trading Post, to Warwick. The Trading Post and the Rotorua properties to be left to Hilton.

While she tells me that she has sent a letter to you to this effect my letter is to alert you to her latest wishes for I am also not entirely sure that she has written to you.

She did not seem to recall telephoning me on 29 December 1999.

[75]     Molly telephoned Mr Morrison on 6 January 2000.  In a file note of that date, Mr Morrison recorded:

Molly Burgess rang just after 5.00pm today. This is what she said:

1.        Warwick wants all the trees.

2.Warwick says he has paid all the rates over the years so therefore he should have all of the trees.

3.Warwick expects you [Mr Morrison] to carry out the terms of the letter of 26 November 1999.  He expects you to abide by that.

4.He (Warwick) only tells me half of what is going on.  I find it very stressful.

5.        If only the two boys could agree but it doesn’t look as though that’s

going to happen.

6.I am worried sick.  The farm needs topdressing badly.  But Warwick says he won’t put on any topdressing until agreement has been reached (I take this to mean until Warwick is satisfied that his instructions to his mother have been carried out).

7.        I am worried sick, without topdressing the stock will die.

8.Will you do that for me Alisdair?  (In answer to this I said “Molly, I have taken a careful note of everything you have said and you can tell Warwick that you have rung me and told me these things.   In

response to that she said “Oh, thank you, thank you” and then she

hung up).

[76]     On 7 March 2000, Molly wrote to Mr Morrison referring to a will that she had personally written in 1998 (seemingly after execution of her 1998 will), “giving back to Warwick all the trees on the Estate”.  Molly said that was because Warwick “has never drawn a wage from the farm, even though he had been running it all these years”.  Molly was concerned that she had not received a reply from Mr Morrison to her earlier communication.   I have not been able to locate a copy of the “will” to which Molly was referring.

[77]     Notwithstanding that sentiment, Molly’s letter of 7 March 2000 provides some evidence of a growing tension between Warwick and herself about the lack of progress in transferring the property to her, consistent with the way in which Mr Morrison had recorded  his concerns in late 1999 and January 2000.    It is also consistent with Warwick’s efforts during this time to bully his mother into changing her will to treat him more favourably.25   Molly concluded her letter by saying:

…

Could I please have a letter of confirmation from you, stating that this has been done, as Warwick refuses to build a house on the property until he receives a letter of confirmation from you.   I would like to show him that you have done this (soon).

…

[78]     On 30 March 2000 (I infer after receipt of Molly’s letter), Mr Morrison prepared a file note.   In it, he mused about various aspects of estate planning for Molly.  Among other things, Mr Morrison wrote that it was “patently obvious” to him “that Warwick is exerting undue influence” on Molly.  He added:

[Molly] is not a free agent and, in any event, her mind, as she has said on more than one occasion, is wandering, but I think if we can set the scene so that the record makes it clear that this change to her will was, in effect, forced, then Warwick cannot expect to benefit from it.

Apart from that, even if it was an effective devise of Molly Burgess to leave Warwick all her interest in the Douglas fir trees, that does not apply to the interest [that Christian’s estate] has in them.

25     See para [61] above.

[79]     Mr Morrison replied to Molly on 5 April 2000.   He explained the delay in responding.  Mr Morrison said that he “wanted to review the file records relating to all that has happened on and since 26 November 1998” before doing so.   He continued:

…

A lot has happened since then.  Your note of 26 November 1998 is the one which was delivered by Warwick at the meeting at Tony Western’s property on that date.  The Agreement in principle reached by your sons as to a 60 –

40 split (in Warwick’s favour) was reached at that meeting.  I concede that no agreement was reached, either at that meeting or at any time since, as to exactly how such a 60 – 40 split should be carried into effect.  On the basis of the valuations obtained in 1999, however, it would appear that if Warwick is now to get all of the trees then there will need to be some adjustment with the Tihoi farm property by way of offset.  I must confess my understanding was that Warwick’s primary concern was to ensure he became the sole owner of the Tihoi farm property (with the exception of the Tihoi Trading Post) and I did not think he would be happy with the idea that as part of a carrying into effect of a 60 – 40 split Hilton would somehow have an interest in the main farm property.  The trees were regarded as a separate item and were seen to be the facilitator for achieving the proportionate division referred to above.

I note in your most recent letter you make reference to a house which needs building and I gather this needs to be built for your own peace of mind and comfort.  If the only thing preventing it being built for you to spend a more comfortable time in is Warwick’s refusal to allow it to be built until you change your will, then that is an unhappy state of affairs.   Obviously that state of affairs should not continue.  It cannot continue.  If the only way to get around this impasse is to now provide that Warwick is to get all of your interest in the trees then I can understand your feelings that you must change your will.   If that is how you see it then please make use of the attached Codicil to your most recent will.  The effect of it is to state that Warwick is to get all of your interest in the Douglas Fir trees situated on the Tihoi property.

…

[80]     Molly signed the codicil on 10 April 2000.  It revoked clause 5(b) and (c) of the 1998 will.26   They were part of the provision in which Molly “suggested” to her executors and trustees how her desired division of property between Warwick and Hilton could be achieved.  Clauses 1 and 2 of the codicil provided:

1.        I REVOKE subclause (b) of clause 5 of my will.

2.I REVOKE subclause (c) of clause 5 of my will and substitute for it the following subclause:

26     Set out at para [69] above.

Transfer to my son  WARWICK BURGESS subject to subclause (a) above  all  my  interest  in  the  Tihoi  farm  property  including  the Douglas Fir plantation, but excluding the separate Title comprising the Tihoi Trading Post.

[81]     On Saturday 12 August  2000, a memorial service was held to mark the passing of Mr Monk’s wife, who had been tragically killed in a violent attack.  The service was attended by Molly, Warwick, Hilton and Mr Morrison.   In a letter to Guardian Trust dated 17 August 2000, Mr Morrison provided a summary of discussions that he had with the three of them at that time.  Mr Morrison said:

…

Following  the  memorial  service  for  Mrs  Joanna  Monk  on  Saturday  12

August 2000 the writer spoke separately (they were not together) with Hilton Burgess and Warwick Burgess.  Hilton indicated that the situation now was, if anything, worse than it was a year or so ago.  He held out little hope for mediation because of his brother’s stance, and seemed resigned to the matter ending up in litigation following his mother’s death.

The writer then spoke to Warwick, who was accompanying his mother.  Mr Burgess  stated,  twice,  that Warwick  refused  to  attend  any  meeting,  and Warwick made the observation that he regarded any meeting or attempts at mediation as a waste of time.

Regrettably, it seems the mediation attempts cannot be resurrected, at least at this time.

…

[82]     In 2001, Molly expressed some concern about Mr Western being appointed as one of her executors and trustees.  During that year, Mr Morrison prepared a draft codicil which would have had the effect of appointing Mr Monk as the sole executor and trustee.  However, that was never signed.  Another draft, to similar effect, was prepared in 2007. This was not sent to Molly.27   Molly died on 18 July 2007, without having executed a codicil to that effect.  It is impossible to say whether Molly made a deliberate decision not to sign the first of those documents, or it was pure inadvertence on her part.  Either way, as a result, the appointment of Mr Monk and Mr Western as Molly’s executors and trustees took effect, in terms of the September

1998 will.28

27     See para [88] below.

28     See paras [84]–[88] below.

[83]     Mr Western telephoned Mr Morrison on 24 July 2007.  He expressed concern about conduct on the part of Warwick, that he regarded as amounting to duress.  In a file note dated 24 July 2007, Mr Morrison recorded:

Tony Western rang this afternoon.  Before he did I had had delivered to me via Tess and Chris the two closed files relating to Will reviews and Estate Planning matters generally for Molly Burgess.   A quick perusal of those including memos, emails, etc. disclosed that I was right in my long held assessment that there was duress and undue influence.

The first thing Tony Western said to me on the phone was that there had been on going duress by Warwick of Molly for years.  He’s prepared to take on the executorship and we discussed some of the issues. …

[84]     Molly’s death was the catalyst to require all assets in her and Christian’s estates to pass in terms of her 1998 will.   As residuary beneficiary in Christian’s estate, all property that Christian’s Trustees continued to hold would be transferred to her.  Efforts began in earnest after 4 September 2007, when probate of the 1998 will was  granted  in  favour  of  Mr  Monk  and  Mr  Western,  to  resolve  outstanding differences and to make distributions to both Warwick and Hilton.

[85]     On 28 August  2007,  Mr Morrison  wrote to  Hilton  advising that  he was seeking probate of the 1998 will, on the basis that Mr Monk and Mr Western were to be executors and trustees.  He continued:

It is presumed that the Trustees of Estate CTE Burgess will shortly be able to transfer to Estate MA Burgess the assets they hold in trust under the terms of the Will of the late Mr CTE Burgess.  That will ensure that all assets are able to be distributed to the beneficiaries at one time.  The Will provides for the division  of  your  mother’s  entire  Estate  in  the  proportions  of  60%  for Warwick and 40% for Hilton.

The main instruction in the Will is not specific as to how this is to be achieved but does set out a number of suggestions.  These suggestions are however, not binding on the Trustees but obviously the Trustees would like to be guided by the wishes of your mother.

In  this  regard  the Trustees  would  in  due  course  welcome  any  mutually agreed suggestions from the beneficiaries about the division of assets set out in the Will.   It should be noted the Trustees cannot, as between the beneficiaries,  be  involved  in  any  role  of  negotiation,  arbitration  or  of offering individual advice.

(Emphasis added)

[86]     On 31 August 2007, Warwick sent a facsimile to Mr Morrison.  He advised that he had found three signed and witnessed copies of the first codicil, which related to Mr Morrison’s letter to Molly of 5 April 200029 and also referred to a letter from his mother asking for Mr Western to be removed as a trustee.  Warwick asked for an explanation about why that had not been done.  Mr Morrison responded to Warwick on 4 September 2007.  As it happens, that was the same day on which probate was granted.

[87]     On 7 September 2007, before they were aware that probate had been granted, Gallie Miles, Te Awamutu solicitors (who had by then been instructed to act for Warwick), wrote to O’Sullivan Clemens querying whether probate ought to be granted in favour of Mr Western. They wrote:

… We enclose by fax a copy of the codicil which was handed into us by our client Mr [Warwick] Burgess.  He also noted that he found with his mother’s papers a letter asking that Mr AR Western be removed as a trustee and seeking an explanation as to why this was not done.

In view of the fact that it appears that you have lodged the papers at the High Court at Rotorua for probate we seek urgently from you confirmation that you are withdrawing the papers so that the necessary amendments can be made to include the codicil.

[88]     On 12 September 2007, Mr Morrison advised Gallie Miles that probate had already been granted, and attached a copy of the Court order.  After raising some issues for debate about whether any variation to the grant of probate should be sought, Mr Morrison responded to the question why removal of Mr Western had not been actioned.  He said:

… The answer to this is twofold:

1.The writer received a communication apparently from Mr [Warwick] Burgess a short time before [Molly] died.  The writer had and still has some very serious reservations as to whether any request by Mrs Burgess that Mr Western be removed as an Executor – assuming such request was in fact being made by her – was being made by her in the absence of undue influence and/or duress on anybody’s part. There is a long history in this matter.

2.A form of Codicil was drawn up with a view to forwarding it to Mrs Burgess for execution.   However she died before any further action could be taken on this.

29     See para [80] above.

[89]     In the latter part of 2007, Molly’s Trustees began the process of seeking valuations of the Burgess Farm, Trading Post and two Rotorua residential properties in order to determine how to proceed.   In writing to registered valuers Reid & Reynolds Ltd (by a letter that appears to have been signed by Mr Western and Mr Monk on 1 and 7 November 2007 respectively), Molly’s Trustees referred to earlier valuations that Reid & Reynolds had undertaken on the two Tihoi properties. These instructions were sent to Reid & Reynolds by Mr Morrison on 9 November

2007. They added:

As  part  of  the  main  Tihoi  block  is  in  native  forest  and  part  in  exotic plantation we ask that your valuation also address the known or possible impact of the Permanent Forest Sink Initiative, the Emissions Trading Scheme, and any other relevant aspects arising out of what is commonly referred to as the Kyoto Protocol.

[90]     Some specific issues also arose in relation to tax implications in respect of the transfer of assets from Christian’s estate to Molly’s estate.  In particular, a complex issue involving GST arose, on which Guardian Trust sought independent advice.

[91]     On 13 November 2007, Warwick swore an affidavit to which he annexed the codicil of 10 April 2000 that he had found among his mother’s effects.30   Probate in relation to that codicil was granted on 13 December 2007.

[92]     Reid & Reynolds provided valuations in respect of the Burgess Farm and Trading Post on 4 and 5 December 2007.  By early 2008, Molly’s Trustees were in a position to deal with all assets to which Warwick and Hilton were entitled to share in terms of the 1998 will.

(f)       2008-2010

[93]     On advice from Mr Morrison, Molly’s Trustees took the view that the 1998

will required a distribution of the residuary estate as to 60 per cent to Warwick and

40 per cent to Hilton, with a broad discretion being granted to the trustees to achieve that division.31   They did not take the view that the will required them to transfer the

30     See para [80] above.

31     See para [69] above.

Burgess Farm and Trading Post to Warwick.32    In their view, the suggestions made by Molly did not fetter their discretion to realise the two properties by a sale to a third party, if necessary.33

[94]     Mr Monk and responsible employees of Guardian Trust acted professionally in the conduct of Christian’s estate.   The same cannot be said of Mr Western, in relation to Molly’s.   In many respects, Mr Monk was the voice of reason, when responding  (or  reacting)  to  some  of  Mr Western’s  more  outrageous  actions,  or communications.

[95]     I have already referred to some of Mr Monk’s evidence about Mr Western.34

On his own admission (evidenced in several written communications), Mr Western was not particularly interested in legal duties owed by trustees, ethical requirements, or the need to treat beneficiaries even-handedly.  My impression is that Mr Western was someone used to solving problems by the most direct route, in order to get his own way.   Subtlety was not his strong point.   He tended to express himself in forceful (sometimes coarse) language.  Often, he was oblivious to the need to act in tandem with his co-trustee.  Mr Western’s correspondence does not present him as a person who was easily led or controlled.   He saw one of his roles as protecting Hilton’s interests.

[96]     Unsurprisingly, given his nature, Mr Western quickly became impatient at the continuing (but unsuccessful) attempts to resolve differences between Warwick and Hilton.  As, by late 2007, some 27 years had passed since Christian’s death, that was not an unreasonable stance to take.   Mr Western was anxious to sell the Burgess Farm and Trading Post to a third party.  He saw great value in the forestry rights that could be granted, in relation to both standing and fallen timber on the Burgess Farm. Unbeknown to Mr Monk, in late 2007 Mr Western initiated a dialogue with Mr

Armer about purchasing the Burgess Farm.

32     Compare cl 2 of the 10 April 2000 codicil, set out at para [80] above.

33     This is the legal issue about the existence (or otherwise) of a precatory trust, discussed at paras

[217]–[227] below.

34     See para [58] above.

[97]     After Warwick had instructed Gallie Miles to act for him,35  considerable correspondence took place between Mr John Gallie of that firm and Mr Morrison about  proposals  for Warwick to  buy the  Burgess  Farm  and Trading Post.   The correspondence began in late 2007, and continued into 2009.  The juxtaposition of those negotiations and apparent attempts by Mr Western to promote the sale of the Burgess Farm to the Armer interests provide the backdrop against which claims crystallising out of the events of July 2009 fall to be determined.

[98]     It will be necessary to review the relevant correspondence in detail when analysing the claims arising out of the 2008 and 2009 events.36   A brief overview is sufficient for present purposes:

(a)      During  a  telephone  discussion  on  31  October  2007,  Mr  Western advised Mr Morrison that he was aware of “at least three people with more than $7 million each to spend who are interested in” the Burgess Farm.   The  names  of  those  persons  were  recorded  in  a  file  note prepared by Mr Morrison on the same day.   One of them was Mr Armer, who was said to own a property “immediately to the north”. Another  confirms  evidence  that  Mr  Western  was  susceptible  to “name-dropping”.37

(b)On 7 December 2007, O’Sullivan Clemens sent to Gallie Miles copies of valuation reports obtained for the Burgess Farm, the Trading Post, and  the  two  Rotorua  residential  properties.     Around  this  time, Warwick advised Mr Morrison that he and some associates were formulating a proposal to buy the Burgess Farm and Trading Post, but that this could not be finalised until a forestry valuation was available.

(c)       Reid & Reynolds Ltd had assessed the fair market value of:

(i)the Burgess Farm at $4,700,000 plus GST (if any), as at an effective date of 20 November 2007; and

35     See para [86] above.

36     See paras [101]–[110], [358]–[378] and [452]–[476] below.

37     See para [448] below.

(ii)the  Trading  Post  at  $275,000  plus  GST  (if  any),  as  at  an effective date of 20 November 2007.

(d)In late November 2007, Mr Gallie received (from Mr Morrison) a copy  of  the  1980  Agreement  and  Christian’s  September  1980 affidavit.  He made them available to Warwick.

[472]   Mr Morrison responded to Mr Elvin’s email just over an hour later.   He indicated  that  he  was  unaware  of  the  contact  in  issue  but  would  “mention  to [Mr Western] that it is appropriate any dealings between Burgess estate and Armer Farms are conducted via their respective solicitors”.   Mr Morrison added that Warwick had been given until 30 September 2008 to make an offer to purchase the Burgess Farm.  If no such offer were made, Mr Morrison said that Christian’s and Molly’s Trustees would respond to the offer from Armer Farms.

[473]   In the meantime, Warwick was pursuing his attempts to purchase the Burgess Farm.  Eventually, draft agreements for sale and purchase were forwarded by Gallie Miles to Mr Morrison on 25 September 2008, for comment.   Some preliminary

comments were provided by Mr Morrison on 26 September 2008, the same day that he forwarded the drafts to Molly’s Trustees for instructions.

[474]   Further correspondence ensued between Gaillie Miles and Mr Morrison.  On

10 October 2008, Mr Gallie put forward a proposal from Warwick, in which it was said that a company would be formed, possibly with the name Tihoi Downs Ltd, to take title to the Burgess Farm.  It was contemplated that the purchase moneys would be  procured  from  Rabobank  with  that  loan  secured  by  first  mortgage  over  the Burgess Farm.   The amount to be borrowed from Rabobank was estimated to be about  $2,400,000,  “plus  some  working  capital”.    The  company  structure  was designed as a means by which a syndicate of people associated with Warwick could assist him to acquire the Burgess Farm.  At this stage, no offer of finance had been made by Rabobank.

[475]  Warwick gave evidence that he was not involved in any dealings with Rabobank.  He told me that other members of the intended syndicate were already customers of Rabobank and they were attending to financing arrangements.  By 14

October  2008,  no  finance  had  been  arranged.    On  15  October  2008,  Warwick, through Gallie Miles, gave notice of a claim he wished to make under the Family Protection Act 1955 and the Law Reform (Testamentary Promises) Act 1949.  Gallie Miles gave notice, in a letter of that date, under ss 47 and 48 of the Administration Act 1969, of Warwick’s intention to bring a claim.  Gallie Miles continued:

Should the Executors proceed with the sale, then they will be in breach of the  provisions  of  the  Administration  Act  1969  and  subject  to  personal liability.

It is regrettable indeed that matters have now reached this impasse.   We recommend that the issues which have now arisen be referred to mediation. We await your advice.

[476]   I find that Warwick’s purpose of giving notice under the Administration Act was to ensure that the Burgess Farm was not sold to Armer Farms, or anyone else, while he continued to organise finance.   In particular, it was done deliberately to delay or defeat Armer Farms’ ability to purchase under its 10 September 2008 offer. In a file note prepared  on 15 October 2008, after receiving Gallie Miles letter, Mr Morrison summarised the gist of his conversation with Mr Gallie:

I said I would like nothing better than for [Mr Gallie] to be able to provide evidence which the Trustees not unreasonably sought in light of the World financial meltdown, that his client had the money organised so that we could confidently look forward to the settlement occurring without fail based on the terms of the unconditional offer submitted by his client.   He said he appreciated that.   I said it was a particular concern the Trustees had and justifiable in my view that with the highly unusual financial mess the World was in if anything prices might be heading down and this would have a negative impact on everybody and in particular the minority beneficiary; especially if Warwick wouldn’t come to the party and if the likes of Armer walked away, and prices headed south.

[477]   The reference to the “highly unusual financial mess” into which the world had  fallen  is  important  in  understanding  what  happened  next.    By  this  stage, Warwick had been told that he needed to match the Armer Farms offer, which remained open.  Yet, there was evidence that farm prices were likely to drop due to the economic crisis that had begun.286

[478]   On  30  October  2008,  Rabobank  offered  Tihoi  Downs  Ltd  the  sum  of

$2,800,000, to be lent on terms set out in the offer and repayable on 28 November

2023.   The amount represented the sum that Warwick needed to pay in order for Hilton’s 40 per cent interest in Molly’s estate to be satisfied without recourse to the Burgess Farm.  It is unclear whether Christian’s Trustees and Molly’s Trustees were told that finance had been granted at that time; the probabilities are that they were not.  For present purposes, that is immaterial.  What is important is that Warwick had the financial wherewithal to make an offer that could match the one from Armer Farms.

[479]   I am satisfied that Warwick made the decision not to proceed with his 2008 proposal because of the falling prices for farm properties.  That, I consider, is clear from  the  terms  of  his  solicitors’ letter  to  Mr  Morrison  of  17  December  2008. Relevantly, Mr Gallie wrote:

We have had further discussions with our client.  He wishes to buy the farm. The syndicate, which includes himself, will support him in that purchase and has, we understand, received a loan offer.

Values have however fallen considerably from where they were two to three months ago.  Our client will be obtaining a valuation and the offer will be based on that.

286   See para [325](b) above.

We thank you for your recent telephone call in which you observed that the time for protection pursuant to our letter of 15 October 2008, expired on 15 or 16 January 2009.

In order to protect his position our client will issue proceedings under the Family Protection Act.  The likely thrust of those proceedings will be that the Will of his mother should have made provision for him by leaving him the farm, but on the basis that he would be required to make up the shortfall in value for his brother’s 40% share.

(Emphasis added)

[480]   By 31 March 2009, Mr Foote, a litigation partner at O’Sullivan Clemens, was writing  to  Gallie  Miles  and  taking  the  view  that  the  Family  Protection  Act proceeding was “essentially an abuse of process because what [Warwick] seeks has already been offered to him and he has failed to follow through i.e. to buy the farm and pay out his brother”.  Mr Foote concluded his letter by saying:

We ask again, is [Warwick] to make a realistic offer to purchase or shall the

Trustees take steps to evict him and sell?

[481] The Family Protection Act proceeding proceeded to the 19 June 2009 settlement conference.  What occurred at that time, and in its aftermath, has already been  explained,287   in  the  context  of  Warwick’s  claim  for  breach  of  the  2009 settlement agreement.   I adopt that analysis for the purposes of the Armer Farms “knowing receipt” claim.

Evaluation of “knowing receipt” claim

[482]   I assume (without deciding the point) that one of either the fourth and fifth categories of knowledge identified by Peter Gibson J in Baden, and restated by Richardson J in Savin,288    apply.  For the purposes of this analysis, I refer to both types as “constructive knowledge”.   In consequence, the question is whether the Armer interests had constructive knowledge: either knowledge of circumstances that would indicate relevant facts to an honest and reasonable person; or were on notice of suspicious circumstances in relation to the existence of such facts that ought to

have put an honest and reasonable person on inquiry.  In order to fix Armer Farms,

287   See paras [101]–[110] and [358]–[378] above.

288   Set out at para [439] above.

FTB and Tihoi Holdings with constructive knowledge it is necessary for Warwick to prove that Mr Armer knew sufficient facts to put him on notice or inquiry.

[483]   Savin was a case in which it was necessary to consider whether a bank was on notice of misapplication of funds by a customer who was paying money into an overdrawn account.289   That type of situation is somewhat different from the present case, in which Mr Armer was approached by one of two trustees of Molly’s estate.  It was clear from the outset that whatever preferences Mr Western may have had to deal with Mr Armer, no binding agreement could be entered into without the consent of all trustees, including (for the purpose of the sale), Guardian Trust as one of Christian’s Trustees.

[484]   I start with some indisputable facts:

(a)      Mr Western approached Mr Armer in an endeavour to interest him in purchasing the Burgess Farm.290

(b)Around 29 July 2008, Mr Western supplied Mr Armer with valuation information that had been obtained by Molly’s Trustees, in their capacity as potential vendors.291    Mr Western had no authority from his co-trustee, Mr Monk, to make that disclosure.  Arguably, it was a breach of his duty as a trustee to provide that type of commercially sensitive information to Mr Armer, as a potential purchaser.

(c)       Mr Western took steps to promote a sale of the Burgess Farm to

Armer Farms, in preference to a sale to Warwick.

[485]   Assuming  (without  deciding)  that  Mr  Western’s  conduct  amounted  to  a breach of the fiduciary duty of loyalty he owed as a trustee of Molly’s estate, the focus of my inquiry is on the state of Mr Armer’s knowledge of that assumed breach. Mr Armer knew that Mr Western was acting in the capacity of a trustee.  The only

aspect of Mr Western’s conduct that might have put Mr Armer on notice of a possible

289   Westpac Banking Corp v Savin [1985] 2 NZLR 41 (CA).

290   See para [448] above.

291   See paras [455]–[459] above.

breach of fiduciary duty was the provision of the registered valuation in late July

2008.292     There are three aspects of Mr Western’s conduct on that occasion that would likely have caused a reasonable third party some concern, if he or she knew of them. They were:

(a)      The provision of a valuation report prepared at the request of the vendor.  It is unusual for a vendor to disclose to a potential purchaser details of the value of the property, particularly at an early stage.

(b)The email of 26 July 2008 suggested to Mr Armer that he “probably best delete” it “after reading”.293

(c)       The subsequent email of 28 July 2008, said that the valuation was for

Mr Armer’s “eyes only”.294

[486]   My sense is that while Mr Armer regarded Mr Western’s conduct as unusual, he did not give much thought to it because, in his particular circumstances, the valuation was of little assistance.  As I have already indicated, I accept Mr Armer’s evidence that the only purpose for which he used the Reid & Reynolds valuation was to ascertain pasture areas.  I have no doubt that the purchase price that Mr Armer was prepared to offer was designed to reflect the value of the property once converted to dairy, having regard to the likely costs of conversion.  Mr and Mrs Armer were well placed to make that assessment on the basis of their considerable experience in the dairy industry.

[487]   By the time Mr Armer received the valuation, he had formed a view of Mr Western’s  personality  that  explains  why  he  did  not  take  phrases  such  as “probably best delete this email” and “for your eyes only” seriously.  I am satisfied that Mr Armer’s professionalism in pursuing an offer, and monitoring the likelihood or otherwise of it being accepted, is demonstrated by the instructions that he gave to Mr Elvin about Mr Western’s involvement, after arranging for Armer Farms to make

an offer on 10 September 2008.   On 24 September 2008, Mr Elvin had advised

292   See paras [455] and [456] above.

293   See para [455] above.

294   See para [456] above.

Mr Morrison that his client did not want to deal with the “Burgess Estate”, other than through solicitors.295    In any event, what happened in June 2008 had no impact on Warwick’s inability to acquire the Burgess Farm.

[488]   Despite   Mr   Western’s   endeavours,   no   enforceable   contract   between Christian’s Trustees and Molly’s Trustees, as vendors, was entered into with Armer Farms, as purchaser, in 2008.   The reason why must be sheeted home firmly to Warwick.   He was the person whose actions meant that an offer to purchase the Burgess Farm and Trading Post for $6,200,000 was lost:

(a)      First, he impeded the intended transaction by giving notice under the Administration Act 1969 of a claim he intended to make under the Family Protection Act and testamentary promises legislation.   That was done because he had not secured finance himself and wanted to thwart Armer Farms’ intended purchase.296

(b)Second,  when  he  did  secure  finance,  Warwick  made  a  deliberate decision not to proceed with his intended purchase, in order to negotiate a lower price due to intervention of the Global Financial Crisis.297    This, in my view, was a cynical attempt to ensure that he paid out his brother as little as possible.  If it were necessary to isolate a single decision taken between 1980 and 2009 to explain why Warwick did not acquire the Burgess Farm, his decision not to uplift finance to complete the purchase in 2008 is it.298

[489]   Mr Armer’s knowledge was limited to contact made by Mr Western with him. In  my  view,  he  could  not  be  regarded  as  having  been  put  on  inquiry  as  to Mr Western’s  actions,  I  do  not  consider  that  he  had  the  type  of  constructive knowledge to which Savin refers.  Accordingly, the Armer interests cannot be liable

for knowing receipt.

295   See paras [471] and [472] above.

296   See paras [474]–[477] above.

297   See paras [478] and [479] above.

298   See, in particular, the extract from Gallie Miles’ letter of 17 December 2008 to Mr Morrison, set out at para [479] above.

[490]   Alternatively, any actions taken by Mr Armer did not cause Warwick to suffer loss.  In Gilbert v Shanahan,299  the Court of Appeal adopted an approach to breach of fiduciary duty which requires a plaintiff to suffer loss “arising out of a transaction or circumstance to which the breach was material” before a successful claim can be made.300    The two reasons why Warwick’s intended purchase did not proceed were (initially) his failure to obtain finance within an appropriate period and (then) his decision not to take up the offer of finance from Rabobank which would have enabled the purchase to be effected.301

(ii)       The “buried or destroyed” claim

The nature of the claim

[491]   Warwick and CTE allege that Armer Farms authorised others to destroy or bury farm equipment or machinery that Warwick had the right to uplift following the sale of the Burgess Farm to Armer Farms.   To succeed, Warwick and CTE must prove that Mr Armer, as the guiding mind of Armer Farms, authorised others to act in this way, knowing that the property in question belonged to Warwick or CTE.

Background

[492]   Under cl 19.1 of the Agreement for Sale and Purchase between Christian’s Trustees and Molly’s Trustees (as vendors) and Armer Farms (as purchaser), CTE and Warwick were given until 31 December 2009 to remove all of their farming equipment from the Burgess Farm.  Clause 19.1 provided:

19.      Removal of Personal Possessions

19.1Notwithstanding  the  date  herein  for  settlement  and  possession [Armer Farms] shall allow the Vendor (including Warwick Burgess) the right to remove from the Property personal possessions and plant and equipment not included in the sale, provided such right shall lapse on the 31st of December 2009.

299   Gilbert v Shanahan [1998] 3 NZLR 528 (CA).

300   Ibid, at 535, applying Everist v McEvedy [1996] 3 NZLR 348 (HC) at 355.

301   See para [488] above.

[493]   The agreement  for sale and purchase was signed on 27 July 2009, with settlement to be effected on 27 August 2009.  On 28 July, Mr Murray sent to Gallie Miles  by  facsimile  a  notice  of  termination  of  the  lease  in  favour  of  CTE  and Warwick.  Under that notice, they were given 20 working days to vacate the Burgess Farm.  Warwick was requested to remove all stock, plant and equipment before 25

August  2009,  so  that  vacant  possession  could  be  given  to  Armer  Farms  on settlement.

[494]   On 4 August 2009, Gallie Miles wrote to Mr Morrison, saying:

I note that we have not had any response to our client’s request that his share of  the  deposit  be  released  to  him,  to  enable  him to  find  an  alternative property.  Please can we have a response on this point as a matter of urgency.

We are further advised by our client that at the time of settlement he will have sheep in the middle of lambing.   It will not be possible for him to remove sheep at this time.

Please can you provide us with a copy of the list referred to at clause 17.1 of the Agreement for Sale and Purchase.

Please can you also provide us with a current valuation of the trees.

[495]   Clause 17.1 of the Agreement for Sale and Purchase required the vendors to “provide the purchaser with the value of all buildings included in the sale, together with the values of all plant and equipment passing under this Agreement”.  Those buildings, plant and equipment were regarded to be included in the purchase price. The list was to be provided by the vendor to the purchaser within 10 working days of

27 July 2009.

[496]   On 6 August 2009, Mr Morrison responded to Gallie Miles.  In summary, he advised:

(a)      He was seeking instructions from Christian’s Trustees and Molly’s Trustees on the request for release of a share of the deposit moneys, for the purpose to which Gallie Miles had referred in their letter of 4

August 2009.

(b)Notwithstanding the information conveyed about “in-lamb sheep”, Warwick was obliged to take “every step to remove livestock” from the Burgess Farm “by [the] date of expiry of the [termination] notice”.

(c)      Armer   Farms   intended   to   commence   “a   major   top-dressing programme” immediately following settlement of the purchase, scheduled for 27 August 2009, so any stock remaining on the Burgess Farm would interfere with that plan.

(d)Failure to remove the livestock within that time would put Christian’s Trustees and Molly’s Trustees in breach of their sale and purchase agreement with Armer Farms, which required them to give vacant possession on 27 August 2009.

(e)      Armer Farms had signalled that it was “prepared to allow [Warwick] to come back onto the property post-settlement for the purpose of removing personal possessions and plant and equipment not included in the sale”. That was to be done on or before 31 December 2009.

(f)       A copy of the list to which cl 17.1 of the Agreement for Sale and

Purchase referred would be provided when received by Mr Morrison.

(g)Clarification was being sought from Christian’s Trustees and Molly’s Trustees on whether any updated tree valuation was being obtained from PF Olsen Ltd.

[497]  The stock was not removed on or before 27 August 2009.   Following settlement, on 3 September 2009, Armer Farms took steps to impound the stock and arrange  for  police  to  serve  Warwick  with  a  trespass  notice  and  confiscate  his firearms. Allegations were made by Armer Farms’ solicitors that Warwick continued to trespass on the Burgess Farm, and threaten Armer Farms’ agents and contractors.

[498]   Warwick alleges  that  between  mid-October and  November 2009,  he  was prevented from removing equipment from the Burgess Farm.  He says that Mr Armer

was prepared to allow access to him on restrictive and burdensome terms.  Warwick alleges that, on 28 October 2009, Mr Armer arranged for a scrap metal dealer to cut up farming equipment and machinery to which Warwick was entitled.

[499]   As a result of cross-examination of Warwick at trial, the following claims remain, based on allegations that Armer Farms buried or destroyed equipment owned by Warwick during this period.302     I use the descriptions of each item set out in Mr Chesterman’s closing submissions:

(a)       Item 1:            200 concrete posts, worth $1,000; (b)   Item 2:           fertiliser, worth $3,524.65;

(c)       Item 3:            steel, worth $1,000; (d) Item 9: baton, worth $1,300;

(e)       Item 13:          D7 bulldozer, worth $21,611;

(f)       Item 14:          cutting up a crane, repair and mileage, worth $170; (g)          Item 20:      two New Holland hay rakes, worth $2,500;

(h)      Item 21:          one Vicon Lely rake, worth $1,000;

(i)	Item 22:	six heavy duty tine harrow sections, worth $1,700;
(j)	Item 23: $17,400;	two   four   wheel   wagon   type   hay   trailers,   worth
(k)	Item 24:	Howard Rotary Hoe heavy duty drive shaft and high speed gearing, worth $4,500;

302   The items listed in this paragraph are taken from a schedule to the Fourth Amended Statement of

Claim.

(l)       Item 25:          One trailer, two round bale feeders, worth $3,500; (m)           Item 26:           Four-wheel drive Subaru station wagon, worth $500; (n)        Item 27:           Pneumatic sheep crush, worth $2,000;

(o)      Item 28:          Silage feeder tail door, worth $500; (p)           Item 29:           Gallagher silorator short, worth $600; (q)        Item 30:          Isuzu chassis, worth $500;

(r)       Item 31:          60 sheets of corrugated iron, worth $700; and

(s)       Item 34:          100 metres of two inch galvanised rope, worth $9,031. The total value of this part of the claim is $73,136.65.  That is a reduction of

$52,726.40 from the original claim of $125,863.05.303

The Armer Farms perspective

[500]   Mr Walker QC, for the Armer interests, contended in closing that Warwick’s and CTE’s conversion claim “rapidly unravelled under cross-examination”.  I agree that Warwick admitted, at various times, that some items were or may remain on the Burgess Farm, or that someone other than Armer Farms had taken or dealt with them.  Warwick accepted that it was uneconomic to remove some items, and others could not be found.  The photographic evidence produced demonstrates that many of the items were “junk”, and it would be very surprising if others had any material value.

[501]   Mr Walker accepted that there were “a few items” that had been damaged by a scrap metal merchant whom Mr Armer had engaged.  As a result of steps taken by

Warwick to call the police, further damage was avoided.  He contends that Warwick

303   See para [142] above.

is attempting to remedy his own failure to collect all items that he wished to remove by re-characterising what occurred as a conversion of his property by Armer Farms.

[502]   Alternatively, even if some of the items were damaged or buried, Mr Walker submitted that there was no evidence of any authority from Mr Armer to destroy or bury any of the goods in question.   It was not put directly to Mr Armer that he authorised anyone to destroy or bury property that he knew to be owned by either Warwick or CTE.  Leaving to one side the need to put to a witness that he or she has deliberately acted in an unlawful way, the law also recognises that, even in civil proceedings, allegations that involve elements of reprehensible or dishonest conduct should be proved satisfactorily.

[503]   The burden of proof point has been expressed in various ways.   In Hall v Vail304  Wild CJ referred to “giving due weight to the gravity of the allegation”, while  in  Hornal  v  Neuberger  Products  Ltd,305   Morris  LJ  stated  that  “the  very elements of gravity become a part of the whole of the range of circumstances which have to be weighed in the scale when deciding as to balance of probabilities.”  In T v M,306 Woodhouse P (delivering the principal judgment of the Court of Appeal, with whom Richardson J and Sir Thaddeus McCarthy agreed) said that “those various observations are all aimed at explaining the simple need to be careful in estimating whether or not the inference to be drawn is in truth probable rather than merely possible.  It is the principle of good common sense that the more serious the issue the greater should be the care used in assessing it”.

[504]   Mr Walker also submitted that Warwick’s approach to the assessment of damages was wrong.  Contrary to what had been submitted by Mr Chesterman, the measure of loss was not the cost of replacing items, without regard to their condition at the relevant time, but to the market value of the goods at the date on which they

were allegedly converted, in their condition at that time.307

304   Hall v Vail [1972] NZLR 95 (SC) at 96.

305   Hornal v Neuberger Products Ltd [1957] 1 QB 247 (CA) at 266.

306   T v M (1984) 2 NZFLR 462 (CA) at 464.

307    See Kuwait Airways Corp v Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19, [2002] 2 AC 883 at 1090 (Lord Nicholls of Birkenhead) and Glenmorgan Farm Ltd (in rec and in liq) v New Zealand Bloodstock Leasing Ltd [2011] NZCA 672, [2012] 1 NZLR 555.

Evaluation

[505]   Warwick’s allegations are no more or less than an assertion that Mr Armer deliberately authorised others to destroy or bury property of value to Warwick.  On the evidence, I am not persuaded on a balance of probabilities that it is so.  Indeed, I go further.  I accept Mr Armer’s evidence that he did not give authority to destroy deliberately property of value.  Those items that may have been destroyed were, I find, no more than “junk” that it was necessary for Mr Armer to have removed from the Burgess Farm.

[506]   I also agree with Mr Walker’s submission that any equipment left on the farm after 15 January 2010, an extended date by which Warwick was to uplift any equipment owned by himself and CTE, was abandoned.   The concept of “abandonment” involves a deliberate relinquishing of proprietary rights in particular property, usually supported by evidence pointing towards the absence of any steps to reclaim.   I consider that the meaning ascribed to the concept of abandonment in insolvency cases should be applied.  Abandonment is established when a person has sufficiently manifested an intention to abandon the property.308    The effect of abandonment is that the property becomes “nobody’s property” and is capable of being claimed by the first passer-by.309

[507]   Even if I had found that Mr Armer had given the necessary authority, I would have rejected this claim on the grounds that no loss had been proved.  No attempt was made to provide evidence of market value at the relevant time.  The evidence consisted, in the main, of attempts to identify similar property for sale elsewhere. The valuation evidence lacked any cogency.  It would be unsafe to rely upon it.

6.       Costs

[508]   Counsel agreed that submissions could be made on costs in their written closing addresses.   That  issue had  been  addressed  fully on  the applications  for

security for costs made during the trial.  Nothing has been drawn to my attention that

308   Re Mayall (A Bankrupt), ex parte Galbraith [1936] NZLR 270 (SC) and Holmes v Official Assignee of Holmes [1938] GLR 395 (SC).   See also, Re Butler-Harrison [1959] NZLR 427 (SC).

309   Re Mayall (A Bankrupt), ex parte Galbraith [1936] NZLR 270 (SC).

would  require  reservation  of  costs,  for  example  the  existence  of  a  relevant

Calderbank letter.

[509]   All counsel agreed at the outset that this was a Category 3 case for the purposes of costs.  Given its complexity and duration, that agreement was inevitable.

[510]   All defendants have been wholly successful.  With one exception, I hold that each is entitled to costs.

[511]   Christian’s Trustees and Molly’s Trustees are entitled to have their costs paid out of the trust fund.  Section 38(2) of the Trustee Act 1956 controls the position.310

Nevertheless, the “reasonableness” of costs incurred must be established before the trust fund is depleted.  In addition, there may be a difficulty if indemnity for costs requires Molly’s Trustees to exercise their right against assets that would, prima facie, be distributed to Hilton’s personal representative.  They have not been joined to this proceeding and do not have, at this stage, an opportunity to be heard.

[512]   I shall declare that Christian’s and Molly’s Trustees are entitled to indemnity from the trust fund for reasonable fees and expenses incurred in relation to this proceeding, and shall make further directions to deal with quantification or other difficulties that may arise in relation to the share of the estate that would otherwise be distributed to Hilton’s personal representatives.  The calculation of costs payable must take into account those awarded by way of wasted costs on 11 August 2015.311

The reasonable costs should be calculated on the basis of two counsel.

[513]   Mr Western’s personal representative took no steps in the proceeding.  I make

no order as to costs in his favour.

[514]   Mr Morrison and O’Sullivan Clemens have been wholly successful.   Costs are awarded in their favour on a 3B basis, with a 50 per cent uplift, together with reasonable disbursements.   They too shall take account of the wasted costs order

made on 11 August 2015.  I certify for second counsel.

310   Burgess v Monk [2017] NZHC 2424 at paras [75]–[77].

311   Burgess v Monk [2015] NZHC 1881 at paras [25] and [26].

[515]   I consider that Mr Morrison and O’Sullivan Clemens are entitled to increased costs because Warwick and CTE took and pursued arguments that lacked merits, and over-complicated  the  claims  that  Mr  Morrison  and  O’Sullivan  Clemens  were required to meet.  In addition, I have taken into account the unjustified allegations of reprehensible conduct that were not withdrawn in open Court until the end of the trial.312  All costs and disbursements are to be fixed by the Registrar.

[516]   The Armer interests have been wholly successful.  Costs are awarded in their favour on a 3B basis, with an uplift of 50 per cent, together with reasonable disbursements.   I certify for second counsel.   The uplift is ordered to reflect the unreasonable way in which Warwick and CTE ran their case against the Armer interests and the unjustified allegations of reprehensible conduct that were not withdrawn in open Court until the end of the trial.313  All costs and disbursements are to be fixed by the Registrar.

7.       Concluding comments

[517]   I have been critical of the way in which Warwick’s and CTE’s claims have been pleaded.  They were unnecessarily complex.  The prolix nature of the Amended Claim tended to obfuscate a number of the substantive complaints.   Nevertheless, there is one point on which I wish to compliment Mr Chesterman.

[518]   Shortly before the hearing began, Warwick applied for an order that Molly’s Trustees advance to him a sum of $800,000 to complete the proceeding.  I declined that application, for reasons given in a judgment delivered on 4 October 2017.314  As a result of issues raised by Mr Latton, Mr Ross and Mr Walker, I issued an injunction to restrain Warwick from dealing with a property near Paeroa in order to protect their clients in the event they were wholly successful.315   Subsequently, a formal security for costs order was made in favour of Mr Morrison, O’Sullivan Clemens and the

Armer interests.316

312   High Court Rules 2016, r 14.6(3)(b)(ii) and (d).  See also Bradbury v Westpac Banking Corp

[2009] NZCA 234, [2009] 3 NZLR 400 at para [27](b).

313   Ibid.

314   Burgess v Monk (No 2) [2017] NZHC 2424.

315   Ibid, at paras [9]–[11].

316   Burgess v Monk (No 5) [2017] NZHC 2732 at para [23].

[519]   The effect of my judgment of 4 October 2017 was to deprive Warwick and CTE of any means of funding the proceeding further.  To his credit, Mr Chesterman did not seek leave to withdraw.

[520]   On 20 October 2017, Mr Chesterman informed me that, as a result of a meeting that he and his junior counsel, Ms McGill, had attended with Warwick earlier that day his position as counsel was compromised.  That was the 18th day of the trial.   Mr Chesterman indicated he intended to seek independent advice over Labour  Weekend.     On  24  October,  Mr  Corlett  QC  appeared  on  behalf  of Mr Chesterman to advance an application for leave to withdraw.   I record that no attempt was made to rely on the absence of funding to support this application.  For reasons given in a judgment delivered on 25 October 2017, I dismissed that application.317   Mr Chesterman, with good grace, continued.

[521]   I recognise that Mr Chesterman was put in a very difficult position as a result of what may have been the (apparent) misunderstanding between himself and his client  that  led  to  the  application  to  withdraw,  and  also  the  absence  of  funds. Mr Chesterman continued to represent Warwick and CTE, and conduct the trial, competently.  I acknowledge that aspect of his conduct of the trial.

[522]   It became clear during the trial that Mr Chesterman had firm instructions from his clients to pursue a number of the allegations made, notwithstanding that I had indicated some concerns about their stance.   In the circumstances to which I have referred, I do not criticise Mr Chesterman for that.  In terms of his overriding duty to the Court as counsel, Mr Chesterman withdrew the allegations of reprehensible conduct publicly at the end of the trial.

[523]   There is one final point I wish to make on the question of funding.  It did not directly   arise   for   decision   because   Mr   Corlett   made   it   clear   to   me   that Mr Chesterman was not pursuing the application for leave to withdraw on grounds involving the unavailability of costs.   If a lawyer elects to prepare for trial on a “Rolls Royce” basis, and the petrol runs out before the trial ends, the lawyer cannot

expect any sympathy from the Court if leave to withdraw were sought.   In most

317   Burgess v Monk (No 4) [2017] NZHC 2618.

cases, use of a more economical model will likely be sufficient to prepare for and conduct the trial to an appropriate standard.   This is something that counsel responsible for the preparation and conduct of trials should bear in mind.

8.       Result

[524]   Judgment is entered in favour of all defendants, with the consequences as to costs that I have already articulated.318

[525]   In addition, I direct:

(a)      Christian’s Trustees and Molly’s Trustees shall provide a schedule of costs they intend to deduct from the trust fund to Warwick and CTE on or before 2 February 2018.  Unless Warwick and/or CTE make an application to the Court to review the amount to be deducted, a sum calculated by reference to my earlier directions319  may be applied from the trust fund no earlier than 19 February 2018.  If an application were made by Warwick and/or CTE, no deduction of costs shall be made pending determination of that application.

(b)If any deduction of reasonable costs is likely to be applied against the share of the trust fund otherwise to be distributed to the personal representative of Hilton, an application for directions must be made on  notice  to  those  personal  representatives  before  his  share  is depleted.

[526]   If an application of either type were made, it shall be referred to Katz J, as Liaison Judge for the Waikato/Bay of Plenty circuit, as soon as practicable after receipt, for procedural directions to be made.  I do not expect her to resolve the issue substantively at that time, but rather to make directions for expeditious determination by a Judge at the earliest available time.  I am about to retire from judicial office and

will be unable to deal with any further applications in this proceeding next year.

318   See paras [510]–[516] above.

319   See paras [511] and [512] above.

[527]   I thank counsel for their assistance.

9.       Addendum

[528]   At approximately 10.00am on 20 December 2017, 90 minutes before the time advised for delivery of this judgment, the Registrar forwarded to me a memorandum from Mr Briscoe, who acts for the sole executor and trustee of Hilton’s estate.  He expressed concern about the possibility that costs might be awarded in a manner that could adversely impact on moneys payable to Hilton’s estate, and indicated a desire to be heard on any relevant questions of costs.

[529]   As will be apparent from the directions I have already made,320 I have taken this contingency into account.  Accordingly, no further direction is required to safeguard Hilton’s position.   The Registrar is directed to forward a copy of this

judgment to Mr Briscoe.

P R Heath J

Delivered at 11.30am on 20 December 2017

320   See para [525](b) above.