Burgess v Monk
[2015] NZHC 1881
•11 August 2015
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
CIV 2013-463-97 [2015] NZHC 1881
BETWEEN WARWICK JAMES BURGESS
First Plaintiff
C T E BURGESS LIMITED Second Plaintiff
AND
PHILLIP CHARLES MONK First Defendant
THE NEW ZEALAND GUARDIAN TRUST COMPANY LIMITED Second Defendant
THE ESTATE OF ANTHONY RICHARD WESTERN
Third Defendant
ALISDAIR MORRISON Fourth Defendant
ARMER FARMS (N.I.) LIMITED Fifth Defendant
Hearing: 10 August 2015 Counsel:
D Chesterman for Plaintiff
R Latton for First, Second and Fourth Defendants
C K Lyon for Third Defendant
T Joseph for Fifth DefendantJudgment:
11 August 2015
JUDGMENT OF HEATH J
This judgment was delivered by me on 11 August 2015 at 2.00pm pursuant to
Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
BURGESS v MONK [2015] NZHC 1881 [11 August 2015]
Introduction
[1] This proceeding arises out of the sale, in late July 2009, of a farm property and other associated businesses situated near Tihoi, on the western shores of Lake Taupo. The farm was run as a sheep and cattle farm, with associated forestry plantations. In addition, the assets sold included a general store and service station, known as “Trading Post”.
[2] The farm and associated businesses had been in the Burgess family for many years. The events that give rise to the present claims occurred after the original owners, Mr Christian and Mrs Molly Burgess had died.
[3] The claim is brought by Mr Warwick Burgess and a company, CTE Burgess Ltd (CTE). Mr Warwick Burgess is the eldest son of Mr and Mrs Burgess. CTE is a company that was originally established by Mr and Mrs Burgess, but is now under the control of Mr Warwick Burgess.
[4] The plaintiffs claim that, as a result of a number of wrongful decisions made by the trustees and executors of the estates of Mr and Mrs Burgess, Mr Warwick Burgess was deprived of his rightful inheritance. Although also including the torts of negligence, interference with goods and conversion, the primary grounds on which the claims are advanced are for various forms of breach of fiduciary duties, dishonestly assisting a known breach of trust, receipt of property with knowledge of a breach of trust and breach of an agreement reached following a settlement conference in separate Family Court proceedings held on 19 June 2009.
[5] The background to the claim is extensive. The difficulties which arose with the ownership and management of the farm and forestry assets appear to have had their genesis in an estate planning exercise undertaken by the first defendant, Mr Monk. At material times, Mr Monk was the accountant for, and financial adviser to, Mr and Mrs Burgess and CTE. He is an executor and trustee of the estates of the late Mr and Mrs Burgess. A co-trustee is New Zealand Guardian Trust Co Ltd (Guardian Trust), the second defendant. Guardian Trust replaced Mr Anthony Western as an executor and trustee of the estate of Mrs Burgess, as from 29 December 2009.
[6] Mr Western was a farmer who became involved with the farm sale process. The executor and trustee of his estate is Mr David Trounson, the third defendant. Mr Western died on 6 October 2011. Mr Trounson’s role in the proceeding is as the personal representative of the late Mr Western, who is sued in respect of a number of acts which Mr Burgess alleges caused him loss.
[7] Mr Alisdair Morrison is the fourth defendant. He is a partner in the firm of solicitors known as O’Sullivan Clemens. The firm practises in Rotorua. Mr Morrison was the partner responsible for fulfilling that firm’s role as solicitor to Mr and Mrs Burgess, and later the executors and trustees of the estate of the late Mr and Mrs Burgess. He had previously acted for CTE and Mr Warwick Burgess.
[8] The fifth defendant is Armer Farms (N.I.) Ltd (Armer Farms). Following an agreement for sale and purchase entered into on or about 9 July 2009, Armer Farms acquired the farm property at Tihoi, the “Trading Post” business and part of the forestry plantation, for a purchase price of $4 million. Armer Farms is alleged to have received those assets knowing that the transfer was in breach of trust.
Case management of this proceeding
[9] This proceeding was commenced in 2013. Prior to that, there had been separate proceedings in the Family Court arising out of the estates of the late Mr and Mrs Burgess. A settlement of that proceeding was reached on 19 June 2009. It is alleged that it was breached when the agreement was entered into on 27 July 2009 for the various assets to be acquired by Armer Farms.
[10] Following a number of case management conferences, this proceeding was set down for hearing over three weeks, to commence on 10 August 2015. I was rostered as trial Judge. On 24 June 2015, I held a case management conference. In preparing for that, I discovered that the First Amended Statement of Claim, on the basis of which the plaintiffs intended to proceed to trial, was (as I described it in a subsequent Minute) almost incomprehensible. I concluded that the pleadings did not
comply with the High Court Rules and that they required “prompt attention and major surgery”.1
[11] In an attempt to bring a more disciplined approach to the proceeding and to retain the trial date, I made a series of orders, the most important of which was a requirement to file and serve a Second Amended Statement of Claim in a form that was fully particularised.2 As I had formed a negative view of the way in which (then) counsel for the plaintiffs, Mr King, had pleaded the claim, I urged him to consult with senior counsel before settling its final form.3
[12] I directed an Issues Conference to be held before an Associate Judge in
Rotorua on 13 July 2015 so that the proceeding could be readied for trial.4 On 8 July
2015, I issued a further Minute, following advice that a compliant Statement of Claim would not be filed and served as contemplated.5 Later that day, the Registrar referred to me a letter from the instructing solicitors for the plaintiffs and a memorandum in which an adjournment of the trial was sought, on the basis of a change of counsel.6 After receiving further memoranda from all counsel, I made an order adjourning the Issues Conference and the trial. I did so, on the basis that a wasted costs order would be made in favour of the defendants in a sum to be either agreed or determined by the Court. Directions were made for the exchange of submissions and evidence. That hearing was set down for 10 August 2015.7
[13] I am satisfied that the true reason for the adjournment was a failure, on the part of Mr King, to prepare adequately for trial. There is a dispute between Mr Warwick Burgess and Mr King about the extent of Mr Burgess’ knowledge of the problems that had become apparent from the plaintiffs’ point of view and the extent
of any communication between them. I need not resolve those matters at present.
1 Burgess v Monk HC Rotorua CIV-2013-463-87, 24 June 2015, para [2].
2 Ibid, paras [6]–[8].
3 Ibid, at para [9].
4 Ibid, at paras [10]–[13].
5 Burgess v Monk HC Rotorua CIV-2013-463-87, 8 July 2015 (Minute 2)
6 Burgess v Monk HC Rotorua CIV-2013-463-87, 8 July 2015 (Minute 3).
7 Burgess v Monk HC Rotorua CIV-2013-463-87, 10 July 2015 (Minute 5).
As against the defendants, it is clear that Mr Burgess is bound by the actions taken by the counsel whom he had instructed to pursue his and CTE’s claim.8
Wasted costs applications
[14] Rather than analysing the positions taken by counsel for each party on the wasted costs applications, I set out the basis of which I intend to proceed and then explain why I have decided to exercise my discretion as to wasted costs in a particular way. I intend no disrespect to counsel in doing so. The nature of the discretionary decision I have to make means that the approach I have adopted will be more transparent.
[15] There is no doubt that this Court has jurisdiction to order that wasted costs be paid when, through the fault of one or more parties, a trial has been postponed, to the detriment of others. The concept of “wasted costs” includes those incurred for work undertaken that will not have any further benefit to the case of the claimant party, as well as the value of work that will be duplicated in order to prepare for a trial in the future.
[16] There are also systemic reasons for making such orders. In Jeffreys v
Morgenstern,9 Venning J said:
[31] I turn to consider the issue of wasted costs. It follows from my discussion above I accept the plaintiffs’ submission that the trial was vacated because of the defendants’ default. The plaintiffs have inevitably incurred wasted costs as a result of that. This Court has jurisdiction to make an order for wasted costs. As this Court has previously observed in the case of Fu Hao Construction Ltd v Landco Albany Ltd10 default that leads to vacation of fixtures leads to inconvenience and costs not only to the other parties to that proceedings but to other parties awaiting fixtures in the Court. Fixtures allocated by this Court are commitments of limited judicial and Court resources. Time is booked for the case. Other parties who might otherwise have had their cases allocated hearing time are disadvantaged by default which leads to late vacation of fixtures.
8 Generally, as to counsel’s authorities, see Carrell v Carrell [1975] 2 NZLR 441 (Cooke J). See also R v Rogers [2006] 2 NZLR 156 (CA) at para [9].
9 Jeffreys v Morgenstern [2013] ZNHC 1361.
10 Fu Hao Construction Ltd v Landco Albany Ltd HC Auckland CIV-2004-404-006608, 23 May
2008.
[32] That is a further reason which supports an award of wasted costs. The Court should apply sanctions to parties who, through their own default, cause fixtures to be vacated.
[17] I have regard to the following factors in determining the quantum of the wasted costs order that should be made:
(a) Although the adjournment was ordered about one month before the intended commencement of the trial, it necessitated the vacation of a hearing scheduled for three weeks. That amount of time is not easy to accommodate within any of the Registries of the High Court. The adjournment has occasioned a lengthy delay in the hearing of the proceeding, perhaps up to one year due to the unavailability of Court time. That has an impact on the amount of work that will need to be duplicated.
(b)The reasons for the adjournment must be laid firmly at the door of the plaintiffs. I emphasise that I do not intend to cast aspersions on Mr Warwick Burgess. As I have already indicated, he is bound by the acts of his own counsel. While Mr Chesterman (who now appears for the plaintiffs) suggested that the absence of any application for wasted costs by the defendants against counsel formerly instructed by the plaintiffs should tell against an order, my view is that the plaintiffs must be left to their own remedies as against their former counsel.
(c) The costs incurred by the first, second and fourth defendants, for whom Mr Latton acts, include those involved with the preparation of an agreed bundle of documents. While there is some dispute about the need for that work to be undertaken by those defendants, the conduct of all parties after it was done is suggestive of an agreement that the solicitors for those defendants undertake that work. If they had not, those costs would have fallen on the plaintiffs in any event.
[18] The claims brought by the first, second and fourth defendants total
$43,578.50. That represents 50% of the actual trial preparation costs incurred. If the total wasted costs were calculated on a 2B basis, they would amount to $26,704.50.
[19] In my view, the costs that have been wasted should be fixed by reference to a standard costs award, a Category 2B basis for the purpose of this proceeding. A discount should be applied to take account of the fact that some work will have value in the continued preparation of the proceeding for trial. In my view, an appropriate award is approximately 50% of costs fixed overall on a 2B basis, together with reasonable disbursements. The amount I order will be higher than that because of the need to make an estimate of a reasonable sum for disbursements. So far as the first, second and fourth defendants are concerned, I award a global sum (inclusive of disbursements) of $16,000 as wasted costs.
[20] Mr Lyon, for the third defendant, accepts that his involvement has been “modest”, since the time at which his client was first served with the proceeding. Costs are claimed on a 2B basis in the sum of $7,761. Mr Lyon has indicated that his client, as executor and trustee of the estate of the late Mr Western, was likely to abide the decision of the Court rather than to take any active steps to oppose the claim. Many of the most serious allegations against Mr Western are ones on which his own instructions would be required and his defence may not be assisted by documentation.
[21] If Mr Trounson elects to take no further steps, many of the costs incurred to date will not be re-incurred. I approach his claim with that possibility in mind. On that basis, I make a wasted costs order in favour of the third defendant in the sum of
$4,000 (inclusive of disbursements).
[22] Mr Joseph, for the fifth defendant, seeks actual wasted costs of $20,350. The alternative amount is calculated by reference to an uplift of 50% on 2B costs, claimed is $17,536.50. Notwithstanding the basis on which an uplift is claimed, I consider that my approach to this claim should reflect that taken in respect of the first, second and fourth defendants. On that basis, I make a global award (including costs and disbursements) in the sum of $12,000 in favour of the fifth defendant.
[23] During the course of the hearing, Mr Latton explained to me that a sum of money was held by the proposed sixth defendant11 on behalf of a deceased estate in respect of which Mr Burgess was a residual beneficiary. Depending on the outcome of this proceeding) Mr Burgess may receive something in the vicinity of $2 million to $2.5 million from the estate.
[24] To avoid the need for any applications for security for costs, Mr Burgess has been receiving interim distributions to meet legal fees. Mr Latton proposed the wasted costs orders be paid from that source. They are held on behalf of the estate in the trust account of O’Sullivan Clemens, the firm of which Mr Morrison is a partner.
[25] I make a direction that the total amount payable of wasted costs of $32,000 shall be paid forthwith by the relevant trustees to the solicitors for each of the parties entitled to them:
(a) First, second and fourth defendants $16,000 (b) Third defendant $4,000 (c) Fifth defendant $12,000
[26] Those payments shall be applied against Mr Warwick Burgess’ entitlement as a residuary beneficiary to those sums. On that basis, I will not be making an “unless” order in respect of these payments.
Case management issues
[27] It is fair to say that the proceeding to date has not been managed rigorously. That will now change. I shall assume responsibility for supervising case management to bring the proceeding to trial as early as possible. If I were unavailable, interlocutory applications may be determined by a Judge other than myself, or an Associate Judge, but I will make directions on that as and when necessary. A date of hearing for the substantive proceeding and the identity of the
trial Judge will be determined later.
11 See para [28] below.
[28] The first procedural issue involves an application by the plaintiffs to join three other parties:
(a) O’Sullivan Clemens, as a sixth defendant,
(b)Mr Elvin and Ms Darraugh, as trustees of the FTB Trust, as seventh defendants, and
(c) Tihoi Holdings Ltd, as eight defendant.
[29] Mr Latton had sufficient instructions to agree to joinder on behalf of O’Sullivan Clemens. Accordingly, an order is made. I expressly record that consent to that order does not operate as a waiver of any limitation defences that might arise.
[30] The proposed seventh and eight defendants are associated with Armer Farms. The plaintiffs wish to join them because they have assumed ownership of some of the assets in issue. Mr Joseph is likely to receive instructions from those entities. He indicates that opposition to joinder is likely. I shall deal with these two proposed parties on the basis that their joinder will be resisted.
[31] There are questions of discovery that require resolution. Mr Chesterman indicated that an application for targeted discovery is likely to be made. I propose to timetable steps required for the joinder application and any other applications, so that they proceed in parallel.
[32] Mr Chesterman accepts that the draft Second Amended Statement of Claim that he has helpfully prepared and served can be refined significantly. I order that the a Second Amended Statement of Claim be filed and served on or before 25
September 2015. If the plaintiffs have any further documents that should be discovered, verified lists of documents shall be filed and served on or before 25
September 2015.
[33] So far as the application to join seventh and eighth defendants is concerned:
(a) Any amended application, together with any affidavit in support shall be filed and served on or before 25 September 2015.
(b)Any notice of opposition and affidavits in opposition shall be filed and served on or before 23 October 2015.
(c) Any affidavits in reply shall be filed and served on or before 30
October 2015.
[34] Applications for targeted discovery or non-party discovery by either party:
(a) Any application, together with any affidavit in support of the original
(or amended) application shall be filed and served on or before 25
September 2015.
(b)Any notice of opposition and affidavits in opposition shall be filed and served on or before 23 October 2015.
(c) Any affidavits in reply shall be filed and served on or before 30
October 2015.
[35] Any other interlocutory applications that are ripe for filing as at 25
September 2015 shall be filed and served in accordance with the times set out in directions previously given12 to ensure all applications can be addressed together.
[36] A case management conference shall be held at 9am during the week of 9
November 2015 before me. I direct that it be held in Auckland and allocated no more than one hour. It shall be held in Court for Chambers. The Registrar is asked to liaise with Ms MacDonald in Auckland to allocate an appropriate date. A date on
which the various applications can be heard will be fixed at that conference.
12 See paras [33] and [34] above.
Costs on 10 August 2015 hearing
[37] I am satisfied that the defendants should have their costs on the hearing that took place on 10 August 2015. Mr Joseph and Mr Chesterman apprised me of Calderbank steps that had been made. The order on which I have settled makes consideration of those proposals unnecessary.
[38] The defendants for whom Mr Latton, Mr Lyon and Mr Joseph act shall each receive one set of costs, on a 2B basis, together with reasonable disbursements, for the hearing on 10 August 2015. Disbursements shall include reasonable travelling expenses from Auckland to Rotorua and return. If agreement cannot be reached as to quantum, they shall be fixed by the Registrar.
[39] I thank counsel for their assistance.
P R Heath J
Delivered at 2.00pm on 11 August 2015
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