Butterfield v Sundberg
[2020] NZHC 1052
•20 May 2020
IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY
I TE KŌTI MATUA O AOTEAROA TE TIHI-O-MARU ROHE
CIV-2020-476-000014
[2020] NZHC 1052
UNDER Part 19 of the High Court Rules 2016 IN THE MATTER
of the Trustee Act 1956 and the Estate of Caitriana Baker
BETWEEN
JOSEPH GORDON BUTTERFIELD
Applicant
AND
JANINE NORA SUNDBERG
First Respondent
AND
LINDA BEVERLEY SUNDBERG
Second Respondent
Hearing: Determined on the papers Counsel:
S D Campbell for Applicant
Judgment:
20 May 2020
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 20 May 2020 at 10.30 am pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
BUTTERFIELD v SUNDBERG [2020] NZHC 1052 [20 May 2020]
The applications
[1] The applicant and the respondents are the executors and trustees of the Estate of Caitriana Baker (Mrs Baker). The applicant believes the Estate should be wound up and the balance of funds distributed to the residuary beneficiary. The respondents have not given their consent to that course.
[2] The applicant applies for permission to bring a proceeding seeking directions under s 66 Trustee Act 1956 by way of originating application pursuant to Part 19 High Court Rules 2016. The applicant will seek directions:
(a)he be authorised to finalise the Estate and distribute any and all remaining Estate property and funds to the Public Trust (as the trustee of the residuary beneficiary of the Estate);
(b)he be permitted to deduct his reasonable fees and expenses as a professional trustee; and
(c)for payment of costs against the respondents.
Background
[3] Mrs Baker died on 13 November 2014. Probate of her last will was granted to the applicant and the respondents on 19 March 2015.
[4] Mrs Baker’s life and affairs were closely tied to those of her brother, Donald Mount Cook Burnett (Mr Burnett). Mrs Baker lived on Mt Cook Station with Mr Burnett until she went into a nursing home on 17 February 2010.
[5] Mr Burnett formed a charitable trust called the Burnett Mount Cook Station Charitable Trust (the Trust) to receive his estate upon his death. This trust is also the residuary beneficiary of the estate of Mrs Baker. Mr Burnett died in July 2010.
[6] In 2016 and 2017 the Trust was involved in litigation in the High Court and the Court of Appeal. The Mount Cook Station had come under considerable financial pressure and was becoming insolvent. The trustees of the Trust (which included the
applicant) sought directions from the High Court as to whether or not a sale of the Mt Cook Station could proceed. The litigation resulted in High Court and Court of Appeal decisions.1 The detail of the litigation is not so important as the fact the applicant and the respondents took opposing views in the litigation on whether the Mt Cook Station should be sold.
[7] Put as neutrally as possible, the relationship between the applicant and the respondents has not been without conflict. The applicant says that the respondents were mostly inactive as trustees and executors of the Estate. He identifies a number of areas of difficulty including their disposal of Estate assets, their failure to account for proceeds of sale of Estate assets and, their failure to respond on matters relating to the administration of the Estate. Another matter concerned the respondents’ wish to utilise the Estate to fund the completion of books they claimed they were preparing at the request of Mrs Baker. The applicant refused this request. The respondents have made a complaint against the applicant to the New Zealand Institute of Chartered Accountants and requested he resign as an executor and trustee of the Estate.
[8] The Estate’s assets and interests have been realised and funds distributed to the Public Trust as trustee of the residuary beneficiary of the Estate. A little more than
$30,000 has been held to finalise the accounts and wind up the Estate. There are as yet unbilled costs and expenses owing to a firm of accountants, Footes Ltd, which has carried out the administration of the Estate on behalf of the applicant and respondents.
[9] Numerous requests of the respondents to authorise the winding up of the Estate have been ignored. The Public Trust is concerned the Estate has not been wound up. It sent a letter dated 21 January 2019 to the applicant and the respondents demanding the Estate be finalised and distributed. In November 2019, the applicant’s counsel discussed the matter with the Public Trust who at that stage was concerned about the respondents’ litigious nature.
[10] On 23 December 2019, the respondents’ solicitors, Arrowsmith Law Ltd, wrote to Footes Ltd in respect of the affairs of the Estate. They noted the complaint the
1 Re Burnett Mount Cook Station Charitable Trust [2016] NZHC 2669 and Butterfield v Public Trustee [2017] NZCA 367.
respondents had made against the applicant and that the respondents had requested the applicant to resign as an executor of the Estate. A request was made for information concerning the Estate. Mr McPherson of Footes Ltd replied by email on 23 December 2019 advising that Footes Ltd had communicated on a number of occasions with the respondents and never had a reply. Information that had already been provided to the respondents was provided once more. It was noted that Footes Ltd held approximately
$31,000 on behalf of the Estate but had recorded unbilled work in progress of $15,311. Mr McPherson concluded:
If [the respondents] have any reason for not having the Estate finalised they should let us know, so that any matters can be resolved. It seems a nonsense to keep running costs up, and possible Court proceedings, when there is so little involved Without agreement from all executors … Footes Ltd is not in a position to act further.
[11] On 17 January 2020, Arrowsmith Law advised Footes Ltd that it had no instructions from the respondents.
[12] On 15 January 2020, the respondents issued three invoices to the Estate claiming more than $150,000 for travel expenses, legal costs and fees for trustees’ services. The applicant does not consider the invoices are properly payable.
Submissions
[13] The applicant relies upon r 19.5(1) of the High Court Rules. The court may, in the interests of justice, permit any proceeding not mentioned in rr 19.2 – 19.4 High Court Rules to be commenced by originating application. Permission may be sought without notice.2
[14] Mr Campbell argues the words “interests of justice” mean the court must secure the just, speedy and inexpensive determination of the proceeding.3 The originating application procedure is suitable, he submits, for cases where it is not necessary for there to be particularised pleadings or interlocutory steps such as discovery for the proper determination of the issues.
2 High Court Rules 2016, r 19.5(2).
3 High Court Rules, r 1.2.
[15] Here, it is said, four matters support the applicant’s contention that the interests of justice require the granting of leave to commence this proceeding by originating application. These are:
(a)the meagre size of the Estate;
(b)the need to efficiently wind up the Estate;
(c)the long history of issues arising between the parties (which the applicant considers irrelevant and does not intend to respond to);
(d)viva voce evidence will not be required, and the giving of evidence by affidavit under Part 19 is appropriate.
Discussion
[16] The High Court Rules contemplate that applications for directions under s 66 of the Trustee Act 1956 shall be brought under Part 18 of the High Court Rules.4 However, r 18.4(2) provides:
(2) The application of this Part to a proceeding does not prevent the commencement of that proceeding by originating application if it is eligible to be so commenced under Part 19, in which event [Part 18] does not apply.
[17] Although the court has in some cases allowed applications under s 66 to be brought by originating application, this is the exception and not the norm. In Public Trust v Kain, Venning J noted the “strong inference” is that applications for directions under s 66 will be brought under Part 18.5 In Jones v O’Keeffe, the Court of Appeal said:6
The originating procedure under pt 19 is normally limited to cases where particularised pleadings and interlocutory steps such as discovery are not necessary for the proper determination of issues. It is not appropriate where factual issues are in dispute.
4 High Court Rules, rr 18.1(a)(v) and 18.1(b)(xiii).
5 Public Trust v Kain [2018] NZHC 1547 at [20].
6 Jones v O’Keeffe [2019] NZCA 222 at [52].
[18] In Body Corporate 68792 v Memelink, Clark J referred to Jones v O’Keeffe and held that despite the urgency of the matter before her, the case should proceed by way of statement of claim and statement of defence, citing the need for detailed pleadings.7
[19] In FFP Trustee (NZ) Ltd v Peng, the court allowed an application for directions under the Trustee Act 1956 to be brought by originating application but, in that instance, Wylie J was satisfied particularised pleadings and interlocutory steps such as discovery were not necessary.8 The parties all consented to the matter being dealt with in that way (having had the benefit of legal advice) and the originating procedure allowed for the matter to be resolved promptly and expeditiously. 9
[20] It is now well recognised that Part 19 is a procedure generally used for cases where it is not necessary to have full pleadings and interlocutory steps for the proper determination of the issues.10 It is designed to be a speedier and less expensive mechanism than Part 18, although the Part 18 procedure is still more efficient and confined than a general proceeding.11
[21] In Solar Bright Ltd v Martin, Solar Bright sought declarations pursuant to s 141 of the Companies Act 1993 and leave to bring the proceeding under Part 19, rather than by way of ordinary proceeding.12 Osborne J relied upon Hong Kong & Shanghai Bank Corporation Ltd v Erceg, in which Asher J stated:13
… [t]he type of proceeding suited to the originating application procedure is a straightforward application not requiring detailed pleadings or interlocutory orders … [It] is not well suited to the determination of substantive rights involving the application of common law doctrines as distinct from statutory tests. It is not well suited to cases involving multiple parties, and cases where there is the possibility of crossclaims or counterclaims.
[22]Osborne J said in Solar Bright Ltd:14
What Erceg and the other cases indicate is that resort to r 19.5 is to be exceptional rather than so common place that it becomes the rule that leave is
7 Body Corporate 68792 v Memelink [2020] NZHC 594.
8 FFP Trustee (NZ) Ltd v Peng [2019] NZHC 3301 at [21].
9 At [21].
10 Fisk v X [2014] NZHC 2797.
11 Public Trust v Kain, above n 5, at [15].
12 Solar Bright Ltd v Martin [2019] NZHC 300.
13 Hong Kong & Shanghai Bank Corporation Ltd v Erceg (2010) 20 PRNZ 652 (HC) at [25].
14 Solar Bright Ltd v Martin, above n 12, at [18].
granted. The cases recognise, as the rule itself stipulates, that it is the interests of justice which this Court must apply as the overarching test. The interests of justice mean that the Court must secure the just, speedy, and inexpensive determination of this proceeding in its consideration of a r 19.3 application.
[23] Here, the applicant has an onus to satisfy the court that despite the express provisions of Part 18 it is in the interests of justice that he be granted leave to permit his application for directions to be made by origination application. I am not so satisfied.
[24] The first two matters relied upon by the applicant speak to his concern about the cost of taking proceedings. As noted earlier, the amount being held to wind up the Estate is just over $30,000. Over half of this sum will be required to pay Footes Ltd’s fees and expenses. Doubtless there will be still further work to be done to wind up the Estate. Whilst I accept that the cost of litigation is a factor that can be considered in the present context, it is plainly not cost effective to litigate in the High Court over a sum of less than $15,000 regardless of which procedure is adopted. Furthermore, whilst it is generally accepted that proceedings under Part 19 are likely to be less expensive than proceedings under Part 18 and ordinary proceedings, the extent to which that would be the case is uncertain and can be controlled by appropriate case management.
[25] The applicant refers to the long history of issues between the parties and the need to avoid irrelevant matters. A similar argument was raised in Public Trust v Kain.15 As Venning J found in that case, I do not consider the applicant has any prospect that his application for directions will proceed as a straightforward matter. There is a strong likelihood the application will be met with a claim by the respondents to be owed substantial sums in excess of the funds available and counter-allegations concerning the applicant’s conduct as trustee. They might well pursue an application to remove him as trustee (having previously sought his resignation).
[26] In any proceeding between the applicant and the respondents, there are likely to be contested factual issues and interlocutory applications and in those circumstances the court and the parties would benefit from full pleadings. This renders the
15 Public Trust v Kain, above n 5.
proceeding unsuited to the Part 19 procedure, whereas it has been recognised Part 18 is routinely used for applications which involve significant contest on factual issues.16
[27] The final matter the applicant relies upon is that viva voce evidence will not be required and could be determined under Part 19 on affidavits. There is nothing in this point. Evidence in proceedings under Part 18 will generally be by agreed statement of facts or affidavit.17
[28] None of the matters advanced therefore satisfy me that the interests of justice require the applicant’s proceeding to be brought under the Part 19 originating application procedure.
[29] There is another matter that supports my conclusion that the application must be dismissed. The s 66 jurisdiction is intended to provide private advice to trustees not resolve contested disputes between them. If trustees cannot agree on a course of action, then an application under s 66 is not the appropriate course and consideration needs to be given to other steps such as the removal of trustees and appointment of new trustees.18
Result
[30] The application for leave to bring an application for directions by way of originating application under Part 19 is dismissed.
16 Fisk v X, above n 10, at [21].
17 High Court Rules, r 18.15(1).
18 Chris Kelly, Greg Kelly and JME Garrow Garrow and Kelly Law of Trusts and Trustees (7th ed, LexisNexis, Wellington, 2017) at [24.34]; Chambers v S R Hamilton Corporate Trustee Ltd [2017] NZCA 131, [2017] NZAR 882 at [36]; Public Trust v Kain, above n 5, at [40]-[41].
[31] The applicant is unsuccessful. My preliminary view is there should be no order as to costs. However, I have not received submissions on the matter and reserve costs. If the applicant has any submissions he wishes to make in relation to costs he may file a memorandum within 14 days. If no memorandum is filed there shall be no order as to costs.
O G Paulsen Associate Judge
Solicitors:
Wynn Williams, Christchurch
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