Elworthy-Jones v Counties Trustee Company Limited HC Auckland Cp15-As02

[2002] NZHC 874

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY CP15-AS02

BETWEEN: (1) J E ELWORTHY-JONES
(2) KAURI BAY FARMING CO LTD
(3) N H B JONES
(4) HOLOLIO FARMS LTD
Plaintiffs

AND: (1) COUNTIES TRUSTEE COMPANY LIMITED
(2) W F SIMPSON
(3) C A SWEENEY
(4) J E ELWORTHY-JONES, qua
TRUSTEE OF THE SWEENEY TRUST
Defendants

Hearing: 7 August 2002

Counsel:
Mr R J Asher QC and Ms S J Pilgrim for Plaintiffs
Mr W F Simpson (in person), Second Defendant and (with leave) as representative of First Defendant
Mr C A Sweeney QC (in person) Third Defendant

Judgment: 14 August 2002

JUDGMENT OF HEATH J

Solicitors:
Grove Darlow & Partners, PO Box 2882, Auckland, Fax: [phone]
W F Simpson, PO Box 72-161, Papakura, Fax: [phone]

Introduction

[1] On 7 August 2002 I heard two applications relating to the proposed sale of farmland situated at 737 Kawakawa Bay Road, Clevedon.

[2] The first application seeks an order approving the sale. This application is brought by Counties Trustee Company Limited as the trustee (and supported by Mr Sweeney QC as “Guardian of the trust) which entered into the agreement. The sale arises from an auction conducted on 19 June 2002. The vendor, Counties Trustee Company Limited, sold the land as trustee of the Kauri Bay Trust. Clause 26 of the Agreement for Sale and Purchase requires, if necessary, the trustee to seek approval of this Court to the contract and orders facilitating delivery of vacant possession to the purchaser. Some directions are required because title to the land in question is registered in the name of Lady Elworthy, the mother of Ms Elworthy-Jones.

[3] The second application concerns the way in which settlement of the property should be effected. This application is brought on behalf of the Plaintiffs. As refined during the course of submissions, Mr Asher QC seeks orders:

[a] that the conveyance of the farm property be carried out by an independent solicitor;

[b] that all proceeds of sale, other than the amounts required to pay the direct costs of sale and to discharge the first mortgage to The National Bank of New Zealand Ltd, be held on interest bearing deposit by the independent solicitor pending trial. Mr Asher QC identified direct costs of sale as:

[i] land agents’ commission and sale costs;

[ii] reasonable vendor conveyancing costs and disbursements on sale; and

[iii] any arrears of rates and insurance premiums.

[4] On 2 August 2002 I made directions requiring service of the applications and supporting documents on parties which appeared to have an interest in the outcome of the applications. Service has been effected in accordance with the directions which I made. As a result:

[a] Lady Elworthy has filed a Memorandum through her solicitors, Raymond Sullivan McGlashan, Solicitors, Timaru. While she prefers to convey the farm property directly to the purchaser she abides by any decision of the Court in relation to the current applications.

[b] Mr Rudkin, a former trustee of the Kauri Bay Trust, has instructed Grove Darlow, the Solicitors for the Plaintiffs, to act on his behalf. He abides the decision of the Court on the current applications.

[c] Wylexen LLC has instructed Vallant Hooker & Partners, Solicitors, Auckland to act for it. Mr Murray of that firm has lodged a Memorandum on its behalf. Wylexen submits that it is entitled to be paid and that there is no basis for any order postponing its rights to payment. It did not seek to be heard through counsel at the 7 August 2002 hearing. I will return to the position of Wylexen later in this judgment.

Trusteeship

[5] At the commencement of the hearing on 7 August 2002 I was advised by Mr Sweeney QC, that, as Guardian of the Kauri Bay Trust, he had, that morning, at the request of Mr Simpson, appointed the Public Trustee as a trustee. I was told that this had been done because Mr Simpson had expressed a willingness for Counties Trustee Company Limited to resign as trustee provided certain acknowledgements sought from the Plaintiffs and Mr Sweeney QC (set out at page 2 of a letter which he had sent to the solicitors for the Plaintiffs dated 6 August 2002) were given. Mr Sweeney QC, for his part, acknowledged that the resignation of Counties Trustee Company Limited would not be interpreted, by him, as an admission of fault on the part of either Counties Trustee Company Limited or Mr Simpson in relation to the subject matter of the proceeding. After taking instructions, Mr Asher QC was able to give a similar acknowledgement.

[6] At the conclusion of the hearing on 7 August 2002 I requested a Joint Memorandum be filed by 5 pm on 9 August 2002 which would clearly indicate the position with regard to trusteeship of the Kauri Bay Trust. Regrettably it has not proved possible for a Joint Memorandum to be lodged. I have therefore received and considered the following documents which have been filed in Court:

[a] A draft “Joint Memorandum” prepared by Mr Sweeney QC and sent to the solicitors for the Plaintiffs on 8 August 2002;

[b] Written advice from the solicitors for the Plaintiffs that, with the exception of paras 14 and 15 of that Joint Memorandum, they agree with the content of Mr Sweeney QC’s draft Joint Memorandum;

[c] A Memorandum prepared by the solicitors for the Plaintiffs dated 9 August 2002 which appends a draft Joint Memorandum which, at the time of filing, had not been seen by Mr Sweeney QC but which had been signed by the solicitor representing Public Trust New Zealand.

[d] A memorandum from Mr Sweeney QC (which runs to some 21 pages) which addresses in detail the areas of disagreement between the parties.

[7] I make it very clear that I do not criticise Mr Sweeney QC for lodging the Memorandum which he has filed as the Plaintiffs, in their Memorandum, went further than I had intended and, in effect, raised new issues which Mr Sweeney QC, quite properly, wished to answer.

[8] Mr Simpson has indicated that both he and Counties Trustee Company Limited will abide the decision of the Court.

[9] Having considered the documentation summarised in para [6] above, I conclude that the current position with regard to trusteeship of the Kauri Bay Trust is as follows:

[a] Until 7 August 2002 Counties Trustee Company Limited acted as sole trustee of the Kauri Bay Trust.

[b] On 6 August 2002 Mr Simpson, on behalf of Counties Trustee Company Limited, wrote to the solicitors for the Plaintiffs stating the intention of Counties Trustee Company Limited to resign as trustee with such resignation being conditional upon receipt of the acknowledgements which I have now recorded in para [5] above.

[c] On 7 August 2002, prior to the Court sitting, Mr Sweeney QC, exercising his power of appointment under the Trust Deed of the Kauri Bay Trust, appointed Public Trust New Zealand to be a trustee with effect from 7 August 2002. A letter of appointment and a letter from Public Trust New Zealand accepting the appointment were produced to the Court.

[d] There are currently two trustees of the Kauri Bay Trust, viz Counties Trustee Company Limited and Public Trust New Zealand. Although an intention to resign has been signalled by Mr Simpson on behalf of Counties Trustee Company Limited, no resignation has yet been tendered.

[e] Public Trust New Zealand confirms that it joins in the application for the Court’s approval to the Agreement for Sale and Purchase and abides the decision of the Court on that application and the application dealing with the machinery of sale.

[f] All parties agree that if Public Trust New Zealand and Counties Trustee Company Limited remain as joint trustees until settlement of the transaction is effected, Mr Simpson will remain as the sole director of Counties Trustee Company Limited.

[10] I attribute no blame for what has occurred but express my regret that it has proved necessary for the parties to diverge in the subsequent memoranda in relation to issues which were addressed before me on 7 August 2002. It is understandable Mr Sweeney QC would not have been prepared to accede to the suggestions summarised in para 7 of the Plaintiffs’ Memorandum of 9 August 2002. I say no more on that subject.

Application by Mr Sweeney QC for me to recuse myself

[11] As a preliminary matter, Mr Sweeney QC sought an order that I recuse myself from this proceeding: I have been assigned to this proceeding by the Executive Judge. Mr Sweeney QC indicated that he had become aware of (what he termed) my “close friendship” with Mr Darlow, the solicitor for the Plaintiffs. He submitted that it may be preferable for a Judge not so close to a major participant in the case to have management of the case. He noted two particular aspects of Mr Darlow’s conduct which were in issue in the proceeding: viz

[a] whether the pleadings filed by Mr Darlow had been drawn responsibly and ethically;

[b] conduct on the part of Mr Darlow which Mr Sweeney QC submits could be interpreted as designed to destroy the auction process.

Mr Sweeney QC submitted that it would be embarrassing for a “close friend” to be asked to preside when such matters were in issue.

[12] I responded in open court to Mr Sweeney QC by stating that I believed his characterisation of my relationship with Mr Darlow was overstated. What follows is a summary of what I said to Mr Sweeney QC which, having regard to the additional thought I have been able to give to the issue, is in greater depth than was articulated in Court in the presence of counsel and Mr Sweeney QC:

[a] I indicated that Mr Darlow and I were not “close friends”.

[b] I indicated that initially my association with Mr Darlow had arisen from professional links. We have met from time to time in relation to the business of the organised legal profession in New Zealand: Mr Darlow is currently the President of the Auckland District Law Society. As recently as Friday, 2 August 2002, Mr Darlow gave a speech at a Bar dinner to welcome five new judicial officers to Auckland, which included myself. Mr Darlow also sat at my table that night.

[c] I disclosed that during my time in practice as a Silk I had acted as counsel on instructions from Mr Darlow. It is fair to say that we are on “friendly terms” as a result of that association. In the context of this particular case it is also important to disclose that I was appointed to the Bench recently: I was sworn in as a Judge on 12 April 2002.

[d] To the best of my recollection:

[i] Mr Darlow has not dined at my home; and

[ii] I have not dined at his home.

We have, however, dined together, with our respective spouses, at the home of mutual friends. Further, we have, at times, discussed the possibility of dining at our respective homes at some time in the future.

[13] I indicated, also in open court, that while I saw no difficulty in ruling on whether the pleadings were responsibly drawn and on whether they disclosed reasonable causes of action (those being questions involving the application of the law to the particular pleadings filed in this case) I could see difficulty arising if a direct conflict arose between Mr Darlow and another witness in respect of which it was necessary, in the course of the trial, to make findings on questions of honesty and good faith. While I would like to think that I could approach such an issue entirely objectively, I could not rule out the possibility that, albeit subconsciously, I might find it more difficult to make a finding of credibility against Mr Darlow having regard to our prior association.

[14] Based on that disclosure I asked Mr Sweeney QC to articulate with greater precision where he saw potential credibility issues arising. I think it fair to summarise Mr Sweeney QC’s argument as follows: the issue would arise either in respect of an analysis of the statement of claim on a strike out application or, possibly, in respect of Mr Darlow’s involvement during the sale process.

[15] Mr Asher QC opposed the application that I should recuse myself. He submitted that the level of association which I had described was not sufficient to justify recusal. He also submitted that the extent of Mr Sweeney QC’s concern about credibility issues affecting Mr Darlow was exaggerated: he emphasised the issue was to be considered objectively. He suggested that that could only be done after pleadings had closed and briefs of evidence had been prepared.

[16] I ruled, during the course of the hearing, that I was not prepared to recuse myself at this time. I indicated that if, after the issues have been defined by the pleadings and briefs of evidence for trial have been compiled, there is a real possibility that credibility findings need to be made in respect of Mr Darlow’s evidence, that leave would be reserved for Mr Sweeney QC to restore this issue for argument. I said that I could not see any reason why I should recuse myself from hearing and determining interlocutory issues: including any strike-out application. I indicated I would give full reasons for that ruling in this judgment. What follows are my reasons for that decision.

[17] The issue of apparent bias of a judicial officer (for, however politely it may be expressed, that is what it is) has been considered recently in a New Zealand context. It is important to remind myself that this is a small country. Where professionals are concerned it is inevitable that there will be a degree of professional and social interaction from which friendships (at varying levels) will spring. Such social interaction of itself, however, does not prevent a judicial officer from hearing a particular case.

[18] In Man O’War Station Ltd v Auckland City Council [2001] 1 NZLR 552 the Court of Appeal was faced by a submission that an earlier decision should be set aside because one of the members of the Court of Appeal who heard the case (Blanchard J) had had a prior association with a person who was a witness in the proceeding. In determining whether the factual situation was sufficient to justify recusal, the Court of Appeal applied the principles set out in the speech of Lord Goff of Chieveley in R v Gough [1993] AC646 (HL) as applied subsequently in Auckland Casino Ltd v Casino Control Authority [1995] 1 NZLR 142 (CA). The test, set out by Lord Goff at 670 of Gough is as follows:

“In conclusion, I wish to express my understanding of the law as follows. I think it possible, and desirable, that the same test should be applicable in all cases of apparent bias, . . . . Furthermore, I think it unnecessary, in formulating the appropriate test, to require that the court should look at the matter through the eyes of a reasonable man, because the court in cases such as these personifies the reasonable man; and in any event the court has first to ascertain the relevant circumstances from the available evidence, knowledge of which would not necessarily be available to an observer in court at the relevant time. Finally, for the avoidance of doubt, I prefer to state the test in terms of real danger rather than real likelihood, to ensure that the court is thinking in terms of possibility rather than probability of bias. Accordingly, having ascertained the relevant circumstances, the court should ask itself whether, having regard to those circumstances, there was a real danger of bias on the part of the relevant member of the tribunal in question, in the sense that he might unfairly regard (or have unfairly regarded) with favour, or disfavour, the case of a party to the issue under consideration by him; . . . .”

[19] The Court of Appeal held that the circumstances were not sufficient to justify recusal of Blanchard J in that case. In coming to that conclusion the Court of Appeal also relied on observations by a strong English Court of Appeal (Lord Bingham of Cornhill CJ, Lord Woolf MR and Sir Richard Scott VC) in Locabail (UK) Ltd v Bayfield Properties Ltd [2000] 1 ALL ER 65 where, at 77 (para 25), the Court of Appeal said:

“It would be dangerous and futile to attempt to define or list the factors which may or may not give rise to a real danger of bias. Everything will depend on the facts, which may include the nature of the issue to be decided. We cannot, however, conceive of circumstances in which an objection could be soundly based on the religion, ethnic or national origin, gender, age, class, means or sexual orientation of the judge. Nor, at any rate ordinarily, could an objection be soundly based on the judge’s social or educational or service or employment background or history, nor that of any member of the judge’s family; or previous political associations; or membership of social or sporting or charitable bodies; or Masonic associations; or previous judicial decisions; or extra-curricular utterances (whether in textbooks, lectures, speeches, articles, interviews, reports or responses to consultation papers); or previous receipt of instructions to act for or against any party, solicitor or advocate engaged in a case before him; . . . . By contrast, a real danger of bias might well be thought to arise if there were personal friendship or animosity between the judge and any member of the public involved in the case; or if the judge were closely acquainted with any member of the public involved in the case, particularly if the credibility of that individual could be significant in the decision of the case; or if, in a case whether the credibility of any individual were an issue to be decided by the judge, he had in the previous case rejected the evidence of that person in such outspoken terms as to throw doubt on his ability to approach such person’s evidence with an open mind on any later occasion; or if on any question at issue in the proceedings before him the judge had expressed views, particularly in the course of the hearing, in such extreme and unbalanced terms as to throw doubt on his ability to try the issue with an objective judicial mind (see Vakauta v Kelly (1989) 167 CLR 568); or if, for any other reason, there were real ground for doubting the ability of the judge to ignore extraneous considerations, prejudices and predilections and bring an objective judgment to bear on the issues before him. The mere fact that a judge, earlier in the same case or in a previous case, had commented adversely on a party or witness, or found the evidence of a party or witness to be unreliable, would not without more found a sustainable objection. In most cases, we think, the answer, one way or the other, will be obvious. But if in any case there is a real ground for doubt, that doubt should be resolved in favour of recusal. We repeat: every application must be decided on the facts and circumstances of the individual case. The greater the passage of time between the event relied on as showing a danger of bias and the case in which the objection is raised, the weaker (other things being equal) the objection will be.” (Emphasis added).

[20] The decision of the Court of Appeal in Man O’War Station Ltd was subsequently upheld by the Privy Council: Man O’War Station Ltd v Auckland City Council (2002) UKPC 28 (PC). Delivering the advice of their Lordships, Lord Steyn, at para 10, noted that the Privy Council had been invited to adopt for New Zealand the adjustment of the test in Gough enunciated by Lord Hope of Craighead in Magill v Porter and Weeks [2001] UKHL 67 (HL) namely that: “the question is whether the fair minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased” (para 103). Their Lordships were not prepared, without the benefit of a view from the Court of Appeal of Appeal on the point, to alter the law of New Zealand.

[21] Having regard to those legal principles it seemed to me that there was no impediment to my continuing to hear and determine interlocutory issues. However, if, after the pleadings have closed and briefs of evidence have been exchanged, there is a real possibility that issues of honesty and good faith arise in respect of Mr Darlow, I would need to recuse myself given that I am satisfied that there may be, at least, some subconscious reluctance on my part to make a finding of dishonesty or bad faith against Mr Darlow.

Background to Litigation

[22] The parties approach the litigation in this case quite differently. Ms Elworthy-Jones, and the other Plaintiffs, see the litigation as a means of resolving questions of contribution made by parties to a farm property which they view as in the nature of a joint venture. Mr Sweeney QC, however, takes the view that there is no reason to set aside the actual structure used to set up the arrangements among the parties and that it is necessary, in order to disentangle the parties from their venture, to apply the terms of the various documents which the parties signed when the project was undertaken.

[23] That fundamental difference in view affects, to a large degree, the attitudes of the various parties to the way in which the sale should proceed. Mr Asher QC, on behalf of the Plaintiffs, expresses concern about the wide-ranging powers and discretions available to Mr Sweeney QC in his capacity as “Guardian” of the Kauri Bay Trust. It is clear, for example, that there is a dispute as to the amounts which ought to be repaid to Kauri Bay Farming Co Ltd as a result of the process undertaken to disentangle the interests of the parties.

[24] I need say no more about the disputes which arise. It is sufficient to record my view that, for whatever reason, there are arguable disputes as to how the money should be distributed. It is also clear that a level of distrust has arisen among participants which will require the Court’s assistance to facilitate the sale process. Once the sale process has been facilitated the parties can concentrate on formulating their substantive claims in respect of the monies which will be held on trust as a result of the sale.

Application for Approval of Sale

[25] By an application dated 15 July 2002 Counties Trustee Company Limited, Mr Simpson and Mr Sweeney QC applied for an order that the Court ratify the agreement for Sale and Purchase dated 19 June 2002 arising out of the auction of the Kawakawa Bay Road property held that day. The agreement for Sale and Purchase has been entered into between Counties Trustee Company Limited qua trustee of the Kauri Bay Trust (as vendor) and Diana’s Farm Ltd (as purchaser). The sale price is $2,320,000 plus GST.

[26] Consequential orders have also been sought by those Defendants in order to enable settlement of the Agreement for Sale and Purchase to be implemented. The consequential directions which are sought may be summarised as follows:

[a] That Lady Elworthy, a previous trustee of the Kauri Bay Trust and the person who remains as registered proprietor of the land, be directed to sign a Memorandum of Transfer transferring legal title in the property to Counties Trustee Company Limited to enable it to settle the sale pursuant to the agreement for Sale and Purchase with Diana’s Farm Ltd.

[b] Failing execution of the transfer by Lady Elworthy, the Registrar of this Court be authorised to sign such a transfer on her behalf.

[c] That caveats registered on the titles to the property be removed from the titles.

[27] As noted earlier (see para [3] above) the Plaintiffs have also sought directions in relation to the sale process.

[28] I am satisfied that I have jurisdiction to approve the sale by dint of s 64 of the Trustee Act 1956 [the Act]. Section 64 of the Act provides:

“64 Power of Court to authorise dealings with trust property and variations of trust

(1) Subject to any contrary intention expressed in the instrument (if any) creating the trust, where in the opinion of the Court any sale, lease, mortgage, surrender, release, or other disposition, or any purchase, investment, acquisition, retention, expenditure, or other transaction is expedient in the management or administration of any property vested in a trustee, or would be in the best interests of the persons beneficially interested under the trust, but it is inexpedient or difficult or impracticable to effect the same without the assistance of the Court, or the same cannot be effected by reason of the absence of any power for that purpose vested in the trustee by the trust instrument (if any) or by law, the Court may by order confer upon the trustee, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions (if any) as the Court may think fit, and may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne, and as to the incidence thereof between capital and income:

Provided that, notwithstanding anything to the contrary in the instrument (if any) creating the trust, the Court, in proceedings in which all trustees and persons who are or may be interested are parties or are represented or consent to the order, may make such an order and may give such directions as it thinks fit to the trustee in respect of the exercise of any power conferred by the order.”(my emphasis)

[29] In addition, this Court may give directions to a trustee in relation to (inter alia) the administration of trust property. Section 66 of the Act provides:

“66 Right of trustee to apply to Court for directions

(1) Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of any such property, or respecting the exercise of any power of discretion vested in the trustee.

(2) Every such application shall be served upon, and the hearing may be attended by, all persons interested in the application or such of them as the Court thinks expedient.”

[30] At the time that the Agreement for Sale and Purchase was executed, the sole trustee of the Kauri Bay Trust was Counties Trustee Company Limited. That company was operated through Mr Simpson who was seen (rightly or wrongly) by the Plaintiffs as close to Mr Sweeney QC. Accordingly, the trustee found itself in the middle of warfare which had broken out between parties who claimed beneficial interests in the trust property. Such a situation is never easy for a trustee to manage. The situation became more difficult, in the context of this particular case, because of the existence of cl 19 of the Trust Deed which provides:

“19. NOTWITHSTANDING anything in this Deed to the contrary the Trustee shall not be entitled to exercise any discretionary power under this Deed without first having obtained the consent in writing of the Guardian to the proposed exercise of that power.”

The Guardian of the Trust is Mr Sweeney QC. Mr Sweeney QC, as Guardian, also holds the power of appointment of trustees: see cl 10 of the Trust Deed.

[31] The term “Guardian” is not one which has a technical legal meaning. It is a term commonly used in trust instruments to describe a person who is empowered, under a Trust Deed to direct or veto the exercise of powers conferred upon trustees; or, to choose or veto the trustees’ choice of beneficiaries of the Trust. Other powers may also be conferred upon a Guardian. Another name for a Guardian is a Protector: generally see the Law Commission’s report, Some Problems in the Law of Trusts (NZLC R 79, April 2002) at para 20. Although there is no statutory basis in New Zealand for the exercise of powers by a “Guardian” or a “Protector” it seems reasonably clear that such a person will be subject to fiduciary obligations which are sufficient to ensure that he or she acts in good faith and for the benefit of those entitled beneficially to the trust property: see Some Problems in the Law of Trusts at para 22 citing Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd [1991] 1 WLR 589 and British Coal Corporation v British Coal Staff Superannuation Scheme Trustees Ltd [1995] 1 ALL ER 912. If a “Guardian” was not subjected to such obligations a real danger would exist that those who are appointed to exercise powers on behalf of those beneficially entitled to the trust property (ie trustees who owe fiduciary obligations) could be undermined by a person owing no fiduciary obligation to beneficiaries. Such a legal position would be inconsistent with the fundamental purpose of a trust structure. I make it clear that these provisional views on the role of a “Guardian” have been expressed without the benefit of argument. They are open for reconsideration should the need arise.

[32] It is true, as Mr Simpson reminded me, that Mr Sweeney QC was appointed as Guardian by the Settlor of the Trust. But it is hardly surprising, given the disputes which have arisen among the parties to this proceeding, that an air of distrust has developed on the part of the protagonists. Similarly, by the nature of the powers conferred upon the Guardian, it is not surprising that the Plaintiffs have seen Mr Simpson and Counties Trustee Company Limited as closely allied to the interests of Mr Sweeney QC.

[33] All of those matters are matters of perception. Deliberately, I do not make any findings in this judgment as to the conduct of either Counties Trustee Company Limited or Mr Simpson in relation to the administration of the Trust and the exercise of powers and discretion conferred by the Trust Deed. Those findings must await the resolution of substantive disputes. I approach the present applications on the basis that there is nothing to suggest that Counties Trustee Company Limited or Mr Simpson would deal with the sale in anything other than an honourable way.

[34] I am satisfied the air of distrust which exists makes it difficult or impracticable for Counties Trustee Company Limited to effect the sale without the assistance of the Court. It is expedient for the Court to approve the sale to provide a degree of protection to the trustee when carrying out obligations under the Agreement for Sale and Purchase which, all parties acknowledge, achieves a sale of the property at the best possible price.

[35] On that basis, I make an order approving the sale.

Directions in Relation to Sale

[36] The Plaintiffs seek the orders which I have summarised in para [3] above to give effect to the sale. The orders sought reflect consistent themes advanced by the Plaintiffs: ie

[a] the sale should be conducted by someone who can be regarded by everyone involved in the transaction as truly independent; and

[b] funds should not be disbursed to any entity which cannot be considered as a genuine arms’ length third party.

[37] There is a contest between the Plaintiffs and Mr Sweeney QC over the extent of the mortgage in favour of Kauri Bay Farming Co Ltd which is supported by a caveat against the title to the land. There is also an arguable dispute as to whether it is appropriate for Wylexen LLC to be repaid advances made to it. There is agreement that the first mortgagee, The National Bank of New Zealand Ltd, should be paid out in full.

[38] In the circumstances of the current proceeding I am satisfied that it is desirable for someone detached from the events of the recent past to oversee the process of sale. I am also satisfied that it is preferable only to pay those parties whose debts are not in dispute. Although that will mean a substantial sum of money being held undisbursed on interest bearing deposit pending resolution of this proceeding, I am confident that the Court can allocate time relatively quickly to resolve outstanding disputes. However, the case will not be ready for hearing until pleadings have closed and interlocutory skirmishes have been completed.

[39] Now that the Public Trust New Zealand has been appointed as a trustee, I am satisfied that it is sufficiently independent to enable a determination to be made, by that trustee, as to whether the conveyancing of the property is done within the Public Trust office or by separately briefed solicitors. For the reasons I have given it would be inappropriate for either Counties Trustee Company Limited or Mr Simpson to be involved in the conveyancing. As indicated earlier, however, such a conclusion does not reflect adversely upon Mr Simpson or Counties Trustee Company Limited. It simply recognises the reality of the situation.

[40] I have decided to make directions as to sale separate from the approval process. The directions which I make with regard to the mode of sale are in the following terms:

[a] Conveyancing in respect of the property shall be carried out by a solicitor appointed by the Public Trust New Zealand. For the avoidance of doubt, that solicitor may either be an in-house solicitor employed by Public Trust New Zealand or a solicitor in a firm of solicitors to be briefed for the purpose.

[b] To enable the settlement to be carried into effect:

[i] Lady Elworthy shall, by 5 pm on 23 August 2002, execute a transfer of the Kawakawa Bay Road property in favour of Counties Trustee Company Limited. That transfer shall be provided to Public Trust New Zealand to use on settlement.

[ii] On settlement, Counties Trustee Company Limited shall provide a Memorandum of Transfer in favour of the purchaser and shall direct the solicitors for the purchaser to pay the purchase monies to Public Trust New Zealand whose receipt for such monies shall be a valid discharge of any obligations of Counties Trustee Company Limited to the purchaser.

[iii] The purchase monies shall be held in a trust account by the solicitor employed to undertake the conveyancing (this may either be a trust account operated by the Public Trust New Zealand or a solicitor). The funds shall be placed on interest bearing deposit on call. From the proceeds of sale the solicitor shall be entitled to pay:

• land agents’ commission and sale costs;

• reasonable conveyancing costs and disbursements on sale;

• any arrears of rates and insurance premiums or any adjustments in relation to those or similar disbursements on sale.

• the balance of the proceeds of sale shall be held on trust pending resolution of this proceeding or earlier order of this Court.

• the funds held shall be used to meet ongoing costs incurred by Public Trust New Zealand in its capacity as a trustee; in other words its remuneration and reasonable disbursements.

[iv] Leave to apply for further or other directions is reserved to any party or to Public Trust New Zealand or to any party or to any person ordered to be served with the current applications.

Deliberately, I make no directions in relation to the withdrawal of caveats. I expect all caveats to be withdrawn to permit settlement to be effected. If any difficulties arise further directions can be sought from me at short notice.

[41] To the extent that Counties Trustee Company Limited may not be fully paid for services rendered as trustee to date, I indicate that I would be prepared to consider an application from that company for an order in the following, or similar, terms:

[a] That any reasonable costs which have been invoiced and remain outstanding be paid out of the funds held by Public Trust New Zealand on condition that such funds be secured against any order for repayment which may be made by this Court as a result of this proceeding.

[b] The security will need to be against real estate. Counties Trustee Company Limited will need to bear the costs of preparing the mortgage. Interest shall accrue on any monies which are ordered to be repaid at 1% in excess of the overdraft rate from time to time operated by The National Bank of New Zealand Ltd at Papakura. I intend that interest accrue on a compounding basis if repayment is ordered.

[c] The mortgage shall not be discharged until such time as either any repayment has been made or the Court has determined that no repayment is required.

Any such application shall be made pursuant to the leave reserved in para [40][b][iv] above.

Result

[42] In consequence, I make the following orders:

[a] I approve the sale of the farm pursuant to the Agreement for Sale and Purchase dated 19 June 2002.

[b] I direct that the sale be conducted in accordance with the directions set out in para [40] above.

[43] For the reasons I have given I confirm my decision not to recuse myself but to reserve leave for Mr Sweeney QC to apply further should a real possibility arise that a credibility finding may have to be made in respect of Mr Darlow: see further paras [13] and [21] above.

[44] Given that the orders which have been required on the current applications are required for the benefit of all parties, I make no order as to costs.

[45] I anticipate that any application from Counties Trustee Company Limited in accordance with the indications given in para [41] above will be made prior to the resignation of that company as a trustee so that the Court has jurisdiction to impose such terms to the order as it considers necessary.

[46] I request the Registrar to liaise with the parties to arrange a date for me to hear outstanding interlocutory applications as soon as practicable. The next date for a conference or hearing shall be fixed by the Registrar.

[47] I thank counsel, Mr Simpson and Mr Sweeney QC for their assistance at the hearing.