Elworthy-Jones v Counties Trustee Company Limited HC Auckland Cp15-Sw02

[2002] NZHC 18

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY CP15-SW02

BETWEEN JOSEPHINE ELLA ELWORTHY-JONES
First Plaintiff

AND KAURI BAY FARMING COMPANY LIMITED
Second Plaintiff

AND COUNTIES TRUSTEE COMPANY LIMITED
First Defendant

AND WARREN SIMPSON
Second Defendant

AND CHARLES AUGUSTINE SWEENEY
Third Defendant

Hearing: 23-24 January 2002

Counsel: P Rice for plaintiffs
G Illingworth for first and second defendants
B Hart for third defendant

Judgment: 25 January 2002

JUDGMENT OF NICHOLSON J

Solicitors:
Grove Darlow & Partners, PO Box 2882, Auckland for Plaintiffs
Warren Simpson & Co, DX EP76-507, Papakura for first and second Defendants
B Hart, PO Box 4706, Ponsonby, for third defendant

[1] Last Thursday afternoon the plaintiffs filed proceedings seeking an interim injunction against the defendants restraining them from denying the plaintiffs occupation of a farm, removing any chattels or stock from the farm, selling or otherwise dealing with any of the chattels or stock on or removed from the farm and requiring them to deliver to the plaintiffs any stock or chattels removed from the farm.

[2] The first plaintiff, Ms Elworthy-Jones, swore a lengthy affidavit in support of the application. Affidavits by the second defendant, Mr W Simpson, the farm manager Mr M Simpson, a real estate agent Mr Macky, a stock agent Mr Saunders, and Mr N Cooke, the solicitor acting for the third defendant Mr Sweeney, have been filed in opposition.

[3] The application has been heard and decided with urgency.

[4] The basic circumstances are that in 1996 Ms Elworthy-Jones and the third defendant, Mr Sweeney, arranged to purchase a farm at 373 Kawakawa Road, Clevedon. Ms Elworthy-Jones is a solicitor. Mr Sweeney is a barrister. He is a tax specialist. The Kauri Bay Trust was established to own the farm. The trust had equal half share beneficiaries, being trusts under which relatives of Mr Sweeney and Ms Elworthy-Jones were beneficiaries. The trust deed provided that Mr Sweeney was guardian under the Kauri Farm Trust with sole power of appointment and removal of trustees and the power to veto the exercise of any discretionary power by a trustee.

[5] Mr Sweeney and Ms Elworthy-Jones borrowed $1,425,000 from the National Bank to purchase the farm. They paid this money to the second plaintiff, Kauri Bay Farming Company Limited (“Kauri Bay Farming”) which had been incorporated for the purpose of occupying and managing the farm. Mr Sweeney and Ms Elworthy-Jones paid the $1,425,000 to Kauri Bay Farming by way of share subscription. It then lent the money to the Kauri Bay Trust to enable it to purchase the farm. The National Bank loans were secured by a first mortgage over the farm. Kauri Bay Farming then formally leased the farm from the Kauri Bay Trust. However, no rent was paid by Kauri Bay Farming to the Trust and in turn the Trust did not pay interest to it for the loan. The amounts were offset against each other in the accounts of the Kauri Bay Trust and Kauri Bay Farming by annual Book entry. A rent of $156,750 per annum stated in the lease was not a market rental but was fixed to offset the loan interest payment.

[6] Ms Elworthy-Jones lived on the farm from 1996. Farming operations were performed by a farm manager. Ms Elworthy-Jones made the necessary payments to satisfy both National Bank personal loans. In her affidavit she claims that she has applied almost $900,000 of her own money towards the capital improvements to the farm and nearly as much again in debt servicing. She developed the shearer’s quarters in the farm barn into a home.

[7] The relationship of Ms Elworthy-Jones and Mr Sweeney broke up in 1999. At that stage Ms Elworthy-Jones’s mother was the trustee of Kauri Bay Trust. Mr Sweeney purported to remove her and appoint himself and a company he controlled in her place. Ms Elworthy-Jones resisted that move. Mr Sweeney appointed a trustee company associated with Mr W Cant, chartered accountant, as trustee in place of Ms Elworthy-Jones’s mother. In September 2000 Mr Sweeney appointed Mr Warren Simpson, solicitor, the second defendant, as trustee in place of Mr Cant’s company, which then resigned. In November 2000 the first defendant, Counties Trustee Company Limited, a company controlled by Mr Simpson, was appointed by Mr Sweeney at Mr Simpson’s request to be the trustee in Mr Simpson’s place.

[8] Considerable dispute arose between Mr Sweeney and Ms Elworthy-Jones over a property they had acquired in Symonds Street, Auckland. A company which Mr Sweeney is alleged to control issued summary judgment proceedings against Ms Elworthy-Jones in respect of this property.

[9] In March 2001 Ms Elworthy-Jones married Mr N Jones. He joined her in paying the interest on both her and Mr Sweeney’s bank loans together with farm trading short falls. Ms Elworthy-Jones states that she hoped she and her husband could reach agreement with Mr Sweeney about the farm but at the end of last year when this proved not possible, they decided they could not continue to afford to maintain the farm because of the level of the National Bank debt. They decided to force a sale of the farm. In December 2001 Ms Elworthy-Jones wrote to Mr Sweeney and Mr Simpson advising of this intention.

[10] When the payments stopped the National Bank served a Property Law Act notice. This expires on 8 February 2002. On 14 January 2002 Mr Simpson caused Counties Trustee to restrain for alleged arrears of rent of $190,000, taking 61 animals and also taking possession of the farm. It gave notice of termination of the plaintiffs tenancy. Ms Elworthy-Jones and her husband were away at the time and on hearing what had happened they returned to the farm to find notices prohibiting access. The plaintiffs thereupon issued the present proceedings.

[11] The pertinent leading authorities American Cyanamid & Co v Ethicon Ltd [1975] AC 396 and Klissers v Harvest Bakeries [1985] 2 NZLR 129, prescribe that the correct approach in a case such as this if for the Court to proceed as follows:

“1 To consider whether there is a serious question to be argued;

2 To enquire whether damages would be an adequate remedy if the injunctive relief sought is not granted;

3 To go on if necessary to consider the balance of convenience;

4 Finally, to stand back and assess where the overall justice lies.”

[12] Having considered the pleadings, the affidavits and counsels submissions, I am of the view that there are serious issues to be tried relating to the plaintiffs alleged right of continued occupancy of the farm and the legality of the defendants actions in taking possession and removing animals.

[13] I do not consider that damages would be an adequate remedy for the plaintiffs if injunctive relief is not granted. Ms Elworthy-Jones occupied the farm residence for six years before the defendant took possession while she was away. It would be very difficult to assess damages and to compensate her for the strain and upset which the defendants actions and consequent occupation has caused and is causing.

[14] As May LJ observed in Cayne v Global Natural Resources plc [1984] 1 All ER 225 (CA), at p 237, it is clear that, although the phrase may well be substantially less elegant, the “balance of the risk of doing an injustice” better describes the process involved than the phrase “the balance of convenience”.

[15] In assessing where the overall balance of justice lies, I consider that Ms Elworthy-Jones and Mr Sweeney are each using the aspect of occupation of the farm and use of the farm assets as a stratagem in their now rather bitter disputes arising from their former business affairs, with each having a desire to prevail. However, Ms Elworthy-Jones had possession of the farm for six years and alone maintained the National Bank loans over that period. It is her intention to leave with her husband to live in the United States of America on 1 April this year.

[16] In all the circumstances I consider that the justice of the case requires that Ms Elworthy-Jones be permitted to return to the residence which she occupied on the farm and reside there until her intended departure on 1 April 2002. Also, that the former farm manager, Mr M Simpson, return and manage the farm on behalf of the Kauri Bay Trust and that the defendants not be permitted to remove any further stock or property from the farm apart from that which would be removed in normal farming trading.

[17] I accordingly grant the interim injunction application in part by ordering that the defendants, their employees and agents do not:

[i] Deny the plaintiffs occupation of the part of the farm comprised of the residence and appropriate surrounding land and road access.

[ii] Remove any further chattels or stock from the farm apart from those removed in normal farm trading.

[iii] Sell, lease, charge or otherwise deal with any of the chattels or stock presently on the farm.

[18] These restraining orders will cease to have effect on 1 April 2002.

[19] Costs are reserved.