Fundacion Pimjo Asociacion Civil v Aguilar & Aguilar Ltd
[2014] NZHC 2322
•24 September 2014 at 2pm
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2013-404-004810 [2014] NZHC 2322
UNDER the Trustee Act 1956 BETWEEN
FUNDACION PIMJO ASOCIACION CIVIL
Applicant
AND
AGUILAR & AGUILAR LIMITED First Defendant
CARISMA PRIMA LIMITED Second Defendant
Hearing: 18 September 2014 Appearances:
I Hikaka and F Whyte for Applicant (Mr Redmond) D McLay for Defendants
Judgment:
24 September 2014 at 2pm
JUDGMENT OF ANDREWS J [Application for joinder as party to proceeding]
This judgment is delivered by me on 24 September 2014 at 2 pm pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
FUNDACION PIMJO ASOCIACION CIVIL v AGUILAR & AGUILAR LTD & ANOR [2014] NZHC 2322 [24 September 2014]
Introduction
[1] Fundación Pimjo Asociacion Civil (“the Fundación”) issued this proceeding on 7 November 2013. The Fundación seeks various orders relating (in very general terms) to the management and control of the Fundación. Mr Jorge Mateo Redmond Schlageter (“Mr Redmond”) has applied to be joined as second plaintiff in the proceeding. The application is opposed by the first and second defendants.
Background
[2] The following narrative is derived from the submissions for Mr Redmond and a Minute of Katz J issued on 9 July 2014. While noting that the submissions told the applicant’s narrative, Mr McLay, for the defendants, accepted that the factual background is relatively clear, for the purposes of the present application.
[3] The Fundación was settled for charitable purposes in 1994 by Mr Joseph
Grootkerk. It is registered as a “civil association” under the laws of Venezuela.1
[4] Mr Redmond was named as a “principal member” and chairman of the Fundación. Mr Luis Alejandro Aguilar (“Mr Aguilar”) was also a principal member, and vice chairman. Both Mr Redmond and Mr Aguilar had an existing association with Mr Grootkerk. Mr Aguilar is a Venezuelan lawyer, and was engaged to establish the Fundación. Mr Aguilar was also for many years lawyer for Mr Redmond, and his business entity Chocolates El Rey Group C.A.
[5] Following a restructuring in 2009, the Fundación’s assets of about USD12 million have been held in an investment account by Openheimer & Co, based in New York. The legal owner of the investment account is Pimjo Trust CV, a Dutch “Commanditaire Venootschap”, which is similar to a partnership. There are two partners: the Xavier Trust, established by a deed dated 27 June 2001, and the
Joseph Trust, established by a deed dated 7 July 2009.
1 Acta Constitutiva y Estatutaria de la Fundación Pumjo A.C. 11 November 1994 (English translation dated 1 November 2013).
[6] The Xavier and Joseph Trusts appear to have been created as discretionary trusts for charitable purposes, and each is expressed to be governed by New Zealand law. The “discretionary beneficiaries” of the Xavier Trust are the “final beneficiaries”, and “any charitable entity existing and operating in” Venezuela. The “final beneficiary” of Xavier Trust is the Fundación.
[7] The “beneficiaries” of the Joseph Trust are the Fundación (named as “primary beneficiary”) and trustees of any trust or fund of which the Fundación is a beneficiary or member; companies under the control of the Fundación, or under the control of any trust of which the Fundación is a member; and any person, body or charity declared to be a beneficiary by the trustees.
[8] The trustee of both the Xavier and Joseph Trusts is the second defendant, Carisma Prima Limited, a New Zealand registered company. The sole shareholder of Carisma Prima is the first defendant, Aguilar & Aguilar Limited, which is also a New Zealand registered company. Mr Aguilar is currently the sole shareholder of Aguilar & Aguilar, and the sole director of Carisma Prima. Pursuant to a deed of nomination dated 30 March 2009, Aguilar & Aguilar acknowledged that it held the shares in Carisma Prima on behalf of the Fundación as beneficial owner.
[9] From early 2011, the relationship between Mr Aguilar and Mr Redmond deteriorated, after Mr Aguilar expressed his concern that Mr Redmond and others filed financial statements for Chocolates El Rey for the year ended 31 May 2010 that were false. According to documents provided in the bundle of exhibits, Mr Aguilar resigned as member and vice president of the Fundación, attorney for Pimjo Trst CV, and director of Carisma Prima Ltd on 22 July 2011 (and the resignation was accepted by Mr Redmond on 25 July 2011). Despite this, Mr Redmond alleges that Mr Aguilar has recently taken a number of steps to make serious changes to the Fundación’s structure, including purporting to:
(a) remove the Fundación as beneficiary of the Xavier and Joseph Trusts; (b) revoke the deed of nomination;
(c) put in place a “ Plan of Revitalization” to create a new structure to manage the assets and appoint beneficiaries of the Xavier and Joseph Trusts (the management and control being by people appointed by Mr Aguilar); and
(d)indicating claims for substantial remuneration Mr Aguilar says he is entitled to.
[10] Mr Aguilar says he did not resign from the Fundación or any of the associated entities, and contends that Mr Redmond is disqualified, as a “corrupt person”, from being involved in the management of the Fundación. He says that his concerns led to his dismissing Mr Redmond and others as directors of Carisma Prima. He alleges that Mr Redmond and others have improperly attempted to transfer money out of the account at Oppenheimer & Co.
[11] It is clear that each of Mr Redmond and Mr Aguilar allege serious wrongdoing against the other, while denying any wrongdoing of their own.
[12] In early 2013, Oppenheimer & Co began interpleader proceedings in the Supreme Court of New York, to determine who has control over the investment account. The Fundación (under the direction of Mr Redmond) applied to be joined into that proceeding, but subsequently withdrew the application. Counsel advised at the hearing of the present application that a “stipulation” has been (or is being) prepared, which will preclude Carisma Prima, Mr Aguilar, the Xavier and Joseph Trusts, and Primo Trust CV from giving directions in relation to the investment account, until such time as this proceeding is disposed of.
[13] As noted earlier, proceedings in New Zealand were filed on 7 November
2013. The proceeding was filed by solicitors acting on instructions from Mr
Redmond. The Fundación claims relief by way of orders:
(a) directing Aguilar & Aguilar Limited to transfer the shares in Carisma
Prima to Amicorp New Zealand Limited (“Amicorp”);
(b) removing Aguilar & Aguilar as trustee of the shares in Carisma Prima; (c) appointing Amicorp as trustee of the shares in Carisma Prima;
(d)declaring that deeds purporting to remove the Fundación as beneficiary of the Xavier and Joseph Trusts are invalid and of no effect;
(e) removing Carisma Prima as trustee of the Xavier and Joseph Trusts;
and
(f) appointing Amicorp or its nominee as trustee of the Xavier and Joseph
Trusts.
[14] The defendants filed a statement of defence on 17 December 2013.
[15] On 4 February 2014, Mr Redmond convened a meeting of the Fundación in Venezuela. At that meeting, Mr Aguilar was removed as vice chairman, and new directors were appointed. On 5 February 2014, Mr Aguilar convened meetings of the Fundación. At that meeting, Mr Redmond was expelled and a resolution passed putting the Fundación into liquidation and appointing Mr Aguilar as liquidator.
[16] Each of Mr Redmond and Mr Aguilar dispute the legitimacy of the meetings convened by the other.
[17] Mr Redmond then brought proceedings in the First Instance Court of Caracas in Venezuela, seeking a constitutional (“amparo”) injunction, claiming a violation by Mr Aguilar of his right of association with the Fundación. The First Instance Court released its decision on 13 May 2014. The Court concluded (as set out in an English
translation of the judgment):2
Until the organisational structure is declared at an ordinary venue, and any deficiencies be healed or the organisation’s dissolution is agreed and all accounts settled, this court with the purposes of protecting the interests of
2 Redmond v Aguilar Juzgado Duodécimo de Primera Instancia en lo Civil, Mercantil, Tránsito y
Bancario de la Circunscripción Judicial del Área Metropolitana de Caracas AP11-0-2104-
000034, 13 May 2014.
FUNDACIÓN PIMJO A.C.’s beneficiaries, states that neither of the so- called administrators, i.e., JORGE REDMOND and LUIS ALEJANDRO AGUILAR may bind, underwrite contracts, represent, dispose of the estate or exceed the simple daily administrative duties of FUNDACIÓN PIMJO A.C. necessary to avoid disrupting its charity and social purposes. IT IS SO DECIDED.
[18] The court then declared (as set out in the English translation of the judgment):
…
FOURTH: The court orders the suspension of any obligation intended to dispose of FUNDACIÓN PIMJO A.C.’s assets; as a result of this, JORGE REDMOND and LUIS ALEJANDRO AGUILAR may not underwrite contracts, represent nor dispose of the estate, nor exceed the simple daily administrative duties of FUNDACIÓN PIMJO A.C. necessary to avoid disrupting the charity and social purposes of the foundation and not harm the rights of its beneficiaries, until the report is carried out, which is mandated by law as was sufficiently explained herein.
[19] At present, as a result of the decision of the First Instance Court of Caracas, neither Mr Aguilar nor Mr Redmond may represent or give instructions on behalf of the Fundación, and there is an issue as to whether it is in liquidation. Mr McLay submitted that while the legal status of the Fundación is a matter to be addressed in the course of this proceeding, for the purposes of the joinder application, it is assumed to be in existence. However, it appears that the Fundación’s assets are protected by the stipulation in the proceedings in the Supreme Court of New York.
Application for joinder
[20] The application for joinder was brought pursuant to r 4.56, and the Court’s
inherent jurisdiction.
[21] Rule 4.56 provides, as relevant:
Striking out and adding parties
(1) A Judge may, at any stage of a proceeding, order that–
…
(b) the name of a person be added as a plaintiff or defendant because–
…
(ii) the person’s presence before the court may be
necessary to adjudicate on and settle all questions involved in the proceeding.
(2) An order does not require an application and may be made on terms the court considers just.
[22] In her judgment in Nagra v Creative Homes Ltd t/a Jennian Homes (in liq), Potter J set out the approach to applications for joinder as follows (referring to the earlier form of r 4.56):3
[16] Jurisdiction exists under r 97(1)(b) for the joinder of a party where joinder may be necessary to enable the Court to effectually and completely adjudicate upon and settle all questions involved in the proceeding.
[17] The sub-rule is broadly worded, providing jurisdiction for joinder of a party where joinder may be necessary to settle all questions involved in the proceeding.
[23] The application for the exercise of the Court’s inherent jurisdiction referred to the Court’s inherent jurisdiction to regulate the conduct of proceedings before it and to determine its own procedure (where not otherwise provided for).4
Submissions
[24] In relation to joinder under r 4.56, Mr Hikaka submitted that Mr Redmond’s presence before the court is necessary to enable the court to adjudicate upon the issues raised in the proceeding, and to do justice between those already party to the proceeding. He also submitted that Mr Redmond’s presence is necessary to act as a contradictor in circumstances where arguably the order of the First Instance Court of Caracas could prevent any party from representing the Fundación (and its beneficiaries) in legal proceedings, and thus the interests that are sought to be protected in the proceeding.
[25] Mr Hikaka acknowledged that this is an unusual case but submitted that as a result of the order of the First Instance Count in Caracas (made after this proceeding had been filed) it is necessary for Mr Redmond to be a party to the proceeding so that evidence can be brought against Mr Aguilar’s evidence, and so that the Court can adjudicate on the issues after hearing all the evidence. Joinder as a party is also
necessary, he submitted, in order for there to be a right of appeal.
3 Nagra v Creative Homes Ltd t/a Jennian Homes (in liq) HC Hamilton CIV 2006-419-1830, 13
December 2007 at [16]–[17].
4 Referring to R A McGechan (ed) McGechan on Procedure (looseleaf ed, Brookers) at [J16].
[26] Mr Hikaka submitted that to say that there is no ability to join Mr Redmond as a party, or hear from him, would be “absurd and unbusinesslike”, as described by Lord Esher MR in Hannay v Smurthwaite:5
I never will construe a rule intended for practical purposes according to its mere language, if such a construction will lead to an absurd and unbusinesslike state of things.
[27] Mr Hikaka further submitted that Mr Redmond has a strong and ongoing interest in the matters at issue which is, he submitted, demonstrated by the fact that he is mentioned 28 times in the defendants’ statement of defence.
[28] Mr McLay submitted for the defendants that the starting point for considering joinder is r 4.1 which provides:
4.1 Limit on parties
The number of persons named or joined as parties to a proceeding must be limited, as far as practicable, to–
(a) persons whose presence before the court is necessary to justly
determine the issues arising; and
(b) persons who ought to be bound by any judgment given.
[29] Mr McLay submitted that the focus is on “people who are to be bound” rather than “people who ought to have a voice”. A person seeking to be joined as a party must be one whose legal rights or liabilities in relation to the subject matter of the proceeding will be directly affected by any order which may be made in the proceeding. In support of this submission, he referred to the judgment of Barker J in Mainzeal Corporation Ltd v Contractors Bonding Ltd,6 citing Dolfus Mieg et
Compagnie SA v Bank of England,7 Gurtner v Circuit,8 and Penang Mining Co Ltd v
Choong Sam.9
[30] Mr McLay submitted for the defendants that Mr Redmond is not a person whose legal rights or liabilities will be directly affected by any order made in this
proceeding, so is not a person who ought to be joined, or whose presence before the
5 Hannay v Smurthwaite (1893) 63 LJQB 41 at 45.
6 Mainzeal Corporation Ltd v Contractors Bonding Ltd (1989) 2 PRNZ 47 (HC).
7 Dolfus Mieg et Compagnie SA v Bank of England [1951] Ch 33 at 42, [1950] 2 All ER 605 at
611.
8 Gurtner v Circuit [1968] 2 QB 587.
9 Penang Mining Co Ltd v Choong Sam (1969) 2 MLJ 52 (PC).
Court is necessary to adjudicate upon and settle the issues. He further submitted that, at the time of commencing the proceeding, Mr Redmond could potentially have been a plaintiff but decided, on correct grounds, that he could not be a plaintiff.
[31] Mr McLay acknowledged that there may be reasons of convenience for Mr Redmond’s presence in the proceeding, but submitted that joinder is determined by whether the presence is necessary, not on questions of convenience.10 He acknowledged, however, that the Court could consider (in the exercise of its inherent jurisdiction) granting Mr Redmond status to appear at the hearing of this proceeding as an interested person, on terms to be determined.
[32] Mr McLay further submitted that the issue raised in the proceeding relates to the Xavier and Joseph trusts. Therefore, as they are charitable trusts, the appropriate person to prosecute the proceeding is the Attorney-General. He accepted that the Attorney-General may be reluctant to become involved in proceedings which have no connection (other than the domicile of the Xavier and Joseph trusts) with New Zealand. In that regard, he referred to the dicta of Lord Macnaughten in Wallis v S-
G:11
It is the province of the Crown as parens patriae to enforce the execution of charitable trusts and it has always been recognised as the duty of Law Officers of the Crown to intervene for the purpose of protecting charities and affording advice and assistance to the Court in the administration of charitable trusts.
He submitted that it would be more logical for the Attorney-General to prosecute the proceeding than for Mr Redmond, a private person, to do so.
Discussion
[33] Determination of an application for joinder involves consideration of two questions:
10 Citing Leaver v Transport (Nelson) Ltd [1960] NZLR 44 (SC) at 46.
11 Wallis v Solicitor-General (1903) NZPCC 23, [1903] AC 173 (UKPC).
(a) Does the Court have jurisdiction to order joinder? There will be jurisdiction if joinder may be necessary to adjudicate on and settle all questions involved in the proceeding.
(b) If there is jurisdiction, the second question is to decide whether the
Court should exercise its jurisdiction in favour of joinder.
[34] The issues disclosed by the statement of claim and statement of defence focus very much on Mr Aguilar and Mr Redmond as individuals. They are clearly the main protagonists in their competing claims as to management of the Fundación and the Xavier and Joseph Trusts.
[35] The rule as to joinder of parties is broadly worded. The Court has jurisdiction to order joinder if that “may be” necessary. I am satisfied that jurisdiction exists in this case. It is established to (at least) the standard that Mr Redmond’s presence may be necessary to adjudicate on and settle all questions involved in the proceeding.
[36] The second question is whether the discretion should be exercised in favour of joinder. As Potter J observed in Nagra v Creative Homes Limited, authorities such as Mainzeal v Contractors Bonding, and the judgment cited in that case, were directed at the exercise of the discretion, rather than joinder.12
[37] On the exercise of discretion, the Court of Appeal said in Westfield Freezing
Co Ltd v Sayer & Co (New Zealand) Ltd:13
In my opinion, that case is clear authority for the view which, so far as I know, has always been accepted in New Zealand, namely that the Court should never dismiss an action for want of parties unless it is compelled to do so for good and sufficient reasons. Once the real dispute is before the Court, then it is in the interests of the parties, and indeed in the public interest, that that dispute should be resolved as soon as possible. Accordingly, the failure by a plaintiff to select the right parties should not stand in the way of the Court bringing the dispute to a conclusion by joining additional persons either as plaintiffs or defendants “who ought to have been joined” in the first instance, or “whose presence before the Court may be
12 Nagra v Creative Homes Limited, above n 3 at [19].
13 Westfield Freezing Co Ltd v Sayer & Co (New Zealand) Ltd [1972] NZLR 137 (CA) at 143, per
North P.
necessary to enable the Court effectually and completely to adjudicate upon
and settle all the questions involved in the action”.
[38] Albeit said in a somewhat different context, that points to a liberal approach being taken to joinder.
[39] I do not accept Mr McLay’s submission that Mr Redmond is precluded from being joined as a party under r 4.1. Mr McLay’s argument relies on it being necessary to satisfy both sub rules (a) and (b) of r 4.1; that is, a party must be both a person whose presence is necessary to justly determine the issues arising and a person who ought to be bound by any judgment given. I am not able to read 4.1 in that manner. To the contrary, the repetition of “a person” at the beginning of sub rules (a) and (b) suggests that either limb must be satisfied. That is also the construction given by the authors of McGechan on Procedure in their synopsis of
r 4.1.14
[40] In this case, I am satisfied that the discretion should be exercised in favour of joinder. Mr Redmond’s presence is necessary so that the Court adjudicating on the matters at issue is placed in the best position to do so, following consideration of all relevant matters. If Mr Redmond were not present, the Court would be hearing only one side of the issues, from one of the protagonists, but not from the other.
[41] Further, I do not accept that in this case the “other side” would more appropriately be presented by the Attorney-General. I accept Mr Hikaka’s submission that in this case, where none of the charitable purposes have any connection with New Zealand, it is not apt for intervention by the Attorney-General. This is particularly so where Mr Redmond, who is intimately involved in the disputed matters, is able to participate in the proceeding.
[42] The real issue, in my view, is as to the capacity in which Mr Redmond should be joined. As I advised counsel at the hearing, I am concerned that joinder as a second plaintiff (with the Fundación as first plaintiff) may indicate a close connection between Mr Redmond and the Fundación. That would run the risk of
contravening the order made by the First Instance Court of Caracas under which Mr
14 McGechan on Procedure, above n 4 at HR4.1.
Redmond (and Mr Aguilar) may not represent the Fundación. Joinder as a second plaintiff is not appropriate.
[43] Although the possibility of Mr Redmond being allowed to participate in the hearing as an “interested person” was raised at the hearing, it was not addressed in any detail, and no specific proposal was made as to the terms of participation. There is also, as Mr Hikaka submitted, the difficulty that participation as an interested person would not give rise to any appeal rights.
[44] The most appropriate course is for Mr Redmond to be joined as a defendant. That would enable issues to be determined between the real protagonists, Mr Aguilar and Mr Redmond, by way of cross claims between defendants. The Fundación could then remain as plaintiff, in a neutral position. Clearly, it would be necessary for the Fundación to be separately represented from Mr Redmond.
Decision
[45] The application by Mr Redmond to be joined as a party to this proceeding is granted. Mr Redmond is to be joined as third defendant in the proceeding.
[46] Mr Redmond’s cross-claim is to be filed and served within 15 working days of the date of this judgment.
[47] If Mr Hikaka’s firm wishes to continue to represent Mr Redmond, then arrangements should be made for the Fundación to be separately represented. Counsel for the parties should be able to agree on such representation. It is appropriate that such representation (which I would assume would be to abide the decision of the Court in the proceeding) should be at the cost of the Fundación. Once counsel have agreed on representation, a draft order may be submitted so as to enable an application to be made in New York for release of funds for this purpose.
[48] Counsel did not address me on the issue of costs. I consider it appropriate, in this case, that costs be reserved.
Andrews J
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