Gatfield v Hinton
[2024] NZHC 1712
•26 June 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-2969
[2024] NZHC 1712
UNDER Parts 5 and 18 of the High Court Rules 2016, the Trusts Act 2019 and the inherent
jurisdiction of the Court
IN THE MATTER
of an application for review under section 126 of the Trusts Act 2019; claims for breaches of trustee duties; and removal of trustee
BETWEEN
GILLIAN JANE GATFIELD
First Plaintiff/Respondent
EMMA JACQUELINE PEARSON
Second Plaintiff/Respondent
AND
ANNE ELIZABETH HINTON
Defendant/Applicant
Hearing: 11 June 2024 Appearances:
M A Jeffries for First and Second Plaintiffs/Respondents A S Butler KC for Defendant/Applicant
A H Waalkens KC for Interested Parties (J M Allen and R M Gatfield)
Judgment:
26 June 2024
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 26 June 2024 at 3:30 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
………………………………
GATFIELD v HINTON [2024] NZHC 1712 [26 June 2024]
[1] A dispute exists between the four surviving daughters and a grandchild of Kenneth Miles Gatfield (Ken) and Jacqueline Mary Gatfield (Jacqui) concerning a family bach built by Ken and Jacqui. The four sisters are Gillian (plaintiff/respondent), Anne (defendant/applicant) and their sisters Judith and Robin. Emma (second defendant) is, as I understand, the only child of the late Kay Gatfield, the fifth sister who died in September 2020.
[2] Ken died in 2012, surviving Jacqui. The dispute concerns Ken’s estate of which Anne is the sole trustee. The right to use the bach is represented by one share in a company. Ken’s estate was left equally to the five sisters with Kay’s share passing to Emma. Anne sold the share to Judith and Robin in February 2022, who have paid the purchase price. As the share has been transferred to Judith and Robin it is no longer in the estate. Judith and Robin are not parties to this proceeding but were directed to be served. They have filed an appearance opposing the relief sought by Gillian and Emma.
[3] Gillian and Emma say that as long ago as 2013, Anne promised to transfer her interest in the share to them. For many years Gillian and Emma say they paid outgoings in relation to the bach as if they were its owners.
[4] This proceeding was commenced on 7 December 2023. In a 55-page statement of claim running to 221 paragraphs, Gillian and Emma seek a range of orders against Anne.
Anne seeks the proceeding be referred to Alternative Dispute Resolution (ADR): What does she have to establish?
[5] On 15 March 2024, Anne applied for orders that this proceeding be referred to mediation and, if mediation is unsuccessful, that the matter be determined by arbitration. The application is made pursuant to s 145 of the Trusts Act 2019 (the Act) which provides:
145 Power of court to order ADR process for internal matter
(1)The court may, at the request of a trustee or a beneficiary or on its own motion,—
(a)enforce any provision in the terms of a trust that requires a matter to be subject to an ADR process; or
(b)otherwise submit any matter to an ADR process (except if the terms of the trust indicate a contrary intention).
(2)In exercising the power, the court may make any of the following orders:
(a)an order requiring each party to the matter, or specified parties, to participate in the ADR process in person or by a representative:
(b)an order that the costs of the ADR process, or a specified portion of those costs, be paid out of the trust property:
(c)an order appointing a particular person to act as a mediator, an arbitrator, or any other facilitator of the ADR process.
(3)This section applies in relation to internal matters only.
[6] Section 142 of the Act is headed “Alternative Dispute Resolution” and sets out the definitions that apply to ss 143-148.
[7] Section 145 of the Act only applies to internal matters. An internal matter is defined under s 142 as “… a matter to which the parties are a trustee and one or more beneficiaries, or a trustee and one or more other trustees, of the trust”. All the parties to this litigation are either a trustee (Anne) or beneficiaries (Gillian and Emma). Accordingly, this is an internal matter.
[8] To be an internal matter, first it must be a matter. “Matter” is defined in s 142(a)(i) of the Act as meaning, “a legal proceeding brought by or against the trustee in relation to the trust.”. This is a legal proceeding brought against a trustee. However, a matter, “does not include a legal proceeding or a dispute about the validity of all or part of a trust”.
[9] Mr Jeffries, counsel for Gillian and Anne, has raised three jurisdictional issues. The first is whether this proceeding is a “matter”, as Mr Jeffries submits that this proceeding, at least in part, concerns the validity of a trust. The second concerns the process by which this application is brought, that is by way of interlocutory application
— Mr Jeffries in effect submitting an application under s 145 of the Act cannot be brought by way of interlocutory application. The third issue is the jurisdiction of an
Associate Judge to deal with an interlocutory application if such can be used to seek orders under s 145.
Jurisdiction issue one: Is this a “matter” — does this proceeding concern the validity of a trust?
[10]Para [2] of the notice of opposition filed by Gillian and Emma says:
2. The proceeding comprises claims regarding the defendant/applicant’s conduct as trustee under 2 express, fixed, will trusts each with the same 5 named beneficiaries (“Gatfield Trusts”).
[11]Gillian’s affidavit in support of the notice of opposition says at para [2]:
I have come to the High Court seeking accountability for a trustee’s conduct in relation to trusts created under the wills of each of my parents, Kenneth Miles Gatfield and Jacqueline Mary Gatfield (the Gatfield Trusts). I am one of 5 beneficiaries named in the Gatfield Trusts. My sister, Ms Pearson’s mother, Kay Gatfield, now deceased, was also a named beneficiary in the Gatfield Trusts.
[12] Mr Jeffries submitted that on the pleadings there is an issue as to the validity of the Gatfield Trusts as defined above because Anne has denied parts of the statement of claim relating to the bach dispute which arises under the Will trusts. I can see how this pleading point led Mr Jeffries to think there was an issue in respect of the existence of the pleaded Wills trust to which the Act could apply. It seems the intent of the denials by Anne were to recognise that, in a technical sense, until the share was sold, she held the share as executor and not as trustee. Now the sale has occurred, that point is overtaken but, in any event, it is not a point that goes to the issue of validity. As Mr Butler KC, counsel for the applicant/defendant, clarified in reply, even if the events in question occurred while Anne was executor, s 4B of the Administration Act 1969 provides:
4B Application of Trusts Act 2019
(1)The duties incidental to the office of an administrator under this Act are taken to be express trusts for the purposes of the Trusts Act 2019.
(2)The Trusts Act 2019 applies, with any necessary modifications, to those trusts.
[13] Accordingly, whether the dispute concerns Anne’s actions in her capacity as executor or as trustee, or both, the Act applies.
[14] Gillian and Emma also say Anne agreed to sell her share in the bach to them and therefore Anne holds a one-fifth interest in the bach for them.
[15]Para [57] of the statement of claim dated 7 December 2023 pleads:
57.From May 2015:
a)Ms Gatfield and Kay Gatfield each started paying 25% of all Bach costs including the LRBO Levy;
b)Mrs Hinton held for each of Ms Gatfield and Kay Gatfield a 25% share in the Bach under the Gatfield Trusts and or under new trusts and promises of distribution (together called the “Trusts”);
c)Mrs Allen and Robin Gatfield, each started paying 25% of all Bach costs, including the LRBO Levy.
[16] There are a number of issues with this pleading. First, Anne is sued only in her capacity as trustee. To the extent the pleading asserts that Anne transferred her own interest in the share to Gillian and Emma, it would have to be a claim against Anne in her personal capacity. If the claim is that Anne as trustee contracted to sell estate property to Gillian and Emma, then as the share is no longer held by the estate, orders against Anne alone cannot be made to give effect to para [57(b)] of the claim set out at [15] above. The relief sought in respect of the bach is pleaded at paras [192] and
[193] of the statement of claim as follows:
192.Bach ownership: Orders that immediately prior to the Second Sale, as trustee of one or more of the Trusts:
a)Mrs Hinton held in trust for one or both plaintiffs beneficial interests each as to 25% as tenants in common, in the LRBO Share and other Bach Assets and all sale proceeds of the same;
b)Each of Ms Pearson and Ms Gatfield had fixed shares of 25% each in the Bach Assets for the purposes of section 123(1) of the Trusts Act 2019.
193.Second Sale of Bach: Orders that in relation to the Second Sale:
a)Mrs Hinton did not sell, and Mrs Allen and Robin Gatfield did not acquire any interests of Ms Gatfield and or Ms Pearson referred to in paragraph 192 above;
b)Mrs Hinton did not sell and Mrs Allen and Robin Gatfield did not acquire any interests in the JMG Trust in the Bach Assets;
c)Section 127(4)(b) of the Trusts Act 2019 does not apply;
d)That the Second Sale be set aside.
(The “Second Sale” reference is to the sale of the bach to Judith and Robin — an earlier sale having been abandoned).
[17] I note here the orders sought in para [193] of the statement of claim will not be available unless Judith and Robin are joined as parties to the proceeding.
[18] Mr Jeffries’ submissions did not analyse the character of the “new trusts” pleaded at para [57(b)] set out at [15] above. Mr Butler, in his speaking notes, submitted that a constructive trust is a form of remedy, not a trust the “validity” of which needs to be established. Mr Jeffries did not develop submissions as to the issue of validity around a constructive trust. There is in fact no pleading of a constructive trust against Anne.
[19] While there are differences between remedial and institutional constructive trusts, in the case of an institutional constructive trust the issue is not so much one of “validity” but of whether its existence is recognised by the Court.
[20] The concept of “validity” used in respect of express trusts — and the Act is focused on express trusts — is understood to refer to the formal steps of the trust being created.1
[21] I am satisfied the undeveloped pleading at para [57(b)] of the statement of claim is not enough to mean this proceeding concerns the “validity” of an express trust.
1 Andrew Butler Arbitration of Trust Disputes under the Trusts Act 2019 [2021] NZLJ 106.
Jurisdiction issue two: Can an application for referral to ADR be made by interlocutory application?
[22] This issue was one of the primary focuses of Mr Jeffries’ written and oral submissions. The thrust of the submission was that Gillian and Emma have been prejudiced in dealing with the present application through not having the ability to obtain full evidence, discovery and the use of other interlocutory procedures to aid in their opposition to the application. As I will develop here, I consider that concern to be misplaced.
[23] That there is a dispute between the parties concerning the bach and that Gillian and Emma do not consent to ADR is self-evident. Gillian and Emma have filed affidavits explaining their views of the dispute and there is a brief response from Anne. Prior to the hearing, Mr Jeffries sought the ability to put before the Court emails alleged to have been selectively quoted by Anne. By agreement, it was directed that Mr Jeffries compile a small bundle of those emails for use in the hearing. However, Mr Jeffries’ clients elected (with leave) not to take that step. That was a matter for Gillian and Emma. I am not aware of a request that further documents be produced that could have assisted in my resolution of the present application.
[24] As I will refer to below, prior to the issuing of these proceedings, Gillian and Emma offered ADR which was declined by Anne. However, details of the circumstances in which ADR was offered and declined, in my view, would not help me determine the present application. As Mr Jeffries submitted, the fact that his clients had previously offered ADR does not commit them to accept ADR now. Equally, the fact that Anne previously declined ADR is not a barrier to her seeking it now.
[25] Two judgments of this court have stated that where a proceeding is underway, an application to referral to ADR may be made by interlocutory application.2
2 See S v N [2021] NZHC 2860 [2021] NZFLR 756 at [14]; and Wright v Pitfield [2022] NZHC 385 at [14]. See also Terry v Terry [2023] NZHC 884, (2023) 6 NZTR 33-019 where the application to refer to ADR was made by interlocutory application at [19] without comment.
[26] Mr Jeffries submits these decisions are in error. He submits a step-by-step analysis of the legislation means a party seeking an order that a trust dispute be referred to ADR must use pt 18 of the High Court Rules 2016 (the Rules).
[27]Mr Jeffries’ argument is as follows.
[28] The Act amended r 18.1(b)(xiii) of the Rules. Part 18 of the Rules is headed “Applications in equity and under statutes”. Rule 18.1(b) is headed “Determination by court under statutes” and provides that pt 18 applies to “proceedings in which the relief is claimed solely under the following enactments”, with item (xiii) being the Act.
[29] Mr Jeffries notes r 18.4 requires a pt 18 proceeding be commenced by way of statement of claim and not by interlocutory application (of course, a proceeding cannot be commenced by interlocutory application whatever its subject matter). Mr Jeffries submits that Anne has therefore used a non-complying process by applying by way of interlocutory application.
[30] Mr Jeffries submits the point is of significance as a statement of claim seeking referral to ADR would provide more information than an interlocutory application and would be a proceeding where discovery, interrogatories and so on would be available. He submits this would have assisted Gillian and Emma as there are intense factual issues in this proceeding.
[31] Mr Jeffries submits the Court’s powers under s 145 of the Act are a “unique power of compulsion” and thus it is appropriate the more robust process under pt 18 would be adopted. Mr Jeffries submits the use of the interlocutory application process has denied Gillian and Emma important safeguards. Mr Jeffries submits pt 7 (applicable to interlocutory applications) is intended for “minor issues” and has resulted in what he calls a “miserly approach to process”.
[32] Mr Jeffries submits the magnitude of what is being sought here should be correlated with the process to be adopted. He submits:
38. … Here the plaintiffs are adversely impacted by the Claims: forced to engage with the defendant by contract and in person against their will; forced to incur added costs or risks of costs of forced ADR, engage in new processes, use extra resources; forced to forego their access to the Court; and their lawfully commenced Proceeding is delayed by mediation, and denied by arbitration.
[33] In short, Mr Jeffries’ submission was that the flaws arising from the use of the interlocutory application process mean the present application is not one the Court can safely rely on to make the orders sought.
[34] Mr Butler submits there is no statutory process stipulated by the Act as to how an application for ADR should be brought. He relies on authorities noted at footnote
[2] above.
Decision on use of interlocutory application
[35] Anne in seeking orders under s 145 of the Act is not commencing a proceeding. Rule 18.1 of the Rules applies to proceedings where relief is claimed under the Act and such must be commenced by a statement of claim. A “proceeding” is defined in r 1.3 as meaning, “any application to the Court for the exercise of the civil jurisdiction of the Court other than an interlocutory application”.
[36] I do not consider Mr Jeffries’ submission is consistent with r 1.2 of the Rules, which requires:
1.2 Objective
The objective of these rules is to secure the just, speedy, and inexpensive determination of any proceeding or interlocutory application.
[37] The authors of McGechan on Procedure note that r 1.2 is to govern the “yardstick” by which all High Court Rules are to be interpreted.3
3 Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR1.2.01].
[38] Anne, by seeking ADR, is not seeking substantive relief but orders ancillary to the orders sought by Gillian and Emma. Determination of whether a matter should be referred to ADR does not require a full hearing process with discovery, interrogatories and the giving of oral evidence, as Mr Jeffries’ argument contemplates. Such would undermine one of the key advantages of ADR being it is a quicker (and cheaper) process than conventional litigation.
[39] The creation of the power under s 145 of the Act to require parties to mediate cannot have been intended to be subject to a pre-condition that there be a full pt 18 hearing process before referral to ADR could occur when such is sought in an extant proceeding. Determining there is a dispute suitable for ADR, despite the objection of a party, does not require a full opposed proceeding.
[40] Even if that view is not correct, then r 1.5 of the Rules provides that a failure to comply with the requirements of the Rules is an irregularity and does not make the proceeding a nullity. Accordingly, we come back to the question of whether the material before the Court is sufficient to support referral of the dispute to ADR.
[41] I do not accept Mr Jeffries’ submissions that interlocutory applications are intended for “minor issues”. Interlocutory applications can determine a proceeding with applications to strike out, stay or for summary judgment being obvious examples. The current application is about the process by which the dispute is to be resolved and does not call for credibility findings about the merits of the dispute being made.
[42] I do not overlook Mr Jeffries’ submission that his clients would have preferred to have more evidence before the Court as to why when they had previously offered ADR, it was declined. I will deal with that point below.
Jurisdiction issue three: Can an Associate Judge deal with an interlocutory application seeking orders under s 145 of the Act?
[43] Being satisfied an application under s 145 of the Act can, when a proceeding is underway, properly be made by interlocutory application, I need to consider whether such can be determined by an Associate Judge. Rule 2.1 of the Rules provides:
2.1 Jurisdiction and powers
(1)An Associate Judge has the jurisdiction and powers of a Judge in chambers conferred by the Act or these rules or another enactment.
(2)The jurisdiction and powers referred to in subclause (1) are in addition to the jurisdiction and powers conferred by section 20 of the Act.
(3)Despite subclause (1), an Associate Judge does not have jurisdiction or powers—
(a)in relation to the matters specified in section 22(4) of the Act; or
(b)under rules 5.35A to 5.35C.
[44]Rule 2.1(3) does not apply.
[45] Mr Jeffries referred to Boult v Crux Publishing Ltd which concerned an Associate Judge’s jurisdiction to deal with access by a non-party to court documents.4 However, such an application is an originating application rather than an interlocutory application and so is not on point.
[46] As the Court of Appeal noted in Boult, interlocutory applications in civil proceedings is defined in s 4(1) of the Senior Courts Act 2016 as an application to the High Court for an order or direction relating to a matter of procedure or for some relief ancillary to that claimed in the proceeding.5
[47] This definition is consistent with the conclusion I have reached that a pt 18 proceeding is not necessary. Anne is seeking procedural orders and not rulings on the substance or merits of Gillian and Emma’s claim.
[48] Accordingly, I am satisfied I have jurisdiction to deal with the current interlocutory application.
4 Boult v Crux Publishing Ltd [2022] NZCA 473.
5 At [8].
Legal principles applying to s 145 of the Act
[49] In S v N, Wylie J described s 145 of the Act as a “novel provision” which was introduced following the Law Commission’s review of trust law.6 His Honour said:7
It has been suggested that the Act’s explicit engagement with ADR is an exciting advance and that it may position New Zealand as a useful jurisdiction for the alternative resolution of trust disputes.
(footnote omitted)
[50]ADR includes mediation and arbitration. Wylie J said:8
[29] Even though the jurisdiction thresholds imposed in s 145 are met, the Court retains a discretion. The matters which could bear on the exercise of that discretion could include cost, confidentiality, speed, the seriousness and complexity of the matter, the suitability of the proposed mediator, the wishes of the parties, the wishes of the settlor (if known), finality and enforceability. This is not meant to be an exhaustive list. Some of these matters are relevant in this case.
(footnote omitted)
[51] In S v N, Wylie J declined to order mediation for three reasons. First, the party seeking mediation had already agreed to the matters he sought to mediate being determined by independent trustees with consent orders being made to that effect.
Ordering mediation would have undermined those existing orders.9
[52] Second, there was a protection order between the parties. Requiring the two parties to attend mediation would undermine the protection offered by the domestic violence regime.10
[53] Third, Wylie J saw little utility on mediation given the history of the matter, his Honour gaining “the distinct impression that N has rather “gamed the system”.11”
6 S v N, above n 2, at [21].
7 At [21].
8 S v N, above n 2.
9 At [32].
10 At [33]-[34].
11 At [35].
[54] Venning J, in Wright v Pitfield, granted an application that a proceeding be referred to mediation.12 One of the grounds for resisting mediation was the dysfunctional relationship between the parties. However, Venning J noted the enactment of s 145 meant Parliament has expressly provided that the Court can require a reluctant party to attend ADR.13 Venning J distinguished Wylie J’s decision in S v N because of the significance in S v N of mediation undermining of the consent orders and that N had “gamed the system”.14 In an addendum to his Honour’s decision, he recorded the parties attended mediation and resolved all issues.
[55] Churchman J, in Wiggins v Wiggins, declined to order mediation as he considered it premature and that it could not produce an enforceable outcome as a key party was not going to be present.15 This meant the costs of a mediation would potentially be wasted. As I will address below, that is not the situation here. Indeed, the opposite is true. Judith and Robin are not parties to the proceeding (albeit they have been served as interested parties), and orders cannot be made dispossessing them of the share unless they are. However, they are prepared to attend the mediation in good faith. Churchman J’s decision is a recognition that there is no point having mediation unless all interested parties are “in the room”.
[56] The final decision is that of Associate Judge Johnston in Terry v Terry.16 There, mediation was declined essentially because the parties could not agree on the matters in issue. However, I adopt Associate Judge Johnston’s description of the benefits of ADR which he described as follows:17
When approached in the appropriate manner by all participants, mediation convened by a skilled mediator tends to resolve a high percentage of cases of all sorts, from the heaviest commercial disputes through to the most trivial matters. And, when successful, mediation is almost always a more efficient process than going to trial. There is then every reason why the Court should encourage the use of the process, and the legislation has recognised this in enacting ss 142-148.
12 Wright v Pitfield, above n 2.
13 At [30].
14 At [32]-[34].
15 Wiggins v Wiggins [2024] NZHC 863 at [22]-[23].
16 Terry v Terry, above n 2.
17 At [24].
[57] In Terry, the trustees were clear they were uninterested in engaging on the issue the applicant wished to mediate.
[58] That is not the case here. Anne, Judith and Robin want to mediate the issues raised by Gillian and Emma in their proceeding. While Gillian and Emma now oppose arbitration, they have been previously willing to use ADR, which I address below. Accordingly, this is not a situation where the party opposing mediation raises different issues from those seeking ADR.
[59] Obviously, while each application will turn on its own circumstances, the factors identified by Wylie J will generally arise.
[60] One of those factors is enforceability. One mechanism by which the parties can ensure the outcome of a mediation as enforceable is to seek a Tomlin Order. Leave can be reserved in a proceeding referred to mediation for the parties if they reach a settlement to request the Court make a Tomlin Order in relation to the settlement.
[61] I note r 13.4 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, requires a lawyer assisting a client with resolution of a dispute to keep their client advised of alternatives to litigation that are reasonably available to enable the client to make informed decisions about the resolution of the dispute. That rule does not apply if the lawyer believes on reasonable grounds that the client already has an understanding of those alternatives. That is likely to be the case here given Gillian and Emma have already sought ADR. However, the rule reflects the modern recognition of the value of mediation even where the issues seem intractable and the parties entirely at loggerheads. I note the observation made by Venning J in Wright that the settlement rate at mediation in respect of parties compelled to mediate is just as high as those who voluntarily participate in mediation.18
18 Wright v Pitfield, above 2, at [35], citing Lord Phillips of Worth Matravers, Lord Chief Justice of England and Wales “Alternative Dispute Resolution: an English Viewpoint” (India, 29 March 2008).
Factors in favour of ADR
[62]Mr Butler relies on the following matters.
[63] Mediation and arbitration are private. I advised the parties during the hearing that I would place no significance on Anne’s position as a High Court Judge. Rather, I considered there is a general confidentiality interest in family matters being dealt with privately. Mr Jeffries confirmed during oral submissions that Gillian and Emma did not seek publicity. In that sense, a referral to ADR does not deprive them of anything. There is no suggestion that Gillian and Emma seek to embarrass or use publicity as a tactic, but that said they see, if I can put it this way, the robustness of the litigation process being bolstered by it being public. I consider the desirability of family matters being dealt with confidentially to, on balance, favour ADR.
[64] The next point said to favour ADR is that the tailored procedure of ADR is better suited to the sums in dispute. This point requires some explanation. While some of the issues raised in the proceeding concern relatively modest sums, Mr Butler accepts that Gillian and Emma’s claim in respect of the bach is not driven by financial considerations, but rather their attachment to it. Mediation can explore non-monetary outcomes. Mediation is aimed at addressing the parties’ interests and not necessarily their strict legal rights. I consider this factor favours a reference to ADR.
[65] Mr Butler then submitted that ADR would better facilitate a just determination of the issues as pleaded. With the share giving the right to use the bach no longer in the estate, the proceeding as it stands cannot deliver to Gillian and Emma what they seek as the current holders of the share (Judith and Robin are not parties to this proceeding). However, Judith and Robin are represented and support this proceeding being referred to ADR. One of the advantages of ADR is that, at least as regards mediation, the parties are not necessarily tied to pleadings when exploring issues and outcomes. Mr Butler endorsed my observation that at ADR a wide range of issues can be addressed, not necessarily only those in a pleading. This factor supports a referral to ADR.
[66] A further factor identified by Mr Butler is the concern Gillian and Emma have that negative inferences may arise because they are bringing a proceeding against one
of this Court’s Judges. Mr Butler submits that a referral to a senior and experienced mediator and arbitrator lessens any suggestion of the “system” favouring Anne. This factor is in favour of ADR.
[67] Mr Butler submits mediation would be a cost effective means of resolution. Anne seeks that the costs of mediation should in the first instance be met by the estate. That is supported by three of the five beneficiaries (Anne and the interested parties). Mr Butler’s point of cost saving is correct as far as it goes, albeit to some extent it assumes there will be a settlement. Given some of the claims are of relatively small financial value (as well as the major claim concerning the bach), it is likely that some of the minor claims can be resolved. However, even if an overall settlement is not reached, the reality is that a mediation serves the secondary purpose of being an issues conference. I have already commented that the pleadings will need to be amended and even if all that is achieved at mediation is a narrowing of the issues to create a focused pleading, that will go some way to off-set Gillian and Emma’s 40 per cent share of the mediation cost. It is also standard practice that the parties’ share the cost of a mediation — payment from the estate achieves that.
[68] Standing against ADR is that Gillian and Emma are exposed to a cost they would not otherwise have been (their share of the mediation costs). However, if mediation is successful, it will ultimately result in cost savings. If mediation is not wholly successful, then there will be some cost saving in terms of the issues being narrowed. I consider this a balanced factor in terms of a referral to mediation.
[69] As regard the referral to arbitration if mediation does not resolve all matters, Mr Butler notes the rights and remedies available to Gillian and Emma are not in any way prejudiced through a referral to arbitration should that be required. Section 12 of the Arbitration Act provides:
12 Powers of arbitral tribunal in deciding disputes
(1)An arbitration agreement, unless otherwise agreed by the parties, is deemed to provide that an arbitral tribunal—
(a)may award any remedy or relief that could have been ordered by the High Court if the dispute had been the subject of civil proceedings in that court:
(b)may award interest on the whole or any part of any sum which—
(i)is awarded to any party, for the whole or any part of the period up to the day on which the sum awarded (including all interest) is paid in full; or
(ii)is in issue in the arbitral proceedings but is paid before the date of the award, for the whole or any part of the period up to the date of payment.
…
[70] Mr Butler submitted s 12 of the Arbitration Act means an arbitrator could exercise the inherent jurisdiction of the High Court. Given Mr Butler’s position that an arbitrator can make the same orders as a High Court Judge, this is a neutral factor.
[71] Mr Butler submits that the proposed mediator and arbitrator are respected and independent of Anne. Gillian and Emma have expressed concern about what they describe as the power imbalance between them and Anne.
[72] Mr Butler confirms Anne will approach mediation with an open mind. Perhaps more importantly, the parties who now own the bach share are also willing to attend the mediation with an open mind. The fact that Gillian and Emma oppose mediation is of itself not determinative. While their opposition is of course a relevant factor, compulsory mediation can work, with Mr Butler relying on Wright.19
[73] Mr Jeffries submits that Anne had her chance to mediate when, from approximately September 2020, Gillian and Emma made numerous approaches offering ADR over a relatively short period which were rebuffed. In respect of ADR, Mr Jeffries submitted “the horse has bolted”. I agree with Mr Jeffries that the fact ADR had previously been offered by Gillian and Emma does not mean they must accept it now. It does, however, show they understand the ADR process and at least when they offered it, were comfortable in participating. I have already referred to Gillian and Emma’s concerns as to what they see as a power imbalance with Anne. Gillian and Emma also raise concern about some of Anne’s conduct, however, the fact
19 Wright v Pitfield, above n [2] at [35].
is their numerous approaches about ADR were at the same time as some of Anne’s alleged actions they now rely on to say they are not prepared to attend ADR.
[74] It is not the case that Gillian and Emma do not wish to achieve a settlement; indeed, as well as suggesting the possibility of a Judicial Settlement Conference, Mr Jeffries submitted that settlement discussions could occur directly between counsel. No doubt that is correct, but the exchange of such offers is time consuming and creates cost. More importantly, offers made directly between counsel are assessed by each side against their own assumptions (and that of counsel) as to the merits of their position. A skilled mediator will get the parties to critically examine the assumptions that underpin their of the merits of their positions. It is also not uncommon for mediation to result in a solution that neither party has contemplated.
[75] The point is, mediation has an immediacy that permits solutions to be explored then and there and if necessary rejected promptly with further ideas advanced. The static process of correspondence between counsel is a second best.
[76] Section 145 of the Act is only relevant where the parties disagree about ADR hence opposition to ADR is not of itself a conclusive ground to deny an application under s 145.
Factors against ADR
[77] Mr Jeffries’ notice of opposition raised some of the following points. I do not address every point in the notice of opposition as there is some overlap between them, but I consider I have addressed the substance of the points Mr Jeffries raised.
[78] Gillian and Emma do not want to participate in mediation or arbitration. I recognise that fact but note that at least one aspect of the relief they seek is only available through mediation. Gillian and Emma seek an order that Anne provide letters of apology in relation to various matters. Whatever the Court might do in a proceeding involving a trustee, it does not order a defaulting trustee to write a letter of apology. If it is important to Gillian and Emma that there is some recognition by Anne of the matters of concern to them, that can only happen through mediation. However, I recognise that the strength of Gillian and Emma’s opposition to arbitration
is a factor that stands against a referral to ADR but again will be present in every s 145 application.
[79] Mr Jeffries submits there is no requirement for confidentiality and privacy in this case. I have already dealt with this point above. Given Gillian and Emma do not seek to use publicity to their advantage, I consider the general desirability of confidentiality in respect of family members favours referral to ADR.
[80] One of the reasons Gillian and Emma do not want ADR is, to paraphrase, that feelings are running high in this proceeding. Mr Jeffries’ notice of opposition refers to what is characterised as hostility on behalf of Anne and the interested parties. Mr Jeffries’ notice of opposition says:
Under those conditions compulsory mediation and arbitration is both unreasonable and unsafe for the plaintiffs.
[81] Mr Jeffries confirmed that his reference to “unsafe” is to it being psychologically unsafe.
[82] I have already touched on the fact that Gillian and Emma previously sought ADR at a time when they allege Anne’s behaviour caused them distress. A skilled mediator can deal with the emotion in this case and of course, Gillian and Emma will have the benefit of counsel. The parties supporting mediation are experienced enough to know there will be no settlement if they act in a high-handed manner or otherwise in a manner inconsistent with trying to reach a settlement with parties who are reluctant to participate. The fact is that the parties supporting mediation will be responsible for 60 per cent of its costs. They have no desire to waste those costs. Again, I recognise and acknowledge Gillian and Emma’s concerns but, in my view, Gillian and Emma are unduly pessimistic at what can be achieved at a well-run mediation.
[83] Mr Jeffries notes that Anne rejected numerous ADR requests. That is correct. However, that does not mean as Mr Jeffries submits, that ADR is no longer relevant or appropriate. As I have said, just as Gillian and Emma’s prior offers for ADR are not determinative, nor is Anne’s prior declinature of ADR determinative. People’s
views of a dispute change. Sometimes the benefit of independent advice leads a party to reflect on their part in the dispute and on the desirability of resolution.
[84] Mr Jeffries submitted that, through arbitration, Gillian and Emma would lose the ability to have access to the Court’s inherent jurisdiction. I have already commented on that. Mr Butler acknowledges that an arbitrator will be able to exercise the same jurisdiction as a High Court Judge, including any inherent jurisdiction. Mr Jeffries submitted that Gillian and Emma would lose access to the Court as reviewer of Anne’s conduct. So much is true but the review will be undertaken by the arbitrator, if settlement is not reached.
[85] Another factor referred to by Mr Jeffries is that Anne is professionally experienced and will be more comfortable and influential in mediation and arbitration. However, the counterfactual is even worse for Gillian and Emma. As a Judge of this Court, Anne will be entirely comfortable in the court environment. It may be the mediation and arbitration environment will be less familiar to her. I do not consider this factor stands against a referral to ADR.
[86] As I have said, I have not touched on every point in the notice of opposition. There are references to Anne’s previous conduct leading up to the present proceedings, her status as a Judicial Officer, to what is characterised as an imbalance of power and an allegation that Anne is seeking special treatment because of her professional status. They are all factors I have already touched on to a greater or lesser extent. As I have said, I have put Anne’s position to one side.
[87] Anne’s prior conduct is also in one sense beside the point. The parties are now in litigation. That Gillian and Emma consider Anne has acted unreasonably towards them is a given. That is why they are suing her. That, however, is not a reason to reject ADR.
[88] Mr Jeffries refers to the proceeding in part seeking orders under ss 127 and 128 of the Act. These provisions empower the Court to review the acts of a trustee. Mr Jeffries submits the review provisions were intended to create a lower bar for beneficiaries to obtain information or to seek the Court’s review of the actions of
trustees. Mr Jeffries submitted this was an important aspect of trustee accountability and would be frustrated if the Court was too ready to refer such applications to mediation.
[89] In my view, there would be more in this point if the proceeding was limited to seeking a review. The proceeding, however, seeks substantive orders based on claims of breach of trustees’ duties, including in respect of the bach. While Mr Jeffries disputed my characterisation of the proceeding as being fundamentally about the bach, that, in my view, is the reality of the situation. While other issues are raised by Gillian and Emma, those items are generally of low financial value. As the pleadings stand, Gillian and Emma can only gain some resolution of the bach dispute through mediation.
[90]The notice of opposition also states that:
28. Interests of justice: It is in the interests of justice that the Court hears and decides these proceedings. It would be inappropriate for the Court in the circumstances of these proceedings to make orders which may be seen to abdicate it’s role to a private arbitrator to interpret vital new provisions of the Trusts Act 2019 rather than the Court doing so.
[91] The fact the Court’s ability to order the parties to use ADR is relatively new is not a basis for not using it. Nor is a desire to build up a body of case law on ss 126 and 127 grounds to deny an applicant access to ADR if their case warrants it. Mr Butler noted there are two recent authorities on ss 126 and 127.20 It is not for the Court to force parties to litigate in order to create what might be a helpful precedent if it is a matter that could be resolved by ADR.
[92] Mr Jeffries submitted ADR can add expense. There is some truth in that. I have addressed the potential costs consequences of the mediation should it be unsuccessful. The estate will need to meet the costs of the mediator and the parties will have their own costs. However, if the matter settles at mediation the costs involved will undoubtedly be less than the costs of running a full hearing. If the matter
20 Paton v Acropolis Holdings Ltd [2024] NZHC 43, Sherwin and JKA Holdings Ltd [2024] NZHC 920.
does not settle, then the time and expenditure will not have been wasted, as discussed at [67] above.
[93] If the parties have to go to arbitration, they will need to meet the arbitrator’s fee which is an additional cost. However, in Court litigation, filing fees on amended claims and interlocutory applications have to be paid (and I have already commented there will need to be an amended claim here if there is no settlement), along with setting down and scheduling fees. A hearing lasting 10 days would incur fees of approximately $33,600 — these fees will not be payable in an arbitration. If the parties end up in arbitration, then they have a choice of venue and hearing date rather than having to work around a date given by the Court. If the Court hearing was to take two weeks, the parties would be lucky to get a hearing in 2026 given the proceeding is far from ready to be set down. A robust arbitration could likely see this matter determined before the end of the year. All the interlocutory applications available in this Court are available in arbitration but can be dealt with more quickly in arbitration. That also creates cost savings. Interlocutory issues are dealt with by the final decision maker, creating a practical incentive for the parties to demonstrate that they are adopting a reasonable approach to the litigation as their whole conduct of the litigation will be under the scrutiny of the final decision maker.
[94] The potential costs of arbitration here cannot be determined because the length of the arbitration cannot be calculated. Assuming those costs will be higher than the Court disbursements and not be off-set by the interlocutory and other efficiencies and cost savings I have referred to, it is a factor that stands against ordering arbitration. However, while the arbitrator’s costs will be underwritten by the estate in the first instance, the arbitrator will have full power to make costs awards in respect of costs. If Gillian and Emma win the day then all of the arbitration costs will likely fall on Anne. This is hostile trust litigation and so in all likelihood, if Anne is held liable for breach of trust, she will have to meet her own costs and contribute to Gillian and Emma’s costs (along with the arbitrator’s costs). If Gillian and Emma lose, then they are exposed to potentially higher costs than in this Court because they may be made responsible for the arbitrator’s fee. The costs risks are shared. However, at the end of the day, that is a risk Anne is prepared to take but one Gillian and Emma resist. This is a factor that stands against a referral to arbitration but is a risk inherent in the ability
to order arbitration and so it is not a factor that, in my view, should carry significant weight.
[95] Finally, Mr Jeffries, in his notice of opposition, refers in general terms to there being a public interest factor in the proceeding being heard in this Court and for justice to be seen to be done “in the transparent and accountable forum of this Court”.
[96]Mr Jeffries’ submissions are summed up as follows, that Gillian and Emma:
… see no benefits, mainly imbalances detriment to them, should orders be made diverting these proceedings behind closed doors, presided over by persons who are or were also the defendant’s professional colleagues, to make decisions in private.
[97] I do not consider this ground of opposition, which captures the tenor of the opposition generally, is a dispassionate assessment of the situation. In my view, Gillian and Emma underestimate the abilities of an experienced mediator and the robustness of an arbitration here proposed to be conducted by a senior Kings Counsel. Both mediator and arbitrator will be alert to the potential of a power imbalance. Gillian and Emma are represented by experienced counsel. Anne, Robin and Judith are represented by senior counsel who have explained to this Court their clients wish to attend ADR with an open mind and with a view to settlement. Such an indication should be welcomed, not rejected.
[98] By rejecting ADR, Gillian and Emma are saying they prefer approximately two years of complicated and expensive litigation. A mediator and arbitrator will be aware of Anne’s position and background and will expect and require her to act in a professional manner and in the spirit of someone who has sought mediation.
[99] In my view, the great majority of factors in this case support the application being granted. To decline to grant the application because Gillian and Emma say they do not believe the matter is capable of settlement would be to undermine s 145 of the Act as it would mean such pessimism need only be recited to block ADR. That cannot have been intended.
Decision
[100] I am satisfied that in all the circumstances it is appropriate to make an order under s 145 of the Trusts Act 2019 that the parties attend mediation.
[101] While Mr Jeffries did not raise any specific objection to the mediator nominated by Anne, I recognise that Gillian and Emma may not have wanted to engage with that issue or nominate their own mediator, least it be thought such was seen as akin to a concession that mediation would be ordered.
[102] Gillian and Emma have five working days to nominate three mediators who would be satisfactory to them. If none of those mediators are satisfactory to Anne then the Court will appoint a mediator — that appointment may or may not be from one of the mediators nominated by the parties.
[103] The mediation is to be completed by 31 July 2024. It will be for the mediator to make such directions in consultation with counsel as to the time and location of the mediation and any other necessary directions.
[104] I note here that s 145 of the Act refers to the Court submitting “… any matter to an ADR process”. Here, the application seeks that the matter be referred to two ADR processes — mediation and then arbitration. I agree with Mr Butler that it would cause costs and delay to require a further application to be made seeking arbitration in the event mediation did not finally resolve the dispute. Mr Jeffries did not submit that if an order was to be made that there could not be the sequential process sought.
[105] If the matter is not entirely resolved at mediation, then I appoint Mr Tom Weston KC to conduct an arbitration between the parties. All case management issues in respect of the arbitration will be a matter for the arbitrator. I have already noted Mr Butler’s acceptance as to the scope of the jurisdiction of the arbitrator. While there will not be an arbitration agreement, s 148 provides that arbitrations ordered pursuant to s 145 are governed by the Arbitration Act 1996. Leave is reserved to apply if Mr Weston KC is not able to accept appointment.
[106] Leave is reserved to the parties to seek a Tomlin Order in this proceeding should such be thought desirable following mediation.
[107] Accordingly, there are orders as sought at paragraph 1(a) to 1(g) of the application dated 15 March 2024 save as to the identity of the mediator as provided above.
Costs
[108] Costs are reserved. In the interests of creating the best environment for a mediation, I propose that memoranda on costs be filed only upon the mediation proving unsuccessful. I note that Anne’s application seeks that the costs of the application, if granted, be paid from the estate.
Associate Judge Lester
Solicitors:
Simpson Grierson (for Defendant and Interested Parties)
Copy to counsel:
M A Jeffries Solicitors, Auckland (for First and Second Plaintiffs) A S Butler KC, Barrister, Auckland (for Defendant)
H Waalkens KC, Barrister, Auckland (for Interested Parties)
4
0