Gavin v Powell
[2019] NZHC 2981
•14 November 2019
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2018-409-000272
[2019] NZHC 2981
BETWEEN CHARLOTTE TERESA GAVIN
Plaintiff
AND
DANIEL JOHN POWELL
First Defendant
AND
PAUL JOSEPH DORRANCE
Second Defendant
Hearing: 21 October 2019 Appearances:
A F Grant for the Plaintiff
W Palmer for the First and Second Defendants
Judgment:
14 November 2019
Reissued:
5 December 2019
JUDGMENT OF NATION J
[1] Since my judgment on interlocutory applications of 7 June 2019,1 the plaintiff (Charlotte) has been endeavouring to settle on the form of an amended statement of claim. This has been necessary so the pleadings can be settled and then evidence again provided by affidavit so the real issues between the parties can be determined. Various draft amended statements of claim were provided to counsel for the defendants. They maintained certain objections to the claim. Counsel agreed the Court would have to rule on the objections for matters to progress.
1 Gavin v Powell [2019] NZHC 1277.
GAVIN v POWELL [2019] NZHC 2981 [14 November 2019]
[2] On 21 October 2019, I heard submissions as to a proposed second amended statement of claim dated September 2019.
[3] Although there were various objections on a paragraph by paragraph basis, I propose to deal with the objections in a more general way. With the rulings I make, it should be possible for counsel to prepare an amended statement of claim which complies with the Court’s directions.
Inconsistent pleadings and alleged failure to differentiate between defendants
[4] In the draft amended statement of claim, Charlotte claims both defendants were not authorised to act as trustees of the Daniel Powell Family Trust (DP Trust) but she also claims that, despite their lack of authority to do so, they were nevertheless subject to certain specified duties as trustees. The defendants contend that, in this, there is a contradiction. To that criticism, Mr Grant, for Charlotte, contends there is not necessarily a contradiction. Charlotte contends that, if they were not authorised to act as trustees, in purporting to act as trustees they had nevertheless assumed obligations pursuant to a trust “de son tort”.
[5] The defendants’ objection to the amended statement of claim in its current form could be met with a pleading, firstly, that the defendants were not authorised to act as trustees and, secondly, an alternative pleading that, if they were not so authorised, they have nevertheless had various duties as trustees under a trust de son tort.
[6]The amended pleading should be prepared on that basis.
[7] Distinct causes of action founded on separate and distinct facts must, if possible, be stated separately and clearly.2 The statement of claim must show the general nature of the plaintiff’s claim to the relief sought.3
[8] As currently drafted, the amended statement of claim is not as clear as it could or should be because it makes allegations against both defendants when, in some instances, they relate to only one of the defendants. For instance, the current para 8
2 High Court Rules 2016, r 5.17.
3 Rule 5.26.
pleads that Daniel Powell (Daniel) was not authorised to act as a trustee unless an independent professional trustee approved and appointed by the High Court was also appointed, and Daniel could not remove or organise for the removal of an independent professional trustee. In para 14, there is a pleading that, for the reasons set out in para 8, both defendants were not authorised to act as trustees of the trust.
[9] There is also an allegation against both defendants that, in acting as trustees, they had a duty:
16(c) Generally to act in good faith, including:
(i) To work constructively and professionally with the Court appointed trustee, Ms Ballinger;
(ii) A duty not to interfere with the appointment of the co-trustee who had been appointed by the Court.
(iii) Not to seek her removal as a trustee other than by way of an application to the Court.
[10] Mr Dorrance was not a trustee at the time Ms Ballinger was a trustee so this must be a pleading as against only the first defendant Daniel.
[11] In para 19, there is a pleading that both defendants have been in breach of duties pleaded in para 16(c), to act in good faith in relation to the orders of the High Court. The allegations however all relate to actions which only the first defendant, Daniel, took as a trustee. There is an allegation in para 19(d) that Mr Dorrance actively participated in the removal of Ms Ballinger but the plaintiff will need to clarify on what basis Mr Dorrance’s alleged actions in this regard were in breach of his obligations as a trustee given, at the time, he was not a trustee.
[12] These concerns or criticisms of the draft statement of claim could be met by a pleading as against the Daniel as to those matters Charlotte relies on in support of her contention that, with the resignation of Ms Ballinger as a trustee, he was no longer entitled to continue as a trustee.
[13] There should be a separate pleading as against the second defendant as to the matters Charlotte relies on to support her contention that Mr Dorrance was not authorised to act as a trustee.
[14] There should be a separate pleading against each defendant as to how they have been in breach of their separate obligations. For instance, as to Daniel allegedly arranging for the resignation of Ms Ballinger as a trustee and the appointment of Mr Dorrance in her place, and his then continuing to act as trustee.
[15] There would be a separate pleading as to Mr Dorrance accepting appointment as a trustee allegedly in breach of the order previously made by the High Court regarding the need for an independent professional trustee.
[16] There could then be a pleading against both defendants that, although not authorised to do so, they nevertheless assumed the obligations as trustees de son tort, with the particular duties the trustees assumed in that regard.
[17] It could then be pleaded in the alternative that, if the defendants were acting as trustees in that capacity, they would have the duties specified.
[18] The plaintiff would then be dealing with duties which both defendants were under on alternative bases.
[19] The statement of claim should then provide particulars as to the way Charlotte alleges the defendants have been in breach of those duties.
[20] I consider the way in which Charlotte has particularised the way both defendants have allegedly been in breach of trust, as set out in para 17(a)-(g), and para 18 and its sub-paragraphs, do provide adequate particulars as to the ways in which Charlotte alleges the defendants have been in breach of duties they both had as trustees.
[21] It should however be clear from the pleadings that the plaintiff’s allegations, as to both defendants being in breach of trust, relate only to the time period since they have been both appointed as trustees.
[22] There were various ways in which the defendants had sought further particulars as to some of the claimed breaches. In response, Mr Grant provided some further particulars. This should be replicated in the amended statement of claim.
Settlor’s intentions
[23]In my judgment of 7 June 2019, I said:4
Essentially, Charlotte’s complaint is that the trustees have failed to appropriately consider requests she has made for financial assistance from the DP Trust, the trustees have failed to provide her with information to which she is entitled, and Daniel and Duncan Cotterill breached or assisted Daniel in breaching his duties as a trustee in bringing about Ms Ballinger’s resignation as a trustee and the appointment of Mr Dorrance as a trustee.
[24]In the draft amended statement of claim, Charlotte pleads:
17(h) The defendants have not taken into account the settlors’ intentions that the Trust be operated in accordance with the following principles:
(i) It was primarily intended to fund the educational needs of their children, grandchildren and greatgrandchildren.
(ii) It, together with the CP Trust, was broadly intended to provide equal benefits for their two children and their respective families.
(iii) It was not intended to lead any of the beneficiaries into a life of laziness and dependence upon the Trust. (SS, TT)
17(i) The defendants:
…
(iv) Have allowed the DP Trust to be the sole source of the first defendant’s income for him to be able to live a comfortable, easy and unchallenging life.
(v) Further, the second defendant has never spoken with John and Lynda Powell about their intentions for the Trust nor attempted to do so. (SS, TT)
[25]In my judgment of 7 June 2019, I noted:
[4] Both trusts had similar terms. In each case, the discretionary beneficiaries included Charlotte, Daniel, their children, grandchildren and spouses. The terms of the trusts enabled each sibling’s family to benefit if the other sibling died leaving no surviving children. Each sibling and his or her family could have recourse to the other’s trust if his or her trust, for any reason, failed. Daniel and Charlotte accepted that settlement of the trusts “was effectively their inheritance from their father”.5
4 Gavin v Powell, above n 1, at [112].
5 See Powell v Powell [2015] NZCA 133, [2015] NZAR 1886 (Court of Appeal judgment); Powell v Powell [2014] NZHC 476, (2014) 3 NZTR 24-011 (first judgment) at [12]-[14]; Powell v Powell [2014] NZHC 2096 (second judgment).
[26]I referred to an affidavit Charlotte and Daniel’s father filed in the proceedings:
[82] By far the greater proportion of John’s affidavit of 4 May 2018 is marked in yellow. There is a significant section on how the DP Trust and CP Trust came to be established, his purpose in establishing the trusts and their particular investments. There was evidence as to this in the earlier proceedings. Dunningham J’s findings in this regard were apparent from her first judgment.
[27] The pleadings I have just referred to would all require evidence to be given by the settlors as to their intentions in establishing the trust. Mr Grant argued that the settlors’ intentions were a relevant consideration for the trustees and thus the Court cannot consider whether the trustees have fulfilled their duties as trustees in a vacuum. He thus argued Charlotte had to be able to call evidence as to the settlors’ intentions.
[28] Mr Grant argued this would not offend the principle of res judicata. The settlors’ intentions had not been an issue in the earlier proceedings which he argued were about only whether or not Daniel should be removed as a trustee.
[29] For the defendants, Mr Palmer argued that the issues Dunningham J had to determine in the earlier proceedings were in the context of all that was relevant to the parties in those proceedings, including the settlors’ intentions. Evidence as to what those intentions were was either before the Court in those earlier proceedings or could have been, and so should not be the subject of further litigation in these proceedings.
[30] I consider the pleading in para 17(h)(ii), that the settlors, through the establishment of the two trusts, intended to provide equal benefits for their two children and their respective families and that this was reflected in the provision which was made for each family to benefit from the other family’s trust, is contrary to the determination made by Dunningham J in her first judgment. She referred to terms of the trusts which enabled each sibling’s family to benefit from the other’s trust in certain circumstances. She then said:6
[13] It was also suggested this was to enable an “evening up” of trust assets should a disparity in value ensue. I am not convinced of this for two reasons. First, there is nothing in the terms of the Trust Deed which indicates this was intended. Second, John explained it was his intention that Daniel and Charlotte would each be responsible for growing the investment portfolios of
6 First judgment, above n 5.
the trust which was in their name, for the benefit of the beneficiaries, with John’s oversight and guidance. I think it unlikely that he intended their individual efforts would then have to be split with the less successful sibling as of right.
[14] It seems that Daniel and Charlotte accepted that the settlement of the trusts was effectively their inheritance from their father, with Daniel saying “John made it very clear from the inception of the trusts that this was all that my family was to receive from his estate and that I was to make the best I could from the company resources. Charlotte was to do the same with Southland. The rest of John’s estate was to go to charity and, as part of this, John later set up the Belfast Community Trust and the Taylors Mistake Rescue Trust”.
[31]Dunningham J also referred to the intention of the settlor. She said:
[109] In considering whether it is appropriate to leave Daniel as a trustee, alongside an independent trustee, I have also had regard to perceived intention of the settlor, which is to allow the family of the child after whom the Trust is named to have some responsibility in managing and growing the Trust assets. This is evidenced by Daniel being invited early on to be a trustee of his Trust and similarly Charlotte to be a trustee of her Trust. The Trust Deed, too, anticipates that Daniel would be a trustee through the provisions of cl 12.
[32] In her second judgment, Dunningham J referred to the way in which the trustees, in the terms of each trust, were required to consider appropriately the needs of the other sibling and that sibling’s children and thus of the need for Daniel to consider the interests of all the beneficiaries in his role as trustee. Dunningham J nevertheless said:7
I remain of the view that settlor’s intentions in settling the trust property in these two trusts was as set out at paras [12]-[14] of my 14 March decision. Each trust was that child’s inheritance, and they were entrusted with responsibility for management of that trust’s assets to allow them to provide for their respective families both now and in the future.
[33] In the Court of Appeal, it was submitted for John Powell that Dunningham J had erred in finding that the settlor’s subjective intention was for the DP Trust to be the “inheritance” of Daniel, with the result that he should be permitted to continue as trustee.8
[34] The Court of Appeal carefully considered the basis on which Dunningham J had reached her conclusions as to the settlor’s intentions. In doing so, they referred to
7 Second judgment, above n 5, at [32].
8 Court of Appeal judgment, above n 5, at [43(a)].
the terms of each trust deed, the circumstances in which the trusts had been established, Daniel’s evidence about John’s communicated intention in setting up the trusts and the way the Judge had discussed John’s evidence that the arrangements contemplated an “evening up” of trust assets should a disparity in value ensue. The Court of Appeal noted Dunningham J rejected John’s evidence on that issue because it was not supported by the wording of the trust deed.
[35] I also note what the Court of Appeal had to say about how settlor’s intentions are to be ascertained and the relevance of them.9 The Court of Appeal recognised that contextually Dunningham J needed to ascertain the settlor’s intentions in the case of a trust that was one of two established to provide for the members of John’s family, and that she had done so.10
[36] The settlor’s intentions in establishing both trusts in both general and specific terms were squarely before the Court in the earlier proceedings. For instance, in John Powell’s initial statement of claim of 5 August 2013, there was reference to John Powell’s decision to set up trusts to provide not only for his children but particularly for his grandchildren and great grandchildren, to establish trusts for inter-generational purposes and of his wish to provide educational and housing opportunities for his grandchildren and great grandchildren.
[37] The settlor’s intentions were referred to at the outset of opening submissions for John Powell in the High Court proceedings before Dunningham J and also in submissions for him in the Court of Appeal.
[38] John Powell gave detailed evidence as to his intentions with regard to the trusts, including his wish to ensure that his children, grandchildren and great grandchildren could benefit from an education in a way he said he missed out on. I refer to his affidavit sworn on 1 August 2013.
[39] In that affidavit and in a second affidavit of 6 December 2013, John Powell also gave evidence that the trusts were set up on terms to enable them to be used to
9 Court of Appeal judgment, above n 5, at [53]-[56].
10 At [56].
even up the way in which Charlotte and Daniel’s families would each be able to benefit from the trusts if Charlotte’s trust’s investment in the Southland cool store turned out to be not as financially secure or profitable as Daniel’s investment through Kensal, the Christchurch cool store.
[40] During his submissions, Mr Grant said that, in the current proceedings, Charlotte would be wishing to put before the Court evidence, I infer, from John Powell as to his intention in setting up the trusts to provide for the educational needs of his grandchildren and also to allow for an evening up between trusts because of the risk that Charlotte’s trust’s investment in the Southland cool store was less secure and riskier than Daniel’s trust’s investment in the Christchurch cool store through Kensal.
[41] Mr Grant contended the pleadings relating to the settlor’s intentions, with regard to the trusts being used to meet the educational needs of his descendants, did not offend against the doctrine of res judicata because Dunningham J had not made any specific determinations as to whether those were the settlor’s intentions. What is permissible in terms of the current pleadings and the scope of the evidence to be presented in these proceedings must however recognise and be consistent with my judgment of 7 June 2019.
[42] It should have been clear to Charlotte through my earlier judgment that the Court would not permit either Charlotte or her father to relitigate issues that were before the Court in the earlier proceedings or to present evidence that could or should have been before the Court in the earlier proceedings relevant to the issues the Court was then considering. I refer in particular to paras [109]-[120] of that judgment.
[43] I rule the pleadings in para 17(h)(i)-(iii) will be an abuse of the Court processes in that they would lead to a relitigation of issues and the likely admission of further evidence in ways that I have already held would be an abuse of the Court process. The pleadings are not needed to enable Charlotte to put her grievance as to the way trustees of Daniel’s trust have dealt with her since the earlier proceedings were concluded.
[44] I also regard the pleadings in para 17(i)(iv) objectionable in that, implicitly, there is a pejorative and personal attack on Daniel in the way I ruled earlier should have no place in proceedings such as these.
[45] These rulings do not mean that the settlor’s intentions are to be ignored. The Court would deal with what is now currently in dispute between Charlotte and the present defendants with due regard to the purpose of the trust as discussed by Dunningham J in the earlier proceedings and by the Court of Appeal.
Alleged failure to provide particulars (pleadings based on Ms Ballinger’s evidence)
[46] In para 19 of the draft statement of claim, most if not all of the breaches of trustee duties pleaded as against both defendants but particularised as referring to only the first defendant appear to be based on an affidavit that was filed by Ms Ballinger earlier in the proceedings.
[47] Counsel objected to these pleadings on the basis that Ms Ballinger’s earlier affidavit “was ruled out” by a direction in a minute of 12 July 2019. My minute recorded both the Court and Ms Ballinger’s anticipation that she would be filing a new affidavit rather than relying on the affidavit she previously filed.
[48] Charlotte’s counsel is entitled to draft the statement of claim and allege breaches on the basis of information currently available to him. Charlotte is thus entitled to allege breaches based on the information contained in Ms Ballinger’s first affidavit. The pleadings are not evidence. Whether such pleadings can be maintained or supported will depend on all the evidence ultimately available.
[49] I do not consider the current pleadings in para 19 can properly be objected to because they are based on information Charlotte believes will be available from Ms Ballinger.
Prayer for relief
[50]At para 20, Charlotte pleads that, in breach of trustee duties as earlier pleaded:
(a) The defendants have been asked on 3 April 2016, 3 December 2016 and 8 March 2017 for copies of financial statements for Kensal for the financial years ending on 31 March 2011, 31 March 2012, 31 March 2013 and 31 March 2014 and have refused to provide them.
(b) Although the defendants have the power to obtain information about Kensal they informed the plaintiff on 8 February 2017 that they are not able to obtain it.
(c) The plaintiff is entitled to the financial statements she has sought, to enable her to learn how the trustees managed the Trust’s assets during the periods concerned.
[51]In para 21, Charlotte claims, by way of relief:
(i) If audited financial statements for Kensal Investments Limited have not been prepared for the financial years ending on 31 March 2011, 31 March 2012, 31 March 2013 and 31 March 2014, a direction that the incoming trustee(s) arrange for audited financial statements for the Company to be prepared for those years, and a direction that those statements be provided to the plaintiff once they are prepared.
(j) If there are audited financial statements for the years set out in (h) above [sic], a direction that the incoming trustee(s) provide copies of the financial statements to the plaintiff.
[52] The defendants object to this being included in the prayer for relief. The defendants say these accounts all pre-date the second hearing before Dunningham J on 11 August 2014. The defendants argue the accounts could have no relevance to matters which are at issue in the current proceedings, particularly so when I have ruled that evidence as to matters that occurred before 11 August 2014 would not be admissible in these proceedings.11
[53] For Charlotte, Mr Grant submitted Charlotte’s request for these accounts should be uncontroversial. The defendants do not accept that, as a beneficiary, she is necessarily entitled to accounts of the company.
[54] My concern is that this particular relief is being sought for an ulterior purpose and not in connection with what is currently at issue between the parties in these proceedings. My concern as to that was increased through the submission from Mr Grant that Charlotte would be willing to provide an undertaking that, if the accounts were provided as ordered, they would not be relied on for the purpose of these
11 Gavin v Powell, above n 1, at [121].
proceedings. He did not suggest that she would undertake not to use the accounts in further proceedings between the parties.
[55] I thus conclude that, for Charlotte to seek orders requiring the trustees to provide to her accounts for Kensal over the years specified, would be an abuse of these proceedings.
Future timetabling
[56] Mr Palmer, for the defendants proposed timetabling directions as to the filing of pleadings, discovery, and inspection of documents, but suggested the timetable should be suspended if there was an application to strike out any part of Charlotte’s further amended statement of claim.
[57] Mr Grant, for Charlotte, asked for the Court to now allocate a hearing date and to then work back from that date.
[58] For these proceedings to progress in an appropriate way, the pleadings need to be finalised first. Hopefully that can be done without the need for further Court hearings.
[59] I direct that Charlotte is to file a further amended statement of claim within 10 working days.
[60] The defendants are to file any application to strike out any part of the amended statement of claim or, if they are not doing so, a statement of defence and counterclaim within 15 working days of receiving the amended statement of claim.
[61] The plaintiff is to file a statement of defence to any counterclaim within 15 workings days of being served with the defendants’ counterclaim.
[62] The Registry is to arrange a telephone conference with counsel if an application is made by the defendants to strike out any part of the plaintiff’s amended statement of claim. If no such application is filed, the proceedings will be adjourned for a telephone conference with counsel in February 2020. Counsel are to file a
memorandum in advance of that hearing with timetabling directions for the proceedings to be progressed through to a full hearing.
Solicitors:
A Grant, Barrister, Auckland
T C Weston QC, Barrister, Tai Tapu S Cottrell, Barrister, Christchurch Buddle Findlay, Christchurch.
This judgment was delivered by me on 14 November 2019 at 3.00 pm Pursuant to Rule 11.5 of the High Court Rules
Registrar / Deputy Registrar Date: 14 November 2019
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