Gibbs v Windmeyer
[2021] NZHC 2582
•30 September 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-859
[2021] NZHC 2582
UNDER Part 18 of the High Court Rules, section 112 of the Trusts Act 2019 and the High Court’s inherent supervisory jurisdiction in relation to trusts BETWEEN
ANTHONY BRYON GIBBS as beneficiary of the Ruby Cove Legacy Trust
Plaintiff
AND
JOSEPH MICHAEL WINDMEYER as
trustee of the Ruby Cove Legacy Trust First Defendant
…/cont
Hearing: 7 September 2021 Appearances:
V Bruton QC and P Brown for the Plaintiff
A Galbraith QC and A Holden for the Defendants
Judgment:
30 September 2021
JUDGMENT OF GORDON J
This judgment was delivered by me
on 30 September 2021 at 12 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: P Brown, Auckland
Wilson Harle, Auckland
Counsel:V Bruton QC, Auckland A Galbraith, QC Auckland
GIBBS v WINDMEYER [2021] NZHC 2582 [30 September 2021]
VALERIE JANE GIBBS as trustee of the Ruby Cove Legacy Trust
Second Defendant
CHARLOTTE ANNE GIBBS as trustee of the Ruby Cove Legacy Trust
Third Defendant
[1] The plaintiff, Anthony (Ant)1 Gibbs, who is a discretionary beneficiary of the Ruby Cove Legacy Trust (the Trust), has filed a proceeding seeking an order that the three defendants (together, the trustees) are removed as trustees of the Trust. He says that the trustees cannot act, and are not acting, fairly or reasonably towards him, are hostile to him, and unable to act impartially or in good faith towards him. He also says the second and third defendants, as qualifying beneficiaries, have a conflict of interest and should be removed on that additional basis.
[2] As part of his evidence in support of his claim, Ant wishes to rely on certain correspondence. On this interlocutory application2 he seeks a determination as to whether that correspondence is protected by settlement privilege under s 57(1) of the Evidence Act 2006. If so, he says that any settlement privilege should be set aside as allowing the privilege to be maintained “provides a cloak for unambiguous impropriety”3 by the trustees; and/or the interests of justice exception in s 57(3)(d) of the Evidence Act applies and that requires the correspondence to be disclosed in the proceeding.
[3] Ant also says any privilege attaching to the correspondence should be disallowed under the “dishonest purpose” test in s 67 of the Evidence Act. Finally, he says any privilege has been waived under s 65 of the Evidence Act.
[4]The trustees oppose the application.
Background
[5] Ant, who is aged 46 years, is the son of the late Tony Gibbs, who was a successful businessman. Mr Gibbs died on 14 June 2020. Mr Gibb’s widow, the second defendant, Valerie Gibbs, and Ant’s sister, the third defendant, Charlotte Gibbs, aged 48 years, are two of the trustees of the Trust. The third trustee is
1 I will refer to the plaintiff by his first name using the shortened version by which he is commonly known and which was used in counsel’s submissions. Ant’s father, who will be mentioned in the judgment, also has the same Christian name and surname. No disrespect is intended by the use of the familiar version of the first name.
2 Ant has also applied for orders that the trustees provide him with certain Trust information and for an interim distribution of $100,000 towards his legal fees. Those applications are to be heard following the decision on this application.
3 Part of a common law exception to settlement privilege as enunciated by Robert Walker LJ in
Unilever plc v The Procter & Gamble Co [2000] 1 WLR 2436 (CA) at 2444 C–D.
Joseph Windmeyer, a solicitor who had advised Mr Gibbs in business and who came to know the family through that connection.
[6] Mrs Gibbs, Ant and Charlotte are the three current “qualifying” discretionary beneficiaries. Ant’s son and Charlotte’s three children are not currently qualifying beneficiaries. Charlotte holds the power of appointment and removal. She is entitled to add or remove qualifying discretionary beneficiaries at her discretion. The trustees accept that power should only be exercised for a proper purpose.
[7] Ant says that for the 10 years prior to his father’s death he had been involved in the horticultural operations of the family business. He refers to his contribution towards the development of those operations. The degree of his contribution and the value of his role is disputed by Charlotte and Mrs Gibbs. Ant accepts that during his period of employment there were often issues between him and his father and accordingly his involvement in the business operations varied from time to time. Mrs Gibbs put it this way. She says when Ant had no other employment, Mr Gibbs tried to involve Ant in the orchards. She says for periods it would work quite well but ultimately it would break down and Ant would leave. She describes his employment in the orchards as occasional and generally only for relatively short periods. But despite Ant’s behaviour, once things had cooled down they would try again.
[8] Ant acknowledges that he has a combative style. He refers to the final dispute with his father in May 2020. He says this conflict resulted in him being removed by his father from his position in the orchard operations. Mrs Gibbs says it was Ant, and the way he was behaving, not Mr Gibbs who brought about his leaving the orchards.
[9] Ant acknowledges the assistance he has received from the Trust. Mrs Gibbs also gives evidence of the financial support she and Mr Gibbs personally provided to Ant. [redacted]. Following the breakdown of his marriage, Ant says his father assisted by buying Ant’s house, putting it in the Trust and allowing Ant to live there. He says his father deducted rent from his weekly income so that he received $1,160 per week.
That was increased following a request by Ant to the trustees to which I refer to further below. Ant is the only beneficiary receiving material distributions from the Trust.4
[10] Ant says that after his father’s death he was brought back to assist Charlotte and his mother with the orchard operations. He says he was happy to help out. Mrs Gibbs says she and Charlotte tried to involve Ant where they could but once again his behaviour, including behaviour towards staff, made it impossible for him to be involved in the orchards.
Correspondence and negotiations
[11]The status of three particular items of correspondence is in issue:
(a)[redacted];
(b)[redacted]; and
(c)[redacted].
[12] Ms Bruton QC, for Ant, accepted that if the Court were to determine that the three documents referred to in [11] above are protected by settlement privilege (and the privilege is not set aside) then the whole of the correspondence and communications from 18 November 2020 up to 11 December 2020 when Ant emailed Mr Windmeyer saying: [redacted] would also be protected by settlement privilege. Ms Bruton accepted that the paragraphs in Ant’s affidavit discussing the communications and correspondence in that period and the annexed correspondence would need to be removed from the affidavit.
[13] That is a proper concession by Ms Bruton. Parties, and the Court, are entitled to assume that where without prejudice negotiations are commenced, the without prejudice status applies to subsequent correspondence unless and until a sufficient
4 Additionally, the school fees of Ant’s only child and Charlotte’s three children are paid for by the Trust and Mrs Gibbs lives in a Trust property.
warning is given that dealings are on an open basis, although the ultimate test is intention.5
[14] In order to place the correspondence that is in issue in context, as well as bearing in mind the background summary above, it is necessary to go back to July 2020.
[15] Mr Windmeyer says that Ant asked to meet him on 15 July 2020 (a month after Mr Gibb’s death). Mr Windmeyer says at that meeting, Ant explained to him that he had recently turned down a job offer but expected to find a new position over the next two to three months. Mr Windmeyer says Ant noted there was no role for him working for the orchards and he needed to move on. Mr Windmeyer says he acknowledged that and he said he hoped that the circumstances may change over time.
[16] Mr Windmeyer accepts that his acknowledgment of Ant’s statement may have upset Ant. Mr Windmeyer says Ant asked that the weekly sum being paid to him be increased while he looked for a new job and asked that certain expenses that he had incurred prior to his father’s death be reimbursed to him. Mr Windmeyer says he said he thought that would be fine, but he would discuss that with the other trustees. He agrees he declined to provide Ant with a copy of the Trust Deed of the Trust (Trust Deed). It is not suggested that these discussions on 15 July 2020 were to be confidential.
[17] Ant followed up that meeting, emailing Mr Windmeyer on 16 July 2020. He noted he had lost his livelihood, that the previous six weeks had put an enormous strain on everybody and requested that until “these matters are properly resolved” his salary or equivalent be reinstated.
[18] Mr Windmeyer responded the following day, on 17 July 2020, stating that he understood Ant’s situation but confirmed their discussion that it was not proposed that Ant be re-employed in the orchard businesses. The email continued:
[redacted]
5 Westgate Transport Ltd v Methanex New Zealand Ltd (2000) 14 PRNZ 81 (HC) at [20](c); Brown v Rice [2007] EWHC 625 (Ch) at [57].
[19] Mr Windmeyer says the trustees were not willing to have Ant employed again in the orchard businesses because of the risk his behaviour towards staff and third- party partners and suppliers, presented to the businesses.
[20] Ant says that from 17 July 2020 to 14 October 2020 he had minimal contact with Mr Windmeyer. He said he assisted Charlotte in response to her request with the orchard operations. He says he was happy to help and was hoping that his role would be reinstated on a full-time basis. He says, however, by 9 October 2020 it was becoming obvious to him that he and Charlotte would struggle to work together in the long-term. He says he began to realise that he needed to make a life for himself away from the family business. He says he engaged Suzanne Robertson QC to assist him to understand his rights as a beneficiary of the Trust and so as to approach the trustees for a distribution to enable him to focus on becoming financially self-supporting in Auckland.
[21] Ant says he wrote to Mr Windmeyer on 14 October 2020 to advise him that he had engaged a lawyer for advice on the Trust and his father’s estate. The email further stated:
I repeat that I am not looking at bring [sic] any claims against the estate or the Trust. However I am left in a very uncertain position and I would like some information to help me work out exactly what that position is.
[22] He asked Mr Windmeyer to provide Ms Robertson with: copies of his father’s will; a statement of assets and liabilities of the estate; the Trust Deed and any Deeds of Variation; and the accounts for the Trust for the previous three years.
[23] On 16 October 2020, Ant made a phone call to Mr Windmeyer, which Mr Windmeyer characterises as “very abusive” [redacted]. Mr Windmeyer says that Ant told him the value of the Trust assets totalled some $200 million, that he and his mother and sister should be treated equally and that he had a legal opinion that he was entitled to his share of the Trust and he wanted it.
[24] Ant describes the conversation in a very different way. Ant says Mr Windmeyer questioned whether he was looking to break up the Trust. Ant says he responded by saying it was not his intention because he knew the Trust was a legacy
trust to benefit the future family. He says he pressed Mr Windmeyer for a solution, asking how do they solve it. He says Mr Windmeyer responded by asking if Ant meant receiving one-third share of the Trust assets. Ant says he repeated that it was not his intention to break up the Trust assets.
[25] Mr Windmeyer says that he was left in no doubt from what Ant said that he wished to receive one-third of the assets of the Trust. Mr Windmeyer knew this was an impossibility without forcing a sale of Trust assets (and it would be contrary to the terms of the Trust Deed). Mr Windmeyer reported the phone call to Charlotte in an email sent very shortly after the phone call which he copied to Pravir Tesiram, at TGT Legal, the Trust’s solicitor. Mr Windmeyer also wrote to Mr Tesiram on 23 October 2020 setting out his recollection of the phone call.
[26] Mr Windmeyer says that Ant telephoned him on 20 October 2020 to apologise for the phone call. Ant does not comment on that.
[27] In her affidavit, Mrs Gibbs, while expressing her love of and support for Ant, [redacted]. She says that during one of their last phone calls, Ant told her that he wanted to break up the Trust. Ant does not comment on that statement by his mother.
[28] On 21 October 2020, Ms Robertson emailed Mr Tesiram, noting Ant’s earlier request for disclosure from the Trust. She also stated that as a potential claimant against his father’s estate under the Family Protection Act 1955, Ant could expect to be given a copy of his father’s will and a statement of assets and liabilities of the estate.
[29] Mr Tesiram replied, referring to the phone call of 16 October 2020 (and Mr Windmeyer’s characterisation of it). He also noted that Ant had repeatedly made it clear to his mother that he insisted on having a substantial sum of money settled on him. The letter continued:
Mr Gibbs’ request is not in good faith and is not made for a proper purpose. Given that, and the confidentiality provisions in the trust deed, the trustees are not prepared to simply provide him with a copy of the trust deed.
However, in order for you to be able to advise your client, the trustees propose that either you or your instructing solicitor view the trust deed at our offices
(without taking copies). We can then discuss how matters should be progressed in light of the specific provisions of the deed.
[30] Mr Tesiram enclosed a copy of probate with the will annexed and noted he was ascertaining the assets of the estate. On 28 October 2020, Ms Robertson visited TGT Legal and made notes of the contents of the Trust Deed.
[31] On 11 November 2020, Ant sent an email to the trustees, copying in Ms Robertson. The email states:
With the aim of resolving current issues, would the Trustees be willing to meet Suzanne [Robertson] and I on either Monday the 16th or Wednesday the 18th? Mornings on both days would be preferable if possible.
[32] Ant says in his affidavit that as far as he was concerned, at that point there was no dispute between him and trustees. He says he was simply trying to work out a way forward on a constructive basis.
[33] Mr Windmeyer responded to Ant’s email on the same day proposing 18 November 2020 as a meeting day, saying:
For the purposes of organising the meeting and discussions at the meeting, we are happy for Suzanne [Robertson] to participate. We have determined not to have [Mr Tesiram] attend. Our intention is that this meeting be on a “without prejudice” basis so that there can be a full and frank discussion to, as you have noted, seek to resolve the issues. Please confirm that this is acceptable.
[34] Ms Robertson responded by email on 11 November 2020 saying, “I confirm the basis of the meeting is acceptable”. Ant says that at the meeting on 18 November 2020, Mr Windmeyer stated at the outset that the meeting was on a “without prejudice basis”.
[35][redacted]:
[redacted]
[36][redacted].
[37][redacted].
[38][redacted]
[39][redacted].
[40][redacted].
[41] On 22 January 2021, Ms Bruton QC, now acting for Ant, emailed Mr Tesiram, proposing a “without prejudice” telephone discussion “about whether there is some sort of path forward on this matter”. Ms Bruton stated that her email was an open email but any telephone discussion would be “without prejudice”. Mr Tesiram responded saying that he and Mr Windmeyer were prepared to speak to Ms Bruton on the basis suggested.
[42] In a letter dated 5 February 2021 to Mr Tesiram, Ms Brown, Ant’s solicitor, [redacted] saying, “the detail of which I will not mention further as I understand the negotiations were without prejudice”. In the 5 February 2021 letter, Ant made an open proposal for an “in principle” settlement offer of primarily capital distributions of over
$10 million to him personally or to a trust for his and his son’s benefit, including three properties and cash payments of close to $5 million. Under the proposal, Ant would remain a beneficiary of the Trust but would agree to not approaching the trustees for further financial or other assistance for a period of 10 years from the date of settlement or the date of Mrs Gibbs’ death, whichever came sooner. The proposal was framed as a request for distribution, but concluded by noting that the offer was open for a period of 14 days after which it would automatically lapse. Mr Tesiram was asked to advise whether or not he was authorised to accept service of proceedings on behalf of the trustees.
[43] Ant’s proposals were not accepted and he commenced his proceeding seeking the removal of the trustees.
[44] Ant says in his reply affidavit that the issues will be resolved if one-seventh of the Trust assets are resettled for his benefit and the benefit of his descendants with him as one of the two trustees. The trustees say this proposal directly contravenes the Guiding Principles of the Trust.
Issues for determination
[45]The issues for determination are:
(a)Are [redacted] privileged communications under s 57(1) of the Evidence Act?
(b)If so, should the privilege be set aside on the basis they are being used as a “cloak for unambiguous impropriety”?
(c)Do the interests of justice otherwise outweigh the need for the privilege so that the communications should be disclosed?6
(d)Should the privilege be disallowed under s 67 of the Evidence Act? and
(e)Has privilege been waived?
Are the communications privileged?
[46] Ms Bruton accepted “as a broad proposition” that the material under consideration was at least related to the meeting on 18 November 2020 agreed to be “without prejudice”. In both her written and oral submissions, Ms Bruton’s focus was on setting aside settlement privilege. However, she did not expressly concede that the communications were privileged under s 57(1). It is therefore necessary to address that issue.
[47]Section 57(1) of the Evidence Act provides:
57 Privilege for settlement negotiations, mediation, or plea discussions
(1)A person who is a party to, or a mediator in, a dispute of a kind for which relief may be given in a civil proceeding has a privilege in respect of any communication between that person and any other person who is a party to the dispute if the communication—
(a)was intended to be confidential; and
6 Evidence Act 2006, s 57(3)(d).
(b)was made in connection with an attempt to settle or mediate the dispute between the persons.
…
[48] The rule protecting without prejudice communications in the context of settlement discussions was explained by the Court of Appeal as follows:7
[11] The rule protecting without prejudice communications from admission as evidence in Court proceedings is well settled. Its existence is justifiable on two complementary bases. First, as a matter of public policy, the rule is designed to encourage parties to negotiate settlements of disputes (using that phrase in the broad sense), secure in the knowledge of two things
– that whatever is said openly and honestly for that purpose will remain confidential; and that if those negotiations are unsuccessful any statements or offers made adverse to the maker cannot be considered in determining liability in later litigation. Second, as a matter of contract, the law should recognise the sanctity of the parties’ agreement to communicate on a without prejudice basis with its underlying expectations of absolute confidentiality and protection.
(citations omitted)
[49] The Court went on to comment on the scope of what are protected communications saying:8
… The word “dispute” is not a term of art; its use was not meant to be exclusive. And, as noted, “negotiations” or the broader term “difference” will suffice. None of these phrases warrant a narrow construction where something has arisen between the parties which must be resolved and they have expressly agreed their communications should be protected for that purpose.
[50] Where a communication is labelled “without prejudice” during negotiations undertaken with a view to a compromise, “the protection that these words claim will be given to it unless the other party can show that there is good reason for not doing so”.9 Negotiations and resolution without hostility do not connote an absence of a dispute.10
7 Morgan v Whanganui College Board of Trustees [2014] NZCA 340, [2014] 3 NZLR 713 at [11] citing Sheppard Industries Ltd v Specialised Bicycle Components Inc [2011] NZCA 346, [2011] 3 NZLR 620 at [23]–[32] applying Oceanbulk Shipping and Trading SA v TMT Asia Ltd [2010] UKSC 44, [2011] 1 AC 662 at [19]–[28] and [41]; and Brown v Rice, above n 5, at [25]. See also Minister of Education v Reidy McKenzie Ltd [2016] NZCA 326 at [21].
8 Morgan v Whanganui College Board of Trustees, above n 7, at [17].
9 Ofulue v Bossert [2009] UKHL 16, [2009] 1 AC 990 at [2].
10 O’Brien v The New Zealand Home Loan Co Ltd HC Auckland CIV-2010-404-008323, 22 July 2011 at [26].
[51] I first ask whether the dispute to which privilege attaches has to be the same dispute as the one before the Court? There is authority that supports that proposition
that it need not be the same dispute.11 But in any case, I consider the dispute in substance is the same. Ant is pursuing a claim to remove the trustees for bias (not acting fairly or reasonably towards him, being hostile to him and unable to act impartially or in good faith towards him). But additionally, Ant has made it clear in the proceeding that he is seeking a substantial payment from the Trust fund [redacted].
[52] Ms Bruton submits the parties were at cross purposes over what was in issue or what was in dispute and as a consequence what they were meeting to discuss on 18 November 2020. Ms Bruton submits that the “dispute” for Ant was as to what distribution he might receive from the Trust fund so as to enable him to start a new life, having regard to the fact that he had lost his job on one of the family orchards in the month before his father’s death.
[53] Ms Bruton submits that it appears from the affidavit evidence of the trustees, that from their point of view they were approaching the 18 November 2020 meeting on the basis of a broader dispute based on Mr Windmeyer’s position that in the 16 October 2020 phone call, Ant had spoken about breaking up the Trust and that he had said he had a legal opinion that he was entitled to his share of the Trust and that he wanted it.
[54] A determination of what exactly was said by Ant and Mr Windmeyer in the 16 October 2020 telephone discussion cannot be resolved without cross-examination. But it is not necessary to make findings about what was said for the purposes of determining this application. I am satisfied on all of the evidence that “something had arisen between the parties which [needed to] be resolved and they [had] expressly agreed their communication should be protected for that purpose”.12
11 Minister of Education v Reidy McKenzie Ltd [2015] NZHC 1555 at [58]. The issue of whether the circumstances attracted settlement negotiation privilege was not a point argued on appeal in The Minister of Education v Reidy McKenzie Ltd [2016] NZCA 326 at [2]; and New Zealand Institute of Chartered Accountants v Clarke [2009] 3 NZLR 264 (HC) at [26].
12 Morgan v Whanganui College Board of Trustees, above n 7, at [11]
[55] First, Ant engaged Ms Robertson to assist him to understand his “rights as a beneficiary of the Trust”.
[56] Second, even accepting Ant’s version of the phone call on 16 October 2021, he says he wanted Mr Windmeyer’s help to “resolve my concerns about my position in the family and business”. He says he asked Mr Windmeyer how to solve this.
[57] Third, on 21 October 2020 Ms Robertson referred to Ant being a potential claimant against Mr Gibbs’ estate under the Family Protection Act.
[58] Next, even though what was said in the 16 October 2020 phone call cannot be resolved, Ant has not disputed his mother’s evidence of what she says he said to her in a telephone call in October 2020 as referred to in [27] above.
[59] Further, Ant was aware of the trustees’ view of what he was seeking. That was set out in Mr Tesiram’s letter of 23 October 2020 to Ms Robertson where Mr Tesiram said:
… On 16 October, Mr Gibbs telephoned Mr Joe Windmeyer shouted abuse at him, and told Mr Windmeyer that he intended to break up the Trust and expected to receive a third or fifth of the Trust assets. Mr Gibbs has also repeatedly made clear to Valerie Gibbs that he insists on having a substantial sum of money settled on him.
[60] The above all provided a context for the meeting on 18 November 2020, which was proposed by Mr Windmeyer to be and accepted by Ant (through Ms Robertson) on a without prejudice basis.
[61] Given the express agreement that the meeting of 18 November 2020 would be on a without prejudice basis, I consider it follows that [redacted], is also covered by the without prejudice arrangement. [redacted].
[62] The subsequent [redacted] all flow from the 18 November 2020 without prejudice meeting. [redacted] are marked “without prejudice”.
[63][redacted].
[64] There are then communications following that period from Ant’s new legal representative Ms Bruton and the instructing solicitor from 18 November 2021 which provide further support, if necessary, for my view. On 22 January 2021, Ms Bruton requested another “without prejudice” meeting looking for a “path forward on this matter in a way that meets the needs and interests of all beneficiaries without recourse to litigation”. Then on 5 February 2021 there is the letter already referred to from Ms Brown to Mr Tesiram stating her understanding that the previous correspondence was “without prejudice”.
[65] For all the above reasons, the three particular communications at issue: [redacted], are subject to settlement privilege under s 57(1) of the Evidence Act. The other correspondence, being emails, letters and texts between the parties and the parties’ discussions all from the date of 18 November 2020 to 11 December 2020, are also subject to settlement privilege under s 57(1) of the Evidence Act.
The Ruby Cove Legacy Trust
[66] Before I address the issue of setting aside settlement privilege, it is necessary to mention the provisions of the Trust Deed. The trustees say that they have acted in accordance with its Guiding Principles.
[67] The Trust was settled by Mr and Mrs Gibbs in 2015 to protect their assets. It was a resettlement of an earlier trust. Mr and Mrs Gibbs wished to benefit themselves and their descendants over several generations. They were concerned to ensure that the Trust be for the benefit of all beneficiaries at the time the Trust was settled and in the future, and accordingly needed to grow over time to ensure that would be the case. Its purpose was to enhance and grow the family assets that had been built up by Mr and Mrs Gibbs, those assets being primarily mandarin and avocado orchards and to support the family for generations to come.
[68] Mrs Gibbs says the Trust was specifically not to fund the lifestyles of the discretionary beneficiaries, or give them a lavish lifestyle. It was important that a beneficiary not feel some form of entitlement and that they establish their own career path. But where there is a genuine need for housing, medical or educational support,
the Trust can provide that support. Mrs Gibbs says this reflects her values and Mr Gibb’s values and they are the Guiding Principles of the Trust.
[69] The notes Ms Robertson made of the contents of the Trust Deed were annexed to Ant’s affidavit. Those notes accord with what the trustees say are the Guiding Principles of the Trust. Accordingly, although the Trust Deed was not before the Court (it was offered if the Court requested it), I did not consider that it was necessary to call for it to be produced because Ms Robertson’s notes accorded with the list of the Guiding Principles put forward by the trustees.
[70] I set out those Guiding Principles because they help inform the context in which the dispute arose and the trustees’ responses to Ant:
(a)Each generation of the family is to consider itself the custodian of the Trust fund for the benefit of future generations;
(b)All members of the family must pursue their own careers, professions and enterprises so that they are self-supporting and financially independent. They should be encouraged to become productive members of the community as none of them should see the Trust as a source of funds to justify a lifestyle beyond what can be supported by their own productive endeavours;
(c)It is expected that assets of the Trust will be passed on to future generations of the family in better shape than they were received in;
(d)Nevertheless where a member of the family is in need with respect to his or her health and wellbeing, or requires assistance to pursue a career, profession or enterprise, then support out of the income, and as a last resort, capital may be provided;
(e)Distributions in any one income year shall not exceed 50 per cent of the net income of that year;
(f)Taking into account the inter-generational nature of the Trust, not less than 50 per cent of the net income of each income year must be accumulated and added to capital for the needs of future generations;
(g)Where a qualifying beneficiary dies or suffers incapacity, the trustees are to ensure the maintenance, education, health, welfare, wellbeing and advancement of children are given due consideration and the Trust fund can be utilised to the extent necessary in supporting children until they become self-supporting;
(h)The Trustees are not to be paid except where the trustee is engaged by other trustees on behalf of the Trust to undertake or carry out specific tasks or jobs for the benefit of the Trust, in which case the trustee can charge for services rendered or business transacted;
(i)Adequate provisioning for future commitments to capital works and investment over the medium to long-term horizon must be made;
(j)It is strongly preferred that no distribution of capital is made except as a last resort where there is a pressing need and the income of the year is inadequate, or it is inadvisable for tax, legal or other reasons to make an income distribution; and
(k)Assistance with housing may be provided to qualifying beneficiaries but only by means of acquiring the relevant property within the Trust as an asset of the Trust, reflecting a more general principle that long- term assets for use, operation or management by members of the family be acquired within the Trust.
[71] The trustees are required to have regard to the Guiding Principles in exercising their discretions. As Mr Galbraith QC, for the trustees, submits, those principles are very directory. They are permitted to give more weight to one or more than others.
[72]The value of the Trust assets is considerable. Ant estimates the value at around
$200 million. The trustees do not disagree with that estimate but say while the value of the assets is significant, they are not liquid. Approximately 85 per cent of the assets are the two orchards.
Setting aside settlement privilege
Legal principles
[73] There is a helpful discussion of the legal principles relevant to setting aside settlement privilege in the judgment of Fitzgerald J in Smith v Shaw.13 As Fitzgerald J notes, s 57(3)(d) of the Act was inserted on 18 January 2017 against the backdrop of a 2013 Law Commission review of the Act which, in the context of setting aside settlement privilege, considered options of directly enacting the common law exceptions to settlement privilege or adopting the approach now reflected in s 57(3)(d), namely the broader test of whether it is in the interests of justice to set aside the privilege.14
[74] In Smith v Shaw, counsel approached the application on the basis that the authorities on the common law exception would be of guidance in the approach to s 57(3)(d).15
[75] In this case, Ms Bruton makes two separate arguments supporting her submission that settlement privilege should be set aside. First, she relies on the common law exception that exclusion of the evidence would act as a cloak for “unambiguous impropriety”16 and second, she relies on the interests of justice exception in s 57(3)(d). Ms Bruton submits that the recognised common law exception
13 Smith v Shaw [2020] NZHC 238, [2020] 3 NZLR 661.
14 Law Commission The 2013 Review of the Evidence Act 2006 (NZLC R127, 2013) at [10.34]– [10.55].
15 Smith v Shaw, above n 13, at [34].
16 Ms Bruton in fact uses the term “serious impropriety”. That seems to be based on Sheppard Industries Ltd v Specialised Bicycle Components Inc, above n 7 at [24(d)], which in turn appears to be a misquote of Lord Clarke in Oceanbulk Shipping and Trading SA v TMT Asia Ltd, above n 7; and Robert Walker LJ in Unilever PLC v The Procter & Gamble Co, above n 3.
she relies on remains part of our law.17 (Although in her oral submissions she appeared to concede that the common law exception may be subsumed in the s 57(3)(d) test).
[76] I am not sure that Ms Bruton’s submission is correct. In New Zealand Institute of Chartered Accountants v Clarke, Keane J had cause to consider the continued existence of the common law exceptions to privilege.18 Keane J said:
[43] Section 57, according to The Evidence Act 2006: Act and Analysis, 233, EV 57.09, is definitive: ‘Section 57(3) sets out the only exceptions to the privilege for settlement negotiations or mediation which are recognised by the Act.’ And as to the common law exceptions: ‘The common law recognised other exceptions to the privilege. However, the effect of codification is that there is little room to argue for the continued existence of these earlier exceptions.’ Section 67 confers the only independent ability to disallow privilege.
[44] I prefer, myself, the opinion expressed in Cross on Evidence, 3614, EVA 57.9, which allows the common law a continuing place in setting boundaries to the privilege conferred:
There are a variety of common law exceptions to the without prejudice rule, including ‘unambiguous impropriety’, misleading the Court, threats, or acts of bankruptcy. None of these exceptions are provided for in the Act, but all, it is submitted, can readily be subsumed into a proper approach to … interpreting the statutory privilege …
[77] Like Keane J, I prefer the opinion in Cross on Evidence so that the common law exceptions are subsumed into the approach to interpreting the statutory privilege. That was, in effect, the approach adopted by Fitzgerald J following the approach of counsel in that case. In the end, the view I take will make little if any practical difference to Ms Bruton’s argument. I will consider the allegation that allowing the privilege to be maintained, provides a cloak for unambiguous impropriety by the trustees under the “interests of justice” test in s 57(3)(b). I will then consider whether there are any other aspects under the “interests of justice” inquiry in s 57(3)(d) which would warrant the settlement privilege being set aside.
17 Relying on s 12 of the Evidence Act and Minister of Education v Reidy McKenzie Ltd, above n 11, at [21] and Sheppard Industries Ltd v Specialised Bicycle Components Inc, above n 7, at [24].
18 New Zealand Institute of Chartered Accountants v Clarke, above n 11, at [38]–[51].
Was there “unambiguous impropriety”?
[78] In the United Kingdom, the leading decision on the exceptions to settlement privilege which is commonly referred to is the judgment in Unilever PLC v The Proctor & Gamble Co,19 where Robert Walker LJ, delivering the judgment of the Court, referred to the rationale for the importance of settlement privilege. Having discussed that issue, Robert Walker LJ then went on to list eight recognised exceptions, one of which is if the privileged communication is being used “as a cloak for perjury, blackmail or other “unambiguous impropriety”.20 The Judge then went on to note, however, that earlier decisions had “warned that the exception should be applied only in the clearest cases of abuse of a privileged occasion”.21
[79] That view was echoed in Oceanbulk Shipping and Trading SA v TMT Asia Ltd,22 where Lord Clarke stated that, “[t]he cases to which I have referred (and others) show that, because of the importance of the without prejudice rule, its boundaries should not be lightly eroded.”23
[80] In her discussion of exceptions to settlement privilege in Smith v Shaw, Fitzgerald J referred to two New Zealand Court of Appeal cases, Bradbury v Westpac Banking Corporation24 and Morgan v Whanganui College Board of Trustees.25 I adopt the summary of the two cases by Fitzgerald J, as follows:26
[39] In Bradbury, the trial judge had taken into account on a question of costs a letter from Mr Bradbury (headed “without prejudice”) which referred to creating “a PR nightmare for Westpac” unless it acceded to his demands. The High Court concluded that settlement privilege did not extend to protect a threat contained in a letter marked “without prejudice”. On appeal, Baragwanath J, delivering judgment of the Court, stated that the High Court Judge had been right to come to this conclusion, and that “[a] letter containing a threat will be characterised not as making an offer the law will protect, but as unlawful conduct in respect of which it will grant relief” (emphasis added).
19 Unilever PLC v The Procter & Gamble Co, above n 3.
20 At 2444.
21 At 2444, referring to Forster v Friedland CA Ch 1052, 10 November 1992;; and Fazil-Alizadeh v Nikbin CA Ch 205, 25 February 1993
22 Oceanbulk Shipping and Trading SA v TMT Asia Ltd, above n 7.
23 At [30].
24 Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400.
25 Morgan v Whanganui College Board of Trustees, above n 7.
26 Smith v Shaw, above n 13, at [39].
[40] Baragwanath J also cited with approval that aspect of the Unilever decision set out at [37] above, namely that “unambiguous impropriety” should be applied as an exception “only in the clearest cases of abuse of a privileged occasion”.
[41] In Morgan v Whanganui College Board of Trustees, Mr Morgan sought to set aside privilege in a record of discussions that were expressly said to be without prejudice. Again, it was said the discussions evidenced unlawful conduct, being first, that they evidenced constructive dismissal of him, and second, the making of threats and blackmail.
[42] Harrison J, delivering the Court of Appeal’s judgment, agreed that “unlawful conduct” was an exception to the “without prejudice rule”. But on the suggestion of constructive dismissal, he noted it was unnecessary for the Court to determine whether the facts of that case gave rise to constructive dismissal, given Mr Morgan had not accepted the school’s offer. And on the suggested threats and blackmail, Harrison J said there was no threat and there was nothing in the agreed statement of facts that might possibly support a finding of blackmail.
(citations omitted)
[81] Fitzgerald J then addressed a submission of counsel that it is sufficient to set aside settlement privilege under s 57(3)(1) if there is a “prima facie or arguable case of unlawful conduct” with counsel justifying that approach on the basis that otherwise the exception “becomes very narrow”.27
[82]Fitzgerald J did not accept that submission saying:
[45] But that is precisely the point of the authorities referred to earlier, namely that only “unambiguous impropriety” or the “clearest cases” of abuse will be sufficient to act as an exception to the privilege. And the Court of Appeal’s approach in Bradbury and Morgan speaks only of “unlawful conduct”, not “alleged” unlawful conduct, “prima facie” unlawful conduct or similar. Further, in both cases, it is clear the Court envisaged or did in fact reach a final view on whether there was unlawful conduct, rather than making interim or preliminary findings, with a final view to be determined in some other context.
[46] Accordingly, given the very clear policy reasons for and benefits of settlement privilege, it is right that any exceptions to it are narrow. Ultimately, whether the unlawful conduct needs in all cases to be “proved” in the application to set aside the privilege does not arise for determination in this case. This is because, as discussed further below, the case for unlawful conduct by Mr Shaw falls far short of any threshold which would justify setting aside this important privilege. I merely observe that the inquiry as to the “interests of justice” mandated by s 57(3)(d) no doubt envisages a broad and flexible approach on the facts of any given case. But I nevertheless expect it would be
27 Smith v Shaw, above n 13, at [44].
rare for a Court to set aside settlement privilege unless there was a very clear or at least very seriously arguable case for doing so.
[83]I respectfully adopt that approach.
[84] Ms Bruton submits that it is a serious (should be “unambiguous”) impropriety to:
(a)[redacted] whilst refusing to provide trust information and pay the beneficiary’s legal fees while the other two beneficiaries/trustees have access to the Trust information and funding;
(b)express in their affidavits their love and affection for Ant but to [redacted]; and
(c)use what Ant allegedly said to Mr Windmeyer in the 16 October 2020 phone call about Ant wanting to break up the Trust and wanting one- third to one-fifth of the Trust assets (which he denies saying) against him, but to hide behind the “without prejudice” cloak to [redacted].
[85] The case that Ms Bruton makes for an allegation of “unambiguous impropriety” on the part of the trustees falls well short of the threshold required to set aside the important privilege in s 57(1):
(a)[redacted];
(b)There is nothing inherently improper about seeking to resolve [redacted] on a without prejudice basis;
(c)There was not an outright refusal to disclose Trust information. I am conscious the issue of provision of Trust information is the subject of a separate interlocutory hearing. But it is necessary to touch on it in this context. First, in relation to the Trust Deed, although Mr Windmeyer declined to provide a copy to Ant, the trustees agreed to Ant’s former counsel, Suzanne Robertson QC, inspecting the Trust Deed at the
offices of TGT Legal and to make notes of the contents of the Trust Deed. Ms Robertson did so and made full notes of the contents which were annexed to Ant’s affidavit. A similar offer has been made to Ms Bruton, but she has not taken up that offer.
As to Trust financial documents, the trustees have made the offer, which was further confirmed by Mr Galbraith at the hearing, that they would make those documents available to independent advisers so that Ant could get independent advice.
The refusal to pay Ant’s legal fees could be seen to be a principled decision under the Trust Deed, and to that extent it is separate from the without prejudice negotiations. But in any event, Ant has been represented to date by two experienced Queen’s Counsel;
(d)Ant himself has made an offer, in his reply affidavit, to settle, which involves him being removed as a beneficiary of the Trust;
(e)For trustees to engage in without prejudice settlement correspondence, which may ultimately depart from the terms of the Trust is an approach that is actively encouraged through the Trusts Act 2019, which provides immunity to trustees for doing so;28
(f)[redacted]. They say they have stepped away from communicating directly with him, first, because he has claimed against them as trustees and engaged legal representatives. I accept it is appropriate for that reason for communications about the proceeding to be through counsel. [redacted]. In any event, the lack of engagement is consistent with Ant’s statement to Charlotte that she and their mother have lost their brother and his son;
(g)Regarding the allegations that Mrs Gibbs and Charlotte will personally benefit from removing Ant as a beneficiary: neither presently receives
28 Trusts Act 2019, s 147.
distributions from the Trust.29 As I have already noted, Ant, in fact, is the only beneficiary receiving on-going distributions from the Trust. Even if Ant were to agree to be removed as a beneficiary, his son and future generations through his son, will remain potential qualifying beneficiaries, even if Ant is not.
Are there any other “interests of justice” considerations?
[86] Ms Bruton emphasises the “broad and flexible approach” to the facts in any given case, identified by Fitzgerald J in Smith v Shaw.30 Ms Bruton submits that this is a dispute involving a family trust and a small number of family members. She submits it is a very different situation from a commercial negotiation where the disputing parties are entitled to nakedly pursue their own self-interest. She says here that the trustees, two of whom are also beneficiaries, have the dual role of advancing the interests of the beneficiaries as a whole in looking after each individual beneficiary. She submits that given that role, it is wrong in principle for the trustees to be able to hide behind the without prejudice privilege, [redacted], whilst using against a [redacted] things he allegedly said in open discussion on 16 October 2016 (which are denied by Ant).
[87] I do not accept that submission that a family trust dispute deserves less protection from a privilege perspective than a commercial dispute. Parliament has specifically encouraged alternative dispute resolution because of the extent of contentious family disputes coming before the Courts.31
[88] In summary, there are no grounds for setting aside settlement privilege under s 57(3)(d) either on the basis of the “unambiguous impropriety” test or for any other interests of justice reasons.
29 Apart from Charlotte’s children (along with Ant’s son) having their school fees paid and Mrs Gibbs living at a home on one of the orchards.
30 Smith v Shaw, above n 13, at [45]–[46] set out in [82] above.
31 Trusts Act, ss 142–148.
Is there a dishonest purpose?
[89] Ant alleges that the trustees have acted with a dishonest purpose and accordingly privilege should be disallowed under s 67 of the Evidence Act.
[90]Section 67(1) provides:
67 Powers of Judge to disallow privilege
(1)A Judge must disallow a claim of privilege conferred by any of sections 54 to 59 and 64 in respect of a communication or information if satisfied there is a prima facie case that the communication was made or received, or the information was compiled or prepared, for a dishonest purpose or to enable or aid anyone to commit or plan to commit what the person claiming the privilege knew, or reasonably should have known, to be an offence.
[91] There is a helpful discussion of s 67 in Rollex Group (2010) Ltd v Chaffers Group Ltd.32 There, Kós J reviewed New Zealand, United Kingdom, Australian and Canadian authorities. It is clear from that decision and the authorities discussed that proof of a “dishonest purpose” carries a very high threshold. At common law, what is needed is “fraud, sham or trickery”.33 Kós J also noted the “conscious deception or sharp practice” test adopted in Gemini Personnel Ltd v Morgan & Banks Ltd.34
[92] A useful comparator case is Fullerton-Smith v Fullerton-Smith.35 Mrs Fullerton-Smith had applied to remove Mr Fullerton-Smith as a trustee of their family trust. She had inadvertently received correspondence from Mr Fullerton- Smith’s counsel advising on the trust and relationship property. Heath J accepted parts of the correspondence reflected an intention by the husband to undertake acts to disadvantage her financially. Heath J considered that on any view of the test (either “fraud, sham or trickery” or “conscious deception or sharp practice”), the correspondence was insufficient to pass the s 67 threshold.
32 Rollex Group (2010) Ltd v Chaffers Group Ltd [2012] NZHC 1332, (2012) 22 PRNZ 21 at [31]– [44].
33 At [32] citing Crescent Farm (Sidcup) Sports Ltd v Sterling Offices Ltd [1972] CH 553 at 565. In Fullerton-Smith v Fullerton-Smith HC Hamilton CIV-2011-419-615, 26 August 2001 and in Manifest Capital Management Pty Ltd v Lawrence HC Auckland CIV-2010-404-7741, 20 December 2011, Heath J also preferred the “fraud, sham or trickery” test as opposed to “conscious deception or sharp practice” adopted in Gemini Personnel Ltd v Morgan & Banks Ltd [2001] 1 NZLR 672 (CA).
34 Gemini Personnel Ltd v Morgan & Banks Ltd above n 33.
35 Fullerton-Smith v Fullerton-Smith, above n 33.
[93] For all the reasons set out above in the section in relation to “unambiguous impropriety”, the allegations here do not reach the high threshold in s 67. Either test “fraud, sham or trickery” or “conscious deception or sharp practice” is not satisfied. [redacted].
Joint privilege and waiver
[94] In his interlocutory application, Ant asserts that due to the joint privilege he is permitted as of right to adduce all correspondence in the period from 18 November 2020, including that labelled “without prejudice”.
[95] That is not correct. Section 53 of the Evidence Acts provides that the privilege is effective if any one of the parties asserts the privilege as the trustees have done here. Also relevant is s 65(5) of the Evidence Act which provides a privilege conferred by s 57 may be waived only by all the persons who have that privilege. Ant may therefore not waive the privilege unilaterally.
[96] Ms Bruton purported to rely on Lambie Trustee v Addleman Ltd,36 to submit that the Supreme Court had abolished without prejudice privilege in trust disputes. That is not correct. That case concerned disclosure of solicitor-client privileged material by trustees to beneficiaries, not disclosure to the Court or third parties.
[97] Finally, the without prejudice privilege has not been waived simply by reference to the existence of those communications in separate correspondence between the holders of that privilege.37
Result and orders
[98]In summary, my decision is:
(a)[redacted] are protected by settlement privilege under s 57(1) of the Evidence Act as are other written communications and discussions
36 Lambie Trustee v Addleman Ltd [2021] NZSC 54.
37 Red Bull GMBH v Manhaas Industries Ltd HC Wellington CIV-2010-485-1866, 29 July 2011 at [35]–[36].
between the parties either in person or through legal advisers in the period from 18 November 2020 to 11 December 2020;
(b)The privilege is not set aside under s 57(3)(d) or s 67 of the Evidence Act; and
(c)The privilege has not been waived.
[99] Ant’s application fails and is dismissed. The following paragraphs and exhibits are struck out of Ant’s affidavit of 6 May 2021:
(i)Paragraphs 30 to 45; and
(ii)Exhibits at pages 155 to 177.
Redactions
[100] As this judgment discusses the nature and content of material I have found to be privileged, it is to be distributed to the parties and their legal representatives only in the first instance. Counsel agreed that in the event that I found and upheld privilege, there would need to be redactions.
[101] I suggested at the hearing that in the version sent to counsel, I would take the preliminary step of marking up the part that I considered might be redacted to protect privilege. I have marked up the judgment accordingly. The parties are now invited to file (preferably) a joint memorandum, or in the event that agreement cannot be reached, separate memoranda within 15 working days of the date of this judgment setting out the parts of the judgment they say ought to be redacted to protect privilege.
[102] I will consider counsel’s proposals on the papers and will then issue the judgment with redactions.
Costs
[103] I reserve costs. In principal, the trustees as the successful party are entitled to costs. I invite the parties to confer on costs and if agreement can be reached, a joint memorandum should be filed within 20 working days of the date of this judgment. If
the parties cannot agree costs, then the trustees may file and serve a separate memorandum within five working days of the date for the joint memorandum. Ant may reply by filing and serving a memorandum within a further five working days.
[104] Memoranda should not exceed five pages (excluding any attachments). I will determine costs on the papers.
Gordon J
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