Gollan v Gollan HC Palmerston North Civ-2010-454-626

[2011] NZHC 27

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2010-454-626

BETWEEN  HAMISH STUART GOLLAN Plaintiff

ANDSPENCER WILLIAM GOLLAN, JANICE MAY GOLLAN AND BDI TRUSTEES LIMITED

First Defendants

ANDJAMES SPENCER GOLLAN Second Defendant

ANDJAMES SPENCER GOLLAN, SPENCER WILLIAM GOLLAN AND ERNEST GRAHAM BEARD

Third Defendants

ANDSANDRA JANE GOLLAN Fourth Defendant

Judgment:      2 February 2011 at 3.00 pm

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by Associate Judge Gendall on 2 February 2011 at

3.00 pm under r 11.5 of the High Court Rules.

Solicitors:           McIntosh & Signal, Solicitors, PO Box 11, Feilding

Greg Kelly Law, Solicitors, PO Box 26243, Wellington 6146

Lloyd Dodson & Pringle, Solicitors, PO Box 46, Dannevirke 4942

HS GOLLAN V SW GOLLAN, JM GOLLAN AND BDI TRUSTEES LIMITED AND ORS HC PMN CIV-

2010-454-626  2 February 2011

[1]      On 1 December 2010, the fourth defendant, Ms Sandra Gollan, filed an application seeking an order that she be struck out as a party to this proceeding. The application is not opposed. The plaintiff, Mr Hamish Gollan, has advised the Court that he does not intend to take any step in relation to the application and abides the decision of the Court on this matter. The defendants have adopted a neutral position in relation to the application, but if it becomes relevant the second and third defendants wish to be heard on costs.

[2]      In her application, the fourth defendant submits that she should be struck out as a party because she wishes to take no part in the proceeding and the statement of claim discloses no cause of action against her.

Background

[3]      The plaintiff, the second and the fourth defendants are siblings.  The plaintiff is a beneficiary of four trusts established in 1980 and 1994, as are the second and fourth defendants. He claims that he is an equal capital beneficiary, along with his siblings, and has brought these proceedings against the trustees of the trusts, the first defendants, alleging breaches of trust, equitable fraud, breach of fiduciary duty, breach of constructive trust and unjust enrichment. The third defendants are the trustees of the second defendant’s family trust, the James Spencer Gollan Trust.

[4]      The plaintiff’s principal allegation seems to be that there was a transfer of trust property from the 1980 trusts to the 1994 trusts, and that the trustees then transferred the trust property to the second and/or the third defendant, improperly benefiting two of the first defendants and failing to treat the capital beneficiaries equally.

[5]      The plaintiff joined the fourth defendant as a party to this proceeding on the basis that she is a beneficiary of all of the trusts involved in the plaintiff’s claim and thus is affected by this litigation.

[6]      The fourth defendant argues that the plaintiff’s statement of claim discloses no cause of action and claims no relief against her, and that she has been improperly or mistakenly joined. The application is made in reliance on r 4.56(1(a) of the High Court Rules, which provides as follows:

4.56     Striking out and adding parties

(1)  A Judge may, at any stage of a proceeding, order that—

(a)  the name of a party be struck out as a plaintiff or defendant because the party was improperly or mistakenly joined; ...

(b)  the name of a person be added as a plaintiff or defendant because— (i)   the person ought to have been joined; or

(ii)  the  person's  presence  before  the  court  may  be  necessary  to adjudicate on and settle all questions involved in the proceeding.

...

[7]      An application to strike out a party generally follows the same approach as an application to strike out for no cause of action: McKendrick Glass Manufacturing Company Ltd v Wilkinson [1965] NZLR 717. In addition, it is to be decided in line with the principles applicable to joinder.

[8]      Rule 4.1 states that the number of persons joined as parties must be limited, as far as practicable, to “persons whose presence before the court is necessary to justly determine the issues arising”, and to “persons who ought to be bound by any judgment given”. Rule 4.3, dealing specifically with joinder of defendants, provides as follows:

4.3     Defendants

(1)  Persons  may  be  joined  jointly,  individually,  or  in  the  alternative  as defendants against whom it is alleged there is a right to relief in respect of, or arising out of, the same transaction, matter, event, instrument, document, series of documents, enactment, or bylaw.

(2)  It is not necessary for every defendant to be interested in all relief claimed or every cause of action.

...

[9]      The  relationship  between  rr  4.56  and  4.3  was  described  as  follows  in

Business Associates Limited v Telecom (1990) 2 PRNZ 665:

The discretion given the Court under R 97 [now r 4.56] requires to be exercised conformably with R 74 [now r  4.3] (McKendrick Glass (supra) at 725; Curnow Shipping  Ltd  v  National  Bank  of  New  Zealand  Limited  unreported  Wellington A489/85 Judgment 16.3.89 Heron J) and with applications to strike out under R 186 (McKendrick Glass (supra); AMP Society v Architectual Windows Ltd (1987) 1 PRNZ
655). In other words, if a person could be joined pursuant to RR 74 and 97(1)(b) then it cannot be  said pursuant to  R 97(1)(a) that he  was improperly joined initially (McKendrick Glass  (supra)  at  723-5).  Whilst  that  approach is  founded  both  on precedent and in logic, it is not always easy to apply in cases such as this in that it requires a harmonising of the pivotal phrase "the right to any relief" in R 74 together with a consideration as to whether a party's presence before the Court is necessary "to enable the Court effectually and completely - to adjudicate upon and settle all questions involved in the proceeding" under R 97(a)(b) in order to ascertain whether the pleadings disclose "no reasonable cause of action" against that defendant under R

186(a)  or  whether  they  have  been  "improperly  or  mistakenly  joined"  under  R

97(1)(a).

[10]     As noted in McGechan on Procedure at HR4.3.02, a liberal approach is generally taken to joinder of defendants. In McKendrick Glass Manufacturing Company Ltd v Wilkinson, Richmond J held that the provision included “a case where it is sought to have a defendant bound by the order sought in the action even though the order may not directly call on that defendant to do or pay anything”. In that case, the Judge allowed joinder on the basis that, although no order for payment of money was sought against the party, the whole purpose of joinder was to have the party bound by way of an order for account.

[11]     In her affidavit, the fourth defendant clearly explains her position that she is unable to add anything to the proceedings, and she goes on to state that she has had no involvement in the affairs of the trusts. She submits that, while she might be considered to have a material interest in the subject of the proceeding, her standing is similar to that of any potential beneficiaries of the trusts. She says that her interests as beneficiary will rely on her surviving her parents in the case of the 1994 trusts, and the later of her parents’ deaths and 1 July 2050 in the case of the 1980 trusts.

[12]     The fourth defendant refers to Business Associates Limited v Telecom, where Master Williams granted an application for strike-out of the fourth defendant on the basis that Telecom had accepted that it was vicariously liable for the fourth defendant’s actions:

...it follows that neither his rights nor his liabilities in respect of the matters at issue in this proceeding will be directly affected by any order which may be made (Penang Mining (supra), he is not a person against whom the right to any relief arises (R 74) and there is no warrant for saying that his presence before the Court as a party may be necessary to enable the Court to adjudicate upon and settle all questions involved in the proceeding (R 97(1)(b)). It follows that the allegations against Mr Blades are incapable of success (R 186) and that he has therefore been improperly or mistakenly joined as a defendant (R 97(1)(a)) and his application for his name to be struck out as a defendant must be granted.

[13]     In essence, therefore, the fourth defendant submits that she should be struck out first, because no relief is claimed against her, secondly, because any judgment given in the proceedings will not bind her personally and thirdly, because her presence before the Court as a party would not advance the adjudication of this matter.

[14]     In my view, grounds for strike out are made out in this case. As in Business Associates Limited v Telecom, no right of relief arises against the fourth defendant here, and in my view the fourth defendant’s presence before the Court is not necessary to enable the Court to adjudicate upon and settle all questions involved in the proceeding. While the beneficiary interests of the fourth defendant are directly affected by this proceeding, her role is more akin to that of a potential plaintiff rather than a defendant. The statement of claim alleges, for example, that transfer of trust property to the second defendant benefited only one of the capital beneficiaries, to the exclusion of the plaintiff and the fourth defendant; and that the trustees acted in reckless disregard for the interests of the plaintiff and the fourth defendant. In these circumstances,  given  the  fourth  defendant’s  position  that  she  does  not  wish  to become involved in the proceeding, there is no need to require her to be a party to it. Unlike in McKendrick Glass Manufacturing Company Ltd v Wilkinson, there would be no real benefit in ensuring that the fourth defendant is directly bound by any ensuing judgment and orders.

Conclusion

[15]     For these reasons, the fourth defendant’s application to be struck out as a party to the proceeding is successful.  An order to this effect is now made.

[16]     The fourth defendant seeks costs. Costs are reserved. The parties may submit memoranda sequentially if they are unable to agree.

‘Associate Judge D.I. Gendall’