Hawkins v Hawkins

[2021] NZHC 1248

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2019-409-553

[2021] NZHC 1248

UNDER

the Trustee Act 1956 and Part 18 of the High Court Rules 2016

IN THE MATTER

of the Heads Trust settled by deed 3 June 2010

BETWEEN

ANGELA MAREE HAWKINS and ST MARTINS TRUSTEE

SERVICES LIMITED, as trustees of the HEADS TRUST)
Plaintiffs

AND

SAMUEL WILLIAM HAWKINS

First Defendant

AND

MORHAWK (2017) LIMITED

Second Defendant

AND

ST MARTINS LAW LIMITED

First Third Party

AND

ERROL WILLIAM HAWKINS and DENISE JUNE HAWKINS

Second Third Party

Hearing:

25 May 2021

(In-person Conference)

Appearances:

G A Cooper and S C Cowan for the Plaintiffs

J R Pullar and M P Davis for the First Third Party P J Shamy for the Second Third Party

Judgment:

31 May 2021

REASONS JUDGMENT OF ASSOCIATE JUDGE LESTER

HAWKINS v HAWKINS [2021] NZHC 1248 [31 May 2021]

Introduction

[1]    This reasons for judgment involves an objection to the admissibility of an affidavit on the grounds that it breaches legal professional privilege. The objection was taken to the affidavit prior to the hearing of the first defendant’s application for summary judgment scheduled for Tuesday 8 June 2021.

[2]    It is necessary to set out the background so that the nature of the evidence and the objection can be understood.

Background

[3]    The plaintiffs and the first defendant are alleged to  be  trustees  of  the  Heads Trust (the Trust).   I say “alleged” because, as I will outline below,  there is     a claim that the Trust is a sham.

[4]    The plaintiffs sue to recover funds they allege were improperly taken from the Trust by the first defendant. The plaintiffs say the first defendant used a little over

$170,000 to buy a business and a further $248,000 to support or maintain that business, or for personal use. The plaintiffs say the funds were used without their knowledge or consent. The causes of action are against the first defendant for breach of trust and against the second defendant, being the first defendant’s company, for purchasing the business in knowing receipt.

[5]    The first defendant is the brother of the first named plaintiff. Their parents are named as the second third parties (Errol and Denise Hawkins). The first defendant pleads the Trust is a sham or, if it is valid, that Errol and Denise were trustees de son tort.

[6]    The Trust was settled on 3 June 2010. Errol and Denise had become bankrupt the previous year. The first defendant says the Trust was created to protect assets from Errol and Denise’s bankruptcy but that they remained controllers of the Trust and owners of its assets of which they were the source.

[7]    The first defendant says it was Errol and Denise who instructed the first third party, St Martins Law Limited (St Martins Law), to disburse the Trust funds which are the subject of this claim.

[8]    The funds used by the business were disbursed by St Martins Law and the remaining funds were disbursed by that law firm into a bank account controlled by the first named plaintiff and the first defendant. The funds were then disbursed by the first defendant from that account.

[9]    Angela Hawkins (Angela), one of the plaintiff trustees, accepts that Errol and Denise were involved in the creation of the Trust.  Their solicitor was the  law firm St Martins Law.

[10]   The business for which the money was used was the lease for the South Brighton Motor Camp (the Camping Ground).

[11]   Angela, in her affidavit filed in support of the plaintiffs’ notice of opposition to the first defendant’s application for summary judgment sworn on 5 December 2019, says that:

21.In 2016, I was told Errol and Denise were going to purchase the South New Brighton Camping Ground (“Camping Ground”) with Samuel and his wife Jacqueline and they were all going to live at the Camping Ground. I remember they were all very excited about it.

[12]   Angela then says she had reservations about the purchase given Errol and Denise’s previous business failure and she did not want them to have to start all over again. She also says she did not know Jacqueline very well, “and it all seemed to be based on trust between family members but as I say, everyone was very excited about this new venture”.

[13]   Angela explains that in a very early discussion, it was suggested that the Camping Ground would be purchased for approximately $170,000 and that Errol and Denise would pay half and Samuel and Jacqueline would pay the other half. She says she was not informed of the final purchase price for the Camping Ground.

[14]   Angela also says that, as Errol and Denise were going to be living at the Camping Ground, it was decided that the Trust would sell a property it owned where Errol and Denise lived. She says:

I was expecting that the sale proceeds were going to be loaned to Errol, Denise and Samuel to allow them to purchase the Camping Ground. I also expected that if this was the case, I would be told of this as I would need to authorise the use of those funds as a trustee.

[15]   Angela says she never heard anything further about it and therefore assumed that Errol, Denise and Samuel had used their own funds. She says it was only later that she learnt that the Trust funds had not only been used to purchase the Camping Ground but also to keep it running.

[16]   In relation to the Camping Ground purchase, Denise says that in 2016 Samuel became aware of an opportunity to purchase the Camping Ground lease from the Christchurch City Council. She says that Samuel discussed it with Errol and that she, Errol, Samuel and Jacqueline were very interested in buying it.

[17]   Denise says it was agreed that a partnership would be formed between Errol, Samuel and Jacqueline to purchase the Camping Ground. Denise says she was not involved as she was opposed to the purchase.

[18]   Denise says it was discussed with Samuel that to finance the purchase of the Camping Ground, the property in which she and Errol lived would be sold and the sale proceeds loaned to a new company to purchase the Camping Ground. She says that Samuel agreed to that.

[19]   Denise says that the three of them sought assistance from St Martins Law, which recommended that a company be set up to buy and operate the Motor Camp.

[20]   Ultimately, broadly speaking, what is described by Denise is what occurred. The property owned by the Trust was sold with the settlement handled by St Martins Law. The sale proceeds were used for the Camping Ground purchase.

[21]   The first defendant’s affidavit is broadly similar to Denise’s account of the sale of the Trust property and the purchase of the Camping Ground business.

[22]   Accordingly, Angela, Samuel, Errol and Denise were all, in broad terms, aware that the Camping Ground was to be purchased and that the sale proceeds from the property owned by the Trust would be utilised for that purpose. However, Angela was not involved in the execution of any formal funding documents in relation to the sale and purchase, so her knowledge of the transaction was incomplete or she assumed alternative funding was obtained in due course.

The evidence alleged to be objectionable

[23]   The solicitors for the first defendant in support of his application for summary judgment filed an affidavit from a Ms Clinch, who is the director of St Martins Law. Ms Clinch, in her affidavit affirmed 7 May 2021, sets out her understanding of the transactions described in broad terms above, that is the sale of the Trust’s property previously occupied by Errol and Denise, the purchase of the Camping Ground lease, and the disbursement of the balance of the funds from the sale of the Trust property.

[24]   Counsel  for  the  plaintiffs  has,  by  memorandum,  sought  a  ruling  that  Ms Clinch’s affidavit not be read on two grounds: firstly, that it contains privileged communications between solicitor and client, and secondly, that it contains opinion evidence.

[25]Section 54(1) of the Evidence Act 2006 provides:

54       Privilege for communications with legal advisers

(1)A person who requests or obtains professional  legal services from   a legal adviser has a privilege in respect of any communication between the person and the legal adviser if the communication was—

(a)intended to be confidential; and

(b)made in the course of and for the purpose of—

(i)the person requesting or obtaining professional legal services from the legal adviser; or

(ii)the legal adviser giving such services to the person.

[26]   While at the brief hearing held to address the challenge to admissibility the discussion focused mainly on whether there had been implied waiver, I am satisfied that the challenge to admissibility should be dismissed on a more straightforward ground.

[27]   It is a prerequisite for the privilege to arise that the communication was intended to be confidential. Communications regarding the sale of the Trust property, the use to which the proceeds from the sale of that property were to be applied, the acquisition of the Camping Ground and who was driving that acquisition were plainly not intended to be confidential within the parties to this proceeding. Those issues were openly discussed and were known to all concerned. Nothing in the affidavits shows that any aspect of the communications relating to the transaction was intended to be confidential. It is true that Denise did not agree with the plan and that disclosure to Angela may have been incomplete, but that is not the same as the transactions being intended to be confidential. Angela signed the documents for the sale of the Trust property, and the balance of the sale proceeds following the purchase of the Camping Ground were transferred into a bank account which Angela could operate with the first defendant. As such, the payment into that account cannot have been intended to have been confidential.

[28]   Whether a communication between a person and their legal advisor is intended to be confidential depends very much on the circumstances. I am satisfied that the circumstances that I have described in broad terms, make it plain that it was not intended that the communications were intended to be confidential for the purposes of giving rise to privilege under s 54 of the Evidence Act 2006. Therefore I dismiss that aspect of the challenge to the admissibility of Ms Clinch’s affidavit.

[29]   The second aspect of the challenge to Ms Clinch’s affidavit is that in two paragraphs Ms Clinch gives statements of opinion.

[30]The first paragraph objected to is as follows:

10. During this meeting and the conversation, it was clear to me that Errol and Denise were under the impression that the assets in the Trust belonged to them personally and they could use those assets as they

pleased. When I explained the nature of a trust and that they did not own the assets they were surprised.

[31]   I do not  consider  this evidence to  represent  an  objectionable opinion.  As  a solicitor dealing face to face with Errol and Denise, Ms Clinch is able to say from her interview with them how Errol and Denise appeared to view the assets in the Trust.

[32]   The second paragraph of Ms Clinch’s affidavit objected by the plaintiffs provides:

19. During these attendances, I discussed with Angela (and the other trustees) that $168,564 of the sale proceeds of the Picton Property would be used to purchase the Motor Camp. Both Angela and Sam had a full understanding of the transaction and were fully aware the funds from the sale were being used to purchase the lease.

[33]   The last line of para [19] of the affidavit may be couched in terms that are too absolute. What Ms Clinch could say is that from her discussions with Angela and Samuel it appeared to Ms Clinch that they understood the advice she had given. The basis of that opinion would have to be given. However, I do not, in the context of this application, consider that objection such as to warrant the paragraph being struck out. The observations I have made will go to the weight, if any, that evidence is given.

Costs

[34]The costs of the evidentiary challenge are reserved.

Observation

[35]   I make one final observation. The application by the first defendant for summary judgment is based on the claim that the Trust is a sham and not a valid Trust and that if there is a trust that it was a resulting trust for the benefit of Errol and Denise and that the Trust property was applied as Errol and Denise directed.

[36]   I emphasise I heard no submissions in relation to the first defendant’s application. However, my first reaction is that the matters relied on by the first

defendant turn on factual matters which are in dispute. Counsel for the first defendant may well be alive to this issue and have charted a path that navigates past the factual disputes, but I mention this issue so that counsel for the applicant is aware that it will have to be confronted on this issue at the hearing of the application.

Associate Judge Lester

Solicitors:

Cavell Leitch, Christchurch Taylor Shaw, Christchurch

Copy to counsel:

P Shamy, Barrister, Christchurch