Helio Trustees 3 Limited v Ronald Gray Trustee Limited
[2023] NZHC 1284
•7 June 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-2310
[2023] NZHC 1284
UNDER the Declaratory Judgments Act 1908 IN THE MATTER OF
the RONALD GRAY FAMILY TRUST
BETWEEN
HELIO TRUSTEES 3 LIMITED
Plaintiff/Counterclaim DefendantAND
RONALD GRAY TRUSTEE LIMITED
Defendant/Counterclaim Plaintiff
Hearing: 2 May 2023 Appearances:
M K Prendergast for the Plaintiff P N Collins for the Defendant
Judgment:
7 June 2023
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
[Application for directions and application for leave to apply for summary judgment]
This judgment was delivered by me on 7 June 2023 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
Solicitors:
Young Hunter (D R Wetherley), Christchurch, for the Plaintiff/Counterclaim Defendant Halliwells (Aaron Foley), Takanini, Auckland, for the Defendant/Counterclaim Plaintiff
Copy for:
Matthew Prendergast, Barrister, Bridgeside Chambers, Christchurch, for the Plaintiff/Counterclaim Defendant Paul Collins, Barrister, Shortland Chambers, Auckland, for the Defendant/Counterclaim Plaintiff
HELIO TRUSTEES 3 LIMITED v RONALD GRAY TRUSTEE LIMITED [2023] NZHC 1284 [7 June 2023]
TABLE OF CONTENTS
Paragraph
Introduction [1]
Background [2]
Helio’s trial mode application [9]
RGTL’s opposition [12]
RGTL’s leave for summary judgment application [13]
Helio’s opposition [15]
Affidavits [15
Affidavit of David Richard Gray, dated 14 October 2022 [16]
Affidavit of Clinton Hataru Tamati¸ dated 21 October 2022 [18]Affidavit of David Richard Gray, dated 1 December 2022 [21]
Affidavit of Lea Ireland, dated 19 December 2022 [24]
Affidavit of Clinton Hataru Tamati, dated 3 February 2023 [26]
Legal principles [30]
Hearing with affidavit evidence only or separation of preliminary issue [30]
Leave to apply for summary judgment [35]
Analysis [37]
Should directions be made under Part 18 for determination by an affidavit-only hearing, or for determination of the preliminary issue proposed by Helio? [39]
Disposal under Part 18 is appropriate [40]
Determination of preliminary question may be warranted [42]
Conclusion in relation to disposal under Part 18 or determination of a
preliminary issue [49]
Should leave be granted to RGTL to apply for summary judgment against Helio? [51] Conclusion in relation to leave to apply for summary judgment [58] Should the Court intervene to advance the winding-up of the Family Trust? [60]
Conclusion in relation to the Court intervention to advance the winding-up
of the Family Trust [63]
Result [64]
Orders [67]
–––-
Introduction
[1] This judgment covers two pending interlocutory applications between Helio Trustees 3 Limited (Helio) and Ronald Gray Trustee Limited (RGTL). Helio seeks an order for this matter to be disposed of via an affidavit-only hearing or the separation of a preliminary issue. RGTL in turn seeks leave to apply for summary judgment against Helio.
Background
[2] The substantive proceeding attempts to determine the identity of the trustee of the Ronald Gray Family Trust (the Family Trust). Both Helio and RGTL claim to be the sole corporate trustee, which is preventing the administration and potential winding up of the Family Trust.
[3] The Family Trust was settled by Ronald Gray (Ronald) in September 2012.1 Ronald was named the sole principal primary beneficiary and appointed the initial protector with a power to appoint and remove trustees. His two sons, Messrs John and David Gray (John and David) were named Class B primary beneficiaries and jointly as the subsequent protector. RGTL, a company controlled by David, was named as the original sole trustee with the power to vary the Family Trust’s terms.
[4] In February 2020, RGTL executed two variation deeds which removed Ronald’s protector power of appointment and removal, and transferred it to RGTL (February 2020 Deeds). This was done as RGTL believed Ronald was under significant duress and coercion from John, with whom he was residing, and RGTL wished to ensure the trustee was not changed to John’s advantage. RGTL obtained no legal advice and did not disclose the February 2020 Deeds to Ronald or any other beneficiaries.
1 For convenience and clarity, and meaning no disrespect, given the commonality of surnames, I will generally refer to each family member by their given name.
[5] On 9 July 2021, Ronald attempted to exercise his protector’s power of appointment and removal by executing a deed removing RGTL as the sole trustee and replacing it with Helio (July 2021 Deed). RGTL then disclosed the February 2020 Deeds to Helio and Ronald, and alleged that Ronald lacked capacity or was unduly influenced when executing the July 2021 Deed.
[6] After discussions, Helio eventually issued these proceedings in November 2021 to determine the Family Trust’s trustee’s identity. In late 2022, both Ronald and John passed away. David then assumed his subsequent protector role and on 10 November 2022 executed a deed purportedly removing Helio and reappointing RGTL as sole trustee (November 2022 Deed). RGTL now relies on the November 2022 Deed as an affirmative defence that it is the trustee and entitled to summary judgment against Helio.
[7] John’s children, as Class C primary beneficiaries of the Family Trust, are concerned over the Family Trust’s future administration and despite ongoing negotiations with Helio, the Family Trust’s administration remains gridlocked.
[8] This judgment determines two applications, one for determination on the affidavits alone or separation of a preliminary issue by Helio and one for leave to apply for summary judgment by RGTL. I note that there was initially an additional application for further discovery by Helio, and I deal with this at [9].
Helio’s trial mode application
[9] With regard to [1.1] of Helio’s interlocutory application,2 regarding the filing and serving of a further affidavit by David covering discovery of further documents relating to advice received in respect of the February 2020 Deeds, I understand this part of the application is not being pursued by Helio, and the issue has been satisfactorily dealt with in David’s affidavits.3
2 Interlocutory application for orders dated 21 October 2022 at [1].
3 Fourth affidavit of David Richard Gray on behalf of the defendant: concerning plaintiff's interlocutory applications; and in support of defendant's application for leave to apply for summary judgment against the plaintiff dated 1 December 2022 at [2.1]–[2.4]; Fifth affidavit of David Richard Gray on behalf of the defendant dated 19 December 2022 at [3].
[10]Helio seeks orders:4
…
1.3. This matter be disposed of via an affidavit only hearing under Part 18 of the High Court Rules or determination of the following proposed preliminary issue:
Whether or not, in the circumstances of this matter, RGTL had the power under the terms of the Trust Deed for the Ronald Gray Family Trust, or at law, to validly execute the Deed of Removal of Protectors Power dated 14 February 2020 and the Addition of Trustees Power dated 21 February 2020.
1.4. Costs.
[11]The grounds on which the orders are sought are:5
…
Disposal of proceeding
2.5. The identity of the trustee of the Ronald Gray Family Trust needs to be determined as soon as reasonably possible. Administration of the Ronald Gray Family Trust is in gridlock. Ronald Gray is the principle primary beneficiary of the Ronald Gray Family Trust. He is elderly and at risk of passing away before this matter is disposed of.
2.6. RGTL executed the Deed of Removal of Protectors Power dated 14 February 2020 and the Addition of Trustees Power dated 21 February 2020 without notification to any other person relevant to this matter. Accordingly, only RGTL can provide narrative evidence regarding the surrounding circumstances. Cross-examination of the narrative evidence is unlikely to be warranted.
2.7. If the proposed preliminary issue is answered:
(a) In the affirmative, then that will be a complete answer to Helio’s claim and Helio will not be involved in the administration of the Ronald Gray Family Trust.
(b) In the negative, then Helio’s status as the sole trustee of the Ronald Gray Family Trust will be confirmed, subject to RGTL or David Gray actively pursuing their allegations that Helio’s appointment was subject to undue influence or otherwise tainted (allegations which Helio is unlikely to take a view on).
2.8. Time and resources will be saved if the matter is heard via an affidavit only hearing or determination of the proposed preliminary issue.
4 Interlocutory application for orders, above n 2, at [1].
5 At [2].
RGTL’s opposition
[12]RGTL opposes Helio’s application on the following grounds:6
…
(b) as to the application to dispose of this proceeding by way of an affidavit only hearing, or the determination of a preliminary issue: the matters in dispute between the parties must necessarily be tested and determined following a trial including the cross-examination of witnesses, concerning:
a.the facts and circumstances surrounding the execution of the deed of removal of protector's power dated 14 February 2020 and the deed of addition of trustee's power dated 21 February 2020;
b.the facts and circumstances surrounding the execution or purported execution of a document described as a Deed of Appointment of New Trustee and Removal of Trustee of the Ronald Gray Family Trust, on 9 July 2021 including;
i.the evidence of lawyers from the plaintiffs former firm of solicitors concerning their dealings with and steps taken to ensure the capacity of Ronald Gray, the protector and purported signatory of that document;
ii.subject to the defendant's examination application, the evidence of Ronald Gray;
c.the status and legitimacy of the plaintiff, and its standing to bring this proceeding, which is in issue in this proceeding because of Ronald Gray's incapacity at the time of the document purportedly executed on 9 July 2021. That issue must necessarily be determined at a trial after hearing evidence including cross-examination;
(c) on the further grounds set out in the affidavit of David Richard Gray dated 14 October 2022 sworn in support of the defendant's application to examine Ronald Gray, and in his further affidavit, subject to directions of the Court.
RGTL’s leave for summary judgment application
[13]RGTL seeks orders:7
(a) granting leave to apply for summary judgment against the plaintiff; and
(b) directing the procedures for the hearing and determination of that application.
6 Notice of opposition to plaintiff’s interlocutory application for orders dated 21 October 2022 (dated 4 November 2022) at [2].
7 Defendant’s on notice interlocutory application for leave to apply for summary judgment against the plaintiff — r.12.4(3) dated 1 December 2022 at [1].
[14]The grounds on which the orders are sought are:8
(a) pursuant to the defendant's affirmative defence at paragraphs 33–39 of its first amended statement of claim, dated 23 November 2022, the plaintiff’s cause of action in its first amended statement of claim dated 26 August 2022 cannot succeed;
(b) the facts and circumstances giving rise to the defendant’s affirmative defence occurred only recently; and
(c) on the further grounds set out in Part 4 of the fourth affidavit of David Richard Gray, sworn 1 December 2022 and filed in support of this application.
Helio’s opposition
[15]Helio opposes RGTL’s application and seeks costs on the following grounds:9
3.1. At the time RGTL filed the Application, the period for Helio to file its Reply to the First Amended Statement of Defence dated 23 November 2022 under High Court Rule 5.62 had not expired.
3.2. RGTL’s affirmative defence asserts that an exercise of power by David Gray means Helio is not the sole trustee of the RG Trust. To the extent Helio is required to have a view, it does not accept that David Gray held an exercisable power or that the exercise of that power (if held) was consistent with the terms of the Ronald Gray Family Trust and David Gray’s fiduciary obligations.
3.3. Helio seeks declarations that the February 2020 Variations were invalid. It does not seek declarations that it is the sole trustee of the Ronald Gray Family Trust. RGTL’s assertion that it has been re-appointed as the sole trustee of the Ronald Gray Family Trust is not a complete answer to Helio’s claim.
Affidavits
Affidavit of David Richard Gray dated 14 October 2022
[16] David has made an affidavit which supports a prior, now discontinued, interlocutory application, but which provides some background relevant to the interlocutory applications for present determination.10
8 At [2].
9 Notice of opposition to application for interlocutory orders dated 7 February 2023 at [3].
10 Affidavit of David Richard Gray in support of interlocutory application for order for examination of witness Ronald Gray dated 14 October 2022.
[17] He outlines his belief in his capacity as sole director of RGTL that the February 2020 Deeds were lawfully executed. He questions Ronald’s capacity and undue influence from John, and his ability to execute the July 2021 Deed given RGTL’s variation. He produces the key Family Trust documents and evidence concerning Ronald’s capacity. He further outlines his belief that John exerted undue influence on Ronald and was instrumental in providing instructions on the July 2021 Deed.
Affidavit of Clinton Hataru Tamati dated 21 October 2022
[18] Mr Tamati, Helio’s General Manager, has made an affidavit, the only remaining relevant part of which is in support of Helio’s application for the matter to be determined via an affidavit-only hearing or as a preliminary issue.11 At the outset, he deposes that Helio was incorporated as a joint venture between Perpetual Guardian and the law firm Tavendale and Partners (Tavendale) in July 2016. It operates as a boutique independent trustee company administering approximately 40 trusts. He then deposes the factual history which is not in dispute.
[19] Mr Tamati asserts that RGTL maintains that the February 2020 Deeds were valid, and if so, Helio never could have been appointed by Ronald. If this is correct, something which could be determined by way of Helio’s application, then this claim would be over as Helio was never validly appointed. Of course, Helio’s position is that the February 2020 Deeds were invalid, making Helio the trustee, subject to any claim by David that Ronald lacked capacity or was under undue influence.
[20] Mr Tamati’s view is that the factual dispute is limited, and the dispute is over the legal ability of RGTL to execute their February 2020 Deeds in accordance with the Trust Deed. He deposes that this could be achieved without the need for a full trial or cross-examination. The relief sought purely concerns the validity of these Deeds, which can therefore be determined by avoiding significant costs and time investments through an affidavit-only hearing or determination of a preliminary issue.
11 Affidavit of Clinton Hataru Tamati dated 21 October 2022.
Affidavit of David Richard Gray dated 1 December 2022
[21] David has made a further affidavit which in relevant parts oppose Helio’s application and support RGTL’s.12 He notes the change in material circumstances caused by the death of Ronald and John.
[22] In opposition to Helio’s application, David states that in his view a full trial with live evidence is important to establish from those who initially took instructions about the July 2021 Deed how they satisfied themselves of Ronald’s capacity.
[23] In support of RGTL’s application, David outlines the affirmative defence arising from him appointing or reappointing RGTL trustee in the November 2022 Deed. He believes this Deed leaves Helio with no standing to continue these proceedings to exercise control over the Family Trust. Consequently, RGTL seeks leave to apply for summary judgment, now being the earliest opportunity to do so given recent developments.
Affidavit of Lea Ireland dated 19 December 2022
[24] Ms Ireland, the daughter of John and granddaughter of Ronald, has made an affidavit in support of Helio’s application and to update the Court on recent family matters involving David, RGTL and the Family Trust’s administration.13
[25] Ms Ireland deposes that her and her family are invested in the outcome of the litigation and whether Helio was appointed trustee, as they are beneficiaries. She is concerned over the closeness of David and RGTL and therefore the impartiality and transparency of the administration of the Family Trust. She outlines the lack of correspondence she has had since Ronald and John’s deaths. She supports Helio’s application to get a clear determination on the Family Trust and eventually lead to it being wound up, or at least an independent trustee appointed.
12 Fourth affidavit of David Richard Gray, above n 3.
13 Affidavit of Lea Ireland dated 19 December 2022.
Affidavit of Clinton Hataru Tamati dated 3 February 2023
[26] Mr Tamati has made a further affidavit setting out Helio’s opposition to RGTL’s application for leave to apply for summary judgment.14 While Helio accepts RGTL’s delay is explainable, he deposes that the application is unnecessary and adds further time and costs to proceedings. He makes three points in support of this.
[27] First, RGTL’s claim that is has been “reappointed”, even if correct, does not address Helio’s claim about the February 2020 Deeds’ validity.
[28] Second, David may not actually hold a sole reappointment power under the Family Trust Deed as the surviving subsequent protector, as the power may have been joint only and therefore ceased to exist upon John’s death.
[29] Third, Mr Tamati believes that if granted the summary judgment application would needlessly prolong proceedings and add costs. He reiterates his view that based on the evidence already before it at this stage, the Court can wholly or at least preliminarily determine via an affidavit-only hearing, or even a preliminary issue trial, whether the February 2020 Deeds are valid.
Legal Principles
Hearing with affidavit evidence only or separation of preliminary issue
[30]Part 18 of the High Court Rules 2016 relevantly provides:
18.1 Types of proceedings
This Part applies to the following types of proceedings:
Equitable jurisdiction
(a) proceedings in which the relief claimed is wholly within the equitable jurisdiction of the court, such as—
…
(v) the giving of directions to persons in their capacity as executors, administrators, trustees, or beneficiaries to do or abstain from doing a particular act:
14 Affidavit of Clinton Hataru Tamati dated 3 February 2023.
…
(viii)the interpretation of a deed or instrument creating a trust:
(ix)the determination of a question that arises in the administration of an estate or trust or whose determination is necessary or desirable to protect the executors, administrators, or trustees:
Determinations by court under statutes
(b) proceedings in which the relief is claimed solely under the following enactments:
…
(v) the Declaratory Judgments Act 1908:
…
18.15 Evidence generally by agreed statement of facts or affidavit
(1)Unless a Judge otherwise directs, evidence in a proceeding to which this Part applies must be given—
(a) by means of an agreed statement of facts in accordance with rule 9.57; or
(b)by affidavit in accordance with rules 9.72 to 9.89.
…
If a preliminary issue is to be separated, r 10.15 provides:
10.15 Orders for decision
The court may, whether or not the decision will dispose of the proceeding, make orders for—
(a) the decision of any question separately from any other question, before, at, or after any trial or further trial in the proceeding; and
(b) the formulation of the question for decision and, if thought necessary, the statement of a case.
[32] The underlying purpose of the rule is to expedite proceedings by limiting or defining the scope of the trial in advance, or to do away with the need for a trial altogether.15 It provides the Court a broad discretionary jurisdiction.
15 Innes v Ewing (1986) 4 PRNZ 10 (HC) at 18.
[33] The starting point assumption is that all matters in issue are to be determined in a single trial; that will ordinarily be the most expeditious and efficient manner of dealing with the proceeding.16 The onus rests on the party contending for the split trial.
[34] Criteria to be taken into account in deciding whether to exercise the discretion are:17
(a)Will there be difficult demarcation issues between those issues to be addressed at the first trial and those left for the second?
(b)Will the separate question bring the proceedings to an end?
(c)What potential time saving does the separate question offer?
(d)How will appeals be dealt with?
(e)Are there any other practical considerations tending one way or the other?
Leave to apply for summary judgment
[35]Rule 12.4 relevantly provides:
12.4 Interlocutory application for summary judgment
…
(3) An application by a defendant may be made either at the time the statement of defence is served on the plaintiff, or later with the leave of the court.
[36] In determining whether leave should be granted, Tip Top Icecream Ltd v Polarland Ltd set out the principles the Court should apply when considering applications for leave:18
(a)Has the delay in filing been satisfactorily explained?
16 Turners & Growers Ltd v Zespri Group Ltd HC Auckland, CIV-2009-404-4392, 5 May 2010 at [10]; Karam v Fairfax NZ Ltd [2012] NZHC 1331 at [58]–[59]; Clear Communications Ltd v Telecom Corp of New Zealand Ltd (1998) 12 PRNZ 333 (HC) at 334.
17 Haden v Attorney-General (2011) 22 PRNZ 1 (HC) at [50].
18 Tip Top Icecream Ltd v Polarland Ltd (2002) 7 NZBLC 103,564 (HC) at [28].
(b)Are the merits of the applicant’s case for the relief sought — in this case summary judgment — particularly strong and therefore deserving of determination at a later time by the Court than prescribed by the rules?
(c)Is there any risk of a miscarriage of justice by determining the application at the later point in time?
Analysis
[37]The issues to be determined in this judgment are:
(a)should directions be made under pt 18 of the High Court Rules 2016 for determination by an affidavit-only hearing, or for determination of the preliminary issue proposed by Helio?
(b)should leave be granted to RGTL to apply for summary judgment against Helio?
(c)should the Court intervene to advance the winding-up of the Family Trust?
[38]I deal with each of these in turn.
Should directions be made under pt 18 for determination by an affidavit-only hearing, or for determination of the preliminary issue proposed by Helio?
[39] Mr Prendergast, for Helio, acknowledges that Helio’s claim was commenced by ordinary proceeding under pt 5 of the High Court Rules 2016. However, given developments of the claim since it was filed, Helio does not consider a full hearing with oral evidence is necessary to determine the substantive claim. He submits that there are limited disputed facts and the claim is capable of being determined following a hearing limited to documentary evidence and legal submissions. Accordingly, he seeks orders that pt 18 of the High Court Rules apply to the remaining steps in this proceeding, or that the following proposed preliminary issue be determined:
Whether or not, in the circumstances of this matter, RGTL had the power under the terms of the Trust Deed for the Ronald Gray Family Trust, or at law,
to validly exercise the Deed of Removal of Protector’s Power dated 14 February 2020 and the Addition of the Trustees Power dated 21 February 2020.
[40] Mr Prendergast acknowledges that as the claim was commenced as an ordinary proceeding, the starting point is that evidence should be adduced orally and by an agreed bundle of documents as set out in pt 9 of the High Court Rules. He submits that Helio seeks leave for the parties to provide evidence in accordance with r 18.15 to limit costs, hearing time and to aid the efficient disposal of this proceeding. He submits the application of pt 18 to the disposal of this claim would:
(a)be proportionate to what is at stake, appropriate for the issues that require determination, and would provide for the swift and efficient determination of this matter in the best interests of the parties and beneficiaries of the Family Trust;
(b)meet the objectives of r 1.2 and be an appropriate exercise of the Court’s inherent jurisdiction to regulate its own procedure.19
[41]In support of Helio’s position, Mr Prendergast submits as follows:
(a)The parties both seek declarations regarding the validity of the February 2020 Deeds under the Declaratory Judgments Act 1908. Neither alternative nor ancillary relief is sought. The High Court Rules contemplate that claims seeking relief solely under the Declaratory Judgments Act should be considered under pt 18 (see r 18.1(b)(v)).
(b)There is nothing at issue that requires the evidence to be adduced under pt 9. The validity of the February 2020 Deeds in RGTL’s affirmative defence primarily concern the interpretation of the Family Trust Deed. These matters can be appropriately considered by the Court exercising its equitable jurisdiction and under pt 18 (see r 18.1(a)(viii) and (ix)).
19 Hennessey v Hennessey [2021] NZHC 1198 at [4] and [5]; District Court at Christchurch v McDonald [2021] NZCA 353, [2021] 3 NZLR 585 at [31].
(c)Close case management normally required for ordinary proceedings is no longer required as pleadings have been exchanged and amended, further particulars have been provided, and discovery is complete. There are limited facts in dispute and subject to disposal of the outstanding interlocutory applications, the matter is ready to be set down for an exchange of evidence and a hearing. The streamlined hearing process contemplated by pt 18 is appropriate.
(d)There are limited, if any, factual disputes regarding the execution of the February 2020 Deeds. The narrative and documentary evidence already filed confirms the circumstances and the reasons for RGTL executing the February 2020 Deeds and Helio anticipates it will not file evidence challenging the circumstances surrounding RGTL’s actions in February 2020, RGTL’s actions and meeting minutes speak for themselves.
(e)RGTL intends to test evidence from the six lawyers from the firm Tavendale and Partners to support its case. To the extent this evidence might be relevant to RGTL’s actions in 2020, the evidence can be adduced via affidavit if necessary and be subject to cross-examination. On this point, Mr Prendergast relies on Official Assignee v Yarrow.20 Mr Prendergast submits that Helio is on notice as to what this evidence may need to address, and RGTL will not be prejudiced by officers of the Court providing evidence via affidavit about their role in the execution of the July 2021 Deed.
[42] Mr Prendergast then submits that if the Court disagrees with Helio’s primary position as to pt 18 and considers that a full hearing is necessary, then it seeks orders under r 10.15 that the proposed preliminary question be determined before any substantive trial directions are made.
20 Official Assignee v Yarrow [2020] NZHC 2594 at [48]–[51].
[43] Mr Prendergast refers to Turners & Growers Ltd v Zespri Group Ltd as setting out the relevant criteria the Court may consider in deciding to order a split trial. 21 He acknowledges that it is a heavy burden to displace the assumption that all matters should be determined at one trial, but he submits that consideration of a preliminary question is warranted in this matter because:
(a)Determining whether the power to remove the protector’s power of appointment and removal without notice is primarily a question of interpretation. Affidavit evidence explaining the circumstances surrounding the February 2020 Deeds and what steps were taken by RGTL at the time has been filed, and the question is capable of being considered on documentary evidence and within one day of legal argument.
(b)Determination of the proposed preliminary question will dispose of this proceeding and advance the administration of the Family Trust:
(i)if RGTL had the power to remove the protector’s power of appointment and removal, then Helio could never be appointed as trustee. Therefore, its role in this dispute is redundant, the proceeding will end, and there would be no need to test RGTL’s allegations about Ronald’s autonomy or call evidence from the six lawyers from Tavendale. The cost and time savings for both parties would be significant and would free up judicial resource for other litigants;
(ii)if RGTL did not have the necessary power to amend the Family Trust then Helio will be confirmed as the prevailing trustee. This would give the beneficiaries certainty and may allow for the Family Trust to be wound up, while still providing David or RGTL the opportunity to consider seeking relief regarding Helio’s appointment;
21 Turners & Growers Ltd v Zespri Group Ltd, above n 16, at [11(a)–(n)].
(iii)if Helio’s appointment is subsequently subject to challenge, then it intends to abide by the decision of the Court and/or continue to manage the administration of the Family Trust as an independent trustee company in the best interests of all the beneficiaries, and the administration of the Family Trust will be advanced.
(c)The potential issues for determination are isolated and independent of each other and accordingly there is limited risk of witnesses needing to be recalled, a Judge making inadvertent findings, duplication of attendances, or issues of estoppel becoming problematic.
[44] Mr Collins, for RGTL, submits that resolution of Helio’s issue concerning the validity of the February 2020 Deeds will not dispose of the proceeding. He submits that RGTL has consistently asserted in its statement of defence that the July 2021 Deed was executed, or purportedly executed, at a time when Ronald lacked capacity. He submits that matter and the consequence for the July 2021 Deed must be determined at trial, which will need to include evidence from the lawyers responsible for the preparation and execution of the July 2021 Deed.
[45] Mr Collins submits that the evidence of Ronald’s incapacity in July 2021 is compelling, and makes reference to David’s affidavit of 14 October 2022 at [4.1] to [4.5].
[46] Mr Collins submits that the evidence concerning the conduct of the Tavendale lawyers, in relation to the circumstances of the execution of the July 2021 Deed, is crucial for resolution of RGTL’s defence to the Helio’s claim and to RGTL’s counterclaim for the following reasons:
(a)the lawyers were aware of the potential issues surrounding Ronald’s capacity but failed to ensure a proper assessment was undertaken to determine his capacity of the sort set out by the Court of Appeal in Woodward v Smith.22 The letter to the Brisbane doctor dated 24 June
22 Woodward v Smith [2009] NZCA 215 at [57].
2021, and the letter from the doctor were inadequate to discharge their duty to properly establish Ronald’s capacity. The process was superficial and the doctor’s reply did not address the questions put to him in the letter;
(b)the events occurred in a very short timeframe, calling into question the quality and integrity of the process for the appraisal of Ronald’s capacity:
(i)there was a single telephone call between Tavendale and Ronald on 23 June 2021;
(ii)the Tavendale letter was sent to the Brisbane doctor on 24 June 2021;
(iii)Ronald evidently consulted the doctor the same day, and the doctor’s letter was issued to Tavendale the same day — the letter lacked meaningful information and included only the general and informal statements suggesting that Ronald thought the change in trustee was linked to his pension payments.
(c)the letter of instruction to the Brisbane doctor was reasonably interpreted as foreshadowing, and intending to accomplish, the removal of David in favour of John;
(d)there is evidence that Tavendale was taking instructions from John;
(e)there is no evidence of Tavendale communicating with Ronald at all before 23 June 2021, although the firm was acting for some weeks earlier before the first letter to David on 21 May 2021;
(f)the background of John’s evidence of Ronald’s serious decline two years earlier.
[47] Mr Collins submits the need for evidence from the Tavendale lawyers is enhanced by the fact that neither Ronald nor John are available, and he submits the six Tavendale lawyers listed at [4.6] of his submissions should be required to give evidence.
[48] In summary, Mr Collins submits that the applications for directions for disposal of the hearing via an abbreviated process should be dismissed. RGTL’s legitimate defence concerning Ronald’s incapacity, the responsibility of the lawyers for the July 2021 Deed in those circumstances, and the consequences for the July 2021 Deed, must be determined at trial with evidence from the Tavendale lawyers.
Conclusion in relation to disposal under pt 18 or determination of a preliminary issue
[49] In my view, Helio’s application to dispose of the proceeding via an abbreviated process under pt 18 of the High Court Rules, or by means of determination of the preliminary question, should be declined. In my view, Helio has not discharged the heavy onus of justifying a split trial for the principal reason that dealing with the validity of the February 2020 Deeds will not necessarily dispose of the proceeding. If the February 2020 Deeds are found to be valid then that may dispose of the proceeding, subject to any appeals that may occur and the determination of those appeals. If, however, the February 2020 Deeds are found to be invalid, then the issue of the validity of the July 2021 Deed and Ronald’s capacity will need to be determined. In this respect, I agree with Mr Collins’ proposition that the Court will require evidence from the lawyers involved as an issue which requires examination appears to have been raised in respect of Ronald’s capacity in July 2021, and the process followed by the Tavendale lawyers in relation to establishing that capacity. I do not consider the potential advantage of determination of a preliminary question advanced by Helio displaces the starting point assumption that all issues should be determined in a single trial.
[50] Given my conclusion at [49], if there is to be a single trial then I accept Mr Collins’ submissions that a full hearing will be required. As I have noted, a serious issue appears to have been raised as to Ronald’s capacity in July 2021 and the steps
taken by the Tavendale lawyers to establish that capacity. Evidence will need to be tested at trial.
Should leave be granted to RGTL to apply for summary judgment against Helio?
[51] Mr Collins submits that the timing of the application for leave to apply for summary judgment was determined by an unexpected turn of events, not by delay or inadvertence on the part of RGTL, that the intended summary judgment application has merit, and that the Court should exercise its discretion to allow the application accordingly.
[52]Mr Collins sets out the procedural history as follows:
(a)Helio’s notice of proceedings and statement of claim were filed on 19 November 2021, and RGTL filed a statement of defence and counterclaim on 28 January 2022;
(b)Helio’s first amended statement of claim was filed on 26 August 2022 and RGTL’s statement of defence to the first amended statement of claim and counterclaim was filed on 9 September 2022;
(c)RGTL filed its first amended statement of defence and counterclaim to the first amended statement of claim on 23 November 2022. That document included, for the first time, an affirmative defence that by the November 2022 Deed, in his capacity as protector, David removed Helio as trustee and appointed (or reappointed) RGTL as trustee of the Family Trust. Accordingly, since the removal of Helio by the November 2022 Deed, Helio lacks status or powers of a trustee of the Family Trust and has no authority or power to continue with the pursuit of the proceedings, or otherwise exercise control over or make decisions concerning the Family Trust;
(d)on 1 December 2022 RGTL applied for leave to apply for summary judgment against Helio under r 12.4(3). That application relies on the affirmative defence and the November 2022 Deed.
[53] Mr Collins submits that the following dramatic change in circumstances in October and November 2022 and their legal consequences determined the timing of RGTL’s summary judgment application, not inadvertence or delay:
(a)the deaths of John and Ronald in October and November 2022;
(b)David’s execution of the November 2022 Deed in his capacity as sole protector; and
(c)consequently, the removal of Helio as trustee of the Family Trust.
[54] Mr Collins submits that the application for summary judgment has merit. He submits for the following reasons that on a proper interpretation of the Family Trust Deed, John was the sole protector, with power to appoint and remove trustees:
(a)after the death or mental incapacity of the initial protector (Ronald), the subsequent protector (David and John) becomes the protector;
(b)the Trust Deed contemplates the surviving protector of the two named subsequent protectors having the continuing status and powers of protector:
(i)under cl 24.5 (Death or Cessation of the Protectors) the trustees become protectors only “… if all the Protectors named in the First Schedule ceased to be the Protectors”. The Family Trust Deed therefore contemplates any surviving protector having the status of protector;
(ii)while he was alive, and his status as a principal beneficiary, Ronald was entitled to appoint “a subsequent protector” as the
protector, which is consistent with the appointment of an individual (sole) protector;
(iii)similarly, the principal beneficiary is empowered to remove “the subsequent protector” which means that a remaining (sole) protector can continue to have that status and authority;
(iv)clause 24.4 contemplates the incapacity of an individual protector, in which case that person ceases to be a protector, again consistent with a remaining (sole) protector continuing in that status.
[55] Mr Collins submits that following the deaths of John and Ronald, David was protector with the power to remove and appoint trustees under cl 28.1 of the Second Schedule of the Family Trust Deed. The November 2022 Deed effectively removed Helio as trustee of the Family Trust, and accordingly Helio has no arguable defence to RGTL’s summary judgment application based on its affirmative defence. He submits there is no dispute of fact and no credibility issues arise concerning the November 2022 Deed and Helio cannot succeed with its cause of action in the first amended statement of claim in which it seeks to establish its status as trustee of the Family Trust
— whatever status it had before 10 November 2022, it was effectively removed as trustee by the November 2022 Deed.
[56] Mr Prendergast, on the other hand, submits that while RGTL’s late application is explained, the consequential delay and additional cost does not justify granting leave to RGTL to apply for summary judgment for the following reasons:
(a)David asserts that by survivorship he is the sole subsequent protector and therefore holds the protector’s power of appointment and removal. This argument is not accepted by Helio nor the family as beneficiaries, so David’s asserted status is a dispute which may need to be resolved;
(b)even if David is correct and he is the sole subsequent protector, it does not necessarily follow that he is able to appoint RGTL as trustee of the
Trust. The subsequent protector’s powers of appointment and removal is a fiduciary power that must be exercised in the best interest of the beneficiaries and not for a collateral purpose. Whether David’s attempt to reappoint RGTL was an exercise of fiduciary power made in the best interests of the beneficiaries is a factual dispute that may also need to be resolved. He also raises the argument that RGTL’s actions in relation to the February 2020 Deeds could be categorised as a fraud on that power and RGTL should not therefore be reappointed as trustee;
(c)even if David is capable of reappointing RGTL, this is not a complete answer to Helio’s claim as RGTL’s affirmative defence does not address the relief sought by Helio or RGTL. For example, even if RGTL is able to establish that it has been validly reappointed by David then the following issues will remain unresolved:
(i)whether the February 2020 Deeds were valid (or not) and what consequences this may have on David’s potential ability to reappoint RGTL as trustee of the Family Trust;
(ii)that Helio was capable of being appointed as sole trustee by the July 2021 Deed (or not);
(iii)the identity of the sole trustee of the Family Trust between July 2021 and November 2022 and whether the party’s costs can be met from resources of the Family Trust.
[57] Mr Prendergast submits that it will not be possible for the Court to assess these issues in a summary judgment context, and accordingly the application should be declined.
Conclusion in relation to leave to apply for summary judgment
[58] In my view, leave should not be granted to RGTL to apply for summary judgment. I accept Helio’s submissions that the affirmative defence is not a complete
answer to Helio’s case, and the appointment (or reappointment) of RGTL as trustee of the Family Trust by the November 2022 Deed leaves open the issues of:
(a)whether David is the sole subsequent protector and therefore holds the protector’s power of appointment and removal;
(b)if David is the sole subsequent protector, Helio has raised the issue of whether appointment or reappointment of RGTL as trustee is an exercise of the fiduciary power made in the best interests of the beneficiaries;
(c)even if David is capable of reappointing RGTL as trustee of the Family Trust, it leaves open the issues in respect of Helio’s claim:
(i)whether the February 2020 Deeds were valid (or not), and what consequence this may have for David’s potential ability to reappoint RGTL as trustee;
(ii)whether Helio was capable of being appointed as sole trustee in July 2021 (or not);
(iii)the identity of the sole trustee of the Family Trust between July 2021 and November 2022, and whether the parties’ costs can be met from the resources of the Family Trust.
[59] I am of the view that these issues are not able to be resolved in the summary judgment hearing based on the affirmative defence, and accordingly leave should be declined.
Should the Court intervene to advance the winding-up of the Family Trust?
[60] Mr Prendergast advances the proposition that it is open to the Court to exercise its inherent and supervisory jurisdiction to intervene in the administration of the Family Trust. He proposes that the Court consider appointing the Public Trust on a permanent or interim basis under s 114(1) of the Trusts Act 2019 as a sole independent
trustee, or alongside Helio or RGTL, to advance the administration of the Family Trust. He notes that s 114 does not require a formal application to be made to the Court by any of the beneficiaries and it is open to the Court to exercise its supervisory role and replace the current trustee with the Public Trustee on its own initiative and in the best interest of the beneficiaries, and relies on the decisions of Green v Green and McLaughlin v McLaughlin.23
[61] Mr Prendergast submits that the proposal the Court intervene using its supervisory jurisdiction is made regardless of the outcome of the interlocutory applications, which are the subject of this proceeding, on the basis that Helio does not (currently) have standing to seek any directions under ss 92 or 133 of the Trusts Act, or apply for the Public Trust’s appointment. Mr Prendergast submits the Court’s intervention may be justified in the best interests of the beneficiaries for the following reasons:
(a)The Family Trust can be wound up — Ronald prepared a memorandum of wishes, and that document records Ronald’s wish that the trustee of the Family Trust considers, subject to the trustee’s discretion, distributing Trust funds to Ronald’s wife and wider family on certain terms. Accordingly, there are strong grounds for the Family Trust to be wound up and the assets to be distributed between David and John’s surviving family, subject to any costs orders made following disposal of this proceeding;
(b)Funds remain unaccounted for — the main asset of the Family Trust was Ronald’s former home, which was sold in December 2020 for approximately $469,000 and is held by RGTL, but RGTL has refused to account for how some of the funds have been applied since Ronald executed the July 2021 Deed. While the unaccounted for sums are modest, RGTL’s refusal to engage with Helio’s request to account for the funds are concerning and need to be explained.
23 Green v Green [2015] NZHC 1218 at [598] to [607]; McLaughlin v McLaughlin [2021] NZHC 3015 at [131] to [151].
(c)Breakdown in relationships — there is no working relationship between David/RGTL and John’s family. John’s surviving family have received no material updates from David or RGTL about the Family Trust and there are high levels of mistrust and hostility within the wider family meaning further litigation may follow disposal of this proceeding. David considers Helio’s status is tainted, and John’s family just want independent oversight of the Family Trust, to which the Public Trustee would be well-suited;
(d)Resolution unlikely — Helio has made proposals to resolve matters, but RGTL has not engaged with any of the correspondence or proposals made by Helio and RGTL is intent on remaining in control, despite its past conduct and concerns raised by Helio and John’s family.
[62] At [22] of his submissions, Mr Prendergast then sets out some proposed procedural steps which could be undertaken if the Court were minded to intervene in the administration of the Family Trust.
Conclusion in relation to Court intervention to advance the winding-up of the Family Trust
[63] In my view, the Court should not intervene in the administration of the Family Trust at this point and should allow the litigation to take its course to determine the validity of the status of Helio or RGTL as trustee. The reasons for this view are:
(a)the proposal to appoint an independent trustee is not supported (nor opposed) by RGTL;
(b)the amount of unaccounted for funds of the Family Trust complained of by Helio is modest;
(c)the trust fund is relatively modest and imposing the cost of appointing the Public Trustee, particularly as an additional trustee, may not be justified;
(d)as noted by the Court in McLaughlin v McLaughlin, the Court’s role in appointing any replacement trustee involves an overarching consideration of the welfare of the beneficiaries.24 The exercise of the Court’s supervisory jurisdiction involving removal and appointment of a trustee is always guided by this concept. In my view, therefore, the beneficiaries would need to be heard as to the merits or otherwise of appointing the Public Trustee as an alternative or additional trustee before the Court could embark on considering whether to intervene in the administration of the Family Trust.
Result
[64] As a result of the conclusions I have reached at [49] and [50], I am of the view that Helio’s application to have the proceedings disposed of by an abbreviated process under pt 18 or by determination of a preliminary issue should be dismissed.
[65] As a result the conclusions I have reached at [58] and [59], RGTL’s application for leave to apply for summary judgment should also be dismissed.
[66] For the reasons set out at [63], I am of the view that the Court at this point should not seek to intervene in the administration of the Family Trust by initiating a process to appoint the Public Trustee, either as a replacement or additional trustee.
Orders
[67]I make the following orders:
(a)Helio’s application to have the proceeding dealt with by an abbreviated process under pt 18 of the High Court Rules with affidavit evidence only, or to have the preliminary issue as set out at [10] determined, is dismissed.
24 McLaughlin v McLaughlin, above n 23, at [130].
(b)RGTL’s application for leave to apply for summary judgment is dismissed.
(c)Counsel are directed to endeavour to agree costs. If no agreement is reached within 20 working days of the date of this judgment, counsel for Helio will file a memorandum as to costs (not to exceed five pages) within 10 working days of expiry of the 20 working day period. Counsel for RGTL will file a memorandum in reply (not to exceed five pages) within 5 working days of receipt of counsel for Helio’s memorandum. A decision as to costs will then be made on the papers.
…………………………….. Associate Judge Taylor
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