Hoeberechts v Sprott
[2018] NZHC 2818
•31 October 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-0960 [2018] NZHC 2818
UNDER Section 21 of the Administration Act 1969 IN THE MATTER
of the estate of THOMAS JAMES SPROTT, probate of which was granted under
CIV-2014-484-8127 on 30 June 2014; the Estate of ETHEL MARION SPROTT, probate of which was granted under
CIV-2014-484-8126 on 30 June 2014, and the Sprott Family Trust and the Rodleigh Family Trust
BETWEEN
LINDSAY ANNE HOEBERECHTS (nee
SPROTT) Plaintiff
AND
ADRIAN JAMES SPROTT Defendant
Hearing:
Further
Submissions:15 October 2018
19 October 2018 and 24 October 2018
Appearances:
V Bruton QC for the Plaintiff
T J G Allan and K M Wakelin for the DefendantJudgment:
31 October 2018
JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 31 October 2018 at 12.00pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel:
P Brown, Auckland
V Bruton QC, Auckland
Grove Darlow, Auckland
HOEBERECHTS v SPROTT [2018] NZHC 2818 [31 October 2018]
[1] The defendant applies for further particulars of the plaintiff's amended statement of claim.
The parties
[2] The plaintiff (Lindsay) and the defendant (Adrian) are two of the three children of the late Thomas James Sprott ("Jim Sprott") and Ethel Marion Sprott ("Marion Sprott"). Jim Sprott and Marion Sprott had another daughter, Alison, but she is not a party to this proceeding.
[3] Marion Sprott died on 31 October 2008. She made certain gifts of jewellery, art, and chattels to each of her three children, and gave Jim Sprott the use of other articles of personal, domestic, or household use during his lifetime. She gave the residue of her estate to Jim Sprott.
[4] Jim Sprott died in April 2014, and probate of his will was granted to Adrian and Richard John Nowacki, Scientist, of Auckland, on 30 June 2014. Jim Sprott left his net estate to his children in equal shares.
[5] Adrian and Alison live in Auckland, and Lindsay lives in Vancouver, Canada. Lindsay says that her parents' estates have not been properly administered in accordance with their last wills.
Lindsay's Court proceeding – steps to date
[6] In May 2017 Lindsay issued this proceeding, seeking orders removing and replacing Adrian and Mr Nowacki as administrators of the two estates, and appointing William Malcolm Patterson as administrator. Lindsay also sought damages from Adrian in an amount to be quantified, together with interest and costs, and orders directing the defendants to provide her with all information they might hold relating to two family trusts said to be associated with Jim Sprott and/or Marion Sprott, namely the Sprott Family Trust, and the Rodleigh Family Trust.
[7] Following the issue of the proceeding, Mr Nowacki was given leave to retire as a trustee in the estate. His name has now been removed as a defendant in the proceeding.1
[8] An interlocutory application to remove Adrian as an executor and trustee was heard on 31 July 2018. It was dismissed by Woodhouse J, in a decision given on
14 August 2017.
[9] In his decision, the Judge also confirmed the appointment of Mr Barry
Stafford, solicitor, as trustee of the estates in lieu of Mr Nowacki.
[10] On 12 July 2018, Adrian applied for orders requiring Lindsay to provide further and better particulars of her statement of claim, and to file and serve an amended statement of claim incorporating those particulars. On 18 July 2018, Woodhouse J directed Lindsay to file submissions addressing the issue of whether she was still pursuing the removal of Adrian as executor and trustee, in light of the Judge's refusal to make that order on Lindsay's interlocutory application.
[11] Lindsay filed a notice of opposition to the particulars application, and on
17 August 2018 she filed an amended statement of claim (the amended statement of claim). The amended statement of claim still seeks an order removing Adrian as executor and trustee, although Lindsay says that such an order may not be necessary if there is a sale within the reasonably near future of the estates' remaining substantial
asset — a property in Combes Road, Remuera to which I refer below.
[12] Adrian contends that Lindsay's notice of opposition to the particulars application is defective, in that it does not address the point Lindsay was directed to address by Woodhouse J. Nor does the amended statement of claim sufficiently address the matters raised in the particulars application. Accordingly, the particulars application is continued in respect of those parts of the amended statement of claim that Adrian contends are still deficient in terms of the particulars required.
1 By order of Woodhouse J made on 18 July 2018.
[13] At the hearing, I invited counsel to file memoranda addressing certain aspects of Adrian's request for further particulars. Memoranda were duly filed, and I have considered them in my judgment below.
[14] I now give judgment on the particulars application.
The amended statement of claim
[15] At the date of Jim Sprott's death, he was residing in the family home at
10 Combes Road, Remuera (the property). The property was comprised of two certificates of title, owned as to a half share each by Jim Sprott and Marion Sprott.
[16] In the amended statement of claim, Lindsay alleges:
13. In breach of his duty to sell [the property] and to divide the proceeds of sale among [the] three children equally, [Adrian] has failed to sell [the property] in a reasonable time and to divide the proceeds of sale among [the] children, instead using [the property] for his personal benefit for his business use and to gamble on a continued rise in the Auckland property market, for the benefit of
himself and Alison who live in that market (whilst [Lindsay] does not), and has unilaterally changed his assurances as to when the
property would be sold.
Particulars
…
(c)Since [Jim Sprott] died [Adrian] has used [the property] for his and [Alison's] personal benefit, and maintained [the property] as the address for service and registered office of TJ Sprott Limited (in which he and Alison are the shareholders and directors) until
13 June 2018.
(d) In April 2014 [Lindsay] asked [Adrian] when [the property] would be sold. He replied that it would not be sold for three years as he and [Alison] ran their businesses from the property;
(e) What is known as the "executor's year" expired on 8 July 2015 and it was reasonable for [Adrian] to sell [the property] by this time;
(f)In response to [Lindsay's] multiple requests that sale of the property occur, and requests for information about the sale process, [Adrian] came up with excuse after excuse including that "Owing to the very strong house market in Auckland, [the property] will not be sold until shortly before the estates are wound up [Email Adrian to Lindsay 22/10/14]."
(g) By email dated 10 March 2016 [Adrian] stated to [Lindsay] that the property would be put on the market in spring that year;
(h) Following receipt of correspondence from [Lindsay's] solicitor requesting estate information, [Adrian] emailed [Lindsay] on
16 March 2016, stating "Do be aware that an estate is not required to distribute substantial assets while there remains a threat of legal action against the estate."
(i) By email dated 2 September 2016 (in the spring of 2016) [Adrian] stated to [Lindsay] that "the executors cannot provide a definitive date when [the property] will be marketed."
(j) By December 2016 [Adrian] told [Lindsay] that [the property] could not be sold until the executors had investigated the feasibility of subdivision, following release of the Auckland Unitary Plan;
(k) By email dated 26 May 2017 [Adrian] told [Lindsay] that a
subdivision feasibility report had found that [the property] could be subdivided into four titles and the property would be marketed later in 2017;
(l) At a Court hearing on 31 July 2017 counsel for [Adrian] told the Court (submissions, para 66) "All that remains to be done is for an agent to be engaged, and subject to that agent's advice the property marketed. Were it not for this interlocutory application, that would already have taken place."
(m) [Adrian] and his new co-executor Barry Stafford did not place [the property] on the market until 23 April 2018, and this by allowing [Adrian] to try to sell the property himself on Trade Me, despite [Lindsay's] objections. [Adrian's] attempts to sell the property himself were unsuccessful. Meanwhile, [the property] continued as the registered office for his business.
(n) On 19 June 2018 [Adrian] and Mr Stafford listed [the property]
with Barfoot and Thompson Limited, with a sole agency until
17 September 2018. The property has still not sold.
[17] At the hearing, Ms Bruton told me that a further particular "(o)" would be added to paragraph 13, relating to the appointment of Ray White as the new agent following the recent expiry of Barfoot and Thompson's sole agency.
[18] Lindsay also alleges in the amended statement of claim that, in breach of his duty not to use his position as administrator to personally profit from the estate, Adrian used Jim Sprott's Mercedes for his personal benefit and business use, and transferred it into his own name in April 2017.
[19] Lindsay alleges generally that Adrian's conduct towards her has been in breach of his duties to her as a beneficiary, and so as to advance his and Alison's personal position over that of Lindsay.
[20] Lindsay contends that Adrian's alleged breaches of duty have caused her loss and damages as follows. Because of the delay in receiving her inheritance in a timely fashion, she and her husband lost the opportunity to purchase a property in Newdale Road, West Vancouver (Newdale Road), in mid-2015, for $1.8 million. She says they had entered into a conditional verbal agreement to purchase Newdale Road on 26 May
2015, but were unable to complete the transaction, and the purchase opportunity was lost. She says that Newdale Road is now estimated to be worth in excess of
$2.8 million, and that she and her husband have lost the benefit of the increase in value they would have had if they had been able to complete the purchase at $1.8 million in
2015.
[21] In addition to the lost opportunity to purchase Newdale Road, Lindsay says that she has incurred legal costs, in the total sum of $64,266.07.
[22] As an alternative contention, Lindsay says that, if she had received her inheritance when she should have, she would have used it to repay her bank borrowings, which stood at $227,703.90 on 8 July 2015. She says that she would not have had to pay interest on that sum, and would have saved interest payments of
$24,865.68 from 8 July 2015 to the date of her amended statement of claim (17 August
2018). She says that she has also had to borrow more since then to pay her legal costs and her daughter's university fees, and has incurred interest on those borrowings, which will continue to increase until she is paid her inheritance.
[23] In addition to her monetary losses, Lindsay alleges that, in breach of his duty to keep accounts, Adrian has failed or refused to provide to her detailed accounts for income and expenditure in the estates since the hearing in this proceeding on 31 July
2017, including providing copies of all visa and bank statements since Jim's death.
Adrian's statement of defence
[24] A detailed statement of defence was filed to Lindsay's original statement of claim. It is not necessary to recite the defence in detail, because this judgment is primarily concerned with the adequacy of the pleadings in Lindsay's amended statement of claim. However, it is appropriate to record that Adrian denies the allegations of improper delay in distributing his parents' estates, and denies any other wrongful behaviour (including the use of estate assets for his personal benefit, or for the benefit of any company with which he is associated).
[25] It is appropriate also to record Adrian's explanation of the reasons for the delay in selling the property. Following Jim Sprott's death, the property appeared to be potentially suitable for subdivision, and Adrian and his co-trustees have directed their efforts to completing the subdivision so as to achieve the best realisation for the beneficiaries. Adrian says that there were particular difficulties which have delayed the subdivision, including the existence of a protected oak tree on one of the titles which would need to be removed if the subdivision was to be progressed. Removal of the oak tree was completed by the first half of 2016, freeing up the garden section for development. Adrian contends that all beneficiaries, including Lindsay, supported the removal of the oak tree prior to any marketing, as it would significantly increase the property's potential market.
[26] Adrian says that he told Lindsay on 28 November 2016 that until maximum subdivision potential could be ascertained, the property would be withheld from the market. But on 30 November 2016 Lindsay demanded an immediate sale, bringing her views into conflict with the other beneficiaries' views and the defendants' desire to maximise the value and potential market for the property.
[27] Adrian says that a subdivision feasibility report was finalised on 24 May 2017, confirming that the property would support the development of four townhouses. He says that the delays necessary to achieve the subdivision have been worthwhile — the property has increased in value from $2-$3 million to $5-$6 million.
Adrian's application for particulars
[28] Some of Adrian's particulars requests were resolved at the hearing, or in the memoranda filed after the hearing. The requests remaining to be resolved are set out in the table below:
Paragraph in amended statement of claim Particulars requested 17. In breach of his duty not to use his position as administrator to personally profit from the estate [Adrian]:
(a) used [Jim Sprott's] Mercedes for his personal benefit and business use, and transferred it into his own name in April 2017;
(b) used [the property] for his own use and personal benefit, and as the registered office of his business.
(a) In what manner and on what occasions does [Lindsay] claim that [Adrian] has used [the property] to personally profit from the estate?
(b) In what manner and on what occasions does [Lindsay] claim that [Adrian] used the Mercedes car to personally profit from the estate?
22. Had [Lindsay] received her inheritance in a timely fashion [she] and her
husband would have purchased
[Newdale Road] in mid-2015 for
$1.8m, which property is now estimated to be worth over $2.8m, and which they entered into a conditional, verbal agreement to purchase on
26 May 2015.
24. As a result of [Adrian's] breaches, [Lindsay] has suffered the following losses:
…
(b) Loss of opportunity to complete the purchase of [Newdale Road] for $1.8m, which property is now estimated to be worth in excess of
$2.8m, updating evidence of which will be provided with [Lindsay's] evidence prior to trial;
…
(a) Specify what, if any, conditions precedent were required to be
performed by [Lindsay] before the
contract went unconditional.
(b) Specify the facts, matters and particulars which are relied on by [Lindsay] to assert that it was foreseeable to [Adrian] that [Lindsay] would:
(i) enter into that agreement to buy
[Newdale Road]; and
(ii) suffer the loss alleged.
24. As a result of [Adrian's] breaches, [Lindsay] has suffered the following losses:
…
(e) Loss of capital due to [Adrian's] failure to sell the estate property on or about 8 July 2015 (or such
other date as the Court determines was a reasonable date for sale of
[the property]), evidence of which
will be provided with [Lindsay's] evidence prior to trial and which can only be provided after [the property] has finally sold.
Specify the date which [Lindsay] claims to have been "the height of the Auckland property market" 16. In breach of his duty to keep accounts [Adrian] has failed or refused to provide to [Lindsay] detailed accounts
for income and expenditure, since the
hearing on 31 July 2017, including providing copies of all visa and bank statements since [Jim Sprott's] death.
In what manner does [Lindsay] claim that [Adrian] has breached his duty to keep accounts? 18. The conduct of [Adrian] towards [Lindsay] has been in breach of his duties to her as a beneficiary, other
than in accordance with the terms of
the will, and so as to advance his and Alison's personal position over that of [Lindsay].
In what manner and on what occasions does [Lindsay] claim that [Adrian] has acted so as to advance his and Alison's personal
positions over that of [Lindsay]?
23. Alternatively, [Lindsay] would have used her inheritance to repay her bank borrowings, which stood at
$227,703.90 on 8 July 2015. She
would not have had to pay interest on that sum and would have saved interest payments of $24,865.68 from 8 July
2015 to date. She has also had to borrow more since then to pay her legal costs and daughter's university fees, and has incurred interest on those borrowings, which will continue to increase until she is paid her inheritance.
(a) What is the amount which [Lindsay]
claims to have borrowed since 8 July
2015 to pay her legal costs and her daughter's university fees?
(b) What is the amount of interest on these borrowings?
Lindsay's opposition
[29] In her notice of opposition, Lindsay contended that a fully (and sufficiently) particularised statement of claim has now been filed. Also, the particulars sought in the application differed significantly from those which had been sought in a request for particulars dated 9 July 2018 (most of which had not been properly requested and were in the nature of interrogatories).
[30] In her submissions, Ms Bruton summarised the basis for the application to remove Adrian as trustee, referring to the following alleged breaches of his duties as trustee and executor:
(i) breach of duty to sell the property within a reasonable time;
(ii) breach of duty to distribute estate assets to Lindsay in accordance with the terms of the will;
(iii) breach of duty to keep accounts and/or failure or refusal to provide detailed accounts to Lindsay since the hearing on 31 July 2017; and
(iv) breach of duty not to use his position as administrator to personally profit from the estate (use of the Mercedes and business use of the property).
[31] Ms Bruton submitted that the function of a statement of claim is to inform the other party of the nature of the plaintiff's case (as distinct from the mode in which it will be proved), to prevent the other party being taken by surprise, and to enable the other party to know what evidence he or she ought to prepare and to limit the evidence he or she ought to prepare. She submitted that the amended statement of claim fully informed Adrian of the causes of action and the case he has to meet, and is sufficient for him to commence preparation of his evidence. She accepted that Lindsay would need to provide evidence in support of the quantum of her damages and loss claims, but submitted that detail was not required in the statement of claim.
[32] Ms Bruton accepted that, assuming the property has sold by the time of the substantive hearing, Lindsay's application to remove Adrian as an executor may be rendered otiose. In that event, a repleading will be necessary and the key issues before the Court will be:
(a)whether Adrian has sold the property in accordance with his obligation to sell within a reasonable time;
(b) if not, what are the damages and costs to which Lindsay is entitled.
[33] In those circumstances, Ms Bruton submitted that there is little to be gained by progressing the case towards trial before the property is sold. She proposed that the particulars application be adjourned to a case management conference to be convened in March 2019. By then, the property should have been sold, and at least some of the particulars requests (those concerned with the claim to remove Adrian as trustee) may not have to be addressed. If the case is forced to proceed now, and a trial of the proceeding takes place before the property has been sold, there would need to be a further trial to deal with Lindsay's damages claim (the quantification of which is in part dependent on when she receives her inheritance).
[34] In the meantime, Lindsay has not been willing to discontinue her substantive claim seeking removal of Adrian as administrator, because of her concerns that he has not been acting in accordance with his duty to sell the property within a reasonable time, and his continued use of the property for personal business purposes. Ms Bruton referred to Adrian's unsuccessful attempts to sell the property on Trade Me and the use of the property as the registered office for TJ Sprott Limited until 13 June 2018.
Directions sought by Adrian
[35] Mr Allan submitted that there should be no further delays in moving the case towards trial. The sale of the property is not to the point — either there is justification for Lindsay's claims or there is not. He asked for orders for the particulars sought, with a direction that Lindsay file a further amended statement of claim incorporating the particulars by no later than 15 November 2018. He proposed that Adrian would file a statement of defence within 21 days thereafter and that a case management conference should then be allocated for the purpose of allocating a trial date and giving pre-trial directions.
Applications for particulars – legal principles
[36] Rule 5.26(b) of the High Court Rules 2016 provides:
5.26 Statement of claim to show nature of claim
The statement of claim—
…
(b)must give sufficient particulars of time, place, amounts, names of persons, nature and dates of instruments, and other circumstances to inform the court and the party or parties against whom relief is sought of the plaintiff’s cause of action; and
…
[37] Under r 5.21, the Court may, following the issue of a notice requiring further and better particulars, or of its own motion, order a party to file a more explicit pleading.
[38] There was no disagreement between counsel on the broad approach the Court should take to an application for further particulars of a pleading. The object is to inform the Court and opposite parties of the plaintiff's cause of action: the statement of claim should tell the defendant the allegations that must be answered, so that the defendant is not left to guess, and can affirm or deny with confidence.2
[39] In PriceWaterhouse v Fortex Group Ltd, the Court of Appeal noted that pleadings are intended to "supply an outline of the case advanced, sufficient to enable a reasonable degree of pre-trial briefing and preparation".3 And in Platt v Porirua City Council Kós J listed the following important functions of particulars:4
(i) inform a defendant as to the case it has to meet;
(ii) limit the scope of matters the plaintiff may put in issue at trial (or in pre-trial settlement discussions);
(iii) enable a defendant to know what witnesses it will need to retain and enable it to start preparing evidence ahead of the formal exchange of evidence; and
(iv) provide an opportunity for a defendant to seek summary determination on the basis that the claim as pleaded is untenable.
2 Financial Markets Authority v Warminger [2016] NZHC 1193 at [13].
3 PriceWaterhouse v Fortex Group Ltd (CA) CA179/98, 30 November 1998, at 19.
4 Platt v Porirua City Council [2012] NZHC 2445 at [19].
DISCUSSION AND CONCLUSIONS
[40] I address each of the particulars in the order they are set out in the table at paragraph 28 of this judgment.
Amended statement of claim, paragraph 17
The pleading
In breach of his duty not to use his position as administrator to personally profit from the estate [Adrian]:
(a)used [Jim Sprott's] Mercedes for his personal benefit and business use, and transferred it into his own name in April 2017;
(b)used [the property] for his own use and personal benefit, and as the registered office of his business.
The particulars requested
(a)In what manner and on what occasions does [Lindsay] claim that [Adrian] has used [the property] to personally profit from the estate?
(b) In what manner and on what occasions does [Lindsay] claim that [Adrian]
used the Mercedes car to personally profit from the estate?
[41] Ms Bruton said at the hearing that Lindsay cannot provide particulars of all individual "occasions" when Adrian allegedly used the property or the Mercedes to personally profit from the estate. However, she said in respect of the Mercedes that Lindsay's case is that Adrian used the car for business and personal benefit throughout the period since Jim Sprott's death. In my view that advice sufficiently informs Adrian of the case he has to meet relating to use of the Mercedes, and I direct that it is to be treated as particulars given in response to Adrian's request (b).
[42] On the use of the property, Ms Bruton confirmed that Lindsay's case is as set out at paragraph 13(c) and (d) of the amended statement of claim (reproduced at paragraph [16] of this judgment) — running the business from the property, and using the property as the registered office of TJ Sprott Ltd from the date of Jim Sprott's death (15 April 2014) to 13 June 2018 (when the registered office was changed).
[43] In my view the particulars provided (including those now given in respect of the Mercedes) are sufficient to fairly inform Adrian of the case he has to meet on the alleged wrongful use of those estate assets. I take into account Lindsay's pleading that
Adrian told her in April 2014 that the property would not be sold for three years, as he and Alison ran their businesses from the property. I also take into account the fact that the matters in issue are wholly within Adrian's knowledge. With the additional particulars relating to the alleged use of the Mercedes, I do not consider he will be prejudiced or embarrassed by any lack of particulars in these allegations.
Amended statement of claim, paragraphs 22 and 24(b)
The pleading
22.Had [Lindsay] received her inheritance in a timely fashion [she] and her husband would have purchased [Newdale Road] in mid-2015 for $1.8m, which property is now estimated to be worth over $2.8m, and which they entered into a conditional, verbal agreement to purchase on 26 May 2015.
24. As a result of [Adrian's] breaches, [Lindsay] has suffered the following losses:
…
(b) Loss of opportunity to complete the purchase of [Newdale Road] for
$1.8m, which property is now estimated to be worth in excess of $2.8m, updating evidence of which will be provided with [Lindsay's] evidence prior to trial;
…
The particulars requested
(a) Specify what, if any, conditions precedent were required to be performed by
[Lindsay] before the contract went unconditional.
(b)Specify the facts, matters and particulars which are relied on by [Lindsay] to assert that it was foreseeable to [Adrian] that [Lindsay] would:
(i) enter into that agreement to buy [Newdale Road]; and
(ii) suffer the loss alleged.
[44] Further particulars were provided in response to request (a) above in
Ms Bruton's memorandum filed after the hearing. The particulars included the advice that "The contract was conditional on finance only".
[45] Adrian's request (b) foreshadows an argument that it was not reasonably foreseeable (by him) that Lindsay would enter into the verbal agreement to buy Newdale Road (and lose the opportunity to complete that transaction). Ms Bruton submitted in her post-hearing memorandum that the request is not properly made, because Lindsay's claim is one for breach of trust by infidelity or disloyalty, such as
to engage Adrian's conscience as a fiduciary, and in such cases questions of foreseeability and remoteness do not arise.5
[46] On request (a), Mr Allan submitted that the particulars provided were inadequate, in that they did not state any date by which finance was required to have been obtained. If there was no date by which the finance clause had to be satisfied (which would determine whether the contract went unconditional), there could not have been a conditional contract.
[47] In his reply memorandum on request (b), Mr Allan changed the direction of his attack. On the authority of BNZ v NZ Guardian Trust Co Ltd, he submitted that (now that Adrian is aware that he is facing a "breach of trust by infidelity or disloyalty" claim) he is entitled to particulars of:
(a) the element or elements of the alleged infidelity and/or disloyalty;
(b) how they are said to have engaged Adrian's conscience as a fiduciary;
(c)how Adrian's conscience as a fiduciary qua Lindsay is said to be different from his conscience as a fiduciary qua the estate; and
(d) how he is said to have profited at Lindsay's expense.
[48] To the extent Lindsay's claims are based on the interests of Adrian and/or Alison being advanced over the interests of Lindsay, Mr Allan submits that particulars of the alleged "advancement" should be given, with reference to the facts, matters, particulars and occasions that is alleged to have occurred and how it has occurred.
[49] I accept Mr Allan's submissions on request (a). It was inadequate to state that the alleged agreement on Newdale Road was "conditional on finance" without stating whether or not there was an agreed date for confirmation of the finance, and if so, what that date was. By way of example only, if the time for confirming finance was very short, Adrian might be able to contend that the opportunity to purchase Newdale Road
would likely have been lost anyway, quite apart from any alleged breach of trust on his part.
[50] I direct that Lindsay is to provide particulars of the date by which the finance condition referred to at paragraph 5(c) of Ms Bruton's memorandum of 19 October
2018 was required to be met, by 28 November 2018.
[51] Turning to particulars request (b), I note that the claim is not one alleging the loss of trust property. Nor has Lindsay put her case on the basis of lack of care or skill on Adrian's part. The case is put on the basis of the second of the three categories identified by Tipping J in BNZ v NZ Guardian Trust Co Ltd, namely "infidelity or disloyalty engaging the fiduciary's conscience (without loss of trust property)". Tipping J noted in BNZ v NZ Guardian Trust Co Ltd that:6
In this situation, the law applies the approach recently outlined by this Court in Gilbert v Shanahan [1998] 3 NZLR 528. In short, in such a case once the plaintiff has shown a loss arising out of a transaction to which the breach was material, the plaintiff is entitled to recover unless the defendant fiduciary, upon whom is the onus, shows that the loss or damage would have occurred in any event, ie without any breach on the fiduciary's part. Questions of foreseeability and remoteness do not arise in this kind of case either. Policy dictates that fiduciaries be allowed only a narrow escape route from liability based on proof that loss or damage would have occurred even if there had been no breach.
[52] As questions of foreseeability of loss do not arise in breach of trust claims of the kind mounted by Lindsay, she could have no onus of proof on that issue. In those circumstances there is no basis to order the particulars sought in request (b).
[53] On the matters raised by Mr Allan in his post-hearing memorandum I note that paragraphs 22 and 24(b) of the amended statement of claim are not concerned with the substantive cause of action against Adrian (breach of trust), but with damage claimed to have been suffered by Lindsay as a result of the alleged breaches of trust. The allegations of breach of trust are set out at paragraphs 13-17 of the amended statement of claim, and further particulars of those paragraphs were either not pursued by Mr Allan at the hearing or the particulars that were sought have already been dealt with earlier in this judgment.
[54] Even if that were not so, I would not have ordered further particulars on Adrian's request (b). First, "infidelity or disloyalty" is no more than an expression used to differentiate one kind of breach of trust or fiduciary obligation from the other two kinds identified in BNZ v NZ Guardian Trust (breach of trust resulting in the loss of trust property, and want of care or skill on the part of the trustee or other fiduciary). In this case, the other two kinds of breach of trust are either clearly irrelevant to the loss claimed in paragraphs 22 and 24(b) (breach resulting in loss of trust property) or are not relied upon (want of skill or care) — what Lindsay is saying in effect is that the breaches pleaded at paragraph 13 of the amended statement of claim were deliberate, not the result of negligence. That being the argument, it is in my view obvious how Adrian's conscience would have been engaged: deliberate breach of trust must inevitably engage the conscience of the trustee.
[55] The relevant duties relied upon by Lindsay are pleaded at paragraph 11 of the amended statement of claim, and there is no suggestion there that Adrian owed Lindsay some separate fiduciary duty, distinct from his duty as an administrator of his late parents' estates. On the pleading as it stands, then, Adrian's conscience is only alleged to have been engaged in that capacity.
[56] Whether the claim for the loss pleaded at paragraphs 22 and 24(b) can stand on that basis is not something I am presently required to decide; Adrian's application was an application for further particulars, not a strike-out application. It is enough to record that, on the amended statement of claim as it is presently drafted, there is no apparent pleading of any fiduciary duty owed by Adrian to Lindsay which is separate and distinct from the duties of an estate administrator pleaded at paragraph 11 of the amended statement of claim. How Adrian is alleged to have profited from the delayed sale of the property has already been addressed on the request for particulars of paragraphs 17 and 18 of the amended statement of claim.
[57] Having regard to those considerations, I decline to order further particulars on request (b).
Amended statement of claim, paragraph 24(e) and claim for relief B
The pleadings
24. As a result of [Adrian's] breaches, [Lindsay] has suffered the following losses:
…
(e)Loss of capital due to [Adrian's] failure to sell the estate property on or about 8 July 2015 (or such other date as the Court determines was a reasonable date for sale of [the property]), evidence of which will be provided with [Lindsay's] evidence prior to trial and which can only be provided after [the property] has finally sold.
…
Claim for Relief B
An order that [Adrian] and his co-executor ought to have sold [the property] on or about 8 July 2015, or such other date as the Court considers reasonable.
The particulars requested
Specify the date which [Lindsay] claims to have been "the height of the Auckland property market".
[58] Those particulars clearly related to Lindsay's earlier pleading — there was no reference in the amended statement of claim to "the height of the Auckland property market". That error was corrected at the hearing, where I allowed an amendment so that the particulars request read:
Specify the date or dates by which it is alleged the property was required to have been sold.
[59] In her post-hearing memorandum Ms Bruton submitted that this particular has already been provided — the date is "on or about 8 July 2015 (one year after the grant of probate) or such other date as the Court considers reasonable".
[60] In his post-hearing memorandum Mr Allan submitted that "[Lindsay] plainly contemplates a cascading series of dates falling after 8 July 2015 which she will urge the Court to find is the date by which [the property] should have been sold". He submitted that Adrian is entitled to know what Lindsay asserts or will assert that date or those dates are — he should not be required to guess the date, which is fundamental to Lindsay's allegations and to any alleged increase or diminution in the value of the estate.
[61] I agree with Mr Allan's submission that the words "such other date as the Court considers reasonable" in Ms Bruton's formulation of the particulars, effectively ensure that Adrian is told nothing of Lindsay's case on the question of when delay in selling the property is said to have become a breach of trust. (On Ms Bruton's formulation Lindsay could contend at trial for a date either before or after 8 July 2015.) And just as in the case of a negligence claim based on an alleged omission the defendant would normally be entitled to be told what he or she has allegedly omitted to do (ie what he or she should have done), so here I think Adrian is entitled to be told when the alleged delays in selling the property are said to have first constituted a breach of trust.
[62] That said, I do not think this is a case where Adrian will be unfairly confronted with a cascading series of dates by which it is contended he should have sold the property. It seems to me that a proper pleading would be that Adrian was "required to sell the property within a reasonable time, being not later than [date]. Thereafter Adrian remained in breach of trust by failing to sell the property …". The reality of the claim here is that it is one of alleged ongoing breach of trust, and in those circumstances I think the most Adrian can be entitled to is particulars of the date on which it is said the ongoing breach started.
[63] Taking those considerations into account, I direct that Lindsay is to provide particulars of the date on which it is alleged that failure by Adrian to sell the property first constituted a breach of trust on his part. That direction will require an actual date
— it will not be a sufficient answer to say "such date as the Court may consider reasonable" (or words to similar effect). Those particulars are to be provided by
28 November 2018.
Amended statement of claim, paragraph 16
The pleading
In breach of his duty to keep accounts [Adrian] has failed or refused to provide to
[Lindsay] detailed accounts for income and expenditure, since the hearing on 31 July
2017, including providing copies of all visa and bank statements since [Jim Sprott's]
death.
The particulars requested
In what manner does [Lindsay] claim that [Adrian] has breached his duty to keep accounts?
[64] At the hearing, I permitted Lindsay to amend the pleading by substituting the word "provide" for the word "keep" in the first line.
[65] The corresponding relief sought in the amended statement of claim is an order that Adrian provide a full accounting of all income and expenditure and assets and liabilities of the estate from the date of Jim Sprott's death, to the extent not already provided, together with copies of all estate bank, credit card, mortgage statements and correspondence with the mortgagee.
[66] Ms Bruton submitted in her post-judgment memorandum that, with the amendment, the pleading (and the relief sought on it) is perfectly clear. She explained that accounts for the estates were provided up to 31 July 2017, and the pleading relates to the period since that date.
[67] Notwithstanding the amendment clarifying Lindsay's pleading, Mr Allan confirmed that Adrian still seeks the following particulars of paragraph 16 — "by what date does Lindsay say the accounts (for the period after 31 July 2017) had to be provided?" In his post-hearing memorandum, he submitted that the request for particulars has still not been answered. Lindsay has still not stated the date or dates by which the accounts should have been provided.
[68] I think similar considerations apply here as applied to the request for particulars of paragraph 24(e) and claim for relief B in the amended statement of claim. An omission is alleged, and at some point that omission is said to have "matured" into a breach of trust. The breach of trust is alleged to have continued thereafter.
[69] In my view, Adrian is entitled to be told when he is first alleged to have fallen into breach. I direct that Lindsay is to provide particulars of the date by which it is alleged Adrian should have provided Lindsay with the detailed accounts referred to in this pleading. Those particulars are to be provided by 28 November 2018.
Amended statement of claim, paragraph 18
The pleading
The conduct of [Adrian] towards [Lindsay] has been in breach of his duties to her as a beneficiary, other than in accordance with the terms of the will, and so as to advance his and Alison's personal position over that of [Lindsay].
The particulars requested
In what manner and on what occasions does [Lindsay] claim that [Adrian] has acted so as to advance his and Alison's personal positions over that of [Lindsay]?
[70] At the hearing, Ms Bruton confirmed that paragraph 18 of the amended statement of claim was not intended to add new allegations of fact not already pleaded elsewhere in the amended statement of claim. Both the "manner" and the "occasions" are as pleaded in paragraphs 13-17 of the amended statement of claim.
[71] Adrian has not sought further particulars of paragraphs 13-15 of the amended statement of claim, and I have addressed the particulars requests he has made relating to paragraphs 16 and 17. With Ms Bruton's assurance that no additional matters of fact are relied upon in paragraph 18, there is no need for the particulars sought. The request in respect of this paragraph is accordingly refused.
Amended statement of claim, paragraph 23
The pleading
Alternatively, [Lindsay] would have used her inheritance to repay her bank borrowings, which stood at $227,703.90 on 8 July 2015. She would not have had to pay interest on that sum and would have saved interest payments of $24,865.68 from
8 July 2015 to date. She has also had to borrow more since then to pay her legal costs and daughter's university fees, and has incurred interest on those borrowings, which will continue to increase until she is paid her inheritance.
The particulars requested
(a)What is the amount which [Lindsay] claims to have borrowed since 8 July 2015 to pay her legal costs and her daughter's university fees?
(b) What is the amount of interest on these borrowings?
[72] Ms Bruton submitted that these are matters of evidence, not particulars. I
disagree.
[73] At paragraph 24(c) of the amended statement of claim, Lindsay pleads that she has suffered loss by way of:
interest paid on [Lindsay's] line of credit from 8 July 2015 to date …
[74] And in her claim for relief she asks for damages "in an amount to be quantified"
— presumably those damages are sought in respect of the various claimed losses, including the interest on borrowings since 8 July 2015.
[75] Rule 5.33 of the High Court Rules 2016 requires that a plaintiff seeking to recover special damages must state their nature, particulars, and amount in his or her statement of claim, and I think the interest claim clearly comes within this rule. I accept that the interest claim is an ongoing one, but there is no reason the individual borrowings, with interest to date and applicable ongoing interest rates, cannot be provided now, so that Adrian will have a proper appreciation of the nature and size of the claim made under this head and can make sensible decisions relating to the resourcing of his defence to this part of the claim.
[76] I direct that Lindsay is to provide the particulars of paragraph [23] which have been requested, by 28 November 2018.
Costs
[77] Mr Allan asked for an order for increased or indemnity costs, relying principally on (i) Lindsay's alleged failure to comply with a direction of Woodhouse J to address in her notice of opposition whether she was pursuing her application for removal of Adrian as administrator, and (ii) Lindsay's alleged persistent failure to respond to Adrian's particulars requests.
[78] Mr Allan relied on r 14.6(4)(a) and (b) of the High Court Rules in support of the claim for indemnity costs. Those subrules provide:
14.6 Increased costs and indemnity costs
…
(4) The court may order a party to pay indemnity costs if—
(a)the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or
(b)the party has ignored or disobeyed an order or direction of the court or breached an undertaking given to the court or another party; or
…
[79] In support of the claim for increased costs, he relied on r 14.6(3)(b)(i) and (iv). Those subrules provide:
14.6 Increased costs and indemnity costs
…
(3) The court may order a party to pay increased costs if—
…
(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
(i)failing to comply with these rules or with a direction of the court; or
…
(iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or
[80] I am not prepared to order increased or indemnity costs in this case. I do not see Lindsay's desire to hold the proceeding over until the property has been sold as a matter justifying increased or indemnity costs. Mr Allan referred to the proceeding being continued against his client "in terrorem" (referring to the fact that Adrian's removal is unlikely to be sought if the property has been sold), but I do not think the answer to any such concern is an increased or indemnity costs order. Now that Lindsay has made it clear that she has not abandoned her application for an order removing Adrian as administrator, the appropriate course is to direct that the claims be progressed towards trial. I have now given directions towards that end.
[81] Lindsay did advise the Court (through her counsel) on 18 July 2018 that she was pursuing the application to remove Adrian as administrator, notwithstanding the
judgment of Woodhouse J on her interlocutory application for a removal order. She may not have directly stated in her notice of opposition to the particulars application that she wished to pursue the claim to have Adrian removed as administrator, but her notice of opposition to the particulars application did expressly refer to the amended statement of claim, which in turn made clear that Lindsay was still asking for an order removing Adrian as executor and trustee of the estates.
[82] I do not have any proper basis at this interlocutory state to conclude that Lindsay has acted vexatiously, frivolously, improperly or unnecessarily in continuing or taking any step in the proceeding (r 14.6(4)(a)). Certainly she did not succeed on her interlocutory application to have Adrian removed as administrator, but the judgment of Woodhouse J was an interlocutory one only, and it is far from clear that it precludes Lindsay taking that issue to trial if she wishes to do so.7
[83] Rule 14.6(4)(b) provides that indemnity costs may be awarded where a party has ignored or disobeyed an order or direction of the Court. Again, I do not see any proper ground for indemnity costs under this subrule. With the reference to the amended statement of claim in Lindsay's notice of opposition it is by no means clear that the order of Woodhouse J was ignored or disobeyed.
[84] Nor do I see any basis for increased costs under r 14.6(3). Mr Allan relies on subrules 14.6(3)(b)(i) and (ii). I reject the claim under 14.6(3)(b)(i) for the same reason I rejected the claim under r 14.6(4)(b) — it is not sufficiently clear that there has been any ignoring or disobeying of the direction of Woodhouse J made on 18 July
2018, such as might justify a sanction in the form of an order for indemnity or increased costs.
[85] Rule 14.6(3)(b)(iv) refers (inter alia) to a party's failure, without justification, to comply with a notice for further particulars. Certainly Lindsay failed to respond to Adrian's particulars notice, but the result of this application shows that, in respect of
7 In his Minute of 18 July 2018, Woodhouse J expressed some surprise at the advice given to him by Lindsay's counsel that she intended to pursue her application to have Adrian removed, but His Honour went on to note that she "may be entitled to pursue the substantive application". If she wished to do so, she was directed to address the issue (and make the grounds clear) in her notice of opposition, affidavit (if any) and submissions on the particulars application.
some of the particulars sought, the matters with which Lindsay took issue were not beyond reasonable argument. In those circumstances I am not prepared to make an award of increased costs.
[86] I accept, however, that Adrian has been substantially successful in the application (whether by obtaining clarification of Lindsay's pleadings at the hearing or in Ms Bruton's post-hearing memorandum, or in the orders I have made on the particulars application). My preliminary view is that he is entitled to costs on a 2B basis, with disbursements to be fixed by the Registrar. If counsel are unable to agree on those costs, memoranda may be filed within 20 working days of the date of this judgment.
The further conduct of the proceeding
[87] It will be apparent from the orders and directions made above that I do not accept Ms Bruton's submission that the proceeding should simply be "parked", pending a sale of the property (when Lindsay might or might not decide that the claim to remove Adrian as administrator does not need to be pursued). First, there was no reason to delay a decision on the particulars requests directed to Lindsay's damages claims (eg those that are concerned with the alleged loss of the opportunity to purchase Newdale Road, and the interest on borrowings claim). Secondly, Lindsay has elected to commence these claims against her brother, and I think he is now entitled to have them brought on for hearing. The time for further delays in progressing the claims towards trial has passed.
[88] Ms Bruton submitted that it would be wasteful of the parties' resources, and the Court's time, to force the case on for trial before the property is sold, and therefore before Lindsay's claims could be fully quantified. I do not accept that submission. If the case did come on for trial before the property was sold, the Court would presumably decide whether Adrian is to be removed as administrator, and it could determine when the property should have been sold (if the Court considered it should have been sold earlier). There would seem to be no reason why the Court could not determine liability on the various liability issues, and if it were considered appropriate, restrain any further wrongful use of estate assets that might have been proved.
[89] That said, there was not in any event much difference between the parties' positions on the future conduct of the proceeding. Mr Allan asks only that I direct that any particulars ordered be supplied in a further amended statement of claim by
15 November 2018, and that Adrian have until 6 December 2018 to file an amended defence. Thereafter, he asks that a case management conference be fixed for the purpose of allocating a trial date and making pre-trial directions.
[90] Any such conference would not realistically take place before February 2019 at earliest, and Ms Bruton's proposal was to adjourn everything to a March 2019 conference (she expressed the tentative view that if the property had not sold by then the application to have Adrian removed as administrator would probably have to proceed).
Result
[91] I make the following orders:
(a)Lindsay is to file and serve a further amended statement of claim, incorporating the further particulars of the amended statement of claim that I have directed her to provide in this judgment, by 28 November
2018.
(b)Adrian is to file and serve his statement of defence to that further amended statement of claim, by 19 December 2018.
(c) Adrian's application for indemnity or increased costs is dismissed.
Subject to that, Adrian is entitled to an award of costs. If counsel are unable to agree on those costs, memoranda may be filed within
20 working days of the date of this judgment.
(d)The Registrar is to allocate a telephone conference, for the first practicable date after 22 February 2019, for the purpose of setting a close of pleadings date, giving directions for the completion of
evidence, chronologies and an agreed bundle of documents, and allocating a fixture for the trial of the proceeding.
Associate Judge Smith
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