Jackson v Coll

[2021] NZHC 1768

IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY

I TE KŌTI MATUA O AOTEAROA TE TIHI-O-MARU ROHE

CIV-2020-476-000028

[2021] NZHC 1768

UNDER

the Family Protection Act 1955

IN THE MATTER

of the Estate of GORDON HENRY STOCKER

BETWEEN

LISA JANE JACKSON

Plaintiff

AND

VALERIE JUNE COLL and TIMOTHY

JOHN JACKSON as executors of the Estate of GORDON HENRY STOCKER

Defendants

Hearing:	5 July 2021
Appearances:	P R Allan and J E Rapana for Plaintiff N A Hornsey for Defendants
Judgment:	14 July 2021

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 14 July 2021 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date: 14 July 2021

JACKSON v COLL [2021] NZHC 1768 [14 July 2021]

[1]    This is an interlocutory application by the plaintiff seeking an order setting aside the defendants’ claim to confidentiality in respect to documents listed in the defendants’ affidavit of documents. The application is made pursuant to r 8.25 High Court Rules 2016. The defendants oppose the application.

Background

[2]    The plaintiff is the daughter of Gordon Henry Stocker who died at Pleasant Point, South Canterbury on 1 May 2019 leaving a last will dated 17 April 2019. The defendants are the executors and trustees of the estate, having been granted probate on 1 November 2019.

[3]    The plaintiff brings this claim under the Family Protection Act 1955 seeking further provision for her proper maintenance and support from her father’s estate.

[4]    The defendant, Valerie Coll (Ms Coll), was Mr Stocker’s de facto partner. Under the will:

(a)Ms Coll is to receive:

(i)all of Mr Stocker’s furniture and other articles of household and personal use or ornament;

(ii)the use, occupation and benefit of Mr Stocker’s half share in their home at Pleasant Point; and

(iii)the income from and the benefit, enjoyment and occupation of the residue of the estate during her life-time.

(b)On Ms  Coll’s  death,  the  plaintiff  is  to  receive  a  half  share  of  Mr Stocker’s interest in the house and residue; and

(c)The  plaintiff’s  three  siblings  will   receive   the   remaining   share of Mr Stocker’s interest in the house and residue.

[5]    The defendants have filed an appearance reserving rights stating they neither support nor oppose the plaintiff’s claim. However, Ms Coll has filed a substantive affidavit stating that she believes Mr Stocker met his moral obligations to the plaintiff.

[6]    At a case management conference on 17 March 2021 directions were made for standard discovery. It was agreed that such discovery was to include:

(d)copies of Ms Coll’s and Point Shingle’s bank statements evidencing   the payments that have been met in relation to the estate and the amounts that have been repaid from the sale of the estate’s assets;

…

(h) Point Shingle’s financial statements and annual reports for the years ending 2014 – 2021.

[7]    Point Shingle Supplies Ltd is a company in which Mr Stocker owned shares. The shares are a major asset of the estate.

[8]    The defendants filed an affidavit of documents on 12 April 2021. In Part 3 of the schedule, the defendants listed the following documents:

(a)financial statements for Point Shingle Supplies Ltd for years ending 31 March 2014 to 31 March 2020;

(b)bank statements for Rabobank Account and Mastercard Account of Ms Coll; and

(c)bank statements for Point Shingle Supplies Ltd’s ANZ Account.

[9]    At [8] of the affidavit of documents, the defendants claimed confidentiality in respect of the above documents in the following terms:

In Part 3 of the Schedule, I list documents that are in my control and for which I claim confidentiality. I propose that inspection of these documents be restricted to an independent chartered accountant in Timaru and that this accountant prepare a report for the Court addressing the particular matters relating to each of these documents as set out in the Discovery Order and that in the event that any of the documents are required to be inspected by the Plaintiff that they have any information not related to this matter redacted.

[10]   The plaintiff did not accept the defendants’ claim the documents were confidential. There was correspondence between lawyers about the matter. In an effort to resolve the dispute without Court involvement, the plaintiff proposed the documents be provided only to counsel who would undertake not to disclose them to the plaintiff unless the parties agreed or the Court ordered. That proposal was not accepted by the defendants.

[11]   Consequently, at a case management conference on 12 May 2021, I made directions for the filing of this application and for a hearing.

High Court Rules

[12]Rule 8.25 provides:

Challenge to privilege or confidentiality claim

(1)If a party challenges a claim to privilege or confidentiality made in an affidavit of documents, the party may apply to the court for an order setting aside or modifying the claim.

(2)In considering the application, a Judge may require the document under review to be produced to the Judge and may inspect it for the purpose of deciding the validity of the claim.

(3)The Judge may---

(a)set aside the claim to privilege or confidentiality; or

(b)modify the claim to privilege or confidentiality; or

(c)dismiss the application; or

(d)make any other order with respect to the document under review that the Judge thinks just.

[13]   As far as I can tell, there is no dispute as to the relevant principles. Relevant documents should generally be made available for inspection. It is for the party claiming confidentiality to justify it. To do so they must lay a proper evidential foundation.1

1      Port Nelson Ltd v Commerce Commission (1994) 7 PRNZ 344 (CA).

[14]In Port Nelson Ltd v Commerce Commission the Court of Appeal noted:2

The ability of each party to a proceeding to inspect the documents of the other, except for documents which are privileged, is important in enabling the proceeding to be brought to a just conclusion. It avoids parties being taken by surprise. It enables legal advisors to better assess the likely outcome of trial, and to concentrate on what will ultimately prove to be the real issues. In this way it can save costs. Sometimes, however, relevant documents which are not privileged may be commercially sensitive. Examples would be documents showing the detailed costings of products or services which are provided in  a competitive market, marketing plans for a proposed new product, or a patent specification during the period before the application has been accepted and made available for inspection.

[15]Later in the same judgment the Court said:3

Relevant documents should generally be made available for inspection. The fact that they are regarded as being confidential, and would not be made available were it not for the requirements of the litigation, is immaterial … It must be either apparent from the document in question or shown by other evidence that disclosure would be likely to prejudice the party in some significant way. Even the possibility of prejudice may be sufficient, but that will depend on the seriousness of the possible prejudice and on the significance of the document to the issues in the proceeding, and the extent to which limited disclosure may enable the concerns of both parties to be accommodated.

[16]   Claims to confidentiality are to be carefully reviewed and scrutinised.4 Recently in  Detection Services  Ltd v  Pickering, Associate Judge Andrew rejected  a plaintiff’s claim for confidentiality in relation to various categories of documents, including financial reports, stating:5

[10]      … [I]n each case the claim for confidentiality is based essentially on mutual distrust and largely unsubstantiated allegations of potential misuse of the documents for improper personal gain.

[11]      It has not been demonstrated that the parties will be prejudiced in     a significant  way,   should  confidentiality  not  be  ordered.    In  each  case, I conclude that there is sufficient protection arising from the obligations that all of the parties have pursuant to Rule 8.30(4) – i.e. the parties can only use the documents for the purposes of the proceedings and not for any collateral or ulterior purpose…

2      At 347.

3      At 348.

4      Detection Service Ltd v Pickering [2018] NZHC 1617 at [9] citing Business Distributors Ltd v SIA Abrasives Australia Pty Ltd [2014] NZHC 3365.

5      Detection Services Ltd v Pickering, above n 4.

Plaintiff’s submissions

[17]   Ms Allan, counsel for the plaintiff, filed thorough and helpful submissions. She explained the relevance of the documents to matters in issue. I note the defendants have acknowledged the relevance of the documents by listing them in their affidavit of documents. I need not explore that matter further except to note I am satisfied the documents concern all of the following issues arising:

(a)the value of the shares in Point Shingle Supplies Ltd;

(b)the extent to which estate funds, Ms Coll’s personal funds, and funds of Point Shingle Supplies Ltd have been intermingled;

(c)the extent (if at all) to which Ms Coll has reimbursed herself from estate funds for work and expenses she says was undertaken on the estate’s behalf;

(d)confirmation of the sale and receipt of proceeds of sale of estate assets; and

(e)the extent to which Mr Stocker made provision for the plaintiff during his  lifetime,  particularly  in  respect  to  payments  made  towards     a property at 1A Buckleys Terrace, Ashburton.

[18]   In her affidavit in opposition to this application, Ms Coll makes the following points:

(a)the claim for confidentiality over the ANZ Bank statements and annual financial statements of Port Shingle Supplies Ltd is made on the basis the documents are commercially sensitive and disclosing them to the plaintiff could cause financial and reputational harm to the company;

(b)the claim for confidentiality over her personal bank statements is made on the basis that disclosing them to the plaintiff could harm her by releasing private information into the public domain; and

(c)that the parties have agreed to the appointment of an independent accountant to audit the financial transactions of the estate and value the shares in Point Shingle Supplies Ltd, “which will allow for the documents to be inspected without potential for harm to be done to Point Shingle Supplies Limited or me personally”.

[19]   Financial accounts and bank records are commonly disclosed and produced for inspection in litigation without any claim being made for confidentiality. Here, there is no evidential basis for Ms Coll’s assertion the financial accounts and bank statements of Point Shingle Supplies Ltd are confidential or that disclosure of the documents to  the plaintiff might  cause harm  to  the company.  The plaintiff is  not a competitor of the company and there is nothing to suggest she might be able to use the documents to the detriment of the company. Given her position as a beneficiary under the will it is obvious she would have no interest in harming the company.

[20]   As to Ms Coll’s bank statements, again there is nothing to suggest they are confidential or that the plaintiff would release them into the public domain. Ms Coll has the protection provided by s 8.30(4) of the High Court Rules, which provides:

(4)A party who obtains a document by way of inspection or who makes a copy of a document under this rule—

(a)may use that document or copy only for the purposes of the proceeding; and

(b)except for the purposes of the proceeding, must not make it available to any other person (unless it has been read out in open court).

[21]   The fact the parties have agreed to the appointment of an independent accountant to prepare statements of account for the estate and value the shares in Point Shingle Supplies Ltd does not advance the defendants’ position.

[22]In her affidavit Ms Colls says:

On the basis that the documents are not disclosed to the Plaintiff or her lawyer, I agree to the independent accountant inspecting the documents for the purposes of the audit of transactions and the share valuation.

and

The engagement of an independent accountant to conduct an audit of the Estate transactions and a  valuation  of  the  shares  in  Port  Shingle  Supplies Limited will allow for the documents to be inspected without the potential for harm to be done to Point Shingle Supplies Limited or me personally.

[23]   How can it be expected the parties will jointly instruct an expert to undertake these tasks when only one side has access to the relevant documents upon which that instruction will be based? How is the plaintiff to know if the information provided to the accountant is correct? How is the plaintiff or her lawyers to test the expert’s conclusions without access to the document upon which the conclusions are based? The position the defendants advance is wholly unreasonable.

[24]   The defendants’ claims to confidentiality will be set aside and the documents will be produced for the plaintiff’s inspection.

Costs

[25]The plaintiff seeks:

(a)costs on a solicitor-client basis;

(b)an order the defendants are to pay her costs in their personal capacities; and

(c)an order the defendants are not entitled to be indemnified from the estate for their costs and disbursements in relation to this application.

[26]   The plaintiff argues the defendants are not entitled to be indemnified for costs on the basis they acted improperly and unreasonably in claiming and then maintaining confidentiality. She submits it will be unfair to allow them to be indemnified in circumstances where ultimately the beneficiaries of the estate will bear the financial burden of their unreasonableness.

[27]The defendants argue that costs should either:

(a)lie where they fall; or

(b)be reserved until the outcome of the forensic analysis of the estate’s transactions is known; and

(c)in the case of Mr Jackson, no costs should be awarded against him personally because he has no control over the documents in respect of which confidentiality was claimed; and

(d)in the case of Ms Coll, no costs should be awarded against her personally because she proposed a fair and reasonable process for the inspection of the documents.

[28]   In relation to the defendants’ submission that costs should lie where they fall or be reserved, there is no doubt the plaintiff is the winning party on this application and is entitled to costs.6 There is also no basis to reserve costs. Rule 14.8 of the High Court Rules provides that costs on opposed interlocutory applications are to be fixed when the application is determined unless there are special reasons to the contrary. There are no special reasons in this case. The fact that there is to be an analysis of the estate’s transactions by an independent accountant has no bearing on this.

[29]   The plaintiff’s claim to solicitor-client costs is made in reliance on r 14.6(4)(a) of the High Court Rules, that the defendants have “… acted vexatiously, frivolously, improperly, or unnecessarily in … defending a proceeding or a step in a proceeding”. However, the plaintiff has not provided any detail of her solicitor-client costs and so I award costs on a category 2B basis.

[30]   As to whether the defendants are entitled to be indemnified for costs from the estate, the starting point is trustees have a right to be protected from liabilities arising in the course of their trusteeship. They are, generally speaking, entitled to be reimbursed from the trust fund, and this includes costs awarded against them in litigation.7 However the right relates to “reasonable costs” incurred on behalf of the trust.

6      High Court Rules 2016, r 14.2(1)(a).

7      C Kelly and G Kelly  Garrow and Kelly Law of Trusts and Trustees (7th (ed) LexisNexis    New Zealand Ltd, Wellington 2013) at [24.51] citing Dark v Weenik (CA) HC Auckland CIV-2003-404-5486, 5 February 2007.

[31]In Re Beddoe Bowen LJ said:8

The principle of law to be applied appears unmistakably clear. A trustee can only be indemnified out of the pockets of his cestuis que trust against costs, charges,  and  expenses  properly  incurred  for  the  benefit  of  the  trust  –  a proposition in which the word ‘properly’ means reasonably as well as honestly incurred.

[32]   In Re O’Donoghue, Hammond J held trustees are entitled to an indemnity in respect of expenses which are “properly incurred” with the consequence that improperly incurred expenses fall upon the trustee personally.9 He noted this principle, evolved by Chancery Judges, was reflected in s 38 (2) of the Trustee Act 1956. He said:10

There is a respectable volume of case law authority around in the British Commonwealth as to what may be regarded as “not properly incurred expenses”. Necessarily, given the principle, these cases all appear to be determinations on the factual position arising in a particular case. But the principle  that  expenses  must  be  properly  incurred  necessarily  requires   a trustee, if called upon, to demonstrate that the expenses arose out of an act falling within the scope of his trusteeship; whether it was something that his or her obligations required the Trustee to undertake; and whether the expense incurred was, in all the circumstances, “reasonable”.

[33]   On the facts of the case before him Hammond J considered that the trustee who had applied for directions under s 66 of the Trustee Act 1956 had not acted reasonably in the position he had maintained that there might have been an intestacy as to the residue of an estate. Hammond J had no difficulty in determining there had not been an intestacy. He awarded costs to the beneficiary under the will and made an order the trustee was not entitled to an indemnity from the estate for his costs and disbursements in the proceeding. He said:11

A Court will naturally hesitate before leaving a trustee, who, after all, shoulders an onerous burden, to carry costs personally. But I am afraid that this is such a case: I can see no proper reason for the trustee having adopted the obdurate position he did. He acted unreasonably in the sense that I can discern no proper justification, or even a reasonably arguable one, for his having persisted in forcing Health Waikato up to a full defended hearing, and a delayed distribution of some years of the estate. It cannot be right that he should then seek to offload his costs of the proceeding onto the residuary

8      In Re Beddoe [1893] 1 Ch 547 at 562 referred to in Cockle v Roydhouse HC Auckland CP438/SD02, 19 December 2003 at [47].

9      Re O’Donoghue [1998] 1 NZLR 116 (HC).

10     At 121.

11     At 122.

beneficiary. There will, therefore, be an order that the trustee is not entitled to indemnity from the estate for his costs or disbursements in these proceedings.

[34]   In The Cats’ Protection League v Deans the plaintiff sought documents and information relating to trust finances and then issued proceedings against the trustees for the information.12 Without filing a defence the defendants agreed on the disclosure of certain documents and all that was outstanding was the issue of costs. Associate Judge Osborne considered the issue of the proceeding was a reasonable step taken to enforce the plaintiff’s entitlement to information concerning the trust. He adopted the concept of reasonableness as the “touchstone”  in  relation  to  the  issue  whether  the defendants should carry their costs personally.13 He referred to Re O’Donoghue,14 and said:

There was a measure of unreasonableness in the position adopted by the defendants which led to this proceeding. But the present case is not close to the level of unreasonableness found by the Court in Re O’Donoghue. In the present case there was some room for debate as to the nature and extent of the beneficiary’s rights. There is some substance to Mr Lester’s proposition that the requests for information were of a developing nature. Finally, this is not  a case where a trustee for years resisted a course of action and defended it to a full hearing. On the other hand, whereas the trustee in Re O’Donoghue was not legally qualified, and the Court was left with a sense that some of the responsibility for events rested with the  advisers  to  the  trustee,  one  of  the trustees in this case is legally qualified and is a member of the firm which has provided the legal representation in this proceeding.

[35]   Associate Judge Osborne ordered the defendants were not entitled to an indemnity from the estate to the extent of 50 per cent of their costs. As far as the plaintiff’s costs and disbursements were concerned, the Judge held that the trustees personally bear 50 per cent of the plaintiff’s costs. He said:

[42] In this case, an injustice would be caused if the plaintiff’s costs were either left to be absorbed by the plaintiff itself or reimbursed to the plaintiff from the trust capital. Ultimately, the financial impact of either course would fall entirely on the plaintiff as income beneficiary.

[36]   The position remains unchanged under the Trusts Act 2019. A trustee’s right to indemnity for expenses and liabilities incurred when acting as a trustee applies to

12     The Cats’ Protection League v Deans (2010) 20 PRNZ 584 (HC).

13 At [37].

14     Re O’Donoghue, above n 9.

expenses reasonably incurred. Section 81 of the Act provides:

81Trustee’s liability for expenses and liabilities incurred, and trustee’s right to indemnity

(1)A trustee is personally liable for an expense or a liability incurred by the trustee when acting as a trustee.

(2)However, a trustee who incurs an expense or a liability when acting reasonably on behalf of the trust is entitled,—

(a)if the trustee has paid the expense or discharged the liability out of the trustee’s own funds, to reimbursement from the trust property; or

(b)in any other case, to pay the expense or discharge the liability directly from the trust property (or to have it paid or discharged by a remaining trustee).

(3)The operation and enforcement of the indemnity in this section is governed by the rules of the common law and equity relating to trusts.

(4)This section does not limit any indemnity available at common law or in equity.

[37]   There was never any basis for the defendants to assert confidentiality in respect to the documents.  The defendants  argue they have acted  reasonably and proposed  a fair mechanism to allow for inspection of the documents over which confidentiality was claimed. I do not accept that submission. The mechanism, as I understand it, was that the documents would be disclosed to a third party accountant but not to the plaintiff. The defendants’ position has been that neither the plaintiff nor her counsel should be allowed to inspect the documents. That was unreasonable. A most reasonable offer that inspection be limited to the plaintiff’s counsel, was rejected by the defendants. That proposal would have addressed all of the defendants’ asserted concerns. The defendants’ rejection of the proposal was also unreasonable. It is an aggravating factor that the defendants adopted this position despite having legal advice and when one of them is a practising lawyer.

[38]   That leads me to the argument Mr Jackson should not be liable for costs personally because he “has no control over the documents over which confidentiality is claimed”. I do not accept this submission. Mr Jackson is a co-executor and co-trustee of the estate. The opposition to this application was advanced on behalf of

both him and Ms Coll. He bears equal responsibility with Ms Coll for the position that has been adopted in relation to this application.

[39]   In all the circumstances, I find that the defendants should not be entitled to an indemnity from the estate for the plaintiff’s costs or their own costs of this application.

Result

[40]   The defendants’ claim for confidentiality is set aside. The defendants are to provide copies of the documents to the plaintiff within 14 days.

[41]   The plaintiff is entitled to costs of this proceeding on a 2B basis plus disbursements as fixed by the Registrar.

[42]   There shall be an order that the defendants are not entitled to an indemnity from the estate for either the plaintiff’s costs or their own legal costs and disbursements on this application.

O G Paulsen Associate Judge

Solicitors:

Malley & Co, Christchurch Gresson Dorman & Co, Timaru