Jacomb v Jacomb
[2020] NZHC 1764
•21 July 2020
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2019-485-503
[2020] NZHC 1764
UNDER the inherent jurisdiction of the High Court to supervise Trusts and Part 18 of the High Court Rules 2016 BETWEEN
VERONICA JACOMB
Plaintiff
AND
MICHAEL JOHN JACOMB
First Defendant
TRENA KATHLEEN JACOMB
Second Defendant
GENSET TRUSTEE LTD
Third Defendant
RLA TRUSTEE SERVICES NO 52 LTD
Fourth Defendant
Hearing: 2 and 3 June 2020 Appearances:
N A Farrands for the Plaintiff
N M Pender and A C Dartnall for the Defendants
Judgment:
21 July 2020
JUDGMENT OF COOKE J
Table of Contents
CLAIM FOR DISCLOSURE OF INFORMATION................................................................................. [5]
The Court’s approach...................................................................................................................................... [6]
Factors in favour of disclosure.................................................................................................................... [13]
Reasons why disclosure should not be ordered....................................................................................... [19]
Veronica’s drug use and criminal associations..................................................................................... [22]
Undermining the Trust................................................................................................................................ [32]
JACOMB v JACOMB [2020] NZHC 1764 [21 July 2020]
Impact on the family.................................................................................................................................... [46]
Conclusion on disclosure............................................................................................................................... [51]
PERSONAL LIABILITY.............................................................................................................................. [52]
Claim that Trust Deed not complied with................................................................................................. [53]
The interpretation of trust deeds............................................................................................................... [58]
The appropriate interpretation here........................................................................................................ [61]
Application for directions.......................................................................................................................... [69]
Claim that first to third defendants personally liable........................................................................... [78]
CONCLUSION................................................................................................................................................. [87]
[1] Ms Veronica Jacomb brings these proceedings in her capacity as a beneficiary of the Genset Trust (the Trust). The first and second defendants are her parents. They are two of the trustees of the Trust. It is a family trust settled by her father by trust deed dated 4 November 1993 (the Trust Deed).
[2] Ms Jacomb is estranged from her family. She left home when she was 16 years old, and turned to a life connected with drug use, and other offending. She is now 43 years of age. Her proceedings raise two matters. First she says that information concerning the Trust has not been provided to her, and that she seeks directions from the Court that certain information be so provided, namely:
(a)Financial statements for the Trust for the years 2013–2019.
(b)Resolutions of the trustees of the same period.
(c)Any memoranda of wishes by Mr Jacomb or the trustees.
(d)Any resolutions of the shareholders of the third named defendant relating to its decisions to act as a trustee of the Trust or to exercise or refrain from exercising any power or discretion conferred by the Trust Deed.
(e)Legal advice given to the defendants as trustees of the Trust, relating to:
(i)the third named defendant’s corporate structure and shareholding in as much as that structure or shareholding related to the Trust;
(ii)any resolutions of the shareholders of the third named defendant relating to its decisions to act as a trustee of the Trust and to exercise or refrain from exercising any power or discretion conferred by the Trust Deed.
[3] In her second claim Ms Jacomb contends that her parents have not properly administered the affairs of the Trust, and in particular the requirement in the Trust Deed that one trustee not be a discretionary beneficiary or relative of such a beneficiary. She says that that has not been the case since 30 October 2014, and she seeks declarations that all decisions purported to be made by the defendants as trustees since 30 October 2014 are invalid, and a declaration that the defendants are personally liable for purported trust actions since that time.
[4] The defendants resist providing disclosure to Ms Jacomb. In relation to the second claim they accept that there was a period of time when the terms of the Trust Deed were not complied with, and at the hearing of this matter asked for directions from the Court to respond to that issue, but they otherwise oppose the declarations sought.
CLAIM FOR DISCLOSURE OF INFORMATION
[5] I deal first with Ms Jacomb’s claim that particular information be disclosed to her. For reasons that will be addressed in greater detail below, that claim invokes the supervisory jurisdiction of the High Court, and involves a close consideration of the relevant facts and surrounding circumstances. I will deal with the relevant factual findings, and the significance of the facts as found in greater detail below.
The Court’s approach
[6] There was no material difference between the parties on the approach that the Court takes to this kind of application which was set out by the Supreme Court in Erceg v Erceg.1
[7] The first point is that, whilst it is initially for the trustees to make a decision on whether to provide disclosure to beneficiaries, an application to the Court requires the Court to exercise its own judgment, and make its own decision on whether disclosure should be made. As the Supreme Court in Erceg held:
[18] We consider the correct position is that the Court’s jurisdiction on an application for the exercise of the supervisory jurisdiction is not limited to the grounds of review of a discretionary decision by the trustees. Rather, the Court must exercise its jurisdiction as a court of equity, exercising its own judgment as to whether disclosure ought to be made at all and, if so, to what extent and on what conditions.
[19] The supervisory jurisdiction is an inherent jurisdiction of the Court. It is complementary to the Court’s statutory jurisdiction under the Trustee Act 1956.2
[8] The Supreme Court also addressed, in some detail, the approach that should be adopted in relation to disclosure applications. It held as follows:
[51] We see the starting point as being the obligation of a trustee to administer the trust in accordance with the trust deed and the duty to account to beneficiaries. A beneficiary who seeks such an account may seek access to documentation necessary to assess whether the trustee has acted in accordance with the trust deed. That can be expected to be the basis on which the beneficiary will seek disclosure of trust documentation.
…
[53] However, it must be borne in mind that there will normally be a number of beneficiaries and the underlying principle in deciding whether disclosure will be made will be identifying the course of action which is most consistent with the proper administration of the trust and the interests of the beneficiaries, not just the beneficiary requesting disclosure.
…
1 Erceg v Erceg [2017] NZSC 28, [2017] 1 NZLR 320.
2 The present case relates only to the inherent jurisdiction and we do not express any view about the statutory jurisdiction under the Trustee Act 1956.
[56] Drawing these threads together, we consider the matters that need to be evaluated in relation to an application for disclosure of trust documents include the following:
(a)The documents that are sought. Where a number of documents are sought, each document (or class of document) may need to be evaluated separately, given that different considerations may apply to basic documents such as the trust deed and more remote documents such as the settlor’s memorandum of wishes.
(b)The context for the request and the objective of the beneficiary in making the request. The case for disclosure will be compelling if meaningful monitoring of the trustee’s compliance with the trust deed in the administration of the trust could not otherwise occur. In this regard, it may be relevant that disclosure has been made to other beneficiaries. However, assuming no improper motive on the part of the beneficiary seeking information, the fact that disclosure has previously been made to other beneficiaries will rarely be a decisive factor against disclosure.
(c)The nature of the interests held by the beneficiary seeking access. The degree of proximity of the beneficiary to the trust (or likelihood of the requesting beneficiary or others in the same class of beneficiaries benefitting from the trust) will also be a relevant factor.
(d)Whether there are issues of personal or commercial confidentiality. Recognition should be given to the need to protect confidential matters of a personal or commercial nature. The Court should also take into account any indications in the trust deed itself about the need for confidentiality in relation to commercial dealings or private matters in relation to particular beneficiaries.
(e)Whether there is any practical difficulty in providing the information. If the information sought by the person requesting the information would be difficult or expensive to generate or collate, that may be a factor against requiring its disclosure.
(f)Whether the documents sought disclose the trustee’s reasons for decisions made by the trustees. It would not normally be appropriate to require disclosure of the trustees’ reasons for particular decisions.
(g)The likely impact on the trustee and the other beneficiaries if disclosure is made. In particular, would disclosure have an adverse impact of the beneficiaries as a whole that would outweigh the benefit of disclosure to the requesting beneficiary? In the case of a family trust, this may include the possibility that disclosure would embitter family feelings and the relationship between the trustees and beneficiaries to the
detriment of the beneficiaries as a whole. However, on the other hand, non-disclosure may have a similar effect.3
(h)The likely impact on the settlor and third parties if disclosure is made. The impact that disclosure will have on the settlor and/or on third parties will need to be considered.
(i)Whether disclosure can be made while still protecting confidentiality. This may require that copies of documents supplied to a beneficiary are redacted to ensure non-disclosure of confidential information.
(j)Whether safeguards can be imposed on the use of the trust documentation. Examples would include undertakings and inspection by professional advisers only and other safeguards to ensure the documentation is used only for the purpose for which it was disclosed.
…
[60] As noted earlier, the starting point is the obligation of trustees to administer the trust in accordance with the trust deed and their duty to account to beneficiaries. So the strongest case for disclosure would be a case involving a request from a close beneficiary for disclosure of the trust deed and the trust accounts, which would be the minimum needed to scrutinise the trustees’ actions in order to hold them to account.
[9] In circumstances described as “unusual” the Court ultimately held in that case that even the basic documents such as the trust deed and financial statements should not be disclosed.4 The Court concluded that the risk of harassment by the applicant was significant and the benefits of disclosure were outweighed by the potential detriment.
[10] These principles were subsequently applied by the Court of Appeal in Addleman v Lambie Trustee Ltd.5 In that case the applicant, who was also estranged from her family, was granted disclosure of information. The Court said:
[28] One of a trustee’s fundamental duties is to maintain proper accounts in respect of trust property and have these available for inspection by beneficiaries. This is a necessary incident of a trustee’s fiduciary duty to account to the beneficiaries. Failure to keep such accounts is a breach of trust. While a beneficiary does not have an absolute right to the accounts, the circumstances in which such accounts may properly be withheld from a close beneficiary are likely to be limited.6 As the Supreme Court observed in Erceg,
3 As Potter J noted in Foreman v Kingstone [2004] 1 NZLR 841 (HC).
4 Erceg v Erceg, above n 1, at [101].
5 Addleman v Lambie Trustee Ltd [2019] NZCA 480.
6 Foreman v Kingstone, above n 3, at [88].
“the strongest case for disclosure would be a case involving a request from a close beneficiary for disclosure of the trust deed and the trust accounts, which would be the minimum needed to scrutinise the trustees’ actions in order to hold them to account”.7
[11] In my view it is of assistance when applying these principles to bear in mind their purpose. As the above passage illustrates, the reason why beneficiaries are normally entitled to information is that such disclosure can operate as a means by which the trustees’ performance of the terms of the relevant trust are checked, and the objects of the trust ultimately promoted. This is in the best interests of the trust and its beneficiaries, including the beneficiary seeking information. That also explains the exception to the principle. If particular disclosure would likely result in the objects of the trust being adversely affected then a basis to withhold disclosure arises. Disclosure to one beneficiary may be adverse to the interests of the wider beneficiaries because of such ramifications. It seems to me, therefore, that ultimately the Court is considering what is in the best interests of the trust and its beneficiaries.
[12] Provisions have now been enacted which regulate the issue of disclosure in the Trusts Act 2019. The relevant provisions of that Act only comes into effect on 1 January 2021, however.8 Under s 52 there is a presumption that trustees must give information on request, subject to the considerations listed in s 53. As a consequence of the s 53 factors a decision can be made to refuse to disclose the information under s 52(2). Under s 54(2) the trustee must then apply to the Court for directions as to whether the decision not to disclose is reasonable. Whilst that involves a different procedural framework for the relevant questions, the factors listed in s 53 are similar to those set out by the Supreme Court. I doubt that any difference between the criteria will be regarded as determinative. For that reason it seems to me that it is likely that the decision of the Supreme Court in Erceg v Erceg, and of the Court of Appeal in Addleman v Lambie Trustee are likely to be highly relevant to the application of the statutory provisions when they come into effect.
Factors in favour of disclosure
[13]It is first appropriate to address the factors that favour the order for disclosure.
7 Erceg v Erceg, above n 1, at [60].
8 See Trusts Act 2019, s 2.
[14] The first point is that Ms Jacomb has a direct and legitimate interest in the Trust. The final beneficiaries of the Trust are her and her brother Richard. The discretionary beneficiaries are defined to include her, her brother, her two children, his three children, his wife, and Mr and Mrs Jacomb themselves. It is accordingly a family trust with limited beneficiaries settled by her father where she and her brother are the final beneficiaries. The discretionary beneficiaries are drawn slightly more broadly to encompass their children and spouses, but it is still reasonably confined. The objects of the trust include “the personal support maintenance comfort education advancement in life or otherwise howsoever” of the discretionary beneficiaries (clause 4(a)) with the final beneficiaries receiving the remaining trust fund on the vesting day, being 80 years after establishment, or such earlier date the trustees determine (clause 11). As a final beneficiary it can be said that Ms Jacomb has what can be described as a potential entitlement to the trust fund, but the powers of the trustees mean that the other discretionary beneficiaries could benefit from the trust funds to her detriment, even potentially to the point of exclusion. But nevertheless it follows that she has a very direct interest in the administration of the Trust.
[15] Secondly, and as I will elaborate in greater detail below, not only is Ms Jacomb estranged from her parents, but also the relationship has become one of some acrimony. Her parents see her as someone who has fallen into the world of drugs and other criminal offending who now treats them in an abusive way. For that reason Ms Jacomb has legitimate reasons to question whether she will receive beneficial entitlements as a consequence of the exercise of powers by the trustees. Given her issues with drug addiction she is also a person who is potentially in need of help.
[16] The third point is that the documents she seeks access to can properly be described as core trust documents. She has been provided with a copy of the Trust Deed, but she has not been provided with other basic information identified in [2] above – such as the Trust financial statements, trustee resolutions, memoranda of wishes or shareholder resolutions related to the Trust.9 The further one goes down the list of materials sought in [2] above, the less fundamental the documents become, but
9 I note that Ms Jacomb and her solicitor have been offered a meeting with the Trust’s new independent trustee and its legal adviser to view the documents on the basis that no copies would be taken. That offer had not been taken up at the time of the hearing.
they still all remain core documents related to the administration of the Trust. For example the financial information, and documents concerning the settlor’s wishes, can be seen as documents that are rudimentary in order for a beneficiary to understand the nature of the Trust, and their interest in it.
[17] The final factor is that the second claim advanced by Ms Jacomb demonstrates that the trustees have not complied with the Trust Deed in the administration of the affairs of the Trust. I will elaborate on this matter below, but a reasonably significant error in the administration of the Trust has occurred. This buttresses the plaintiff’s claim for access to the documentation in order to assess whether the trustees have acted in accordance with the Trust Deed.10
[18] These factors in combination demonstrate that Ms Jacomb, who has a significant interest as a final and discretionary beneficiary, has a legitimate reason to be concerned that she will not receive beneficial entitlements under the Trust as a consequence of the decisions of the trustees, particularly given the acrimonious relationship she now has with them. She seeks access to reasonably fundamental information against that background, and against the further background that there have been errors in the administration of the Trust. I accept Mr Farrands’ arguments that these are factors strongly in favour of disclosure being required.
Reasons why disclosure should not be ordered
[19] Notwithstanding the significance of the factors in favour of disclosure I accept Ms Pender’s submissions that disclosure should not be ordered. That is so for three interrelated reasons:
(a)Ms Jacomb has a history of drug and dishonesty offending, and I am satisfied from the evidence that she continues to have significant drug and criminal associations. In my view any disclosure made will likely be used for improper reasons associated with these connections. This would be inconsistent with the best interests of the Trust and the beneficiaries.
10 See Erceg v Erceg, above n 1, at [51].
(b)I am satisfied that Ms Jacomb has previously used information she has obtained to seek to undermine her parents in their capacity of trustees, and act in a manner that is contrary to the best interests of the Trust and the beneficiaries. She has engaged in a campaign to coerce them into making distributions to her, including by the misuse of information she has obtained. This has actively harmed the Trust and its beneficiaries. Any further disclosure will likely be used in a similar way.
(c)Providing disclosure would involve encouraging a continuation of the acrimonious relationship that has been established between Ms Jacomb and her parents, which would be detrimental to the beneficiaries of the Trust more broadly. It would have significant detrimental effect on the family relationships, and the administration of the Trust.
[20] Before dealing with those three issues in detail, and addressing the relevant facts, it is appropriate to make some initial observations about the basis for my factual findings.
[21] I received affidavit evidence from Ms Veronica Jacomb, which was responded to with affidavits from her mother Mrs Trena Jacomb, Ms Eloise Jacomb (Veronica’s daughter) and Mr Noel Ingram QC for the defendants. Ms Jacomb provided an affidavit in reply. All deponents were cross-examined on their affidavits and a number of factual disputes were involved. I generally found Ms Veronica Jacomb’s evidence less than complete, some of her answers were evasive, and her evidence often involved an inaccurate reconstruction of events in an attempt to present her position in a better light. Examples of the incomplete and evasive evidence she gave include her involvement with the theft of her parents email data addressed at [40]–[42] below and her answers about the misuse of information disclosed in this proceeding addressed at
[39] below. Examples of the attempted reconstruction of events in her evidence of her conversations with Mr Ingram addressed at [36] below, and with her daughter described at [29] below. I generally found the evidence from the defendants’ witnesses to be honest and reliable. For Mrs Trena Jacomb and Eloise Jacomb in particular giving evidence would have been difficult, but I have no hesitation in preferring their evidence to that of Ms Veronica Jacomb on a number of matters.
Veronica’s drug use and criminal associations
[22] Mrs Trena Jacomb described Veronica as a happy and well-balanced child until the age of 15, but from that stage they “effectively lost our daughter” and that she began taking drugs and socialising with gang members from that time. Although Ms Jacomb initially denied it in her affidavit, in 2006 she consented to orders at the Family Court that Mr and Mrs Jacomb take over the parenting and guardianship of her two children, who at the time were aged ten and four.
[23] Although Ms Jacomb also acknowledges she has had problems with drug addiction, and admitted some significant criminal offending, her evidence minimised these matters. In response the record of her criminal convictions was produced. This begins in 1995 with a conviction for assault. In March 1998 she was convicted of theft, and then in May 1998 she was convicted and sentenced for theft, receiving stolen property and possession of prescription medicine. In June 1998 she was then sentenced to periodic detention for burglary offending. In July 1999 she was further sentenced to imprisonment for a series of offences including receiving stolen property, possession of methamphetamine for supply and failing to answer District Court bail. In May 2001 she was then sentenced to a fine for failing to stop when required. In June 2002 she was again convicted and fined for dishonestly using a document for pecuniary advantage. In April 2005 she was again convicted and fined for shoplifting.
[24] Her offending then moved from the Auckland and North Shore area to the Hutt Valley when in May 2006 she was convicted and fined for possession of methamphetamine and amphetamine utensils. She then returned to the Auckland region where she was convicted and sentenced to community work and reparation for wilful damage in October 2014. In June 2016 she was sentenced to community detention and intensive supervision for a series of offences including possession of methamphetamine/amphetamine utensils and supplying fantasy substances. She was also convicted for breach of her community work sentence during 2016.
[25] The conviction history is consistent with other evidence of drug and dishonesty offending. Mrs Jacomb explained that in 1996 the trustees attempted to assist Ms Jacomb by arranging a flat for her in Auckland above a shop so that she could run
the shop as a toy library, and the Trust purchased new toys for that operation. The police subsequently contacted Mr and Mrs Jacomb and asked for the shop to be shut down because the toy library was being used for drug dealing and receiving stolen property. Later the Trust purchased a property for Ms Jacomb and her children in May 2005. I accept Mrs Jacomb’s evidence that she absconded from that property in 2006 and left it in a mess, including from graffiti written on the property and/or its furnishings.
[26] In her evidence Ms Jacomb accepted that she had had a problem with addiction but that she had “not consumed any illegal drugs or any alcohol since mid-2014”. Given the sentence imposed in June 2016 for possessing methamphetamine/ amphetamine and supplying fantasy substances I do not accept that. More generally her evidence was that she has put this life behind her, and that she has now started her own business which she said involved a company which designed logos, branding and other advertising for clients. But Mrs Jacomb provided records for the relevant company which showed that Ms Jacomb is a 50 per cent shareholder, and the other shareholder is Mr Gregory Dean Sharpe. Mrs Jacomb also provided a copy of a judgment of the Court of Appeal dated 4 November 2008 concerning Mr Sharpe’s sentence of six years three months’ imprisonment for the manufacture of methamphetamine. The Court of Appeal referred to Mr Sharpe as a “persistent offender with an abysmal record relating to the manufacture of methamphetamine prior to the present offending”.11 Ms Jacomb did not mention that the co-owner of her new business had such a background in her initial affidavit. Her response in her reply affidavit was to say that it is her understanding that Mr Sharpe had been clean since October 2014 and wants to be a productive member of society. I do not find that persuasive.
[27] Ms Jacomb also has a prominent tattoo on her back. It reads in large block capitals covering almost her entire back “fuck the police”. She said that this tattoo no longer reflects her views. But a photograph of her tattoo has been posted on her Facebook page, and whilst she said she had taken that down she accepted when I asked her that she had only done so this year. She also gave evidence that she had “never
11 R v Sharpe [2008] NZCA 464 at [24].
associated with gangs or gang members”. But Mrs Jacomb produced a copy of a Facebook page for a Mr Steve Gunbie which contains photographs in which he clearly identifies as a Mongrel Mob member or associate, and which includes photographs of Ms Jacomb’s back with its prominent tattoo. Ms Jacomb’s explanation for her photo being on his Facebook page was that she had gone out with Mr Gunbie about 20 years ago. But given this, and other evidence, I do not accept her evidence that she has not associated with gang members, or that her tattoo does not reflect her current attitudes.
[28] This also emerges from other threads of evidence. For example Mrs Trena Jacomb gave evidence that Ms Jacomb has had countless addresses — including five in the last year — and at least 20 mobile phone numbers. Ms Jacomb did not dispute this, but responded that since 2000 she had enjoyed trying out cheap mobile phones and different mobile phone networks, and had had many different numbers. By itself this evidence does not establish much, but when it is combined with the other evidence it is much more difficult to accept Ms Jacomb’s innocent explanation for frequently changing her mobile phone number. In my view this behaviour is consistent with a lifestyle involving drug related activity.
[29] Ms Jacomb’s 18 year old daughter gave evidence. She has contact with her mother and has stayed with her in Auckland. She said that her mother had told her that she was still using drugs, including cocaine and methamphetamine.12 I do not accept Ms Jacomb’s evidence that her daughter has misunderstood what she meant, and that the discussion they had was about drugs that both of them had taken, and only in the past. I accept Eloise’s answers under cross-examination that she has not used these drugs. It is most unfortunate that Ms Jacomb’s counsel was required to put to her that she had. She accepted that her mother might have been talking about historic use, but explained she took her to be referring to current use, and I accept that that was the obvious inference.
[30] The evidence as a whole satisfies me that Ms Jacomb is still involved with drugs, and continues to associate with others involved in drugs and other criminal offending. For Ms Jacomb to have left behind the life of drugs and associated criminal
12 There was no objection to this evidence, but there was objection to Eloise’s evidence in relation to her opinion in relation to her mother’s drug use which I do not reply upon.
activity as she suggested would have been a watershed moment in her life. But there is no evidence of a significant change of this kind. On the contrary the evidence discloses a continuation of the same general lifestyle.
[31] Having a record of drug and dishonesty offending, and a continuing association with people involved in such activities does not disqualify a beneficiary of a trust from their interests as a beneficiary, including their ability to receive information about the administration of a trust. Indeed drug addiction may suggest the beneficiary has a need as Mr Farrands argued. But offending of this kind raises an issue. Convictions for dishonesty and drug related offending, and concerns about the effects of drug addition, raise a risk that information that is disclosed to the beneficiary may be misused in a way that is contrary to the interests of the other beneficiaries, and the trust overall. For the reasons I next address, Ms Jacomb has so misused such information, and acted contrary to the interests of the other beneficiaries of the Trust.
Undermining the Trust
[32] I accept that Ms Jacomb has actively sought to undermine her parents in their capacity as trustees, and has misused information that she has obtained when doing so. I do not accept Ms Jacomb’s evidence refuting this. This has happened on two previous occasions of significance.
[33] The first occasion involves her involvement with significant litigation taken against the Trust. The Trust was sued by Edel Metals Group Ltd, a company associated with Mr John Sorenson and Mr Kenneth Wikeley. A number of steps were taken in that litigation at some cost to the Trust. Ultimately the High Court determined that claims against the Trust should be struck out, with Fogarty J concluding that Mr Sorenson had acted in an opportunistic, deliberate, unfair and unprincipled manner in the litigation.13 The Trust was awarded costs on an indemnity basis which were ultimately fixed in the amount of $693,323.45.14 I accept the evidence of Mrs Trena Jacomb that Ms Jacomb supported the plaintiffs in this litigation against the Trust. I do not accept Ms Jacomb’s evidence that she did not.
13 Edel Metals Group Ltd v Geier Ltd [2015] NZHC 1528 at [26].
14 See Edel Metals Group Ltd v Geier Ltd [2018] NZCA 494 and Edel Metals Group Ltd v Geier Ltd
[2019] NZHC 2538.
[34] There are certain aspects that Ms Jacomb cannot dispute. In a Facebook post of 31 January 2017 Ms Jacomb posted:
Dad’s in the Auckland High Court this Thursday. If anyone wants to support him? NOT! I’ll be there! LAUGHING. Wouldn’t miss it for the world!
[35] Ms Jacomb attended this hearing. She took a photograph of her parents when they were seated in the body of the Court. She then photoshopped the photograph by inserting comic strip speech bubbles seeking to ridicule them and the stance taken by them in the litigation. She then posted the image.
[36] Mr Ingram gave evidence that at the hearing in February 2017 Ms Jacomb approached him saying that she had learnt about the hearing from Mr Sorenson and complaining that she had not received distributions from the Trust. He said that she was aggrieved about not receiving distributions, and that she was concerned about the Trust. I do not accept Ms Jacomb’s evidence that Mr Ingram must have misheard her as she had not said that she had learnt of the hearing from Mr Sorenson, and that she did not complain about not receiving distributions. Mr Ingram said he had a clear recollection of these matters. Given the very difficult nature of the litigation such an unexpected approach from Ms Jacomb would have been very surprising and memorable.
[37] It is also significant that Ms Jacomb earlier attempted to coerce her parents to make distributions from the Trust when this litigation was commenced, and said that she would assist the plaintiffs if they did not. At that time she sent her mother a text message saying “Up to you Trena. Backpay me and I won’t bother with Ken. Decide now as tomorrow doesn’t count”. The reference to Ken was to Mr Wikeley. Ms Jacomb accepted in evidence that she had threatened to cooperate with the plaintiffs, but said she had never in fact done so.
[38] I do not accept that. Ms Jacomb said in her affidavit that she had not seen Mr Wikeley, who was a friend of her father, since she was a child. Under cross- examination she accepted that she had seen him in more recent times at a nightclub where “we may have mentioned a few things” and that this was “just a few hours talking”. Even this minimises the contact I conclude that she had. It is apparent that
they have been in communication about the Trust. In a letter from Ms Jacomb’s solicitors to the defendants’ solicitors dated 30 June 2014 Ms Jacomb’s solicitors questioned “the use of trust resources to pursue Mr Wikeley to bankruptcy”, being steps taken as a consequence of the litigation taken against the Trust. In addition, Mrs Jacomb produced an email from Mr Wikeley dated 11 March 2015 in which Mr Wikeley criticises Mr and Mrs Jacomb for not financially supporting Ms Jacomb. So they were clearly in communication with each other, and were each advancing the interests of the other in their communications with the Trust.
[39] In addition there is clear evidence of Ms Jacomb actively supporting these men in 2019. As a consequence of information concerning the absence of an independent trustee revealed to Ms Jacomb in the course of these proceedings, Ms Jacomb filed her amended statement of claim dated 19 December 2019. This is when she first advanced the second claim in the proceedings that I deal with below. At the same time the solicitors for Mr Sorenson raised exactly the same point with the Trust’s solicitors by letter dated 20 December 2019. Mr Sorenson’s solicitors sought to use this information in an attempt to resist enforcement of the indemnity costs award on the basis that all decisions made by the trustees were invalid because of a lack of an independent trustee. I do not accept Ms Jacomb’s evidence that she did not provide the relevant information to Mr Sorenson. The suggestion that Mr Sorenson’s solicitors found out about this issue in some other way at exactly the same time is unrealistic. The striking feature about this is that Ms Jacomb has used information concerning the administration of the Trust to assist others resisting a significant claim that the Trust has against them for indemnity costs. This is a clear situation where Ms Jacomb has misused information in a manner contrary to the best interests of the Trust and its beneficiaries.
[40] As I indicated earlier there are two situations where Ms Jacomb has so actively misused information. The second situation involves more serious conduct. Sometime in 2013/2014 an IT worker who had been given access to the computers of Mr and Mrs Jacomb electronically copied and thereby stole a number of their emails, perhaps numbering 12,000. The emails contained personal and confidential communications, including some related to the Trust. In January 2020 Ms Jacomb told her parents that she had those 12,000 emails during one of the arguments she was having with them.
This was raised as a threat. When she gave evidence she accepted that she had said this, but said that this was not, in fact, true. In response Mrs Jacomb provided the Court with a copy of an email that she had received in December 2014 which attached a draft email from the information that had been stolen. The draft email concerned the administration of the Trust. The covering email was said to be from someone called “Frank Smith”, but Mrs Jacomb said that Frank Smith was really her daughter.
[41] Ms Jacomb denied that she was Frank Smith or that she sent the email. But there is another highly abusive email to Mrs Jacomb from Frank Smith of the same date, and in it the sender refers to Mr Jacomb as “Dad”. In her first affidavit Ms Jacomb said of this email:
… there is no excuse from what is said in the email. 2014 was a very difficult time for me. I had been homeless. I had lived in my car while trying to find a place to live. I needed help and I reached out to my parents …
[42] When she was cross-examined, however, she denied being the sender. But the above statement from her affidavit involved a recognition that she had sent the email. At the very least if she did not send it, she was associated with someone who had, and that person has possession of the stolen emails. This confirms that what Ms Jacomb has told her parents is true — she had access to the stolen 12,000 emails. I do not accept her evidence to the contrary.
[43] I have highlighted these two matters as they have directly involved Ms Jacomb misusing information concerning the affairs of the Trust and her parents in a manner adverse to the best interests of the Trust and its beneficiaries.
[44] There are other relevant matters. I accept that it is more likely than not that Ms Jacomb had at least an indirect involvement in the theft of Mr Jacomb’s firearm by the Mongrel Mob in 2005. Mrs Jacomb said that Mr Jacomb had to take steps to retrieve the weapon from the Mongrel Mob at the time. I also accept her evidence that only a person with inside knowledge of their home would have known where the guns were located. Given the association that Ms Jacomb has had with drug and criminal offending, and her connections to the Mongrel Mob at around that time, I conclude it is more likely than not that she supplied the information that led to that robbery.
[45] I do not address the other evidence of Ms Jacomb’s communications with her parents, and other things that she did, or is alleged to have done over the years. The findings above are sufficient to illustrate the key point, which is that Ms Jacomb cannot be trusted to act honestly and appropriately with any information that she obtains. On the contrary she is likely to use that information inappropriately, including in connection with dishonest or even criminal activities. I accept that she would likely use the information in a manner contrary to the best interests of the Trust, and the other beneficiaries of the Trust.
Impact on the family
[46] The final factor emerges from the above matters, and from the evidence generally. As the Supreme Court said in Erceg the embitterment of family feelings and the relationship between trustees and beneficiaries can be to the detriment of the beneficiaries as a whole.15 This can be relevant to whether disclosure should be ordered.
[47] As I have explained this is a closely held family trust with a limited number of beneficiaries. The relationship between Ms Jacomb and her parents is now dysfunctional. Ms Jacomb’s communications with them have been abusive, and they have been victims of her insulting and dishonest behaviour. Allowing Ms Jacomb access to information is only likely to lead to her to have further interactions with them as trustees which would involve a continuation of this behaviour. This has an adverse impact not only on the three of them, but the relationships within the family who are beneficiaries of the Trust more generally.
[48] Ms Jacomb said in her evidence that her primary concern is for her children rather than herself. But it is her parents that have brought up her children given that she was unable to do so because of her life of crime and drugs, and I have no reason to doubt that they will properly attend to the children’s legitimate interests as discretionary beneficiaries in accordance with the terms of the Trust. The continuous acrimonious interaction between Ms Jacomb and her parents must be highly distressing for all the family. When Eloise gave evidence she was cross-examined on
15 Erceg v Erceg, above n 1, at [56](g).
why she had been asked to do so. She somewhat poignantly responded that she was giving evidence so that the dispute between her mother and grandparents could be brought to a conclusion. I agree with her that this is needed.
[49] It may be very difficult for the relationship to improve, but a requirement that the trustees provide Ms Jacomb with information will simply fuel the fire. It will likely lead to a continuation of the disputes that are taking a heavy emotional toll, and no doubt cause distress to the wider family.
[50] Ms Jacomb will remain a beneficiary of the Trust, and she is entitled to have her interests considered in that context. It is apparent that she has had problems with drug addiction. The evidence that I heard, some of which I have described above, is consistent with her still being adversely affected by drugs and addiction. As I understood the position of Mr and Mrs Jacomb they still care for her, and the Trust would still consider assisting her if she made a genuine attempt to put her drug and criminal past behind her. Drug addiction, and particularly methamphetamine addiction can have terrible effects. Some of Ms Jacomb’s behaviour described above is consistent with the adverse effects of methamphetamine addiction. I am satisfied that the trustees remain concerned about Ms Jacomb’s position, that they are aware of the challenges she faces in life, and remain willing to consider assisting her if she honestly confronts her issues. Ordering disclosure is not appropriate to ensure the trustees meet their responsibilities. In my view it would hinder their ability to do so.
Conclusion on disclosure
[51] For the above reasons, and notwithstanding the strong reasons in favour of disclosure I have identified at [14]–[18] above, this is a case where it is clear to me that disclosure should not be required. The case has unusual features of a similar kind to the circumstances identified by the Supreme Court in Erceg.16 Indeed in my view this case is more clear cut as disclosure would be adverse to the Trust, and not in the best interests of the beneficiaries of the Trust. I am satisfied that disclosure would lead to further abusive communications, and to the misuse of information so disclosed,
16 Erceg v Erceg, above n 1.
including for potentially dishonest and even criminal activities. In my view disclosure is not appropriate.
PERSONAL LIABILITY
[52] Ms Jacomb’s second claim is that the terms of the Trust Deed have not been honoured in terms of the composition of the trustees of the Trust, and that there should be declarations that the trustees’ decisions for that period were invalid, and declarations that the trustees are personally liable for the actions and decisions of the Trust since 30 October 2014.
Claim that Trust Deed not complied with
[53] I deal first with the allegation that the terms of the Trust Deed were not complied with. The relevant term of the Trust Deed provides:
15. THE number of Trustees shall be kept up to at least two (2) (at least one of whom shall at all times be a person or body who/which is not a Discretionary Beneficiary and is not a relative (within the meaning of Section 2 Income Tax Act 1976) of any Discretionary Beneficiary) in number and all decisions or actions of the Trustees pursuant to this Deed shall be valid and effectual if agreed to unanimously by the Trustees or in the case of there being no unanimity by a majority of Trustees, which majority must include at least one such Trustee who/which is not a Discretionary Beneficiary nor a relative of any Discretionary Beneficiary.
[54]There is a similar clause regulating the removal of trustees (cl 14(e)).
[55] The relevant facts are not in dispute. Mr and Mrs Jacomb have been trustees throughout. When the Trust was established on 4 November 1993 the third defendant was also a trustee. It was a company with Mr Peter Richardson, barrister and solicitor, as its sole shareholder. The company was then called Upper Hutt Law Trustee No 18 Limited.
[56] On 30 October 2014 Mr Richardson stood down as a director and shareholder of the company, and Mr and Mrs Jacomb were appointed as directors and equal shareholders. That state of affairs existed until 22 June 2018. Then Mr and Mrs Jacomb reduced their shareholding to a one third interest each, Ms Raewyn
Lovett, barrister and solicitor acquired a one third share, and the third defendant changed its name to Genset Trustee Limited.
[57] There is a provision in the clause of the Constitution of the third defendant requiring any decision by the board of the company acting as trustee must be made unanimously by the shareholders. It has the following proviso:
For the avoidance of doubt, day to day management of trust funds and assets subject to a trust not requiring the exercise of a specific power conferred by a trust deed shall be exercised by the board.
The interpretation of trust deeds
[58] I first briefly address the submissions from Mr Farrands and Ms Dartnall in relation to the interpretation of trust deeds.
[59] The principles concerning the interpretation of contracts apply to the interpretation of the provisions of express trusts.17 There has been recent debate about the approach to contract interpretation, and the precise balance between literal and contextual influences.18 But in New Zealand the principles are well settled, and were set out in the majority judgment of the Supreme Court in Firm PI 1 Ltd v Zurich Australian Insurance Ltd.19 This means that the aim is to ascertain the meaning which the trust document would convey to a reasonable person having all the background knowledge which would reasonably have been available at the time that the trust was settled.20
17 See Powell v Powell [2015] NZCA 133, [2015] NZAR 1886 at [53]-[55]; Pryor v Bulley [2013] NZCA 559, [2015] NZAR 518 at [12] and [85]; and New Zealand Māori Council v Foulkes [2014] NZHC 1777, [2015] NZAR 1441 at [71]–[72].
18 See Jonathan Sumption A Question of Taste: The UK Supreme Court and Interpretation of Contracts (2016–2017) 8 UKSCY 74; and Leonard Hoffman Language and Lawyers (2018) 134 LQR 553.
19 Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [60]– [63].
20 Adapting the general approach described by the Supreme Court for contractual interpretations in Firm PI 1 Ltd at [60] with reference to Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 (HL) at 912 per Lord Hoffman.
[60] The fact that the provisions to be interpreted are contained in a trust deed may influence the approach to interpretation.21 As the Supreme Court said in Firm PI 1 Ltd “the scope for resort to background is itself contextual”.22 A trust deed is not a contractual bargain and is unlikely to be the product of the process of negotiation or compromise.23 The Court will be seeking to identify the manifested intention of the settlor in light of the purposes of the trust and the interests of those who are to benefit from it. That particular context is well capable of being accommodated within the standard approach to interpretation.
The appropriate interpretation here
[61] I received only limited submissions from the parties on the interpretation and application of cl 15. But the position nevertheless seems to me to be clear.
[62] The requirement in cl 15 for there to be at least two trustees, that one trustee not be a beneficiary, and that decisions be unanimous or have a majority including the non-beneficiary are there to ensure that somebody independent of the beneficiaries must agree to the decision before it can be made. I accept Mr Farrands’ argument that this amounts to a requirement for independence. The clause goes on to identify more precisely what amounts to a lack of independence by providing that not only can the person not be a beneficiary, but cannot be a relative of the beneficiary. The definition from the Income Tax 1976 has been used as a convenient definition of what a relative is.
[63] The Income Tax Act 1976 was repealed on 1 April 1995, some two years after the Trust was settled. The definition of “relative” from the repealed Act nevertheless remains the meaning to be applied as it retains its contractual force. The alternative view is that the equivalent definition in the more recent legislation applies (most recently the definition of “relative” contained in the Income Tax Act 2007). But the definition in the 1976 Act remains the definition chosen by the settlor irrespective of
21 See Re Marianne Caughey Smith-Preston Memorial Rest Homes Trust Board [2018] NZHC 3014, [2019] NZAR 92 at [21]–[23] citing New Zealand Māori Council v Foulkes, above n 17, at [71]– [72].
22 Firm PI 1 Ltd, above n 19, at [62].
23 At [62].
that Act’s repeal. I note that, by contrast, cl 20 expressly provided when a statutory replacement or equivalent provision would apply.
[64]The definition of “relative” in the Income Tax Act 1976 was as follows:
Relative, in relation to any person, means any other person connected with the first-mentioned person by blood relationship, marriage, or adoption; and includes a trustee for a relative; and for the purposes of this definition–
(a)Persons are connected by blood relationship if within the fourth degree of relationship:
(b)Persons are connected by marriage if one is married to the other or to a person who is connected by blood relationship to the other:
(c)Persons are connected by adoption if one has been adopted as the child of the other or as a child of a person who is within the third degree of relationship to the other:
[65] This definition is generally applicable only to natural persons. It does not deal with the question of related corporate entities.24 Yet cl 15 contemplates the potential existence of a corporate trustee as it speaks of a trustee being a “person or body”. It is here that a more difficult question might be said to arise. On a literal approach a corporate trustee is never a “relative” of a discretionary beneficiary, and given that only natural persons are identified as discretionary beneficiaries under the Trust Deed, a corporate trustee would also never itself be such a beneficiary. On that basis the existence of the third defendant as a third trustee would satisfy cl 15 even when it was owned and controlled by Mr and Mrs Jacomb.
[66] But I accept Mr Farrands’ argument it did not do so. In my view the third defendant could not act as a third trustee whilst it was owned and controlled by the other two trustees. It was incapable of providing a third voice. I doubt that it could perform the role as an additional trustee at all in those circumstances. There is no doubt that a corporate body can be a trustee, but it must be capable of performing the functions and duties of a trustee.25 For example it must be able to attend meetings and make decisions. Here the third defendant was indistinguishable from Mr and Mrs
24 Except, potentially, when referring to a “trustee for a relative” which might include a corporate trustee.
25 See Andrew Butler (ed) Equity on Trusts in New Zealand (2nd ed, Thompson Reuters, Wellington, 2009) at 4.1.2 (1) and (2).
Jacomb. When it attended meetings of the trustees to make decisions it could only reflect the will of the other two trustees. It could only agree with what they had both decided, and could not break any deadlock if there was disagreement between them. It could certainly not introduce the independence required by cl 15. The agent or representative of a discretionary beneficiary must also be treated as a discretionary beneficiary for the purposes of cl 15.
[67] For these reasons I accept that the terms of cl 15 of the Trust Deed were not satisfied when the third defendant was owned and controlled solely by Mrs and Mrs Jacomb between 30 October 2014 and 22 June 2018.
[68] For essentially the same reasons, however, it seems to me that the third defendant could satisfy the requirements of cl 15 once Ms Raewyn Lovett became a one third shareholder under the constitution. Unanimity of the shareholders was required for anything other than the day to day management. At that point the third defendant is not simply a vehicle of Mr and Mrs Jacomb, and Ms Lovett herself would be able to perform the functions required of a trustee. There is no information before the Court to show that any conduct undertaken in this period, including any conduct said to be in reliance upon the day to day management of the Trust, was inconsistent with the requirements of the Trust Deed in this respect.
Application for directions
[69] On the eve of the hearing of this proceeding the defendants recognised the difficulty that they faced in relation to the period of time when Mr and Mrs Jacomb were effectively the only true trustees of the Trust. On the Friday prior to the hearing, and by application dated 28 May 2020, the first to third defendants applied for orders adding RLA Trustee Services No 52 Limited (RLA) as a fourth defendant, and also seeking the following directions under s 66 of the Trustee Act 1956:
(b) A direction that the process for review of decisions made by the trustees of the Genset Trust since 4 November 2014, as particularised at paragraph 14 of the affidavit of Kenneth O’Shea filed in support of this application, be carried out;
(c) A direction that the trustees of the Genset Trust provide to all adult beneficiaries, other than those who are parties to this proceeding, copies of
this notice of interlocutory application and all other documents relevant to the orders and directions sought in this application.
[70] In the accompanying affidavit Mr O’Shea explained that he was an accountant, and was the sole director and shareholder of RLA. He also explained that RLA had been appointed a trustee, and that the third defendant had been removed on 26 May 2020.
[71] At the commencement of the hearing I made orders that RLA should be joined as a fourth defendant, with the balance of the application to be dealt with in this judgment.
[72] The proposal in Mr O’Shea’s affidavit was that he would follow the following process:
(a)I would review all decisions made by the trustees during since 30 October 2014.
(b)The purpose of the review would be to satisfy myself that all decisions made were appropriate, legal and proper at the time they were made.
(c)In carrying out this exercise, I would be authorised to seek advice from Mr [Greg] Kelly on any issues of a legal nature.
(d)If I am satisfied that a decision was appropriate, legal and proper at the time it was made, I will recommend that the trustees ratify it.
(e)If there are matters that cannot be ratified or approved by the trustees, then the trustees will exercise a decision under the terms of the Trust deed as to what action should be taken.
[73] Mr Farrands for the plaintiff opposed the Court giving the directions. He indicated that no leave had been sought to file such a late application, and that in any event it was not appropriate for application for directions under s 66 to be directed to controversial issues of this kind. He referred to the decision of Wylie J in FFP Trustee (NZ) Ltd v Peng where the Court addressed whether directions should be given under s 66 when the Court’s approval was sought in circumstances when a trustee had resolved to undertake certain actions because of their importance.26 Wylie J held:
26 FFP Trustee (NZ) Ltd v Low Hock Peng [2019] NZHC 3301.
[61] In this country, Fitzgerald J, in Re PV Trust Services Ltd,27 has held that the jurisdiction conferred by s 66 can extend to [such matters] provided appropriate procedural safeguards are put in place to minimise potential prejudice to beneficiaries. The Judge observed that caution is required in considering orders in such circumstances, given the potential for disadvantage to beneficiaries resulting from such orders. It is of paramount importance that an applicant trustee provides the Court with all relevant facts, documents and information when making application. Further, it is imperative that, when considering such an application, a Judge only makes the orders sought after “scrupulous consideration” of the evidence. The Court will not rubber stamp such applications, and if the Court is left in doubt, then it should decline to make the direction sought.28
[74] I agree with Mr Farrands that the Court should not give directions under s 66 at this stage. What is essentially being proposed is a review of the decisions made when the trustees were not validly comprised in accordance with the Trust Deed. The Court has little information of what the actual decisions in question are, or the consequences of any such decisions. It may be appropriate for the properly comprised trustees to ratify the decisions.29 But the Court cannot presently tell. It does not have any information in relation to the decisions sought to be reviewed for ratification purposes, and the late stage at which this point is raised has prevented any inquiry into those matters. Whether directions under s 66 are appropriate cannot be identified at this point.
[75] Based on the information before the Court it seems to be a sensible step for such a review to be undertaken. But I accept Mr Farrands’ point that it is not appropriate for the Court to give approval for the process of review under s 66 at this point in the absence of information about the decisions and activities of the Trust over that period. The Court should have a fuller understanding of the facts and circumstances before giving such directions.
[76] A similar issue arises, however, in relation to the first of the declarations sought by the plaintiff. The two declarations sought in the amended statement of claim are as follows:
27 Re PV Trust Services Ltd [2017] NZHC 2957, [2018] 3 NZLR 160.
28 At [55].
29 See Hansard v Hansard [2014] NZCA 433, [2015] 2 NZLR 158 at [45]-[51].
(a)A declaration that decisions purported to be made by the defendants as trustees of the Trust since 30 October 2014, are invalid; and
(b)A declaration that the defendants are personally liable for purported Trust actions and decisions since 30 October 2014.
[77] I am satisfied that for the period between 30 October 2014 and 22 June 2018 the requirements in the Trust Deed relating to the composition of the trustees were not met. But I am not in a position to make declarations that all decisions of the trustees of the Trust since 30 October 2014 were invalid as a consequence. I have no information as to what those decisions were, or the consequences. It is possible that the Court may validate, or approve the ratification of the decisions of the properly comprised trustees under its statutory or inherent jurisdiction.30 Again it seems to me that the position is premature in the absence of fuller information. I further elaborate on this point with respect to the next claim advanced by the plaintiffs.
Claim that first to third defendants personally liable
[78] Ms Jacomb seeks a declaration that the first to third defendants are liable for all Trust actions and decisions since 30 October 2014.
[79] There is no doubt that trustees can become personally liable when there has been a failure to conform with the terms of a trust. Once Mr and Mrs Jacomb obtained all of the shareholding in the third defendant, cl 15 of the Trust Deed was not complied with. It was Mr Jacomb as the settlor who had the power of appointment of new trustees under cl 13 of the Trust Deed, and a further trustee could have been appointed by him. Mr and Mrs Jacomb should not have taken up the ownership and control of the third defendant as trustee. A new independent person should have taken on the role.
30 See for example in its statutory jurisdiction the Court’s power under s 64 of the Trustee Act 1956 to “authorise dealings with trust property”. This power was applied retrospectively in Pryor v Bulley, above n 17, at [92]–[124]; but see the observations of Muir J in Re Hamilton Residential Trust [2017] NZHC 104, [2017] NZAR 411 at [37]-[39].
[80] But the consequences of this failure are less clear cut. It is certainly true that the decisions of the trustees will not be deemed valid in accordance with the effect of cl 15. But as I have already said, that does not prevent any relevant decisions being subsequently ratified, or validated. Whether that is appropriate depends on the circumstances.
[81] Personal liability is not automatic as Mr Farrands argues. Trustees only become liable for a breach of trust if there has been demonstrated loss.31 Here no loss has been identified. There is also a clause in the Trust Deed that limits any liability. Clause 20 provides:
20. NOTWITHSTANDING any rule of law or statutory provision to the contrary, no Trustee hereof shall be liable for any loss arising from any cause whatever including a breach of the duties imposed by Section 13B and/or Section 13C Trustee Act 1956 (as enacted by the Trustee Amendment Act 1988) (or any statutory replacement or equivalent);
UNLESS such loss is attributable:
(i)To his own dishonesty; or
(ii)To the wilful commission by him of an act known by him to be a breach of trust
[82] Mr Farrands pointed to the potential limitation on the effect of such clauses by reference to the decision of the English Court of Appeal in Armitage v Nurse.32 Such limitations have been recognised by the New Zealand Courts.33 But on the basis of the information currently before the Court none of the potential limitations on the application of cl 20 appear to arise.
[83] In any event this is not a case where a breach of trustee duties has caused loss. It is a case where there was a period where the trustees were not validly comprised under the terms of the Trust Deed. That situation cannot be addressed by a simple assertion that the persons acting as trustees are personally liable. If there are losses caused by particular actions it is possible that they could face personal liability. It may be that the trustees have been dealing with what is Trust property, such that the Court
31 Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 (CA).
32 Armitage v Nurse [1998] Ch 241 (CA).
33 Spencer v Spencer [2012] 3 NZLR 229 (HC) at [189]; and Gillespie v Guest [2013] NZHC 669 at [48].
may conclude that they dealt with that property as constructive trustees, even if the clause regulating the composition of the trustees was not complied with.
[84] The Court cannot draw conclusions on the question of any personal liability in the absence of information concerning the purported dealings of the Trust in issue. There is nothing before the Court to demonstrate that the trustees are personally liable as there is no information about the relevant actions or decisions. No such matters have been identified by the plaintiffs. For that reason alone the claim for declarations of personal liability must fail.
[85] As indicated, the current trustees have advised the Court they are intending to conduct a review of decisions dating back to when cl 15 was not properly complied with. It may be that following that review the trustees could seek to make some application to the Court. One of the central considerations should any such matter be raised is whether there has been any loss incurred, or any gain not accounted for. Other than making those points, it is not appropriate for the Court to make any further comment. To do so would be premature.
[86] If there is any application to the Court, for example under s 66, the Court will need to address who will be given notice of the application. The fact that I have determined that the plaintiff should not be given disclosure of information because the information will likely be used in a manner that is contrary to the interests of the other beneficiaries, and of the Trust generally, will be a relevant consideration. The position of the other beneficiaries will also be relevant. But in the end the Court will need to address that situation if and when that arises, based on the circumstances then before it.
CONCLUSION
[87]For the above reasons I dismiss both of the plaintiff’s claims.
[88] In relation to the application for disclosure, I have concluded that it would not be appropriate to direct that Ms Jacomb be provided with information concerning the Trust as it is likely it will be misused in a manner that is contrary to the best interests of the Trust, and the beneficiaries more broadly.
[89] In relation to the claims for declarations on the basis that the terms of the Trust Deed have not been complied with, I have accepted that for the period between 30 October 2014 and 22 June 2018 the Trust lacked an independent trustee as required by cl 15. But the Court does not have sufficient information before it to declare that all decisions and actions made by the trustees over that period are invalid. Neither does it have any information that would allow Ms Jacomb to successfully attain an order that her parents are personally liable for all decisions since 30 October 2014.
[90] Given that the plaintiff has failed in her claims the defendants are entitled to costs. If the question of costs cannot be resolved I will receive memoranda from counsel. Any memorandum claiming costs (no more than 10 pages plus a schedule) is to be filed within 15 working days, and any memorandum in response (no more than 10 pages plus a schedule) 10 working days thereafter.
Cooke J
Solicitors:
Morrison Kent, Auckland for the Plaintiff Franks Ogilvie, Wellington for the Defendants
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