Johnston v Brown

[2021] NZHC 507

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE

CIV-2018-412-92

[2021] NZHC 507

IN THE MATTER

of the Where A Wha Kawe Family Trust

AND

IN THE MATTER

of an application for a stay of proceeding pending appeal to the Court of Appeal pursuant to r 12 of the Court of Appeal (Civil) Rules 2005

BETWEEN

TOBY GREGG JOHNSTON

Plaintiff/First Counterclaim Defendant

AND

JENNIFER EVA BROWN

First Defendant/First Counterclaim Plaintiff

AND

NIGEL WARREN HUGHES

Second Defendant/Second Counterclaim Defendant

Hearing:

2 March 2021

(By way of telephone hearing)

Counsel:

T G Johnston – self represented

J I Taylor and J J Anson-Holland for the First Defendant A V Foote and S Caradus for the Second Defendant

Judgment:

15 March 2021

JUDGMENT OF ASSOCIATE JUDGE LESTER

(in respect of application for stay and enforcement and other orders)

This judgment was delivered by me on 15 March 2021 at 2.30 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 15 March 2021

JOHNSTON v BROWN [2021] NZHC 507 [15 March 2021]

[1]        This judgment concerns a number of applications made by Mr Johnston whose primary application is to stay enforcement of my judgment of 7 September 2020 (the September Judgment).1 Along with the stay, Mr Johnston seeks the following additional orders:

(a)an order staying any publication of the September Judgment;

(b)an order requiring the parties to attend mediation;

(c)an order appointing counsel to represent the child of Mr Johnston and Ms Brown, the child being a beneficiary of the Trust in issue in this proceeding;

(d)an order granting Mr Johnston exclusive possession of the property at 19 Bevan Place, Wanaka (the Wanaka property); and

(e)an order prohibiting any person entering the property for the purposes of pre-sale or marketing activities.

The Judgment subject to appeal

[2]        Mr Johnston and Ms Brown were a couple and they moved to Wanaka in September 2009. They settled a Family Trust on 11 February 2008 and as trustees purchased the Wanaka property in March 2012.

[3]        The second defendant, Mr Hughes, is the professional trustee of the family trust.

[4]Mr Johnston and Ms Brown separated in September 2016.

[5]        The September Judgment largely concerned a settlement agreement Ms Brown said was reached at a settlement conference in the Family Court on 11 December 2018. Judge Farnan, who chaired the conference, recorded in a Minute at the end of the

1      Johnston v Brown [2020] NZHC 2298.

conference: “Agreement reached. Counsel will file joint consent memorandum by Friday 5.00pm and to be referred to me in chambers.”

[6]        Ms Brown’s counsel then prepared a draft joint memorandum seeking consent orders. However, the evidence was Mr Johnston declined to sign the consent memorandum as he wished to have parenting issues addressed at the same time.

[7]        As Mr Johnston did not agree to sign the memorandum, Ms Brown’s counsel filed a memorandum with the Court explaining why an order was not sought on a joint basis and sought orders that the draft order represented the agreement reached between the parties at the settlement conference.

[8]        That memorandum was dated 17 December 2018.  The  following  day,  Judge Farnan issued a minute recording “Order in terms of memorandum of counsel as agreed at Settlement Conference” and an order of the Court was sealed.

[9]        The order recorded that Mr Johnston would be allowed to occupy the Wanaka property rent-free for six months, after which it would be sold. I held that the agreement  meant  that  Mr Johnston  had  to  pay  $160,000  to  Ms Brown  from  the 50 per cent of the sale proceeds that would otherwise have gone to Mr Johnston (or at least his new trust).

[10]      Mr Johnston’s position then, which remains unchanged, is the consent order was improperly obtained and did not in fact reflect the agreement of the parties.     Mr Johnston says the Wanaka property should be dealt with under cl 9.2 of the trust deed which requires the property to be sold if the parties separate with the sale proceeds to be resettled equally on two new trusts – one for Mr Johnston and one for Ms Brown with the same beneficiaries and trustees as the original trust, save for    Mr Johnston in respect of Ms Brown’s  trust and save for Ms Brown in respect of   Mr Johnston’s trust.

[11]      Accordingly, Mr Johnston’s position is that the trust deed requires the property to be sold and the sale proceeds to be distributed to two new trusts. Ms Brown does not dispute that, except to say the agreement reached at the settlement conference and

recorded in the Court order requires there to be an adjustment in her favour of

$160,000 from Mr Johnston’s new trust’s share of the sale proceeds.

[12]      Given the breakdown in the relationship between Mr Johnston and Ms Brown, I also made orders removing Mr Johnston and Ms Brown as trustees, and appointed  a new independent trustee alongside Mr Hughes.

The appeal

[13]Mr Johnston raises the following grounds of appeal:

(a)The September Judgment failed to consider or assess family violence matters. In the telephone hearing of his applications, Mr Johnston said the agreement at the settlement conference was the result of duress, domestic violence, financial violence and undue pressure.

(b)Mr Johnston says the September Judgment relied upon and placed significant weight on a number of assumptions and inferences that were incorrect.

(c)That the Court failed to assess the integrity or test the material provided by Ms Brown’s counsel or their legal arguments.

(d)That the consent order issued by the Family Court was improperly obtained, is a false record of agreement and is otherwise incomplete. This ground of appeal is a reference to Ms Brown’s counsel tendering the order to the Court on the basis it was an accurate record of the outcome of the settlement conference when Mr Johnston says it is not.

(e)That the removal of Mr Johnston as a trustee was not authorised by the Trustee Act 1956 as he identified himself as the only trustee who was adhering to the intention of the Trust Deed and the process it specified in the case of a separation.

Principles applicable to a stay

[14]      The High Court’s jurisdiction to order a stay pending an appeal to the Court of Appeal is set out in r 12 of the Court of Appeal (Civil) Rules 2005 (the Rules).

[15]      While r 12 creates a concurrent jurisdiction, an application for a stay should first be made to the High Court, absent some special circumstance justifying initial application to the Court of Appeal.2

[16]McGechan on Procedure sets out the general principles that apply:3

CR12.01        Principles

(1)General approach

(a)An application under r 12(3) requires the Court to balance the competing rights  of  the party who obtained the judgment appealed from (ie the benefit of that judgment) against the need to preserve the appellant’s position against the  event  of  the appeal succeeding: Duncan v Osborne Buildings Ltd (1992) 6 PRNZ 85 (CA) at 87.

(b)“The object, where it can be fairly achieved, must surely be so to arrange matters that, when the appeal comes to be heard, the appeal Court may be able to do justice between the parties, whatever the outcome of the appeal may be”, per Buckley LJ at 676 in Minnesota  Mining   and   Manufacturing  Co v Johnson & Johnson [1976] RPC 671 (CA), cited by the Court of Appeal in New Zealand Insulators Ltd v ABB Ltd (2006) 19 PRNZ 459, at [13].

(c)Factors to be taken into account in the balancing exercise include:

(i)Whether the appeal may be rendered nugatory by the lack of a stay;

(ii)The bona fides of the applicant as to the prosecution of the appeal;

2      Andrew Beck and others (eds) McGechan on Procedure (online ed, Thomson Reuters) at [CR12.01(5)].

3      At [CR12.01(1)].

(iii)Whether the successful party will be injuriously affected by the stay;

(iv)The effect on third parties;

(v)The novelty and importance of questions involved;

(vi)The public interest in the proceeding; and

(vii)The overall balance of convenience.

Keung v GBR Investments Ltd [2010] NZCA

396 at [11]; Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd (1999) 13 PRNZ 48 (HC) at [9].

(d)While not included in this list, the apparent strength of the appeal now appears to be generally recognised as an additional factor: Keung v GBR Investment Ltd at [11].

Discussion of factors

[17]      Mr Johnston’s position is that the precondition for a sale being required under the Trust Deed has been satisfied - that is, his and Ms Brown’s separation. Therefore, the issue is the distribution of the sale proceedings.

[18]In his affidavit of 21 August 2020 to the High Court, Mr Johnston said:

5. Following our separation I lived in the Wanaka property from  time-to-time and it remains my permanent abode, but my position has always been the property has to be sold in order to comply with the terms of paragraph 9.2 of the Trust.

[19]      In respect of the stay application, Mr Johnston filed a document saying he would not object to a direction that saw the Trust Deed being adhered to. This would involve the immediate commencement of a sale process, a sale being settled within five weeks (which then was by 5 March), and the funds distributed as per the Trust Deed.

[20]      Picking up on that point, Ms Brown’s counsel submitted a proposal that the current trustees arrange for the sale of the Wanaka property, that costs associated with the Wanaka property, secured debt, and trustees’ costs be met, and that the remaining

sale proceeds be held pending determination of Mr Johnston’s appeal or agreement between the parties.

[21]      Mr Johnston was not prepared to agree to that course, although he indicated  a preparedness to consider something of a middle ground where there would be a sale with a fund held pending the appeal and an interim distribution.   The property has    a value somewhere between $1,200,000 and $1,500,000 with negligible debt.

[22]      I put to Mr Johnston that the real issue between him and Ms Brown was how the sale proceeds were to be distributed, but he did not accept that. It was clear from his submissions during the telephone hearing on 2 March 2021, that at that time he wished to continue occupying the property indefinitely and rent-free to save funds to enable him to relocate. He referred to the possibility of moving to Wellington to be with family and needing to save money for this purpose.

[23]      If Mr Johnston is correct so that the trust deed prevails and the sealed order in the Family Court is in error, then the Wanaka property will be sold as required by cl 9.2 of the trust deed. An order preventing the sale of the Wanaka property is not necessary to preserve the appellant’s position.

[24]      While a successful appeal will only mean that Ms Brown’s application for summary judgment in respect of her counterclaim will have failed, with the result that there will not be a final determination of what was agreed at the settlement conference, the fact remains that on Mr Johnston’s case, the property should be sold.

[25]      If  the  property  were  sold  with  the  sale  proceeds  held  in  trust,  then    Mr Johnston’s appeal would not be rendered nugatory. Mr Johnston opposes a sale and says there is no prejudice from ordering a stay as, in the context of the currently buoyant property market, the property represents a solid investment for the trustees.

[26]      Mr Anson-Holland, counsel for Ms Brown, submitted the test was not whether there was an absence of prejudice from a stay. Rather, he contended the onus was on Mr Johnston to demonstrate he would be prejudiced in respect of his appeal if the stay was not granted.

Prejudice identified by Mr Johnston

[27]      Mr Johnston and Ms Brown are also involved in proceedings in Australia relating to their child.

[28]      Mr Johnston  explained   he   had   a   parenting   hearing   commencing   on  8 March 2021 which is set down for four days, but may run longer. He said an order requiring him to vacate the Wanaka property and for it to be sold now would seriously disrupt his preparation for that case. He said the fact he had a residence, being the Wanaka property, would also of itself be significant to the parenting hearing.

[29]      Of course, Mr Johnston only has a residence because he remains in occupation contrary to the intentions of the present trustees, who have issued him with a trespass notice.

[30]      Mr Johnston said that housing instability was a factor that Ms Brown was using against him in the parenting case. He also referred to there being an adverse impact on his child.

[31]      These are not factors that would make the appeal nugatory if the stay was not granted. I accept the appeal is against the whole of the September Judgment, including the removal of Ms Brown and Mr Johnston as trustees, but I see little or no prospect of that part of the appeal being successful.

[32]      It is not suggested Mr Johnston is not bona fide in pursuing his appeal. He has applied to have security for costs dispensed with but that application has yet to be determined at the time this application was heard. As a result, the requirements for the filing of the case on appeal, under r 43 of the Court of Appeal Rules, have has been suspended and must now be complied with by 26 March 2021.

[33]      As to whether Ms Brown will be injuriously affected by the stay, other than her new Trust being kept out of half of a half-share of the sale proceeds and a $160,000 adjustment in her favour, no prejudice was identified or any financial pressure. If necessary, issues as to costs and recognition of Mr Johnston’s rent-free occupation of the Wanaka property, can be compensated for as against his share of the sale proceeds.

[34]      The effect on third parties, other than on the parties’ child, was not relied on by either party. The child does not reside at the Wanaka property.

[35]      Mr Johnston suggested there were novel and important questions involved in the appeal, including what he called the “improperly obtained consent order”. In the September Judgment I did not accept that the consent order was improperly obtained. As I have said, the draft order was approved by the Judge who chaired the settlement conference, and there been no application to set the order aside. There is no uncertainty about the law applying to the process for setting aside orders said to have been sealed in error or inappropriately.

[36]      Mr Johnston suggested that the Court’s approach to what he referred to as financial violence and duress leading to the (disputed) agreement was an important factor to take into account in the balancing exercise. However, such was not relied on by his then counsel during the hearing of the judgment under appeal.

[37]I do not see there is any public interest in the proceeding.

[38]      As to the overall balance of convenience, Ms Brown does not suggest she will face any particular inconvenience through a stay. It is some years since the parties’ separation. It is clear both parties would like matters resolved. On the other hand, the points Mr Johnston relies on (identified above), as prejudice arising to him from    the stay, can be considered under this head.

[39]Finally, as to the strength of the appeal, I do not see ground (a) (referred to at

[13] above) that is, the Court’s alleged failure to consider or assess family violence as being a strong point. As I have said, Mr Johnston’s counsel did not rely on this ground during the hearing of the judgment under appeal, nor are such allegations included in Mr Johnston’s affidavits for the summary judgment hearing.

[40]              Mr Johnston has sought, in his notice of appeal, to refer to a significant volume of material not before me in the hearing leading to the September Judgment. I am not aware of there being an application to produce further evidence on the appeal. Of course, the decision under appeal was based on the affidavits filed at the time.

[41]              Perhaps the key ground of appeal is the claim that the September Judgment was based on an improperly obtained consent order. Again, Mr Johnston seeks to advance new material, in particular referring to correspondence between Mr Johnston and  his  lawyers  which  would  otherwise  be  privileged  and  is  not  produced.   Mr Johnston’s affidavit in support of his appeal, proceeds on the basis that the Court will undertake some form of enquiry of his then solicitors. Again, the September Judgment was based on the affidavits filed at the time.

[42]              Finally, I consider the claim that the order removing Mr Johnston as trustee was not authorised by the Act to be a particularly weak point. The relationship between the parties is problematic to say the least. They are unable to co-operate in respect of trustee issues and it was appropriate that both trustees be removed, as was ordered.

[43]              I do not consider the appeal grounds to be particularly strong, but I return to Ms Brown’s preparedness to allow the sale proceeds to be held in trust pending     the appeal. I am attracted to that outcome. It reflects that on either party’s view of the dispute there is to be a sale, with the only issue being the division of the sale proceeds. Mr Johnston sought to resist this proposition but it is a direct consequence of his own position that the trust deed requires the property to be sold.

The standing of the newly appointed trustee in this proceeding

[44]              As noted, Mr Johnston and Ms Brown were removed as trustees and a new trustee, Hawea Trustees Ltd, was appointed replacement trustee.

[45]              Accordingly, the present trustees and registered proprietors of the Wanaka property are Mr Hughes, the second defendant, and Hawea Trustees Ltd.

[46]              Hawea Trustees Ltd is presently not a party. Its counsel has, by memorandum, sought that it be added as a party on the basis that Hawea Trustees Ltd has succeeded Mr Johnston and Ms Brown as trustees. I consider that is appropriate.

[47]              There is an order under r 4.56 of the High Court Rules 2016 joining Hawea Trustees Ltd as joint second defendant with Mr Hughes.

The application for a stay – result

[48]The application for a stay is granted only in part.

[49]              The stay relates to Order 2(d) in the September Judgment which directed how the net proceeds of sale were to be divided following the sale of the Wanaka property. That order is stayed. The net proceeds of sale are to be held by the current trustees  on interest bearing deposit, pending the determination of the appeal or agreement between the parties.

[50]              The trustees’ reasonable costs to the time of sale are to be deducted from the net proceeds of sale of the Wanaka property. The ultimate responsibility as between Mr Johnston and Ms Brown as to who should bear those costs is reserved.

The sale process

[51]              The orders made following the September Judgment gave the independent trustees leave to seek any necessary directions in relation to the sale of the Wanaka property. The trustees took a neutral position in relation to the stay application. However, in the event the stay of the sale order was declined, they sought directions giving them control of the sale process, including the right to have Mr Johnston removed from the property, directions in relation to the removal and storage of the property’s chattels, and that the cost of the removal and storage of the chattels to be deducted from Mr Johnston’s share of the property’s sale proceeds.

[52]              Mr Johnston resisted any order requiring him to vacate the Wanaka property. At the time of the September Judgment, Mr Johnston was living in Australia and the property was vacant. No order requiring vacant possession was made, nor was one sought. The Wanaka property is vested in the independent trustees and they control who occupies the property. Mr Johnston’s status as a beneficiary of the trust, without more, does not give him an entitlement to reside at the property. Through issuing him with a trespass notice, the trustees have made it quite clear that he is not entitled to stay at the property.

[53]              I order that Mr Johnston is to vacate the property no later than  5.00 pm on  31 March 2021. He is to remove all chattels to which he says he is entitled within the same time period. Any chattels that remain at the property may be placed in storage by the trustees. The cost of storage is to be borne by the party who did not remove the particular chattel(s).

[54]              The uncontradicted evidence is the value of the Wanaka property will be maximised through it being professionally staged rather than being marketed with occupier’s chattels. It is in everyone’s interest to maximise the sale price.

[55]              If Mr Johnston does  not  voluntarily  vacate  the  property  by  5.00pm  on  31 March 2021, leave is reserved to the trustees, by memorandum, to seek an order for  possession  under  the  High  Court   Rules  2016.   Such  will   only   increase Mr Johnston’s costs exposure. Mr Johnston should be aware that an order for possession allows an enforcing officer to eject someone from the land in question.4

The remaining applications

Court ordered mediation

[56]              The Court is functus officio in relation to the proceedings dealt with in the summary judgment hearing. I was informed there have been discussions with a view to resolving matters which have not yet borne fruit. While the Court has power to direct a settlement conference, it cannot order the parties to attend a mediation.

[57]This application is dismissed.

Counsel for the parties’ child

[58]              I accept Mr Anson-Holland’s submission that this is a matter for the Court of Appeal. There is no extant application in this Court for which counsel to represent infants or minors should be appointed. This application is dismissed.

4      High Court Rules 2016, r 17.80.

Exclusive occupation of the Wanaka property and no visiting the property for marketing purposes

[59]              It follows from the orders I have made in relation to the stay application that these applications are also dismissed.

Application to stay publication

[60]              The application is declined. As is standard, the September Judgment, went to legal publishers shortly after it was released. I doubt it would be possible to recall publication in any event but, at the end of the day, I am satisfied Mr Johnston has not demonstrated any specific adverse consequences justifying an exception to the ground rule of open justice.5

Addendum

[61]              After this Judgment was completed in draft, Mr Johnston sent an email to the parties, the Court and others. The email recorded that Mr Johnston had accepted a job in Wellington and that he would  be  vacating  the Wanaka  property  on  or  about  31 March 2021 and that it will be empty from that time. My draft Judgment had allowed time for Mr Johnston to vacate the property.  I have amended this time to   31 March 2021, given Mr Johnston’s advice that the house will then be vacated.

Costs

[62]Costs are reserved.

Associate Judge Lester

Solicitors:

Medlicotts, Dunedin (Plaintiff/First Counterclaim Defendant)

Wynn Williams, Christchurch (for the First Defendant/First Counterclaim Plaintiff) Duncan Cotterill, Christchurch (for Independent Trustees, Hawea Trustees Limited)

5      ASB Bank Ltd v AB [2010] 3 NZLR 427 (HC), Erceg v Erceg [2016] NZSC 135, [2017] 1 NZLR 310: Y v Attorney-General [2016] NZCA 474, [2016] NZFLR 911.

Copy to counsel:

D J More, Barrister, Dunedin

Copy to:

Mr Toby Johnston, Wanaka (Self-represented Plaintiff/First Counterclaim Defendant)