Jones v Bassett

[2023] NZHC 2926

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2023-409-561

[2023] NZHC 2926

BETWEEN

DARREN IAN JONES

Applicant

AND

TERESSA JANE BASSETT

First Respondent

AND

TERESSA JANE BASSETT and DARYN JAMES BASSETT

Second Respondents

Hearing:	On the papers
Appearances:	G K Edmundson for Applicant
Judgment:	18 October 2023

JUDGMENT OF DUNNINGHAM J

This judgment was delivered by me on 18 October 2023 at 4 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

JONES v BASSETT [2023] NZHC 2926 [18 October 2023]

Introduction

[1]                  This is an application, without notice, for preservation orders. The preservations orders are sought in relation to the net proceeds of sale of property which the applicant says he has reason to believe has been improperly transferred from a family trust. He only seeks the preservation order for a period of two months. In that time, he either envisages his, and the other beneficiaries’ concerns could be resolved, or litigation would be commenced against the respondents.

Background

[2]The background to this matter is as follows:

(a)Graeme and Anne Jones are the parents of Darren, the applicant; Teressa Bassett, one of the respondents; and two other sisters, Tracey and Melanie.

(b)In 1996 the parents settled their 16 hectare property at Loburn (the Property), into the DG and AB Jones Family Trust (the Trust).

(c)In 2018, Graeme and Anne, as trustees of the Trust, sold 1/100 shares in the property to Tracey and her partner, Paul Warburton, in expectation that Tracey and Paul would eventually live on a portion of the Property.

(d)Graeme died in 2020, leaving Anne as the then sole trustee of the Trust.

(e)In April 2021, Teressa was appointed as a new trustee alongside Anne. Ten days later, on 29 April 2021, the trustees and Tracey and Paul entered into an agreement to sell the Property to Teressa and her husband Daryn for $600,000.

(f)By way of a sale and purchase agreement dated 18 September 2021, Teressa and Daryn agreed to sell a portion of the Property (arising from a then proposed subdivision) to an unrelated third party. The agreement

is  now  unconditional  and  settlement  is  due  to  take  place  on     19 October 2023.

(g)Anne, Darren and Tracey have sought updates and assurances from Teressa and Daryn regarding the sale of the Property by the trustees, the subdivision of the Property and the subsequent sale of a portion of the Property to the unrelated third party.

(h)Anne has also sought copies of core trust documents in her role as trustee. I am advised that these requests have gone answered.

[3]                  The applicant, Darren Jones, in his affidavit in support of the application without notice for preservation orders, says he and his sister Tracey have the following concerns about how Teressa and Daryn got hold of the property and the fact they are now selling what was part of Trust property. Their concerns are as follows:

(a)Teressa and Daryn bought the property from the Trust 10 days after Teressa became a trustee and when their mother was starting to show “signs of fragility”. At the time their mother was living with Teressa and Daryn and she had had a relatively serious medical event. Mr Jones says it is not clear if she knew what she was doing when she signed the documents and he understands she has no clear recollection of doing so.

(b)Mr Jones understands the same law firm acted for the trustees and for Teressa and Daryn when completing the sale and purchase of the property in late April 2021. They do not know if independent advice was obtained or whether waivers of such advice was given.

(c)It is not clear if Teressa and Daryn paid the nominated purchase price of $600,000 for the property and it is not clear whether this was a fair amount for the property given its obvious subdivision potential. He understands that Teressa did not obtain a valuation at the time, either in her role as trustee or as purchaser.

(d)Although, through lawyers, Mr Jones and his sister have made repeated requests for information and clarity about these issues. They have not yet received a substantive response.

(e)While they do not wish to stop the sale of one of the sections which is due to settle tomorrow, they do have concerns about whether the proceeds will be spent or transferred once they leave the law firm’s trust account.

[4]                  At this point, and given the urgency of the matter, and the lack of information Mr Jones has, he has not filed a statement of claim. However, he outlines the potential claims he may have in his affidavit. He says that subject to what explanations Teressa can provide, he intends to allege she had breached her obligations to him and the other beneficiaries in that she and her husband knowingly profited from the deal when they should not have. He may also seek her removal from the Trust or ask that the Court review her actions.

[5]                  He also believes there may be a claim for undue influence; in particular, relating to the circumstances in which she agreed to sell the land to Teressa and Daryn shortly after Teressa was appointed a trustee. He points out that while Teressa’s lawyer has said the Trust’s paramount obligation was to care for their mother, he says his mother’s relationship with Teressa has broken down and there does not appear to be any intention of directing the funds towards their mother’s support.

Reasons for applying without notice

[6]                  Mr Jones also sets out the reasons for proceeding without notice. He explains that his lawyer has been trying to get information from Teressa relating to the transfer of the property out of the trustees’ ownership and these requests have been ongoing since 2021 and they still do not have the information. The only recent substantive response they have had, was a letter in September giving Tracey notice to vacate the property.

[7]                  In Mr Jones’ view, the relationship with Teressa has broken down and he does not believe she will keep the beneficiaries informed of what is happening. Given the

circumstances and, in particular, her reluctance to provide them with any information, he does not trust how Teressa and Daryn will deal with the funds or whether they will account to the Trust in the future. As the funds are to be received tomorrow, they consider proceeding on notice would cause undue delay and would risk the funds being dissipated.

[8]                  I accept it is appropriate to proceed without notice given the timeframes involved. Furthermore, the respondents will be given the opportunity to apply to set aside the orders if they can provide a proper basis for doing so.

Should an order be made?

[9]                  The application is made under High Court Rules, r 7.55 and also in reliance on r 7.23 (applications without notice), and r 7.53 (application for interim injunction).

[10]              Mr Prendergast, for the applicant, points out that the fundamental requirement of an application under r 7.55(3) is the existence of a fund, the right to which is in question in the litigation. Here, subject to settlement taking place as is contemplated by the parties, there will be funds that can be subject to an order under r 7.55. The applicant recognises that ordinarily the requirement for orders under r 7.55 are not that of an interim injunction. Rather, the applicant must show a proper basis for the order sought.1 However, he also notes that the application relies on r 7.53 which allows for orders to be made before the commencement of proceedings in urgent circumstances.

[11]              I am satisfied that there is a fund identified which the applicant has explained could be in question in proposed litigation. As he points out, there are grounds for believing that Teressa has breached her duties to act in good faith, to act with loyalty (including not to profit or act in a conflict), and to act in the bests interests of the beneficiaries. The beneficiaries may seek relief from Teressa (or Daryn) in the form of a constructive trust over the funds.

[12]              There is also an evidential basis that Teressa and/or Daryn may have exerted undue influence over Anne, the other trustee. If that is correct then the sale of the

1      ?Carr Helicopters Ltd v Watts (1992) 6 PRNZ 61, 65.

property to Teressa and Daryn is avoidable and the beneficiaries would see relief in the form of a remedial constructive trust over the funds.

[13]              While not strictly an application for an interim injunction, in deciding whether to make an order, I consider it is important to balance the interests of the applicants against potential prejudice to the respondents. At present there is no information (nor could there be), of any immediate prejudice if the funds are the subject of a preservation order. The order is only sought for a short-medium period, in order to get clarity on the issues which the applicant raises. Of course, if proceedings are to issue within that period, it may well be that an order is sought to extend the preservation order.

[14]              Balanced against that, the order I make will grant leave to the respondents to seek to set aside the preservation order on notice, assuming there are grounds for doing so. In my view, that adequately addresses the protection of the respondents’ interests.

[15]Accordingly, I make the following orders on a without notice basis:

(a)An order precluding the first or second respondents from transferring, directing or otherwise dealing with any proceeds from the sale of Lot 1 of 149 Loburn Terrace Road, Loburn (which is subject to an agreement for sale and purchase dated 18 September 2021) without prior approval in writing from the applicant or the prior approval of the Court.

(b)The order set out at (a) stay in effect for a period of two months to allow for:

(i)service of this application and any associated information or order to be made on the first and second respondents and Melanie Jones (a named beneficiary of the subject trust) as soon as possible;

(ii)the applicant and the members of his family that support the application to obtain independent advice (if necessary) and to commence substantive proceedings;

(iii)if necessary, the Court is to timetable the disposal of the substantive application;

(iv)if necessary, leave to seek an extension of the order set out at (a) on an on-notice basis.

(c)The second respondents have leave to seek to set aside the order at (a) on notice.

(d)Costs are reserved.

Solicitors:

Helmore Stewart, Rangiora