Kinney v Pardington
[2018] NZHC 155
•15 February 2018
IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY
I TE KŌTI MATUA O AOTEAROA NGĀMOTU ROHE
CIV-2013-443-058 [2018] NZHC 155
UNDER the Family Protection Act 1955 IN THE MATTER
of the estate of KENNETH JOHN PARDINGTON (deceased)
BETWEEN
ERIN MAUREEN KINNEY Plaintiff
AND
MYRTLE MARGARET PARDINGTON, DAVID JOHN PARDINGTON AND KENNETH MARK PARDINGTON Defendants
AND
MYRTLE MARGARET PARDINGTON, DAVID JOHN PARDINGTON AND KENNETH MARK PARDINGTON Interested Parties
CIV-2017-443-73
BETWEEN ERIN MAUREEN KINNEY Plaintiff
ANDROYCE WILLIAM WOOD as Trustee of the KJ PARDINGTON FAMILY TRUST First Respondent
DAVID JOHN PARDINGTON as Trustee
of the KJ PARDINGTON FAMILY TRUST Second Respondent
KENNETH MARK PARDINGTON as Trustee of the KJ PARDINGTON FAMILY TRUST
Third Respondent
WAYNE FRANCIS McCURDY as Trustee of the KJ PARDINGTON FAMILY TRUST Fourth Respondent
KINNEY v PARDINGTON [2018] NZHC 155 [15 February 2018]
Hearing: 5 February 2018 Appearances:
C T Gudsell QC and D E G Nielsen for Plaintiff in FPA
proceedings and Trust proceedings
K A McKenzie for Defendants in FPA proceedings
S W Hughes QC for Interested Parties in FPA proceedings
D Matheson for second, third and fourth respondentsJudgment:
15 February 2018
JUDGMENT OF CULL J
[1] This decision concerns a consolidation application, seeking to consolidate Family Protection Act 1955 (FPA) proceedings, which were substantively heard in August 2016, with Trust proceedings recently filed on 10 October 2017. The plaintiff applies for consolidation of both proceedings because there are common questions of fact and/or law arising in both proceedings, relating to the historic administration of the K J Pardington Family Trust (the Trust) and the Estate of K J Pardington (the Estate). In the alternative, the plaintiff seeks particular discovery before the FPA proceeding is determined.1
[2] The FPA proceedings were adjourned on 16 August 2016 part-heard, to determine the quantum of the estate. At issue are the liabilities of the estate to the Trust, including a Deed of Assignment dated 20 December 2013, which was entered into 10 months after the date of commencement of these proceedings on 8 February
2013. In my minute of 16 August 2016 I recorded that with the Estate’s total indebtedness of $526,474.49, the Court required clarification of the appropriate deduction from the value of the Estate assets.2
Factual background
[3] Since the adjournment of the proceedings on 16 August 2016, the parties have filed numerous memoranda and evidence in response to my minute of 16 August 2016.
1 The details of the discovery sought are dealt with under the heading “Particular discovery” later in this judgment.
2 Minute of Cull J, 16 August 2016.
Over this time, certain trust documents have been provided, following requests by the plaintiff for source documentation of the trust account material made available to date.3
Trust proceedings
[4] On 10 October 2017, during the course of the exchanges of documents and memoranda, the plaintiff issued Trust proceedings against the trustees of the K J Pardington Family Trust, comprising Kenneth and David Pardington together with two independent trustees. The independent trustees are not parties to the FPA proceedings. The Trust proceedings allege three causes of action, namely breach of trust in respect of the distributions of income and capital to the discretionary beneficiaries of the trust, being D J, K M and M M Pardington; mistake in that distributions were made pursuant to a mistake of fact; and a further breach of trust for distributions made to each of D J and K M Pardington in the year ended 31 March
2014. The remedies sought are orders removing the defendants as trustees and appointing new trustees, together with orders setting aside the distributions and requiring the defendants to either repay distributions or pay equitable compensation to the new trustees on behalf of the Trust.
The parties’ positions
Plaintiff ’s position
[5] The plaintiff submits that because there are common questions of fact and/or law arising in both proceedings, particularly relating to the historic administration of the Trust, the Court should hear both proceedings together, as a view will need to be formed as to the valid liabilities of the Estate and the pattern of conduct of the Estate executors and the trustees. Because both purported liabilities of $523,709.37 from the Estate to the Trust and the Trust’s purported liability of $701,680 to D J and K M Pardington are relevant in both proceedings, consolidation will eliminate the risk
of inconsistent findings on the common questions of fact and/or law.
3 Minute of Cull J, 2 December 2016.
Defendants’ positions
[6] The executor defendants in the FPA proceedings indicated they would abide the decision of the Court on consolidation of the proceedings but opposed the plaintiff’s application for particular discovery.
[7] The interested parties oppose the making of the order for consolidation on the grounds that there are no common questions of fact or law; the FPA claim has been on-foot for more than four years and there is a fixture scheduled to finalise the FPA claim; the Trust proceeding is in its infancy; there is no common legal representation between the two proceedings; and the sole issue for the FPA claim is “how much” is in the Estate, because the parties accept that the applicant had a legitimate claim from the outset.
[8] For the trustees, Mr Matheson opposed the orders on the grounds that the two proceedings are at different stages of readiness for trial; there is insufficient overlap between the two proceedings in relation to questions of fact and/or law to justify consolidation and there is no risk of conflicting findings of fact and/or law given that the two proceedings involve different causes of action and issues. Importantly, the consolidation of the proceedings will result in increased costs to the parties because of different sets of lawyers involved in each of the proceedings, with some of the parties and their representation being involved in a hearing, where many issues will not be relevant to the proceeding in which they are acting. He submits that the Trust proceeding is capable of informal settlement in respect of the removal and replacement of trustees.
The relevant legal principles
[9] The Court’s power to consolidate proceedings is contained in rr 10.12 and
10.13 of the High Court Rules 2016. They provide:
10.12 When order may be made
The court may order that 2 or more proceedings be consolidated on terms it thinks just, or may order them to be tried at the same time or one immediately after another, or may order any of them to be stayed until after the determination of any other of them, if the court is satisfied—
(a) that some common question of law or fact arises in both or all of them; or
(b) that the rights to relief claimed therein are in respect of or arise out of—
(i) the same event; or
(ii) the same transaction; or
(iii) the same event and the same transaction; or
(iv) the same series of events; or
(v) the same series of transactions; or
(vi) the same series of events and the same series of transactions; or
(c) that for some other reason it is desirable to make an order under this rule.
10.13 Application of rule 10.12
Rule 10.12 applies even though—
(a) the relief claimed in the proceedings is not the same; or
(b) 1 or more of the proceedings—
(i) is pending in the court in the exercise of its admiralty jurisdiction; or
(ii) is brought under the provisions of an Act conferring special jurisdiction on the court.
[10] In Regan v Gill, the Court of Appeal confirmed the power to consolidate proceedings is a wide discretion, to be exercised broadly in the interests of justice.4
The Court of Appeal has also previously acknowledged that courts must “balance all the considerations of justice, convenience and expense” in determining whether to consolidate proceedings.5
[11] Rodney Hansen J, in Medlab Hamilton Ltd v Waikato District Health Board, identified that relevant factors which will favour a consolidation order are the savings
that will be achieved, in time and cost to the parties as well as in judicial resources,
4 Regan v Gill [2011] NZCA 607 at [10].
5 Gair v Newnham [1974] 1 NZLR 662 (CA) at 665.
and removing the risk of inconsistent decisions.6 In granting a consolidation order in
Medlab, the Judge considered:
(a) the proceedings had a common factual and legal context and raised the same underlying issues (including the same statutory framework) which would be addressed more logically, efficiently and coherently if heard together;
(b)the plaintiffs were related companies with the same legal representation and the second defendant in each proceeding was the same person; and
(c) it was important to avoid inconsistent findings being made on the common issues.
Discussion
[12] The outstanding issue for determination in the FPA proceedings is the quantum of the Estate and the clarification of the Estate’s liability to the Trust. In the course of the exchanges among counsel following the hearing in August 2016, I issued a minute on 19 July 2017, in which I recorded that I had reviewed all of the 10 memoranda and the additional material and affidavits filed since the August 2016 hearing and I considered the financial statements from the Trust needed to be disclosed because:7
It is a relevant consideration for the Court to take into account the respective assets, distributions and liabilities that pertain to both the estate and the Family Trust, where a plaintiff claiming under the Family Protection Act 1955 has an entitlement under a Trust and has a valid claim under the Family Protection Act.8
[13] As I indicated in that minute, I wanted to ensure that counsel could address the matters in contention, which were raised in their memoranda, so that there was an opportunity to be properly heard. As I viewed the position and still do, the determination that needs to be made is whether the liabilities of the Estate to the Trust
are properly deductible.
6 Medlab Hamilton Ltd v Waikato District Health Board (2007) 18 PRNZ 517 (HC) at [8].
7 Minute of Cull J, 19 July 2017 at [10].
8 Flathaug v Weaver [2003] NZFLR 730 (CA) at [36]–[37].
[14] In finally assessing the award to the plaintiff in the FPA proceedings, the availability of historic distributions to other discretionary beneficiaries under the Trust may or may not have relevance, but the plaintiff should receive that information, which may or may not inform the Court of any factors which the Court may take into account in making the award under the FPA.
[15] The Trust proceedings, as described above, allege breaches of trust and mistake and seek remedies against the trustees personally. As the defendants in opposition submit, the Trust proceedings focus on the personal liability of the trustees, two of whom are not parties to the FPA proceedings.
[16] I do not consider it is appropriate at this time in the FPA proceedings, to consolidate those proceedings with the recently issued Trust proceedings. In summary, my reasons are:
(a) The FPA proceedings are adjourned part-heard following the substantive argument in August 2016 and are awaiting a determination on the quantum of the Estate from which an award to the plaintiff will be made.
(b)The outstanding issue for determination in the FPA proceedings is the value of the Estate, which involves a taking of account of the Estate assets and liabilities and a review of the Trust financial records, where relevant.
(c) The Trust proceedings allege breaches of trust and mistake. The focus of such proceedings is the pattern of conduct of the trustees and their personal liability, including specific allegations against the first defendant that he should have been aware of the plaintiff’s existence.
(d) The trust proceedings involve two trustees, Mr Woods and
Mr McCurdy, who are not parties to the FPA proceedings.
(e) The FPA proceedings were issued in 2013, heard substantively in
August 2016 and are scheduled for hearing on 26/27 March 2018.
(f) If consolidation of the proceedings occurs, or the proceedings are heard concurrently, there will be further delay and more cost to the additional defendants, having to be involved in both proceedings.
(g)The resolution of the FPA proceedings will determine the quantum of the Estate. Any further claim against the Trust can be pursued by the plaintiff, at a hearing where all the trustees are parties. This will enable any further evidence to be adduced and liability issues to be determined.
(h)The possibility of inconsistent findings, as advanced by the plaintiff, is not a risk, in my view, because personal liability issues should await the Trust proceedings hearing.
[17] For those reasons, I decline the plaintiff’s application to consolidate the proceedings.
Particular discovery
[18] In the alternative, the plaintiff seeks particular discovery of the following documents:
(a) Partnership financial statements for the years 1989–1999.
(b)Tania Roberts’ working papers concerning the preparation of both the summary spreadsheet and the partnership spreadsheet.
(c) Unredacted bank account statements in relation to all payments/amounts recorded in the summary spreadsheet, partnership spreadsheet and financial statements and/or referred to by Ms Roberts.
(d)Source documents, for example cheque books and deposit books, in relation to all payments/amounts recorded in the summary spreadsheet, partnership spreadsheet and financial statements and/or referred to by
Ms Roberts.
(e) An unlocked electronic copy of the partnership spreadsheet.
(f) A full unredacted copy of the financial statements of the Tarata Deer
Company Ltd for the years 1993 and 1994.
(g)All other documentation held and/or reviewed by Ms Roberts in relation to the Trust and/or the Estate which has not previously been provided to the plaintiff.
[19] Ms McKenzie for the executors opposes particular discovery, principally on the grounds that matters connected with the administration of the Trust are not materially relevant to the FPA claim. In addition, Ms McKenzie refers to documents that have been provided to the plaintiff, but objects to working papers of the Trust’s accountants connected with the administration of the Trust being provided, as they are not relevant to the FPA claim.
[20] During the hearing, I indicated to Ms McKenzie that I was unattracted to the executors’ stance. In my minute of 19 July 2017, I noted that if the deductions are made from the value of the Estate, in respect of the loans to the Trust recorded as liabilities, the Trust will be the recipient of those assets.9 I considered that the detail of the loans should be disclosed. It was appropriate, therefore, that the financial statements for the Trust, since the Trust’s establishment in 1984, should be provided to the plaintiff.
[21] For the reasons expressed in my minute of 19 July 2017 and as addressed above, the remaining documents which the plaintiff seeks and which have been deposed to by the plaintiff’s forensic accountant, Mr Parsons, should be disclosed.
[22] The details of the outstanding documents which the plaintiffs still seek are attached to the Supplementary Affidavit of Ms Stutt, at paragraph [3] of Nielson Law’s letter of 2 February 2018.
[23] Those documents should be provided to the plaintiffs forthwith and I hereby make a formal order of particular discovery of the following materials:
9 Minute of Cull J, 19 July 2017 at [8].
(a) Partnership financial statements for the years 1989–1999.
(b)Tania Roberts’ working papers concerning the preparation of both the summary spreadsheet and the partnership spreadsheet.
(c) Unredacted bank account statements in relation to all payments/amounts recorded in the summary spreadsheet, partnership spreadsheet and financial statements and/or referred to by Ms Roberts.
(d)Source documents, for example cheque books and deposit books, in relation to all payments/amounts recorded in the summary spreadsheet, partnership spreadsheet and financial statements and/or referred to by Ms Roberts.
(e) All other documentation held and/or reviewed by Ms Roberts in relation to the Trust and/or the Estate which has not previously been provided to the plaintiff.
[24] I direct that these documents are disclosed no later than 5.00 pm on
21 February 2018.
[25] Costs are reserved.
Cull J
Solicitors:
Nielsen Law, Hamilton
Govett Quilliam, New Plymouth
Quin Law, New Plymouth
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