Legler v Formannoij

[2021] NZHC 2759

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE

CIV-2020-488-000032

[2021] NZHC 2759

IN THE MATTER OF

the Kaahu Trust

UNDER

Part 18 of the High Court Rules 2016

BETWEEN

LI KARI LEGLER, LAILA SUN LEGLER KLAUI and KEN LEGLER
Plaintiffs

AND

MARIA GUILLAUMINA CORNELIA JOHANNA FORMANNOIJ

First Defendant

KAAHU TRUSTEE LIMITED

Second Defendant

Hearing:	13 October 2021
Appearances (via VMR):	DR Bigio QC and JWH Little for Plaintiffs JD McBride and R Woods for Defendants
Judgment:	18 October 2021

JUDGMENT OF DOWNS J

(Undertaking to pay damages)

This judgment was delivered by me on Monday, 18 October 2021 at 11 am

pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:

TGT Legal, Auckland.

Martelli McKegg, Auckland. DR Bigio QC, Auckland.

JWH Little, Auckland. JD McBride, Auckland. R Woods, Auckland.

LEGLER v FORMANNOIJ [2021] NZHC 2759 [18 October 2021]

A long run-up

[1]        ... best explains why I recall my stay and interim relief orders and make them conditional on an undertaking to pay damages.

[2]        Ricco Legler died 2017 leaving his wife, Maria Formannoij; three adult children from an earlier marriage, Li, Laila and Ken Legler;1 and two family trusts: Kaahu Trust2 and Horowai Family Trust.3 Kaahu existed primarily to benefit Ricco and Maria.4 Horowai existed primarily to benefit the children. Each trust has substantial assets.

[3]        Ricco’s death left Kaahu with two trustees: Maria and another. The other resigned. Maria appointed Kaahu Trustee Ltd5 as a trustee, then herself resigned.

[4]        The children challenged their stepmother’s appointment of Kaahu Trustee. They alleged Maria committed a fraud  on  a  power,  meaning  she  appointed  Kaahu Trustee with an improper purpose.

[5]        On 8 July 2020, the children obtained an interim injunction, without notice, from Brewer J. The injunction prevented Maria and Kaahu Trustee from exercising “any dispositive powers” in relation to trust property.6

[6]        The children did not provide an undertaking to pay damages, nor inform Brewer J they were not doing so. It is unlikely these omissions were sinister, for, the children served the papers on a Pickwick basis (making them readily discoverable). But, the omissions were serious. To compound matters, the children certified the application contained “all relevant information” when, plainly, it did not. Again, the children did not inform Brewer J they were not providing an undertaking. Nor did the

1      The children.

2      Kaahu.

3      Horowai.

4      I use Christian names to avoid confusion given Ricco’s children are parties.

5      Kaahu Trustee.

6 Minute of Brewer J at [5].

children seek exemption from r 7.54 of the High Court Rules 2016.7 This rule makes an undertaking mandatory when someone seeks an interim injunction.

[7]        All this escaped attention, presumably because duty Judges are very busy and things happened quickly.

[8]The interim injunction was later varied by agreement.

[9]        The children’s challenge to Maria’s appointment of Kaahu Trustee failed at trial. On 2 June 2021, I found instead for Maria and Kaahu Trustee.8 So, I rescinded interim relief.

[10]      The children then filed an appeal to the Court of Appeal. On 2 July 2021, and over opposition, I stayed my judgment and restored interim relief pending appeal.9      I did so assuming the children had given an undertaking to pay damages because

(a) not giving an undertaking is exceptional, hence record worthy; and (b) Brewer J’s decision said nothing about this topic (because it had not been drawn to his attention).

[11] From 16 July 2020, I received a flurry of memoranda. Maria’s and Kaahu Trustee’s barrister, Mr McBride, had discovered the unfortunate combination at [6]. I directed Maria and Kaahu Trustee to file an application identifying, exactly, what they wanted. They did. Maria and Kaahu Trustee applied for orders that:

(a)       The plaintiffs must comply with any order for the payment of damages to compensate the defendants for any damage sustained through the interim injunction granted by Brewer J on 8 July 2020; and

(b)       The plaintiffs must comply with any order for the payment of damages to compensate the defendants for any damage sustained through the interim injunction granted by Downs J on 2 July 2021.

[12]In later written submissions:

7      Caselaw is divided on whether an exemption is possible; see A C Beck and others

McGechan on Procedure (looseleaf ed. Thomson Reuters, Wellington) at [HR7.54.01].

8      Legler v Formannoij [2021] NZHC 1271.

9      My Minute of 2 July 2021.

(a)Maria and Kaahu Trustee argued an undertaking to pay damages is automatically implied when interim  relief  is  granted.  In  support, Mr McBride relied on English case law.

(b)On behalf of the children, Mr Bigio QC argued there was no jurisdiction to now require the children to provide an undertaking; English case law was distinguishable; and in any event, no undertaking should be required (given the facts).

[13]      I called on Mr Bigio first at the hearing. I said the parties’ submissions were somewhat off-point, and things could be dealt with much more simply. I explained that given the sequence set out in this judgment and my “fundamental misapprehension” an undertaking to pay damages had been given, I was inclined to recall the orders I made 2 July and require an undertaking.

[14]      Mr Bigio very responsibly accepted: (a) the children had been “in error” before Brewer J; (b) I could recall my orders; and (c) now require an undertaking as a condition of the stay and interim relief. However, Mr Bigio argued an undertaking was not necessary. I reserved my decision, which I said I would release within a week.

[15]The next day, Mr Bigio filed and served this helpful memorandum:

May it please the Court:

1.     Your Honour advised yesterday that the Court was of the understanding at the time the plaintiffs’ stay application was heard that an undertaking as to damages given by the plaintiffs had been in place. Counsel for the plaintiffs was unaware at the time the application was heard of this circumstance, and accepts that had your Honour been appraised of the situation, submissions on the appropriateness of an undertaking would have been sought by your Honour and formed part of the decision making process.

2.     Following yesterday’s hearing, counsel has taken instructions. The plaintiffs wish to bring the issue to a close by providing an undertaking to the Court, confined to the position of the trustee, to support the continuation of the current order.

3.     Counsel for the plaintiffs proposes a draft form of undertaking for the Court’s consideration, as follows:

“We will comply with any order for the payment of damages to compensate the trustee of the Kaahu Trust (either the first or second defendant, as the case may be), in its or her capacity as such, for any damage sustained to the trust property from the date of this undertaking through the order granted by the Court on 2 July 2021.”

4.     The plaintiffs remain opposed to an undertaking that would extend to Ms Formannoij in her personal capacity as a beneficiary. She is not a party to the proceeding in that capacity and, as discussed yesterday, an undertaking could only be for the purpose of protecting the trustee of the Kaahu Trust.

5.     To the extent that it is still pursued by the defendants, the plaintiffs continue to oppose the retrospective imposition / implication of an undertaking in respect of the spent orders made by Brewer J in July 2020 for the reasons set out in the written submissions.

So, the only issue for adjudication is how the undertaking is framed.

[16]      I am not persuaded the proposed undertaking is sufficiently broad. Courts cannot foresee all ends, hence the breadth of the language in r 7.54, namely that the applicant “will comply with any order for the payment of damages to compensate the other party for any damage sustained through the injunction”. There is no reason why the undertaking should not use this language and good reason why it should. After all, the children are now doing only what they ought to have done before Brewer J in the middle of last year.

[17]      For completeness, Mr Bigio expressed concern at the hearing an undertaking could be “weaponised” given intra-familial acrimony. The answer to this submission is twofold. First, an undertaking to pay damages is the orthodox, presumptive “price” of an interim injunction. Second, Kaahu now exists primarily for Maria’s benefit. The interim  injunction  prevents  the  trust  disposing  of  property  to  benefit  her.10      An undertaking to pay damages is, therefore, proper.

Result

[18]      I recall the stay and interim relief orders I made 2 July 2021. I re-issue them conditional on the children providing an undertaking to pay damages in accordance with r 7.54 on or before 5 pm, Thursday 21 October 2021.

10     I do not overlook Maria may sell the home “Mokomoko” by dint of an agreed variation.

Costs

[19]      I think I am right to say costs in relation to the stay application are still to be determined. So too, obviously, costs in relation to this application. I am inclined to award the children scale costs in relation to the stay application. But, I am inclined to award Maria and Kaahu Trustee increased costs (50 percent) in relation to this application even though I have approached matters a little differently than them. If the parties disagree, they may file memoranda of not more than seven pages each:

(a)Maria and Kaahu Trustee on or before 8 November 2021.

(b)The children on or before 15 November 2021.

(c)Maria and Kaahu Trustee, strictly in reply, 22 November 2021.

……………………………..

Downs J