Mauger v Tucker
[2021] NZHC 3214
•29 November 2021
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2020-409-226
[2021] NZHC 3214
BETWEEN W J MAUGER (by his litigation guardian P J Cron)
Plaintiff
AND
S M TUCKER
First Defendant
L C HERMANSSON
Second Defendant
Hearing: 13 October 2021 Appearances:
N A Till QC for Plaintiff
K W Clay and R L D Paul for First Defendant T J Castle for Second Defendant
A N Riches for Executors of Estate of W J Mauger
Judgment:
29 November 2021
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
Introduction
[1]In January 2019, Mr Warner Mauger executed two deeds of gift, one for
$550,000 to the first defendant, Mr Simon Tucker, and one for $485,000 to the second defendant, Ms Louise Hermansson. Subsequently, both gifts were paid out. In May 2020 Mr Mauger, through his guardian ad litem or litigation guardian, his daughter, Ms Penelope Cron, commenced this proceeding which is directed at clawing back those gifts. In the original statement of claim, he pleaded one cause of action, that is to say that the transactions were unconscionable and should be set aside.
MAUGER v TUCKER [2021] NZHC 3214 [29 November 2021]
[2] In July 2020 both defendants entered defences. They say Mr Mauger had full capacity, that he was quite entitled to make the gifts, that it was his firm wish to make them and that they are unassailable.
[3] Mr Mauger died in November 2020. The executors of his estate, Mr Cranwell Bull (Mr Mauger’s solicitor) and Mr Wynton Cox, did not wish to pursue the claim. In April 2021, they assigned their interest in the claim to Mr Mauger’s children, Mr Philip Mauger, Mr Timothy Mauger, Mr Stephen Mauger and Ms Cron. The children are the principal beneficiaries of Mr Mauger’s estate, and referred to herein as the applicants in relation to the first application identified below.
[4] Before the Court for immediate determination are three interlocutory applications:
(a)by the applicants for an order substituting themselves for their late father as the plaintiffs in the proceeding;
(b)by the first defendant for an order striking out the claim; and
(c)by the second defendant for an order striking out the claim.
The factual background
[5] Before turning to those applications, it is necessary to flesh out the factual background to the proceeding.
[6] In relation to this there is no shortage of affidavit evidence. On my count, there are at least 14 affidavits before the Court in relation to these three interlocutory applications. They occupy the lion’s share of three substantial volumes of material. In a synopsis of submissions dated 8 July 2021 filed and served by the applicants’ solicitors prior to Mr Till being instructed, and in anticipation of their interlocutory application being heard at an earlier date, the background was described in considerable detail. This summary unquestionably canvasses the facts from the applicants’ perspective. It is not consistent in all respects with the affidavit evidence offered on behalf of the defendants. Obviously, it has not been the subject of challenge
at this point, and aspects of the narrative, especially the evaluative aspects, may well be open to challenge. For all that, it does appear to me to provide a general picture from which the principal issues emerge, and I set it out below in preference to offering my own summary. I have redacted unnecessary aspects in the interests of brevity as much as anything else:
6. Mr Mauger was born on 18 June 1934. He married Patsy on 2 February 1957, and they had 4 children: Philip Simon Mauger (aged 63), Timothy James Mauger (aged 60), Stephen Warner Mauger (aged 58) and Penelope Cron (aged 53) who are the applicants (Mauger children).
7. Mr Mauger was a successful businessman, with his main trading company being Rookwood Holdings Limited. Ultimately, he and Patsy accumulated assets in three trusts – the Mauger Charitable Foundation, Patricia Mauger Trust and The Warner Mauger Trust. By 2018, the trustees were Cran Bull (Mr Mauger’s solicitor), Gill Cox and Kevin McDonnell, as well as the Maugers. Ms Cron was appointed on 29 October 2018, before the gifting transaction.
8. Mr Mauger’s accountant, from 2006, was Jane Jackman who was also an advisor to the board of Rookwood and attended director meetings. Mr Tucker was employed at Rookwood as General Manager and Ms Hermansson as Office Administrator. They were the only employees in management – Mr Tucker began in 2009 and Ms Hermansson in 2011.
9. The Mauger’s were of charitable disposition. Through the Foundation, they donated $1,406,699 from 2011 to 2018 with the last being for the purchase of an ambulance to St John for $225,000, on 23 October 2018. In their individual capacities, from 2013 to 2016, Mr Mauger donated $5,147.50 and Mrs Mauger
$47,207.50. Mrs Mauger was influential when it came to making donations and was known as the “gatekeeper”. The last charitable donation Mr Mauger made personally was in 2014 for $250. He never made non-charitable cash gifts.
10.10.
11. From 2017, Mr Mauger began to withdraw from the business as he was experiencing short-term memory loss. This coincided with Philip and Tim being appointed as directors. Mr Tucker also became more influential in accounting functions.
12. Due to deteriorating physical and mental health, Mr and Mrs Mauger moved into Alpine View Retirement Village in late 2017, receiving rest home level care. As part of this process, Mr Mauger had to undertake a MoCA test. He scored 19 plus 1 out of a total possible score of 30, scoring poorly on delayed recall, language and executive function. This indicated mild cognitive impairment.
13. On 21 June 2018, Mr Mauger received an urgent medical assessment which noted recent acute cognitive decline, memory loss and depression. A full medical assessment, in July 2018, noted there were concerns of recent cognitive decline, characterised by deteriorating short term memory over the past 18 months, indicative of early dementia. During this assessment, Mr Mauger himself expressed concerns regarding his deteriorating short-term memory, reporting that he was unable to remember recent events. Another MoCA test was administered. On this occasion, Mr Mauger scored 16 plus 1, again performing poorly on delayed recall and fluency, indicating dementia. This assessment also noted evidence of micrographia in Mr Mauger’s handwriting, an acquired disorder characterised by abnormally small, cramped handwriting, commonly found in people with neurodegenerative disorders such as dementia. A CDHB referral form, dated 24 July 2018, records that Mr Mauger was admitted to the care centre at Alpine View as an “overnight emergency admission” and notes Mr Mauger’s declining mental health.
14. Mrs Mauger died on 25 July 2018.
15. This exacerbated Mr Mauger’s declining mental state and depression. Ms Jackman observed Mr Mauger was depressed with deteriorating cognition. He had trouble articulating his words, often forgetting what he was saying mid-sentence and, during one conversation, was hardly coherent.
16. Mr Mauger was then moved into a single unit at Alpine View on 13 September 2018, where he received rest home level care. This included assistance and supervision with showering, meal preparation, medication management and domestic assistance. Declining ability to carry out personal care, triggering the need for supervision, further indicates the progression of Mr Mauger’s dementia.
17. Mr Mauger then received a psychiatric review. A report, dated 16 October 2018, noted Mr Mauger had expressed ideas of self-harm and suicide. Dr Jonathon Darley, a consultant psychiatrist, confirmed a diagnosis of early mixed Alzheimer’s and Vascular Dementia from a CT scan which affected Mr Mauger’s ability to understand abstract concepts. On the same day, Dr Chima issued a medical certificate confirming that Mr Mauger was no longer safe to drive.
18. There was a developing awareness of cognitive issues by the trustees. Mr McDonnell raised doubt of Mr Mauger’s ability to sign in July 2017. Mr Tucker observed confusion in relation to money to be gifted to grandchildren in September 2018, which he characterised as “karma” and in respect of which Mr Cox said “I do not think Warner comprehends!”
19. Notes by health care assistants and nursing staff at Alpine View refer to inappropriate behaviour by Mr Mauger, beginning in late 2017:
[(a)–(n) redacted]
20. This was a marked change in Mr Mauger’s behaviour, a decline in his social function and evidence of impaired executive function due to dementia. This behaviour created a need to evaluate Mr Mauger’s mental wellbeing, as identified
by Alpine View and shared with the trustees. The seriousness of this behaviour triggered Dr Chima to make an urgent mental health referral, again noting mild cognitive disorder, cognitive impairment and depression. Dr Chima’s medical notes question whether Mr Mauger should be committed to a psychiatric ward due to the behaviour. The trustees of Mr Mauger’s trusts were made aware of these issues.
21. Mr Mauger’s driving licence was removed by the Police in December 2018.
22.22.
23. The gifting transaction was instigated by Mr Tucker in mid-December 2018.
24. He telephoned Mr Bull who opened a file for the gifting transaction on 18 December 2018 following an email from Mr Tucker. Mr Bull’s first file note records a discussion with Mr Tucker, not Mr Mauger, which states that the amounts were $550,000 for Mr Tucker and $485,000 for Ms Hermansson and the purpose of the gifts was to “clear mortgages”.
25. Around this time, Ms Cron voiced her concern to the trustees regarding the amount of money Mr Mauger had access to in his personal account. She suggested the funds be transferred to Mr Mauger’s trust and, hence, under the control of the trustees.
26. Mr Bull did not advise Ms Cron of the proposed gifting, nor did he involve Stephen, who had a power of attorney. He did, however, include all trustees, except Ms Cron, who had been appointed a trustee on 29 October 2018. Nor was Jane Jackman, who was well familiar with the earlier gifts involved.
27. Mr Bull’s email of 19 December 2018 to the other trustees records:
(a)He had spoken with Mr Mauger and it was concerning that he “couldn’t give me the amounts”.
(b)Ms Hermansson was to email the amounts.
(c)He said he had advised Mr Tucker:
“There was an absolute need to be able to establish Warner has full capacity”.
(d)Mr Tucker had agreed because if there were any doubt the family may challenge the gifts. It also appears that Mr Tucker was already aware that Dr Chima was away until 7 January 2019.
(e)Mr Bull would attend Mr Mauger the following day, have the gifts signed and hold them pending a satisfactory medical certificate.
28. :
[(a)–(b) redacted]
29. On the same day, Mr Mauger had an appointment with Dr Chima. Dr Chima observed that Mr Mauger was “vague and gets lost mid-sentence”. Ms Hermansson was present at this appointment.
30. Ms Hermansson then provided the gift amounts to Mr Bull. There is no record of how the amounts were calculated other than they were tied to the mortgages. No steps were taken by Mr Bull to confirm the existence of a mortgage or the amount owing under any mortgage. In fact, Ms Hermansson did not have a mortgage at the time.
31. Mr Bull attended Mr Mauger the following day, 20 December 2018, at Alpine View. His file note is the only written record of instructions from Mr Mauger. The reliability of this note is in question. It has been examined by Patricia James, a senior document examiner with the Police. Ms James concludes the details after “expressed concern” (which includes the amounts and the suggestion Mr Mauger’s children were not to be informed) were added after the gifts were made, over a month after its stated date of authorship.
32. The deeds of gift were signed by Mr Mauger at this meeting and held until a medical certificate had been issued.
33. Mr Bull did not give any written instructions to Dr Chima to establish whether Mr Mauger had capacity to:
(a)Give instructions to Mr Bull; and
(b)Make a decision to enter into the gift transaction.
34. Instead, Mr Bull requested Ms Hermansson to arrange for the medical appointment, which she organised for 7 January 2019.
35. At the appointment, Ms Hermansson actively participated and, according to Dr Chima, represented that the purpose of the medical certificate was for a donation to buy an ambulance. Dr Chima’s recollection is corroborated by his medical notes written the day of the appointment:
“… discussion re request from lawyer re recent donation to purchase new ambulance currently of sound mind, acknowledges memory is getting worse”
36. Dr Chima issued the medical certificate on this basis. It noted Mr Mauger was currently of sound mind but “will need assessment before any future donations were made”. Dr Chima did not use the word “gift”.
37. Dr Chima says he was aware that Mr Mauger was of a charitable disposition and had donated an ambulance in the past. He says:
As noted in my later email of 17 July 2019, this appointment was unusual because the request for it came from Ms Hermansson. It was also unusual, because unlike earlier appointments, she fully participated whereas Warner did not say very much. She informed me Warner intended to make a donation for an ambulance and needed me to give a certificate to prove Warner’s competency to purchase an ambulance for 3-400,000. I was a little uneasy but I was also aware, in earlier discussion with Warner, that he had made charitable donations to the hospital. So, it was not unexpected. I am now aware that was not the purpose.
38. Dr Chima later confirmed he would not have issued that medical certificate had he known the true purpose of the transaction. He would have requested further information from the lawyers or trustees (assumed to be providing a layer of protection for Mr Mauger).
39. Mr Bull telephoned Dr Chima on 17 July [2019]. He made two file notes of the one conversation. One file note does not refer to the gift to Mr Tucker and Ms Hermansson, and is consistent with Dr Chima’s recollection and his contemporaneous file note of the medical appointment. The other refers to the gift to Mr Tucker and Ms Hermansson, and is inconsistent.
40. The gifts were paid out to Mr Tucker and Ms Hermansson on 15 and 21 January 2019, respectively. The money was not used to repay mortgages.
41. Mr Bull did not prepare a letter confirming instructions until after the transaction on 24 January 2019. He added to his file note, as noted above, some time on or after his date according to Ms James.
42. Jane Jackman visited Mr Mauger on 20 February 2019 to go over his tax return. She says:
I knew Warner’s cognition was deteriorating. I knew he was depressed with the passing of Patsy in July 2018. At her funeral, Warner was disorientated and had trouble articulating his words often forgetting what he was saying mid-sentence. Also, around this time, I recall a telephone conversation with Warner from Queenstown when he was hardly coherent, but I rang him as Louise told me he wanted to check and confirm something with me.
I was shocked at how Warner had deteriorated, his tiredness and his depressed state. He said he wished he were not here and how much he missed Patsy. He did not really listen as I went through the tax return.
My Manager, Kaye Vincent, came with me and as I was running through the tax return itself she said he had gone to sleep. His state of mind was such I would not have expected him to discuss any other matters although he did make a general enquiry as to the company’s performance to date that financial year so I ran through some November 2018 interim management accounts with him while visiting.
43. During March 2019, Mr Bull suggested Ms Cron be appointed as power of attorney in relation to property for Mr Mauger. In an email dated 14 March 2019, Mr Bull stated he had “concerns about your father’s mental capacity”. As noted, Stephen already had a power of attorney given on 31 August 2016. Unlike the gift transaction, this was conferring contingent authority over property.
44. Ms Cron was appointed power of attorney in relation to property on 27 March 2019. Mr Bull certified the appointment without requiring a medical certificate, confirming that he had “no reason to suspect the donor was or may have been mentally incapable at the time the donor signed the instrument”.
45. The day following her appointment, Ms Cron met with Mr Mauger to review his finances. She discovered the gifting transaction during this meeting. Mr Mauger did not remember how much he had gifted, initially stating he had gifted $10,000 and then correcting himself to $100,000. There was no mention of the amount being tied to a mortgage debt.
46. This resulted in Ms Cron beginning an investigation into the gifting transaction. During April 2019, Tim and Phil confronted Mr Tucker who offered to give the money back. They said it was not about the money but how it was done and that they would be looking into it further.
47. Mr Tucker later produced a letter, witnessed by Ms Hermansson, and allegedly signed by Mr Mauger on 2 July 2019. It purports to record the gift to Mr Tucker was because of “natural affection” and for the personal help he gave Mr and Mrs Mauger. Ms James has advised Mr Mauger’s signature on this letter has resulted from an attempt to copy/simulate the signature style of Mr Mauger. A report produced by I.T.online establishes the letter was created by Ms Hermansson
on 8 July 2019 and subsequently saved by Mr Tucker, on the same day. The signature is not similar to Mr Mauger’s deteriorating signatures.
48. Ms Hermansson resigned on 7 October 2019, citing health issues.
49. On 9 October 2019, Dr Colin Peebles administered a further MoCA test on Mr Mauger, who scored 12 plus 1. This indicated Alzheimer’s disease, nearing severe cognitive impairment. On 3 November 2019, Dr Peebles reported that Mr Mauger had dementia of at least moderate severity resulting in a lack of capacity to make significant financial and welfare decisions.
50.50.
New party order
[7] The application for a new party order is brought pursuant to r 4.52 of the High Court Rules 2016. This appears in sub-pt 8 of pt 4 of the Rules (rr 4.49–4.53).
[8] Rule 4.49 provides that the death of a party to a proceeding does not bring the proceeding to an end.
[9] Rule 4.50 provides that in the case of the death of a party, the Court must order that “a personal representative, trustee, or other successor to the interest (if any) of that party be made a party to the proceeding, or be served with notice of it, in the prescribed manner and form on terms it thinks just …” and goes on to say that the Court may make such other orders it regards as just for the disposal of the proceeding.
[10]Rule 4.52 provides:
4.52 New parties order
(1)Subclause (2) applies if, after a proceeding has commenced, there is an event causing a change or transmission of interest or liability (including death or bankruptcy) or an interested person comes into existence, making it necessary or desirable—
(a) that a person be made a party; or
(b) an existing party be made a party in another capacity.
(2)An application without notice may be made for an order that the proceeding be carried on between the continuing parties and the new party (a new parties order).
(3)The new parties order must, unless the court otherwise directs, be served on—
(a) the continuing parties to the proceeding; and
(b) each new party, unless the person making the application is the only new party.
(4)The new parties order is binding on a person served from the time of service.
(5)A person who is not already a party who is served with a new parties order must file a statement of defence in the same time frame and manner as a person served with a statement of claim.
[11] On behalf of the applicants, Mr Till submits that this rule applies directly to the current circumstances. The events on which the applicants rely are the death of Mr Mauger and the assignment of the cause of action by the executors to them. Mr Till submits that in the circumstances it is both necessary and desirable that the applicants become parties to the proceeding so that they can prosecute it.
[12]That application is opposed by the defendants.
[13] Mr Till’s submissions can be summarised in the following series of propositions:
(a)The applicants propose to prosecute the current proceeding, though they intend to amend the statement of claim so as to allege two causes of action — lack of capacity and unconscionably;
(b)The challenge to the gifts is reasonably arguable, and neither of the defendants contend otherwise;
(c)The applicants would be entitled to commence a fresh proceeding making precisely the same allegations;
(d)The Rules (in sub-pt 8 of pt 4) provide that the Court may make an order substituting the applicants for the late Mr Mauger as the plaintiffs so as to enable them to pursue the claim, and it is both necessary and desirable that such an order be made;
(e)Such an order is necessary to enable the applicants to prosecute the claim, when there is no one else to do so, and desirable in the sense that it would be consistent with the objective of the High Court Rules as articulated in r 1.2 as it would secure the just, speedy and inexpensive determination of the substantive issues in the proceeding.
[14] On what grounds, then, do the defendants oppose the making of the order sought?
[15] Mr Clay took the lead in relation to this aspect of the case, marshalling the arguments under three headings.
[16] First, he invited the Court to consider r 4.50, discussed at [9] above. As I understood his argument, Mr Clay contended that on Mr Mauger’s death the Court’s only option was to appoint his personal representatives — the executors of his estate
— in his stead.
[17] That does not appear to me to be correct. Rule 4.50(a) is certainly mandatory in its terms. It says that on the death of a party the Court must make orders to deal with the situation. But the orders that the Court must make are not limited to the appointment of the deceased’s personal representatives. They include an order appointing another successor to the interest or interests, which I take to mean the interest or interests being pursued in the proceeding.
[18] In this case, following Mr Mauger’s death, or more properly following the grant of probate, his personal representatives succeeded to that interest, that is to say the chose in action. However, they subsequently assigned that chose to the applicants. In those circumstances, it appears to me to be open to the applicants to contend that, following the assignment, they are now the successors to the interest that Mr Mauger was formerly pursuing in the proceeding.
[19] Even if that interpretation of r 4.50 is incorrect, and the Court’s only option is to make an order that Mr Mauger’s executors be substituted as the plaintiffs, that is a mere matter of process because the executors are no longer in a position to pursue the claim. It cannot be that the law is so maladroit so as to prevent the Court making orders which would achieve the practical objective of enabling the claim — whatever its merits — to be aired by the most efficient means.
[20] Furthermore, it appears clear that the Court could if necessary make multiple orders, first appointing Mr Mauger’s executors and then substituting the applicants for the executors.
[21] I reject any argument that under sub-pt 8 of pt 4 of the Rules the Court is unable to make the order sought in this case.
[22] Mr Clay’s second submission focussed on the deed of assignment between Mr Mauger’s executors and the applicants. I accept the implicit contention that if that assignment is unlawful or unenforceable, then the Court should not make the procedural order sought because, in the end, this would not enable the applicants to pursue the claim.
[23] As Mr Clay submitted, equity has never permitted the assignment of bare rights of action. This is because the transfer of a right of action enjoyed by A to B, where, but for the transfer, B would have no interest in the matter, “savours of maintenance or champerty” (basically, involving yourself in litigation which is none of your business) both of which are directed at outlawing the pernicious perpetuation of litigation by parties with no genuine interest in it.1
[24] In my view, this case could not be further removed from such a situation. The applicants are the very individuals who stand to gain from a successful prosecution of the cause of action that has been assigned. What the Court would be doing by making the order sought is ensuring that the individuals with the real interest in the claim can prosecute it without having to start all over again. After all, had Mr Mauger’s executors wished to do so, they would unquestionably have been entitled to prosecute this claim, and, in doing so, they would be pursuing the claim on behalf of the applicants. It is only because the executors have taken a view as to the merits of the case which, for all I know, may be right or wrong, that the assignment was necessary.
[25] I reject Mr Clay’s submission that the assignment in this case involved the unlawful assignment of a bare chose in action.
[26] Third and finally, Mr Clay submits that in terms of r 4.52 it is neither necessary nor desirable that the orders sought be made. His submission in relation to this is, in my view, circular. He says that it is neither necessary nor desirable because it would
1 Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at 670.
involve a procedural irregularity (his first point), would involve sanctioning the assignment of an unassignable right (his second point) and because the executors do not wish to pursue the proceeding, which strikes me as irrelevant.
[27] It is correct of course that if an order is to be made pursuant to r 4.52, the Court must first conclude that the order is necessary or desirable.
[28] To repeat myself, the contention that it is necessary that the order be made so as to enable the applicants to prosecute the claim appears to me to be unanswerable — in the absence of an order the applicants would have no standing in this proceeding as they are not parties. Further, it appears to me to be desirable that such an order be made to avoid putting the applicants, and, for that matter, the defendants, to the additional costs of commencing, and responding to, a new proceeding.
[29] I reject Mr Clay’s submission that the orders sought are neither necessary nor desirable.
[30] In his submissions, Mr Castle raised some further points in relation to this application:
(a)First, Mr Castle criticised the applicants’ appeal to convenience. He described as a concession the submission made on their behalves that they were wishing to “ avoid undue expense or delay and being put to the trouble of initiating fresh derivative proceedings”. I do not regard that as a legitimate basis for criticism. The object of the High Court Rules is to secure the just, speedy and inexpensive determination of proceedings. To the extent that the application is based on avoiding additional costs and steps in order to get the substantive issue before the Court for determination, then that appears to me to be a legitimate aim.
(b)Second, Mr Castle questioned the submission made on behalf of the applicants that the case they would be advancing was the case that Mr Mauger would have been advancing had he not died, because it
would not involve the same parties and the same issues. Again, I disagree. Whilst it is true that the individuals may be different, that is to say Mr Mauger on the one hand and the applicants on the other, they are effectively standing in the same shoes. It appears clear to me that the issues Mr Mauger might have raised are the same issues as the applicants will be entitled to raise.
(c)Third, Mr Castle introduced into the argument the question of the propriety of the ex parte application made by Ms Cron to be appointed as her father’s litigation guardian in order to prosecute this claim. In my view, that issue — which is certainly a very important one — is best addressed in the context of the applications to strike out the claim by the first and second defendants.
(d)Finally, Mr Castle submitted that the emphasis on the factual background in the submissions advanced on the applicants’ behalf — and the merits of the substantive application — should not distract the Court from dealing with the interlocutory applications before it. This point is well made, though of course the potential merits of the case, in so far as the Court can gain an impression of those at this stage, are not irrelevant to the strike out applications.
[31]I am satisfied that the applicants are entitled to the order they seek.
[32] As to the form of the order, having regard to the view I take of r 4.50, I do not think it necessary to make a preliminary order appointing the executors. I will make an order pursuant to both r 4.50 and r 4.52, substituting the applicants for Mr Mauger as the plaintiffs.
The defendants’ strike-out applications
[33]Mr Castle took the lead in relation to this aspect of the case.
[34] The defendants’ applications can be addressed together, as both move to strike-out this proceeding in its entirety pursuant to r 15.1 of the High Court Rules which provides:
15.1 Dismissing or staying all or part of proceeding
(1)The court may strike out all or part of a pleading if it—
(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b) is likely to cause prejudice or delay; oI(c) is frivolous or vexatious; or
(d) is otherwise an abuse of the process of the court.
(2)If the court strikes out a statement of claim or a counterclaim under subclause (1), it may by the same or a subsequent order dismiss the proceeding or the counterclaim.
(3)Instead of striking out all or part of a pleading under subclause (1), the court may stay all or part of the proceeding on such conditions as are considered just.
(4)This rule does not affect the court’s inherent jurisdiction.
[35] Essentially, the defendants submit that the proceeding constitutes an abuse of process under r 15.1(1)(d). They appear to contend that this abuse has been or is being exacerbated by the application for a new party order. Mr Castle also suggested that the proceeding was vexatious (r 15.1(1)(c)) but, in my assessment, the concept of abuse of process encapsulates vexatiousness in the sense raised in this case.
[36] Mr Castle’s analysis of the scope of an abuse of process justifying striking-out drew on a range of cases, all of which are referred to and analysed in the leading New Zealand texts.2 In the course of his analysis he also drew on the English equivalent of those texts — The White Book.
[37]In my view the most helpful analysis is in Sim’s Court Practice at HCR15.1.10:
Abuse in this context is a misuse of the judicial process which tends to produce unfairness and to undermine confidence in the administration of justice: Reid v NZ Trotting Conference [1984] 1 NZLR 8 (CA). The circumstances in
2 Matthew Casey and others Sim’s Court Practice (online ed, LexisNexis) at [HCR15.1.6]— [HCR15.1.10]; and Robert Osborne (ed) McGechan on Procedure (ebook ed, Thompson Reuters, 2021) at [HR15.1.02].
which proceedings may amount to an abuse of process are varied, and the duty of the Court to prevent abuse is not limited to fixed categories: Chamberlains v Lai [2006] NZSC 70; [2007] 2 NZLR 7. The power, unlike the High Court Rules or the inherent powers of a Court, to stay a proceeding for abuse of process is not limited to the narrow tort of abuse of process: Waterhouse v Contractors Bonding Ltd [2013] NZSC 89 at [30] and following as to scope of the power to stay.
[38] The commentary goes on to identify a number of particular situations in which the Courts have been prepared to strike-out or stay proceedings for abuse of process. Amongst these categories is where the case is driven by an improper purpose in respect of which the learned authors say:3
It may be an abuse of process if a proceeding has been issued for an improper motive, for example, an ulterior purpose of seeking collateral advantage beyond that which the law offers. However, if a plaintiff has a cause of action recognised by law, there is a heavy onus on the defendant to satisfy the Court that the proceedings should be stayed: Ullrich v Ullrich (1996) 2 NZPC 553; (1996) 10 PRNZ 253. For further consideration of relevance of motive see Waterhouse v Contractors Bonding Ltd [2013] NZSC 89 at [30], fn 32.
[39] The essential basis upon which the defendants contend that the proceeding is an abuse of process concerns the circumstances of Ms Cron’s successful ex parte or without notice application for an order appointing her as her father’s litigation guardian which preceded the commencement of this proceeding. The submission is that that application is so tainted by impropriety that the proceeding ought not to be allowed to proceed.
[40] Mr Castle mounted a comprehensive attack on the way in which Ms Cron and her legal advisers made this application.
[41] He began by referring to r 7.23(2) of the High Court Rules which prescribes the grounds on which an applicant may apply ex parte.
[42] The first limb of this rule (r 7.23(2)(a)) provides that such applications may only be made in five circumstances. In her application dated 8 May 2020, Ms Cron expressly relied on two of these grounds — that the application related to a routine matter and that an enactment expressly permitted the application to be made ex parte. In relation to this limb, Mr Castle’s criticism was that it was evident from Associate
3 Sim’s Court Practice, above n 2, at [HCR15.1.10(e)].
Judge Paulsen’s carefully reasoned judgment of 21 May 2020 that the application was anything but routine. Further, inferentially at least, it would seem that the “enactment” relied on was the High Court Rules which are subordinate legislation promulgated pursuant to the Senior Courts Act 2016.
[43] I am not persuaded that this criticism of the application takes matters very far. It appears to me that there is a sense in which any application for the appointment of a litigation guardian might be considered a routine exercise because it is necessary whenever the titular party lacks capacity. It does not follow of course that every such application is uncomplicated. It also appears to me that the term “enactment” in the rule is wide enough to incorporate subordinate legislation, even if the terminology may not be entirely apt to refer to rules.
[44] There is a further point. It appears to me that, had more care been taken accurately to identify the bases upon which it was said to be appropriate to move ex parte, the applicant may have claimed that at least two other grounds in r 7.23(2)(a) applied, namely that the application affected only the applicant, and that it was in the interests of justice to have the matter disposed of on an ex parte basis so that the substantive issue could be put before the Court as efficiently as possible.
[45] I reject the submission that the grounds identified by Ms Cron in her application render the application an abuse of process.
[46] The second limb of r 7.23(2) requires that all reasonable enquiries and all reasonable steps be taken to ensure that the application and the supporting documents contain all material that is relevant to the application, including any defence that might be relied on by any party and any facts that would support the position of any party.
[47] Mr Castle reserved his most strident criticism for the lack of information relating to the potential defences. The criticism is that Ms Cron — or, perhaps more realistically, her solicitors and counsel at the time — did not lay out all of the defences that might, if the substantive proceeding got to trial, have been available to the first and second defendants.
[48] I accept Mr Castle’s contention that there were factual and legal aspects of potential defences that were known to Ms Cron at the time that she made her application, that were not articulated in her application or in her supporting affidavit. To that extent, Associate Judge Paulsen may not have been provided with as full a picture as he could have been. That however, is not to say that the outcome would necessarily have been any different had further information been provided.
[49]Rule 7.23(4) provides:
Failure to disclose all relevant matters to the court or to comply with subclause
(3) may result in the court—
(a)dismissing the application; or
(b)if 1 or more orders have been made by the court in reliance on the application, rescinding those orders.
[50] In a case management teleconference in April 2021, the Court observed that the value of rescission of the orders made as a result of Ms Cron’s application without notice was questionable, given that the death of Mr Mauger brought Ms Cron’s appointment as his litigation guardian to an end.
[51] Mr Castle submits that it is still open to this Court to strike out the extant pleading made by Ms Cron pursuant to r 15.1(1)(d) as a result of it being tainted by an abuse of the process of the court. While that is no doubt correct, I agree with the observations made by the Court in April 2021. Were Mr Mauger still alive there may well have been a legitimate reason to rescind the order made by Associate Judge Paulson on 21 May 2021. And were that the issue before me I would have to give very serious consideration to making such an order. However, I reject the submission that the Court should strike out the proceeding on that basis. I agree with Mr Till’s submission that the key issue for determination at that stage was whether Mr Mauger had the “capacity to understand that which he needs to understand in order to pursue a claim”. That is no longer the issue. In my judgment, no useful purpose would be served by striking out the claim.
[52]The defendants’ applications are dismissed.
Result
[53] Pursuant to both r 4.50 and r 4.52, I order the applicants in this case be substituted for Mr Mauger as the plaintiffs.
[54]I dismiss the defendants’ strike-out applications.
[55] Costs are reserved. My preliminary view is that the applicants are entitled to a costs order on a 2B basis against the defendants jointly. However, as I have not heard from counsel as to costs I cannot deal with them. I expect counsel will be able to do so, but if not, they may file and serve memoranda in the usual way and I will deal with costs on the papers.
Associate Judge Johnston
Solicitors:
Rhodes & Co for the Plaintiffs
Tim Holton Law for the First Defendant Allan & Yee for the Second Defendant
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