McCullum v McCullum
[2021] NZHC 2993
•5 November 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-372
[2021] NZHC 2993
UNDER Part 18 of the High Court Rules BETWEEN
WILLIAM FRASER McCALLUM JNR AND FIONA CATHERINE JANE McCALLUM
Plaintiffs
AND
CARRICK ROBERT ZACHARY McCALLUM AND CALLUM FRASER McCALLUM AS EXECUTORS AND
TRUSTEES OF THE ESTATE OF WILLIAM FRASER McCALLUM SNR
First Defendants
Cont:/
Hearing: 3 November 2021 Appearances:
D A T Chambers QC for the First-Named Plaintiff S L Robertson QC for Second-Named Plaintiff
A R Gilchrist for Third Plaintiff in CIV-2019-404-2013
A S Butler for First and Second Defendants and Sixth Defendants in CIV-2019-404-2013
A M Camerson for Third and Fourth Defendants S C I Jeffs for Fifth Defendants
Judgment:
5 November 2021
JUDGMENT OF PAUL DAVISON J
[Re Application to Recall Judgment]
This judgment was delivered by me on 5 November 2021 at 3:00 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
McCALLUM v McCALLUM [2021] NZHC 2993 [5 November 2021]
AND
Cont:/
CARRICK ROBERT ZACHARY McCALLUM AND CALLUM FRASER McCALLUM AND McCALLUM INDEPENDENT TRUSTEES LTD AS
TRUSTEES OF THE CALLUM FAMILY TRUST
Second Defendants
AND
CARRICK ROBERT ZACHARY McCALLUM
Third Defendant
AND CALLUM FRASER McCALLUM
Fourth Defendant
AND
ANDREW ROBERT GILL, CALLUM FRASER McCALLUM AND JAN MAUREEN McCALLUM AS TRUSTEES OF THE CF & JM McCALLUM FAMILY TRUST
Fifth Defendants
Solicitors:
Kelly Flavell Law, Auckland BSA Law, Auckland McVeagh Fleming, Auckland
[1] On 12 August 2021 I delivered a judgment determining an application by the plaintiffs for further discovery and disclosure of documents held by the defendants as trustees and executors for which they claim privilege.1
[2] In a joint memorandum dated 13 August 2021 counsel for the defendants seek a recall of the judgment and make written submissions in support of their application.
[3] On the day the joint memorandum seeking recall was filed, the parties were participating in a mediation conference before Hon Rhys Harrison QC. The mediation had commenced on 12 August and continued through 13 August 2021. The mediation was successful and resulted in the parties reaching agreement to settle the substantive disputes between them, and they recorded the terms in a Deed of Settlement dated 13 August 2021. The Deed of Settlement expressly provides that the settlement was subject to the approval of the High Court.
[4]Clause 1.1 of the Deed of Settlement provides:
Full and final settlement
Subject to the approval of the High Court to the terms of this Settlement, this agreement is in full and final settlement of all or any rights, claims or demands that the Parties may have against another, and shall be in full and final satisfaction, release and discharge from all rights to property which any party might otherwise have or have had against another and the others’ estate whether under the Property (Relationships) Act 1976 (PRA), the Family Protection Act 1955 (FPA), Family Proceedings Act 1980 (FamP), Law Reform (Testamentary Promises) Act 1949 (TPA), Trusts Act 2019 or any other statute, or otherwise at law or in equity.
[5] In a joint memorandum dated 19 August 2021, counsel for the plaintiffs noted that the mediation had been successful and that a deed of settlement had been entered into and that the terms of settlement were subject to the approval of the High Court. The plaintiffs’ counsel further noted that as well as the parties seeking approval of the settlement by the High Court they had also agreed that the proceedings would be stayed pending implementation of the settlement. The plaintiffs’ counsel said that in those circumstances they assumed that the defendants’ application for recall of the judgment would not be pursued.
1 McCallum v McCallum [2021] NZHC 2104.
[6] However, by a second joint memorandum dated 23 August 202, counsel for the defendants advised that notwithstanding the deed of settlement the defendants nevertheless wished to pursue their application for recall of the judgment.
[7] By Minute issued on 13 October 2021 Justice Walker made consent orders approving the terms of the Deed of Settlement.2
[8] On 3 November 2021 I held a judicial telephone conference with counsel to hear oral submissions in support and in opposition to recall of the judgment. Mr Gilchrist appearing for the Third Plaintiff in CIV-2019-404-2013 (the Public Trust) as executor of the estate of Heather McCallum abides the Court’s decision.
The parts of the judgment for which recall is sought
[9] The defendants seek recall, reconsideration, and alteration of two sentences in the judgment which are contained in paragraphs [75] and [76]. Those paragraphs read as follows. (The relevant sentences are emphasised):3
[75] This “exclusion of beneficiaries” provision clearly shows that the settlor and the first and second defendants anticipated that the plaintiffs would not accept the resettlement which effectively removed them as the final beneficiaries of the assets held by the original trust and limited their interest to that of discretionary beneficiaries in the new trust, and be likely to challenge the restructuring arrangements. The fact that the first and second defendants were trustees of the New Trust put them in a position where they were likely to have had knowledge of Bill Snr’s concern about this. At the time that these arrangements were made and the New Trust was settled, William Jnr was still a trustee of the Original Trust although an application to the High Court seeking an order for his removal as trustee was shortly to be commenced.
[76] The plaintiffs allege in their causes of action that the first and second defendants collaborated with Bill Snr to carry out the restructuring in an unconscionable manner and in breach of their duties owed to the plaintiffs. Accordingly allegations regarding the bona fides of the actions taken by the first and second defendants in relation to the 2016 restructuring and the application to the Court for removal of William Jnr lie at the heart of this proceeding. In this regard it is relevant to note that in his reasons judgment delivered on 6 June 2017, Woodhouse J proceeded on the basis that the reason why Bill Snr wanted William Jnr removed as a trustee of the Original Trust was because he had refused to co-operate with him regarding his proposed transfer of assets (specifically a one-third share in the Lismore farm property)
2 Minute (NO.2) of Walker J (Approval of Settlement) 13 October 2021.
3 McCallum v McCallum, above n 1.
from the Original Trust in exchange for income producing assets, and that Bill Snr wished “to make [the] changes to the [Original Trusts] assets to make better financial provision for his wife and two children as beneficiaries of the trust.”4 That observation of the Judge provides strong support for the plaintiffs’ submission that the real reasons for the transfer of assets from the Original Trust were not disclosed to the Judge and the terms of the New Trust which had already been established, rather than making better provision for Heather and the plaintiffs, effectively extinguished their interests as final beneficiaries and contained a provision stating that if they challenged the trustees they would be removed as beneficiaries.
[10] The defendants submit that the two sentences appear to reach conclusions in relation to disputed allegations which should have been left for determination at trial and ought not to have been made in a judgment deciding an interlocutory application. The defendants accept that recall and alteration of the challenged sentences would be unlikely to change the outcome of the judgment and the orders requiring them to provide details of each document for which they claimed privilege and the basis on which it was claimed.
[11] However, the defendants submit that as the proceedings and dispute between the parties have now been settled and approved by the High Court, the apparent findings of fact expressed in the challenged sentences of the judgment will be the “last word” on the allegations made by the plaintiffs that the defendants had failed to make full and proper disclosure to Woodhouse J when they made an unopposed application to the High Court for orders removing the plaintiff, William Fraser McCallum Jnr, (Bill (Jnr)) as a trustee of the WF McCallum Trust (the Original Trust) on the grounds that he was unfit to continue as a trustee, and which was granted.5
[12] The defendants submit that the challenged sentences relate to matters that are irrelevant to the issues to be determined in relation to the plaintiffs’ application for further discovery. They further submit that recall is appropriate because the McCallum family are well known in Auckland and the challenged sentences of the judgment may be read as being an adverse finding by the Court on the issue of whether the defendants acted with propriety in relation to the completeness of the information they provided to the Court at the hearing before Woodhouse J when seeking Bill (Jnr)’s removal as a trustee of the Original Trust.
4 McCallum v McCallum [2017] NZHC 1218 at [9].
5 At [21].
[13] Ms Chambers QC and Ms Robertson QC for the first and second plaintiffs respectively, make two principal submissions. First, they submit that the terms of settlement set out in the Deed and approved by the High Court expressly provide that the settlement is full and final settlement of all claims that the parties may have against another, including in relation to this proceeding.6 Ms Robertson also notes that the Deed of Settlement provides that the parties have agreed that the proceedings are to be discontinued and that no further steps will be taken. They accordingly submit that the terms of the Deed of Settlement preclude the defendants from now taking any steps to pursue recall of the judgment.
[14] The plaintiffs further say that when the terms of settlement were finalised and the Deed of Settlement was signed, the parties had already received the judgment delivered on 12 August 2021, and the defendants had already filed their joint memorandum in which they made their application for recall. The plaintiffs note that the terms of settlement were a comprehensive resolution of the proceedings and disputes between the parties and that the defendants did not reserve or ‘carve out’ the application to recall the judgment from the scope of the comprehensive settlement.
[15] Secondly, the plaintiffs submit that the challenged sentences do not amount to concluded findings of fact and say that in any event they are fully justified on the basis of the evidence and material that was before the Court in relation to the application.
Applicable principles on recall application
[16]Rule 11.9 of the High Court Rules 2016 states:
A Judge may recall a judgment given orally or in writing at any time before a formal record of it is drawn up and sealed.
[17] It is trite law that generally, a judgment stands for better or worse, subject to appeal. As Palmer J restated in Erwood v Holmes (No 2),7 a judgment may be recalled,
6 Deed of Settlement paragraphs E and 1.1
7 Erwood v Holmes (No 2) [2020] NZHC 53.
under r 11.9 of the High Court Rules 2016, if (with reference to Wild CJ’s statements in Horowhenua):8
·(a) there has, since the hearing, been amendment to a relevant statute or regulation or a new judicial decision of relevance and high authority issued;
·(b) the Court's attention has not been directed to a legislative provision or authoritative decision of plain relevance; or
·(c) justice requires the judgment to be recalled for some other very special reason.
[18] The threshold for a judgment’s recall is high - this is reflective of the need for finality in litigation, and the recall jurisdiction is exercised sparingly.9 The Court of Appeal has concluded that the third Horowhenua category is intended to be “narrow” and that cases appropriate for recall on that basis “are likely to be rare”.10 I also note that the third category for recall in Horowhenua does not extend to a challenge of any substantive findings of fact and law in the judgment.11
Analysis
[19] I agree with and accept the plaintiffs’ submission that the terms of the Deed of Settlement preclude the defendants from taking any further steps in this proceeding. I reject Mr Jeffs’ submission for the defendants that the application for recall is not an integral part of the dispute between the parties which falls within the scope of the terms of settlement. The judgment issued on 12 August 2021 dealt with significant discovery issues which were in dispute between the parties and which were required to be resolved and implemented before the trial of the proceeding took place. The defendants’ application for recall of the judgment is clearly contrary to the terms of the Deed of Settlement which stipulate that it is “in full and final settlement of all or
any rights, claims, or demands that the Parties may have against another, …”
8 At [2], citing Horowhenua County v Nash (No 2) [1968] NZLR 632 (SC) at 633. See also endorsement in Saxmere Co Ltd v Wool Board Disestablishment Co Ltd [2009] NZSC 122, [2010] 1 NZLR 76 at [2].
9 Fitzgerald v IAG New Zealand Ltd [2019] NZHC 632 at [8].
10 Unison Networks Ltd v Commerce Commission [2007] NZCA 49 at [23] and [34].
11 Zhang v Yu [2020] NZCA 592 at [9].
Furthermore, the defendants’ present application for recall is a “further step” in the litigation that is precluded by the Deed of Settlement.12
[20] By pursuing the application for recall the defendants are seeking to reopen and litigate issues that were central to the dispute that are now settled and precluded by the terms of the Deed of Settlement, and the defendants have not shown that the grounds on which they seek recall come within the narrow category described in Horowhenua, where for some “very special reason” the Court should recall the judgment. Having reached that conclusion, I find that the defendants’ application for recall of the judgment must fail.
[21] However, notwithstanding that finding which determines the application for recall, I would also dismiss the application for recall of the judgment on its merits. The challenged sentences contained in [75] and [76] of the judgment were supported by the information before the Court, and did not express a final determination of any of the issues in dispute in the proceeding and which were to be determined by the substantive trial.
Paragraph [75]
[22] The first sentence of [75] refers to the “Exclusion of Beneficiaries” provision in the trust deed settled by William Fraser McCallum Snr (Bill Snr) on 18 August 2016 (the New Trust).13 Under this provision, in the event of any of the discretionary beneficiaries commencing or joining any legal proceedings against or involving the trustees of that trust in relation to the validity of the decision to distribute or not distribute from the trust fund, or any challenge being made to the exercise of any of the trustees’ powers, the trustees “shall record by way of a Deed that the class of Discretionary Beneficiaries ceases to include that particular person unless the Trustees (or a majority of them) resolve to the contrary.”
[23] Mr Jeffs submits that the Exclusion of Beneficiaries provision was one which was customarily included in trust deeds drafted by the defendants’ solicitors, and its
12 Deed of Settlement, paragraph 5.2.
13 Deed Creating the McCallum Family Trust (2016), at paragraph 23 and set out at McCallum v McCallum, above n 1, at [74].
inclusion in the New Trust deed should accordingly not be regarded as something that the settlor and defendants would necessarily have considered or turned their minds to. In my view however, the Exclusion of Beneficiaries provision in the New Trust deed is an unusual provision which would place the discretionary beneficiaries in the vulnerable position where any challenge they made to the validity of the trustees’ decisions would risk their exclusion as discretionary beneficiaries, and as such is a provision that Bill (Snr) and the defendants may have obtained legal advice about.
[24] The significance of the Exclusion of Beneficiaries provision to the plaintiffs’ application for further discovery of the defendants’ documents for which privilege is claimed, is that any legal advice obtained by Bill (Snr) and the defendants regarding the effect of this provision which would significantly prejudice the plaintiffs, would be potentially relevant to support the plaintiffs’ allegation that the asset restructuring undertaken by Bill (Snr) prior to his death was designed to transfer the legal and equitable property ownership of his and his wife Heather’s collective property assets, to other entities for the benefit of Robert, Callum and Callum’s children, at the expense of the plaintiffs who were the final beneficiaries of the Original Trust which owned a one-third interest in the Lismore farm and other valuable assets.
[25] In his written submissions Mr Jeffs says that the second defendants wish to record that they have never, and will never rely on the exclusion provision to exclude the plaintiffs as beneficiaries. In my view however, the second defendants’ indication through their counsel that they will never rely on the exclusion provision to exclude the first and second plaintiffs as beneficiaries of the New Trust is irrelevant to consideration of the application for recall. What is relevant is the fact that the Exclusion of Beneficiaries provision was included in the New Trust, and whether Bill (Snr) and/or the defendants obtained legal advice regarding the inclusion in the deed of a provision that would significantly prejudice the plaintiffs and provide a basis on which the trustees could exclude them altogether as discretionary beneficiaries of the assets that were to be resettled from the Original Trust to the New Trust.
[26] Against that background the first sentence of [75] of the judgment simply states the obvious. Namely that with such an exclusion provision included in the New Trust deed, the plaintiffs could be expected to dispute the propriety of the proposed
resettlement. Pursuant to the proposed resettlement the assets of the Original Trust, of which the plaintiffs were the final beneficiaries, would be transferred to the New Trust of which they were only discretionary beneficiaries and could be excluded as beneficiaries should they challenge any decision of the trustees regarding distributions from the trust. A restructuring on those terms would be immediately recognised by the plaintiffs, if they knew about it, as being significantly contrary to their interests.
[27] Accordingly, I do not accept the defendants’ submission that in these circumstances there was no basis for the Court’s observation at [75] that the inclusion of the exclusion of beneficiaries provision clearly shows that the settlor and first and second defendants anticipated that the plaintiffs would not accept a resettlement which effectively removed them as the final beneficiaries of the assets held by the Original Trust and limited their interest to that of discretionary beneficiaries, subject to the exclusion provision.
[28] The effect and implications of the exclusion provisions are significant in the context of this proceeding and their inclusion in the New Trust deed was a relevant factor which provided support for the plaintiffs’ application for further discovery by the defendants of information and particulars of the defendants’ discovery for which privilege was claimed. Any legal advice given to the trustees of the Original Trust and the New Trust regarding the restructuring of the trusts in a manner that would be prejudicial to the plaintiffs’ interests as the final beneficiaries of the Original Trust would be potentially relevant to the pleaded allegations being made by the plaintiffs and to the issues to be determined at the trial of the proceedings.
Paragraph [76]
[29] The challenged sentence in [76] does not express a conclusion on the issue of whether, when applying to the Court for an order for the removal of Bill (Jnr) as a trustee of the Original Trust, the defendants had failed to disclose that their reason for wanting Bill (Jnr) removed as a trustee of the Original Trust was not because he had refused to co-operate with them in his role as a trustee, but rather because Bill (Snr) had already settled the New Trust and it was intended to transfer the significant assets of the Original Trust into the New Trust in which Bill (Jnr) was named as a
discretionary beneficiary and could be excluded as a beneficiary if he were to challenge trustee decisions regarding distributions from the New Trust. As noted in
[76] the fact that Woodhouse J proceeded on the basis that Bill (Snr) wanted Bill (Jnr) removed as a trustee of the Original Trust because he had refused to co-operate with him regarding his proposed transfer of that trust’s one-third interest in the Lismore farm in exchange for income producing assets, and because Bill (Snr) “wanted to make changes to the trust’s assets to make better financial provision for his wife and two children as beneficiaries of the trust”, can be contrasted with Bill (Snr)’s actions the previous year of settling the New Trust naming the plaintiffs as discretionary beneficiaries who could be excluded altogether if they challenged any decisions made by the trustees as to the distributions for the trust. That clearly inconsistent position provides strong support for the submission made by the plaintiffs that the real purpose of removing Bill (Jnr) as a trustee was to enable the defendants and Bill (Snr) to implement their plan to restructure the trusts and transfer the assets of the Original Trust to the New Trust for the personal benefit of Robert and Callum and Callum’s family trust and family, to the detriment of the plaintiffs’ interests as the final beneficiaries of the Original Trust, and why those details of the proposed restructuring and the terms of the New Trust were not disclosed to Woodhouse J.
[30] The relevance of the finding that those circumstances provide strong support for the plaintiffs’ submission regarding the reasons for seeking Bill (Jnr)’s removal as a trustee of the Original Trust is set out in [77] of the judgment, namely that by reason of those circumstances the plaintiffs were entirely justified in wanting to subject the first and second defendants’ claims of privilege to close scrutiny. This was a relevant factor in relation to whether to grant the plaintiffs’ application.
[31] The phrase strong support for means just what it says, and it does not express or convey a conclusion or even something “close to a conclusion”, as Mr Jeffs submitted it does. I therefore reject the defendants’ submission that the challenged sentence in [76] expresses a conclusion as to what the “real reasons” for the application to remove Bill (Jnr) as a trustee were, or even that the challenged sentence expresses something close to a conclusion. I accordingly find that the defendants have not shown that there is any very special reason why in the interests of justice the judgment should be recalled to enable the Court to reconsider or amend paragraphs [75] and/or [76].
Result
[32] The defendants’ application for recall of the judgment is declined and is dismissed.
[33] The first and second plaintiffs having succeeded in opposing the defendants’ application for recall of the judgment are entitled to an award of costs together with their reasonable disbursements.
[34] In the absence of agreement by the parties as to costs, I direct the first and second plaintiffs to file and serve on the defendants a joint costs memorandum by 5.00pm on Friday, 19 November 2021. I further direct the defendants to file and serve their joint costs memorandum in reply by 5.00pm on Friday 3 December 2021. The memoranda are not to exceed three pages in length excluding a schedule or annexures.
[35] Following the filing and receipt by the Registrar of the costs memoranda, I will determine the question of costs on the papers.
[36] As an appeal against this judgment would be rendered nugatory if my substantive judgment of 12 August 2021 was to be published before such an appeal was determined, I also make an order that my judgment of 12 August 202114 not be published for 20 working days after the date of release of this judgment, whereupon unless extended, this order will expire.
Paul Davison J
14 McCallum v McCallum, above n 1.
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