McKean v McKean Family Trustee Limited

[2025] NZHC 149

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV-2022-454-21

[2025] NZHC 149

BETWEEN

JANET ANNE ABIGAIL MCKEAN AND JOHN DUGALD STEWART MCKEAN

Plaintiffs

AND

MCKEAN FAMILY TRUSTEE LIMITED

First Defendant

AND

IAN MACGREGOR STEWART MCKEAN

Second Defendant

CIV-2022-454-71

BETWEEN

MCKEAN FAMILY TRUSTEE LIMITED
Applicant

AND

JANET ANNE ABIGAIL MCKEAN AND JOHN DUGLALD STEWART MCKEAN

Respondents

Hearing:

10 February 2025

Counsel:

L McKeown and P Gerard for Janet McKean and John McKean V T Bruton KC for McKean Family Trustee Ltd

N L Walker, P B Trebilco and E Thorpe for Ian McKean S D Campbell and C Martin for Torwood Trustees Ltd

Judgment:

10 February 2025

ORAL JUDGMENT OF RADICH J

[Disclosure of the files in the possession of Torwood Trustees Ltd]

[1]    On 29 January 2025 counsel for the first and second plaintiffs in CIV-2022-454-21 (Janet and John) wrote to counsel for Torwood Trustees Ltd (TTL), the plaintiff in CIV-2022-454-71, and repeated a request it had made previously for

MCKEAN v MCKEAN FAMILY TRUSTEE LTD [2025] NZHC 149 [10 February 2025]

two sets of communications. First, all communications between the second defendant in CIV-2022-454-71 Ian McKean (Ian) or the McKean Family Trustee Ltd (MFTL), the first defendant in that proceeding who I will call MFTL, and MFTL’s lawyers— Dentons and Ms Bruton KC.

[2]    Secondly, all legal advice or opinions were sought that were obtained by MFTL as trustee including, but not limited to, advice paid using trust funds. TTL had obtained an electronic copy of MFTL’s legal files from Dentons. It said that the information is likely to be relevant to MFTL’s conduct as trustee and to whether MFTL has acted reasonably such that it should be indemnified for its costs from the trust fund, which is one of the issues in the proceeding.

[3]    It was said also that the disclosure issue will need to be heard by the Court unless resolved pre-trial and it was said that Janet and John continue to seek the information pre-trial including so that they could review it before cross-examining Ian and others. It was indicated that the files needed to be reviewed and that a decision needed to be made. It was said that the disclosure was to be made on the basis of a common interest privilege basis between Janet and John and TTL.

[4]    On 7 February 2025, counsel for TTL wrote to counsel for the other parties in the proceedings in response. It said, by way of summary, that having considered the request it had decided that it would provide the parties access to all of the documents including documents covered by solicitor client privilege and/or litigation privilege as between Dentons and Ms Bruton and the trustees. A number of reasons were given which by way of summary are these:

(a)it was said that TTL is out of liquid finance and did not have the resource to work through the files on an item by item basis;

(b)it was said that TTL is and had intended to take a limited role in the proceeding in relation to the hostile allegations;

(c)it was said  that  the  judgment  from  Associate  Judge  Skelton  on  20 December 2024 clarified that MFTL would be entitled to pursue its application despite non-payment of costs;1

(d)it was said that MFTL’s claim for indemnity proceeds on the basis that its actions were reasonable and proper, such that the documents would be relevant;

(e)it pointed to the fact that TTL will not be serving as a contradictor in relation to the MFTL claim and that Janet and John are essentially serving in that role;

(f)it was said that the request was re-enlivened only very recently and it did not consider there to be a basis to withhold solicitor client privilege from the beneficiaries and it did not consider that there was a compelling basis that tended against the waiver of privilege in relation to litigation privilege.

[5]    Counsel for MFTL took a contrary view and early in the afternoon of Friday, 7 February 2025, sought an urgent teleconference with the Court. In a memorandum filed that afternoon, counsel for MFTL said that in its view it was clear that some of the material on the files would be subject to litigation privilege belonging to MFTL and/or TTL. It said that it was a live issue as to whether or not TTL as successor trustee had the unilateral right to waive the privilege and that even if it does there were issues as to whether or not the material on the file is trust information as that term is used in s 49 of the Trusts Act 2019 and that, even if it is trust information, whether in those circumstances it would be a reasonable trustee decision having regard to the fact that the trial was starting Monday and in relation to which evidence and discovery were complete. It was said that TTL’s previous position had been that it would provide such disclosure as is ordered by the Court.

[6]    Counsel for MFTL added that the position that had been taken by TTL most recently was a considerable change from its previous position: without considering the

1      McKean v McKean Family Trustee Ltd [2024] NZHC 3927.

issues; without seeking input from MFTL; without considering the logistical implications of the disclosure; and having regard to the fact that there needed to be, in MFTL’s submission, an interlocutory application for disclosure in the first instance.

[7]    In a memorandum in response on Friday, counsel for Janet and John said that MFTL was claiming that it obtained advice from Dentons and Ms Bruton in the proper administration of the Trust and that the costs of MFTL in doing so are reasonable and should be paid from the Trust funds such that Janet and John have a genuine interest in the advice and in the documents that were sought. It was said, in addition, that:

(a)MFTL are not the sole holders of the information and that of course TTL now have the information in circumstances in which it is not subject to the same privilege issues.

(b)If the files contain documents or advice protected by solicitor client privilege then MFTL was likely not obliged to give those documents to the new trustee and, rather, should have asserted privilege at the time.

(c)In the circumstances there had been a waiver of privilege and TTL could not properly claim any separate privilege over the information sought.

(d)The files are likely to be of assistance to the Court particularly given the significant concerns expressed by Churchman J that MFTL had acted in a partisan matter in the decision that he gave in 2023 on the prospective costs application.2

(e)Janet and John effectively with the other beneficiaries have paid for the advice through the legal costs that have been paid to date.

[8]    A teleconference was convened at 4:30 pm on Friday, 7 February. The parties addressed their respective positions consistent with their exchanges during the day which I have summarised in this judgment.

2      McKean Family Trustee Ltd v McKean [2023] NZHC 1098.

[9]    At the end of the teleconference I said that my preliminary view was that the documents should not at that time be disclosed. I said that there were substantive issues to be considered on the application of relevant Trust Act provisions and privilege principles and that given that the trial was due to start on the next working day (which is today) to allow disclosure now of what I understand to be 1.5 gigabytes of material—possibly hundreds of documents—disclosure would inevitably in my view require an adjournment of the trial. As I saw it that would be an unsustainable outcome in all the circumstances. I made an interim order at the end of the teleconference that the file should not be disclosed and I directed on Ms Bruton KC’s application that the 29 January 2025 request—which led to TTL’s letter about proposed disclosure of the files—be made available to the parties subject to the redaction of any content that was not material to the issue. That letter and related exchanges were made available on Friday evening. I said that the issue would be considered further at the beginning of the trial this morning.

[10]   Counsel have addressed the position further this morning. A memorandum was filed on behalf of Ian resisting the further disclosure. The point was made in the memorandum that the proceedings had been on foot since April 2022 with lawyers exchanging correspondence since July 2020. It was said, in addition, that Ian did not agree that there had been any relevant change that justified the belated request and decision and that, if Janet and John had considered that the documents sought were relevant to the allegations in the statement of claim or amended statement of claim, then the appropriate procedural vehicle would have been to seek discovery.

[11]   It is said that the information sought is best characterised as a fishing expedition in all of the circumstances which tells against disclosure under the Trusts Act. It is said that the information requested is, in any event, not of real relevance to the allegations made in the amended statement of claim such that a detailed and forensic examination of the correspondence would not shed light on the allegations. Points were made that there are complex legal issues associated with the decision to disclose including whether the entire file is trust information for the purposes of the Trusts Act. The submission was made that the legal file is not basic trust information; that disclosure is not reasonably necessary in the case and that much of the legal file

will not be trust information because trust information excludes expressly reasons for trustee decisions.

[12]   It is said that whether the legal file is privileged as against Janet and John is an issue for the trial with the question being when that joint expedition came to an end. It is submitted that the Court should make interim orders preventing disclosure until the conclusion of the trial. Furthermore, issue was taken with the reasons advanced by TTL for what is described as a change of position regarding disclosure.

[13]   In a memorandum in response for Janet and John and in submissions from  Ms McKeown this morning, it is said that the files had been handed over to TTL without any reservation as to privilege. Moreover correspondence is pointed to, on behalf of Ian, in which he said that questions of disclosure should fall entirely to TTL. The point is made that the files are likely to be of assistance in the case. It is said that it is TTL’s decision to disclosure, it is said that the trial needn’t be held up; that documents can be analysed by counsel for all relevant parties with appropriate expedition such that they can be put to witnesses without there being undue prejudice.

[14]   It is said by Mr Walker in response, that the points made in the memorandum— in terms of the correspondence that is pointed to—is correct but that that does not affect the issues. That is to say, points that Ian made previously do not affect the matters that the Court is being called upon to consider. The position for MFTL reflected the submissions that were made on Friday.

[15]   I am not going to permit the disclosure that is sought to take place. First and foremost, the disclosure of the information is the very subject of the third cause of action in the proceeding. In some ways it might be said its something of a catch twenty-two in the sense that counsel for Janet and John say that in those circumstances the files sought are very much relevant in terms of determining that cause of action but, on the other hand, there are substantive issues to be considered in terms of the disclosure of the information at all. It is pleaded that the very information sought should be made available to Janet and John under s 52 of the Trusts Act and relevant provisions of a Trust Variation Deed. Substantive issues arise under the Trusts Act and in terms of relevant privilege principles as to whether any privilege that MFTL can

claim in the documents could be claimed also by TTL. TTL had previously and appropriately left the issue for determination by the Court. In helpful submissions this morning, Mr Campbell has outlined the reasons for the decision that has been made to disclose the information and I understand those reasons and the basis for them informing the decision that was made.

[16]   The position on Friday came about as a result of a renewed request for the information. The point was made during submissions this morning that it had been understood that the issues which had been raised in earlier correspondence were not being pursued and that the renewed request did come very late in the piece.

[17]   The position taken by TTL may ultimately be quite right. I do not yet know. But to propose disclosure one working day before trial leaves the case itself in a position that is not, in my view, sustainable. The proceeding has been carefully timetabled and timetabling orders made following a joint memorandum of counsel on 26 September 2024. Any further interlocutory applications (and the proceeding had already had  a considerable history to that point) were to be filed  and served by       1 November 2024. Janet and John—if the documents were to be disclosed prior to trial—needed to have pursued an application at an earlier point and time. For the issue to be addressed now and for the prospect of disclosure to be made at this point effectively on the first morning of trial, is at odds with fair trial rights on the part of all parties, particularly where the issues are the subject of a substantive cause of action in the proceeding.

[18]   I do not on balance see many prejudice that might arise through the decision being such as to outweigh the prejudice that would arise if the documents were now provided. As I said on Friday—and my view remains consistent on this—there would need to be an adjournment to enable the parties to consider the information if it was now made available. The parties are all ready for trial. Evidence is complete. Substantive openings submissions have been filed. A common bundle is ready. Arguments on the causes of action are addressed in the written submissions to date.

[19]   Accordingly, I make an order declining the further disclosure that is essentially sought by Janet and John and that TTL were willing to provide in advance of trial.

The issues that arise here and their disposition will be considered during the course of the trial and will be addressed in my decision following trial.

Radich J

Solicitors:

Duncan Cotterill, Wellington for Plaintiffs in CIV-2022-454-21 and Respondents in CIV-2022-454-71 Wynn Williams, Christchurch for First Defendant in CIV-2022-454-21 and Applicant in

CIV-2022-454-71

Russell McVeagh, Wellington for Second Defendant