McLaughlin v McLaughlin - [2024] NZSC 11

IN THE SUPREME COURT OF NEW ZEALAND

I TE KŌTI MANA NUI O AOTEAROA

SC 116/2023
[2024] NZSC 11

BETWEEN	MARK JAMES MCLAUGHLIN AND ANDREW ASHLEY MCLAUGHLIN Applicants
AND	JOHN DAVID MANUEL MCLAUGHLIN Respondent

Court:	Ellen France, Kós and Miller JJ
Counsel:	A A H Low for Applicants E D Peers and G G Dill‑Russell for Respondent
Judgment:	15 February 2024

JUDGMENT OF THE COURT

A The application for leave to appeal is dismissed.

B The applicants must pay the respondent costs of $2,500.

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REASONS

Introduction

The applicants seek leave to appeal from a decision of the Court of Appeal.[1] The Court dismissed their appeal from a decision of the High Court rejecting their claim for a disgorgement of profits from an allegedly errant trustee.[2]

Background

[1]McLaughlin v McLaughlin [2023] NZCA 473 (French, Courtney and Clifford JJ) [CA judgment].

[2]McLaughlin v McLaughlin [2021] NZHC 3015 (Gendall J) [HC judgment].

The issues the applicants wish this Court to consider arise in this way. The applicants and the respondent are brothers. Their parents, Jim and Edna (now deceased), settled a trust in February 2004 (the Trust) with the wish that the “Trustees shall realise the value of [Jim and Edna’s] farm property by way of subdivision”. John (the respondent), along with Jim, Edna and the family solicitor, were appointed as trustees of the Trust. Jim, Edna and their children, along with other family members, were the discretionary beneficiaries of the Trust. The final beneficiaries were Jim and Edna’s children.
The Trust undertook a residential subdivision which included the Trust’s own land plus adjoining land belonging to John and his wife. The Court of Appeal said it was clear “from the overwhelming weight of evidence that the primary reason for the creation of the Trust was to provide a vehicle whereby the land would be preserved for subdivision and the subdivision work able to be continued after Jim’s death”.[3]
[3]CA judgment, above n 1, at [24].
For the three years prior to Jim’s death in 2007, John was engaged in the subdivision process. By the time Jim died, John “had taken over all aspects of the management of the project”.[4] Up until June 2008 the work John did on the project was unpaid, and he was concurrently in full time work as the Chief Executive Officer of a building company. A company controlled by John (John’s Company) subsequently took up the role of project manager for the development. The trustees approved payment of a management fee to John’s Company, although that fee was not paid until March 2016 when the arrears owing ($800,000) were paid. Development of the project proceeded.
[4]At [31].
The respondents issued the current proceedings in the High Court in August 2017. There were three causes of action:
(a)The first cause of action sought removal of John as trustee and replacement with a professional trustee, on the grounds John had misconducted himself in administering the Trust.
(b)The second cause of action was an allegation of breach of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading McLaughlin v McLaughlin

Details

AGLC: McLaughlin v McLaughlin [2024] NZSC 11
Case: [2024] NZSC 11
Decision Date: 15 February 2024

CaseChat Overview and Summary

In the case of McLaughlin v McLaughlin, the applicants, Mark James McLaughlin and Andrew Ashley McLaughlin, sought leave to appeal from a decision of the Court of Appeal. The Court of Appeal had dismissed their appeal from a High Court decision rejecting their claim for a disgorgement of profits from an allegedly errant trustee. The applicants argued that the Court of Appeal had erred in its interpretation of the charging clause in the Trust deed and in its approach to the burden of proof. They contended that the Court had incorrectly allowed John to appoint himself to a new role and to authorise himself to create a role meeting his skillset and then charge for it. They also argued that the burden of proof was on John to demonstrate that he was entitled to benefit from the charging clause, but the evidence was “thin at best.”

The Supreme Court considered the proposed grounds of appeal and concluded that the first ground was new and it would not be appropriate to address it as a court of first instance. The remaining two proposed grounds concerned the Court’s interpretation of the charging clause and a challenge to the forensic analysis of the High Court. The Supreme Court found that the findings arose from the specific facts and wording of the charging clause and that no question of general commercial significance arose. The Court also found that there had been no abuse and that nothing raised by the applicants gave rise to any appearance of a miscarriage of justice in the Court of Appeal’s approach to the charging clause. The Court concluded that the applicants had insufficient prospects of success on appeal.

The application for leave to appeal was dismissed, and the applicants were ordered to pay the respondent’s costs of $2,500. The Supreme Court found that the Court of Appeal had correctly interpreted the charging clause and that there had been no abuse. The Court also found that the applicants had insufficient prospects of success on appeal. The applicants were ordered to pay the respondent’s costs of $2,500.

Orders