Morris v Morris

[2015] NZHC 1689

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2015-404-000568 [2015] NZHC 1689

UNDER

the inherent jurisdiction of the High Court

and ss 51, 64 and 64A of the Trustee Act
1956

IN THE MATTER OF

the MORRIS FAMILY TRUST settled by deed dated 21 October 2003

BETWEEN

MACHELLE ANNE MORRIS Plaintiff

AND

PETER JOHN MORRIS Defendant

Hearing:	20 July 2015
Appearances:	A Manuel/L La Mantia for the Plaintiff D Chambers QC for the Defendant
Judgment:	20 July 2015

ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

M A MORRIS v P J MORRIS [2015] NZHC 1689 [20 July 2015]

[1]      The plaintiff’s proceeding invites the Court to grant discretionary relief.  That this Court can do so on a summary judgment application.  If the Court accepts that it is inevitable such relief be granted then it should grant that, but a Court ought to be weary of claims of inevitability when there is sharp difference of point of view regarding each parties’ account of matters.

[2]      The Court is also mindful of the requirements of s 51 of the Trustee Act 1956, as it is of the extent of the Court’s inherent jurisdiction when it deals with these issues. A threshold of persuasion needs to be established. More so than just showing that there are breaches of trust that have occurred, because if the Court is to act then there must be a compelling need for such an intervention.

[3]      In the background of this case is a relationship property claim.  In February

2014 the parties separated after 13 years of marriage.  They are the trustees of the Morris Family Trust.  They and their 12 year old son are discretionary beneficiaries of  that  Trust.    There  are  currently  relationship  property  proceedings  before  the Family Court.

[4]      The plaintiff claims the trust assets are relationship property.  The defendant does not deny that but says that debts owed by the Trust to each of them is, separate property.

[5]      The High Court application for which summary judgment is sought seeks to replace the defendant as a trustee; to sell the trust’s properties and to apply the proceeds; and meanwhile to restrain the defendant from exercising any power of appointment.  The questions before the Court today are focussed upon why recourse to the High Court is needed and why recourse to summary judgment is necessary.

[6]      The properties in question were owned by the parties separately pre marriage. That property owned by the defendant at Potts Road is now valued at no less than

$4M.  The other properties that were formerly owned by the plaintiff are valued at less than $2M.

[7]      The defendant presently lives at the Potts Road property and the plaintiff lives in one of her former properties.  The defendant now operates the business of companies that were previously owned by the trust which businesses, the plaintiff says,  the  defendant  now controls  through  other entities.   The plaintiff says  she receives none of the income earned by those businesses and does not receive any other support from the defendant.

[8]      It is submitted on behalf of the plaintiff that the defendant’s replacement as a trustee is necessary because there is serious disharmony between them both which is causing “dysfunction in the fulfillment of their joint duty to administer the trust assets”.  She says the defendant wishes to sell trust property seemingly at any cost in order to avoid selling the property he resides in.  She says there have been delays in reaching any agreement for the sale of trust property.

[9]      Ms  Manuel  submits  that  in  overall  analysis  not  only  has  there  been disharmony between both parties but the defendant has misconducted himself by “placing trust property assets into jeopardy and effectively by removing other trust assets which are the businesses in trust ownership”.

[10]     Ms Manuel submits that the defendant is utilizing trust assets to his own interests and without any consideration of the plaintiff’s interests and that acts of management by the defendant include negligence and delays in cooperating with property sales.

[11]     In overview it appears to the Court that the plaintiff sees the High Court proceeding as a means of assisting with the Family Court proceedings by addressing issues which it is perceived are not able to be addressed by the Family Court.

[12]     The plaintiff ’s position is that the Bank requires the sale of trust property and although the return from the sale of one of those properties has made some progress towards settlement of the Bank’s debt of $1.4M there remains a shortfall and for that reason other property will have to be sold and the plaintiff’s concern is that her property should be targeted by the Bank when the Potts property would provide a resolution for all court proceedings if it was sold.

[13]     For the defendant Ms Chambers submitted that it is far from clear that this Court would at all in this proceeding, and is much less likely upon a summary judgment application to replace the defendant as a trustee.   Counsel submits that issues about actions undertaken and responsibilities for outcomes will almost inevitably require a trial and the hearing of oral evidence when the parties cannot agree about claims of fault and where the views of the parties are directly in conflict.

[14]     It is the position in opposition to the summary judgment application that it is unclear why this process has been used.

[15]     The Court says ‘Summary Judgment’ as its title suggests is a shortcut to judgment and there are principles which protect the integrity of the process and foremost of those is that an applicant must prove that there is no defence to the claim.   In this case the issues focus upon the actions of a joint trustee when complaints have come from the other trustee and when those complaints follow in the wake of a relationship split.

[16]     Presently  the  relationship  property  has  significant  value  but  the  parties’ incomes are somewhat modest.   In the outcome it seems to the Court much will depend on the Judge’s view about whose account of factors ought to be accepted and the consequences that will flow from that.  The Court considers that until a Judge hears in person from each of the parties that it is unlikely any firm conclusions can be reached.    If  that  is  the case  then the summary judgment  application  cannot succeed.

[17]     In this Court’s view it is far from clear why the Family Court proceedings are not adequately addressing relationship property trust ownership and control issues sufficiently.   Complaints have been made about delays and comments made about the inevitability of delays before the matter is heard.   That is a matter for Court process in due course.

[18]     The plaintiff expresses her concern that the Bank might decide her property is its next target for mortgagee sale.  However there is a suggestion in the evidence that the Bank presently seems prepared to provide time to allow a sale of property not

occupied by either the plaintiff or the defendant.   The Bank is still owed approximately $550,000.   There may be the capability at present to sell property other than that in which the parties separately reside.

[19]     A significant submission advanced on behalf of the plaintiff was the claim of irrefutable evidence of the defendant’s breaches of trust; particularly with respect to the defendant’s development of a new business utilising the assets owned by the trust.   It is the Court’s view of the affidavit evidence that a contrary view could readily be reached.   The trust’s businesses were clearly worthless.   But if the defendant did obtain some advantage from the use of trust assets then the plaintiff can make a claim for that against the defendant and in the process of that the plaintiff can expect to obtain all relevant financial records to assist that claim.

[20]     As it appeared from my questions of counsel it seems to the Court it is the plaintiff’s firm position that there cannot be any resolution of relationship property claims without the Potts Road property, occupied by the defendant, being sold.  The Court is not persuaded by the affidavit evidence that that is so.   That is a matter which will require oral evidence before any final judgment can be made.

[21]     The plaintiff says that the defendant’s trustee actions have compromised asset value because of delays.   But on the other side of the coin there is evidence and submissions suggesting that the plaintiff may also, or even more so, be responsible for delays affecting the value of assets.   At this time the Court is not making a judgment one way or the other – it simply says that it is not prepared on the basis of the affidavit evidence to reach any final conclusions on those matters.

[22]     A trial is needed as is clearly apparent from the evidence.   Therefore the application for summary judgment is dismissed.

[23]     Costs are ordered on a 2B basis to be paid by the plaintiff to the defendant in the resolution of the proceeding.

Associate Judge Christiansen