Morris v Templeton

[2000] NZCA 126

IN THE COURT OF APPEAL OF NEW ZEALAND CA105/00

BETWEEN	C E MORRIS AND J M K MORRIS
Applicant

AND	R R TEMPLETON
Respondent

Coram:	Gault J Thomas J Blanchard J
Counsel:	W J Wright for Applicant M Perpick for Respondent
Judgment:	17 July 2000

JUDGMENT OF THE COURT

1. The applicant seeks leave pursuant to s67 of the Judicature Act 1908 to appeal a judgment of Chisholm J in the High Court at Christchurch on 14 December 1999, dismissing the applicant’s appeal from a judgment of the District Court.  Leave to appeal to this Court was refused by Chisholm J on 7 February 2000. By agreement of the parties, this application has been determined on the basis of written submissions.

Background

1. The applicants are beneficiaries under their grandfather’s will.  The respondent is one of two trustees of the grandfather’s estate.  In 1998 the applicants brought proceedings in the District Court at Christchurch alleging (inter alia) that the respondent had breached his trust by investing in unauthorised securities.  In a reserved judgment delivered on 8 May 1998.  Somerville DCJ found in favour of the applicants, holding the respondent to be in breach of trust when he made the unauthorised investments.

2. But in a further reserved judgment delivered on 31 May 1998, the District Court Judge decided to exercise the discretion under s73 of the Trustee Act 1956 and wholly excused the respondent from personal liability for the losses suffered as a result of his breach of trust.  The applicants appealed to the High Court against this exercise of discretion. In the High Court Chisholm J considered Somerville’s DCJ’s exercise of discretion, and could not see any error in the way it had been exercised.

3. After leave to appeal to this Court was declined by Chisholm J, the applicants applied to this Court under s67 of the Judicature Act 1908 for leave to appeal. It was then realised for the first time by counsel for the applicants (who had not appeared below) that there was a serious question over the jurisdiction of the District Court to hear applications under s73 of the Trustee Act.  Leave to appeal is therefore sought on the ground that the District Court had no jurisdiction to grant relief under s73, and that decision is therefore a nullity.

Leave to appeal

1. The test for granting leave to appeal under s67 of the Judicature Act was stated by this Court in Waller v Hider [1998] 1 NZLR 412, 413:

   The appeal must raise some question of law or fact capable of bona fide and serious argument in a case involving some interest, public or private, of sufficient importance to outweigh the cost and delay of the further appeal: Rutherford v Waite [1923] GLR 34; Cuff v Broadlands Finance Ltd [1987] 2 NZLR 343 at pp 346-347.

   …

   Upon a second appeal this Court is not engaged in the general correction of error. Its primary function is then to clarify the law and to determine whether it has been properly construed and applied by the Court below. It is not every alleged error of law that is of such importance, either generally or to the parties, as to justify further pursuit of litigation which has already been twice considered and ruled upon by a Court.

2. Where the alleged error of law is that the Court which originally decided the matter did not have jurisdiction to do so, and that the decision is therefore a nullity, then the error will be of sufficient general importance to warrant leave to appeal being granted.  Accordingly, the error of law alleged by the applicants in this case must come within s67 and the test set out in Waller v Hider.

The jurisdiction of the District Court under s73

1. We turn now to the question of whether the District Court has jurisdiction to hear applications under s73 of the Trustee Act 1956.  Section 73 provides as follows:

   If it appears to the Court that a trustee, whether appointed by the Court or otherwise, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the commencement of this Act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the Court in the matter in which he committed the breach, then the Court may relieve him either wholly or partly from personal liability for the same.

2. Section 2 of the Trustee Act provides:

   … “Court” means the High Court;

3. The Legislature specifically reserved the power to grant relief under s73 to the High Court.   The District Court can hear claims for breach of trust under its equitable jurisdiction as provided for in s34(1) of the District Courts Act 1947.  But under s 34(2), where jurisdiction in respect of a particular “proceeding or class of proceeding” is reserved by statute to another Court, such as the High Court, then s34(1) does not apply, and the District Court does not have jurisdiction in respect of that proceeding.  The Trustee Act reserves jurisdiction to grant relief under s73 to the High Court, and therefore, by virtue of s34(2), the District Court has no jurisdiction under s73.

4. Counsel for the respondent submitted that s34(2) does not apply in this case, as the power to relieve under s73 is not a “proceeding or class of proceeding”, but a bare power exercisable in the context of proceedings for breach of trust.  We do not agree with this submission. “Proceeding” is defined in s2 of the District Courts Act as any application to the Court for the exercise of the Court’s civil jurisdiction (other than an interlocutory application).  An application under s73 clearly comes within this definition.

5. Support for this conclusion is provided by s34(2A) of the District Courts Act, which provides that, notwithstanding s34(2), the District Court is to have the power to make orders pursuant to s49 of the Administration Act 1969.  Under the Administration Act the “Court” means the High Court or a Judge of the High Court (s2).  Section 49 provides “the Court” with the power to order remedies following the distribution of an estate’s assets by its administrators. In expressly providing for the District Court to have jurisdiction to exercise the powers under s49, the Legislature clearly recognised that, without such provision, jurisdiction under the section would be restricted to the High Court.  As no equivalent express provision is made with respect to s73 of the Trustee Act, there is no ground for holding that s34(2) does not apply to that section.  Accordingly, the District Court has no jurisdiction to exercise any powers under s73.

Respondent’s other arguments

1. Next, counsel for the respondent submitted that, even if the District Court had no jurisdiction to hear the application for relief, the applicants waived the jurisdiction point pursuant to s3 of the Inferior Courts Procedure Act 1909.  Under this section, parties may waive any defect in the jurisdiction of the Court to hear a proceeding, and where this is done the proceedings are valid as if there had been no error or defect.  However, in order to waive an error, defect or irregularity in proceedings there must arguably be an informed decision to waive.  As the applicants, the respondent, the District Court and the High Court all overlooked the question of jurisdiction, it is very doubtful that the applicants can by default be said to have waived this point.

2. At any rate, s3 does not enable the applicants to waive the jurisdiction point in this case.  Section 3(3) provides:

   (3) Nothing in this section shall apply so as to make valid any judgment or order which on the face thereof is of such a nature that the Court giving or making the same could not under any circumstances have jurisdiction to give or make it.

3. As concluded above, the jurisdiction to exercise the powers under s73 of the Trustee Act is limited to the High Court.  There are no circumstances under which the District Court could have jurisdiction to give judgment under s 73.  Accordingly, even if the applicants could be said to have waived the jurisdiction point (which we very much doubt), such a waiver would not make the judgment of the District Court valid.

4. Finally, counsel for the respondent submitted that it was “simply far too late” for the applicants to raise this jurisdiction point now.  While we sympathise with the respondent, it cannot be too late to raise a point of jurisdiction in a case where the original decision is a nullity, especially where the application for leave to appeal to this Court is within time.  In the circumstances of this case, where there is an application for appeal pending, it is certainly not too late to raise such a fundamental matter as the District Court’s jurisdiction.

5. Although the High Court reviewed the District Court’s purported exercise of discretion and saw no basis for disturbing it, it does not necessarily follow that the High Court Judge would have exercised an original jurisdiction in the same way.  In saying this we should not be taken to be indicating any particular view of the substance of the matter.

Conclusion

1. Accordingly, leave to appeal is granted and the appeal is allowed.

2. We order that the matter be remitted back to the District Court for judgment to be entered for the applicants as original plaintiffs on the issue of liability.  It will then be for the respondent as the original defendant to bring such application for relief in the High Court as he considers appropriate.  There will be a stay of the judgment of the District Court preventing its enforcement for one month after entry of judgment to allow the respondent to apply in the High Court for relief.  Any further application for stay should be made in the High Court.

3. In the circumstances we make no order for costs in this Court.

Solicitors

Wilkinson Adams, Dunedin for Applicant
Wynn Williams & Co, Christchurch for Respondent