Nisbet v Blakey

[2020] NZHC 1196

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2020-485-156

[2020] NZHC 1196

BETWEEN

CRAIG GRANT SCOTT NISBET

Applicant

AND

PHILLIPA GAY BLAKEY and PENELOPE ANNE PERE

First Respondents

JOHN ROBERT HANDS and WAYNE STUART KIRK

Second Respondents

Hearing:	2 June 2020
Counsel:	C G S Nisbet in person, and S P Girvan as McKenzie friend D M Kerr for Respondents
Judgment:	2 June 2020

JUDGMENT OF CHURCHMAN J

Background

[1]        By statement of claim dated 15 May 2020, the applicant commenced proceedings alleging a breach of fiduciary duties against the first and second respondents.

[2]        The first respondents are the applicant’s sisters who were trustees of the Nisbet Family Trust. The second respondents are professional trustees who, along with the first respondents, are trustees of the Nisbet Family Trust No. 2.

NISBET v BLAKEY & ORS [2020] NZHC 1196 [2 June 2020]

[3]        In 2018, the assets of the Nisbet Family Trust were resettled by the trustees (which then also included the applicant’s late mother, Wendy Grant Nisbet, on the Nisbet Family Trust No. 2.

[4]        The statement of claim challenged that resettlement. It made a number of allegations including an allegation that the value of the Trust fund had been depleted; that the first respondents had a conflict of interest being both trustees and beneficiaries and alleged that there was an “imminent breach of fiduciary duties on behalf of the first respondents that could only be remedied by their removal of trustees and their replacement with an independent trustee”.

[5]        The statement of claim also sought what was said to be equitable damages against the second respondents “on the basis of the loss of value from the corpus of the Trust fund”. No details were given as to how the alleged loss occurred or what value it might be said to represent.

[6]        Prior to filing the statement of claim, the applicant, on 14 April 2020, had filed a without notice interlocutory application seeking an urgent mandatory injunction to require “that the full proceeds, without deduction for real estate fees or commission, or any other disbursements, from the sale of the property at 16 Ferguson Avenue, Westshore, Napier” be paid into the Trust account of an independent solicitor.

[7]        The applicant  had  previously registered a caveat  in respect  to the title of  16 Ferguson Avenue. That caveat had lapsed. The applicant asserted that the only reason for its lapsing was the failure by his solicitor, Mr Ross, to action his instructions to take steps to preserve it.

The applications

[8]        The applications set down for interlocutory hearing were an application which had been filed by the applicant on 22 April 2020 for leave for the caveat to be reinstated and the application for injunction. The application in relation to the caveat was abandoned during the course of the hearing and need not be addressed further.

[9]        At a teleconference held on 17 April 2020, Ellis J noted that in substance the application for the injunction was for a freezing order pursuant to r 32.2 of the High Court Rules 2016 (HCR) and she dealt with it as such. I will do so too.

[10]      Ellis J made directions as to service and the filing of a statement of claim and a sworn copy of the applicant’s affidavit, and further directed the applicant to provide “evidence of (his) financial position sufficient to satisfy the Court that his undertaking as to damages has substance”.

[11]      By a minute of 1 May 2020, Grice J directed that the application for leave to apply for the reinstatement of a caveat and the freezing order application be heard together.

[12]      The respondents, who are represented by Mr Kerr, filed notices of opposition supported by extensive affidavit evidence from J Strawbridge, W Kirk and P Pere.

Relevant facts

[13]      The applicant has asserted that he was a “fixed beneficiary” of the Nisbet Family Trust and the Nisbet Family Trust No. 2. However, a review of the trust deed shows that he has only ever been a discretionary beneficiary of either trust.

[14]      The applicant claimed that he had been denied the opportunity to have the accounts of the Nisbet Family Trust No. 2 audited. However, he omitted to disclose to the Court that the trustees had consented to this occurring and that he had not progressed the matter any further over a period of some six months.

[15]      The applicant had asserted that a statement in his late mother’s Will that he had received financial support in the past was incorrect. However, attachments to the affidavit evidence filed in opposition confirmed that he had received both distributions and loan advances.

[16]      The applicant disputed his late mother’s statements that he had previously been in financial distress, asserting that he had never been seriously short of money. The affidavit evidence filed in opposition confirmed that the applicant had in fact been

bankrupted in 2008. The affidavit evidence also showed that the applicant had been convicted of theft in 2009 and also, separately, of perjury.

[17]      Attached to the respondents’ affidavit evidence were full statements of accounts for the Nisbet Family Trust and the Nisbet Family Trust No. 2.

[18]      A review of those documents shows that the assets of the Nisbet Family Trust No. 2 consisted principally of the house in Napier which had been sold unconditionally for the sum of $1,180,000 due to settle on 10 June 2020; a beach house at Mahia with a rating value of $390,000; and shares in a company called Gaisford Properties Limited with an estimated value of between $265,000 and $327,000.

[19]      In response to the direction of Ellis J in the minute of 17 April 2020, the applicant had filed a one-page document setting out what he said to be his current financial position. The two principal assets were said to be Wharepuni Developments Limited at $1.4 million and Cohasset Group Limited at $134,000. There was no indication as to whether these were loans from the applicant to these entities; whether they represented a shareholder’s current account balance, or whether they were the value of the shares. Orally, the applicant confirmed that these entries were said to represent the value of shares he owned in these companies. No share valuation supporting the claimed value was provided.

The law

[20]      HCR 32.2 gives the Court jurisdiction to make a freezing order in relation to assets either in or outside of New Zealand. HCR 32.2(3) provides that an applicant for a freezing order without notice must fully and frankly disclose to the Court all material facts including:

(a)any possible defences known to the applicant; and

(b)information casting doubt on the applicant’s ability to discharge the obligation created by the undertaking as to damages.

[21]      In order to obtain a freezing order, an applicant needs to satisfy three requirements:

(a)a good arguable case that the allegations in the proposed claim are capable of tenable argument and are supported by sufficient evidence;1

(b)that there are assets to which the order can apply; and

(c)that there is a real risk of dissipation.2

[22]      The fact a respondent is going to dispose of assets does not invoke the freezing order jurisdiction unless there is a real risk that a judgment in favour of the applicant will be partly or wholly unsatisfied if the freezing order is not made.3

[23]      Mere assertion of belief that the respondent might dissipate its assets unsupported by solid grounds justifying that belief, is insufficient.

[24]      As discussed above, an applicant seeking a restraining order on a without notice basis has additional obligations. In the present case, the applicant has not discharged those additional obligations given that there was no attempt to provide any possible defences known to the applicant; a failure to set before the Court material facts and a failure to properly comply with the direction of Ellis J to provide the Court with sufficient information so that the Court could assess the applicant’s ability to discharge the obligation created by the undertaking as to damages.

Good arguable case?

[25]      The respondents challenged the proposition that the applicant had a good arguable case submitting that, notwithstanding the applicant’s claim to be a fixed beneficiary, it was clear that he was a discretionary beneficiary and did not have a right to receive any Trust property, or to be treated equally with other beneficiaries.

1      Dotcom v Twentieth Century Fox Film Corporation [2014] NZCA 509.

2      Tranquil Holdings Ltd v Hudson (1987) 2 PRNZ 551.

3      Oaks Hotels & Resorts NZ Ltd v Body Corporate 358851 [2013] NZHC 2695 at [18], [19] and [22].

[26]      Counsel also drew the Court’s attention to the fact that the Nisbet Family Trust deed gave the trustees the discretionary power to resettle and that the resettlement took place by a deed dated 20 December 2018. He also noted that the Nisbet Family Trust No. 2 deed specifically appointed the first respondents as both trustees and beneficiaries, and that the deed permitted the trustees to exercise their powers notwithstanding a conflict of interest.

[27]      The respondents, in response to the claim that the applicant’s late mother was of increasingly unsound mind and influenced by his sisters, noted that Wendy Nisbet’s prior Will showed a longstanding and consistent wish for her children to be treated differently and for the first respondents to be appointed as trustees. They referred to the evidence which was said to establish that the late Mrs Nisbet was of sound mind up until the date she died. They also referred to the statements of fact as to applicant’s financial position referred to above.

Analysis

[28]      The principal allegation in the statement of claim is that the “Trust fund” was depleted in value. The Court has no evidence before it at all relating to these allegations. The allegation that the trustees declined a request by the applicant for an independent audit of the Trust is patently false. There is no sufficient evidence supporting the allegations made by the applicant that would bring those allegations to a standard of being able to be tenably argued.

[29]      It also appears that the application is based in part on what the applicant perceives might be the actions of the respondents in relation to the sales proceeds of the Napier house. However, it is clear that a freezing order will not be granted on a quia timet basis.4

[30]      I concluded that the applicant has not met the standard of having a good arguable case.

4      See Euro-National Corporation Ltd v NZI Bank Ltd (1991) 4 PRNZ 365 at 370.

Assets available

[31]      There is no dispute that in terms of HCR 32.2(2), the Nisbet Family Trust No. 2 has assets capable of being the subject of a freezing order.

Real risk of dissipation

[32]      The applicant has provided no affidavit evidence upon which the Court could reasonably conclude that there was any risk of dissipation of any of the Trusts’ assets. In terms of the tests applied by the Court, the applicant has not established that “a prudent, sensible, commercial [person] can properly infer a danger of default”.5

[33]      The Court must also consider whether damages would be an adequate remedy. The only assertion made by the applicant in this regard was that the second respondents, John Robert Hands and Wayne Stuart Kirk, were a “corporate trustee” and would therefore be able to hide behind the “corporate veil”. However, the applicant has chosen to sue the two second respondents individually rather than to sue a company. There is no indication that any of the respondents would not be able to meet an order of damages against them personally should the applicant ultimately be successful. Indeed, it is not even clear what “equitable damages” the applicant might be able to receive, given that there is no evidence at all supporting the claim in the statement of claim that the assets of the Trust fund have been depleted in value through some wrongful act on the part of the trustees.

Outcome

[34]      The applicant has failed to discharge a number of the obligations upon an applicant for a freezing order as detailed above. Accordingly, the application is dismissed.

[35]      The parties are encouraged to resolve costs between themselves. However, should that not be possible, the respondents are to file an application of no greater than three pages in length within 14 days of the date of this judgment with the applicant

5      See Raukura Moana Fisheries Ltd v The Ship Irina Zharkikh [2001] 2 NZLR 801.

having 14 days to file any reply, again of no greater than three pages in length. The question of costs will then be dealt with on the papers.

Churchman J

Solicitors:

DAC Legal, Waipukurau for Respondents cc:  C G S Nisbet