Public Trust v Kain
[2019] NZHC 2789
•31 October 2019
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2018-409-40
[2019] NZHC 2789
UNDER The Trustee Act 1956 and Part 18 of the High Court Rules IN THE MATTER OF
an application by the trustee for directions under section 66 of the Trustee Act 1956
BETWEEN
PUBLIC TRUST
Plaintiff
AND
GEORGINA KAIN AND OTHERS
First Defendants
AND
MARNIE COUPIE FORCER KAIN AND OTHERS
Second Defendants
AND
WILLIAM ALEXANDER XAVIER COUPER
Interested Party
Hearing: 11 October 2019 Appearances:
B D Gray QC and A A Holden Plaintiff (Public Trust)
A R B Barker QC and J Moss for the First to Fourth Named First Defendants (the Kain defendants)
T C Weston QC and G J D Mander for Fifth Named First Defendant (Mary Hutton)
Appearance excused for Nineteenth to Twenty First Named First Defendants and Fourteenth to Sixteenth Named Second
Defendants
A R Galbraith QC for Interested Party
M J Wallace for Sixth to Eighteenth Named First Defendants and First to Thirteen Named Second Defendants (Grandchildren,except for Mary Hutton)
Judgment:
31 October 2019
PUBLIC TRUST v KAIN AND OTHERS [2019] NZHC 2789 [31 October 2019].
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 31 October 2019 at 4.00pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar 31 October 2019
[1] The first four named first defendants, referred to by the parties as the “Kain defendants”, have sought discovery orders against the other parties. Their application has been brought, in a sense, informally in that an interlocutory application for discovery has not been made, but it was clear from memoranda filed by the parties for a case management conference that the parties did not agree on the discovery to be given and hence what has been treated as an application for discovery was set down for hearing.
[2] Counsel for the plaintiff in their memorandum of 8 July 2019, set out the dispute as to the scope of discovery. The plaintiff considered that discovery ought to be limited to the various statements of wishes of the settlor of the two trusts in issue in this proceeding. The memorandum records the scope of discovery sought by the Kain defendants at that time. Additional documents are sought in the submissions filed in support of the application when compared to the position recorded in the 8 July 2019 memorandum, although those resisting discovery did not suggest anything turned on that.
[3] The documents sought by the Kain defendants are set out in the submissions filed in support of the present application as follows:
Deed of Equality/principle of equality
6.1Documents that relate to the treatment of the Deed of Equality or the principle of equality in the High Court Judgment including all relevant pleadings, applications, evidence and submissions;
6.2Documents that relate to any consideration of the Deed of Equality or the principle of equality by the trustees of trusts within the Couper-Kain trust group;
6.3Documents that describe any distribution made by the trustees of trusts within the Couper-Kain trust group in reliance on or following consideration of the Deed of Equality or the principle of equality;
6.4Documents that describe the value of the distributions that have been received to date by each of Janet Kain’s children from the Couper-Kain trust group and the South Canterbury interests of the family;
Statement of Wishes
6.5Correspondence or records of communications with the Settlor or Appointor, Mr WAX Couper, or persons acting on his behalf, that relate to the management, administration or the making of distributions from the trusts within the Couper-Kain trust group (Statement of Wishes);
6.6Documents that relate to any consideration of the wishes of Mr Couper by trustees of trusts within the Couper-Kain trust group;
6.7Documents that record any distribution made by trustees of trusts within the Couper-Kain trust group in reliance on or following consideration of any Statements of Wishes;
General
6.8Documents that relate to the establishment of the Waitaha Trust;
6.9Documents relating to the management and administration of the Waitaha Trust including financial statements, valuations, and distributions to beneficiaries.
[4] While the Kain defendants seek discovery in relation to the Waitaha Trust, the parties Mr Wallace appears for submitted that if discovery was ordered in relation to that Trust it should also be ordered in relation to the Middle Road Block Trust. Counsel did not suggest different considerations would apply to discovery concerning the Middle Road Block Trust.
Background and context
[5] Venning J in a judgment dated 27 June 2018 dealt with the issue of whether this proceeding could be brought by way of an originating application or whether it had to be commenced by way of statement of claim under pt 18 of the High Court Rules.1 In declining the application that the matter be brought by way of an originating application, Venning J gave an overview of events leading to the present proceeding. For convenience I adopt His Honour’s summary below.
[4] In a substantive judgment delivered on 3 December 2004 Panckhurst J dealt with an application under the Trustee Act 1956 to remove trustees and various related orders.2 The background facts to the trusts, the relationships and disputes within the Kain family are fully set out in that judgment.
1 Public Trust v Kain [2018] NZHC 1547, (2018) 4 NZTR 28-012.
2 Kain v Hutton (2004) 1 NZTR 14-022 (HC).
[5] In the course of the dispute some members of the family negotiated a deed of family arrangement in June 1997 (sometimes referred to as the “Deed of Equality”). The deed was between Tom and Charles Kain on the one hand and George Michael Kain, George Harry Couper Kain, Georgina Kain and Mary Hutton on the other. The parties agreed there had been unequal assistance provided from the family’s South Canterbury and Hawke’s Bay interests. They agreed to work towards ascertaining a fair statement over the amounts received by each party and to work towards a position which would ensure so far as practicable, all parties were treated equally. In his judgment Panckhurst J made various observations about the application of the deed, including that the new trustee may require directions about it and a later consent order made in October 2002.3
[6] Panckhurst J’s judgment ultimately led to the appointment of Public Trust as an independent trustee of a large group of trusts. The Waitaha Trust and Middle Road Block Trust (the Trusts) are two of the trusts that Public Trust was appointed to administer following Panckhurst J’s judgment.
[7] Following the judgment an “unwind” has been put in place. Mr Gray QC confirmed that the unwind is still some two to three years from completion. Once completed the accounts of the various trusts and entities will be balanced and resolved as at 2006 when Public Trust assumed responsibility.
The application for directions
[6]As summarised by Venning J, Public Trust seeks:4
…. directions from the Court under s 66 of the Trustee Act on matters it may be required to take into account in the administration and distribution of the Trusts.
[7] It will be necessary to consider in more detail the directions sought when assessing the competing positions on discovery.
Discovery principles
[8]The basic principles relating to discovery are not controversial.
[9]McGechan on Procedure says “in respect of” r 8.7:5
Standard discovery only requires disclosure of documents of actual and direct relevance …
…
3 Kain v Hutton, above n 2, at [303]-[305].
4 Public Trust v Kain, above n 1, at [8].
5 McGechan on Procedure (online loose-leaf ed, Thomson Reuters) at [HR8.7.01].
The definition of standard discovery in r 8.7 is seen as an elaboration on the concept of relevance that has always been at the heart of discovery and provides a formula by which relevance can be assessed. … Relevance is still a hallmark of what has to be discovered, and is to be assessed having regard to the pleadings.
…
Before any discovery application can be determined it is necessary for the issues arising on the pleadings to be identified, and for the categories of documents or particular documents to be assessed as to their relevance to those issues …
[10] However, counsel for the Kain defendants did not advance their discovery application on the grounds that issues arising from disputed pleadings require the disclosure sought. Mr Barker QC submitted that the need for discovery was inherent in the directions being sought.
[11]The directions sought by Public Trust are as follows:
(a)In respect of the Waitaha Trust:
(i)Public Trust must act consistently with the terms of the Trust Deed.
(ii)Public Trust is required to take into account the interests of the beneficiaries. This depends on the particular circumstances of the Trust and the beneficiaries but may include the extent to which a beneficiary would benefit from a distribution, the financial needs of the beneficiaries and, if the beneficiaries are children, the extent to which their needs will be met by their parents.
(iii)Public Trust is not required to take into account what the beneficiaries, who are also beneficiaries of other trusts, have received from the other trusts in the Couper-Kain trust group.
(iv)Public Trust is required to take into account the wishes and subsequent wishes of the settlor, Tom Couper, provided that
they are not inconsistent with the terms of the Trust. Where subsequent wishes are inconsistent, Public Trust is entitled to consider the most recent wishes as overriding earlier wishes.
(v)The Deed of Equality is not binding on Public Trust.
(vi)Public Trust may take the Deed of Equality into account, but it is not required to.
(vii)Public Trust is not required to ensure that all of the beneficiaries of the Waitaha Trust receive equal amounts from that Trust.
(viii)Public Trust is not required to ensure that all of the beneficiaries of the Trusts in the Couper-Kain trust group receive equal amounts from the group.
(ix)Such other orders as the Court considers just.
[12] Accordingly, the real issue is what, if anything, do the above directions of themselves require by way of discovery before they could be answered by the Court (should the Court be prepared to make the directions sought). Similar (but not identical) directions are sought in relation to the Middle Road Block Trust – it was not suggested the difference in the directions was material to the application.
The plaintiff’s position
[13] Public Trust says that the directions it seeks relate to questions of law only. It says it seeks:
… clear judicial guidance on contentious issues of law regarding the mandatory, permissible, proper and improper considerations for Public Trust in exercising its distributions discretion in the Waitaha … Trust.
[14]Public Trust seeks by bringing the application:
… to avoid hostile and costly litigation brought by disappointed beneficiaries challenging the distributions ultimately made, particularly given the context of a long-running family dispute.
[15] Public Trust’s position is that the documents sought in this application do not relate to issues “grounded in the pleadings” and that the directions do not require the discovery sought before they can be given.
[16] Public Trust rejects what it surmises the Kain defendants believe is the real purpose of this proceeding, that is for Public Trust to obtain guidance on the distribution which will eventually be made. Public Trust says it is not seeking substantial factual guidance on distributions, only limited guidance as to questions of law. In terms of the four categories of cases in which directions will be given by the Chancery Division of the English High Court, as identified by Robert Walker J, Public Trust says this case is a category one case and not category two, described as follows:6
(1)The first category is where the issue is whether some proposed action is within the trustees’ powers. That is ultimately a question of construction of the trust instrument or a statute or both. The practice of the Chancery Division is that a question of that sort must be decided in open court and only after hearing argument from both sides. It is not always easy to distinguish that situation from the second situation that I am coming to …
(2)The second category is where the issue is whether the proposed course of action is a proper exercise of the trustees’ powers where there is no real doubt as to the nature of the trustees’ powers and the trustees have decided how they want to exercise them but, because the decision is particularly momentous, the trustees wish to obtain the blessing of the court for the action on which they have resolved and which is within their powers. Obvious examples of that, which are very familiar in the Chancery Division, are a decision by trustees to sell a family estate or to sell a controlling holding in a family company. In such circumstances there is no doubt at all as to the extent of the trustees’ powers nor is there any doubt as to what the trustees want to do but they think it prudent, and the court will give them their costs of doing so, to obtain the court’s blessing on a momentous decision. In a case like that, there is no question of surrender of discretion and indeed it is most unlikely that the court will be persuaded in the absence of special circumstances to accept the surrender of discretion on a question of that sort, where the trustees are prima facie in a much better position than the court to know what is in the best interests of the beneficiaries.
6 Robert Walker’s judgment is unnamed and unreported. The relevant passage has been set out in, among other cases, Re PV Trust Services Ltd [2017] NZHC 2957, [2018] 3 NZLR 160 at [42].
[17]Public Trust says:
Public Trust does not yet have a view on what the distributions might be, as it cannot consider that without knowing what it needs to ask itself (hence the directions application). It also does not yet have full information from the beneficiaries to carry out such an exercise, despite requests.
The applicant’s position
[18] Mr Barker for the Kain defendants, challenges the utility of the directions sought. The submission is made that the directions sought by Public Trust are “on their face, just statements of principle”.
[19]Mr Barker theorises that:
What appears to be behind this application is a concern on the part of the Public Trust as to how it should treat the various statements of wishes, when compared to the Deed of Equality (or in its lesser form, the principle of equality).
[20] The submission is made that what in reality is being asked cannot be answered without understanding the relevant context in which the Kain defendants say makes relevant the documents they seek. Mr Barker submits that whether something is a permissible consideration is not a pure question of law but rather is largely a question of fact that must depend on the circumstances of each Trust.7
[21] Mr Barker refers to the principles that apply to a trustee seeking directions and notes:
The courts have repeatedly confirmed that the jurisdiction is not “purely advisory, or to be invoked to resolve abstract hypotheses.” What is required is some dispute as to how the trustees should proceed.8
[22]Of the directions sought, the submission is that:
On their face, they raise abstract questions of principle, many of which are unlikely to be in dispute. They are not directed to the key issues of how those principles ought to be applied in any decision that the [plaintiff] take[s]. They are not put forward in any particular context.
7 David Hayton, Paul Matthews and Charles Underhill and Hayton, The Law Relating to Trusts and Trustees, 19th ed at [57.27].
8 New Zealand Maori Council v Foulkes [2014] NZHC 1777, [2015] NZAR 1441 at [47].
[23] The clearest examples of this are certain directions sought which are all said to be truisms in the context of a discretionary trust and are not appropriately the subject of directions by the Court.
[24]The remaining directions are then said to address three broad questions:
(a)Are the trustees bound to apply the Deed of Equality?
(b)If they are not bound to apply the Deed of Equality, are they nevertheless required to take into account the principle of equality?
(c)Are the trustees entitled to take into account the latest statement of wishes from Mr Couper?
[25] The Kain defendants submit that the difficulty with the directions is that they ask the Court to restate basic principles of trust law.
[26] There is at least that degree of agreement between counsel for the applicants and Public Trust as both submit that the directions raise legal questions. As recorded, Mr Gray for Public Trust has unequivocally said that his client seeks guidance on legal questions. Public Trust has, from the outset of this proceeding, rejected that the directions concern the substance or merits of distributions it will eventually make.
[27] Whether the directions sought are capable of achieving the objective of avoiding further litigation may be debatable. The protection granted to trustees by s 69 of the Trustee Act 1956 (“the Act”) is limited to the subject matter of the direction made. If the directions sought are made, such would not be a licence to the trustees to exclude other proper considerations, they should take into account or make any distribution immune from challenge as if the distributions had been sanctioned by the Court.
[28] The submissions made in support of this application are in substance a challenge to the utility of the directions as drawn. The criticism that the Court will not make the directions because they are hypothetical questions or the like, is a matter for the hearing of the application for directions. If the Kain defendants are correct in
their challenge to the form of the directions sought, then Public Trust runs the risk that the Court will not make the directions sought.
[29] Examples of the Court declining to make such directions can be found in the decision of Panckhurst J:9
[296] The directions sought essentially involve the interpretation of lengthy and complicated provisions found in archaic trust deeds. Some of the directions seem to me questionable in terms of content. For example, I doubt the appropriateness of an abstract direction confirming that certain factors identified by counsel are relevant discretionary considerations. Whether a direction in such terms would serve any useful purpose in the context of a number of trusts, where there must be scope for different considerations to come into play, must be questionable.
…
[301] The possible utility of the direction sought by the trustees, escapes me. The legal position with reference to a statement or letter of wishes is clear, namely that trustees make take serious account of the settlor’s wishes but always appreciating that the ultimate decision is theirs. It follows that trustees may properly decide to act contrary to the settlor’s wishes after taking account of all the relevant circumstances. As to these propositions see for example the discussion in Underhill and Hayton, Law of Trusts and Trustees (15th ed) at p 47 and the decision in Hartigan Nominees Pty Ltd v Ridge (1992) 29 NSWLR 405.
[30] Mr Gray’s position was that the directions sought were category one legal issues and not mixed questions of fact and law.
Decision
[31] The Kain defendants say that the directions raise legal questions. However, that the directions raise legal questions does not mean they give rise to factual issues to which the discovery sought could relate. The trustees only ask if a certain consideration can be taken into account, not whether a consideration must be taken into account or how it should be taken into account. Mr Barker submits the directions cannot be given without factual context, but that submission does not assist in trying to identify what the relevant factual issues are which would limit the scope of discovery. In other words, without more, a claim that the directions require context presents an open ended factual enquiry.
9 Kain v Hutton, above n 2.
[32] How the questions identified in the directions may impact on a particular distribution is not before the Court. Only threshold questions arise. Public Trust asks which considerations (for example the issue of priority between statements of wishes) it can take into account.
[33] Seen in that light, the directions sought can only take Public Trust a limited way towards achieving its objective of avoiding further litigation. The directions as sought will not represent the Court’s sanction to the distributions to occur at the end of the day nor did the plaintiff suggest that the directions would.
[34] Mr Barker submitted that before the Court could give directions in relation to which statement of wishes should be given effect to, the Court will need to know all the relevant circumstances. The directions in respect of the settlor’s wishes relate to the effect of a statement of wishes if it is inconsistent with an earlier statement of the settlor’s wishes. The direction only addresses the issue of priority between inconsistent statements – does the last in time prevail and no more.
[35] I have not overlooked Mr Wallace’s submission that the statements of wishes are lengthy and later statements may only be inconsistent on particular issues but that does not alter the basic point that what Public Trust is asking for is guidance on whether the last expression of the settlor’s wishes on a particular issue prevails. Some statements of wishes may remain the last statement on some issues but be superseded on others.
[36] Mr Galbraith QC, for the interested party Mr Couper (the settlor), submitted that Public Trust had chosen to seek the direction it thinks will be useful to it and while there may be issues about the utility of those directions, it was wrong in principle to work from utility backwards to create an expanded proceeding to support the discovery sought. I agree. That the Kain defendants have been critical of the directions sought and doubt whether the directions will be given is not a basis for my ordering discovery that the directions on their face do not require or to via discovery convert the directions towards Category two type questions.
[37] The more the Kain defendants highlighted the hypothetical, legal or generic nature of the directions, the more the application for discovery was undermined. The Kain defendants’ application for discovery was based on the type of directions they believed should have been sought. Mr Barker in his reply submissions said Public Trust asking legal questions was inconsistent with the purpose of an application under s 66 of the Act because Public Trust is asking the Court to address largely hypothetical questions. Mr Barker described the direction as being inconsistent with the approach that the courts take to resolving applications for directions, which requires reference to the broader context. Mr Barker submitted it is not appropriate to approach the application on the basis that all that is required are directions on abstract issues of law. However, I can only determine the application for discovery based on the directions as they are in fact framed. The submission is to the effect that the Court should save the directions or ensure their utility by ordering the discovery sought but as Mr Galbraith said that is to work backward from utility rather than forward from directions as they are written.
[38] Mr Gray rejected the suggestion that the directions were being sought in a vacuum saying that the background set out in the statement of claim and the history recorded in past judgments, was sufficient context. Again, it is for Public Trust to determine how it wants to run the proceeding. Mr Barker did not suggest that the contextual matter Mr Gray said would be relied on warranted the discovery sought.
[39] Accordingly, I do not consider that the directions as framed require the parties to give the discovery sought by the applicant and the application for discovery is dismissed. Costs are reserved.
[40] All counsel agreed to provide discovery of any statement of wishes held other than those recently circulated by Public Trust. I make directions in that regard in the Directions Minute issued with this judgment.
[41] Mr Gray was adamant that the directions sought only raise legal questions. As Mr Galbraith said, that is a stance the plaintiff will be held to.
Associate Judge Lester
Solicitors:
Wilson Harle, Auckland (Plaintiff)
Copy to counsel:
B D Gray QC, Auckland
Izard Weston, Wellington (First to Fourth Named First Defendants)
Copy to counsel:A R B Barker QC, Auckland
J Moss, Barrister, Christchurch
Duncan Cotterill, Christchurch (Fifth Named First Defendant, Mary Hutton)
Copy to counsel:T C Weston QC (Nineteenth to Twenty First Named First Defendants and Fourteenth to Sixteenth Named Second Defendants)
A R Galbraith QC (Interested Party)
M J Wallace, Barrister, Christchurch (Sixth to Eighteenth Named First Defendants and First to Thirteen Named Second Defendants (Grandchildren except for M Hutton)
J F Anderson QC, Auckland (for Nineteenth to Twenty First Named First Defendants and Fourteenth to Sixteenth named Second Defendants)
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