Ram Custodian Limited v Raymond
[2012] NZHC 3438
•26 October 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-3798 [2012] NZHC 3438
UNDER the Trustee Act 1956 and Part 19 of the
High Court Rules
IN THE MATTER OF an application by trustees for directions under section 66 of the Trustee Act 1956
BETWEEN RAM CUSTODIAN LIMITED, JOHN RUSSELL STRAHL AND BENJAMIN WILLIAM MCALPINE TOTHILL Applicants
ANDRICHARD WYNNE RAYMOND, DAVID ATHOL HAMILTON BROWN AND BENJAMIN WILLIAM MCALPINE TOTHILL
First Respondents
ANDJOHN RUSSELL STRAHL AND JOHN CARLAW HAGEN
Second Respondents
Hearing: 24 October 2012
Appearances: A S Ross and R A Rose for the Applicants
T C Weston QC and A V Foote for the First Respondents
N Ingram QC and A Kyriak for the Gough Bros
Judgment: 26 October 2012
Reasons: 17 December 2012
REASONS FOR JUDGMENT OF ELLIS J
This judgment was delivered by me on 17 December 2012 at 11am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors: Chapman Tripp, PO Box 2206, Auckland 1140
Duncan Cotterill, PO Box 5, Christchurch 8140
Kyriak Law, 4/40 Eden Crescent, Auckland 1010Wynn Williams, PO Box 4341, Christchurch
Counsel: T Weston QC, PO Box 3976, Christchurch 8140
N Ingram QC, 2006 The Precinct, 6 Lorne Street, Auckland 1010
RJB Fowler, PO Box 10048, Wellington 6143
RAM CUSTODIAN LTD V RAYMOND HC AK CIV-2012-404-3798 [26 October 2012]
[1] This judgment sets out my reasons for decisions made by me on 26 October
2012:
(a) declining an application for stay of this proceeding (CIV 2012-404-
3798) pending the determination of the proceeding numbered CIV
2011-404-6645;
(b)granting an application to consolidate this proceeding with the proceeding numbered CIV 2011-404-6645.
[2] This proceeding and the proceeding numbered CIV 2011-404-6645 both involve the Head Trust of the Tracy Thomas Gough Estate (the applicants) and (directly or indirectly) the sub-trusts that represent two branches of the Gough family, the Blair Gough Sub-trust and the Owen Gough Sub-trust. The Head Trust has become something of a focal point for the longstanding internecine struggle between Tracy Gough’s descendants.
[3] The Head Trust is required by its Trust Deed to have three trustees. The trustees of the two sub-trust each appoint one trustee and then those two trustees then appoint the third. Mr Tothill is the Blair Gough Sub-trust’s appointee to the Head Trust. Mr Strahl is the Owen Gough Sub-trust’s appointee and RAM Custodian Limited (RAM) is the independent trustee appointed by Mr Tothill and Mr Strahl..
[4] Tracy, Harcourt and Anthony Gough (collectively referred to as the Gough brothers) are beneficiaries under the Owen Gough Sub-trust.
[5] The first respondents are the trustees of the Blair Gough Sub-trust.
[6] The 2011 proceeding concerns a claim made by one of the Gough brothers, Harcourt Gough, that Mr Tothill and RAM were invalidly appointed as Trustees of the Head Trust (“the vires proceeding”). By way of consequential relief, he seeks declarations that any decisions purportedly made by the trustees of the Head Trust during the relevant period “are of no effect”.
[7] In the course of that proceeding, a decision was made that the validity of the appointments would be determined separately from any issues as to consequences.
[8] The appointment issue in the vires proceeding was heard by Courtney J on 21 and 22 May 2012.
[9] Prior to the release of her judgment, in July 2012 the Head Trustees applied for, and were granted, leave to commence the present proceeding (CIV 2012-404-
3798) by way of originating application.[1] The application principally sought a
direction under s 66 of the Trustee Act 1959 winding up the Head Trust (“the winding up proceeding”). I do not need to record the grounds advanced for that application here.
[1] I mention that, although the existence of the vires proceeding was disclosed to the Judge who granted application for leave, I am not entirely confident that the full complexity of the matter, or the intractability of the underlying dispute, was made as clear as it might have been.
[10] When leave to commence was granted, directions as to service were made, including a direction that the application be served on the Gough brothers. The Gough brothers filed an appearance.
[11] On 30 August 2012 Courtney J delivered her judgment in the vires proceeding on the appointment issue.[2] In it, she held that RAM’s appointment in
2006 was invalid and that the extension of that appointment in 2009 was necessarily similarly invalid. She also held that Mr Tothill’s appointment between 2005 and
2008 was invalid, but that his subsequent reappointment was valid.[3]
[2] Gough v RAM Custodians Ltd [2012] NZHC 2218.
[3] At [61].
[12] In September 2012, the two de jure Head Trustees (Mr Tothill and Mr Strahl) appointed RAM as the third Head Trustee, without prejudice to final outcome of the vires proceeding. The Head Trustees filed an appeal from Courtney J’s decision. A cross appeal was also filed.
[13] On 20 September 2012 the Gough brothers filed the application for a stay of the winding up proceeding pending resolution of the vires proceedings.
[14] On 10 October 2012 the Head Trustees filed an amended application in the present (winding up) proceedings seeking further directions from the Court validating all decisions, powers and exercises of discretion by the Head Trustee
between 2005 and September 2012.
[15] At the same time, they filed the application seeking consolidation of the vires and the winding up proceedings.
[16] The Head Trustees opposed the stay. The Gough brothers opposed the consolidation application. The trustees of the Blair Gough Sub-trust generally supported the position of the Head Trustees. Mrs Avenal McKinnon (the Gough sister) abides the Court’s decision on both applications.
[17] The applications were heard by me on 24 October 2012 and, as I have said, I
issued a results judgment on 26 October.
[18] For completeness, I record (but necessarily do not take into account) that on 3
November 2012 Courtney J heard an application to recall her August “appointment” judgment. On 9 November 2012, she issued a decision granting the application and there is now to be a further hearing on the appointment issue. In light of my consolidation decision in future Courtney J will be managing both the vires and the winding up proceedings together.
Discussion
[19] The position of the Gough brothers in relation to both their stay application and their opposition to consolidation was principally based on the propositions that:
(a) At the time the winding up proceeding was filed, one or more of the Head Trustees were invalidly appointed and therefore had no standing to file (or to participate in) the proceeding;
(b)The “sequestering” by the Head Trustees of $1 million in order (inter alia) to fund their participation in both proceedings was therefore also invalid.
[20] In my view, the first difficulty with these propositions is that the approach underlying them necessarily impedes, rather than assists, the resolution of what I perceive to be the fundamental issue: what should be the practical consequences of the invalid Head Trustee appointments.
[21] In that respect I agree with Mr Ross that declarations of the kind sought by Mr Gough in the vires proceeding (namely that all decisions made by Head Trustees during the period of the invalid appointments simply have no effect) are largely empty, and ultimately, unhelpful. As Mr Ross said, it is almost a given that decisions made by invalidly appointed Trustees are prima facie of no effect. The issue will most likely be whether declarations to that effect should, as a matter of discretion, be made. The question of real moment is the very question that the vires proceeding does not ask the Court to answer, namely what should then be done. Sanctioning a procedural course that prevents that question being asked or answered seems difficult to reconcile with the Court’s duty to uphold and protect trusts.
[22] The second, related, difficulty is that the propositions at [18] above have a circular effect. In particular, the effect of the invalid appointments/alleged wrongful “sequestration” on the Head Trustees’ standing to bring the winding up proceeding, can only be determined in the context of a substantive determination of the issues put before the Court by the (amended) winding up proceeding. Moreover, if the second proposition is accepted (at this interlocutory stage), the Head Trustees would presumably also be prevented from participating in the vires proceeding as well. The Head Trustees would be hamstrung in terms of the proper administration of the Head Trust, and without funds, for some considerable period.
[23] Thirdly, and in light of the presumably valid (re)appointment of RAM following the delivery of Courtney J’s judgment, a finding that the Head Trustees previously had no standing to bring the winding up proceeding (or the grant of a stay on that basis) would be unlikely to be the end of the matter. In that respect, Mr Ingram QC quite rightly accepted that the Head Trustees (now properly appointed) could simply make a further, identical, application to which the objections presently taken by the Gough brothers could not be maintained. While Mr Ingram said that the filing of a new proceeding would be the proper course, it certainly does not appear to me to be the expedient one.
[24] Lastly, I record, but do not intend to detail, the fact that there are also third parties with significant commercial interests who are likely to be adversely affected if the Trust is unable to resolve the issues raised by this proceeding.
[25] In my view, all those reasons militated strongly against a stay of the winding up proceeding.
[26] The fact that I have declined to stay the winding up proceeding removes the principle impediment to consolidation. And as far as that issue is concerned, it seems clear enough from the account above that the two proceedings are intertwined. There is undoubtedly a considerable overlap of both legal and factual issues. Moreover, attempts to separate out (and separately determine) the issues arising in the vires proceedings have not in my view been a success.[4] I have little difficulty in concluding that consolidation is appropriate under High Court Rule 10.12.
[4] For example I note that in her recall judgment (at [9]) Courtney J said:
In the present case, it is evident that important issues that counsel wished to have addressed have not been addressed. This is certainly a matter of regret from my point of view and tends to demonstrate the risks involved in splitting issues in a case for separate determination.
[27] Obviously, how that order manifests itself in terms of the final shape of the substantive hearings (which may, for example, be sequential rather than combined) can be determined at a later date. As I have already noted above, the two proceedings
are already being managed together by Courtney J.
Rebecca Ellis J