Re Goldman
[2016] NZHC 1010
•18 May 2016
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-2176 [2016] NZHC 1010
IN THE MATTER of Rule 4.35 High Court Rules AND
IN THE MATTER
of DIANA PERKINS GOLDMAN Incapacitated Person
AND
IN THE MATTER
of LEWIS THOMAS GRANT Applicant
Hearing: 5 May 2016 Appearances:
AF Grant and AJ Steele for Incapacitated Person
VTM Bruton and P Brown for Applicant (a Defendant in
CIV-2015-404-1962)KG Davenport QC for Gwyneth Christine Perkins (a Defendant in CIV-2015-404-1962)
PM Fee and F Darlow for Fountainhead Trustee Limited (a
Defendant in CIV-2015-404-1962)Judgment:
18 May 2016
JUDGMENT OF TOOGOOD J [Application to remove Litigation Guardian]
This judgment was delivered by me on 18 May 2016 at 3:00 pm
Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Goldman v Grant [2016] NZHC 1010 [18 May 2016]
Introduction
[1] A defendant in a substantive civil proceeding has applied for an order revoking the appointment of a litigation guardian for the incapacitated plaintiff who sues him, and has suggested replacements. Unsurprisingly, the application is opposed on behalf of the plaintiff.
[2] The plaintiff, Diana Perkins Goldman, is 88 years old. In the mid-1970s, her husband and she acquired a large farm on Waiheke Island: “Fountainhead”. Mrs Goldman’s husband died in 2007. The couple had no children, but they have many nieces and nephews on both sides of the marriage. “Fountainhead” has a private beach and government valuations estimate that it is worth more than $20 million; it is owned by Fountainhead Holdings Ltd. Until February 2013, all of the shares of the company were owned by Mrs Goldman, and she was also its sole director.
[3] On 28 February 2013, Mrs Goldman gifted all her shares in Fountainhead Holdings Ltd to the trustees of the Fountainhead Trust, a family trust she had settled on 28 September 2012, as part of a relatively complex estate-planning exercise. The named discretionary beneficiaries of the Trust are Mrs Goldman; a niece, Ms Christine Perkins; a great-nephew, Mr Thomas Lane (Ms Perkins’s son); and Mr Robert Goldman, who is a nephew of Mrs Goldman’s late husband. Other discretionary beneficiaries include any children, grandchildren or great- grandchildren of Mr Lane, as well as charities or charitable societies. The trustees of the Trust are Mrs Goldman; a closely held trustee company, Fountainhead Trustees Limited; and Ms Perkins.
[4] On 28 September 2012, Mrs Goldman also signed a new will in which she left the Trust the residue of her estate. On 4 November 2012, Ms Perkins became a co-director of Fountainhead Holdings Ltd.
The substantive proceedings
[5] On 21 August 2015, Mrs Goldman filed a statement of claim in CIV-2015-
404-1962 (“the substantive proceedings”) against the trustees of the Fountainhead Trust, Ms Perkins and Mr Lane. She alleges that she was in a relationship of trust and confidence with Ms Perkins and Mr Lane, who is a solicitor, such that they had influence over her in relation to the settlement of the terms of the Trust and her new will, and related transactions in late 2012 and early 2013. It is claimed that the transactions settling the Trust were unconscionable bargains; they were procured by undue influence; and/or were induced by mistake. Mrs Goldman seeks to have the Trust dissolved and the transactions associated with its creation set aside.
[6] Ms Perkins and Mr Lane deny these allegations. They assert that Mrs Goldman is mentally incapacitated and that she has come under the influence of others who stand to benefit from the setting aside of the Trust and related transactions, including Mr Robert Goldman, her late husband’s nephew, and a live-in housekeeper.
[7] There is much at stake in the substantive proceeding, both financially and in terms of an inquiry into of the conduct and character of the various parties and other persons.
Appointment of a litigation guardian
[8] It is common ground that Mrs Goldman is suffering from a degree of mental incapacity, although the history and extent of her disability may be matters in dispute in the substantive proceeding. On 16 September 2015, less than a month after the substantive proceeding was issued, Mrs Goldman began this proceeding: a without notice originating application under pt 19 of the High Court Rules (“HCR”) for the appointment of a litigation guardian.
[9] The application was supported by an affidavit sworn by Dr Bede McIvor, a consultant psychiatrist and psychogeriatrician. The affidavit addressed, relevantly and in accordance with the applicable legal principles, whether at the time of
Dr McIvor’s examination on 20 August 2015 Mrs Goldman was incapacitated within the meaning of r 4.29 of the HCR for the purpose of the substantive proceeding. Dr McIvor expressed the opinion that Mrs Goldman was an incapacitated person as defined, in that she has mild dementia and issues with short-term impairment of memory such that she will be unable to give sufficient instructions to issue, defend or compromise the proceeding. Dr McIvor said Mrs Goldman had an impaired ability to understand the issues on which her decisions would be required as a litigant conducting proceedings.
[10] There were two other supporting affidavits, from Mrs Goldman and Mr Lewis Grant. Mrs Goldman’s affidavit recorded that she was happy for Mr Grant to act as her litigation guardian. She noted that he was her long-standing lawyer and said she believed he would do the right things to regain her control of her assets. In regards to her capacity, she recorded that she was not confident in her ability to understand complex legal arguments, but she said she could understand the general nature of the substantive proceedings.
[11] Mr Grant’s affidavit emphasised both his experience as a lawyer and his relationship with Mrs Goldman. His curriculum vitae was annexed as an exhibit, which noted his 39 years of practice in the area of trusts and estates. He recorded that he had previously acted for Mrs Goldman between 2001 and 2010, and also since March 2015. He says he has a good working relationship with her and a detailed knowledge of the facts and circumstances of her claim.
[12] On 17 September 2015, Gilbert J granted an order appointing Mr Grant as litigation guardian for Mrs Goldman. The Judge also directed, pursuant to r 3.8 of the HCR, that the court file for the substantive proceeding was not to be accessed without the permission of the Court.
Application by Mr Lane to revoke or vary the order appointing Mr Grant as litigation guardian
[13] Relying on his status as a defendant in the substantive proceeding, Mr Lane applied under r 7.49(1) of the HCR for an order revoking or varying the appointment of Mr Grant as litigation guardian representing Mrs Goldman. He argued that, in
terms of the rule, he is a party affected by an interlocutory order or by a decision given on an interlocutory application, and that he may apply to the court to vary or rescind the order or decision because he considers that it is wrong.
[14] Mrs Goldman opposed the application, but in an affidavit filed in response to it, Mr Grant indicated that, rather than distract the parties to the substantive proceeding from the real issues in the litigation, he had received approval from Mrs Goldman to be replaced by someone else.
[15] On 5 May 2016, after hearing from counsel, I indicated that I proposed to dismiss Mr Lane’s application for the removal of Mr Lewis Grant as litigation guardian, and that I would do so in a reasoned judgment to be issued in due course. This is that judgment.
[16] There are two bases on which Mr Lane sought to challenge Gilbert J’s order
of 17 September 2015: one is procedural and the other is substantive.
Procedural challenge – High Court Rules not followed
[17] For the procedural challenge, Ms Bruton argued that the appointment was incorrectly made on a without notice basis because none of the requirements for a without notice interlocutory order, listed at r 7.46 of the HCR, apply in this case.
[18] In my view, however, the applicant’s reliance upon the High Court Rules relating to interlocutory proceedings does not assist. First, the order appointing Mr Grant to be Mrs Goldman’s litigation guardian was not an order made on application under sub-pt 2 of pt 7 of the Rules for an interlocutory order in the substantive proceeding; it was a separate originating application made under pt 19 of the Rules and in accordance with rr 4.29 to 4.48. Although it is probably the case that applying under pt 19 required Mrs Goldman or her representatives to make an application under r 19.5 for permission to apply for a litigation guardian by an originating application, it may be assumed that Gilbert J would have granted
permission had he been asked to do so, and tacit permission may be inferred. Any non-compliance with the Rules does not nullify the orders made.1
[19] Second, even if the order appointing Mr Grant falls within the definition of an interlocutory order in r 1.3(1) of the Rules for the purposes of the substantive proceeding:2
(a) it was an order which the Court was entitled to make on a without notice application, being an application affecting only Mrs Goldman;3 and
(b)Mr Lane has no standing to apply for variation or rescission of the order appointing the litigation guardian because he is not a party affected by it.4
[20] Other than in exceptional circumstances, it is difficult to see how the appointment of a litigation guardian to commence, continue or defend a substantive proceeding on behalf of a party could be said to be a matter affecting an opposing party to the proceeding, such that the opposing party may apply for an order varying
or rescinding such an appointment.5 In the few cases of which I am aware in which
an application to revoke an appointment has been heard, the issue of whether the applicant was affected by the appointment has not been addressed. It is certainly the case here, however, that Mr Lane cannot reasonably claim to be affected by the appointment in any relevant sense, for reasons which may be obvious but which are,
in any event, explained more fully below.
1 High Court Rules, r 1.5.
2 Rule 1.3 defines interlocutory order as “an order or direction of the court that … is made or given for the purposes of a proceeding or intended proceeding and … concerns a matter of
procedure or grants some relief ancillary to that claimed in a pleading….”
3 Rule 7.46(3)(b).
4 Rule 7.49(1).
5 An exceptional circumstance might exist, for example, where the appointed guardian was a solicitor who had previously acted for the defendant and was in possession of relevant confidential information.
Substantive challenge to the appointment
[21] Approaching the matter as an application for removal of the litigation guardian under r 4.46(3) of the HCR, I acknowledge that there is nothing in the rules which limits the class of persons who may so apply. In Re Clapham,6 Muir J held that it is open to anyone reasonably connected with the incapacitated person to bring such an application. That must be right, but the question in this case is what, if any, weight the Court should give to the views of a defendant about the suitability of the
court-appointed representative of the plaintiff suing him. The answer will be determined by the purposes for which a litigation guardian may be appointed and the nature of the role to be undertaken, as indicated by the rules relating to the appointment, powers, and removal of a litigation guardian.
[22] Rule 4.35 provides that the court may appoint a litigation guardian for a person whom the court determines is an incapacitated person if the litigation guardian:
(a) is able fairly and competently to conduct proceedings on behalf of the incapacitated person;7
(b) does not have interests adverse to those of the incapacitated person;8
and
(c) consents to being a litigation guardian.9
[23] In deciding whether to appoint a litigation guardian, the court may have regard to any matters it considers appropriate, including the views of the person for whom the litigation guardian is to be appointed.10
[24] Rule 4.38 provides that a litigation guardian may do anything in relation to a proceeding that the incapacitated person could do if he or she were not incapacitated.
6 Re Clapham [2015] NZHC 210.
7 Rule 4.35(2)(b)(i).
8 Rule 4.35(2)(b)(ii).
9 Rule 4.35(2)(b)(iii).
10 Rule 4.35(3).
Rule 4.46(3) provides that a litigation guardian may be removed by the court “when it is in the interests of the person he or she represents.”
[25] The requirement that the Court must be satisfied that a litigation guardian does not have interests adverse to those of the incapacitated person, and the ability of the Court to remove a litigation guardian when it is in the interests of the incapacitated person to do so, establish that the overarching consideration in these matters is what is in the interests of the person represented. The requirement that the person appointed to be the litigation guardian should be able to conduct proceedings “fairly and competently” should be read in that light, rather than as imposing on the litigation guardian a duty of fairness to other parties to the proceeding which is not imposed on the incapacitated person.
[26] Ms Bruton submitted that it was necessary for the person acting as Mrs Goldman’s litigation guardian to be independent in the sense of having no personal interest in the conduct or outcome of the proceeding. Although suggesting that Ms Perkins adopted a neutral position on the application, Ms Davenport QC supported that argument. I do not accept the submission.
[27] In A v D,11 Doogue J considered an application by defendants for an order removing the first plaintiff as next friend12 of the second plaintiffs, his children. At the time of the litigation, r 82 of the High Court Rules enabled a minor to sue by a next friend, the appointment being deemed to have been made when the next friend
filed in the Court an affidavit showing that he or she was not under a disability and that his interests were not adverse to those of the minor. Under r 85(2), however, the Court could remove a next friend “upon sufficient cause being shown”. It was suggested that there was a difference in interest between the plaintiffs and that the father’s interest was adverse to that of the children.
[28] Doogue J noted that the defendants had accepted that in the ordinary course a father was regarded as a suitable next friend unless his interests were adverse to
11 A v D (1994) 7 PRNZ 502 (HC).
12 The equivalent of a litigation guardian under the current High Court Rules.
those of the minor.13 The Judge held that, on the face of the proceeding, the interests of the members of the family were the same; namely, that the father and the children should recover damages from the defendants for the negligence of the defendants in adequately investigating allegations of sexual abuse. Doogue J held that since it could not be said by the Court that the proceedings were necessarily contrary to the interests of the children, requiring the removal of the next friend, the application would be dismissed.
[29] More recently, in Erwood v Glasgow Harley,14 Harrison J observed in a postscript to the judgment that an obligation of independence was fundamental to the office of guardian ad litem (the equivalent of a litigation guardian). But that observation needs to be considered in context. Harrison J was acknowledging the correctness of the decision of the guardian to depart from an earlier decision not to entertain an alternative method of dispute resolution without the approval of the party whom he represented. The Judge noted that the represented person, Mr Erwood, was unable to make rational decisions for himself in the litigation and that the litigation guardian was required, therefore, to reach his own view as to how the proceeding should be conducted.
[30] During oral argument, Ms Bruton submitted that Mr Lane had a right to be heard because of the negative effect that Mr Lewis Grant’s approach to the litigation
– which counsel described as “aggressive” – would have on his longstanding and close personal relationship with Mrs Goldman. Counsel suggested that the case was one in which Mrs Goldman’s solicitors had consistently taken the approach that Mrs Goldman has no wish to have any contact with Mr Lane and Ms Perkins “because they stole her assets.” It was suggested that, given the closeness of contact between Mrs Goldman and her niece and great nephew “over many, many years ... one might raise an eyebrow or two at that assertion,” particularly given that the settlement of the Trust occurred back in 2012. In counsel’s view, the case was not one which should go to trial, but one to be sorted out around a table. So, it was
submitted, an aggressive approach was certainly not in Mrs Goldman’s best interests.
13 Dey v Victorian Railways Commissioners (1949) 78 CLR 62 (HCA) at 113; Rhodes v
Swithenbank (1889) 22 QBD 577 (CA); and Re Taylor’s Application (1972) 2 QB 367 (CA) at
380.
14 Erwood v Glasgow Harley HC Auckland CP179-SD02, 17 March 2003.
Ms Bruton nominated alternative senior counsel whom she said should be appointed to replace Mr Grant as guardian.
[31] Although the Court is mindful that it should not needlessly trample over parties’ emotions, a potential for hurt feelings does not give any credence to Mr Lane’s views on what should be done the best interests of the plaintiff in litigation against him. His claim that those now advising Mrs Goldman have come between his great-aunt and him unjustifiably may be proved correct in due course. But that is a matter for trial. It is not for the Court to direct Mrs Goldman’s litigation guardian and her counsel on their approach to the litigation, and it is much less a matter on which the Court should take account of the views of a defendant, which are inevitably tainted by self-interest. The proposition that the Court should accept a defendant’s suggestion of less aggressive counsel to represent a plaintiff as her guardian is remarkable.
[32] I acknowledge that Mrs Goldman’s difficulties in conducting litigation, caused by mild dementia and short-term memory loss, render her incapacitated to an extent which justifies the appointment of someone to step into her shoes and conduct the substantive proceeding in her interests. Nevertheless, it is evident from Mrs Goldman’s affidavits in support of the application for the appointment of a litigation guardian,15 and in opposition to this application, that she is not wholly incapacitated and that she has a clear preference for Mr Grant’s undertaking that role. Moreover, she is represented by senior and experienced counsel, Mr Anthony Grant.16 Ms Bruton was unable to point to any authority which supported the view that, despite those features, this was a case in which the defendant’s views of the plaintiff’s best interests should influence the Court.
[33] Nevertheless, Ms Bruton submitted that Mr Lewis Grant has interests adverse to Mrs Goldman, and that he may not be able to fairly and competently conduct
proceedings on her behalf. I set out counsel’s arguments and comment on them:
15 Which, I acknowledge, the defendants have not seen.
16 No relation to Mr Lewis Grant, the litigation guardian.
(a) It is said Mr Grant is a partner in Martelli McKegg, the firm acting for Mrs Goldman in the substantive proceeding, and that it follows that he has a financial interest in the litigation continuing as long as possible.
Putting to one side the attack on the ethics of an experienced legal practitioner, without any evidential foundation, accepting that proposition would disqualify any paid professional adviser or representative from acting as a litigation guardian. That would undermine the requirement of competence in r 4.35(2)(b)(i). Moreover, the submission runs contrary to r 4.45, which provides that, unless the Court otherwise orders, a litigation guardian is entitled to be reimbursed out of the property of the incapacitated person for any costs (including solicitor and client costs) paid or incurred, or that are to be paid or incurred, by the litigation guardian on behalf of the incapacitated person. The rule does not exclude the recovery of professional fees properly charged by the litigation guardian.
In all respects, Mr Grant’s obligation is to act in Mrs Goldman’s best interests. As her solicitors, Mr Grant and his firm have fiduciary duties to her which are consistent with the responsibilities of a litigation guardian. In both roles, Mr Grant has a legitimate interest in ensuring that Mrs Goldman’s claim is resolved in a manner which suits her best interests. Ms Bruton has adduced no evidence which indicates that Mr Grant is acting improperly or contrary to Mrs Goldman’s best interests in this matter, and there is no arguable reason, therefore, why his dual roles of solicitor and guardian require his removal.
(b)Referring by analogy to the conflict which counsel would have if required to give evidence, Ms Bruton argued that Mr Grant was disqualified from appointment because he may need to be a witness of fact in the substantive proceeding. That evidence would relate to Mrs Goldman’s one-time change of lawyers from Mr Grant’s firm to
the law firm by whom Mr Lane was employed at material times, and the reasons for that change.
There is no merit in this point. The position of counsel – who is required to provide objective, independent advice and whose duties to the court transcend duties to a client – is not analogous to the position of a litigation guardian. A litigation guardian is expected to be partisan and to advance pro-actively the interests of the person he or she represents. Since a plaintiff is undeniably competent to give evidence on their own behalf, the same must apply to the person standing in their shoes. The position would be different, of course, if the guardian’s evidence was intended to further the guardian’s interests contrary to those of the person represented; there is no evidence of that conflict in this case.
(c) It was argued that Mr Grant is conflicted because he also represents a family who are Mrs Goldman’s neighbours. At a meeting on 22 April
2015, Mrs Goldman apparently expressed a wish that “Fountainhead” be sold to them. At that meeting, Mr Grant said that Mrs Goldman had waived any conflict of interest he might have if such a transaction was seriously contemplated and he continued to act for the neighbours. However, Ms Bruton argued Mrs Goldman may not have had capacity to make that waiver.
The point is entirely speculative and irrelevant to any matters currently in issue, particularly since the ownership of “Fountainhead” is not exclusively in Mrs Goldman’s hands. Mrs Goldman’s decision- making capacity at relevant times will be a matter for trial.
(d)It was submitted that Mrs Goldman may not have had the capacity to file the substantive proceedings on 21 August 2015 given that, as a result of Dr McIvor’s examination of her the previous day, she was declared incapacitated and Mr Grant was appointed to represent her.
Ms Bruton suggested there is a question about whether the filing of the substantive proceedings was an act of Mrs Goldman’s free will.
Having regard to Mrs Goldman’s affidavit in support of the application for the appointment of a litigation guardian and Dr McIvor’s affidavit,17 there is no evidence indicating that Mrs Goldman was overborne in the bringing of the substantive proceeding. Nor is there any proper basis for making an order under r 4.34 setting aside the proceeding or any step in it on the ground that
it is unfairly prejudicial to Mrs Goldman.
Conclusions
[34] There are few cases which have considered the rule that a litigation guardian may be removed by the Court when it is in the interests of the person represented.18
The broad wording of the rule suggests that any outcome will be heavily fact dependant but it is clear that, as the applicant, Mr Lane carried the onus of demonstrating that it is in Mrs Goldman’s interests that the litigation guardian should be removed.19 The grounds advanced in this case fall well short of the threshold of proof, even on a balance of probabilities.
Decision and costs
[35] I dismiss the application.
[36] The plaintiff is entitled to costs. Rule 14.8(1)(a) of the High Court Rules requires that costs on an opposed interlocutory application must be fixed in accordance with the rules when the application is determined, unless there are special reasons to the contrary. In this case, a number of other interlocutory applications were heard with this and they remain under consideration by the parties.
Further rulings may be required.
17 Summarised above at [9] and [10].
18 Re Clapham, above n 6; L v Chief Executive of the Ministry of Social Development (2008) 27
FRNZ 328 (HC); A v D above, n 10.
19 A v D, above n 11, citing Re Taylor’s Application, above n 13.
[37] Costs on this application are reserved until all of the interlocutory applications heard on 5 May 2016 are determined.
………………………..
Toogood J
5