Ruocco v Ruocco
[2019] NZHC 2758
•29 October 2019
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IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2016-485-1004
[2019] NZHC 2758
UNDER the Trustee Act 1956 IN THE MATTER
of proceedings under pt 18 of the High Court Rules and the LS and L Ruocco Family Trust
BETWEEN
LUIGI GERARD RUOCCO
Plaintiff
AND
LUISA RUOCCO,
ANTONELLA THERESE ASPELL, JOHN PAUL RUOCCO and
JOHN CLAYTON MEO
Defendants
Hearing: 9 October 2019 Appearances:
T Castle for plaintiff
C Matsis for defendant
Judgment:
29 October 2019
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
TABLE OF CONTENTS
Introduction 1
The first application — Mr Castle’s position 7
The second application — particulars 26
The third application — interrogatories 47
The fourth application — the use of trust resources 78
Conclusion 90
Costs 92
RUOCCO v RUOCCO, [2019] NZHC 2758 [29 October 2019]
Introduction
[1] The Ruoccos are one of several families — many, like the Ruoccos, of southern Italian extraction — that have been closely involved in Wellington’s commercial fishing industry for many years. It is characteristic of these families that they are very close, living and working together — il sangue non è acqua.
[2] Regrettably, a dispute has developed within the Ruocco family, which has given rise to this litigation. The plaintiff, Luigi Ruocco (Luigi), is suing the trustees of the Ruocco Family Trust. The trustees are Luigi’s mother, Luisa Ruocco (Mrs Ruocco), two of his siblings, Antonella Aspell (Antonella) and John Ruocco (John), and a non-family trustee, Mr John Meo (Mr Meo), who is a partner in Gault Mitchell Law, the defendant trustees’ solicitors.
[3] Luigi’s essential allegation is that the settlement of the trust on 18 October 2002, the transfer to the trust of the family’s fishing business including such assets as plant and quota, and the trustee’s subsequent administration of the trust, have disadvantaged him vis-à-vis other family members. In his statement of claim dated 21 December 2016, he pleads six causes of action. For reasons that will become clear the remedies sought in relation to each of these causes of action are not readily apparent, but in an affidavit, also dated 21 December 2016, Luigi says that he has a claim in respect of half of the capital value of the trust.
[4] Before the Court for determination are four interlocutory disputes that I propose to describe in what appears to me to be the most helpful way, although my description does not correspond in all respects with the formal documentation:
(a)An application by the defendant trustees for an order prohibiting Mr Castle, who has been instructed by Luigi’s solicitors, from appearing as counsel for him in this proceeding.
(b)An application by the defendant trustees for an order requiring Luigi to particularise aspects of his statement of claim.
(c)An application by the defendant trustees for an order requiring Luigi to answer interrogatories.
(d)An application by Luigi for an order prohibiting the defendant trustees from expending trust resources in the defence of this proceeding.
[5]All four applications are opposed.
[6]I will deal with them in the order I have summarised them.
The first application — Mr Castle’s position
[7] In relation to the defendant trustees’ application for an order disqualifying Mr Castle from acting as counsel for Luigi, Mr Matsis submitted:1
[44]The legal principles have been well established since the Court of Appeal decision of Black v Taylor, where the Court held:
44.1A barrister did not an absolute and independent right to determine whether he or she would act in any proceedings subject only to breach of confidence obligations.
44.2The Court’s power to restrain a barrister from acting arose from the Court’s inherent jurisdiction where the interests of justice so required.
44.3It was important that justice be done and be seen to be done. The Court may prevent a barrister acting as counsel in the matter in which he had a conflict of interest, or in which he appeared to have a conflict of interest such that justice would not be seen to be done.
[8] Mr Matsis also referred me to Li v Liu, in which the Court of Appeal, referring to the Supreme Court’s judgment in Vector Gas Ltd v Bay of Plenty Energy Ltd, emphasised that where counsel has been personally involved in matters that are the subject of litigation, it is undesirable for him or her to act in the subsequent litigation because of the risk of loss of the objectivity that the Court is entitled to expect.2
1 Referring to Black v Taylor [1993] 3 NZLR 403 (CA).
2 Li v Liu [2018] NZCA 528, citing Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444.
[9] That, Mr Matsis submitted, was the position here as a result of Mr Castle’s earlier professional involvement with the Ruocco family.
[10] As the argument developed, the defendant trustees’ submission focussed on Mr Castle’s claimed historical involvement with the family on three occasions:
(a)For a number of years from the late 1980s, Mr Castle acted for Luigi’s late father, Mr Luigi Salvatore Ruocco (Mr Ruocco), in connection with the implementation, under changes to the Fisheries Act 1996, of the current quota system. This apparently involved not only assisting with the preparation of Mr Ruocco’s application but appeals to the Quota Appeal Authority, the High Court and the Court of Appeal.
(b)In late 1994, the Ministry of Fisheries threatened to prosecute Mr Ruocco or the Ruocco family business, and Mr Castle acted for Mr Ruocco in relation to this threatened prosecution (which did not eventuate).
(c)It is said that when the dispute that is the subject of this litigation first arose in about April 2007 Mr Castle became involved in offering advice and assistance as to its resolution.
[11] The issues are whether Mr Castle acted on one or more of those three occasions, and if so whether that compromises him to the extent described in the cases so that the Court must conclude that his acting in this litigation would result in an actual or apparent injustice.
[12] As to the first of those issues, Mr Castle accepts that he acted for Mr Ruocco and the family business in relation to the business’ application for allocation of quota, and in relation to the Ministry of Fisheries’ threatened prosecution. He offers the Court an unqualified assurance that he was not consulted by and did not offer advice to any member of the family in relation to this dispute at any time before he was instructed by Luigi’s solicitors in relation to this litigation.
[13] Mr Matsis submitted that Mr Castle’s assurance was contradicted by Luigi’s affidavit evidence. He pointed to a paragraph of Luigi’s affidavit dated 29 August 2019 in which he said:
In the secret, and upsetting, recording referred to, I do discuss with my father that I had asked for [Mr Castle’s] opinion regarding my situation and also hypothetically discussing what would happen if it went to Court; and I did say it seems, that I could not have [Mr Castle] representing me if that happened…
[14] As can be seen it is not correct to say that Luigi’s evidence is that he consulted Mr Castle. His evidence is that he told Mr Ruocco that he had done so. Speculation as to why, if it were not true, Luigi may have told his father that would be unhelpful.
[15]The Court accepts Mr Castle’s assurance.
[16] Accordingly, the issue reduces itself to whether Mr Castle’s involvement in acting for Mr Ruocco and the family business in relation to the quota application and the Ministry of Fisheries’ threatened prosecution should stand in the way of him acting for Luigi in this litigation.
[17] I am far from satisfied that this a case in which the Court should exercise its jurisdiction to prohibit Mr Castle from acting.
[18] With respect to Mr Castle’s involvement in acting for Mr Ruocco and the family business in relation to the quota application, Mr Matsis submitted that he would have become intimate with the evolution of the business including Mr Ruocco’s establishment of the business, how its structure changed over the years as he brought Luigi and other members of the family and the different partnerships that may have existed, who contributed what over what periods of time and the like. All of that, Mr Matsis submitted, will be relevant in this litigation in which Luigi says amongst other things that Mr Ruocco involved him and other family members in the business, that he made a major contribution and that the transfer of the business assets to the trustees effectively involved a transfer of his assets.
[19] I reject this submission. Under the Fisheries Act, initial quota applicants were certainly obliged to demonstrate something of the history of their business. But this
had next to nothing to do with the internal operation of the business. It concerned catch history. This is amply demonstrated here by reference to the High Court and Court of Appeal judgments in the litigation between Mr Ruocco on the one hand and the Quota Appeal Authority and the Director-General of Agriculture and Fisheries on the other. These judgments make only passing reference to the internal management of the Ruocco family business. Their focus is catch history.
[20] To the extent that Mr Castle learned anything of the family history and the internal arrangements for the management of the business, this is likely to have been minor and incidental. An important point, which Mr Castle emphasised, is that he never acted for the family unit as a whole. He acted for the family business, which primarily involved dealing with Mr Ruocco.
[21] John refers in his evidence to one incident that arose from the threatened prosecution in 1994. He recalls attending a meeting with Mr Castle, Mr Ruocco and a fisheries officer, during which he says he became agitated by the fisheries officers’ interrogation of his father. Mr Castle is said to have stepped in to calm him down. John says he would not feel comfortable being cross-examined by Mr Castle as he would be able to draw on this previous dealing with him.
[22] There are certainly situations where it would not be appropriate for a lawyer to act against a former client because of knowledge the lawyer possesses pertaining to the client, as opposed to the client’s affairs.3 As Eichelbaum CJ observed in Black v New Zealand Law Practitioners Disciplinary Tribunal, knowledge of a client’s personality could be a real asset in cross-examination.4 However, even putting aside the fact John was never technically Mr Castle’s client, I am not convinced that a single incident of the sort described is likely to be of any assistance to Mr Castle in the present litigation. The context of a threatened prosecution against a business is quite distinct from this family dispute. Furthermore, the incident occurred many years ago.
3 Black v Taylor, above n 1, at 406 per Cooke P, citing Taylor v Black HC Wellington CP 157/92, 4 October 1992 at 48; Black v New Zealand Law Practitioners Disciplinary Tribunal [2001] NZAR 314 (CA); and Hana New Zealand Ltd v Stephens [2007] 1 NZLR 833 (HC) at [23].
4 Black v New Zealand Law Practitioners Disciplinary Tribunal, above n 3, at [5].
[23] The view I have reached is that the Court can be satisfied that in dealing with this earlier litigation Mr Castle will have obtained minimal insight into the internal management of the family business, and certainly his involvement in acting for Mr Ruocco and the family business twenty-five years ago will not have involved him receiving confidential information that would give him an unfair advantage or imperil his ability to act independently in this litigation. I am quite satisfied that no fair-minded outsider with full knowledge of the circumstances would regard Mr Castle’s involvement in this litigation as being unfair.
[24] Mr Castle’s involvement in the Ministry of Fisheries threatened prosecution appears to me to be even more remote from the issues in this case.
[25]The trustee defendants’ first application is dismissed.
The second application — particulars
[26] Rule 5.26 of the High Court Rules 2016 provides that a party’s pleadings must contain sufficient information adequately to inform the other party or parties of the grounds for the claim or defence as the case may be.
[27]Rule 5.21(1) of the High Court Rules provides:
(1)A party may, by notice, require any other party—
(a)to give any further particulars that may be necessary to give fair notice of—
(i)the cause of action or ground of defence; or
(ii)the particulars required by these rules; or
(b)to file and serve a more explicit statement of claim or of defence or counterclaim.
[28] As the rule indicates, the essential principle in that a party is only required to provide sufficient particulars fairly to inform the other party or parties, and the court, of the basis for his, her or its case so that the other party or parties can reply.5
5 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [84].
[29] It is well settled that a request for particulars must be directed at pleadings and must seek clarification of the allegation or defence in question. They are not a means by which one party may obtain an early indication of what the other side’s evidence will be.
[30] In this case, the defendant trustees seek particularisation of six aspects of the plaintiff’s claim.
[31] I deal first with the defendant trustees’ application for an order that the plaintiff identify the remedies sought in relation to each of his six causes of action. Rule 5.27(2) of the High Court Rules provides that a plaintiff pleading more than one cause of action must identify the relief sought under each. The plaintiff has not done this. The plaintiff accepts that his statement of claim is deficient in this regard.
[32] Accordingly, I propose to order that the plaintiff file and serve an amended statement of claim and that if this contains more than one cause of action he identify with precision the relief sought in relation to each cause of action.
[33]Paragraph 18 of the plaintiff’s statement of claim pleads:
Unbeknown to the plaintiff, the plaintiff’s mother and brother, John Paul Ruocco, in concert prevailed upon the plaintiff’s father to establish the LS and L Ruocco Family Trust and to settle upon the trustees progressively over the period that followed, significant assets which had previously been the property of the family fishing partnerships, namely and in particular, perpetual individual transferable quota in crayfish and wetfish.
[34] The defendant trustees seek an order requiring the plaintiff to particularise this allegation in these terms:
In relation to paragraph 18 of the statement of claim, further and better particulars of the assets of the fishing partnerships (as opposed to the assets of Luigi Salvatore Ruocco) that the respondent alleges were transferred to the LS & L Ruocco Family Trust (the “Trust”), including in whose name those assets were held before they were transferred to the Trust.
[35] The view I take is that this request sits right at the cusp of the distinction between the proper particularisation of the claim and the pleading of evidence. The plaintiff’s pleading identifies what his allegation is, that is to say that the business’
assets were transferred to the trustees. In the pre-trial process the plaintiff will of course be obliged to serve briefs of evidence from his witnesses, which will no doubt expand on that by articulating the assets that he says were wrongly transferred. I am not prepared to make an order that he do so at this stage.
[36]Paragraph 20 of the plaintiff’s statement of claim pleads:
From the period 2002 onwards, progressively, the plaintiff’s mother and brother, John Paul Ruocco, have continuously sought to deny and resist or minimise any claim by the plaintiff to the assets of the Family Trust and revenue generated from and by them; and keep hidden from the plaintiff all details of their dealing with the plaintiff’s share of the trust assets.
[37]The defendants seek particularisation of that paragraph in these terms:
In relation paragraph 20 of the statement of claim, further and better particulars of the claims that the [plaintiff] alleges he made to the assets of the Trust, including when he says such claims were made and when he says they were resisted.
[38] This appears to me to be a legitimate request for particularisation. The plaintiff’s broad allegation is that he has since 2002 made claims of the trustees and that the defendant trustees have resisted these and attempted to keep information from him. It seems to me that the defendant trustees are entitled to more detail of when and in what terms such claims were made. I propose to order that the plaintiff provide the particulars sought.
[39]Paragraph 21 of the plaintiff’s statement of claim pleads:
In the accompanying misconduct and in bad faith, the plaintiff’s family members (the first three named defendants) who are now all trustees of the Family Trust, have so misconducted themselves as to continue to deny to the plaintiff his rights in respect of a share of the assets of the fishing partnerships and to deny or restrict his right of revenue generated from those assets; and further keep hidden from the plaintiff details of their dealings with the plaintiff’s share of the trust assets.
[40]The defendants seek particularisation of this paragraph in these terms:
In relation to paragraph 21 of the statement of claim, further and better particulars of the alleged misconduct and alleged bad faith on the part of each of the [plaintiff’s] family members in their capacities as trustees of the Trust.
[41] The view I take is that the plaintiff’s pleading fails adequately to particularise very general allegations and that the defendant trustees are entitled to the particulars they seek. I propose to order that the plaintiff provide the particulars sought.
[42]Paragraph 28 of the plaintiff’s statement of claim pleads:
The third named defendant is required to account for the breaches of the contract by way of partnership between the plaintiff, his late father and his brother.
[43]The defendants seek particularisation of this paragraph in the following terms:
In relation to paragraph 28 of the statement of claim, further and better particulars of:
1.The cause of action against the applicants, as trustees of the Trust, which the [plaintiff] says arises from the alleged breaches of a partnership contract.
2.The remedy claimed against the applicants, as trustees of the Trust, in respect of that cause of action.
[44] The first component of this request is not a request for particulars. It is a challenge to the legal basis for this aspect of the claim. The defendant trustees are saying that as the claim is against them in their capacities as the trustees of the Ruocco family trust, the plaintiff cannot advance a claim for breach of the terms of an alleged partnership agreement to which, at least in their capacities as trustees, they were not parties. I have already dealt with the second component of this request. I do not propose to order that the plaintiff respond to this.
[45]Finally, the defendant trustees seek:
In relation to the remedy sought for alleged unjust enrichment and as alleged constructive trustees, further and better particulars of the percentage share in the assets held by the Trust which the [plaintiff] says it is fair to yield to him.
[46] The defendant trustees say they are entitled to insist that the plaintiff commits himself to the quantum of a claim. The plaintiff’s response is that he has already articulated the quantum of his claim in his affidavit evidence filed in support of his substantive claim and that in any event this is a request for evidence. In my view, the plaintiff is obliged as a matter of pleading to provide all information known to him as
to the quantum of his claim and the defendant trustees are entitled to seek that information by way of particulars. In any event, if the answer is already in the evidence, as the plaintiff will need to file an amended statement of claim, there seems no reason for him not to particularise the quantum of his claim. I propose to order that he do so.
The third application — interrogatories
[47]Rule 8.34 of the High Court Rules provides:
(1)After a statement of defence has been filed, a party who has filed a pleading may file and serve on another party who has filed a pleading a notice requiring that party to answer specified interrogatories relating to any matter in question in the proceeding between the interrogating party and the party served.
(2)The notice may require that the answers be verified even if the interrogating party has not previously required any answers to interrogatories to be verified.
(3)The notice must be in form G 35.
[48] Unlike the process relating to the particularisation of pleadings, pre-trial interrogation by one party of another does facilitate the obtaining of evidence.
[49]The purposes of interrogatories are said to be four-fold:6
(a)to obtain admissions as to facts that will support the case of the interrogating party;
(b)to obtain admissions that will destroy or damage the case of the party interrogated;
(c)interrogatories that are in the nature of a request for further and better particulars; and
(d)interrogatories that seek to obtain accounts from a party occupying a fiduciary position.
6 W A Pines Pty Ltd v Bannerman (1980) 41 FLR 175 (FCA) at 190.
[50] Although r 8.34 is expressed in very general terms, a significant body of law has grown up around it that, for the most part, limits interrogation. The relevant principles can be dealt with as the interrogatories sought by the defendant trustees in this case are considered.
[51] The defendant trustees seek an order that the plaintiff respond to thirteen interrogatories.
[52]Interrogatory 1 is as follows:
1.In respect of the LS Ruocco and others fishing partnership and the LS, LG and JP Ruocco fishing partnership:
1.1Who owned the fishing vessels that the partnerships used?
1.2In whose name was the fishing permit used by the partnerships?
1.3In whose name was the individual transferrable quota issued?
1.4In whose name were each of the various quota-related Court and Tribunal actions brought?
[53] It is common ground that the family fishing business, including all relevant assets, has been transferred to the defendant trustees. Accordingly, this interrogatory seeks information most obviously within the knowledge of the defendant trustees. Furthermore, in at least two respects (in relation to interrogatories 1.2, 1.3 and 1.4) it seeks information in the public domain. I propose to decline to order the plaintiff to answer.
[54]Interrogatory 2 is as follows:
2.In whose name was the individual transferable quota referred to in paragraphs 8, 13 and 14 and 18 of the statement of claim dated 21 December 2016 before it was transferred to the LS & L Ruocco Family Trust?
[55] Again, this interrogatory seeks information that is in the public domain. I propose to decline to order that the plaintiff answer.
[56]Interrogatory 3 is as follows:
3.In relation to paragraph 8 of the statement of claim dated 21 December 2016, what are the assets of the LS Ruocco and other fishing partnerships that the LS, LG and JP Ruocco fishing partnership that the plaintiff says he was obstructed, prevented and denied from accessing.
[57] This interrogatory appears to me to be a legitimate request on the part of the defendant trustees that the plaintiff say to exactly what assets he was denied access. I propose to order the plaintiff to answer.
[58]Interrogatory 4 is as follows:
4.In relation to paragraph 11 of the statement of claim dated 21 December 2016, what “other assets” did the plaintiff bring to the partnership?
[59] Whilst this is more in the nature of a request for particulars of paragraph 11 of the statement of claim, it does seem to me that the defendant trustees are entitled to more detail of the allegation in that paragraph. I propose to order that the plaintiff answer.
[60]Interrogatory 5 is as follows:
5.In relation to paragraph 13 of the statement of claim dated 21 December 2016, exactly what skills and expertise does the plaintiff say he had, how did he acquire those skills and expertise, and what impact, if any, does he say having those skills and expertise had on the final outcome of the claims and appeals?
[61] A request to answer an otherwise legitimate interrogatory that would be oppressive from the perspective of the party being interrogated is objectionable.7 In my view, this interrogatory falls into that category. It would be a major exercise for the plaintiff to attempt fully to answer this question. To the extent that he needs to do this, it will no doubt be done in his briefs of evidence prior to trial. I can see no obvious purpose in the plaintiff being required to do so at this stage. I propose to decline to order the plaintiff to answer.
[62]Interrogatory 6 is as follows:
7 High Court Rules 2016, r 8.40(1)(b).
6.What, if any, payments and benefits, including by way of cash and by way of allocation of individual transferable quota, did the plaintiff receive from his father in respect of the plaintiff’s pursuit of fishing quota, as referred to in paragraph 13 of the statement of claim dated 21 December 2016, and when did he receive such payments and benefits.
[63] This seems to me to be a legitimate request for details of payments made to or received by the plaintiff, which is relevant to the issues in the proceeding. I propose to order that the plaintiff answer.
[64]Interrogatory 7 is as follows:
7.In relation to paragraph 16 of the statement of claim dated 21 December 2016:
7.1What outside assistance was sought?
7.2Who was that assistance sought from?
7.3How was the request for assistance sought – verbally or in writing?
7.4When was that assistance sought?
7.5In respect of what differences was the assistance sought?
[65] The plaintiff’s pleading is simply that as the dispute between himself and other members of the family developed he “sought outside assistance to try and have the differences escalated between the members of the plaintiff’s family resolved by mediation”. This pleading is incidental at best. That being so, the view I take is that requiring the plaintiff to answer detailed questions of the sort contained in this interrogatory would be oppressive. I propose to decline to order that the plaintiff answer.
[66]Interrogatory 8 is as follows:
8.In relation to paragraph 17 of the statement of claim:
8.1Which family members the proposal was allegedly put to?
8.2When was that proposal put to those family members?
8.3What did John Paul Ruocco say when allegedly refusing to agree with the proposal?
8.4What did other family members say about the proposal?
8.5Who was the independent person that the plaintiff proposed to use?
[67] In paragraph 17 of the statement of claim the plaintiff alleges that he proposed that the family engage an independent person to help them resolve their differences. This allegation appears to me to be peripheral to the issues in the case, and it is not obvious to me why the information sought by the defendant trustees is relevant. I propose to decline to order the plaintiff to answer.
[68]Interrogatory 9 is as follows:
9.When did the plaintiff first learn that his parents had set up a family trust and how did he learn that?
[69] This appears to me to be a legitimate area of inquiry on the part of the defendant trustees. I propose to order the plaintiff to answer.
[70]Interrogatory 10 is as follows:
10.When did the plaintiff first learn that the family trust set up by his parents held individual transferable quota and how did he learn that?
[71] This too seems a legitimate area of enquiry. I propose to direct the plaintiff to answer.
[72]Interrogatory 11 is as follows:
11.Was the plaintiff present when, in or about early 2002, Bruce Scott, solicitor, advised the plaintiff’s father that, if he were to continue to fish commercially, he should place his quota in a trust or other such entity?
[73] The precise relevance of this question is not obvious to me. However, it is hardly oppressive. The answer is yes or no. I propose to order the plaintiff to answer.
[74]Interrogatory 12 is as follows:
12.Has the plaintiff received distributions from the LS & L Ruocco Family Trust and, if so:
12.1When did he first receive any such distribution?
12.2Who was he told the distribution was from?
12.3How much was the first distribution?
12.4How much has he received in total by way of distributions from the LS & L Ruocco Family Trust?
[75] It is difficult to conceive of a question, the answer to which is more obviously within the knowledge of the interrogator. The defendant trustees should know the answers to these questions, assuming of course that they have kept proper trust records. I propose to decline to order the plaintiff to answer.
[76]Interrogatory 13 is as follows:
13.Did the plaintiff ever say to his father words to the effect that he (the plaintiff) would sue his father for a share of the individual transferable quota held by his father and, if so:
13.1When did he say that?
13.2What was his father’s response?
[77] It is not obvious to me that what the plaintiff said to Mr Ruocco about his proposed course of action is relevant to any issue in the case. Furthermore, this question effectively asks the plaintiff about what I expect were many and varied discussions between himself and Mr Ruocco over years and, in that sense, it is oppressive and unnecessary. I propose to decline to order the plaintiff to answer.
The fourth application — the use of trust resources
[78] The plaintiff seeks an order precluding the defendant trustees from expending trust monies in the defence of this proceeding.
[79] Mr Castle’s submissions in support of this application began by referring to s 38(2) of the Trustee Act 1956, which provides:
(2) A trustee may reimburse himself or pay or discharge out of the trust property all expenses reasonably incurred in or about the execution of the trusts or powers; but, except as provided in this Act or any other Act or as agreed by the persons beneficially interested under the trust, no trustee shall be allowed the costs of any professional services
performed by him in the execution of the trusts or powers unless the contrary is expressly declared by the instrument creating the trust:
provided that the court may on the application of the trustee allow such costs as in the circumstances seem just.
[80] He referred me also to Davis v White, where the Court of Appeal observed that the effect of s 38(2) is that trustees are generally entitled to pay expenses incurred in the execution of the trust, including costs incurred in one form or another as a result of litigation, from trust property.8 But the Court also drew attention to Hammond J’s observations in Re O’Donoghue that trustees taking an obdurate position in such litigation may be deprived of their costs and accordingly become obliged to bear them personally.9 Finally, Mr Castle referred to Hardie Boys J’s judgment in Strachan v Marriott.10 On the plaintiff’s behalf, Mr Castle submitted that this was a case of the kind envisaged by Hammond J, contending that the behaviour of the trustee defendants here involved “continuous obdurate actions to frustrate and delay the substantive proceeding herein progressing either to trial or prior settlement.”
[81]Mr Castle expanded on this in his written submissions:
7.In counsel’s submission an equally obvious reason why the siblings (and mother) trustees should bear the expenses themselves are where those trustees are also beneficiaries and are:
(a)either making purported trustee decisions, in actuality, to protect and advance their positions as beneficiaries in the trust property.
(b)ignoring or avoiding the stark conflict of interest they have as both trustees and beneficiaries in making purported trustee decisions to punish or prejudice another of the beneficiaries (here, the plaintiff) in the trust property.
(c)deliberately incurring expenses and resisting a fellow beneficiary’s claim to avoid addressing the substance of that beneficiary’s claim.
[82] He also referred then to some very recent decisions of this Court and the Court of Appeal, which, as I read them, simply go to re-enforce the principles as stated in Davis v White.
8 Davis v White [2017] NZCA 585, [2018] NZAR 226 at [19].
9 At [20], citing Re O’Donoghue [1998] 1 NZLR 116 (HC) at 122.
10 Strachan v Marriott [1995] 3 NZLR 272 at 278.
[83] Turning to the facts of this case, under the heading “Trustees’ disentitling conduct”, Mr Castle emphasised the following points:
12.In this case the sibling beneficiary trustees have already taken unnecessary, hostile and frivolous steps, needlessly increasing costs. They have also “posed questions the answers to which are perfectly obvious”.
13.First they quibbled over the plaintiff’s discharge of discovery obligations – unnecessarily. The plaintiff’s discovery has been fulsome and complete.
14.Next they applied to the Court in April 2019 to have this proceeding adjourned pending resolution of a complaint their counsel told the Court had been made to the Law Society about plaintiff’s counsel acting in that role. Counsel for the defendants told the Court on that occasion that he had not seen the complaint. The Court’s Minute of 17 April drew attention to the proper course the defendants should follow (by application to the Court) which the defendants have now done. Yet when the Law Society dismissed the plaintiff’s mother’s complaint (she being one of the defendant trustees), she then applied to the Legal Complaints Review Officer seeking a review of the Law Society’s decision rejecting her complaint against plaintiff’s counsel. The plaintiff and his counsel have been needlessly put to expense and inconvenience dealing with both the Law Society, and, now the LCRO process, and the application now made to the Court herein for a like order of disqualification. These are not the steps of a responsible trustee or group of trustees – especially when they are taken by them against one of the group of beneficiaries in trust property – as are they also.
15.Next – despite extensive formal evidence already before the Court in this proceeding from the plaintiff, full discovery by the plaintiff, and their own personal knowledge of relevant facts, the defendants have needlessly sought interrogatories and particulars in the proceeding: for consideration by the Court in an omnibus interlocutory application hearing: and this after the defendants have already pleaded in any event.
[84]He concluded his submissions on this point as follows:
16.These steps – quite apart from putting the plaintiff and his counsel to unnecessary expense – mean that unless restrained, the sibling (and mother) trustee defendants impose on the trust expenses which diminish, dollar after dollar, the trust property – otherwise to be available for all beneficiaries.
17.In counsel’s submission, the conduct thus far displayed by the sibling (and mother) beneficiary/trustee defendants reveals a cynical and studied attempt to put every obstacle in the path of a sibling family member and beneficiary – who, on the evidence before the Court, not controverted, clearly has a claim to trust property. The overwhelming inference to be drawn from established facts formally and properly
put before the Court is that the sibling (and mother) defendant trustees will try everything to deny their sibling/son an opportunity to have his claim determined; and have the expenses and cost of those deliberate steps paid out of trust property.
18.Such a situation is manifestly unjust. The Court has extensive powers and discretions under the Trustee Act 1956, and in equity, to prevent such an injustice perpetuating to the prejudice of the plaintiff.
[85] On behalf of the defendants, Mr Matsis submits that there is no evidence to support the contention that the defendant trustees are acting obdurately in order to frustrate and delay the resolution of the plaintiff’s claim. He draws attention to a number of matters that he submits suggest otherwise. These are:
3.2.1The events in question date back 20-plus years and the applicant has delayed bringing them both whilst his father was still alive and promptly afterwards.
3.2.2There was then a further delay of 15 months between the applicant filing the substantive proceeding and serving the respondents.
3.2.3The respondents had to then give priority to the interlocutory application for a freezing order (the “freezing order application”) the evidence in support of which, as outlined above, was long, wide-ranging, and difficult to follow.
3.2.4The respondents took a reasonable and pragmatic approach to the freezing order application. That approach was accepted by the applicant.
3.2.5The applicant did not progress the substantive proceeding after that. For example, a first case management conference was not scheduled until February 2019, and not held until April 2019.
3.2.6It is accepted that part of the reason of the delay was due to attempted discussions about possible settlement options. The respondents took the view that at least some discovery was required before they could progress those discussions. It is submitted that that was a wholly reasonable approach in light of the significant value of the trust assets and the obligation of the trustees to act in the best interests of the beneficiaries as a whole.
3.2.7The respondents proposed informal discovery which again, it is submitted, was a reasonable and pragmatic approach to take. The applicant sought full discovery. That was costly and caused further delay.
3.2.8The respondents then sought further information from the applicant about his claim. The applicant refused to provide that information, forcing the respondents to formally seek further particulars and interrogatories. That has add[ed] time and cost for both parties. Having done so, the applicant’s response was to object to particulars
on the basis that they are interrogatories and then object to interrogatories on the basis that they are particulars.
[86] Nor, Mr Matsis submits, is there any evidence supporting the submission that the defendant trustees are treating Luigi differently from any other beneficiary of the trust, or to support any of the other assertions made against them.
[87] I am not satisfied that there is sufficient evidence before the Court to support the suggestion that the defendant trustees in this case have acted or are acting in a way that would disentitle them to access to the trust funds in relation to the defence of this proceeding.
[88] Having reached that conclusion I need to make it clear that the plaintiff’s argument is to a significant extent founded on the trustee defendants’ motivations. I am not prepared to reach any conclusions in relation to such matters on untested assertions in affidavit evidence or submissions.
[89] The trustee defendants need to understand, as I am confident they do, that at the conclusion of this litigation costs will need to be addressed and, if at that stage, it is concluded that they have acted improperly in the manner described in cases such as Re O’Donoghue, orders may well be made requiring them to reimburse the trust fund in respect of costs. One option that the trustees have at this stage is to make an application pursuant to s 66 of the Trustee Act sanctioning the expenditure on trust funds for the purposes of meeting the costs of this litigation. Whether or not they do so is a matter for their judgement. But that is the only way that they can gain certainty as to their position.
Conclusion
[90]I make the following orders:
(a)The plaintiff must file and serve an amended statement of claim that:
(i)separately specifies the relief sought in relation to each cause of action;
(ii)articulates the quantum of his claim; and
(iii)provides further particulars in relation to paragraphs 20 and 21 of the current statement of claim.
(b)The plaintiff must answer the interrogatories numbered 3, 4, 6, 9, 10 and 11.
(c)The plaintiff is not required to answer the interrogatories numbered 1, 2, 5, 7, 8, 12 and 13.
[91] I decline to make orders precluding Mr Castle from acting for the plaintiff or restraining the defendants from using trust money to fund their defence of this litigation.
Costs
[92] Costs are reserved. Both parties have achieved a degree of success. My preliminary view, without having the benefit of argument, is that this is a case in which costs may be best left to lie where they have fallen. I expect Mr Castle and Mr Matsis will be able to agree as to costs. However, if they cannot then they may come back by way of memorandum and I will deal with costs on the papers.
Associate Judge Johnston
Solicitors:
Chris Ritchie, Wellington for plaintiff
Gault Mitchell Law, Wellington for defendants
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