Rust v Greer
[2022] NZHC 91
•4 February 2022
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2021-412-52
[2022] NZHC 91
UNDER the Trusts Act 2019 BETWEEN
RODERICK DAVID ALLAN RUST
Plaintiff
AND
KATHERINE ANNE GREER
Defendant
Hearing: 2 February 2022 Appearances:
D Tobin for the Plaintiff
L A Andersen QC and S Gaskell for the Defendant
Judgment:
4 February 2022
JUDGMENT OF ASSOCIATE JUDGE LESTER
RUST v GREER [2022] NZHC 91 [4 February 2022]
[1] The defendant seeks an order that the plaintiff file a more explicit statement of claim.
Background
[2] The broad background is not in dispute. The parties were married in May 1985, separated in August 2001 and are now divorced. A trust known as the Greer-Rust Family Trust (the Trust) was settled by Yvonne Edna Greer, who I assume is a relative of the defendant. The parties were, and are, the only trustees of the Trust.
[3] In August 2000, the parties sold to themselves as trustees, a commercial building, they owned in Dunedin known as the Hydro Building. That building is retained by the trustees and, in the broadest of terms, it is the management of that building which is in issue between the parties.
[4] The statement of claim, after setting out the background summarised above, pleads that the plaintiff sought information from the defendant and the accountant acting for the Trust about the financial affairs and management of the Trust. Some information was provided and one of the issues between the parties is the extent of the information provided.
[5] The key pleading for the purposes of this application is para [15] of the statement of claim which states as follows:
15.A review of the financial material provided by the Accountant disclosed the following concerns:
a.Potential conflicts of interest between the Greer-Rust Family Trust and commercial entities associated with the Defendant;
b.Management fees paid to the Defendant by the Greer-Rust Family Trust; and
c.The business relationship between the Defendant and the Accountant.
[6]No particulars are provided to flesh out the above allegations.
[7]The statement of claim goes on to plead that the defendant has:
refused, failed or neglected to provide all of the financial information and records requested by the Plaintiff or agree to its provision by the Accountant.
[8] The statement of claim seeks that the defendant be removed as a trustee, that there be a new trustee appointed in substitution and such further order as the Court considers appropriate.
The statement of defence
[9] To overly simplify, the statement of defence asserts the plaintiff disengaged from his role as trustee and thereby in effect delegated management of the Trust to the defendant, which the defendant says she has undertaken in a proper manner.
[10] The statement of defence records space is let in the commercial part of the Hydro Building to two companies. The defendant and Trust accountant are directors and shareholders of one of the companies, and the defendant is sole director and joint shareholder with the Trust accountant of the other.
[11] The statement of defence acknowledges that, in addition to the above two commercial tenancies, management fees have been paid to the defendant by the Trust for managing short term residential apartments which make up the residential area of the Hydro Building. The statement of defence alleges the residential flats were in poor condition when last rented in 2013 and that, through the work of the defendant, the apartments were improved and have been successfully tenanted, save for one unit which has not been renovated due to the costs involved.
[12] The statement of defence accepts the defendant initially received five per cent of the short term rentals as a management fee but that currently the defendant is paid
$25 an hour as an employee of the Trust for the work carried out in managing the short term rentals. It is pleaded the amount received by the defendant for managing the short term rentals is less than it would cost to employ someone independent to carry out the same role.
[13] The defendant has filed a counterclaim seeking an order under s 139 of the Trusts Act 2019, that amounts received by the defendant for managing the rentals be approved by the Court. The defendant in her counterclaim provides details of the work undertaken and a breakdown of the amounts received on a yearly basis.
The application for particulars
[14] The application seeks of para [15](a), set out at [5] above, particulars of the potential conflicts of interest claimed to exist.
[15] Particulars are also sought of para [15](c) of the statement of claim, that is, of the claimed business relationship between the defendant and the accountant of the Trust.
[16] Particulars are sought of the requests for financial information and records said not to have been provided, and the information the defendant has “refused, failed or neglected to provide” or authorise the Accountant to release.
The principles
[17] The principles applying to an application for further particulars under r 5.26 of the High Court Rules 2016 (the Rules) are not in dispute. The Court of Appeal in Price Waterhouse v Fortex Group Ltd put the text in this way:1
… The pleader and Court simply ask “in the circumstances of this claim, is that statement sufficiently detailed to state a clear issue and inform the opposite party of the case to be met?”. This is not, under modern practice, simply some minimum which a Defendant needs so as to be able to plead. It is intended to supply an outline of the case advanced, sufficient to enable a reasonable degree of pre-trial briefing and preparation. Discovery and interrogatories are only an adjunct, not a substitute for pleading.
[18] In Securitibank Ltd (in rec and in liq) v Rutherford, the Court confirmed that “a certain amount of detail is necessary in order to ensure clearness and that what particulars need to be stated depends on the facts of each case”.2
1 Price Waterhouse v Fortex Group Ltd CA179/98, 30 November 1998 at 19.
2 Securitibank Ltd (in rec and in liq) v Rutherford HC Auckland A355/81, 10 October 1983 at 11.
[19] It is not a defence to a proper request for particulars that the particulars are unknown. That general rule may give way, however, where the party seeking particulars knows that the party from whom the particulars are sought does not have them, and the Court considers the former is not genuinely embarrassed by the lack of particulars, or that the particulars sought are within the knowledge of the requesting party, in those circumstances, the Court can make an order that the particulars not be provided or defer the provision of particulars until after the provision of discovery.3
Discussion
[20]I am satisfied that the defendant is entitled to the particulars sought.
[21]Paras [15](a) and [15](c) of the statement of claim are pleaded in general terms.
[22] As to para 15(a), Mr Tobin, counsel for the plaintiff, said the plaintiff does not have details of the lease arrangements between the Trust and the defendant’s companies. The appearance of a conflict of interest exists. The defendant acknowledges she has taken on practical management of the Trust given what she says is the abandonment of the plaintiff of his role. Where Trust property is leased to companies owned and operated by the defendant, the defendant is “on both sides of the deal”. If the substance of the allegation is that the properties have been let on other than commercial terms, that needs to be pleaded. For such a pleading the plaintiff will need the leases and will then need to plead in what way the leases are not on commercial terms.
[23] The statement of claim should plead the duties it is said are owed by the defendant and breaches of duties with particulars, not “concerns”, as presently framed in para [15] of the claim.
[24] Mr Tobin accepted the real issue was whether the leases were on commercial terms – if so, it was unlikely this aspect of the claim would be pursued.
3 Pickard v Ambrose HC Wellington CIV-2003-091-143, 14 April 2008 at [29].
[25] Para 15(c) is more opaque. Just what concerns exist about the business relationship between the defendant and the accountant is not stated and again, while “concerns” are one thing, the defendant is entitled to know what duties she is said to have breached arising from her dealings with the accountant claimed to warrant her removal as trustee. The pleading does not provide adequate particulars.
Decision
[26] It is the defendant’s position that the plaintiff essentially abandoned his role as trustee. Nonetheless, he remains a trustee and is entitled to full disclosure of the Trust material. Mr Andersen QC, counsel for the defendant, did not suggest otherwise.
[27] The practical answer in this application is for the defendant to provide disclosure of her dealings with the Trust property, which is to be completed within 28 days of the date of this Judgment and for the plaintiff to then replead and file an amended statement of claim within a further 28 days.
[28] I direct Ms Greer is to provide to Mr Rust copies of any lease or other dealing between the Trust and her or any entity associated with her. Mr Andersen agreed to provide copies of any valuations that support such arrangements. For the avoidance of doubt, this direction applies to all historical dealings, not just current ones.
[29] The plaintiff’s amended statement of claim is to: specify what duties it is alleged are owed by the defendant as trustee; how those duties have been breached in relation to any particular dealing between the Trust and the defendant or her commercial entities; and give particulars of how it is alleged those commercial arrangements were on other than market terms. Further initial disclosure in respect of those allegations is also to be provided.
[30] In relation to the pleading concerning the business relationship between the defendant and the Trust’s accountant, at the moment the pleading does not disclose a breach of trustee duty by the defendant in respect of that relationship. Again, a pleading of mere “concerns” takes the defendant and the Court no further.
[31] The statement of defence acknowledges that the accountant has been appointed a director of one of the defendant’s companies as a professional director and as a trustee of the defendant’s personal trust.
[32] I accept Mr Andersen QC’s submission that implicit in the plaintiff’s position is some misconduct either by the defendant or the accountant in relation to the affairs of the Trust. The plaintiff must be explicit as to his concerns in relation to the role of the accountant or the defendant’s actions if either is maintained.
[33] As to the pleadings that there has been a failure to provide information as requested, the defendant is entitled to know what requests have not been satisfied. This should be straightforward as the plaintiff should be able to point to the date and method of the request for information, what was requested and what was not supplied.
[34] That said, the practical point remains that the plaintiff is a trustee and is entitled, as a trustee, to the records relating to the Trust. Mr Andersen invited Mr Tobin to refer any required information to him.
Costs
[35] Mr Andersen sought costs on the basis that the application had been successful and relied on the default position that costs on an interlocutory hearing should be fixed when the application is determined.
[36] Mr Tobin sought that costs be reserved. He submitted the plaintiff was justified in commencing the claim given the defendant’s refusal (through the Trust’s accountant), to provide further Trust information. That point would have carried more weight if the claim had been focused on the failure to provide information. No express relief in that regard is sought in the present claim.
[37] I agree with Mr Andersen that costs should follow the event. Mr Andersen suggested a modest award would be appropriate.
[38] There is a costs award in the defendant’s favour on a 2A basis with a quarter day allowed.
Orders
[39]I make the following orders:
(1)Within 28 days, Ms Greer is to provide to Mr Rust, copies of any lease or other dealing between the Trust and her or any entity associated with her. Mr Andersen agreed to provide copies of any valuations that support such arrangements. For the avoidance of doubt, this direction applies to all historical dealings, not just current ones.
(2)Within a further 28 days the plaintiff is to file and serve an amended statement of claim providing, in relation to the present para [15](a), the particulars detailed at paras [29] and [30] above.
(3)If the amended statement of claim repeats the present para [15](c), it is to particularise the duty owed by the defendant and how it was breached by her in relation to her dealings with the accountant.
(4)If the amended pleading maintains the defendant failed to provide requested information, details of the requests made and of the information not provided are to be given.
(5)Costs as per para [38] above.
Associate Judge Lester
Solicitors:
Marks & Worth, Dunedin
Counsel: D Tobin, Barrister, DunedinKatie Lane Law, Dunedin
Counsel: L A Andersen QC, Barrister, Dunedin
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