Ryan v Lobb

[2021] NZHC 496

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-1591

[2021] NZHC 496

BETWEEN

VERENA COLLEEN RYAN

Plaintiff

AND

STUART JAMES LOBB

First Defendant

LOCKHART TRUSTEE SERVICES NO.56 LIMITED

Second Defendant

On the papers:

12 March 2021

Appearances:

W M Patterson for the Plaintiff

P A Fuscic and Kate Thompson for the First Defendant A A H Low for the Second Defendant

Judgment:

12 March 2021

JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 12 March 2021 at 4:00pm

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:

Patterson Hopkins (W M Patterson/Luke Dixon), Auckland, for the plaintiff McVeagh Fleming (P Fuscic/K L Thompson), Auckland, for the First Defendant

Alexandra Low and Associates (A A H Low), Ponsonby, Auckland, for the Second Defendant

RYAN v LOBB [2021] NZHC 496 [12 March 2021]

[1]                 Mr Lobb seeks leave under s 56(3) of the Senior Courts Act 2016 to appeal against Associate Judge Smith’s decision of 20 November 2020 dismissing Mr Lobb’s application to dismiss or stay this proceeding and refusing his application for the return of record and documents.1 Both Mr Lobb and Ms Ryan accept that leave to appeal is required. Lockhart Trustee Services No 56 Ltd is not taking an active part.

[2]                 I asked the parties to file submissions after which I would assess whether to decide the matter on the papers or to hear the application in court. Both sides have filed helpful submissions. A joint memorandum of 10 March 2021 accepts that the application can be decided on the papers. A hearing is not required. Accordingly, the fixture for 20 April 2021 at 10.00 am is vacated.

[3]                 The case is about a family trust established in 2005. Mr Lobb and Ms Ryan were married but separated in October 2016. Their marriage is now dissolved. The trust owns the former family home and certain antique furniture, jewellery and watches. Mr Lobb and Ms Ryan were the settlors under the trust deed. As protectors, they have the power to appoint and remove trustees. At their separation they were also the trustees along with Lockhart Trustee Services No.56 Ltd. They and their children are discretionary beneficiaries. Their children are final beneficiaries.

[4]The trust deed has a resettlement provision:

2.5      Resettlement of Trust

…

(3)If the Settlors separate (or their marriage is legally dissolved), either Settlor may give the Trustees written notice requiring them to resettle (on new Trusts acceptable to the Settlor who has given notice) such part of the Trust assets as the Trustees consider fair and equitable having regard to the respective contributions of the Settlors (whether by gifting, inheritance or otherwise) to the total assets of the Trust.

(4)Once resettlement is effected under clause 2.5(3), the Settlor who gave notice shall cease for the purposes of this Deed to be a Discretionary Beneficiary and one of those acting as Protector. From that time, the other Settlor alone shall exercise all powers and discretions given to

1      Ryan v Lobb [2020] NZHC 3085.

the Settlors by this Deed (including any powers the Settlors may have at that time as Protector).

(5)Any dispute or failure to agree relating to the provisions of this clause

2.5 is to be treated as a dispute to which clause 3.7 applies.

[5]                 Clause 3.7 is a dispute resolution provision. In short, it provides that any dispute arising out of the deed must be referred to arbitration.

[6]                 Ms Ryan gave notice under cl 2.5(3) requiring resettlement. The parties cannot, however, agree on the interpretation of the words “having regard to the respective contributions of the Settlors (whether by gifting, inheritance or otherwise) to the total assets of the Trust.”

[7]                 Ms Ryan’s position is that, as she and Mr Lobb were joint owners of the family home before it was sold to the trustees, there should be equal division. On the other hand, Mr Lobb says that the trustees should have regard to how much each of them contributed to the acquisition and maintenance of the family home. Mr Lobb contends that the assets were derived from his separate pre-relationship property.

[8]                 In this proceeding, Ms Ryan seeks a ruling as to the correct interpretation. She began the proceeding in August 2019. In his application of December 2019, Mr Lobb applied for an order dismissing the proceeding on the ground that the dispute should be referred to arbitration under cl 3.7 of the trust deed. The matter to be arbitrated was the question in this case, the correct interpretation of cl 2.5(3).

[9]                 Associate Judge Smith held that arbitration could not be held between trustees, because there were no longer any trustees. In Lockhart Trustee Services No.56 Ltd v Ryan,2 Edwards J had removed all three trustees and appointed a receiver instead. The settlors no longer had any interest in the administration of the trust, once their assets had settled on the trust. Mr Lobb and Ms Ryan might have standing as discretionary beneficiaries but the arbitration provisions of the trust deed were invalid to the extent that they purported to bind discretionary beneficiaries (such as the parties’ children) who were not parties to the trust deed and had never agreed to arbitrate. Accordingly,

2      Lockhart Trustee Services No.56 Ltd v Ryan [2020] NZHC 1823, (2020) 5 NZTR 30-019.

the arbitration provisions were null and void, or had become incapable of operation under art 8(1) of the First Schedule of the Arbitration Act 1996.

[10]              At the time of his decision, the arbitrability of trust disputes was a new question in New Zealand law. Since then, the Trusts Act 2019 has come into force. It provides for alternative dispute resolution of trust disputes, including by arbitration.3

[11]              In Greendrake v District Court the Court of Appeal approved the dictum of Fitzgerald J in Finewood Upholstery Ltd v Vaughan4 that leave to appeal should serve as a “filtering mechanism”, to ensure that unmeritorious appeals of interlocutory orders, or appeals of interlocutory orders of no great significance to either of the parties or more generally, do not unnecessarily delay the proceedings in which the orders are made and said:5

The following considerations were recognised as relevant on an application for leave to appeal:

(a)a high threshold exists;

(b)the applicant must identify an arguable error of law or fact;

(c)the alleged error should be of general or public importance, warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value;

(d)the circumstances must warrant incurring further delay;

(e)the ultimate question is whether the interests of justice are served by granting leave.

[12]              Mr Fucsic’s thoughtful submissions set out reasons why Associate Judge Smith’s judgment is arguably wrong. Some of the matters he raised were about only the circumstances of this case and therefore unlikely to be of general importance. But there is another aspect, which he did not raise. An appeal to the Court of Appeal is by way of re-hearing. On such an appeal, the court applies the law in force at the date of the appeal, not the law as it was at the date of the decision appealed from.6 That means that the matter may have to be decided under the alternative dispute resolution

3      Trusts Act 2019, ss 142–148.

4      Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [13].

5      Greendrake v District Court [2020] NZCA 122 at [6].

6      Pratt v Wanganui Education Board [1977] 1 NZLR 476 (SC) at 490.

provisions of the Trusts Act 2019.7 There is a potential public benefit in having the Court of Appeal consider the alternative dispute resolution provisions of the Trusts Act, a new feature in trusts law.

[13]              There are undoubtedly interesting legal issues that could be explored on appeal and they could be of wider interest than just to the parties themselves. But in applications for leave to appeal against decisions on interlocutory applications, it is important to bear in mind that the conduct of the proceeding may require that a decision should stand, even if it is arguably wrong. The law places great value on finality in resolving disputes, as well as on their prompt resolution. Delays in a substantive hearing on the merits can defeat justice.

[14]              While this is a trust dispute, the context is the division of assets on the failure of a marriage. When a marriage fails, the law favours a clean break with a clear division of the assets so that the parties may disengage and go their separate ways. Delay works against that. The re-settlement provision in the trust deed is intended to give a clear mechanism for the division of family assets held in the trust. But it is now nearly five years since their separation, and the parties have made no progress at all in carrying out the resettlement. The sooner a definitive ruling on the interpretation of the resettlement provision, the better.

[15]              Mr Lobb’s affidavit in support of his application shows a disturbing history of litigation with Ms Ryan in the Family Court, this Court and the Court of Appeal, including:

(a)Several applications for protection orders in the Family Court;8

(b)A contested dissolution application and Mr Lobb’s unsuccessful appeal to this Court against the dissolution order;9

7      Trusts Act 2019 ss 142–148; Arbitration Act 1996, s 10A.

8      Detailed in Lobb v Ryan [2020] NZFC 7202 at [4].

9      Lobb v Ryan [2020] NZHC 348.

(c)Applications for occupation and spousal maintenance and Mr Lobb’s unsuccessful appeal to this Court;10

(d)Further appeals by Mr Lobb to the Court of Appeal;11

(e)This Court finding contempt by Mr Lobb;12 and

(f)An application to remove a caveat lodged by Mr Lobb against the title to a property owned by Ms Ryan’s new partner.13

[16]              In her decision removing the trustees and appointing a receiver, Edwards J said:14

[28] …[T]he extent of the dysfunctional relationship between Mr Lobb and Ms Ryan… is evidenced by the multiplicity of proceedings between Mr Lobb and Ms Ryan. Nine separate proceedings between the couple have been listed in Mr Lobb’s affidavit. These include applications by each spouse for a protection order against the other.

…

[30] The interests of the beneficiaries are directly compromised by the ongoing dispute between the two primary trustees. The level of acrimony and dysfunction is such that there is really no other option but to remove all trustees.

[17]              In the light of that history Mr Lobb’s proposal to appeal to the Court of Appeal offers more litigation and delay in carrying out the resettlement. Given the history of protracted disputes and Mr Lobb’s tendency to appeal every decision that goes against him, the question whether Associate Judge Smith was correct that this matter could not go to arbitration is relatively unimportant when considered against the need to have this case disposed of promptly. The circumstances do not warrant further delay.

[18]Accordingly, the application for leave to appeal is dismissed.

10     Lobb v Ryan [2020] NZHC 834, [2020] NZFLR 211.

11     Lobb v Ryan [2020] NZCA 244.

12     Lobb v Ryan [2020] NZHC 2841.

13     MacDonald v Lobb [2020] NZHC 2206.

14     Lockhart Trustee Services No.56 Ltd v Ryan [2020] NZHC 1823, (2020) 5 NZTR 30-019 at [28]. Mr Lobb has applied for an extension of time to appeal that decision.

[19]              The conference for 18 March 2021 at 3.45 pm will still go ahead so that further case management directions can be given.

……………………………...

Associate Judge R M Bell