Schischka v Schischka
[2024] NZHC 3829
•13 December 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-1773
[2024] NZHC 3829
UNDER Part 18 of the High Court Rules IN THE MATTER OF
the property at 25 Curran Street, Herne Bay, Auckland
BETWEEN
JOHN CRAIG SCHISCHKA and GREGORY ERROL BUCHAN SCHISCHKA
Plaintiffs
AND
GLENN LAURENCE SCHISCHKA
Defendant
Hearing: 27 November 2024
Further submissions 28 November 2024 and 11 December 2024
Appearances:
T P Kelly for the Plaintiffs
L J Kearns KC/ J S Langston for the Defendant
Judgment:
13 December 2024
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 13 December at 3 pm Pursuant to Rule 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
Solicitors/Counsel:
Morris Legal, Auckland
Shieff Angland, Auckland Bastion Chambers, Auckland
SCHISCHKA v SCHISCHKA [2024] NZHC 3829 [13 December 2024]
Introduction
[1] The plaintiffs, John Schischka and Gregory Schischka, and the defendant, Glenn Schischka, are brothers.1 Their mother, Sylvia Schischka (Mrs Schischka), was their last surviving parent.
[2] Mrs Schischka’s last will dated 10 February 2015 appointed Glenn, Gregory and her solicitor, Ronald Craig, as her executors. The Schischka brothers are all beneficiaries under the will, largely receiving equal treatment.
[3] After Mrs Schischka’s death, each renounced their positions as executors in favour of New Zealand Guardian Trust Ltd (NZGT), a statutory trustee company which took on the role of administrator. NZGT later became known as Perpetual Guardian.
[4] In October 2019, Perpetual Trust Limited (Perpetual Trust) was substituted as administrator of the estate, in place of NZGT, following the restructure of Perpetual Guardian.2 Perpetual Trust completed administration of the estate without issue, making final distributions to Glenn, John and Gregory on 30 November 2021.
[5] Mrs Schischka’s estate did not include the family home at 25 Curran Street, Herne Bay, Auckland (the property). Mrs Schischka became the sole registered proprietor of the property after the death of her husband. On 13 February 2015, Mrs Schischka transferred the property to Glenn, by way of gift (the transfer of the property).
[6] On 15 September 2022, John and Gregory commenced this proceeding challenging the transfer of the property. They claim that Mrs Schischka lacked capacity at the material time, or alternatively, that the transfer was brought about by the undue influence of Glenn.
1 For convenience, and intending no disrespect to the parties, I will refer to each of the brothers by their given name.
2 Re New Zealand Guardian Trust Company Ltd [2019] NZHC 2548.
[7] Glenn applied for summary judgment dismissing the claim, including on the ground that John and Gregory do not have standing to bring the claim in their capacity as beneficiaries of the estate.
[8] On 22 August 2023, I dismissed the application for summary judgment.3 I applied the principle that beneficiaries of an estate do not generally have standing to sue on the rights of the deceased, but in special circumstances may bring a derivative claim.4 The special circumstances which justify a derivative claim must be pleaded and proved. The administrator should be joined as a defendant.5
[9] I granted leave to John and Gregory to join Perpetual Guardian as a second defendant, directing that the plaintiffs would be required to file an amended statement of claim pleading the facts relied on to establish special circumstances for a derivative claim. I noted that joinder of Perpetual Guardian would raise the issue of whether Perpetual Guardian would be entitled to an indemnity from John and Gregory for costs, and that this may cause the parties to consider whether Perpetual Guardian should be the plaintiff, to prosecute the cause of action in the usual way.6
[10] Since then, the issue of the identity of the proper plaintiff has vexed the proceeding, and John and Gregory now apply for an order substituting Perpetual Trust as the plaintiff (the substitution). Glenn opposes the substitution.
Substituting a party — the legal principles
[11]Rule 4.56 of the High Court Rules 2016 (HCR) provides:
4.56 Striking out and adding parties
(1)A Judge may, at any stage of a proceeding, order that—
(a)the name of a party be struck out as a plaintiff or defendant because the party was improperly or mistakenly joined; or
(b)the name of a person be added as a plaintiff or defendant because—
3 Schischka v Schischka [2023] NZHC 2275.
4 At [39], citing Hayim v Citibank NA [1987] AC 730 (PC) at 748.
5 At [39], citing Roberts v Gill & Co [2010] UKSC 22, [2011] 1 AC 240 at [103].
6 Schischka v Schischka, above n 3, at [79].
(i)the person ought to have been joined; or
(ii)the person’s presence before the court may be necessary to adjudicate on and settle all questions involved in the proceeding.
(2)An order does not require an application and may be made on terms the court considers just.
(3)Despite subclause (1)(b), no person may be added as a plaintiff without that person’s consent.
[12] The principles applicable to r 4.56 are well settled and were reviewed by the Court of Appeal in Newhaven Waldorf Management Ltd v Allen.7 There is no fixed general rule in relation to joinder, reflecting the wide variation in circumstances arising in any particular case. It is necessary to assess the rights of the person sought to be joined that will be affected by a judgment in the proceeding. The approach to joinder is liberal. All persons materially interested in the subject of the proceeding ought to be parties.8
[13] In Westfield Freezing Company Ltd v Sayer & Company (New Zealand) Ltd,9 the Court of Appeal confirmed that the predecessor to r 4.56 could be used to add a plaintiff in circumstances where the original plaintiff had no cause of action. North P referred to Van Gelder, Apsimon and Co v Sowerby Bridge United District Flour Society,10 a patent case where joinder was ordered after the wrong plaintiff commenced the proceeding, stating:11
In my opinion, that case is clear authority for the view which, so far as I know, has always been accepted in New Zealand, namely that the Court should never dismiss an action for want of parties unless it is compelled to do so for good and sufficient reasons. Once the real dispute is before the Court, then it is in the interests of the parties, and indeed in the public interest, that that dispute should be resolved as soon as possible. Accordingly, the failure by a plaintiff to select the right parties should not stand in the way of the Court bringing the dispute to a conclusion by joining additional persons either as plaintiffs or defendants “who ought to have been joined” in the first instance, or “whose presence before the Court may be necessary to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the action.”
7 Newhaven Waldorf Management Ltd v Allen [2015] NZCA 204, [2015] NZAR 1173.
8 At [44] and [45].
9 Westfield Freezing Company Ltd v Sayer & Company (New Zealand) Ltd [1972] NZLR 137 (CA).
10 Van Gelder, Apsimon and Co. v Sowerby Bridge United District Flour Society (1890) 44 Ch 374 (CA).
11 At 143 per North P.
[14] However, joinder cannot be used as a cloak to substitute another new and different cause of action for the one originally put forward.12
[15] In New Zealand Mutual Travel Service Ltd v South Canterbury Finance Ltd, Young J permitted the substitution of a Fijian company as plaintiff in place of a related New Zealand company, stating:13
I agree that my decision here is ultimately one of discretion. But in a case where it is common ground that the proceeding is in the name of the wrong plaintiff, common sense and orthodox practice in this Court suggest that I should be quick to substitute the appropriate company as plaintiff unless there is good reason to the contrary.
[16] In Inverness Medical Switzerland GMBH v NDS Diagnostics Ltd,14 the application in substance sought the substitution of the proper plaintiff for the existing plaintiff. It was obvious that the proposed substituted plaintiff should have been the plaintiff from the outset.15 The defendants argued that the existing plaintiff should discontinue the proceeding and the correct plaintiff should file a fresh proceeding. Rodney Hansen J applied Westfield, permitting the addition of the proposed plaintiff.16
[17] In Cambria Commercial 2009 Ltd v Pedley,17 Associate Judge Gendall (as he then was) ordered a substitution of plaintiff to correct the naming of the wrong plaintiff in a proceeding which included a claim for summary judgment. The Judge held that the party joined ought to have been named as plaintiff from the beginning.18
Steps since the application for summary judgment
[18] Following my judgment declining Glenn’s application for summary judgment, John and Gregory filed an amended statement of claim dated 2 October 2023. They pleaded special circumstances in support of a derivative claim as beneficiaries and
12 At 146 per Turner J.
13 New Zealand Mutual Travel Service Ltd v South Canterbury Finance Ltd (2000) 14 PRNZ 459 (HC) at [34].
14 Inverness Medical Switzerland GMBH v MDS Diagnostics Ltd HC Auckland CIV-2007-404-748, 19 June 2008.
15 At [16]–[18].
16 At [22], citing Westfield Freezing Company Ltd v Sayer & Company (New Zealand) Ltd, above n 9, at 143.
17 Cambria Commercial 2009 Ltd v Pedley HC Palmerston North CIV-2011-454-457, 7 December 2011.
18 At [21].
applied for an order joining NZGT as second plaintiff. NZGT was named as second plaintiff in the amended statement of claim. Glenn opposed the joinder of NZGT.
[19] At some point between 2 October and 16 October 2023, John and Gregory and Perpetual Trust must have realised that the administrator of the estate is Perpetual Trust, and not NZGT. On 16 October 2023, Perpetual Trust filed its own application for an order that it be joined as a plaintiff.
[20] By a minute dated 14 May 2024, I directed the parties to consider whether an order could be made by consent, either joining the administrator as a defendant to a derivative claim or substituting the administrator as plaintiff.19 John and Gregory and Perpetual Trust agreed that Perpetual Trust should bring the claim as plaintiff in substitution for John and Gregory, so that there would be no need for a derivative claim.
[21] The parties then attempted to reach agreement on consent orders, unsuccessfully. Glenn continues to oppose the substitution of Perpetual Trust as plaintiff instead of John and Gregory. I directed John and Gregory to make a formal application, which is now before the Court.
The defendant’s argument
[22] Counsel for Glenn, Ms Kearns KC, submitted that John and Gregory initiated and continued this proceeding when they knew, or should have known, that they were not the proper claimant.
[23] It was argued that r 4.56 is not readily suited to circumstances where the current plaintiff should not have issued the proceeding in the first place. If the Court has determined that the proceeding should not have been brought because of lack of standing, then the justice of the case does not support joinder. It is different if there is some uncertainty as to the proper party, or both parties are required to adjudicate on the issues raised in the proceeding.
19 Schischka v Schischka HC Auckland CIV-2022-404-1773, 14 May 2024 (Minute of Associate Judge Brittain).
[24] Alternatively, if the Court considers that the grounds in r 4.56 are made out, Ms Kearns argued that the Court should exercise its discretion to refuse substitution because of possible prejudice to Glenn arising from limitation issues.
Analysis
[25] This is not a case where John and Gregory have no standing — they have standing to bring a derivative claim, which requires them to plead the special circumstances that justify a derivative claim and to name Perpetual Trust as a defendant. The form of John and Gregory’s first statement of claim was deficient because they failed to plead special circumstances. That does not negate their standing. To succeed with their claim, they will ultimately need to prove the special circumstances.
[26] There is no doubt that Perpetual Trust has a material interest in the proceeding as the administrator of the estate. Perpetual Trust ought to have been joined from the outset. If John and Gregory wish to maintain their derivative claim, then Perpetual Trust should be named as a defendant rather than as a plaintiff.
[27] The issue is whether Perpetual Trust should be permitted to substitute as plaintiff in its own right. The substance of the cause of action would remain the same, however, it would no longer be necessary to plead special circumstances permitting John and Gregory to bring the cause of action as a derivative claim.
[28] The issue is whether a substitution will prejudice Glenn’s ability to mount a limitation defence. John and Gregory’s first statement of claim was filed on 15 September 2022. The relief sought was an order that the transfer of the property is void, and such other orders as the Court sees fit. This claim for relief is repeated in the first amended statement of claim dated 2 October 2023.
[29] Ms Kearns submits that the relief sought is wide enough to include a claim for equitable compensation, which is a money claim subject to a primary limitation period
of six years under the Limitation Act 2010 (LA).20 No limitation issue is raised in respect of an order that the transfer is void and any constructive trust that might result.
[30] Ms Kearns submits that the primary limitation period for a money claim expired on 13 February 2021, six years after the transfer of the property, providing a defence to any claim for equitable compensation filed after that date. If that submission is correct, then the limitation period for a money claim expired before John and Gregory filed their first statement of claim on 15 September 2022. The position would be the same if Perpetual Trust filed a fresh proceeding.
[31] Ms Kearns argued that the point of difference that arises is in respect of the availability of an extension of the primary limitation period under s 45 of the LA:
(a)John and Gregory may be entitled to apply for an extension of the primary limitation period under s 45, on the grounds of Mrs Schischka’s incapacity, which might result in an extension of the primary limitation period until 28 August 2024 at the latest, bringing John and Gregory’s claim for equitable compensation within time;
(b)if Perpetual Trust is permitted to substitute as plaintiff, then Perpetual Trust would acquire the same right (if it exists); and
(c)if Perpetual Trust must now file a fresh proceeding claiming equitable compensation, then the claim for equitable compensation will be out of time and an application under s 45 of the LA will not assist.
[32] At the conclusion of the hearing, I called for submissions on whether Perpetual Trust would be prepared to waive any rights it may have under s 45 of the LA as a condition of the substitution, to avoid any prejudice that might result from a substitution.
[33] Counsel for John and Gregory filed a memorandum dated 28 November 2024, advising that Perpetual Trust has already filed its own separate proceeding, on 12 August 2024, before the critical date of 28 August 2024, to ensure it can exercise
20 Limitation Act 2010, ss 11 and 12.
any right it may have under s 45 of the LA. This was the first time that this step by Perpetual Trust was disclosed to the Court. It should have been disclosed at the hearing.
[34] Ms Kearns submits that Perpetual Trust’s proceeding should be struck out because Perpetual Trust has not complied with r 5.72 of the HCR, which requires that a statement of claim is served as soon as practicable after it is filed. That is a matter to be resolved in Perpetual Trust’s proceeding. It is unlikely that the Court will strike the claim out for a breach of r 5.72 if that will have consequences for limitation defences.
[35] Given that Perpetual Trust’s proceeding was filed before the critical date of 28 August 2024, the same limitation defences will now apply irrespective of whether Perpetual Trust pursues its own proceeding or joins this proceeding as substituted plaintiff. There is no prejudice to Glenn from the latter course.
[36] A substitution will have no material impact on the procedural steps that are now required:
(a)an amended statement of claim will be required in either case; and
(b)the parties have not yet begun discovery.
[37] A substitution will have a significant efficiency for the overall conduct of the proceeding because it will remove the issue of whether special circumstances exist for John and Gregory to bring a derivative claim. This issue would likely require an examination of the conduct of NZGT/Perpetual Trust when the administrator initially failed or refused to investigate or bring the claim.
[38] The parties have expended significant time and cost on the issue of the identity of the proper plaintiff. It has caused a delay in the progress of this proceeding of at least a year. There will be consequences for costs. Glenn’s position is that John and Gregory should discontinue this proceeding, which would entitle Glenn to costs.
However, if Perpetual Trust is not substituted, there is the potential for John and Gregory to continue this proceeding.
[39] If this existing proceeding continues after a substitution, then any prejudice to Glenn arising from the manner of the conduct of the proceeding to date can sound in a costs order made now. I am satisfied that the interests of justice are best served by a substitution of Perpetual Trust for John and Gregory as plaintiffs in this proceeding.
[40] Although John and Gregory have been successful in their application, the application was only necessary because John and Gregory failed to properly deal with the derivative nature of their claim. This error was compounded by confusion regarding the identity of the administrator of the estate, and the filing of an amended pleading which incorrectly named an administrator as a second plaintiff, rather than as a defendant.
[41] Glenn should have costs now for all steps in the proceeding since the summary judgment hearing and any other steps before the summary judgment hearing that relate to the issue of the identity of the parties. This would exclude costs for steps in respect of the application for summary judgment — the parties have agreed that those costs lie where they fall.
Orders
[42] John Craig Schischka and Gregory Errol Buchan Schischka and New Zealand Guardian Trust Limited are removed as plaintiffs.
[43]Perpetual Trust Limited is joined as plaintiff.
[44]Perpetual Trust Limited shall file an amended statement of claim by
31 January 2025.
[45] The Court shall allocate a case management conference on the first available date after 31 January 2025.
[46] If the parties are unable to agree on the quantum of costs for the defendant, then:
(a)the defendant may file and serve written submissions on the calculation of costs in accordance with [40] above, by 31 January 2025;
(b)the plaintiffs may file and serve written submissions in reply by
14 February 2025; and
(c)I will then fix costs on the papers.
Associate Judge Brittain
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