Shotter v Kokako Farms Ltd
[2015] NZHC 2479
•9 October 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2014-404-3085 [2015] NZHC 2479
BETWEEN HEATHER RUTH SHOTTER AND MBT
LTD AS TRUSTEES OF THE SHOTTER FAMILY TRUST
Plaintiff
AND
KOKAKO FARMS LTD Defendant
CIV 2015-404-977
BETWEEN EVAN WELCH DAVIES Plaintiff
ANDHEATHER RUTH SHOTTER Defendant
CIV 2015-404-1448
BETWEEN HEATHER RUTH SHOTTER AND MBT LTD AS TRUSTEES OF THE SHOTTER FAMILY TRUST
Plaintiff
ANDEVAN WELCH DAVIES Defendant
Hearing: 9 October 2015 Counsel:
H L Thompson for Shotter interests
A H H Choi for Kokako Farms Ltd and Mr DaviesJudgment:
9 October 2015
(ORAL) JUDGMENT OF HEATH J
Solicitors:
McMahon Butterworth Thompson, Auckland
Kemps Weir, AucklandCounsel:
D A T Chambers QC, Auckland
SHOTTER AND MBT LTD AS TRUSTEES OF THE SHOTTER FAMILY TRUST v KOKAKO FARMS LTD [2015] NZHC 2479 [9 October 2015]
Introduction
[1] Ms Shotter and Mr Davies married on 18 November 2000 and separated on
12 June 2006. An agreement dealing with (among other things) relationship property issues (the relationship property agreement) was signed by each of them on 28 June
2006.
[2] Three proceedings have been issued, all of which appear to have their genesis in the relationship property agreement. They are:
(a) Shotter and MBT Ltd v Kokako Farms Ltd (the Company proceeding).1 This proceeding was commenced in November 2014. Kokako is a company presently controlled by Mr Davies. In this proceeding, the trustees of the Shotter Family Trust (Ms Shotter and MBT Ltd), (the trustees) claim that Kokako holds a property in Hawke’s Bay on trust for them and seek an order for the transfer of
the asset. The trustees allege that the trust to which they say Kokako is subject was established by the relationship property agreement.
(b)Davies v Shotter (the Summary Judgment proceeding).2 This proceeding was commenced on 5 May 2015. It is a summary judgment proceeding. An Amended Statement of Claim was filed on
11 June 2015 in which Mr Davies sought judgment against Ms Shotter in the sum of $1,554,036.60, and an order for interest in respect of other sums owing under the relationship property agreement.
(c) Shotter and MBT Ltd v Davies (the Damages proceeding).3 This proceeding was issued on 26 June 2015. The trustees seek judgment for $500,000 under cl 3.7 of the relationship property agreement, and compensation for the market value of the Hawke’s Bay property that
they allege was promised under the relationship property agreement.
1 CIV-2014-404-3085.
2 CIV-2015-404-977.
3 CIV-2015-404-1448.
[3] The Company proceeding has been set down for hearing on 23 November
2015. Kokako applies to vacate that hearing. Kokako and Mr Davies seek an order consolidating (or requiring a joint hearing of) all three proceedings.
[4] The summary judgment application was argued on 25 August 2015 before Associate Judge Sargisson. Her judgment remains reserved. The present applications proceed on the assumption that the summary judgment proceeding will not be determined finally by the Associate Judge’s decision. If the contrary position were to result, consolidation or joint hearing of the Company and Damages proceedings is sought.
[5] If consolidation or joint hearing were not granted, a stay of the Damages proceeding pending determination of the two others is sought.
[6] All applications are opposed by the trustees and by Ms Shotter, personally.
Consolidation/joint hearing
[7] I deal first with the application for consolidation or joint hearing in respect of all three proceedings. I do so because the outcome of that application will dictate my response to the adjournment and stay applications.
[8] Rule 10.12 of the High Court Rules provides:
10.12 When order may be made
The court may order that 2 or more proceedings be consolidated on terms it thinks just, or may order them to be tried at the same time or one immediately after another, or may order any of them to be stayed until after the determination of any other of them, if the court is satisfied—
(a) that some common question of law or fact arises in both or all of them; or
(b) that the rights to relief claimed therein are in respect of or arise out of—
(i) the same event; or
(ii) the same transaction; or
(iii) the same event and the same transaction; or
(iv) the same series of events; or
(v) the same series of transactions; or
(vi) the same series of events and the same series of transactions; or
(c) that for some other reason it is desirable to make an order under this rule.
[9] Mr Choi, for Mr Davies and Kokako, submits that consolidation or joint hearing is required. Although expressed in more fulsome terms in the application and submissions filed in support, the grounds on which the application is brought may be distilled as follows:
(a) All three proceedings arise out of the relationship property agreement entered into between Mr Davies and Ms Shotter in 2006.
(b)There are common questions of fact and law relating to all three proceedings.
(c) There is a substantial overlap in issues that will be traversed in the proceeding, and as a result there is a risk of inconsistent findings of fact being made.
(d)Questions of interpretation arise in respect of the relationship property agreement.
(e) Mr Davies, who is now sole director and 90% shareholder in Kokako, is being required to defend, in two separate proceedings, claims by the trustees in respect of the Hawke’s Bay property.
[10] The trustees and Ms Shotter advance the following grounds in opposition to the application:
(a) The three proceedings are discrete in nature.
(b)The conduct of both Kokako and Mr Davies evidences something in the nature of disqualifying conduct. In that regard, the Company proceeding was set down on 2 June 2015, at the conclusion of a case management conference before Associate Judge Doogue. That was done without opposition from Kokako. The first occasion on which objection was raised to the Company proceeding being heard in the week of 23 November 2015 was when the application for adjournment was filed on 25 September 2015.
(c) Notwithstanding the fact that the Company proceeding had been set down for hearing and the Damages proceeding awaits a first case management conference on 1 December 2015, Mr Davies elected to proceed with his summary judgment application separately, despite a prior invitation from counsel for the trustees and Ms Shotter, to withdraw that application so that the Company and Summary
Judgment proceedings could be heard at the same time.4
[11] The Company proceeding is brought in reliance on the relationship property agreement of 28 June 2006. Kokako is the registered proprietor of the property at Fernhill, in Hawke’s Bay. Clause 3.1 of the relationship property agreement contemplated the transfer of that property to the trustees for the benefit of Ms Shotter and her children. Two remedies are sought; a declaration that Kokako holds the Hawke’s Bay property as bare trustee for the absolute benefit of the trustees and an order that Kokako take all necessary steps to transfer the property unencumbered. The latter relies on machinery provisions contained in cls 3.3 and 6.1 of the relationship property agreement.
[12] Kokako’s Statement of Defence challenges the trustees’ interpretation of the relationship property agreement. It also pleads two affirmative defences. The first is that Mr Davies had no authority to bind Kokako to transferring the property. The second is that any (otherwise) binding decision to transfer amounts to an incomplete
and (unenforceable) gift.
4 At that time, the Damages proceeding had not been issued: see para [2] above.
[13] During the course of today’s hearing, Mr Choi referred me to paragraph 11 of the Statement of Defence in the Company proceeding. That pleads, in addition to the affirmative defences, that Ms Shotter has failed to comply with cl 3.10 of the relationship property agreement and, as at March 2014, owed Mr Davies
$913,345.21. That now translates to the sum of approximately $1.5 million claimed in the Summary Judgment proceeding.5
[14] There is nothing in the Statement of Defence to explain with specificity exactly how the amounts claimed would impact on the need to make an order transferring the property to the trustees, if an obligation to do so were properly grounded in that agreement.
[15] In my view, the Company proceeding is confined in nature. It raises a question which is discrete from both the Damages and Summary Judgment proceedings. In the Summary Judgment and Damages proceedings, attempts are made to enforce monetary remedies under the relationship property agreement. Under the Company proceeding, the issue turns on whether there is a requirement for Kokako to transfer the property in Hawke’s Bay to the trustees.
[16] The Summary Judgment proceeding may or may not require substantive resolution. The application for summary judgment has already been argued. For reasons given by Gendall J in East Quip Ltd (in liq) v Galanising (HB) Ltd,6 consolidation or joint hearing is unavailable in respect of a summary judgment application, at least until such time as the interlocutory application for summary judgment has been determined. Rule 10.12 of the High Court Rules7 refers to “two or more proceedings”. The definition of the term “proceeding” in r 1.3 of the Rules excludes interlocutory applications. Because a summary judgment application seeks “relief that is ancillary to that claimed in a proceeding”, it is an interlocutory application.8 I agree, with respect, with the analysis undertaken by Gendall J in East
Quip.
5 See para [2](b) above.
6 East Quip Ltd (in liq) v Galanising (HB) Ltd [2013] NZHC 1503 at paras [24]–[30].
7 Set out at para [8] above.
8 Fidow, ex parte Registered Securities Ltd (in liq) (1990) 3 PRNZ 66 (HC), Zurich Australian Insurance Ltd v Cognition Education Ltd [2013] NZCA 180 at para [20] and East Quip Ltd (in liq) v Galanising (HB) Ltd [2013] NZHC 1503 at para [26].
[17] Another significant discretionary factor arises out of the order in which the proceedings were brought. The Company proceeding was first in time, having been issued in November 2014. The Summary Judgment proceeding was not commenced until 5 May 2015. On 3 June 2015, the order setting down the Company proceeding for hearing in November 2015 was made. On 11 June 2015, an Amended Statement of Claim was filed in the Summary Judgment proceeding on behalf of Mr Davies.
[18] There was no objection to the setting down of the Company proceeding. Indeed, a conscious decision was made after that to pursue the summary judgment, application independently of the Company proceeding. It is difficult to understand how Mr Davies can say, on the one hand, that the three proceedings are so linked as to require consolidation and joint hearings yet proceed independently with the summary judgment application, seeking a significant sum of money from Ms Shotter.
[19] The possibility was explored, during the course of argument, of Mr Davies withdrawing the current summary judgment application and agreeing to pay costs. That would have negated the need for the Associate Judge to give a decision on the application. It would also have enabled the substantive part of the Summary Judgment proceeding to be heard in conjunction with the Company and Damages proceedings. Mr Thompson, for the trustees and Ms Shotter, have made it clear that he would not oppose consolidation or joint hearing in the event that were to occur.
[20] Mr Choi took instructions from Mr Davies. Mr Davies has declined to withdraw the summary judgment application. That is his choice. I make no criticism of it. The effect of the choice is simply a factor that goes into the mix when determining what decision I must make on the present applications.
[21] In my view, the grounds for seeking consolidation or joint hearing have not been made out. In the circumstances I have described, although the proceedings all arise out of the relationship proceeding agreement, there are discrete aspects arising in each. The common questions are not such as to require consolidation or joint hearing to do justice among the parties.
[22] In the event of the trustees obtaining judgment in the Company proceeding, in the form of an order requiring the transfer of the Hawke’s Bay property to them, it would remain open (if proper grounds were advanced) for Kokako to seek a stay of execution of that judgment pending determination of other proceedings, or an appeal to the Court of Appeal. Those remedies are ample to protect Mr Davies’ and Kokako’s interests.
[23] For those reasons, I am not satisfied that the proceedings should be consolidated or heard together. Given my findings on the consolidation and joint hearing application, I decline the application to adjourn the Company proceeding. That proceeding is capable of being determined independently, in the same way as the summary judgment application was.
[24] Nor is there any reason to order a stay of the Company proceeding. The remedies to which I have just referred9 relating to stay of execution of any judgment are sufficient to meet any difficulties that might arise in that regard.
Result
[25] For those reasons, all applications are dismissed.
[26] One set of costs is ordered in favour of the trustees and Ms Shotter personally, on a 2B basis together with reasonable disbursements. Those costs are payable by Kokako and Mr Davies on a joint and several basis. Both costs and
disbursements shall be fixed by the Registrar.
P R Heath J
9 See para [22] above.
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