Staite v Kusabs
[2013] NZHC 1851
•25 July 2013
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
CIV 2009-463-000888 [2013] NZHC 1851
UNDER the Trustee Act 1956 and the Declaratory
Judgments Act 1908 and the Land Transfer
Act 1952BETWEEN
PETER DANIEL STAITE, JEAN TANIRAU-CARSTON, DEBORAH PAKAU, LEONIE REI NICOLLS and BRUCE ANDERSON B AMBER as trustees of the WHAOA NO 1 LANDS TRUST
First Plaintiffs
AND
ANDREW MATUTUEHU KUSABS, DONALD MAIRANGI BENNETT, JULIAN KUMEROA KEEPA and WIREMU WAAKA as trustees of the TUMUNUI LANDS TRUST
First Defendants
Continued over/...
Hearing: 16 July 2013 Appearances:
M McKechnie for the Applicants/Defendants
D Chesterman for the Plaintiffs/RespondentsJudgment:
25 July 2013
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
25.07.13 at 4:30pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
P D STAITE, J TANIRAU-CARSTON, D PAKAU, L R NICOLLS and B A BAMBER as trustees of the WHAOA NO 1 LANDS TRUST v A M KUSABS, D M BENNETT, J K KEEPA and W WAAKA as trustees of the TUMUNUI LANDS TRUST & ORS [2013] NZHC 1851 [25 July 2013]
PETER DANIEL STAITE, JEAN TANIRAU-CARSTON, BRUCE ANDERSON BAMBER, DAVID TE NOHI JAN NIKORA, LUCKY JR PEHI, OONAGH BERENICE MARINO as trustees and representatives of the beneficiaries of the NGATI WHAOA MAORI RESERVATION
Second Plaintiffs
ANDREW MATUTUEHU KUSABS and DONALD MIRANGI BENNETT retired as trustees of the TUMUNUI LANDS TRUST
Second Defendants
EDIE TE HUNAPO MOKE and PIPI PHOEBE MOKE as personal representatives of the ESTATE OF EDWARD PAURINI MOKE as a former trustee of the WHAOA NO 1 LANDS TRUST and the NGATI WHAOA MAORI RESERVATION
Third Defendants
[1] This judgment concerns the defendants’ application for strikeout of the plaintiffs’ first amended statement of claim.
The proceeding
[2] The proceeding was initially filed on 17 December 2009. It was an 8 page document comprising 40 paragraphs and contained a single cause of action of an alleged breach of the Rule against Self-dealing.
[3] The named plaintiffs were noted as being trustees of the Whaoa No.1 Lands Trust (the Whaoa Trust) and the Ngati Whaoa Maori Reservation, and Mr P D Staite. The defendants were named trustees of the Tumunui Lands Trust.
[4] On 19 July 2012 the plaintiffs filed an application for leave to file an amended statement of claim, to add new defendants, and to remove and add a second plaintiff.
[5] The proposed amended statement of claim was a 41 page document comprising 161 paragraphs and containing six causes of action.
[6] The application to leave to file the amended statement of claim was opposed.
[7] My judgment upon that application issued on 14 December 2012. It reviewed a not uncomplicated history of issues now emerging concerning the lease by the Tumunui Trust of Maori freehold land owned by the Whaoa Trust for 42 years from 1 June 1990. When the Tumunui Trust took over the land in question from the previous tenant it converted its use from dry stock grazing to a dairy unit and had completed this by 1 June 1990 before the lease term began.
[8] The leased land comprised part of the 529.8624 hectares owned by the Whaoa Trust. On 31 October 1985 the Maori Land Court made a recommendation that 174.0183 hectares of the said land be set aside as the Whaoa Reserve for the purposes of a timber reserve, catchment area and a place of historical interest for Ngati Whaoa. On 17 February 1986 that reserve land was set apart by Gazette notice.
[9] From 1964 the balance of the land (i.e. that which was not eventually set aside as a reserve) comprising approximately 355.72 hectares was leased by a Mr Mills, through his company, for dry stock grazing.
[10] In October 1985 and, the Court assumes, as a precursor to the events formalised by the aforesaid orders of the Maori Land Court, the Whaoa Trust and Mr Mills entered into a partial surrender of the leased area whereby occupation of an area of 174.0185 hectares was surrendered.
[11] Mr Kusabs a trustee of the Tumunui Trust deposes the Trust was informed that Mr Mills wished to quit his lease of the Whaoa Land. In discussions that followed Tumunui reached a settlement to acquire Mr Mills lease in early 1989. Mr Kusabs said it was understood that the consent of the Whaoa Trust would be required to any assignment of the lease. Mr Kusabs says extended discussions between the trustees of Tumunui and Whaoa Trusts then occurred. Both trusts were at that time represented by experienced lawyers. In that process the Whaoa Trust instructed surveyors to undertake a land survey for the purpose of defining the area to be leased by the Tumunui Trust. In the plan prepared the surveyors depicted the Whaoa Reserve as comprising 158.1600 hectares, that being 15.8583 hectares less than the area of land set aside when the partial surrender of lease occurred in 1986.
[12] On 16 November 1992 the trustees of both Trusts agreed on the terms and conditions for a new lease. A deed of lease (the Tumunui lease) was completed on
16 February 1994 and on 23 June 1994 that lease was registered. The Tumunui lease includes those 15.8583 hectares of land which belongs as part of the Whaoa reserve.
[13] The initial statement of claim pleads that at the time the Tumunui lease was negotiated Mr Edward Moke was the chairman and trustee of the Whaoa Trust and a trustee of the Tumunui Trust who owed a fiduciary duty to ensure that his duty as trustee of both did not cause any conflict of responsibilities. Contrary to the duties he bore it is pleaded that he arranged for the Tumunui Trust to take a lease of the land in circumstances which favoured Tumunui and disadvantaged Whaoa.
[14] Relief sought by Whaoa included a declaration that Edward Moke had breached his fiduciary duty to the beneficiaries of the Whaoa Trust and to the beneficiaries of the Whaoa Reserve, and therefore a declaration was sought that the Tumunui lease be set aside as a breach of the Rule against Self-dealing.
[15] The original proceeding had been set down for trial before leave was sought to file the amended statement of claim. In the meantime new counsel had been appointed to represent Whaoa.
[16] By my judgment dated 14 December 2012 I granted leave for the amended statement of claim to be filed on the basis of claims that new material had only recently been discovered by the plaintiffs which, together with the discovery already available, had enabled the plaintiffs to better plead causes of action. Also the new pleading attempted to distinguish the responsibilities of the present trustees from the defendant trustees involved when Tumunui took over their lease. As well, the estate of Mr Edward Moke was separately joined. Mr Moke died in 2003.
[17] Regarding the addition of causes of action counsel for the plaintiff submitted it was appropriate to add a pleading of a breach of trustees duties in the alternative to a pleading of breach of fiduciary duty; that a new pleading of undue influence was a “natural legal extension which recognised the controlling power that Mr Moke had within the plaintiff trust...”; and that a new pleading of knowing receipt/unjust enrichment arises from the newly discovered documents showing, it is claimed, that Mr Moke worked for the Tumunui Trusts interests by failing to provide complete information to his co-trustees of the Whaoa Trust. New causes of action under ss 80 and 81 of the Land Transfer Act 1952 arose, counsel submitted, because of the recently discovered documents which provided the necessary information showing how the loss of the 15.8385 hectares strip came about. Finally, a new cause of action relating to an alleged breach of right-of-way over the leased land to access the Reserve arises because of new factual allegations in relation to the issues involved.
[18] The defendants opposed leave to file the amended statement of claim. In large part I agreed with criticism of the plaintiffs claim and it’s pleading. The heart of the claims are assertions that Mr Moke controlled the decisions made by the two
trusts but no particulars were given about how that control was alleged to have been made or how it was claimed any undue influence was said to have been exercised. No particulars were provided of the claim that Mr Moke was the controlling decision maker within the Whaoa Trust. I considered the barest of connection could be made out to link the allegations against Mr Moke with suggestions that those were causative of the signing of the lease by the two trusts. Both trusts were in receipt of legal advice at the time.
[19] Suggestions in the plaintiffs proceedings criticising the actions of Mr Kusabs an accountant who was for a time the auditor of the Whaoa Trust, are not supported by particulars at all. Indeed it appeared there was a considerable gap between vague suggestions of influence or actions done and the pleading of particulars in support.
[20] Also Mr McKechnie drew the Court’s attention to a dispute in 2011 when the Whaoa Trust gave notice of multiple alleged breaches of lease. In the judgment of Barry Paterson QC after the arbitration that followed he noted that although the lease was not signed until after Tumunui had funded the costs of converting the property from dry stock farming to a diary unit, it is clear that the conversion had taken place with the full knowledge of Whaoa which accepted the position. Further it is clear that Tumunui would not have undertaken the conversion without the agreement of Whaoa that a 40 year lease be granted.
[21] Mr Paterson found against Whaoa and awarded significant costs in favour of
Tumunui.
[22] In part because of claims on behalf of the plaintiffs of newly discovered material, in part because the Court did not consider it was appropriate on an application for leave to consider challenges to the basic principle that the plaintiff be considered able to prove pleadings claims, and because the Court considered it too early to investigate Limitation Act issues, leave was granted to file the amended statement of claim.
Application to Strike out
[23] The defendants strike out application permits a closer analysis of an assumption of provability of pleadings, of the quality of those pleadings, and of limitation issues.
[24] In their notice of opposition the plaintiffs say:
(a) The amended statement of claim discloses reasonably arguable causes of action;
(b) The causes of action are not statute barred because they are equitable in nature, based upon equitable fraud, seek equitable relief, and have no analogous common law claims, and accordingly are governed by the doctrine of Laches;
(c) That determination of the issue of Laches requires an assessment of the relative equities of the parties, which is not possible at this stage and will require determination at trial;
(d) Issues of limitation and Laches need to be separately addressed from the perspective of the Whaoa Trust and the beneficiaries of the Ngati Whaoa Maori Reservation who are not plaintiffs in their own right and who did not consent to the breaches of trust;
(e) That the plaintiffs did not discover the information entitling them to bring their claims until December 2006 at the earliest;
(f) The plaintiffs rely on the status of Edward Moke as a Rangitira of the Iwi of Ngati Whaoa in terms of explaining the actions or inactions of his co-trustees and the plaintiffs will be asking the Court to take into account the tikanga and kawa of Ngati Whaoa in assessing their claims and this should be left for trial.
[25] In short, it is the position of the plaintiffs that in the circumstances of this case and notwithstanding the length of delay in prosecuting the proceedings, there is no clear case suitable for strike out.
The Tumunui lease
[26] The plaintiffs plead that the terms of lease included, inter alia: (a) A commencement date of 13 December 1992.
(b) The land subject to the lease was 370.9000 hectares.
(c) Rental was $45,250 per annum from 13 December 1992 to 12
December 2002.
(d) Rights of renewal for a further term of ten years from 13 December
2012 and 13 December 2022 with a final termination date being 12
December 2032.
(e) There were rental reviews every 10 years for the first 20 years and every three years thereafter.
(f) Rental was to be calculated on the basis of 5 per cent of the capital value of land but deducted from the capital value was the improvements made on or to the land since 13 December 1961.
(g) The maximum term of the lease was 40 years.
(h) At termination date, no compensation was payable to the lessee in respect of any improvements effected by the lessee upon or to the land.
[27] It is pleaded (para 80) that the terms of the Tumunui lease were favourable to the Tumunui Trust and unfavourable to the Whaoa Trust as follows:
(a) When Mr Mills surrendered his lease in favour of the Tumunui lease which provided for a termination date of 12 December 2032 the Tumunui Trust obtained a benefit of a 21 year extension to the term of the lease that Mr Mills had been entitled to.
(b) That rent payable under the Tumunui lease on 13 December 2011 until 12 December 2032 is significantly below market rental because it is calculated based on the condition of the land as at 13 December
1961 and so deprives the Whaoa Trust from the benefit of any improvements to the land for a period of 71 years from 1961.
(c) The Tumunui lease included 15.8 hectares of the Whaoa reserve land which belonged to the beneficial owners of the Whaoa Reserve Trust.
The claims against Mr Moke
[28] Regarding the role played by Mr Moke it is pleaded:
(a) That he controlled the decisions made by the trustees of the Whaoa
Trust and the Whaoa Reserve Trust.
(b) He owed fiduciary duties to the beneficiaries of the Whaoa Trust and their Reserve trust and to his co-trustees which included:
(i) To deal with the land in the best interests of the beneficiaries.
(ii) To ensure his duties as trustee of the Whaoa Trusts was not in conflict with interests of the Tumunui Trust and his personal interests as a beneficiary of that Trust.
(iii) He was not to personally profit directly or indirectly from his role.
(iv) He owed duties of confidentiality and loyalty.
(c) Mr Moke breached his fiduciary duties to the beneficiaries of the Whaoa Trusts by having an actual or apparent conflict of interest during the negotiations of the lease.
(d) That he was conflicted because he was a beneficiary, a trustee and the chairman of the Whaoa Trusts; that he was the only trustee and was Maori, a descendent of Ngati Whaoa, and a Rangitira; he was a controlling decision maker; he provided instructions to the solicitor acting for the Whaoa Trust; that he was a beneficiary of the Tumunui Trust and an agent of that Trust and held himself out as a trustee of that Trust in relation to negotiations with the lease.
(e) He used his control and decision making position to gain for the
Tumunui Trust the favourable lease terms they obtained.
(f) He withheld information from the trustees of the Whaoa Trust and its advisors or misinformed them when:
(i) He did not inform his co-trustees of the Whaoa Trust that the Tumunui Trust had negotiated a 20 year extension of the Mills lease.
(ii) He did not inform the Whaoa Trust that the reasons for Tumunui Trusts request for titles to be issued was that this was a lending requirement from their bank.
(iii) He did not inform them that the 15.8 hectares strip had been illegally cleared and fenced by Mr Mills and the Tumunui Trust.
(iv) He discouraged Mr Mills from considering transfer to another person instead of the Tumunui Trust.
(g) He failed to recuse himself from voting or taking part in the negotiations relating to the Tumunui lease when he stood to
personally benefit from that lease due to his position as a beneficiary of the Tumunui Trust.
(h) For similar reasons he did not apply to the Court allowing him to remain involved in the negotiations of the Tumunui lease.
(i) He favoured the interests of the Tumunui Trust over the interests of the beneficiaries of the Whaoa Trusts.
(j) He disregarded the interests of the beneficiaries of the Whaoa Reserve Trust in particular those who were not also beneficiaries of the Whaoa Trust in that:
(i) He failed to call a meeting to gain the beneficiaries consent to a reduction of the size of the Reserve land by 15.8 hectares.
(ii) He failed to ensure the reduction in the size of the Reserve land was carried out in a procedurally correct manner which required approval of the Court.
(iii) He caused the reserve trust to be bound by a right-of-way easement certificate which imposed financial onerous obligations upon that trust to repair, maintain, and construct the right-of-way, when the reserve trust had no funds for such works.
(iv) He failed to object to the inclusion of the 15.8 hectares strip in the Tumunui lease.
(k) The beneficiaries of the Whaoa Trusts did not consent to or acquiesce in the breaches of Mr Moke.
(l) The third defendants as personal representatives of Mr Moke’s estate are liable for his actions and for damage loss caused by him, to the extent to the assets of his estate.
(m) The second defendants acted wrongfully because they conducted the negotiations with the knowledge of Mr Moke’s breaches of fiduciary duty and the knowledge that the Tumunui Trust benefitted from those breaches.
Overview of the plaintiffs claims
[29] In overview the plaintiffs claims are that the terms of the Tumunui lease are favourable to Tumunui and unfavourable to the Whaoa Trust; that the Tumunui Trust got a lease which was at least 21 years longer than a standard farm-lease between commercial parties; and the Tumunui Trust was to pay rental significantly below market rental for the 21 year period from 13 December 2011 because the rental continues to be calculated based on the condition of the land as at December 1961.
[30] Immediately apparent from the nature of these pleadings is a lack of specific particulars pleaded in support. Rather the pleadings rely upon claims that because of his position as a trustee of competing trusts he was able to, even if he did not, influence the behaviour of fellow trustees. The focus is not so much upon the fact that he did benefit but relies upon a claim that he must have benefitted. It also seems to the Court that a number of assumptions about lease term disadvantages are qualified by little more than claims that the particular lease terms are less favourable than those of a “standard farm lease between commercial parties”.
[31] Regardless, even if Mr Moke acted in good faith for all parties concerned and even if he did not benefit from perceived inequities between the parties and even if he acted in reliance upon professional advice it is the plaintiffs position supported by submissions from Mr Chesterman and in reliance upon the authorities he referred to, that a case against him is provable – because of his dual roles as a trustee. It is that connection which is so pivotal to the plaintiffs claim and which to their mind subjects all other considerations for what the plaintiffs believe is the rightful return of their land to them.
[32] In defence of the summary judgment applications the plaintiffs rely upon their position that they are capable of proving the truth of allegations contained in their pleadings. Whilst it is claimed that Mr Moke “favoured the interests of certain beneficiaries, that he “had the capacity to influence his co-trustees...”, that he “disposed of property of the Whaoa Trust...” all are, as Mr McKechnie submits, vague and unparticularised. It is no different now than when I dealt with the matter upon the plaintiffs’ leave application. The Court’s impression is that the plaintiffs have pleaded their case as best as they will ever be able to.
[33] An important consideration in the plaintiffs’ application to file its amended statement of claim was the plaintiffs claims to have recently located other material which supported the pleading of those claims. But since, there has been no discovery of that material.
[34] Mr McKechnie asks questions about the recently discovered material which deserve an answer. Who was the secretary of the Whaoa Trust in April 2012 and how can that person explain how those recently located documents advance the plaintiffs case; where had those documents previously been? These factors notwithstanding there is nothing in the affidavit of Mr Staite on behalf of the plaintiffs that references what loss, if any, the plaintiffs might suffer if the lease was to remain in place.
[35] The plaintiffs appear content with the position that it need not make any such disclosure, merely that it has to be assumed it can prove these claims at trial.
[36] The plaintiffs submit they are able to prove the pleading that the lease obtained by Tumunui was a poor commercial bargain and does not compare with “standard farming leases” today. Reference is made to the length of the lease and of the fact that the rental payable is discounted for improvements made. There is no evidence to support these as relevant factors in standard farming leases nor can these be assumed.
[37] The plaintiffs were plainly wrong if they claim that Tumunui were responsible for the inclusion of part of the reserved land within the area leased for farming purposes.
[38] The plaintiffs claims ignore the report of its own secretary Mr Price dated 16
April 1989 wherein it is recorded:
... Tumunui... produced very impressive proposals for managing the property... It is most impressive to have a Maori Trust operating in this way.
[39] Later:
We were exceedingly fortunate in having top rate legal advice from Pat
Savage and Ross Burton, both of Davies Burton and Henderson.
[40] And later:
... Mills had renewed approaches to Tumunui. Although we are not certain what is currently taking place it appears Tumunui is showing a genuine interest in acquiring the lease.
If this is the final outcome it will prove most satisfactory for all the parties concerned.
[41] There is the following unchallenged evidence of Mr Kusabs on behalf of the defendants:
•That Mr Moke had no part of discussions between Tumunui and the lessee Mr Mills.
•Throughout Whaoa had legal advice from the Davies Burton law firm. A letter from the Whaoa secretary dated 18 July 2009 records that all of the trustees were in favour of an agreement to transfer the lease to Tumunui.
•A further letter from the secretary of the Whaoa Trust to its solicitor Mr Burton, dated 16 August 1989 acknowledges that many of the owners in the Whaoa Trust are also owners in Tumunui and that the two trusts should work together.
•Records indicate all trustees were in attendance when there was detailed discussion concerning the lease.
•The trustees agreed to the requirement by Whaoa of the engagement of surveyors in connection with the separation of the lease land.
•Tumunui were in occupation and had begun their milking operation and were undertaking building work and that although Tumunui didn’t have a signed lease, clearly the evidence indicated both parties were agreed with the arrangement.
•On 26 November 1991 Mr Burton wrote to the secretary of the Whaoa Trust enclosing documents for circulation amongst all the trustees. Those documents included the land transfer plan and details of the Maori Land Court order that was made.
• A meeting of the beneficial owners of the Whaoa land on 4 April
1992 recorded:
... a very strong effort had been required of the trust to persuade Mr Alan Mills to sell his lease to Tumunui Lands Trust instead of his individual protégé whom the trust regarded as a very insecure risk. Prospects now appeared very bright, with the land converted to a very efficient diary unit by a large and reputable concern. Many of the beneficial owners of the property were also in Tumunui and thus getting a twofold return.
• Again at a general meeting of the beneficial owners of Whaoa on 30
September 2001 the record of that meeting noted:
Eria Moke spoke briefly, reporting that the farm was in good heart and fully productive. He thanks his fellow trustees for strong support during the management of the trust’s affairs.
Peter Staite expressed appreciation of the trustees work on behalf of the owners.
[42] I agree with Mr McKechnie that in none of the documents discovered or disclosed by the plaintiffs is there any record of any of the trustees opposing the lease to Tumunui. Nor is there any record post-the signing of the lease in February
1994 of any opposition or disquiet in relation to the lease, not even when Whaoa filed their Maori Land Court claim in June 2007 because that claim was only in relation to the area of 15.8583 hectares of reserve land which had been included in part of the land being farmed. It appears common ground of the responsibility for that situation was an error of the surveyors.
[43] Overall and upon any view of the amended statement of claim there is nothing in that which is identified as being supported by any action or record identifying support of the plaintiffs generalised and unspecified claims.
[44] In recent years there has been a change in view or attitude of the Whaoa owners who face the prospect of a further 19 years before their land is returned to them. Mr Moke has been targeted as the reason why Whaoa consider it proper to take action to unwind the lease, even though there is no evidence of fault on his part and even though Whaoa were advised throughout by experienced and well respected lawyers.
[45] The plaintiffs’ faith is in principles of equity and the expectation that those can rescue them – not because Mr Moke has done anything, but simply because of the perception that he was in a position which enabled him to do something to the detriment of Whaoa.
Strike out
[46] Rule 15.1(1)(a) enables the Court to strike out all or part of a pleading where it discloses no reasonable cause of action or defence or other cause appropriate to the nature of the pleading. Pleaded facts, whether or not admitted, are assumed to be true.
[47] The jurisdiction is to be exercised sparingly and only in clear cases. The jurisdiction is not excluded where the application raises difficult questions of law, even if they require extensive argument.
Limitation considerations
[48] The Court frequently encounters strike out applications raising limitation issues. This case is essentially about limitation issues.
[49] In Murray v Morel & Co Limited 1 Tipping J held that it must be shown that the cause of action was clearly statute barred and that the plaintiffs claim can properly be regarded as frivolous, vexatious or an abuse of process. If the defendant
demonstrates a proceeding was commenced after the period allowed for a particular
1 [2007] NZSC 27.
cause of action, the plaintiff needs to show there is an arguable case for relief from the limitation provisions.
[50] Section 4(9) of the Limitation Act 1950 excludes claims for equitable relief from the time limits set out in s 4 of that Act.
[51] Section 4(9) provides:
This section shall not apply to any claim for specific performance of a contract or for any injunction “or for other equitable relief”, except insofar as any provision thereof may be applied by the Court by analogy and like manner as the corresponding enactment repelled or amended by this Act, or ceasing to have affect by virtue of this Act, has therefore been applied.
[52] Accordingly time limits in s 4 of the Act can be applied “by analogy” to claims for equitable relief, in situations where there is a relationship between proceedings in equity and at common law under which Courts of Equity would apply the common law limitation rules in certain instances by analogy.
[53] As to how to apply limitation principles by analogy Collins J in Lee v Lee 2
said:
[43] Like Associate Judge Christiansen, I believe that for the purposes of s 4(9) of the Act, analogies can be drawn between Robert Lee and Helen Heard’s claims and common law claims based on breach of contract. The task of the tort when determining limitation by analogy is to determine whether the equitable claim “parallels the statute barred claim so closely that it would be inequitable to allow the statutory bar to be outflanked by the fiduciary claim.” Johns v Johns [2004] 3 NZLR 202 (CA). In order to do so, I must “examine not only the underlying facts but also the nature of the relationship between the parties and the policy and purpose of the different courses of action.
[54] Mr McKechnie submits there are essentially two allegations contained by the plaintiffs’ proceeding i.e. one of breach of fiduciary duty and the second concerning allegations of undue influence being exerted over all other trustees so as to deprive them of the freedom of decision making.
[55] Mr Chesterman submits the case is all about self-dealing and that Mr Moke as a trustee of both trusts was in breach of the self-dealing rule. That he says is the
2 CIV 2010-463-430 [2013] NZHC 1069, Rotorua Registry.
fundamental basis of the statement of claim. Further, that in that event his breach cannot be consented to by co-trustees, only by beneficiaries and the beneficiaries consent needs to be a fully informed consent.
[56] As Mr Chesterman expressed it in his submissions to the Court a breach of the self-dealing rule represents the holy grail of equitable fraud and therefore limitation principles simply do not apply at all, much less by analogy to common law claims.
[57] Accordingly Mr Chesterman submits that at trial, all that is available to the defendants is the equitable defence of Laches. Mr Chesterman submits that Laches can only be dealt with at a full trial where there can be a balancing of the competing interests.
[58] The plaintiffs’ position is that there has been a clear case of the trustees’ control of trust property on both sides and due to the figure of Mr Moke an irresistible inference of self-dealing arises. That, Mr Chesterman submits, is why the plaintiffs have not filed any evidence because it will need a trial to properly balance the equities of the competing parties.
[59] Mr Chesterman says that the case has been pleaded in a manner to identify as plaintiffs, trustees who were at the relevant time trustees of the Whaoa Trust, and as well, as second plaintiffs, persons who were trustees and representatives of the Reserve land.
[60] Mr Chesterman submits case authority adequately supports the approach taken by the plaintiffs in their opposition to the strike out application. That opposition is not affected or influenced by claims that the plaintiffs were at all relevant times in receipt of competent legal advice; that it matters not there may be no proof of any self-dealing before the Court is provided with the trial opportunity to weigh the competing equities. Further, Mr Chesterman submits that present trustees and beneficiaries are not stigmatised by any delay in relation to the actions of prior
trustees. 3
3 Naakobi v Nzekwu [1964] 1 LR 1019 (PC) (at p1024).
Considerations
[61] The “limitation by analogy” rule operates in addition to the purely equitable doctrine of Laches. Laches permits a defendant to set up the plaintiffs delay in bringing or pursuing his or her remedy with due speed as a defence to a claim for equitable relief. Importantly, delay in commencing a suit and/or delay in prosecuting
a suit can trigger Laches. 4
[62] The issue that falls for consideration concerns whether or not the defence of Laches is only suitable for consideration at trial and not upon an interlocutory application for strike out where the only evidence for consideration is affidavit evidence.
[63] The plaintiffs’ faith in the “trial only” option is reinforced by their confidence that no affidavit evidence was required from the plaintiffs at all; that Mr Moke was a trustee of both trusts and therefore double dealing has occurred and the Court’s primary purpose will be to evaluate the consequences for Whaoa’s beneficiaries. The plaintiffs want the lease to be cancelled.
[64] The defendants’ position is that a defence of Laches can be examined upon a strike out application and if the Court considers there can be no benefit at all in the plaintiffs’ claim and if there is no excusable reason for the delay in bringing the claim then the Court can strike the claim out.
[65] No case authority has been cited to the Court where in the absence of a limitation defence by analogy, there would be the availability of Laches upon a strike out application. Mr Chesterman submits a Laches defence cannot be examined pre- trial. He relies upon the statement of Tipping J in Matai Industries Limited v
Jensen. 5 The Learned Judge said:
It must, I would have thought, be a rare case indeed where an equitable claim should be barred in limine by a finding of Laches, as opposed to an equitable bar by analogy.
4 NZ Law Society seminar paper Equitable Remedies April 2013, Dr Andrew Butler and Jessica
Palmer.
5 [1989] 1 NZLR 525 at p545.
[66] Mr Chesterman refers to the decision of Allan J in Chellew v Excell. 6 In that case the Learned Judge referred to a number of references including:
Where a trustee sells the property to himself, the sale is voidable by an beneficiary ex debito justitiae, however fair the transaction. 7
The purchase, (or lease) of trust property by a trustee is generally prohibited. This is because it places the trustee’s personal interest in conflict with a duty to the beneficiaries... 8
Where the rule has been infringed, a non-consenting beneficiary may, within a reasonable time, seek to have the sale rescinded. 9
[67] In his case Allan J held that he had no option but to apply the ordinary rule that no one who had duties to discharge could enter into an arrangement in which the fiduciary had or could have a personal interest conflicting with the interests of those whom the fiduciary was bound to protect. 10
[68] Clearly whether Laches is made out will depend on a closer analysis of the facts of each case, with an assessment of where the overall balance of justice lies.
[69] Consideration needs to be given to:
(a) The nature of the remedy sought. (b) The position of the plaintiff.
(c) Whether those prejudiced are the defendant or a third party. (d) Whether there are evidential difficulties caused by delay.
(e) The nature of the transaction involved.
(f) The length of delay including any explanation there for. 11
6 [2009] 1 NZLR 711.
7 Tito v Waddell (No.2) [1977] ch 106 at 241.
8 Dar Pont and Chambers, Equity and Trusts in Australia and New Zealand (4th ed, 2007).
9 Re Postlethwaite (1888) 60 LT 514.
10 At p.715.11 Butler, Equity and Trusts in New Zealand (2nd ed, 2009) at p. 1060.
[70] Laches is a personal defence and this means a trustee need not be stigmatised by the actions of a prior trustee.
[71] Although brought by the trustees of the Whaoa Trust and the Reserve trust, it is represented that the claim is brought for the beneficiaries even though the trustees and even Mr Staite may in the past have endorsed the actions of prior trustees. Despite this it is said the beneficiaries have never been consulted and as a group have never been asked to approve any actions at all in relation to the creation of the Tumunui lease. Notwithstanding, it has not been identified by pleading or otherwise how exactly they have been disadvantaged by the actions of their trustee representatives. Indeed, without this claim of a separate interest of the beneficiaries it is not clear on what basis the claims of the Whaoa trustees could have been brought at all.
[72] Regardless, Mr Chesterman submits there is clear authority that allegations of self-dealing will stand and are not amenable to strike out even if:
(a) There is no evidence of fairness or unfairness of the transaction entered into. 12
(b) No loss or harm has been suffered by a beneficiary. 13
(c) The trustee acts honestly and his actions provide a benefit for the beneficiaries. 14
[73] Mr Chesterman refers to the case of re Thompson’s as an example of a case of a trustee being on both sides of a transaction where Vinelott J concluded: 15
It is clear that the self-dealing rule is an application of the wider principle that a man must not put himself in a position where duty and interest conflict with his duty to another... The principle is applied stringently in cases where a trustee concurs in the transaction which cannot be carried into effect without his concurrence and who also has an interest in or holds a fiduciary duty to another in relation to the same transaction. The transaction cannot
12 Aberdeen Railway Co v Blaikie Brothers (1854) 1 MacQ 461 at p472.
13 Dal Pont and Chalmers, Equity and Trusts in Australia and New Zealand (4th Ed), p570.
14 Equity and Trusts at p497.15 [1985] 2 All ER 720 at p730
stand if challenged by a beneficiary because in the absence of an express provision in the trust instrument the beneficiaries are entitled to require that the trustees act unanimously and that each brings to bear a mind unclouded by any contrary interest or duty in deciding whether it is in the best interests of the beneficiaries that the trustees concur in it.
[74] Mr Chesterman refers to the authority of Wong v Burt 16 in support of the proposition that it is no defence to an action for breach of trust for a trustee to claim that he acted in good faith or on the legal advice of counsel.
[75] Mr Chesterman acknowledges that although the primary focus of the plaintiffs proceeding is to have the Tumunui lease rescinded, it will be available to the Court to consider an order for payment of compensatory damages as well as or instead of rescission of the lease.
[76] Mr Chesterman submits that the pleadings identifies damage suffered by the first and second plaintiffs as follows:
(a) First plaintiffs: the rent paid under the lease is significantly below market rates and on its terms are favourable to the first and second defendants.
(b) Second plaintiffs: 15.8 hectares of reserve land was included in the lease and must be returned with compensation paid.
Conclusions
[77] In appropriate cases Courts can examine whether a party ought to be able to pursue claims for equitable relief in situations where delay has occurred which might or has caused prejudice and where the overall interests of justice are threatened. In cases where the equitable relief sought is analogous to an available common law remedy, the Court has been prepared to strike out a proceeding where the delay was
greater than the period of time permitted in an analogous common law case.
16 [2004] NZLR 91 at 99.
[78] The plaintiffs’ position is that time limits do not apply in this case because the only available defence is Laches in the absence of any analogous common law remedy. It follows that regardless of any circumstances affecting the appointment of a person as a trustee of one’s trust whilst he holds a similar position with another trust, all decisions of either trust may, even beyond the foreseeable future, be challengeable if at that later time it is perceived by either trust that they were then disadvantaged in connection with an arrangement that all trustees of both trust entities representing all of the landowner beneficiaries of the land in the control of the trusts were perfectly happy with when the decision in question that was made. It matters not it seems that a majority of the Whaoa beneficiaries (who numbered about
200) were also beneficiaries of the Tumunui trust (whose members numbered more than 4000).
[79] It is the plaintiffs’ case that at the end of the enquiry if they are to succeed it will be because the balancing of equities has favoured it. They say that if that is to be the outcome then, as case authority has identified, the Courts will not be distracted by considerations of honesty, proprietary or receipt of good advice.
[80] But, this Court considers there ought to be a sufficient case available to warrant the Court acknowledging there are competing equities needing balance. With respect to the plaintiffs in this case this Court does not consider an appropriate case has been made out.
[81] More is required of pleadings than general allegations of impropriatory. In this case those allegations appear improbable or extravagant. What is provided is inadequate.
[82] The case is about a lease the terms of which were engaged by all after an extensive process of review. Claims of influence by Mr Moke are not supported by any evidence at all.
[83] It involved Tumunui taking bare land which it improved and maintained at considerable expense thereafter, and for which it provided significant added value
for the purpose of running a dairy farming activity and at the end of the lease Whaoa will receive the benefit of all improvements free of any cost.
[84] Claims of a poor lease bargain are not explained by reference to any material or evidence.
[85] The parties’ business arrangement has endured for about 18 years until this proceeding was filed.
[86] What is significant is that the plaintiffs have had access to the records of their trust and they say there has been recently discovered material that has assisted them to better able plead their case. Yet, there is no reference to evidence which has been discovered which is relied upon in support of their allegations. Obviously it does not exist.
[87] There ought to be some responsibility upon a plaintiff to provide pleadings that identify some lawful purpose in the outcome. Such is not evident in this case. Any perception of a need for the balancing of equities does not appear to be identified by recourse to a properly identifiable reason.
[88] Mr Moke died 10 years ago. His estate representatives contacted Mr McKechnie shortly prior to this hearing. They have had insufficient time to instruct counsel. They support the strike out applications. The plaintiffs sue Mr Moke’s estate to recover the losses it is claimed have occurred due to Mr Moke’s actions more than 20 years ago.
[89] The import of the plaintiffs case is that Laches should not provide a defendant with any means to challenge the adequacy of a plaintiffs case which pleads that because of perceptions of double-dealing a plaintiff is entitled to a trial hearing to assess whether the equities of both sides need rebalancing. It is the Court’s view that where all available evidence is likely to be subject to written record and when there has been a lapse in time of 20 years and because the two trusts concerned unanimously embraced a business arrangement which is continuing and which had not before now been challenged, that it is proper for a consideration of the
defence of Laches when it appears the plaintiffs have no evidence available or likely to become available to support pleadings of reasons which are vague and uncertain.
[90] Whilst recourse to the defence of Laches usually requires a thorough examination of competing equities it may however be appropriate for a Court to conclude that, pleadings notwithstanding, there is simply no suggestion of evidence available to the plaintiffs to prove its case. By their strike out application the defendants have clearly placed in issue the question of the sufficiency of evidence to support the pleadings.
Judgment
[91] The plaintiffs proceeding will be struck out against all defendants. [92] Costs are reserved.
Associate Judge Christiansen