Stratford v Moses
[2021] NZHC 3473
•15 December 2021
IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY
I TE KŌTI MATUA O AOTEAROA TE TIHI-O-MARU ROHE
CIV-2021-476-40
[2021] NZHC 3473
UNDER the Trusts Act 2019 IN THE MATTER
of the Stratford Investment Trust
BETWEEN
BRIAN GEORGE STRATFORD, as
beneficiary and former trustee of the Stratford Investment Trust
Plaintiff
AND
JULIET MOSES, DAVID STUART VANCE
and LYNN STRATFORD, as trustees of the Stratford Investment Trust
First Defendants
AND
JULIET MOSES
Second Defendant
Hearing: 13 December 2021
(Telephone Conference)
Counsel:
D A T Chambers QC and M M Gray for Plaintiff
P J Hunt and D P Turnbull for First-named First Defendant and Second Defendant
J W A Johnson and J I Taylor for Third-named First Defendant J P Bell-Connell for Second-named First Defendant
Judgment:
15 December 2021
2ND RULING OF ASSOCIATE JUDGE LESTER
STRATFORD v MOSES (2nd Ruling) [2021] NZHC 3473 [15 December 2021]
[1] This Ruling follows an earlier Ruling issued 7 December 2021, and should be read with that Ruling.1
[2] Brian Stratford (Brian) and the now third-named first defendant, Lynn Stratford (Lynn), separated in July 2020. Their separation has been described by Ms Chambers QC, counsel for Brian, as acrimonious.
[3] The substantial farming assets established by Brian and Lynn were transferred to the trustees of the Stratford Investment Trust in 2015 (the Trust). At establishment, Brian and Lynn were trustees along with Ms Moses. In substance, this proceeding is a dispute between Brian and Lynn.
[4] Under the Trust, Lynn has the power to remove and appoint trustees. Lynn exercised that power to remove Brian as a trustee in 2020. After these proceedings were issued, Ms Moses resigned as a trustee and Lynn appointed Mr David Vance as a new independent trustee.
[5] While at the telephone conference held on 6 December 2021 Ms Chambers did not impugn Mr Vance’s integrity, Brian remains critical of his appointment. Mr Vance was added as a party in the 7 December 2021 Ruling.
[6] On 23 November 2021, Brian filed an application which sought the appointment of a receiver to administer the Trust or, in the alternative, that Court-appointed trustees be appointed and/or that Ms Moses and Lynn’s powers as a trustee be constrained.
[7] By memorandum dated 1 December 2021, Ms Chambers sought a hearing of that application before the end of year. That application for urgency was declined in the 7 December 2021 Ruling – in part because the appointment of Mr Vance was a practical control on Lynn’s powers as trustee. At the 6 December 2021 telephone conference, Ms Chambers asked that if an urgent hearing was not available that a date early in the New Year be allocated.
1 Stratford v Moses [2021] NZHC 3337.
[8] By Minute dated 8 December 2021, I advised counsel that a one day hearing was available on 8 February 2022.
[9] On 10 December 2021, Brian filed an amended statement of claim and an amended interlocutory application deleting the request to appoint a receiver but asking the Court for orders:
1.Securing preservation of the Stratford Investment Trust’s current Trust assets (“trust fund”) until final determination of the substantive proceeding (“2021 proceeding”) via orders/directions:
1.1Appointing interim Court appointed trustees and/or suspending David Vance (“David”) and Lynn Stratford’s (“Lynn”) powers to make any decision affecting the trust in any way; or
1.2In the alternative, precluding David and Lynn, or any person related or connected or associated with David or Lynn from acting in any way contrary to schedule 1 without prior Court approval; and/or
1.3As the Court considers appropriate.
2.Preventing Lynn from exercising her power to appoint and remove trustees of the Stratford Investment Trust.
(“Brian’s application”)
[10] Prior to the amended statement of claim, counsel for Lynn, Mr Johnson, had applied to strike out part of the statement of claim. The challenged aspect of the claim was not carried over into the amended claim and one of the issues to be addressed in this Ruling is the costs arising from that strike out application.
[11] The first call date for both the strike out application and for Brian’s original application was 13 December 2021. Both matters were removed from the Timaru List and dealt with at a telephone conference held on the afternoon of 13 December 2021.
The following matters needed to be addressed:
(a)the joinder of Lynn in her personal capacity;
(b)costs on the application to strike out;
(c)whether an undertaking in damages should be provided by Brian;
(d)whether a challenge to the evidence of a Mr Noone relied on by Brian should be heard prior to the hearing of Brian’s amended application to remove or restrain the powers of the existing trustees;
(e)whether in hearing Brian’s application there should be cross-examination of witnesses; and
(f)Mr Vance as an independent trustee wishes to bring application for a Beddoe order and wants that determined before the hearing of Brian’s application.
[13]I now deal with each of those matters.
Joinder of Lynn in her personal capacity
[14] I am satisfied it is appropriate that Lynn be joined to the proceeding in her personal capacity and there is an order accordingly under r 4.56 of the High Court Rules 2016 (the Rules).
[15] Ms Chambers complains that Lynn, in her capacity as trustee, is conflicted yet she opposed Lynn being involved in any capacity other than as a trustee. Ms Chambers also makes the point that it is Lynn’s actions as trustee that are in issue, not her conduct personally.
[16] As noted, the true contest in this proceeding is between Brian and Lynn. Lynn should be a party in her personal capacity so that she can take steps to protect her own interests but without being subject to the criticism that she is in a conflict of interest situation when acting as trustee of the Trust. Further, Mr Johnson notes that the relief sought at cl 2 of Brian’s application (set out at [9] above), seeks to restrain Lynn’s personal power of appointment. It is submitted this means she needs to be a party in her personal capacity as her power of appointment is not held by her as a trustee.
[17] Further, the amended statement of claim seeks an order that Lynn “pay equitable compensation in the amount of the loss of Trust profit caused by her breaches of trust”. This order would impact on Lynn personally and as such she should be joined personally.
[18] Mr Johnson, in a memorandum dated 10 December 2021, notes that if Lynn is added as a beneficiary she could then as a trustee take a neutral role.
[19] I agree with these observations and there is an order that Lynn is joined in her personal capacity as third defendant.
Costs on application to strike out part of the statement of claim
[20]Rule 14.8 of the Rules provides:
14.8 Costs on interlocutory applications
(1)Costs on an opposed interlocutory application, unless there are special reasons to the contrary,—
(a)must be fixed in accordance with these rules when the application is determined; and
(b)become payable when they are fixed.
(2)Despite subclause (1), the court may reverse, discharge, or vary an order for costs on an interlocutory application if satisfied subsequently that the original order should not have been made.
(3)This rule does not apply to an application for summary judgment.
[21] This rule applies in this situation. Costs should follow the event – the event here is that the challenged aspect of the statement of claim was deleted on the amended claim. I agree in substance that Lynn has succeeded on that point.
[22] Ms Chambers submits that the application was filed prematurely. In response, Mr Johnson says it is unclear how it was filed prematurely. He submits: “The plaintiff filed a statement of claim seeking relief that was not plausibly available to him and [Lynn] sought to strike out that part”.
[23] However, Mr Johnson confirmed at the 13 December 2021 telephone conference there had been no “letter before action” before the strike out was filed.2 He suggested such could be reflected in a discount to scale costs.
[24] Given the “no holds barred” approach taken to these proceedings so far, I am satisfied that there is no basis to depart from the normal rule that costs follow the event. Whether a call to delete the challenged passages from the statement of claim would have been complied with is unknown. There is an award of costs in Lynn’s favour on a 2B basis less 25 per cent in respect of the application to strike out dated 1 December 2021 which I record is withdrawn.
Undertaking in damages
[25] The issue of an undertaking in damages was addressed in the earlier Ruling when the appointment of a receiver was sought. Even though the order seeking the appointment of a receiver has been removed from the amended pleading, I am satisfied that an undertaking in damages is still required.
[26] The orders set as set out at [9] are injunctive in nature. The revised application seeks the interim appointment of trustees and/or the restraining of the current trustees. An undertaking is appropriate as those steps granted have the potential to cause loss to the Trust and as such, Brian should stand behind the orders he seeks.
[27]An undertaking is to be provided within five working days.
Evidence of Mr Noone
[28] Mr Johnson foreshadows the making of an application that parts of Mr Noone’s evidence not be read on the basis that it contravenes s 57(1) of the Evidence Act 2006. That application has not been filed. There is nothing preventing Lynn’s counsel at the hearing asking the Judge not read the allegedly inadmissible passages. That does not require a formal application and hearing. It would be sufficient for Lynn’s counsel to file a memorandum identifying the offending passages and the basis on which they should not be read.
2 Morrell v World Solar Ltd [2018] NZHC 518 at [22].
Cross-examination of deponents
[29] Mr Johnson also foreshadows makng an application to cross-examine the deponents who have filed affidavits in support of Brian’s amended application. That cross-examination application has not been filed.
[30] As Ms Chambers notes, that application would have to meet r 7.28 of the Rules. I note McGechan on Procedure refers to William J’s suggestion that a party seeking to cross-examine should file particulars of what it seeks to cross-examine and provide a proper basis for the application.3
[31] Again, in the absence of an application before the Court, I make no directions in respect of this point. Cross-examination would mean Brian’s application could not be dealt with in a day. Mr Johnson did not press this issue at the 13 December 2021 telephone conference.
Beddoe application by Mr Vance
[32] Mr Vance is an independent professional trustee of the Trust. He wishes to bring an application for a Beddoe order for certainty around his fees. Given the acrimony between Brian and Lynn, such is sensible. The difficulty the Court faces is it is not practical to determine a Beddoe order application that has not yet been filed prior to the proposed hearing date of 8 February 2022.
[33] I put to Ms Chambers that if she wished to retain the hearing date of 8 February 2022, her client should agree that Mr Vance’s costs can be paid from the Trust assets until the determination of that application. That will mean Mr Vance can participate in a meaningful way in the hearing with security (albeit interim), as to his costs. It also will mean Brian secures the early hearing date that he seeks and the parties are then free to deal with the Beddoe order application when it is made. The arrangement will, of course, be without prejudice to the parties’ position on the Beddoe application.
3 Andrew Beck and others (eds) McGechan on Procedure (online ed, Thomson Reuters) at [HR7.28.02], citing Auckland City Council v Auckland City Electric Power Board HC Auckland CP26/93, 10 June 1993 at [11]..
[34] Ms Chambers was prepared to agree to that course, as was Mr Vance’s counsel, Mr Bell-Connell. However, both counsel wished to confirm the position with their clients.
[35] The effect of the proposal is there would be what amounted to an interim Beddoe order until the determination of Brian’s application. If such is not agreed then the 8 February 2022 hearing will not be possible as the Court is not prepared to commit Mr Vance to that hearing without certainty as to his fees. Ms Chambers and Mr Bell-Connell are to confirm agreement on this point as soon as possible and no later than 4 pm on 17 December 2021.
Directions as to service
[36] Whether this proceeding should have been filed with directions as to service remains alive. It cannot be dealt with prior to the 8 February 2022 hearing date (which is confirmed) subject to the interim Beddoe order being confirmed. Whether directions as to service are still required will be addressed at the first case management conference.
[37] Ms Chambers is to file submissions, not more than five pages, on this issue 10 working days before the first case management conference. Any reply on that point to be filed five working days prior.
Timetable directions
[38]The following directions are made:
(a)Lynn’s opposition to Brian’s application and evidence in support to be filed and served by 15 December 2021;
(b)Lynn’s memorandum identifying the parts of Mr Noone’s affidavit that are objected to and the grounds relied on to be filed and served by 21 December 2021;
(c)Mr Vance’s opposition to Brian’s application and affidavits in support to be filed and served by 23 December 2021;
(d)Brian’s reply evidence to be filed and served by 21 January 2022;
(e)Brian’s submissions in support of his application to be filed and served by 25 January 2022;
(f)Lynn’s submissions in reply to be filed and served by 1 February 2022; and
(g)Mr Vance’s submissions and any reply, strictly in reply, to be filed and served by 1 February 2022.
Associate Judge Lester
Solicitors:
Tavendale and Partners, Christchurch (for Plaintiff)
McElroys, Auckland (for First-named First Defendant and Second Defendant) Wynn Williams, Christchurch (for Second-named First Defendant)
Copy to counsel:
D A T Chambers QC, Barrister, Auckland (for Plaintiff)J W A Johnson, Barrister, Auckland (for Second-named First Defendant)
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