Stratford v Moses
[2021] NZHC 3337
•7 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 3337
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 and LYNN STRATFORD,
as trustees of the Stratford Investment Trust First Defendants
AND
JULIET MOSES
Second Defendant
Hearing: 6 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 Second-named First Defendant J P Bell-Connell for Mr David Vance (non-party)
Judgment:
7 December 2021
RULING OF ASSOCIATE JUDGE LESTER
STRATFORD v MOSES [2021] NZHC 3337 [7 December 2021]
[1] In July 2020, the plaintiff Mr Brian Stratford (Brian), and the second-named first defendant, Lynn Stratford (Lynn), separated.
[2] Brian issued these proceedings on 15 October 2021. On 23 November 2021, Brian filed an interlocutory application seeking the following orders:
1.1Appointing a receiver to administer the trust until final determination of the 2021 proceeding, with:
(a)The receiver having any additional power conferred on liquidators under the Companies Act 1993 … that the Court considers appropriate;1
(b)Leave reserved for any party or the receiver to apply to the Court for any additional power considered reasonable; or
1.2In the alternative, appointing interim Court appointed trustees and/or suspending Juliet Moses, and Lynn Stratford’s powers to make any decision affecting the trust fund in any way; or
1.3In the alternative, precluding Juliet Moses (“Juliet”) and Lynn Stratford (“Lynn”), or any person related or connected or associated with Juliet or Lynn from acting in any way contrary to schedule 1 without prior Court approval; and/or
1.4As the Court considers appropriate.
[3] The application was given a first call date of 13 December 2021 in the Timaru High Court miscellaneous list.
[4] On 1 December 2021, Ms Chambers QC, counsel for Brian, sought by memorandum that the application be set down for an urgent hearing.
[5] I note here that when Associate Judge Paulsen reviewed the interlocutory application, he issued a Minute on 29 November 2021 saying he did not see any urgency in relation to the matters raised in the application. However, with the full memoranda filed, the application for urgency was considered at a telephone conference on 6 December 2021.
1 For example, power pursuant to ss 261 – 267 and 273 – 274 of the Companies Act 1993, as if the trust were a company in liquidation and the settlor and trustees (past and present) were the directors of a company and the beneficiaries of the trust were shareholders of a company in liquidation.
Test for urgency
[6] I adopt the submissions of Mr Johnson, counsel for Lynn, on the applicable principles, which were not disputed by Ms Chambers.
[7] The principles to be applied in considering applications for priority fixtures were summarised in Gavin v Powell.2 They are relevantly:
(a)the Court has a broad discretion to allocate a priority fixture if it is satisfied that it is just in all the circumstances to do so;
(b)the Court will not grant a priority fixture unless the applicant presents strong evidence justifying such an order;
(c)the factors that may justify the granting of a priority fixture must be exceptional, going beyond the usual hardship experienced by a litigant, including compassionate grounds, impending financial disaster, health problems, and the public interest or the interests of children;
(d)the lack of preparedness of the matter for trial is a significant factor in the Court declining an application for a priority fixture.
[8] Urgency is advanced essentially on the ground that Lynn is in a position of conflict, and given that Brian and Lynn’s separation is acrimonious, there is concern that major distributions to the beneficiaries could be authorised or decisions will be made that cannot be easily unwound. Further, there is concern that assets will be dissipated. The memorandum where urgency is sought was prepared on the basis that Juliet Moses (Juliet) and Lynn were the trustees of the Trust. However, the memorandum does refer to the appointment of Mr David Vance (Mr Vance) as a trustee, which I refer to below.
[9] At the telephone conference on 6 December, Ms Chambers confirmed the relief sought in order 2 of the application would not be included in the hearing if
2 Gavin v Powell [2020] NZHC 1224 at [25].
urgency was granted. Any relief sought against beneficiaries will require them to be joined and that has not yet occurred.
[10] As to orders 1.2 and 1.3 (set out above at [2]), so far as they refer to Juliet, she has resigned as trustee. Accordingly, the orders sought against Juliet in the application are now redundant.
[11] When Juliet retired as trustee, Lynn appointed Mr Vance as an independent trustee on 15 November 2021. Mr Vance was represented at the telephone conference on 6 December 2021 by Mr Bell-Connell. Mr Vance’s qualifications and experience as both a receiver and an independent trustee, often in situations where family relationships have deteriorated, are not in dispute. Significantly, Ms Chambers expressly confirmed that Mr Vance’s integrity was not being impugned.
[12] Despite that express acknowledgement, Ms Chambers submitted that Mr Vance’s appointment was in some way tainted by association, after having been appointed by Lynn who holds the power of appointment. The submission (while not put this way), seemed to be that the animosity between Lynn and Brian would somehow have rubbed off on Mr Vance’s appointment. She went so far as to say that had there been the courtesy of a telephone call to say Juliet was resigning and that it was intended a new independent trustee would be appointed, that might have helped. The complaint seems to be as much about a lack of consultation and Lynn using her powers of appointment without prior reference to Brian, rather than any particular concern about whether Mr Vance is a suitably qualified independent trustee.
[13] The telling submission in reply from Mr Johnson was that if Mr Vance’s integrity was not impugned then his independence cannot be an issue. This submission was not replied to. In my opinion, Mr Johnson’s submission must be correct. As Mr Bell-Connell put it for Mr Vance, there is no suggestion that Mr Vance cannot fulfil his duties as an independent trustee.
[14] With an independent trustee being in place, Lynn has in a practical sense, through exercising her power of appointment, achieved the objective of orders 1.2 and
1.3 of the application as Lynn cannot act unilaterally and can only act with the consent of the independent trustee.
[15] Further, with the safeguards of the independent trustee and the other safeguards I refer to below in place, the need for the urgent appointment of a receiver falls away. I have no doubt that if Mr Vance has any concerns about the operation of the Trust he will bring those to the attention of the Court and Ms Chambers.
[16] The other safeguards just noted are that Lynn has provided undertakings relating to giving Brian notice of any proposed distributions, asset sales, or to vary or resettle the Trust and those undertakings remain in place. Further, Brian has notices of claim over the farm land meaning no sales can take place without knowledge about a sale and the notices being removed.
[17] There is no suggestion that Lynn has not been even-handed in terms of Trust property since the separation. Indeed, Mr Johnson submitted the balance may favour Brian.
[18] Ms Chambers did not suggest the parties had not been treated equally financially but she referred to Brian having been “given the boot” after having run the farms held by the Trust for some 50 years. In a sense, that submission simply highlights the passage of time since the parties separated in July 2020, with the proceedings having been issued in October 2021 and the application made on 23 November 2021 without a request for urgency.
[19] Accordingly, the idea that urgency was required because Brian had been excluded from the farm property is not borne out by the fact urgency had not been sought previously.
[20] A further issue relied on in Brian’s application for urgency is the February 2022 harvest. There is a cropping farm in mid-Canterbury owned by the Trust due to begin harvest in February 2022. Approximately $5,000,000 of crop needs to be harvested within the four-week harvest. The submission is that due to the acrimony between the parties, there is a real risk there will not be enough people to carry out the harvest. It
is said that Lynn and Juliet have prevented Brian from being involved with the farms, including the upcoming harvest.
[21] Mr Mark McCully is the farm manager of the cropping farm. He has been manager of the property for eight years. In his affidavit he emphasises the need to have sufficient and skilled staff for the harvest. Mr McCully says he would benefit from Brian’s involvement and advice. That can be contrasted with Mr McCully’s observations about Brian’s input into the 2021 harvest. On 16 March 2021, Mr McCully reported in his crop report as follows:
Brian has had the lowest involvement this harvest that he has ever had. It was like he didn’t want to be there. The staff saw this which wasn’t helpful. Unfortunately I had to disregard most of his suggestions of what we should be doing over the last few months as he was unaware of what was fully going on. I am unsure if his attitude was deliberate to upset harvest or if he is lost in the separation. He came to the farm on Sunday for our last day harvesting clover and seemed in a good space.
[22] The material filed on behalf of Lynn advises there are currently nine and a half staff employed or contracted for the 2022 harvest together with two reserves, compared with eight staff for the 2021 harvest.
[23] The enquiries made by the independent trustee show he is satisfied there is no risk to Trust assets. Mr Vance, in an email of 3 December 2021, says:
Concern has also been raised around the operations of the farms, particularly the Cropping operation. These centre around the preparation of the business to harvest the crops at the end of summer. This concern is a farming operational concern and one which needs to be addressed by the directors and management of the farming business. Notwithstanding this position, as a Trustee of the Trust that owns the vast majority of the farms I have spoken to both directors about this issue (Lynn and Mark Darrow). Both have expressed their comfort where the arrangements currently sit. The harvest was achieved last year without Brian being the main organiser and only being intermittently on farm, staffing is in place to manage the harvest, with experienced parties managing the process (Nick G and Mark M).
[24] I note here that Mr Mark Darrow is an independent director of the farming company.
[25] The memorandum for Brian seeking urgency did not explain how the appointment of a receiver of the Trust would solve any alleged staffing issues in
relation to the harvest being operated by the farming company. Brian was trespassed by the farm by Mr Darrow. Absent the receiver taking steps to remove Mr Darrow as a director and appointing a further director who would reverse the trespass order, it is hard to see how the appointment of a receiver will permit Brian back onto the property. At the end of the day, the latest material before the Court is that there is adequate staff organised for the 2022 harvest.
[26] In short, I am satisfied the circumstances do not warrant the allocation of a priority fixture. The strong evidence justifying urgency is not present.3 Priority fixtures are exceptional and require circumstances going beyond the usual hardship experienced by a litigant. Further, the lack of preparedness of the matter for trial is a significant factor in the Court declining an application for urgency.
[27] Again, this dispute has been on foot since July 2020, the trespass notice was issued in April 2021 and the proceedings were filed in October 2021, and it was only very recently that urgency has been sought.
[28] With the undertakings that are in place and the independent director and trustee in place, there is no risk of dissipation of assets. Undoubtedly, the relationship between Brian and Lynn has broken down, but such of itself does not justify urgency.
[29]The informal application for urgency is declined.
Remaining procedural issues
[30] In his memorandum, Mr Johnson identified the recent authority of Armani v Armani as authority for the proposition that an interim application to appoint a receiver of a trust is akin to an injunction and therefore requires an undertaking in damages.4 Ms Chambers accepted that requirement and will provide an undertaking in damages by Friday 10 December 2021.
3 Gavin v Powell, above n 2, at [25].
4 Armani v Armani [2021] NZHC 3145 at [59].
[31] With Juliet having resigned as a trustee and with it appearing that the only relief against her related to her removal, her counsel, Mr Hunt, sought that she be removed as a party. I was prepared to make that order but Ms Chambers asked that I defer doing so until she could reflect on the consequences of that step. However, in the meantime, Mr Vance is added as a first defendant. Ms Chambers is to, by Friday 10 December 2021, file a memorandum as to the grounds upon which Juliet should remain the first-named first defendant given no further relief is sought against her.
[32] Given I have declined the application for urgency, if Brian wishes to pursue the relief against the beneficiaries then they will need to be joined as parties. Ms Chambers is to reflect on the need for directions as to service generally.
[33] This proceeding remains listed for first call on 13 December 2021. The timeframe for the filing of papers in opposition is extended to Friday 10 December 2021.
Costs
[34] Costs are reserved. I will advise counsel shortly of possible hearing dates in the New Year.
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)