Terry v Terry
[2022] NZHC 1721
•19 July 2022
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE
CIV-2021-454-73
[2022] NZHC 1721
IN THE MATTER of the Dennis Terry Trust and the Christine Terry Trust UNDER
the Trusts Act 2019
BETWEEN
NIGEL AMESBURY TERRY
Plaintiff
AND
CHRISTINE MARY TERRY, ROSS JOHN HADWIN, WILLIAM
KENNETH RAMSEY-EVANS, as trustees of the Dennis Terry Trust
First Defendants
AND
CHRISTINE MARY TERRY, ROSS JOHN HADWIN and WILLIAM
KENNETH RAMSEY-EVANS as trustees of the Christine Terry Trust
Second Defendants
Hearing: 27 June 2022 Appearances:
G Mason for Plaintiff/Applicant
P J Reardon for First Defendants (no appearance required) P Chisnall for Respondents
D Sheppard for S D Terry, Interested Party (no appearance required)
Judgment:
19 July 2022
JUDGMENT OF ASSOCIATE JUDGE LESTER
(Initial Disclosure Application)
TERRY v TERRY [2022] NZHC 1721 [19 July 2022]
[1] The plaintiff applies for an order that the second defendant trustees (the trustees) produce, as part of their initial disclosure documents, the documents they refused to provide to the plaintiff when requested under the Trusts Act 2019 (the Act).
[2] The plaintiff is the son of Christine Mary Terry (Christine) and the late Dennis Terry (Dennis) and is a discretionary and final beneficiary of the Christine Terry Trust (the CTT).
[3] The Dennis Terry Trust and the CTT (the Trusts) were settled by Dennis and Christine respectively. Dennis died in 2017. Christine is the executor of Dennis’ estate.
[4] The Trusts ultimately own a farming enterprise in which the plaintiff, in his own right, has an interest. There are disputes between the plaintiff and Christine in relation to the management of the farm and the future of its assets, the Trusts and Dennis’ estate.
[5] The statement of claim seeks the removal of the existing trustees from the Trusts and their replacement with the Public Trust.
[6] The plaintiff, prior to issuing these proceedings, requested from the second defendants the following information:
(a)a copy of the Trust Deed for the CTT;
(b)copies of the CTT’s financial statements for the financial years ending 2016 to 2021 (save for the 2018 year) from the CTT; and
(c)details of the recipient of $105,000 distributed to an unidentified recipient in the financial year ending 2018.
[7] The request was made pursuant to s 52 of the Act. The trustees declined to provide the information. Recently, a copy of the CTT Trust Deed has been provided to Mr Mason, counsel for the plaintiff, along with a response to query [6](c) above.
Accordingly, it is only the accounts for the CTT Trust that are now subject to this application.
[8] In relation to the refusal to provide the above information, the plaintiff seeks the following order in this proceeding:
Review of the decision of the Defendants in their capacity as trustees of the CTT not to provide a copy of the Trust Deed, and the CTT’s financial statements for the years from financial year ending 31 March 2016 (excepting 2018 already disclosed) and details of the recipient of the $105,000 distributed in financial year ending 2018 to the Plaintiff pursuant to s 126 and s 127 Trusts Act 2019 or pursuant to this Honourable Court’s inherent jurisdiction.
[9] The relief sought in the statement of claim is partly overtaken by the recent disclosure by the trustees of the CTT.
[10] In their statement of defence, the second defendants said they considered the plaintiff’s request for the information against the factors set out in s 53 of the Act and resolved not to provide the plaintiff with the information he sought in relation to the CTT other than the basic information required by the Act.
[11] This proceeding is at an early stage, having been filed in December 2021. The statement of defence was filed at the end of February 2022. The second defendants provided initial disclosure which, as is the norm, was not filed. The plaintiff says the second defendants’ statement of defence refers to the Trust Deed for the CTT and the financial statements sought by the plaintiff, but the second defendants failed to include those documents in their initial disclosure. The issue in this application is whether the second defendants were obliged to include the information requested by the plaintiff in their initial disclosure.
Initial Disclosure
[12]Rule 8.4 of the High Court Rules 2016 (the Rules) provides:
8.4 Initial disclosure
(1)After filing a pleading, a party must, unless subclause (2) applies, serve on the other parties, at the same time as the service of that pleading, a bundle consisting of—
(a)all the documents referred to in that pleading; and
(b)any additional principal documents in the filing party's control that that party has used when preparing the pleading and on which that party intends to rely at the trial or hearing.
(2)A party need not comply with subclause (1) if—
(a)the circumstances make it impossible or impracticable to comply with subclause (1); and
(b)a certificate to that effect, setting out the reasons why compliance is impossible or impracticable, and signed by counsel for that party, is filed and served at the same time as the pleading.
(3)A party acting under subclause (2) must, unless the other parties agree that initial disclosure is not required, or that a longer period is acceptable, either serve the bundle referred to in subclause (1) within
10 working days from the service of the pleading or apply for a variation of that requirement within that period.
(4)If a party fails to comply with subclause (1) or (3), a Judge may make any of the orders specified in rule 7.48.
(5)Despite subclause (1), a party does not need to disclose any document in which the party claims privilege or that a party claims to be confidential.
(6)Despite subclause (1), a party does not need to disclose any document that either—
(a)is the subject of a claim of public interest immunity; or
(b)is reasonably apprehended by the party to be the subject of such a claim.
(7)Despite subclause (1), a party does not need to include in a bundle served by that party any document contained in a bundle already served by any party or any document attached to an affidavit already filed in court.
(8)The bundle of documents may be served either electronically or as a bundle of copies in hard copy form.
(9)If an amended pleading is filed prior to the making of a discovery order, this rule applies to that amended pleading if it either—
(a)refers to documents not referred to in any earlier pleading filed by the party who files the amended pleading; or
(b)pleads additional facts.
[13] The plaintiff submits the second defendants did not claim confidentiality for the information he seeks in this application when the second defendants provided their initial disclosure and are therefore obliged to provide the documents sought.
[14] In opposition, confidentiality for the documents is claimed and the substance of the second defendants’ opposition is summed up as follows:
The plaintiff in this proceeding is applying for review of the trustees’ resolution not to provide trust information (including the Deed and Financial Statements). It is premature for the issue of the plaintiff’s access to the Deed and Financial Statements to be resolved on an interlocutory application, ahead of a substantive hearing of the application for review of the trustees’ resolutions.
[15] The second defendants also take issue with whether they have in fact referred to the accounts in their pleading so as to bring r 8.4 into play at all.
The purpose of initial disclosure
[16]McGechan on Procedure says:1
The purpose of initial disclosure is to give parties an early opportunity to assess the strength of their opponent’s position, to help to narrow issues and to facilitate settlement: Glaister v Harris [2014] NZHC 1285 at [33]-[35].
[17] Associate Judge Doogue in Pankhurst v Cullinane said the Court would take a “pragmatic and robust” approach to decisions relating to the scope of initial disclosure.2
[18] In Drive NZ Classic Ltd v Low Volume Technical Association Inc, Associate Judge Smith noted it does not matter that r 8.4 does not provide any express mechanism for challenging claims to privilege or confidentiality, the Court has sufficient inherent jurisdiction to decide such claims without waiting for formal discovery to complete it at a later stage. Alternatively, the Court can deal with a case
1 Robert Osborne (ed) McGechan on Procedure (online ed, Thomas Reuters) at [HR 8.4.01].
2 Pankhurst v Cullinane [2016] NZHC 2774 at [9] referred to by Associate Judge Smith in Drive NZ Classic Ltd v Low Volume Vehicle Technical Association Inc [2020] NZHC 396, (2020) 25 PRNZ 589 at [23].
of failure to provide initial disclosure by an enforcement order under r 7.48 of the Rules.3
[19] Associate Judge Smith considered whether a claim for privilege had been waived. Waiver is not claimed here. As to the claim for privilege and confidentiality, the plaintiff says such issues will only arise again in discovery so should be dealt with in the present application. The plaintiff says:
The obligation to provide discovery is not necessarily the same as the trustees’ obligation to provide Trust disclosure to a beneficiary. The trustees’ disclosure obligations will be relevant to whether discovery of Trust documents is oppressive or disproportionate to the exercise of the Court’s discretion.
(footnotes omitted)
[20] The plaintiff submits that approach should apply to initial disclosure as well. The issue of privilege can be put to one side – such is not claimed. The issue is confidentiality.
[21] As to what I consider to be the key issue, that is, the second defendants’ submission that disclosure is premature, the plaintiff says the Act’s processes are not determinative of discovery and disclosure obligations. The plaintiff notes the principal relief sought in the proceeding is the replacement of the trustees and that determination of those issues will be advanced by early disclosure of the Trust Deed for the CTT (now provided) and financial statements.
[22]The plaintiff relies on s 4 of the Act which provides:
Every person or court performing a function or duty or exercising a power under this Act must have regard to the following principles:
(a)a trust should be administered in a way that is consistent with its terms and objectives:
(b)a trust should be administered in a way that avoids unnecessary cost and complexity.
3 Drive NZ Classic Ltd v Low Volume Technical Association Inc, above n [1] at [20] referring to
Schick Construction & Cartage Ltd v Auckland Council [2015] NZHC 2722 at [6].
[23] The plaintiff submits s 4(b) is consistent with r 1.2 of the Rules and says the disclosure of the financial statements now would be consistent with those principles and is inevitable with the only issue being timing.
[24] The plaintiff refers to Erceg v Erceg as an example of the exceptional circumstances required if financial statements are not to be disclosed.4 The Supreme Court said the strongest case for disclosure would be a case involving a close beneficiary seeking disclosure of the trust deed and the trust accounts which would be the minimum to scrutinise the trustee’s actions.5 The plaintiff says he has pointed to genuine issues concerning the administration of the CTT and therefore his request falls squarely within the minimum requirements for disclosure.
Discussion and Decision
[25] If the plaintiff’s submission was accepted it would render the application for a review of the trustees’ decision to withhold the information redundant. A party faced with a refusal by trustees to disclose information would only have to file a statement of claim to obtain the information under initial disclosure unless the trustees were not careful to avoid referring to the documents sought in their pleading.
[26] While here the initial disclosure should perhaps have been accompanied by an express claim for confidentiality of the documents not included the fact the statement of defence which accompanied the initial disclosure maintained the refusal to disclose the documents put the plaintiff on notice that the second defendants had not changed their position on withholding the information.
[27] Mr Chisnall, counsel for the trustees, submitted the second defendants had reasonably decided pursuant to s 52 of the Act not to provide the financial accounts. Section 52 provides:
52. Presumption that trustee must give information on request
(1)There is a presumption that a trustee must within a reasonable period of time give a beneficiary or the representative of a beneficiary the trust information that person has requested.
4 Erceg v Erceg [2017] NZSC 28, [2017] 1 NZLR 320.
5 Erceg v Erceg, above n 4 at [60].
(2)However,—
(a)before giving the information, the trustee must consider the factors set out in section 53; and
(b)if the trustee reasonably considers (after taking into account those factors) that the information should not be given to the person,—
(i)the presumption does not apply; and
(ii)the trustee may decide to refuse the request for trust information.
[28] Section 53 of the Act sets out the factors that must be considered by the trustees and lists 12 such factors and concludes with:
(m)any other factor that the trustee reasonably considers is relevant to determining whether the presumption applies.
[29] Whether the information sought is subject to personal or commercial confidentiality is but one of the s 53 factors. Mr Chisnall submitted the financial accounts were confidential for the purposes of initial disclosure as the trustees had reasonably decided not to disclose them. Whether that decision was correct is one of the substantive issues to be determined in this proceeding and an application for initial disclosure is not the place to determine that substantive issue.
[30] This is not an application for summary judgment – even if it were, the factual issues inherent in determining whether the trustees’ decision was reasonable, given the range of s 53 factors they had to consider, means it is unlikely a challenge to a trustees’ decision under s 52 by way of a summary judgment application would be successful. Mr Chisnall described the present application as a “trojan horse” that, if successful, could be used by a disgruntled beneficiary to obtain trust information refused to them by their trustee.
[31] Mr Mason, counsel for the second defendants, submitted the trustees must have at least some good faith basis for claiming privilege or confidentiality before they can omit the documents from their initial disclosure.6 Mr Mason submitted the belated
6 Drive NZ Classic Ltd v Low Volume Technical Association Inc, above n 3 at [42].
disclosure of the CTT Trust Deed casts doubt on whether the second defendants are claiming confidentiality in good faith.
[32] One of the trustees has deposed that the trustees discussed the plaintiff’s request for information and resolved not to provide it after considering the factors set out in s 53:
The factors that we considered included that the request came from a beneficiary who was engaged in litigation against the estate of Denis Terry, and the context of the ongoing commercial negotiations to resolve that litigation and broader estate planning issues and tensions within the Terry family.
[33] This evidence emphasises that the trustees’ decision not to disclose the information is not limited to narrow definitions of confidentiality.
[34]Mr Mason relied on s 5(9) of the Act which provides:
Interrelationship between Act and other enactments
(9)If there is an inconsistency between the provisions of this Act and those of any other enactment, the provisions of that other enactment prevail, unless this Act provides otherwise.
[35] Because the Rules are deemed to be part of the Senior Courts Act 2016, by s 147(1) of that Act, Mr Mason submitted the effect of s 5(9) of the Act was that the initial disclosure and discovery obligations under the Rules “trumped” the Act’s provisions in relation to a trustee’s ability to withhold documents once litigation was underway. I do not accept that submission.
[36] The issue in this proceeding is not whether a claim for confidentiality raised in relation to initial disclosure/discovery is valid, but whether the trustees’ decision under s 53 of the Act to decline disclosure of the information will be overturned by the Court. Mr Mason relied on Gavin v Powell, where Nation J accepted a submission that the obligations on a trustee to provide disclosure to a beneficiary are not necessarily the same as the obligation to provide discovery of documents relevant to matters at issue in proceedings involving the trustees.7
7 Gavin v Powell [2018] NZHC 2866 at [38].
[37] With respect to Nation J, I agree with that observation. Where a trustee seeks to do no more than assert, for example, legal professional privilege or commercial confidentiality, such will be assessed on normal discovery principles with the fact it is a trustee who wishes to withhold documents being irrelevant. However, where the claimed confidentiality arises from a trustee’s decision based on applying the wide range of factors under s 53 of the Act, resolving whether that decision was reasonable is unlikely to be possible in a summary context given the breadth of those factors.
[38] I entirely understand and indeed have some sympathy for Mr Mason’s submission that disclosure of the information here would simplify the matters in issue and avoid unnecessary costs in relation to the potential need for a preliminary hearing in relation to the reasonableness of the trustees’ decision to withhold the information. However, I am unable to conclude in this context that the trustees were wrong to not include the accounts for the CTT in their initial disclosure. To order the retained accounts be provided as part of initial disclosure would require me to find the trustees’ decision to decline the request for those documents was unreasonable. It would be to grant what amounts to summary judgment on the plaintiff’s claim for review of the trustees’ decision.
[39]It follows the present application is dismissed.
Costs
[40] I did not hear from counsel on costs but my initial view is that there should be no order as to costs. I say that as no claim for confidentiality was made at the time of initial disclosure by the trustees and following the issue of this proceeding and indeed, on the date the plaintiff’s submissions were due, the second defendants provided a copy of the CTT Deed and an answer to who had received the funds referred to at [6](c) above. Indeed, the second defendants had to acknowledge that one of the plaintiff’s claims, namely that Christine Terry was barred by the terms of the CTT Trust from being a trustee, was correct. That claim was included in the statement of claim. Why it took approximately six months for that to be acknowledged was not explained. The continuing trustees have expressly ratified all decisions undertaken while the first named second defendant was not eligible to be a trustee of the CTT.
[41] As an obiter observation, it seems to me the second defendants could not reasonably oppose a request by the plaintiff to have the review of the trustees’ decision to withhold the financial accounts determined prior to the other aspects of the plaintiff’s claim. What the accounts will show has happened to the CTT’s income since 2016 is material to the plaintiff’s claims. That said, there is merit in the possibility that the financial accounts could be disclosed to plaintiff’s counsel and/or expert on agreed confidentiality terms.
[42] If no memoranda in relation to costs is filed within five working days of the date of this Judgment (and not more than five pages), then the order of the Court will be costs lie where they fall on this application.
Associate Judge Lester
Solicitors:
McIntosh & Signal, Feilding (for Plaintiff)
Lawler & Co, Auckland (for First Defendants) Gibson Sheat, Lower Hutt (for Second Defendants)
Fitzherbert Rowe, Palmerston North (for S D Terry, Interested Party)
Copy to counsel:
P J Reardon, Barrister, Auckland (for First Defendants) P Chisnall, Barrister, Auckland (for Second Defendants)
D Ballinger, Barrister, Auckland (for Second Defendants)
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