Vincent v Mindel HC Auckland CIV 2010-404-6275
[2011] NZHC 1853
•19 August 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2010-404-6275
BETWEEN AVIONNE JOY VINCENT Plaintiff
ANDCOLIN DAVID MINDEL AND ALAN JOHN MANU WADAMS
Defendants
Hearing: 6 and 27 July 2011
Counsel: GJ Mercer for plaintiff
PJL Hunt and JE Tomlinson for defendants
Judgment: 19 August 2011 at 4:00 AM
JUDGMENT OF ASSOCIATE JUDGE FAIRE
[on applications to strike out, or for summary judgment or for security for
costs]
This judgment was delivered by me on 19 August 2011 at 4pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Gellert Ivanson, PO Box 25 239, Auckland
McElroys, PO Box 835, Auckland 1140
VINCENT V MINDEL HC AK CIV 2010-404-6275 19 August 2011
The applications
[1] The defendants apply for orders:
(a) Striking out the proceeding; or
(b) Entering summary judgment against the plaintiff; or
(c) Seeking security for costs.
[2] The application to strike out or for summary judgment alleges that the statement of claim:
(a) Is frivolous, vexatious or an abuse of process because the cause of action is:
(i) Statute-barred or barred by analogy; and/or
(ii) So untenable that it cannot possibly succeed; and/or
(iii) An abuse of process; and
(b) Discloses no reasonably arguable cause of action having regard to the
14 listed matters that I will later refer to; and
(c) Is additionally an abuse of process having regard to the five listed matters that I will later refer to.
[3] With respect to the security for costs application, the parties reached agreement on the orders that I should make if the statement of claim is held to survive the strike out and summary judgment applications. For that reason, the security for costs application is not separately analysed in this judgment.
The proceeding
[4] This proceeding involves claims arising out of the administration of the estate of Cedric Raymond Vincent, who died on 28 September 1967. He left a will which was made on 20 July 1967. His daughter, the plaintiff, was a beneficiary in the late Mr Vincent’s estate. The late Mr Vincent appointed the Guardian Trust and Executors Company of New Zealand as his executor and trustee.
[5] On 14 August 1978 the trustee company was replaced by FH Rodway and AJM Wadams as joint trustees. Mr Rodway and Mr Wadams were then partners in the accountancy firm, Staples Rodway, later Staples Rodway Limited. The defendant, Mr CD Mindel, became a partner in Staples Rodway in June 1978 and became a consultant in January 2000. Mr Mindel acknowledges being involved in the preparation and managing the estate’s annual accounts and annual taxation returns. There is some dispute as to how wide his particular involvement was.
[6] The statement of claim alleges one cause of action. It alleges that both defendants owed duties as fiduciaries to the beneficiaries of Mr Vincent’s estate, including the plaintiff. It is alleged that they both breached their obligations as fiduciaries in the course of the administration of the estate. The actions that are the subject of the plaintiff’s claim necessarily all occurred prior to the defendants’ involvement with the estate ceasing, which occurred in September 1986. For the purposes of these applications, Mr Hunt advised that I could treat Mr Mindel as having the same responsibilities as Mr Wadham. In short, there was no need to consider Mr Mindel’s position for the purposes of this application and as to whether
he is a trustee de son tort.1
[7] The defendants are pleaded as having breached their fiduciary duty to the plaintiff as follows:
(a) Failing to inform the plaintiff that her share in the house proceeds were incorporated into that advance;
1 Laws of New Zealand Equity at [125].
(b)Failing to properly account to the plaintiff for her share of the house proceeds;
(c) Purporting to advance to the plaintiff funds representing her future interest in the Rockfield Road property when part of such funds incorporated the house proceeds;
(d)Failing to ensure that the advance represented a fair value for the shares in the Rockfield Road property transferred to the trustees as security for the advance;
(e) Allowing Valerie Joy Allen, as life tenant of one half of the residual estate, to benefit at the expense of the plaintiff in contravention of the provisions of the will; and
(f) Administering the estate in circumstances where the trustees had a conflict of interest caused by the association of the firm Staples Rodway with the husband of Valerie Joy Allen.
[8] As a result of the alleged breaches, it is claimed that the plaintiff in summary:
(a) Lost her share of the house proceeds, both as to the share that she was entitled to on attaining the age of 25 and on the sale of the house; and, further, the interest which she was entitled to on her mother’s death together with the income that could have been earned, had her entitlement been paid; and
(b)A loss that she claims she has suffered as a result of the estate’s acquisition of her interest in the Rockfield Road commercial property at an undervalue and the interest that could have been earned by her had the correct consideration for that interest been paid to her at the time. The amounts claimed are said to be equitable damages. In addition, interest on the amount claimed is sought pursuant to s 87 of the Judicature Act 1908. Also claimed are general damages allegedly
arising from the distress and anxiety which the breach of fiduciary duty has caused the plaintiff.
[9] The plaintiff, in her affidavit in opposition, provides a brief summary of her complaint and its consequences, where she said:
7.This proceeding concerns allegations that funds due to me as a beneficiary of my father’s estate were wrongly administered by the trustees and day-to-day administrators of that estate to exclude me from subsequently receiving my share of income from the estate. I also allege that if I had not been wrongly treated in this way I would have avoided bankruptcy which occurred in 1989.
8. I believe the following events to be relevant:
8.1the replacement of the trustees appointed under the Will with the accounting firm, Staples Rodway;
8.2the role of Colin Mindel, the second named defendant, as the day to day administrator of the estate;
8.3the sale of the family home and the dealings with the proceeds of the sale;
8.4an arrangement in August, 1980 under which I received an advance of approximately $96,000 secured against my share of the Rockfield Road property;
8.5the failure to provide me with the further income that formed part of my inheritance.
Prior proceedings
[10] This proceeding, unfortunately, is one of many involving the plaintiff and her late father’s estate. The papers before me do not give a full list of those proceedings. What follows, therefore, is not a complete historical account of the proceedings. It appears that two sets of proceedings were issued in 1987. The first was issued against the former trustees of the time, including Mr Wadhams and the then trustees, J M Cruickshank and R L Stewart. Proceedings against the trustee sought declarations concerning the plaintiff’s share of her deceased father’s estate. The proceedings were non-suited on the day that the proceeding was to be heard. In the judgment of Sinclair J on costs (29 May 1989), his Honour records the reason given to him:
Concerned mainly family matters. She had taken this particular course of action so as to avoid further deterioration within the family.
[11] The next significant proceeding mentioned in the papers culminated in a judgment given by Williams J on 19 October 1995.2 That proceeding related to the validity of caveats which the plaintiff had lodged against titles to a commercial property at Rockfield Road in 1984. The judgment in that case is significant because there is consideration of one of the specific issues raised in this proceeding, namely the 1980 transaction relating to ownership of the Rockfield Road property.
[12] The next significant case referred to in the papers is an application which came before Venning J on 17 April 2003. In that proceeding, the plaintiff obtained an order, pursuant to s 83B of the Trustee Act 1956 that an audit of the plaintiff’s late father’s estate be conducted by Mr Shane Hussey Chartered Accountant. That judgment also had to deal with an application to remove the then trustee. An order to that effect was made. In dealing with the issues before him in relation to the audit,
Venning J concluded, after referring to the 1987 proceedings that:3
An audit from and including the financial year ending 31 March 1996 will enable consideration of whether the trustee has acted appropriately in balancing the interests of the life tenant and the residuary beneficiaries.
[13] In 2002, the plaintiff issued proceedings seeking relief under the Family Protection Act 1955 against her mother’s estate. Those proceedings were heard before Randerson J in 2005 and were determined by his judgment of 22 February
2006.4 This proceeding is particularly significant because many of the issues that
were raised before me in these applications were the subject of investigation by his Honour in the Family Protection proceeding. His Honour had the benefit of Mr Hussey’s report, from which much of the background factual position was obtained.
[14] It appears that the estate was finally distributed as a result of orders made by
Ellen France J in a judgment delivered on 9 February 20065 when her Honour gave judgment in reliance on s 75 of the Trustee Act 1956. The orders made in that
2 Vincent v Vincent HC Auckland M671/87.
3 Vincent v Vincent HC Auckland M671-IMO2, M1248-SDO2, 17 April 2003 at [53].
4 Vincent v Lewis [2006] NZFLR 812.
5 Public Trust v Vincent HC Auckland CIV 2005-404-6291, 9 February 2006.
judgment barred the plaintiff and another from bringing claims against the then trustee of the estate and ordering that the Public Trust (who, at the time, had been appointed trustee of the trusts created by Mr Vincent’s will) may distribute the estate to the persons entitled under the trusts of the estate.
[15] This proceeding was filed on 22 September 2010, 24 years after the defendants ceased their association with the Ray Vincent Will Trust.
Background
[16] I set out a background summary and in doing so acknowledged that it is certainly not complete. Important events, however, are recorded by Randerson J in the family protection judgment.
[17] Mr Vincent married his widow, Valerie, in 1945. They had two children, the plaintiff (who was born in 1951) and a son, Peter Raymond Vincent (who was born in 1954). Mr Vincent established a car wrecking business which was conducted by a company, Ray Vincent Limited. He also owned the majority of shares in a company named Transport Equipment Limited. That company owned valuable industrial property at 60 Rockfield Road, Penrose. The principal assets in his estate at the date of his death included:
(a) A house at Victoria Avenue, Remuera, Auckland; (b) Shares in Transport Equipment Ltd; and
(c) Shares in Ray Vincent Ltd.
[18] At the time of his death, Mr Vincent was survived by Valerie and their two children.
[19] Mr Vincent’s will left his estate to his trustees:
(a) To pay certain legacies which are of no importance for this proceeding;
(b)To hold family and personal chattels contained in the house for his wife, Valerie;
(c) To permit Valerie:
to use, occupy my house property in Victoria Avenue, Remuera free of all charges during her life or for so long as she shall desire AND I EMPOWER my trustee with her written consent to sell such house property and to invest the proceeds in a house or flat to be used by my dear wife as a home in substitution for the house in Victoria Avenue and on the same terms
(d)To make small payments to Messrs W Elvin and G Tilsey, which again are of no consequence so far as this proceeding is concerned;
(e) As to the balance his residuary estate:
to sell call in and convert into money the same or such or such part thereof as shall not already consist of money (with power to postpone such sale calling in and conversion of any part of my residuary trust estate and to retain any of my investments in the same state of investment as at my decease or so long as my trustee in its absolute discretion shall think fit without being personally liable or responsible for any loss occasioned by such postponement or retention) and out of my ready money and the proceeds of such sale calling in or conversion to pay my debts funeral and testamentary expenses and death duties and to invest the remainder of my ready money and of the said proceeds (hereinafter called by
―residuary trust estate‖) in such investments as may be authorised by law or by the terms of this will for the investment of trust funds UPON TRUST to divide the same into two equal parts and UPON TRUST to pay the net annual income of one of such parts (including income on securities unauthorised by law for the investment of trust funds but retained by my trustee under the power of retention hereinafter contained or authorised in terms of this my will) as from the date of my death to my dear wife VALERIE JOY VINCENT until her death AND I DECLARE that if such net income shall in any year fall below the sum of TWO THOUSAND DOLLARS ($2,000) I DIRECT AND AUTHORISE my trustee to have resource to the capital of such half part to make up any deficiency and as from the death of my said wife to hold such half part or share in my residuary trust estate IN TRUST for such of my children PETER RAYMOND VINCENT and AVIONE JOY VINCENT who shall attain the age of twenty five years and if more than one in equal shares and as to the other part to hold the same in trust for such of my said children as shall attain the age of twenty five years and
if more than one in equal shares AND I DECLARE if either of my said children shall die in my lifetime or before reaching the age of twenty five years leaving issue any of whom are then living such issue shall take and equally among them if more than one the share which their respective parent would have taken AND I AUTHORISE AND DIRECT my trustee that until such children respectively reach the age of twenty five years my trustee in its absolute discretion may apply such part of the capital and income of such part of my residuary trust estate as it thinks fit for the maintenance and education and advancement of my said children.
[20] The will went on to confer a number of powers on the trustee, which need not be the subject of comment for the purposes of this judgment.
[21] In 1974 Valerie Vincent married Leslie Roy Allen. At that time she ceased to live in the home at Victoria Avenue, Remuera and she moved into Mr Allen’s residence. The house at Victoria Avenue, Remuera was tenanted. A deed of family arrangement, dated 10 March 1975 was entered into by Mrs Allen, as she had become, Peter Vincent, the plaintiff and the then trustee. It provided for the rent from the tenanting of the home at Victoria Avenue, Remuera to be applied in payment of all outgoings and the balance to be applied in payment to Mrs Allen. To that extent it varied Mr Vincent’s will.
[22] The plaintiff turned 25 in March 1976. In terms of the provision made in Mr Vincent’s will the plaintiff, from March 1976, became entitled to a 50 per cent share in the second part of residue of the estate. That should not be confused with the additional share to be paid on her mother’s death, which relates to the first part of the residue of the estate.
[23] The Victoria Avenue house was sold by Mr Vincent’s trustees in February
1977. The net proceeds of sale yielded $73,793. Mr Hussey in his report noted that there was a house fund into which the proceeds of sale passed. He expressed no opinion as regards that house fund. The matter was raised before Randerson J in the family protection proceedings. His Honour recorded that he did not regard the income from the house fund as material to the issues that he had to decide and
therefore did not decide entitlement to income from that house fund.6
6 Vincent v Lewis, above n 4 at [22].
[24] In 1976 the plaintiff received $65,329.46, which appears to have represented a quarter share of the value of the shares in Ray Vincent Limited that were sold, plus a further capital payment of $23,447. The estate shares in Transport Equipment Limited were then allocated in accordance with the provisions of the will. Some of the minor shareholders were bought out, the detail of which I need not go into.
[25] In a deed dated 14 August 1978 South British Guardian Trust Company Ltd retired as trustee and executor Mr Vincent’s estate. FHH Rodway and the second defendant, Mr AJM Wadhams, were appointed jointly as trustees of the estate. The plaintiff is critical of the appointment of the new trustees because of their association with her step-father and his company. Her step-father’s company borrowed money from the estate. She said that concerns about their appointment were expressed by the South British Guardian Trust but their reservations were never passed on to her. She said at the time she was living overseas. The plaintiff further alleges that the first-named defendant was the person who had the day-to-day of her father’s estate, though that is not accepted by Mr Mindel.
[26] Several paragraphs of Mr Hussey’s report are helpful in explaining transfers of assets and interests of the beneficiaries in Mr Vincent’s estate and are therefore set out.
3.26For tax reasons, in 1979 a partnership of the shareholders in TEL was formed, being the Vincent Syndicate, which acquired Rockfield Road from TEL. The interests in the Syndicate were exactly the same as the proportionate shareholdings in the capital of TEL. The cost of Rockfield Road to the Syndicate was $650,000, less a small existing mortgage taken over, which was settled by the Syndicate acknowledging a debt to TEL of the net amount of approximately
$630,000. I understand that the $650,000 purchase price was based on a formal valuation of the property, which I have sighted. The valuation of Hugh Abbot and Associates is dated 28 July 1977, almost two years prior to the 1979 transaction. Given that this was a high inflation period it is likely that the 1979 transaction value was significantly less than the market value at the time. I accept that the transaction has been recorded in accordance with the legal documents recording the transaction.
3.27 Subsequent to this transaction, TEL’s only other assets were some
miscellaneous shares which were sold in 1983 for approximately
$15,000.
3.28I have already explained that in 1980, based on the executed legal documents, the Estate purchased a 23.72% interest in the Rockfield
Road property from each of Avionne Vincent and Peter Vincent. The combined purchase price was $200,000 which it seems may have been determined on the basis of funds available to the Estate, rather than on the basis of the likely value of their respective interests at that time. The 1977 value of the Rockfield Road property was
$650,000 equates to $6,500 per one percent of the property. The purchase of the new interests of 23.72% for $100,000 each, values
that acquisition at $4,216 per one percent of that property. As such, the 1980 transactions were valued at approximately 65% of the 1977
value (although it must be recognised that individually and collectively, they were minority interests in the Syndicate, which could account for at least some of the reason for the lower value
attributed.
3.29Based on a market valuation of $650,000 as at July 1977 and given the inflation experienced in the period July 1977 to September 1980, I consider that the September market value of the Rockfield Road property would likely have been in the region of $1m. Therefore the value attributed to the 1980 purchase of the 23.72% Syndicate equities appears to have been less than half the possible market value at that time.
3.30This value seems unusual/unorthodox. I note that the circumstances leading to this transaction were detailed in the judgment of Justice Williams dated 19 October 1995 and the validity of the transaction upheld.
3.31The increased equity in the property resulting from this transaction, forms part of the residuary assets of the Estate. I record that the transaction treated Avionne and Peter Vincent equally as to the purchase price and conditions and each had an equal interest in the residuary Estate.
[27] The plaintiff is critical of the administration of her father’s estate in relation
to the 1980 transaction involving the Rockfield Road property.
[28] There is, in the papers, an allegation that the transaction involving the Rockfield Road property was intended simply to be an advance by way of loan to the plaintiff. That was considered by Williams J as I have recorded in [11] of this judgment. The plaintiff in that proceeding registered a caveat against titles which related to the Rockfield Road property. In a reserved judgment Williams J found that
there was no such loan, but rather a transfer.7
[29] This question was discussed by Randerson J in the family protection proceeding:
7 Vincent v Vincent, above n 2.
[28] In his report, Mr Hussey referred to several items of correspondence in 1987 and 1988 which appeared to support the view that Avionne, Peter and Mrs Allen all understood the 1980 transaction to be an advance with a transfer of Avionne and Peter’s interests in Rockfield Road purely as security. The contents of these letters were summarised in paragraph 3.34 of Mr Hussey’s report. It is unnecessary to recite the relevant correspondence in detail. But in letters dated 13 August 1987 and 22 September 1987 to Mr Cruickshank of Benson Cruickshank & Co, Peter made it very clear that he regarded the transactions as loans. He stated that upon repayment by Avionne of her loan, the share in the land would be passed back to her. Peter made a similar statement in a letter he wrote to Roger Stewart who was appointed a trustee of the Ray Vincent Estate in September 1986. Mrs Allen herself expressed a similar view in a letter dated 12 October 1988 to Mr R Hindle, then a partner of Simpson Grierson Butler White.
[29] It is probable that these letters were not drawn to the attention of Williams J at the time of his decision in 1995 since he did not mention them in his decision. Peter now maintains that the first of the letters had been discovered in earlier proceedings and attempts in his affidavit of 14 July 2005 in this proceeding to explain that the correspondence represented his recollections seven or eight years after the transaction in question and without reference to the documents. He does not however deny that the correspondence represented his views at the time.
[30] Mr Patterson did not invite me to find that the conclusions reached by Williams J were wrong. He was right not to do so because, unless and until the judgment of Williams J is set aside, issues he determined must be treated as binding between the parties in accordance with the doctrine of res judicata. At best, the correspondence referred to could form a possible basis for rectification of the written documents but no such application has been made and it is impossible in the context of the current proceedings for a collateral attack to be made on the findings of Williams J.
[31] Instead, Mr Patterson sought to rely on the correspondence in 1987 and 1988 as justifying Avionne’s long held view that the transaction was regarded by the parties as a loan thereby justifying her attempts through litigation and otherwise, over a lengthy period, to establish the true nature of the transactions and to recover an interest in the Rockfield Road property.
[32] Mr Patterson also pointed to Avionne’s assertion that she was able and willing to repay the $100,000 loan to the estate in 1984 and was prevented from doing so at that time because, Mrs Allen and her then husband Roy were asserting there had been an outright sale. Mr Patterson also pointed out that, in consequence, Mrs Allen received a much greater share of income between 1980 and the date of her death (more than 20 years later) than she would have been entitled to if Avionne had been permitted to repay the loan in 1984.
[33] Mr Patterson also referred to the view expressed by Mr Hussey in his report to the effect that, in 1980, the market value of the Rockfield Road property was probably in the region of $1 million and his conclusion at paragraph 3.29 that the value attributed to the
1980 purchase of the 23.72% interest held by Avionne and Peter appeared to have been less than half the market value at that time.
Conclusions on the 1980 Transaction
[34] While I accept there is some evidential basis for Avionne’s view that the 1980 transaction may have been thought by the parties to have been a loan, the transaction was certainly not documented in that way and none of the contemporaneous documents supports her contentions. The 1987/1988 correspondence does however provide some justification for Avionne’s sense of injustice in relation to the transaction.
[35] Beyond that, I do not regard the 1980 transaction as having disadvantaged Avionne. First, she obtained $100,000 which, in
1980, was a very substantial sum of money. Secondly, even on her account of the matter, she agreed to forego the rental income from her interest in the property so long as the ―loan‖ existed. Thirdly, to
the extent there may have been an undervalue in the transfer, the benefit of any such undervalue was received by the Ray Vincent
Estate which was ultimately to be distributed to Avionne and Peter. Fourthly, it is speculative as to whether Avionne had the ability in
1984 to repay the loan. Her assertion to that effect is not supported
by any evidence. Fifthly, if she had managed to regain her interest in the Rockfield Road property, it would have passed to the Official Assignee upon her bankruptcy along with any other remaining interest in the Ray Vincent Estate. This is a crucial point which appears to have been overlooked. Finally, and most importantly, as I shortly relate, Avionne was able to recover her interest in the Ray Vincent Estate from the Official Assignee in October 1992 for
$245,000.
Mr Mercer took issue with the findings and as to whether they were binding on the parties to this proceeding having regard to s 50 of the Evidence Act. He drew attention to the following matters:
(a) The 1980 transfer was signed on the plaintiff ’s behalf by Mr Mindel
who held a power of attorney from the plaintiff.
(b)He questioned the finding that the plaintiff had agreed to forego the rental income from her interest in the property so long as the loan existed.
(c) The fact that the plaintiff was able to recover her interest in the estate on behalf of her trust from the Official Assignee in October 1990 does not specifically deal with the question of a potential arguable wrongful distribution of estate income to Mrs Allen. Because this is central to the current proceeding, I will return to the matter under the analysis section of this judgment.
[30] It is appropriate to briefly record the position of the trustees. This is helpfully summarised in the audit report. Messrs Rodway and Wadhams retired as trustees and executors of Mr Vincent’s estate and were place by Messrs Cruickshank and Stewart in September 1986. In 1988 Mr Cruickshank retired and was replaced by Mr Delugar, who retired in 1990. That left Mr Stewart as the sole trustee until he was replaced by the Public Trust in 2003.
[31] I return to the plaintiff’s position. On 4 October 1989 the plaintiff was adjudicated bankrupt, and her property interests passed to the Official Assignee. She was discharged from bankruptcy on 4 October 1992. Steps were taken to acquire her interest in property, including her interest in the estate from the Official Assignee by the Vincent Martelli Trust. It was a trust established to benefit the plaintiff’s daughter.
[32] This purchase also was the subject of considerable friction and litigation between members of the family, as competing bids were lodged with the Official Assignee for the plaintiff’s interest in her father’s estate. On acquiring the interests, it is apparent that the Vincent Martelli Trust has made significant gains. That does not, however, require particular analysis for the purposes of the issues arising in this judgment.
[33] The next significant date for the purposes of the various property interests was the death of Mrs Allen on 31 January 2001. That has significance in terms of the provisions dealing with residue contained in Mr Vincent’s will.
[34] The next significant event would appear to be the plaintiff’s application for the audit report which resulted in the orders made by Venning J on 17 April 2003. The report which followed that appointment is dated 2 February 2005.
[35] I have already referred to the further proceedings in which the plaintiff has been involved following the death of her mother and will not repeat them in this section of the judgment. Suffice to say, the current proceeding was filed on
22 September 2010, 24 years after the defendants’ ceased their association with the
Ray Vincent Will Trust.
The court’s approach to strike out applications
[36] Rule 15.1 of the High Court Rules provides:
15.1 Dismissing or staying all or part of proceeding
(1) The court may strike out all or part of a pleading if it—
(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b) is likely to cause prejudice or delay; or
(c) is frivolous or vexatious; or
(d) is otherwise an abuse of the process of the court.
(2) If the court strikes out a statement of claim or a counterclaim under subclause (1), it may by the same or a subsequent order dismiss the proceeding or the counterclaim.
(3) Instead of striking out all or part of a pleading under subclause (1), the court may stay all or part of the proceeding on such conditions as are considered just.
(4) This rule does not affect the court's inherent jurisdiction.
[37] The general principles to be applied in a strike out application are well known. They were confirmed in Attorney-General v Prince & Gardner where the
Court of Appeal said:8
8 Attorney-General v Prince & Gardner [1998] 1 NZLR 262 (CA) at 267.
A striking-out application proceeds on the assumption that the facts pleaded in the statement of claim are true. That is so even although they are not or may not be admitted. It is well settled that before the Court may strike out proceedings the causes of action must be so clearly untenable that they cannot possibly succeed (R Lucas & Son (Nelson Mail) Ltd v O'Brien [1978]
2 NZLR 289 at pp 294 – 295; Takaro Properties Ltd (in receivership) v
Rowling [1978] 2 NZLR 314 at pp 316 – 317); the jurisdiction is one to be exercised sparingly, and only in a clear case where the Court is satisfied it
has the requisite material (Gartside v Sheffield, Young & Ellis [1983] NZLR
37 at p 45; Electricity Corporation Ltd v Geotherm Energy Ltd [1992]
2 NZLR 641); but the fact that applications to strike out raise difficult questions of law, and require extensive argument does not exclude
jurisdiction (Gartside v Sheffield, Young & Ellis).
[38] The principles referred to above were endorsed in Couch v Attorney- General.9
[39] The court can have regard to evidence put forward either in opposition or support of the application provided it does not contradict that which is pleaded in the statement of claim: Attorney-General v McVeagh.10
[40] Caution is required, particularly where the case involves allegations of duties of care in novel situations. That has to be measured against the position that defendants should not be subjected to substantial costs by defending untenable claims: Queenstown Lakes District Council v Charterhall Trustees Ltd.11
[41] Because the inquiry in this case involves limitation issues, it is appropriate that I set out the approach to strike out applications where these matters are raised.
[42] Matai Industries Ltd v Jensen,12 referring to the decision of the English Court of Appeal in Ronex Properties Ltd v John Laing Construction Ltd,13 observed in
summary:
9 Couch v Attorney-General [2008] NZSC 45; [2008] 3 NZLR 725.
10 Attorney-General v McVeagh [1995] 1 NZLR 558 (CA) at 566.
11 Queenstown Lakes District Council v Charterhall Trustees Ltd [2009] NZCA 374; [2009]
3 NZLR 786 at [16].
12 Matai Industries Ltd v Jensen [1989] 1 NZLR 525 (HC) at 531-532.
13 Ronex Properties Ltd v John Laing Construction Ltd [1983] QB 398 (CA).
(a) That a defendant could never apply to strike out a claim against him as disclosing no reasonable cause of action merely because he might have a good limitation defence;
(b)A defendant who believes he has a good limitation defence may, however, either plead the defence and seek trial of the defence as a preliminary issue or, in a clear case, apply to strike out the plaintiff’s claim on the grounds that it is frivolous, vexatious and an abuse of process;
(c) The onus is on the defendant to show that the plaintiff’s claim is
statute-barred;
(d) Evidence can be tendered by affidavit; and
e) The court should be slow to strike out a claim or cause of action altogether in limine; but against that, if the position is quite clear, the defendant should not be vexed by having to go to full trial when the answer is obvious and inevitable.
[43] This position was endorsed by the Supreme Court in Murray v Morel & Co
Ltd.14
The court’s approach to a summary judgment application by a defendant
[44] Rule 12.2(2) of the High Court Rules requires that the defendant satisfy the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[45] Westpac Banking Corp v MM Kembla New Zealand Ltd noted the following when dealing with r 136(2), the predecessor of r 12.2(2):15
14 Murray v Morel & Co Ltd [2007] NZSC 27; [2007] 3 NZLR 721 at [33].
15 Westpac Banking Corp v MM Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).
[58] The applications for summary judgment were made under R 136(2) of the High Court Rules which permits the Court to give judgment against the plaintiff ―if the defendant satisfies the Court that none of the causes of action in the plaintiff's statement of claim can succeed‖.
[59] Since R 136(2) permits summary judgment only where a defendant satisfies the Court that the plaintiff cannot succeed on any of its causes of action, the procedure is not directly equivalent to the plaintiff's summary judgment provided by R 136(1).
[60] Where a claim is untenable on the pleadings as a matter of law, it will not usually be necessary to have recourse to the summary judgment procedure because a defendant can apply to strike out the claim under R 186. Rather R 136(2) permits a defendant who has a clear answer to the plaintiff which cannot be contradicted to put up the evidence which constitutes the answer so that the proceedings can be summarily dismissed. The difference between an application to strike out the claim and summary judgment is that strike-out is usually determined on the pleadings alone whereas summary judgment requires evidence. Summary judgment is a judgment between the parties on the dispute which operates as issue estoppel, whereas if a pleading is struck out as untenable as a matter of law the plaintiff is not precluded from bringing a further properly constituted claim.
[61] The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually summary judgment for a defendant will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claim. Examples, cited in McGechan on Procedure at HR 136.09A, are where the wrong party has proceeded or where the claim is clearly met by qualified privilege.
[62] Application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment only able to be properly arrived at after a full hearing of the evidence. Summary judgment is suitable for cases where abbreviated procedure and affidavit evidence will sufficiently expose the facts and the legal issues. Although a legal point may be as well decided on summary judgment application as at trial if sufficiently clear (Pemberton v Chappell [1987] 1 NZLR 1), novel or developing points of law may require the context provided by trial to provide the Court with sufficient perspective.
[63] Except in clear cases, such as a claim upon a simple debt where it is reasonable to expect proof to be immediately available, it will not be appropriate to decide by summary procedure the sufficiency of the proof of the plaintiff’s claim. That would permit a defendant, perhaps more in possession of the facts than the plaintiff (as is not uncommon where a plaintiff is the victim of deceit), to force on the plaintiff’s case prematurely before completion of discovery or other
interlocutory steps and before the plaintiff's evidence can reasonably be assembled.
[64] The defendant bears the onus of satisfying the Court that none of the claims can succeed. It is not necessary for the plaintiff to put up evidence at all although, if the defendant supplies evidence which would satisfy the Court that the claim cannot succeed, a plaintiff will usually have to respond with credible evidence of its own. Even then it is perhaps unhelpful to describe the effect as one where an onus is transferred. At the end of the day, the Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment made by the Court on interlocutory application is not one to be arrived at on a fine balance of the available evidence, such as is appropriate at trial.
[46] These passages were approved by the Privy Council in Jones v Attorney- General.16
Analysis
[47] The plaintiff acknowledges that if this was a claim in negligence or for breach of trust, time would have expired well before the issue of this proceeding. That follows from ss 4 and 21(2) of the Limitation Act 1950 and s 59 of the Limitation Act 2010.
[48] The claim is pleaded as a claim alleging breach of fiduciary duty.
[49] The first three particulars of claim, which I have set out at [7], relate to the proceeds of the estate’s house at Victoria Avenue. It is not surprising that this claim is limited to the proceeds of sale of the house because the parties had effectively varied the deceased’s will with the deed of family arrangement dated 10 arch 1975 to which I have made reference at [21] of this judgment. That deed’s terms do not deal with the proceeds of sale, however. On the sale of the house its proceeds must fall into residue. Those proceeds must be dealt with in accordance with the will provisions as to residue as set out at [19](e).
[50] At the time of the sale of the house in February 1977 South British Guardian
Trust Co Ltd were the estate trustees. That company was therefore charged with
16 Jones v Attorney-General [2003] UKPC 48; [2004] 1 NZLR 433 at [5].
dealing with the house proceeds in accordance with the will. It is common ground that the house proceeds were retained by the trustee following sale. Mr Hussey’s inquiries, although not directed to the period around the time of the sale, conclude at paragraph 3.21:
The net proceeds from the sale $73,793 were notionally allocated to a separate house fund trust and invested in a mortgage with Allen Industries Limited. In 1979-1980, Allen Industries Limited repaid the $238,590 mortgage (referred to in paragraph 3.8). Of this amount $200,300 represented the estate funds notionally invested in trust for Mrs Allen and the house fund trust.
[51] At paragraph 3.8 of Mr Hussey’s report he finds that South British Guardian Trust Co Ltd were the trustees who provided the mortgage to Allen Industries Ltd. Allen Industries Ltd is one of the plaintiff ’s step-father’s companies.
[52] Mr Hussey, at 2.8 of his report, concludes that the capital assets of the estate, including the Victoria Avenue residential property ―have been appropriately dealt with in accordance with the will‖.
[53] What Mr Hussey does not express is an opinion on Mrs Allen’s entitlement to funds earned from the sale of the house trust. That is made clear from what he records in paragraphs 2.7 and 2.10 of his report. In short, he expresses no opinion on who is entitled to income from the house proceeds.
[54] It is necessary to see when the plaintiff first raised a complaint about the house proceeds. That gives some guidance as to when she knew, or had reason to believe, that the income from the house proceeds, or the proceeds themselves, had not been dealt with in accordance with the will. Its significance will become self- evident when I discuss later in this judgment s 28 of the Limitation Act 1950.
[55] Potentially, the plaintiff could have been aware of problems associated with the distribution of the house proceeds as early as the 1987 proceedings. At that time, the house had been sold, the deed of family arrangement no longer applied and South
British Guardian Trust had established the separate house fund trust. The possibility of such inquiry in 1987 was in fact referred to by Venning J where his Honour said:17
The other issue is income. A practical approach must also be taken in relation to the income. An appropriate starting point to consider the position of income and the general administration of the CR Vincent Estate to determine whether the trustee has been even handed in his treatment of the life tenant and the residuary beneficiaries is the date when the trustees of the Vincent Martelli Trust purchased their interest in the Cedric Vincent Estate from the Official Assignee. From Avionne Vincent’s bankruptcy in 1989 until the sale by the Official Assignee of Avionne Vincent’s interest in the estate Cedric Vincent rights were held by the Official Assignee rather than her. Prior to that date Avionne Vincent had taken proceedings had the opportunity to have pursue them if she wished. For whatever reason, she elected a non-suit in those proceedings.
[56] Correspondence has been produced which was written in 1986. In a letter from Mr Mindel to the late Mrs Allen, dated 16 May 1986, he refers to a meeting which took place on that day at his office and the fact that the plaintiff brought up the question of the sale of the Victoria Avenue home and that the plaintiff had implied that the sale and the subsequent investment of its proceeds was not in accordance with Mr Vincent’s will.
[57] In a letter written by the plaintiff’s solicitor on 20 May 1986 to Guardian Trust & Executors Co Ltd, the plaintiff’s solicitors inquired as to whether any step or attempt to obtain a house in substitution for the Victoria Avenue home was set in motion. The significance of this letter is that the plaintiff was questioning the former trustees about the utilisation of the sale proceeds of the Victoria Avenue home.
[58] In a letter dated 19 July 2002 Guardian Trust & Executors Co Ltd wrote to the plaintiff. In the section of the letter dealing with the Victoria Avenue home, the Guardian Trust record:
There does not appear to be anything on file to indicate why the proceeds for the house property were invested in a mortgage to Allen Industries and not invested in a new house. … The provision in the will which enables the Trustee to sell the property and purchase a property is a power to the trustee and not a direction or a duty.
17 Vincent v Vincent, above n 3 at [53].
[59] The house issue was raised in the family protection proceeding. It is referred to by Randerson J at [22] of the judgment as follows:
I note in passing that Mr Patterson submitted that Mrs Allen was not entitled to receive the income because the Victoria Avenue property (in which she had a life interest) had been sold. Whether that is so or not I do not regard it as material to the issues I have to decide.
[60] Mr Patterson was the plaintiff’s counsel in that proceeding. The case was heard on 12 September 2005. Judgment was delivered on 22 February 2006.18 One can assume that the plaintiff and her counsel were fully aware of the house proceeds issue before the submission was made to the court on 12 September 2005. Indeed, when the submission is looked at against the correspondence that I have earlier referred to, the 1987 proceedings, the plaintiff had knowledge of a failure to
distribute the house proceeds in accordance with the will for a number of years before the family protection proceeding.
[61] The family protection hearing was just over five years before this proceeding was issued.
[62] The plaintiff describes in her own words her knowledge of the utilisation of the house funds in a number of paragraphs in her affidavit, starting at paragraph 22. She says that she did not know that the house fund was used to fund the purchase of her interest in the Rockfield Road property. That may be so. However, it is not the issue. The issue which was identified, she says, by Mr Patterson was a simple one. The question is and was: did the trustees distribute that part of the house proceeds which fell into the second part of residue in accordance with the will? On the material before me it was plain, following the sale of the house and the fact that no replacement house was purchased, that the trustees had not carried out what was required in terms of the will. At the very latest, that must have been clear to the plaintiff when she received the Guardian Trust & Executor Co Ltd letter of 19 July
2002, to which I have made reference in [58].
[63] I am satisfied that the plaintiff had sufficient evidence available to her to make complaints and, indeed, did make complaints concerning the distribution of the
18 Vincent v Lewis, above n 4.
house proceeds and the income earned in respect of the house proceeds substantially prior to 22 September 2004.
[64] The fourth, fifth and sixth particulars of claim, which are set out in [7], are linked.
[65] The fourth particular lacks clarity and is confusing. It needs to be broken down. It first alleges that the trustees made an advance. Because the particular refers to the Rockfield Road property transaction, the advance is alleged to be an advance made in 1980. The particular next alleges that the defendants, in their capacity as trustees, failed to ensure that what was advanced represented a fair value for the shares in Rockfield Road. The problem here is that the trustees were acting in relation to the sale and purchase transaction as buyers, not sellers, of proprietary shares in Rockfield Road. The particular next alleges that the transfer of the shares in the Rockfield Road property was as a security for the advance.
[66] The consequence of the complaints that are made in the fourth particular are set out in the fifth particular, which allege, in essence, that the plaintiff ’s mother, as life tenant of one half of the residuary estate, benefited from the alleged advance transaction relating to Rockfield Road. This is because Mrs Allen received the share of income which the plaintiff and her brother, Peter, had enjoyed prior to the transaction as a result of their ownership of shares in the Rockfield Road property.
[67] Although I have considerable doubts as to the validity of the fourth particular pleaded, I approach these parts of the claim as, in essence, being that the trustees did not permit the plaintiff to have her entitlement to income from the Rockfield Road property. I acknowledge that when one considers the prayer for relief, there is also an allegation of a loss of a capital component arising out of the Rockfield Road 1980 transaction, being the sale at undervalue. For the reasons that I have just recorded, however, I do not see how the trustees acting as buyers can be held to account for this. Indeed, when I pressed Mr Mercer about this aspect of the claim, he could provide me with no specific justification for the capital claim that was made. That is not surprising when one considers Mr Hussey’s conclusion that the distribution of the capital assets of the estate was in accordance with the will.
[68] I do not overlook that the plaintiff has previously raised the issue as to whether the Rockfield Road transaction in 1980 was a sale as opposed to a grant of a security interest over a proprietary share in the property to secure an estate advance to the plaintiff (for example the family protection proceedings and the caveat proceedings).
[69] This complaint, however, comes down at its very best to two aspects, namely, a possible claim to a loss of a capital interest and the loss of the right to enjoy the income from the proprietary share that was formerly owned by the plaintiff in the Rockfield Road property. As with the house trust fund, it is necessary to consider when the plaintiff knew the nature of the transaction that had actually been entered into by the trustees; or had sufficient evidence available to her so that, with reasonable diligence, she could have discovered the position.
[70] Leaving aside the confusing way in which the fourth particular is pleaded, what is pivotal to the plaintiff’s case is the nature of the Rockfield Road transaction and how the capital derived from it was treated and how the income from it was distributed. Mr Hunt referred to a valuation report of Mr Hugh Abbott & Associates of 7 March 1980. I disregard that report in terms of whether it provided knowledge of the transaction to the plaintiff.
[71] Chronologically, the next event would appear to be the meeting on 16 May
1986, which I have referred to when discussing the house trust fund. The Staples Rodway letter to Mrs Allen of 16 May 1986, sent on the day of the meeting, records that the plaintiff complained about the adequacy of the consideration paid in respect of her share of the Rockfield Road property. That, however, may not go far enough. There was further correspondence in 1986 between Mr Mindel and solicitors acting for the plaintiff relating to the payment of $100,000, which she received. What I have been provided with, however, does not go on to question the income distribution which followed that transaction.
[72] I was also referred to the statement of claim filed in the 1987 proceedings
which sought a declaration as to the plaintiff’s entitlement to her share of the
residuary estate. However, a perusal of the statement of claim does not identify a specific complaint about income distribution.
[73] The caveat proceedings that were determined by Williams J on 19 October
1995 are significant.19 By finding there was no caveatable interest on the part of the plaintiff held in the Rockfield Road property, the plaintiff was confronted with a court ruling as to the status of the transaction in 1980. She was not then receiving income from the Rockfield Road property or, apparently, from the trustees of her father’s estate. Any complaint about a loss of capital, because of the actions of the trustee, was plainly before the plaintiff to see at the very latest by Williams J’s judgment in 1995.
[74] Even if there is any possible concern about the use of the house trust funds to finance the purchase of the share in Rockfield Road, it is plain that the core complaints relating to both the house fund income, any capital loss, and any income loss from Rockfield Road were well and truly able to be identified and were, in fact, signalled to the plaintiff by 1995. I do not rely separately on the findings of Randerson J in the family protection proceeding to support that view. It is clear from his Honour’s findings that in Mrs Allen’s lifetime there were disputes between mother and daughter. There were also the court cases that I have referred to about both matters. What is self-evident, however, is that as at 22 September 2004, the plaintiff was in a position to know what the capital and income position was in relation to the house fund and in relation to the Rockfield Road property.
[75] I refer to the last particular of claim. Here the complaint is that the defendants had a special relationship with one of the beneficiaries of the estate. That relationship arose because Mrs Allen’s husband had had an association with the defendants’ accountancy firm. One of its partners was a director of his company. Another acted for him as his accountant. The implication that arises from this particular is that whenever the defendants were required to make a decision involving the position of the widow, on the one hand, and the position of the children, Peter and the plaintiff who were the residuary beneficiaries, on the other,
their position was conflicted. For the purposes of these applications, as a matter of
19 Vincent v Vincent, above n 2.
fact, the position just outlined is correct. The duties imposed by analogy are similar to those of an agent serving two principals. To proceed to act in these situations the conflicted party must have the informed consent of the principal: Premium Real Estate Ltd v Stevens.20
[76] Having set out the factual position I now look specifically at the legal issues which arise.
[77] I deal with the first limitation issue. That requires a consideration of s 28 of the Limitation Act 1950. The Limitation Act 1950 is applicable to this case by the operation of s 59 of the Limitation Act 2010.
[78] Section 28 provides:
28 Postponement of limitation period in case of fraud or mistake
Where, in the case of any action for which a period of limitation is prescribed by this Act, either—
(a) The action is based upon the fraud of the defendant or his agent or of any person through whom he claims or his agent; or
(b) The right of action is concealed by the fraud of any such person as aforesaid; or
(c) The action is for relief from the consequences of a mistake,—
the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake, as the case may be, or could with reasonable diligence have discovered it:
[79] It was not suggested by counsel that the proviso to s 28 has any application. For that reason I consider it no further.
[80] The factual conclusions I have reached are that the plaintiff could have, with reasonable diligence, discovered the alleged position prior to 22 September 2004 and certainly, at the very latest, on receipt of the letter from the Guardian Trust
& Executors Co Ltd on 19 July 2002. I have said at the very latest. The position
was there to be seen, however, as early as the 1987 proceedings. The position was
20 Premium Real Estate Ltd v Stevens [2009] 2 NZLR 384 (SC).
reinforced with the caveat proceedings which were determined by judgment in
October 1995.
[81] I conclude therefore that s 28 of the Limitation Act 1950 does not save the plaintiff’s claim from the otherwise statute-bar which would apply, or the bar which applies by analogy.
[82] I deal with the second limitation issue. Mr Mercer submitted that no period of limitation applies because of s 21 of the Limitation Act 1950.
[83] He submitted that this is an action by a beneficiary under a trust, being an action in respect of fraud or fraudulent breach of trust to which the defendants were party or privy. He submitted that s 4 of the Limitation Act 1950 is excluded by s 4(9) in respect of this claim, which is a claim for equitable damages. He submitted that there was no place for the imposition of a limitation by analogy as the limitation issue is expressly dealt with by the Act. He submitted that the case was one of breach of fiduciary duties amounting to equitable fraud. He submitted it was simply not a matter of trustee negligence or a technical breach of trust. Because of that, s 4(9) of the Limitation Act 1950 could not apply.
[84] Section 21 of the Limitation Act 1950 provides:
21 Limitation of actions in respect of trust property
(1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action—
(a) In respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or
(b) To recover from the trustee trust property or the proceeds thereof in the possession of the trustee, or previously received by the trustee and converted to his use.
(2) Subject as aforesaid, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of 6 years from the date on which the right of action accrued:
Provided that the right of action shall not be deemed to have accrued to any beneficiary entitled to a future interest in the trust property until the interest fell into possession.
(3) No beneficiary as against whom there would be a good defence under this Act shall derive any greater or other benefit from a judgment or order obtained by any other beneficiary than he could have obtained if he had brought the action and this Act had been pleaded in defence.
[85] The cause of action pleaded by the plaintiff alleges breach of fiduciary duty rather than deliberate concealment. Before s 21 can apply to assist the plaintiff, it is necessary to find that it is arguable:
(a) That the breach of fiduciary duty: (i) Is equitable fraud; and
(ii)That such equitable fraud fits within the definition of fraud, or fraudulent breach of trust, contained in s 21(1) of the Limitation Act 1950.
[86] I propose to concentrate on the second of those two issues, namely whether equitable fraud fits within the definition of fraud or fraudulent breach of trust contained in s 21(1) of the Limitation Act 1950.
[87] Mr Hunt submitted that s 21(1) applies to fraudulent breaches of trust. That must be compared with s 21(2), which imposes a limitation of six years in respect of breaches of trust simpliciter. The argument proceeds that if one accepts that a fraudulent breach of trust includes a breach of trust simpliciter then s 21(2) of the Limitation Act 1950 would be rendered redundant. Further, it would appear that ss 21 and 28 would come into direct conflict if they applied to equitable fraud. Accordingly, s 21(1) and (2) and s 28 should not be interpreted as applying to the same conduct if this would result in a contradiction within the statute.
[88] The cases which I will discuss define fraud under s 21 as excluding constructive fraud. By contrast, the cases under s 28 include constructive fraud. The cases, however, do not attempt any rationalisation of the different position adopted in
relation to each section. Two New Zealand cases appear to exclude the wider definition of equitable fraud as applying to s 21. In Walkers Nurseries Ltd v National Bank of New Zealand Ellis J said:21
my view "fraud" and "fraudulently" are to be construed in the same way as "dishonesty" in Royal Brunei Airlines v Tan (above), and accordingly my finding is that the Bank had acted fraudulently, as I have already described. I have read the commentary on the equivalent English provision in Halsbury's Laws of England 4th ed vol 28, paras 1037 and 1038, which relies on Armitage v Nurse [1997] 2A11ER 705. This case draws a distinction between "actual fraud" and equitable or constructive fraud as applied by the Courts of Equity: see the judgment of Millett LJ (as he then was) at page 710 and the reference to Nocton v Lord Ashburton [1914] AC 932.
[89] Armitage v Nurse required the interpretation of a clause in a deed of settlement.22 Clause 15 of the deed of settlement provided that no trustee should be liable for any loss or damage occurring to the capital or income of the trust property
―unless such loss or damage shall be caused by his own actual fraud‖. The Court of Appeal held that the words ―actual fraud‖ in clause 15 excluded constructive fraud and equitable fraud and simply connoted dishonesty.
[90] Mr Mercer correctly submitted that the use of the words ―actual fraud‖ makes the interpretation of the clause in the deed of settlement significantly different to the interpretation of the Limitation Act 1950. Accordingly, this case, by itself, may not assist directly in the interpretation in the meaning of fraud as it is used in s 21.
[91] In Burmeister v O’Brien the court held that s 21(1)(a) applied to an accessory liability action based on the defendant being privy to a fraudulent breach of constructive trust.23 The court further held that it does not apply to a deceit claim against the defendant. Section 28(a) and the standard limitation period of six years
applies.
21 Walkers Nurseries Ltd v National Bank of New Zealand HC Napier CP45/95, CP22/97, 2 August
2001 at [54].
22 Armitage v Nurse [1997] 2 All ER 705.
23 Burmeister v O’Brien HC Tauranga CIV 2005-470-3396, 1 December 2009, Asher J.
[92] By contrast, when one considers the cases which have considered s 28 of the Limitation Act 1950 they have all concluded that the wider definition of fraud applies to that section, namely, equitable fraud.24
[93] I return, therefore, to a consideration of the two sections themselves. Section
21, by its words, distinguishes breaches of trust from fraudulent breaches of trust. It is only a fraudulent breach of trust for which no limitation is prescribed. A six-year limitation applies for breaches of trust simpliciter. If one were to accept that a fraudulent breach of trust includes a breach of trust simpliciter, then it follows that s 21(2) would be redundant. That lends support to the view that fraud, as it is used in s 21, means actual fraud.
[94] I next consider how I should approach the plaintiff’s pleading. In Murray v
Morel & Co Ltd the court said:25
In the end the Judge must assess whether, in such a case, the plaintiff has presented enough by way of pleadings and particulars (and evidence, if the plaintiff elects to produce evidence), to persuade the Court that what might have looked like a claim which was clearly subject to a statute bar is not, after all, to be viewed in that way, because of a fairly arguable claim for extension or postponement. If the plaintiff demonstrates that to be so, the Court cannot say that the plaintiff’s claim is frivolous, vexatious or an abuse of process. The plaintiff must, however, produce something by way of pleadings, particulars and, if so advised, evidence, in order to give an air of reality to the contention that the plaintiff is entitled to an extension or postponement which will bring the claim back within time. A plaintiff cannot, as in this case, simply make an unsupported assertion in submissions that s 28 applies. A pleading of fraud should, of course, be made only if it is responsible to do so.
[95] In Shannon v Shannon the court said:26
The threshold the plaintiff faces is high. The fraud alleged … must be fully and distinctly pleaded and particularised. Unless the fraud alleged as fully particularised raises a reasonable prospect of success and was clearly discovered since the judgment complained of, the action will be stayed or dismissed as vexatious and an abuse of the process of the Court.
24 Official Assignee of Collier v Creighton [1993] 2 NZLR 534 (CA); Inca Ltd v Autoscript (New Zealand) Ltd [1979] 2 NZLR 700, 700–711; Matai Industries Ltd v Jensen, above n 12; Ngati Karewa and Ngati Tahinga Trust v Clark HC Auckland CIV 2003-404-426, 15 October 2003, Venning J.
25 Murray v Morel & Co Ltd, above n 14 at [34].
26 Shannon v Shannon [2002] 3 NZLR 567 at [51].
[96] The plaintiff has not alleged or provided evidence of actual fraud.
[97] The plaintiff does not gain assistance from s 21(1) of the Limitation Act
1950. The claim she has pleaded does not fit within s 21(1).
[98] It follows from the conclusion that I have reached that s 21(1) does not apply to the pleaded case advanced by the plaintiff. That is because there is no pleading of actual fraud. I accept Mr Hunt’s submission that the limitation imposed by s 4 applies by analogy by virtue of s 4(9) of the Limitation Act 1950. In Johns v Johns the court had to consider alleged breaches of trust and breaches of fiduciary duty by defendant trustees.27 The court at [68] identified the principal issue as:
… whether the plaintiff’s equitable claim for breach of fiduciary duty was barred by analogy with s 21(2) of the Act. As it is an equitable claim, the Act does not apply directly to the claim for breach of fiduciary duty. But s 4(9) of the Act preserves the ability of the Courts to apply to any claim for equitable relief an analogous time bar corresponding to one provided for in the Act. Broadly speaking the basis for doing so is that the equitable claim is sufficiently analogous to the statute-barred claim to make it inequitable to allow it to proceed.
[99] The court noted at [69] that:28
The doctrine only applies, of course, if there is no specific statutory limitation on the equitable cause of action. It is generally referred to as an example of equity following the law.
The court explained carefully how the matter should be approached and at [80]
said:29
The fiduciary claim will always prima facie survive the statutory barring of an allied common law or indeed equitable claim. There will be a bar by analogy only when the fiduciary 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. In order to determine how close the parallel is the Court 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 causes of action. If there is a sufficient difference in any material respect, the suggested parallel is unlikely to be close enough to make it appropriate in equity to apply an analogous bar.
27 Johns v Johns [2004] 3 NZLR 202 (CA).
28 Ibid.
29 Ibid.
[100] Mr Hunt drew attention to the following: the allegations made in the statement of claim concern breach of trust. They are, prima facie, therefore, covered by s 21(2) of the Limitation Act 1950, which prescribes a six-year limitation. The pleadings refer specifically to the defendants’ as performing obligations under the terms of the will. That position is confirmed by the plaintiff herself in her affidavit of 27 April 2011 at paragraph 7 where she says:
This proceeding concerns allegations that funds due to me as a beneficiary of my father’s estate were wrongly administered by the trustees and day-to-day administrators of that estate to exclude me from subsequently receiving my share of income from the estate.
[101] Mr Hunt next referred specifically to the pleaded breaches of fiduciary duty, which I have set out in [7] of this judgment. When one considers the underlying facts and the nature of the relationship between the parties, the alleged breaches are all breaches of trust. Accordingly, I reach the view that the fiduciary claim that has been pleaded parallels the statutory-barred claim so closely that it is plainly inequitable to allow the statutory bar to be out-flanked by the fiduciary claim.
[102] I next consider the issue as to whether or not the statement of claim discloses no reasonably arguable cause of action. I am not prepared to strike out the claim on this ground.
[103] There are essentially two principal reasons for my conclusion. They are:
(a) There is before me at least no clear reason why the house proceeds were not paid out to the plaintiff as to a one-half interest following the sale and advice that the widow did not require the purchase of a replacement house; and
(b)There is an acknowledgement that the house proceeds were part of the fund that was used to purchase the interest in the Rockfield Road property by the trustees.
If that is ultimately proven there is a basis for the proposition that the Rockfield
Road property was acquired by the trustees with funds that came from the second
part of residue, that is, that part of residue reserved for the plaintiff and her brother, Peter, on their attaining the age of 25 years. Accordingly, if that is proven then there is a basis for a partial claim to lost income, which the plaintiff has in respect of the trustees’ acquisition of the Rockfield Road property.
[104] These matters cannot be resolved on the material before me. There is, at least, an arguable basis for a breach of trust claim that can only be resolved when all the estate documents are assembled and inspected. Accordingly, the defendants have not proven a basis to strike out the claim having regard to r 15.1(1)(a) of the High Court Rules. Strictly speaking, having regard to the findings that I have made in relation to the limitation points, a finding on this matter is unnecessary.
[105] The defendants have a further alternative basis for seeking an order striking out the proceeding. It is that the proceeding is otherwise an abuse of process of the court. In doing so, the defendants rely on r 15.1(1)(d) and, in particular, upon Reid v New Zealand Trotting Conference.30 The Court of Appeal exercised its inherent jurisdiction to strike out a proceeding as an abuse of process based on four considerations, namely:
(a) The overall delays that had taken place;
(b) The prima facie application of the Limitation Act 1950; (c) The deficiencies in the pleadings; and
(d) The justice of the case.
[106] There have been substantial delays in this case particularly when one takes into account that the defendants’ participation in Mr Vincent’s estate ended in 1986. The summary of prior proceedings, again, points out that the plaintiff had some knowledge of the issues that she is now complaining of and has had them for some
time.
30 Reid v New Zealand Trotting Conference [1984] 1 NZLR 8 (CA).
[107] I have already ruled against the plaintiff on the Limitation Act matters.
[108] So far as the pleadings are concerned, I have referred to some confusing and contradictory aspects in the way pleadings deal with the Rockfield Road property.
[109] It is difficult to rule out substantial injustice to the defendants if this case was allowed to proceed having regard to the fact that they released all documents relating to their stewardship as trustees at the time of their retirement as such in 1986. Clearly, they would be hampered in now trying to recall the precise basis for the steps that were taken without access to all the documents. If it were necessary for me to rule on this ground to decide the case, I would, in fact, find that it is an appropriate case to exercise the court’s inherent jurisdiction and to strike the proceeding out as an abuse of process.
Strike out or summary judgment
[110] There is only one cause of action alleged. I have already ruled that the cause of action would be defeated on limitation grounds. In my view, this is an appropriate case where summary judgment should be entered and not simply an order made striking out the proceeding. That will have the effect of bringing the possibility of a claim against the named defendants in this proceeding to an end. On the facts that I have analysed this is not a case that is likely to be able to be cured. Although my conclusion justifies a strike out, I am of the view that the appropriate relief that should be granted in this case is an order entering summary judgment in the defendants’ favour against the plaintiff.
[111] Having regard to the conclusion I have reached, there is no need to deal with the security for costs aspect of the case. Had the case remained, I would have made an order based on the parties’ consent which provided for the payment of the sum of
$43,052 to be held in the plaintiff’s solicitor’s trust account on terms to be agreed between the parties as security for costs. The parties also agreed that there should be leave to apply to review any aspect of the security agreement.
[112] I simply record the position that was reached by the parties in case it is determined that my decision on this matter should be challenged and there is then a need to deal with the question of security for costs.
Costs
[113] My preliminary view is that this is an appropriate case for an order for costs to be made in the defendants’ favour based on Category 2 Band B and as if the matter were dealt with as a summary judgment application. I have not given counsel the opportunity of presenting submissions on costs. For that reason, I reserve costs. If counsel are unable to agree, memoranda in support, opposition and reply shall be filed and served at seven-day intervals. On receipt of the reply memoranda the file
shall be referred to me to consider the appropriate position in relation to costs.
JA Faire
Associate Judge
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