Vincent v Vincent Family Corporate Trust Limited
[2023] NZHC 525
•16 March 2023
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE
CIV-2020-463-54
[2023] NZHC 525
UNDER Part 18 of the High Court Rules 2016 IN THE MATTER OF
the ET and P Vincent Trusts
BETWEEN
ROSEMARY JEAN VINCENT
Plaintiff/Respondent
AND
VINCENT FAMILY CORPORATE TRUST LIMITED
First Defendant/Applicant
CAPITAL BENEFICIARIES
Second Defendants
Hearing: 17 November 2022 Counsel:
J W McDougall and M A Chester for plaintiff/respondent A F S Vane for defendant/applicant
M S McKechnie and R J Smith for second defendants
Judgment:
16 March 2023
JUDGMENT OF ASSOCIATE JUDGE TAYLOR
[Strike out/security for costs]
This judgment was delivered by me on 16 March 2023 at 11.30am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors/Counsel:
Holland Beckett, Rotorua for plaintiff/respondent Le Pine & Co, Taupö for first defendant/applicant Murray McKechnie, Rotorua for second defendants
VINCENT v VINCENT FAMILY CORPORATE TRUST LTD [2023] NZHC 525 [16 March 2023]
Introduction [1]
Background [3]
Interlocutory applications [7]
Affidavit of David Morris dated 14 July 2022 [9]
Notice of opposition [16]
Affidavit of Rosemary Vincent dated 5 September 2022 [17]
The Trustee’s submissions [23]
Strike-out application [23]
Dismissal application [25]
Capital Beneficiaries’ submissions [28]
Rosemary’s submissions [31]
Legal principles [42]
Strike out [42]
Dismissal for want of prosecution [44]
Security for costs [49]
Analysis [57]
Should Rosemary’s second cause of action be struck out? [59]
Conclusion on whether the second cause of action should be struck out [71]
Should the proceeding be dismissed for want of prosecution by Rosemary? [72] Conclusion on whether the proceeding should be struck out pursuant to r 15.2(a) [80] Should an order for security for costs be made against Rosemary? [82]
Conclusion on security for costs [87]
Result [91]
Orders [92]
Costs [93]
Introduction
[1] The respondent, Rosemary Vincent is the mother of Marie Vincent, who in turn is the mother of minors ‘D’ and ‘T’.1 In the substantive proceeding Rosemary seeks that ‘D’ and ‘T’ be recognised as beneficiaries of two family trusts.
[2] The applicant, Vincent Family Corporate Trust Ltd (the Trustee) has brought three interlocutory applications, seeking to strike out Rosemary’s second cause of action, to strike out the proceeding for want of prosecution, and for security for costs.
Background
[3] This proceeding is about two mirror trusts, the ET Vincent Trust and the P Vincent Trusts (the Trusts). The Trusts were settled by Ernest Thomas Vincent and Paretekohera Vincent on 24 June 1985. The Trustee is the trustee of the Trusts.
1 Given the commonality of surnames in this proceeding, and meaning no disrespect, I will generally refer to individuals in this judgment by their given names.
[4] The Trusts’ capital beneficiaries include named grandchildren of the settlors and all grandchildren born before 24 June 2020 (the Capital Beneficiaries). Rosemary contends ‘D’ and ‘T’ are “grandchildren” for the purpose of the Trusts because she adopted them by whāngai.
[5] The Trustee has declined to recognise ‘D’ and ‘T’ as beneficiaries. Rosemary has therefore filed the present proceeding. Her first cause of action seeks declarations that the term “grandchildren” in the trust deeds (the Trust Deeds) includes grandchildren of the settlors by whāngai and that ‘D’ and ‘T’ are beneficiaries of the Trust. Her second cause of action seeks declarations as to whether a company can be validly appointed sole trustee of the Trusts, whether the Trustee has been validly appointed as trustee of the Trusts, and whether the actions taken by the Trustee as trustee of the Trusts are valid.
[6] The Trustee seeks to strike out Rosemary’s second cause of action, dismiss the proceeding for want of prosecution and security for costs.
Interlocutory applications
[7] The Trustee seeks orders striking out the second cause of action in the statement of claim and dismissing that part of the proceeding; alternatively, dismissing the whole of the proceeding for want of prosecution; alternatively, for the giving of security for costs.2
[8] The grounds on which the orders are sought are many and detailed. Broadly, they are that the second cause of action against the defendant contains no live issue, lacks utility and relevance, cannot succeed and is an abuse of process; there was significant and inordinate delay before the issue of the proceeding which is prejudicial to the beneficiaries, and Ms Vincent has been tardy in prosecuting the proceeding; and there is reason to believe Ms Vincent will be unable to pay the Trustee’s costs if she is unsuccessful in this proceeding.3
2 Interlocutory application on notice by the defendant for orders dated 21 July 2022 at [1].
3 At [2].
Affidavit of David Morris dated 14 July 2022
[9] David Morris, a director of the Trustee, has made an affidavit in support of its interlocutory applications. He deposes he has had a long association with the Vincent family and the Trusts, dating back to the 1960s. He says he has 40 years’ experience in the administration and management of trusts and private assets, and that over those years he became a close advisor and friend of Tom and Polly. He says he became one of their closest advisors, and that he was closely involved in the management of the Trusts. Through that association, he deposes, he gained knowledge about the Vincent family and, relevantly, about Rosemary.4
[10] Mr Morris says that the date of distribution under the Trusts’ Deeds passed on 24 June 2020, and the assets of the Trusts are therefore now in the process of being realised. He deposes the Trusts will be ready to be wound up and distributed by the end of 2022. He says he believes that prejudice to the Trusts and the Capital Beneficiaries will arise by the unnecessary incurring of costs and diversion of resources in having to continue to defend the second cause of action. He says that cause of action manifestly has no live issue, no utility or relevance, and that it should be struck out.5
[11] Mr Morris deposes that Rosemary commenced the proceeding on 24 June 2020, bringing causes of action that have potentially existed for significant periods of time. He says Rosemary did not prosecute the claims until the date of distribution under the Trusts’ Deeds, and that between 2003 and 2020 the trustees distributed income from the Trusts to the income beneficiaries in shares calculated on the basis of the then known number of income beneficiaries. Mr Morris says that if the sought declarations were to be made in respect of ‘D’ and ‘T’, then there may need to be a retrospective distribution of income reaching as far back as 2009, with corresponding reductions in income for the named and known beneficiaries during that period. He estimates that several thousands of dollars would be involved in any re-calculation, and that ‘D’ and ‘T’ would gain those amounts at the expense of existing named and known income beneficiaries. Mr Morris says many of those beneficiaries are now
4 Affidavit of David Wayne Morris in support of interlocutory application on notice by the defendant for orders dated 14 July 2022 at [1]–[11].
5 At [12]–[15].
elderly and will suffer significant financial hardship if they are made to repay a portion of the Trusts’ income paid to them, or they may not be able to do so at all.6
[12] Turning to the Capital Beneficiaries, Mr Morris says the financial effect of the sought declarations would be to reduce the 33 Capital Beneficiaries’ distributions by
$24,000 each, or $792,000 collectively. Taking into account the income adjustments already mentioned, Mr Morris says, the existing named and known Capital Beneficiaries will likely be prejudiced by significantly more than the capital sums of
$24,000 each. Mr Morris therefore says there is, in his view, prejudice to the existing Capital Beneficiaries of the Trusts arising out of Rosemary’s delay in commencing the proceeding. He says that prejudice has continued in that Rosemary has not taken steps to advance the proceedings over recent months, compounding the delay.7
[13] As to the Trustee’s security for costs application, Mr Morris says he has reason to believe Rosemary will be unable to pay the Trustee’s costs and those of the interested parties if she is unsuccessful in this proceeding. He says that in the course of his long association with the Vincent family, he has had various direct dealings with Rosemary. Those dealings include her regularly requesting, between November 2002 and October 2004, advances as an income beneficiary of the Trusts to pay for things like a flat in London and for airfares. More recently, Mr Morris says, Rosemary approached him as Trustee of the Trusts to enquire whether the Trusts could assist financially to purchase a house in Taupō for Marie, ‘D’ and ‘T’. And he says over the years Rosemary frequently requested the Trustees, through Mr Morris, to make loan advances to her from the Trusts for living expenses on the basis that she was short of money. These requests continued up until June 2020.8
[14] On the basis of his various sources and dealings with Rosemary, Mr Morris says he believes she has few assets of her own, has been largely itinerant since the early 2000s and since that time has not owned residential property. He says he believes Rosemary will have little or no ability to borrow money to fund her proceeding and, if unsuccessful, to pay costs. He says he is advised scale costs in the proceeding are
6 Affidavit of David Wayne Morris, above n 4, at [16]–[21].
7 At [22]–[45].
8 At [46]–[52].
in the order of $130,000, and that he does not believe such sum is within Rosemary’s means. He says he understands that since the beginning of 2022 Rosemary has sought financial assistance for the litigation from the Capital Beneficiaries, confirming to him she does not have the money to continue with the proceeding or to pay costs.9
[15] Mr Morris says he considers Rosemary’s first cause of action to be very weak, and that the second cause of action has no utility or relevance and should be struck out. He says there are significant discrepancies in Rosemary’s assertions about having adopted ‘D’ and ‘T’ by whāngai, and that it is not clear to him as a trustee that the relationship is not one of shared care or some other lesser relationship than adoption. Finally, he says, there are other issues in relation to the alleged whāngai relationship, including that there is a risk that ‘D’ and ‘T’ will be allowed to “double-dip”, in that they will become Capital Beneficiaries in their own right, as well as inheriting, in due course, Marie’s capital interest. Mr Morris says he does not believe the settlors intended this outcome, and that he does not consider it would be in the interests of the Trusts, which have been managed over the years broadly on an equal sharing basis.10
Notice of opposition
[16] Rosemary opposes the Trustee’s interlocutory applications.11 Her grounds of opposition are, broadly, that there is no basis on which the Court may strike out the second cause of action; that the second cause of action is reasonably arguable; that the second cause of action is not an abuse of process; that there was no significant and inordinate delay prior to the issue of the proceeding; that Rosemary has not been tardy in prosecuting the proceeding; that Rosemary is not impecunious; that the Trustee delayed unreasonably in bringing the applications; that it is in the interests of justice to allow the proceeding to continue without security for costs; and that the application for security for costs is an abuse of process.12
9 Affidavit of David Wayne Morris , above n 4, at [52]–[62].
10 At [63]–[67].
11 Notice of opposition to interlocutory applications dated 5 September 2022 at [2].
12 At [3].
Affidavit of Rosemary Vincent dated 5 September 2022
[17] Rosemary has made an affidavit in support of her opposition to the Trustee’s interlocutory applications. She deposes that her daughter, Marie, suffers from bipolar schizophrenia and has spent many years in and out of mental health facilities. Rosemary says she was made Marie’s property and welfare guardian in June 2009, and it was at this time that she decided it would be best for Marie and her family to relocate from Auckland to Taupō. Rosemary says she, Marie and her family moved there in 2010.13
[18] Rosemary says that as part of the move to Taupō, the family negotiated with Mr Morris to lease part of the second floor of the family’s building at 38 Te Heuheu Street. She says the intention was to renovate the building and to operate an IT business from it. The renovations began in 2012, at which time the family approached Mr Morris for a formal lease. Rosemary says they reminded Mr Morris to draw up the lease as the renovations neared completion. She says he refused to do so, saying it would upset other family members already working out of the building. By that point, Rosemary says, almost $45,000 had been invested in IT infrastructure and
$25,000 in building upgrades.14
[19] Rosemary deposes that at the end of 2017 her partner accepted an IT consultant job with a Christchurch biotech company. She says they now reside in a home in Merivale, and that they run a successful IT business there. She says they have savings on which they can draw, are financially secure and are able to meet a costs award. However, she says, requiring them to pay full security for costs now would jeopardise their ability to meet legal fees going forward and put undue financial strain on them.15
[20] Rosemary denies Mr Morris’s suggestion that she has made requests for financial assistance from other Capital Beneficiaries. She says she has never approached any of the beneficiaries — income or capital — for money. She says further that her historical requests for assistance from the Trusts while living in London do not say anything about her ability to meet a costs order. She says those
13 Affidavit of Rosemary Jean Vincent dated 5 September 2022 at [1]–[7].
14 At [9]–[13].
15 At [18]–[22].
requests were for payment of an annual dividend as an income beneficiary, and not, as Mr Morris suggests, requests for advance payments. She says the Trusts’ financial accounts all show her personal debt to the Trusts to be nil.16
[21] Rosemary says she accepts there has been some delay in her prosecuting her claim since the start of the year, but that she believes any prejudice to the beneficiaries is limited because the assets of the trust are continuing to appreciate, the Trustee continues to make distributions to the beneficiaries with a view to carrying out a final equalisation payment, and ‘D’ and ‘T’’s status within the family, at a cultural and spiritual level, are of greater importance in the circumstances. She says many assets are yet to be sold, and that it is not the case that the Trusts are simply sitting on a depreciating bank account of cash awaiting the outcome of the proceeding.17
[22] Rosemary deposes further that at no point has the Trustee or its lawyers explored her financial circumstances or sought agreement on security for costs. She says she is suspicious of the timing of the application for security for costs, which she considers to be a strategic ploy to drain her resources and to make it more difficult for her pursue her claim for ‘D’ and ‘T’. She says the Trustee’s applications feel like an attack on her, ‘D’ and ‘T’, and an unnecessary distraction to determining the critical issue in the proceeding — whether, as a consequence of ‘D’ and ‘T’ having been raised by her as whāngai, they qualify as beneficiaries of the trusts. She reiterates that in the event she is unsuccessful, she will be able to meet the likely costs award in favour of the Trustee.18
The Trustee’s submissions
Strike-out application
[23] Mr Vane, for the Trustee, submits that the second cause of action cannot succeed because there is no impediment to there being a sole trustee under the Trust Deeds and a company may permissibly act as a trustee. He says there are no allegations against the Trustee of wrongdoing, misconduct, impropriety, dishonesty,
16 Affidavit of Rosemary Jean Vincent , above n 13, at [23]–[33].
17 At [41]–[44].
18 At [45]–[54].
breach of duty, or negligence. The second cause of action also lacks relevance because the date of distribution under the Trust Deeds passed over two years ago and nearly all of the assets of the Trusts have now been realised and converted. Mr Vane submits, therefore, that continuing with the second cause of action has no utility or relevance other than being pursued for the ulterior motive of obtaining a collateral forensic advantage — embarrassing the Trustee in the eyes of the beneficiaries and trying to limit the Trustee’s involvement in the first cause of action. The second cause of action, in those circumstances, represents an abuse of process.19
[24] Mr Vane says the Trusts and the Capital Beneficiaries are being prejudiced by the unnecessary incurring of costs and diversion of resources in defending the second cause of action. Further, he submits, the Capital Beneficiaries are entitled to be paid out following the date of distribution. In this respect, they are prejudiced by the second cause of action — seeking to limit the Trustee’s involvement in the first cause of action and therefore delaying its resolution. And, Mr Vane submits, it is relevant that the first cause of action has little prospect of success. If the first cause of action cannot succeed, and the second cause of action also cannot succeed and otherwise lacks relevance and utility, both causes of action should be struck out.20
Dismissal application
[25] Mr Vane submits there was significant and inordinate delay prior to the issue of the proceeding, which is prejudicial to the beneficiaries. He says ‘D’ and ‘T’ were born in 2003 and 2009 respectively, meaning any whāngai claim existed from those years. But, he points out, the proceeding was not filed until the date of distribution under the Trust Deeds, being 24 June 2020. Between 2003 and 2020, meanwhile, the Trustee distributed income to beneficiaries in shares calculated on the basis of the then known number of income beneficiaries. A retrospective distribution to ‘D’ and ‘T’ would result in a corresponding reduction in income for the existing beneficiaries.21
19 Synopsis of argument of counsel on behalf of the applicant in support of strike out application dated 11 November 2022 at [9]–[20].
20 At [21]–[24].
21 Synopsis of argument of counsel on behalf of the applicant in support of dismissal application dated 11 November 2022 at [1]–[9].
[26] Mr Vane submits Rosemary has also been tardy in prosecuting the proceeding. He says she has taken no steps to advance matters, despite requests from the Trustee that she do so. The delay has been prejudicial to the Trusts and their winding up and distribution, and to the Capital Beneficiaries who have been increasingly expressing their concerns about delay and distribution following a winding up of the Trusts. Mr Vane says every day without action and progress is prejudicial to the Trusts and beneficiaries and that to be able to make proper and lawful distributions the Trustee requires certainty as to the identity and number of beneficiaries.22
[27] Summarising, Mr Vane submits that the Trusts have vested in the Capital Beneficiaries, that the Capital Beneficiaries are entitled to be paid out, that the Trustee cannot complete the pay-out process while there is the contingency of the first cause of action, and Rosemary’s lack of prosecution of her claims significantly prejudices the Trusts and the beneficiaries. For those reasons, he submits, the proceeding ought to be dismissed.23
Capital Beneficiaries’ submissions
[28] Mr McKechnie, for the Capital Beneficiaries, submits that the law does not recognise whāngai adoptions except with one very limited exception, being where there are interests in Māori land. Aside from that issue, he says, the Trust Deed does not contemplate that the great grandchildren of the settlors would be beneficiaries. Further, he says, irrespective of the issue whether a whāngai relationship can give rise to a claim, the Capital Beneficiaries do not in any event accept there was a qualifying whāngai relationship. He says there were significant periods of time when ‘D’ and ‘T’ were not with Rosemary, and significant periods of time where the two were in the joint care of Marie and Rosemary.24
[29] On the strike-out application, Mr McKechnie submits there is no evidence of any malpractice, wrongdoing or impropriety on the part of Mr Morris. He says replacing the existing trustee would involve significant expense, and that Mr Morris
22 Applicant’s dismissal submissions, above n 21, at [11]–[21].
23 At [22]–[23].
24 Submissions on behalf of the second defendants in support of application to strike out second cause of action, alternatively to dismiss the whole of the proceedings and thirdly for the giving of security for costs dated 10 November 2022 at [1]–[12].
already has a long acquaintance with the administration of the trust company. He says no useful purpose would be served by replacing the current trustee.25
[30] As to the security for costs application, Mr McKechnie submits, among other things, that Rosemary has given no explanation why she parted company with her Christchurch-based solicitors and has furnished no account of her financial situation other than to assert that she can meet costs. He submits that Mr Morris has given a detailed account as to the monies advanced to Rosemary following requests for financial assistance. Having regard to the expected complexity of the substantive hearing, Mr McKechnie says $50,000 would be an appropriate amount of security, and that it might be appropriate for the sum to be made payable in tranches. He suggests a first payment of $10,000 be made within 10 working days of any court order, a second payment of $20,000 when a date for the hearing of the proceeding is advised, and a further and final payment of $20,000 21 days before the commencement of the hearing of the proceeding.26
Rosemary’s submissions
[31] Mr McDougall, for Rosemary, submits there is no basis on which the Court may strike out the second cause of action under r 15.1 of the High Court Rules 2016. He says the threshold is a high one and is not met in these circumstances. He submits the cause of action is reasonably arguable, concerns a live issue, is not an abuse of process and is not likely to cause prejudice or delay.27
[32] Mr McDougall submits that whether the appointment of the Trustee as sole trustee of the Trusts was valid is a serious question to be tried. He says the appointments were and are subject to the Trustee Act 1956 (the Trustee Act), not the Trusts Act 2019 (the Trusts Act). He submits that the court cannot be certain that the cause of action cannot succeed and that this is not a clear case in which the Court can exercise its strike out jurisdiction. That the Trustee finds the cause of action
25 Second defendants’ strike out submissions, above n 24, at [13].
26 At [15]–[20].
27 Synopsis of argument of plaintiff in opposition to interlocutory applications dated 15 November 2022 at [2.1].
inconvenient or embarrassing, Mr McDougall says, is not grounds for the cause of action to be struck out.28
[33] Mr McDougall submits that the second cause of action is not being pursued for an improper collateral purpose, and that the Trustee cannot discharge the heavy onus of establishing this point. He says that if the Trustee has acted improperly or breached trust then the beneficiaries are entitled to a declaration and the failing ought to be acknowledged as a matter of principle. Seeking validation or invalidation of a trustee’s actions is a valid purpose and proper use of the process.29
[34] There is no prejudice or delay brought on by the second cause of action, Mr McDougall submits, beyond the natural delays and costs inherent in determining a valid concern through the court system. He says the evidence does not support the Trustee’s argument that both causes of action are delaying the final distribution of the Trusts’ funds. Assets continue to be realised, and some remain to be sold. And, he says, if Rosemary sought to limit the Trustee’s involvement in the defence of the first cause of action to delay resolution, she could simply drop the second cause of action.30
[35] Turning to the application to strike out the proceeding for want of prosecution, Mr McDougall submits the Trustee cannot show that Rosemary has been guilty of inordinate delay, that such delay is inexcusable and that it has seriously prejudiced the Trustee. He submits it is in the interests of justice for the matter to proceed to trial and that justice can be done at trial despite the delay. As to pre-issue delay, Mr McDougall says it only became clear the Trustee would not recognise ‘D’ and ‘T’ as beneficiaries when Rosemary made inquiry in 2019. That ‘D’ and ‘T’ may have been entitled to earlier distributions does not cause prejudice to the Trustee or the other beneficiaries beyond what is a natural consequence of properly recognising their status as beneficiaries.31
28 Plaintiff’s opposition submissions, above n 27, at [2.2]–[2.13].
29 At [2.14]–[2.20].
30 At [2.21]–[2.27].
31 At [3.1]–[3.3].
[36] As to post-issue delay, Mr McDougall accepts the proceeding has been slow to progress since the start of 2022. But he says that delay has not be inordinate or inexcusable. The delay was caused in part by Rosemary’s need to seek new counsel because of an insurmountable difference of opinion in how to advance the proceeding. He points out Rosemary has now instructed new counsel and is committed to prosecuting her claim on behalf of ‘D’ and ‘T’. As to prejudice to the Trustee, Mr McDougall submits that if the Trustee were concerned to obtain certainty of the Capital Beneficiaries, it ought to have applied to the Court for guidance on interpreting the Trust Deeds in 2020, when it was first required to do so. As well, the remaining assets of the Trusts are continuing to appreciate, the Trustee continues to make distributions to beneficiaries, ‘D’ and ‘T’’s family status is of greater importance in the circumstances, the Trustee continues to ready the Trusts’ assets for sale, and some Trusts’ assets are yet to be sold. Finally, Mr McDougall says, the Trustee’s evidence that the Capital Beneficiaries have been increasingly expressing their concerns to Mr Morris about the potential delay in distributions is inadmissible hearsay.32
[37] Mr McDougall reiterates that it is in the interests of justice that the matter proceed to trial. He says the case concerns the future of ‘D’ and ‘T’, who were both minors at the outset of the proceeding and who deserve to have their claim heard. He says justice can still be done despite the delay — all witnesses are still available and will presumably be able to give evidence.33
[38] On the security for costs application, Mr McDougall says no order should be made because there is no reason to believe Rosemary will not be able to meet a costs award, it is not appropriate that an order be made, and that the amount sought is, in any event, excessive. He submits there is no credible evidence of surrounding circumstances from which it may reasonably be inferred that Rosemary will be unable to pay costs, so the impecuniosity threshold is not met. Much of the Trustee’s evidence relates to events from 20 years ago, and is outdated, irrelevant and not credible in relation to Rosemary’s current circumstances. He says that the Trustee’s allegation that Rosemary has sought advances for living expenses is a mischaracterisation, and that Rosemary’s evidence is that those requests were for payments of the annual
32 Plaintiff’s opposition submissions, above n 27, at [3.4]–[3.7].
33 At [3.8]–[3.9].
dividends to which she was entitled as an income beneficiary of the Trusts. And he submits that the Trustee has ignored that Rosemary and her partner run a business that employs them both, and that she has savings on which she can draw.34
[39] Mr McDougall submits that in this case Rosemary’s interests outweigh the alleged interests of the Trustee and that an order for security would not be just in all the circumstances. He says Rosemary is very likely to succeed in her second cause of action and that the Trustee is unlikely to obtain any costs award in its favour. He submits that this proceeding takes place against the backdrop of emerging developments in the interface of tikanga Māori and the common law, and that in those circumstances the Court should be slow to conclude that the proceeding is without merit. And it should be cautious not to stifle Rosemary’s claim by imposing a security for costs arrangement that would threaten her ability to meet legal fees going forward
— especially with the Trustee having delayed for so long before bringing its application.35
[40] Even were the Court to decide that a security for costs order should be made, Mr McDougall says, the amount the Trustee seeks is inappropriate. So too is the request for security for all remaining stages of the proceeding. He says a staged order would be better. He suggests, if the Court is minded to make orders, that $20,000 could be paid now, with any further stages and amounts to be agreed later.36
[41] Concluding, Mr McDougall reiterates that Rosemary requests orders declining to strike out the second cause of action, to strike out the proceeding for want of prosecution, and to make an order for security for costs.37
Legal principles
Strike out
[42]Rule 15.1 of the High Court Rules 2016 provides, relevantly:
34 Plaintiff’s opposition submissions, above n 27, at [4.1]–[4.12].
35 At [4.13]–[4.21].
36 At [4.22]–[4.26].
37 At [5.1].
15.1Dismissing 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;
(b)is likely to cause prejudice or delay; or
…
(d) is otherwise an abuse of the process of the court.
[43]There are established criteria for strike out:38
(a)A strike out application proceeds on the assumption the pleaded facts are true, unless those pleaded facts are entirely speculative or without foundation.
(b)The cause of action or defence must be clearly untenable.
(c)The jurisdiction is to be exercised sparingly and only in clear cases.
(d)The jurisdiction is not excluded by the need to decide difficult questions of law.
(e)The Court should be slow to strike out a claim in any developing area of the law, perhaps particularly where a duty of care is alleged in a new situation.
Dismissal for want of prosecution
[44]Rule 15.2 provides:
15.2Dismissal for want of prosecution
Any opposite party may apply to have all or part of a proceeding or counterclaim dismissed or stayed, and the court may make such order as it thinks just, if—
(a)the plaintiff fails to prosecute all or part of the plaintiff’s proceeding to trial and judgment; or
38 Attorney-General v Prince & Gardner [1998] 1 NZLR 262 (CA) at 267; and Couch v Attorney- General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
(b)the defendant fails to prosecute all or part of the defendant’s counterclaim to trial and judgment.
[45] There are three principal requirements for an order to dismiss a proceeding. The applicant must show that the plaintiff has been guilty of inordinate delay, that the delay is inexcusable, and that the delay has seriously prejudiced the defendant.39 The Court is also to “stand back” and consider whether the overall interests of justice would allow the case to proceed.40
[46] Whether delay is “inordinate” depends on the circumstances of the case.41 Delay prior to the issue of the proceeding cannot, by itself, constitute inordinate and inexcusable delay. But if there has been such delay, further delay after the issue of the proceeding will be regarded more critically by the Court. The defendant must show prejudice caused by the post-issue delay. And an overriding consideration is whether justice can be done despite the delay.42
[47] Delay, even significant delay, is sometimes excusable. But a full explanation should attend significant delays, otherwise the inference will be that the delay is inexcusable.43
[48] Possibly the most significant factor is whether the failure to prosecute results in serious prejudice to the other party, because this informs the ultimate consideration whether justice can still be done as between the parties if the proceeding goes to trial.44
Security for costs
[49]Rule 5.45 provides:
5.45 Order for security of costs
(1)Subclause (2) applies if a Judge is satisfied, on the application of a defendant,—
(a)that a plaintiff—
39 Lovie v Medical Assurance Society New Zealand Ltd [1992] 2 NZLR 244 (HC) at 248.
40 Commerce Commission v Giltrap City Ltd (1997) 11 PRNZ 573 (CA).
41 Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229 at 268.
42 Lovie v Medical Assurance Society New Zealand Ltd, above n 39.
43 New Zealand Industrial Gases Ltd v Andersons Ltd [1970] NZLR 58 (CA) at 62.
44 Robert Osborne and others McGechan on Procedure (online ed, Thomson Reuters) at [HCR.15.2.04]–[15.2.05].
(i) is resident out of New Zealand; or
(ii) is a corporation incorporated outside New Zealand; or
(iii) is a subsidiary (within the meaning of section 5 of the Companies Act 1993) of a corporation incorporated outside New Zealand; or
(b)that there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff’s proceeding.
(2)A Judge may, if the Judge thinks it is just in all the circumstances, order the giving of security for costs.
(3)An order under subclause (2)—
(a)requires the plaintiff or plaintiffs against whom the order is made to give security for costs as directed for a sum that the Judge considers sufficient—
(i) by paying that sum into court; or
(ii) by giving, to the satisfaction of the Judge or the Registrar, security for that sum; and
(b)may stay the proceeding until the sum is paid or the security given.
(4)A Judge may treat a plaintiff as being resident out of New Zealand even though the plaintiff is temporarily resident in New Zealand.
(5)A Judge may make an order under subclause (2) even if the defendant has taken a step in the proceeding before applying for security.
(6)References in this rule to a plaintiff and defendant are references to the person (however described on the record) who, because of a document filed in the proceeding (for example, a counterclaim), is in the position of plaintiff or defendant.
[50] In determining applications under r 5.45, the Court will generally follow these steps:45
(a)Has the applicant satisfied the court of the threshold under r 5.45(1)?
(b)How should the court exercise its direction under r 5.45(2)?
(c)What amount should security for costs be fixed at?
(d)Should a stay be ordered?
[51] The decision to order security, and the quantum of such security, are at the Court’s discretion. It is generally not to be to be fettered by constructing “principles” from the facts of previous cases.46 But the Court is to balance the competing interests
45 Busch v Zion Wildlife Gardens Ltd (in rec and in liq) [2012] NZHC 17 at [2].
46 McLachlan v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [13] and [14].
— being the defendant’s interest in protection from a costs order that is incapable of fulfilment and the plaintiff’s right of access to justice.47 Courts will be slow to make an order for security that will stifle a genuine claim.48 This balancing exercise is the Court’s overriding consideration.49
[52]The Court should assess whether there is:50
… credible (that is, believable) evidence of surrounding circumstances from which it may reasonably be inferred that the [party] will be unable to pay the costs. This does not, of course, amount to proof that the [party] will, in fact, be unable to pay them.
[53] The Court will assess the claim’s merits and prospects of success, to the extent that is possible at an early juncture.51 The Court will also consider the extent to which the plaintiff’s impecuniosity may have been caused by the defendant’s conduct.52
[54] A plaintiff’s unwillingness to pay previous judgment debts weighs in favour of an order for security.53 But whether a plaintiff has been a responsible litigant is secondary to the issue of whether the lack of merit of the claim justifies security that would prevent the claim from proceeding.54
[55] Quantum of security is discretionary and is assessed in the round. It need not be fixed by reference to likely cost awards.55 It is to be what the Court thinks fit in all the circumstances.56
[56]A Court will generally stay a proceeding until the security ordered is given.57
47 Clear White Investments Ltd v Otis Trustee Ltd [2016] NZHC 2837 at [4].
48 Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737 at [3].
49 Highgate on Broadway Ltd v Devine [2012] NZHC 2288, [2013] NZAR 1017 at [24(c)].
50 Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd (No 2) [1977] 1 NZLR 516 (SC) at 519; New Zealand Kiwifruit Marketing Board v Maheatataka Coolpack Ltd (1993) 7 PRNZ 209 (HC) at 212; and Stephenson v Jones [2013] NZHC 638.
51 Meates v Taylor (1992) 5 PRNZ 524 (CA); and Lee v Lee [2019] NZCA 345 at [73].
52 Bell-Booth Group Ltd v Attorney-General (1986) 1 PRNZ 457 (HC).
53 Taylor v Adair [2018] NZHC 1975 at [30]–[31], citing Burden v Dixie Cummings New Zealand
[2016] NZHC 729 at [22]; and Mawhinney v Auckland Council [2014] NZHC 3207.
54 Wright v Attorney-General [2019] NZHC 3046 at [26].
55 Sharp v Pillay [2017] NZHC 647; and Red 9 Ltd v The Learning Ladder Ltd (in liq) [2021] NZCA 284 at [30].
56 McLachlan v MEL Network Ltd, above n 46.
57 Tomanovich Holdings Ltd v Gibbston Community Water Co 2014 Ltd [2018] NZHC 990 at [68] and [85].
Analysis
[57]The issues to be determined in this judgment are:
(a)Should Rosemary’s second cause of action be struck out pursuant to r 15.1 of the High Court Rules?
(b)Should the proceeding be dismissed for want of prosecution by Rosemary?
(c)Should an order for security for costs be made against Rosemary?
[58]I deal with each of these in turn.
Should Rosemary’s second cause of action be struck out pursuant to r 15.1 of the High Court Rules?
[59] Mr Vane, for the Trustee, makes the following submissions as to grounds for striking out Rosemary’s second cause of action:
(a)the judgment of Justice Dunningham in Re Hayward Trustee Services Ltd is to the effect that the Trustee Act yields to the provisions of the trust deed — so that a trust deed can provide, either expressly or by implication, for the appointment of a corporate trustee as sole trustee notwithstanding anything to the contrary in the Trustee Act;58
(b)so far as the appointment of a corporate trustee as sole trustee of the Trusts at issue is concerned, the Trust Deeds do not prohibit or prevent the appointment of a corporate trustee as sole trustee — indeed to the contrary when examined, the Trust Deeds contemplate a corporate trustee as sole trustee;
58 Re Hayward Trustee Services Ltd [2022] NZHC 2217.
(c)if, contrary to that submission, the Court considers the Trust Deeds at issue do not go that far, then the Trustee Act (prevailing at the date the Trust Deeds at issue were entered into) does not expressly prohibit or prevent the appointment of a corporate trustee as sole trustee of the Trusts;
(d)sections 43(2)(c), 45(3) and 48(2) of the Trustee Act do not invalidate the appointment of a corporate trustee as sole trustee, but rather do not discharge a prior retiring trustee;
(e)the Trusts Act and the actions taken by the appointors under the Trust Deeds to re-appoint the Trustee as sole trustee of the Trusts, at least prospectively, cure any invalidity in the appointment of the Trustee as sole trustee of the Trusts;
(f)in the circumstances where no allegations of wrongdoing, misconduct, impropriety, dishonesty, breach of duty or negligence are made against the Trustee, and having regard to the actions taken by the appointors under the Trusts Act, the second cause of action lacks utility and any substantive outcome, is pointless and has no real relevance or purpose.
[60]Mr Vane submits specifically in relation to the Hayward decision as follows:
(a)The Hayward case is nearly on all fours with the present case, or at least closely analogous to it. Hayward concerned the validity of certain requirements and appointments of trustees between 2017 and 2021 and included the seeking of orders that a corporate trustee in that case was validly appointment as sole trustee in 2017, that is, when the Trustee Act was in force, as is the case in the Trusts.
(b)The following passages from Hayward are relevant to the present Trusts:
(i)Sections 2(4) and (5) of the Trustee Act make it clear that the Act’s provisions remain subject to the terms of the trust deed. As such, interpretation of the terms of the trust deed are salient.59
(ii)The trust deed allows for there to be a sole trustee.60 In that regard, cl B(1) of the schedule of powers to the trust deed provide (as does cl B(1) of the schedule in the Trust Deeds) that “words importing the singular include the plural and vice versa”. As such a reference to “trustees” throughout the Trust Deeds should also be read as “trustee”.
(iii)The trust deed allows for the sole trustee to be a company. In that regard, cl 11.02 of the schedule of powers of the trust deed expressly contemplates (as does cl 11.02 of the schedule of powers in the Trust Deeds) the appointment of a body corporate as trustee.61
(iv)There is no rule of law besides the limited application of ss 43, 45 and 48(2) of the Trustee Act which prohibits a company from being appointed as a trustee. Section 48(2) only prohibits a company being appointed as a trustee where the trust deed forbids such appointment. Neither the trust deed in Hayward nor the Trust Deeds forbid/prohibit a corporate trustee. Consequently, there is no reason to read down the trust deeds to exclude companies from appointment as trustees of the trusts.62 The same applies to the Trusts — there is no prohibition in the Trust Deeds or at law on the appointment of a company as a trustee.
59 Re Hayward Trustee Services Ltd, above n 58, at [35].
60 At [18].
61 At [19].
62 Re Hayward Trustee Services Ltd, above n 58, at [19].
(v)The Hayward trust deed does not expressly address what numbers of trustees are permissible, in which circumstances, or whether there were requirements upon the retirement and discharge of a trustee. The power of appointment was vested by the trustee in very broad terms.63 The same applies to the Trusts.
(vi)The authors of Neville’s Law on Trusts, Wills and Administration note, in circumstances where the wording of an instrument indicates that a settlor contemplated only one trustee acting for the trust, then one trustee will suffice and the restrictions imposed by the Trustee Act do not apply.64
(vii)Given the similar function of ss 43(2)(c) and 45(3) of the Trustee Act, the principle that a deed can exclude their function applies. The deed permits there to be a sole trustee.65 The effect of ss 43(2)(c) and 45(3) is not to invalidate the appointment of a corporate trustee as sole trustee, but rather not to discharge the prior retiring trustee.
(viii)Body corporates, whether specifically trustee corporations or not, are able to be trustees provided neither the constitution of the company nor the trust deed precludes it.66 The Hayward trust deed, as in the case with the Trust Deeds, cannot be read as ousting the ability of a company to act as trustee.
[61]Mr Vane also submits the following in support of the strike out application:
(a)no substantive relief is sought against the Trustee and its removal is not sought, and there are no allegations against the Trustee of wrongdoing, misconduct, impropriety, dishonesty, breach of duty or negligence;
63 At [37].
64 At [39].
65 At [42].
66 At [43].
(b)the Trustee Act has been repealed and replaced by the Trusts Act under which the Trustee may be and has been re-appointed as sole trustee of the Trusts — relying by analogy on the principle in Mercury Energy Ltd v Transpower NZ Ltd where it is not common law but rather earlier legislation which is eclipsed by legislation coming into force subsequent to the second cause of action being filed;67
(c)the re-appointed Trustee has re-examined and reconsidered decisions made and actions taken by the Trustee since 2008 and, on being satisfied as to the lawfulness, propriety and prudence of them, has resolved to ratify those decisions and actions;
(d)the date of final appropriation (distribution) under the Trust Deeds passed over two years ago on 24 June 2020, the assets of the Trusts are now in the course of being realised and converted into cash, and nearly all are so realised and converted and the Trusts are expected by the Trustee to be ready to be wound up and distributed in early 2023;
(e)the second cause of action is being pursued by Rosemary with the ulterior motive of endeavouring to obtain a collateral forensic advantage by seeking to embarrass the Trustee in the eyes of the beneficiaries and to try to limit the Trustee’s involvement in the first cause of action and accordingly the second cause of action in those circumstances is an abuse of the process of the Court;
(f)the Trusts and Capital Beneficiaries are prejudiced by incurring unnecessary costs and diversion of resources with respect to defending the second cause of action;
(g)the Capital Beneficiaries are entitled to be paid out following the date of appropriation and on realisation of the assets of the Trusts on their winding up, and they are prejudiced from being so by the first cause of action and indirectly by the second cause of action;
67 Mercury Energy Ltd v Transpower New Zealand Ltd (1998) 8 TLLR 554.
(h)the first cause of action is unlikely to succeed.
[62] Mr McKechnie, on behalf of the Capital Beneficiaries, the second defendants, made submissions supporting the submissions of the Trustee in respect of strike out of Rosemary’s second cause of action and dismissal of the whole proceeding for want of prosecution.
[63] Mr McKechnie made the following submissions in respect of the strength of Rosemary’s case in the first cause of action:
(a)The Trust Deeds do not contemplate that great grandchildren of the settlors of the Trusts would be beneficiaries and there is no reference to great grandchildren or reference to whāngai relationships or adoptions in the Trust Deeds.
(b)The Adoption Act 1955 makes no reference to whāngai relationships and whether a whāngai relationship can be a lawful adoption for the purposes of succession to a family member’s estate was considered by the Court of Appeal in Whittaker v Maori Land Court New Zealand.68 Mr McKechnie submits that the Court of Appeal held that an adoption which had not been registered and the adoption said to have been completed according to Māori custom, that is to say a whāngai adoption, could not be recognised.
[64] Mr McKechnie relies on the further decision of Keelan v Peach,69 where he submits the issue was whether a whāngai relationship or adoption could be recognised for the purposes of a claim under the Family Protection Act 1955. Mr McKechnie submits the Court held that a whāngai is not a child of the deceased for the purposes of s 3 of the Family Protection Act and that if the definition of those who could make a claim was to be extended, that would require legislative amendment.
68 Whittaker v Maori Land Court New Zealand [1997] NZFLR 707.
69 Keelan v Peach [2002] NZFLR 481.
[65] Finally, Mr McKechnie submits on this issue that, in any event, it is not accepted that there was a qualifying whāngai relationship – he submitted there were significant periods of time when ‘D’ and ‘T’ were not with Rosemary and there were significant periods of time when ‘D’ and ‘T’ were essentially in the joint care of their mother, Marie, and Rosemary.
[66] Mr McDougall, on the other hand, submits there is no basis on which the Court may strike out the second cause of action under r 15.1 as the second cause of action:
(a)discloses a reasonably arguable cause of action and is a real live issue which is relevant to the overall proceedings and which is likely to succeed;
(b)is not an abuse of process of the Court; and
(c)is not likely to cause prejudice or delay beyond the natural delays and costs inherent in determining a valid concern through the court system.
[67] Mr McDougall submits that the second cause of action is not clearly untenable and whether the appointments of the Trustee as sole trustee of the Trusts was valid is a serious question to be tried for the following reasons:
(a)The Trusts were, and are, subject to the Trustee Act, not the Trusts Act. Because the Trusts had three trustees originally appointment when settled, a proper interpretation of ss 43(c) and 45(3) of the Trustee Act is that each Trust ought to have at least two individual trustees throughout their existence. Mr McDougall refers to this Court’s judgment in the Trustee’s Beddoe application.70
(b)As to whether the sole trustee can be a company, while s 48 of the Trustee Act provides “any trustee corporation may be appointed and may lawfully act as the sole trustee in respect of any trust”, “trustee
70 Re Vincent Family Corporate Trust Ltd [2021] NZHC 2250 at [90]–[100].
corporation” has the limited meaning under the Trustee Act which does not include the Trustee.
(c)The provisions of the Trusts Act are not relevant to the Trustee’s failure to comply with the terms of the Trust Deeds and the Trustee Act. As indicated in the Beddoe decision, the merits of the second cause of action against the Trustee are particularly strong.71
(d)The Hayward decision is distinguishable and is not on all fours with the present case. It turns on the interpretation of quite a different trust deed in different procedural circumstances, and the following reasons distinguish it:
(i)Hayward involved an uncontested application for directions from the Court, and unless there is a good reason otherwise the Court was highly likely to make the directions consistent with the parties’ request. The deed in Hayward contained a bespoke date of distribution clause which contemplated a sole trustee and no such clause exists in the present Trust Deeds.
(ii)Clause 9.01 of the present Trust Deeds expressly deals with situations where the trustees are not unanimous and enables a majority decision (if there are three or more trustees) or implied removal of a trustee by a person holding the appointment power. The expectation is of unanimity or three trustees in a majority. This favours interpretation in which the present Trust Deeds require more than one trustee.
[68] Mr McDougall submits that Hayward is distinguishable and the specific terms of the trust deed in question in that decision allow for an interpretation that is not available in the present Trust Deeds. Accordingly the Court cannot be certain that the second cause of action cannot succeed and this is not a clear case in which the Court can exercise its jurisdiction to strike out and it would be inappropriate to do so.
71 At [100].
[69]Mr McDougall also answers the various submissions by the Trustee as follows:
(a)the Trustee’s assertion that the Trustee’s ratification of decisions and re-appointment are valid has not been determined, nor is any documentary evidence on the ratification and re-appointment from the Trustee before the Court;
(b)the Trustee’s submission that no wrongdoing, misconduct, impropriety, dishonesty, breach of duty or negligence on the part of the Trustee and that its removal is not sought, and no other substantive relief against the Trustee is sought ignores the fact that the Trustee acting in breach of the Trustee Act in being the sole trustee of the Trusts is itself actionable without more.72
[70]Mr McDougall further submits as follows:
(a)There is no abuse of process in the second cause of action being pursued. The Trustee has failed to discharge the heavy onus of establishing the action was brought for an improper purpose and there is no evidence before the Court to support such a contention.
(b)If the Trustee has acted improperly, or breached trust, then the beneficiaries are entitled to a declaration in respect of the same and this failing ought to be acknowledged as a matter of principle. Seeking validation or invalidation of a trustee’s actions is a valid purpose and proper use of the Court process.
(c)The Trustee has also filed its own affirmative defences and counterclaims seeking declarations approving or validating its appointment as trustee and endorsing its actions and decisions, and in the alternative appointing it as sole trustee and discharging or relieving former trustees from any liability arising from the appointment as trustees. Mr McDougall submits that even if Rosemary did abandon
72 Re Vincent Family Corporate Trust Ltd, above n 70, at [75].
the second cause of action, it is quite right that the Trustee should seek guidance and declarations as to whether it is has been validly appointed, just as the trustees saw fit to do in Hayward. In these circumstances, the Trustee cannot maintain the second cause of action lacks relevance, utility or is an abuse of process because it is seeking its own declarations on these issues.
(d)The second cause of action is not likely to cause prejudice or delay beyond the natural delays and costs inherent in determining a valid concern through the court system, through which the first cause of action will be progressing in any event. Mr McDougall submits that the beneficiaries do not need to spend any money and resources to defend the second cause of action. The Trustee could accept it was invalidly appointed and seek directions from the Court, as it could have done in relation to the first cause of action at the outset. That the beneficiaries are exposed to legal fees in legitimate proceedings is not an abnormal prejudice and if Rosemary is unsuccessful then a costs order will likely address this point.
(e)The evidence does not support the contention that the final distribution of the Trust’s funds has been delayed by both causes of action. Rosemary’s evidence is that:73
… “since the proceeding has been on foot, the Trustee has behaved as it would have done otherwise in that it continued to ready the Trust’s assets for sale, continued to actually sell them and continued to make capital distributions to the beneficiaries.
There are also Trust assets which remain to be sold.
73 Affidavit of Rosemary Jean Vincent, above n 13, at [42].
Conclusion on whether the second cause of action should be struck out
[71] In my view, the second cause of action should not be struck out as it is not clearly untenable and it is reasonably arguable by Rosemary. This is for the following reasons:
(a)Rosemary’s interpretation of the Trust Deeds is reasonably arguable and it is reasonably arguable that the Hayward decision is distinguishable on the basis proposed by Mr McDougall. This view is reinforced by Justice van Bohemen’s comments in the Beddoe decision.
(b)The fact that there is no allegation against the applicant of wrongdoing, misconduct, impropriety, dishonesty or breach of duty or negligence, nor is its removal as Trustee sought, is not the complete answer to the second cause of action. I accept Mr McDougall’s submission that if the Trustee was not validly appointed as trustee, the matter can be the subject of a declaration by the Court.
(c)The allegation that the second cause of action is being pursued as an abuse of process because of an ulterior motive to obtain collateral forensic advantage and to embarrass the Trustee in the eyes of the beneficiaries is unsubstantiated by evidence before the Court.
(d)The Trustee has brought its own application to the Court for declarations approving or validating its appointment as trustee and endorsing its actions and decisions, or in the alternative appointing it as sole trustee and discharging and relieving the former trustees from liability arising from appointment as trustees. This indicates that the declaration as to the validity or otherwise of the appointment of the Trustee under the Trusts Deeds and the Trustee Act is a relevant and live issue.
(e)Continuing the second cause of action will not cause undue delay and prejudice to the beneficiaries as the first cause of action will be progressed through the courts in any event.
(f)There is insufficient evidence before the Court for the Court to conclude that the second cause of action, on its own, will interfere with the realisation of the remainder of the Trust’s assets as is currently being undertaken by the Trustee and delay distribution of those assets to the final beneficiaries.
Should the proceeding be dismissed for want of prosecution by Rosemary?
[72] Mr Vane submits that there was significant and inordinate delay prior to the issue of the proceeding which is prejudicial to the beneficiaries. In particular he submits:
(a)‘D’ and ‘T’ were born in 2003 and 2009 respectively, and according to Rosemary’s allegations were adopted by Rosemary by whāngai in those respective years. On that basis, if any whāngai claim existed, it existed from 2003 and 2009 respectively and the proceeding was not filed until the date of final appropriation under the Trusts, being 24 June 2020.
(b)Between 2003 and 2020, the Trustee distributed income to the beneficiaries in shares calculated on the basis of the then known number of income beneficiaries. If ‘D’ and ‘T’ were whāngai as alleged by Rosemary, then they might be entitled to a retrospective distribution of income going back many years to 2003 and 2009 respectively, with a corresponding reduction in income for the known beneficiaries, on the basis that the income beneficiaries have been very broadly treated equally. Mr Vane points to Mr Morris’s evidence that while Mr Morris has not undertaken any precise calculation of the amounts involved, he estimates from his knowledge of the financial statements of the Trusts over many years that several thousands of dollars would be involved in
the recalculation, possibly hundreds of thousands of dollars.74 Such payments to ‘D’ and ‘T’ would be at the expense of the income beneficiaries, nine of whom (and three of whom have died) are not Capital Beneficiaries and cannot have any adjustments in income payments to them via adjustments to the capital payments. Those beneficiaries would have to repay the Trusts any overpayment of income arising from recalculation of roughly equal payments if ‘D’ and ‘T’ are included as income beneficiaries.
(c)After issue of the proceeding, Rosemary has been slow in prosecuting the proceeding. Since the Beddoe application was decided, Rosemary has taken no steps to advance the proceeding and Rosemary has not complied with directions of the Court. He points to a number of matters that have not been responded to in relation to case management.
[73]Mr Vane submits that there is prejudice arising from the delay as follows:
(a)the assets of the Trusts are shortly to reach the point of having been realised, enabling capital distributions, and the Trustee expects to be in a position to do so in early 2023;
(b)in order to make proper and lawful distributions to the Capital Beneficiaries as part of the winding up of the Trusts, the Trustee requires certainty as to the identity and number of the Capital Beneficiaries, and the Trustee has been prejudiced in obtaining that certainty by Rosemary’s proceeding not being prosecuted;
(c)the Capital Beneficiaries are entitled to be paid their shares and the Trustee suffers prejudice by reason of not having certainty to do so, plus the uncertainty coupled with capital distributions and the possibility of a retrospective income distribution adjustment required from the proceeding.
74 Affidavit of David Wayne Morris, above n 4, at [20]–[23].
[74] Mr McDougall, on the other hand, submits that the Court does not have jurisdiction to strike out Rosemary’s claim for want of prosecution under r 15.2 because:
(a)the Trustee cannot show that Rosemary has been guilty of inordinate delay, such delay is inexcusable and it has seriously prejudiced the Trustee;
(b)it is in the interests of justice for the matter to proceed to trial;
(c)justice can be done despite the delay.
[75] In relation to the delay prior to the issue of the proceeding, Mr McDougall submits that it only became clear that the Trustee would not recognise ‘D’ and ‘T’ as beneficiaries when Rosemary made enquiries in 2019. The fact that ‘D’ and ‘T’ may have been entitled to earlier distributions from 2003 and 2009 does not cause prejudice to the Trustee or the other beneficiaries beyond what is the natural consequence of properly recognising their status.
[76] In relation to the delay following issue of the proceeding, Mr McDougall accepts there has been some delays in the progression of the substantive proceeding since the start of 2022, but this delay has not been inordinate nor inexcusable. He points to Rosemary’s evidence that part of the delay was attributable to her need to seek new counsel because of a difference of opinion with her former counsel in how to advance the proceeding which was insurmountable. He also submits that Rosemary has instructed new counsel and she is in a position to reply to the second amended statement of defence and defence to the counterclaim and to timetable matters to a hearing.
[77] As to prejudice to the Trustee, Mr McDougall submits that if the Trustee was concerned to obtain certainty of the Capital Beneficiaries, it ought to have applied to the Court for guidance on interpreting the Trust Deeds in 2020 when it was first requested to do so. Also, the other beneficiaries are able to make their own applications should they claim to be prejudiced, but have not done so.
[78] Mr McDougall submits there has not been any prejudice to the beneficiaries because the remaining assets of the Trusts are continuing to appreciate, the Trustee has and continues to make distributions to the beneficiaries with a view to carrying out a final equalising payment, and the Trustee has behaved as it would have done otherwise. That is it continued to ready the Trusts’ assets for sale, continued to actually sell them and continued to make capital distributions to the beneficiaries. Finally, some Trust assets are yet to be sold. Mr McDougall points to the evidence of Rosemary in this respect.75
[79] Finally on this point, Mr McDougall submits that it is in the interests of justice that the case should proceed to trial. This case concerns the future of ‘D’ and ‘T’ who were both minors at the outset of the proceeding and who deserve to have their claim heard. He submits it is also a matter of public interest, in light of the recent decision in Ellis v R,76 when the substantive proceedings will involve addressing the place of tikanga in New Zealand law and the position of whāngai adoptions in light of these developments. Mr McDougall submits the overriding consideration of the Court is whether justice can be done at the trial despite the delay. Mr McDougall submits that justice can be done as all witnesses are still available and able to give evidence.
Conclusion on whether the proceeding should be struck out pursuant to r 15.2(a)
[80] In my view, the proceeding should not be struck out for want of prosecution pursuant to r 15.2(a). This is for the following reasons:
(a)The pre-issue delay cannot in itself constitute inordinate and inexcusable delay for the purposes of the strike out application.77 In any event, there is an explanation that Rosemary claims it was unclear that ‘D’ and ‘T’ would not be treated as beneficiaries until enquiry was made in 2019.
75 Affidavit of Rosemary Jean Vincent, above n 13, at [42]–[43].
76 Ellis v R [2023] NZSC 114.
77 Lovie v Medical Insurance Society New Zealand Ltd, above n 39, at 253.
(b)The prosecution of the proceeding has not been the subject of inordinate delay. While there have been delays and failure to comply with Court rules and participate properly in case management, in my view, these are not sufficient to justify strike out. Explanation has been offered by Rosemary of having to part company with her former counsel and instruct new counsel.
(c)The overriding issue is consideration of whether justice can be done despite the delay. In my view, the issues of ‘D’ and ‘T’’s claim to their entitlement as beneficiaries, and the interests of justice, require that claim to be heard. I accept Mr McDougall’s submission that justice can still be done despite the delay as witnesses are available and the issue can be tried. There has been no evidence presented by the Trustee to the contrary.
[81] Accordingly, in my view the proceeding should not be struck out pursuant to r 15.2(a) for want of prosecution.
Should an order for security for costs be made against Rosemary?
[82] Mr McKechnie makes the following submissions on the issue of security for costs:
(a)Rosemary obtained an order from the Family Court at Auckland to be the property manager for her daughter, Marie, in June 2009 and that order expired in June 2012. There is no explanation as to whether or not any application was made to renew that order and if not, why not.
(b)There is no explanation as to why Rosemary parted company with her Christchurch-based solicitors.
(c)Rosemary gives no account of her financial situation other than to assert that she can meet the costs. There is no documentation as to property owned, investments which might be held or savings.
(d)Rosemary lives in rented accommodation.
(e)Mr Morris’s evidence is that monies were advanced to Rosemary following requests for financial assistance.78
[83] On the other hand, Mr McDougall submits that the Court should not make an order for security for costs as:
(a)there is no reason to believe Rosemary will not be able to meet an award of costs so the threshold test is not met;
(b)it is not appropriate that an order be made; and
(c)alternatively, the amount sought as security is inappropriate and, if security for costs is awarded, a staged approach should be adopted.
[84] Mr McDougall makes the following submissions in relation to security for costs:
(a)There is no credible evidence of surrounding circumstances from which it may reasonably be inferred that Rosemary will be unable to pay the costs and the threshold is not met.79 The evidence put forward by the Trustee is insufficient to infer that Rosemary will be unable to meet a costs award and the Trustee’s evidence relating to events that occurred 20 years ago is outdated, irrelevant and not credible in relation to her current circumstances.
(b)The inference that a request for financial assistance to buy a property six or seven years ago is not reliable evidence that Rosemary is currently impecunious. Even if that request were more recent, Rosemary, as an income beneficiary, and Marie as a capital beneficiary, were entitled to seek distributions from the Trusts.
78 Affidavit of David Wayne Morris, above n 4, at [63]–[66].
79 Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd (No 2) [1977] 1 NZLR 516 (SC) at 519.
(c)The allegation that Rosemary sought advances for living expenses is a mischaracterisation of her evidence and the requests for payment were requests for the Trusts to make payment of the annual dividend she was entitled to as an income beneficiary.
(d)The allegation that Rosemary “squatted” in a building is disputed and Mr McDougall asserts that this was part of an agreement with Mr Morris in relation to leasing that building, which he later reneged on.
(e)The suggestion that Rosemary will not be able to borrow money, or that she will have to, is unsupported by any evidence before the Court.
(f)Rosemary’s evidence is that she is financially secure and will be able to meet the costs award as she and her partner run a successful IT business and have savings on which to draw. Additionally, Rosemary has been meeting significant legal expenses throughout the case.
(g)There is no onus or standard of proof and Rosemary does not need to prove she is not impecunious. While she has not provided the Court with detailed evidence of her financial position, she is not obliged to. Security for costs should not be imposed simply because a plaintiff has been silent as to its financial position.80
(h)The plaintiff is not outside the run of ordinary plaintiffs, she is employed, educated and runs a business.
[85] Mr McDougall further submits that an order for security for costs is not appropriate for the following reasons:
(a)Rosemary is likely to be successful in relation to the second cause of action and accordingly, the Trustee is unlikely to obtain any costs award
80 New Zealand Kiwifruit Marketing Board v Maheatataka Cool Pack Ltd (1993) 7 PRNZ 209 (HC) at 212–213.
in its favour. The Trustee’s involvement in the first cause of action is limited to that of a witness, in relation to which it cannot obtain a costs award.
(b)The Court has already indicated the prospects of success in the second cause of action are strong, and while the Beddoe decision considered the merits of the first cause of action were not strong, that was on the basis of limited evidence before the Court.
(c)The relationship between tikanga Māori and European legal concepts are of particular public interest and in this instance the Court can draw on tikanga in interpreting the terms of the Trust Deeds. To carry out such an exercise the Court will need the benefit of all parties’ full evidence.
(d)Rosemary’s evidence is that requiring her to pay full security for costs would threaten her ability to meet legal fees going forward. Access to the Court by a genuine plaintiff is not to be lightly denied and the Court should be slow to make an order for security for costs given the potential that it will stifle Rosemary’s claim or result in its inefficient determination.
(e)The Court should take into account the Trustee’s delay in bringing the application for security. The application was not made as soon as the Trustee supposedly became aware of Rosemary’s alleged inability to meet costs. It had knowledge of the assumptions and information contained in Mr Morris’s affidavit for some time, but the application was only made after two years of ongoing litigation in the High Court in which it is clear that Rosemary has been meeting significant legal fees. The delay is relevant as it has caused unfairness and prejudice to Rosemary, who has committed significant effort, resources and time to conducting her case, which is nearly ready to be set down for trial and may be prejudiced by the late application for security for costs to
prevent its progression, and thereby, may cause wasted costs to Rosemary.
(f)Overall, and balancing the interests of the parties, it is in the interests of justice to allow the case to proceed without security for costs.
[86] As to the amount of any security ordered by the Court, Mr McDougall submits that the amount sought by the Trustee is excessive. He proposes that the appropriate order would be an order for costs of $20,000 to be paid now, with further stages and amounts to be agreed.
Conclusion on security for costs
[87] In my view, it is not appropriate to make an order for security for costs against Rosemary. I accept Mr McDougall’s submission that the Trustee has not met the threshold of demonstrating reason to believe that Rosemary will be unable to meet a costs award against her. In my view, the evidence of Mr Morris does not establish this, as a number of the matters are historical. I take note of Mr McDougall’s argument that Rosemary’s requests for financial assistance from the Trusts have been mischaracterised and that they were only requests for distributions and dividends to which she was entitled.
[88] In addition, I take note of Mr McDougall’s submission that Rosemary has been meeting significant legal costs in respect of the existing proceeding, and that she and her partner run a successful IT business in which they are both employed.
[89] In addition, a factor counting against the award of security for costs is the delay by the Trustee in bringing the application, given it has been aware of Rosemary’s claim since the proceeding was issued in 2020. I note Mr McDougall’s submission that this has allowed Rosemary to expend more time and resources in pursuing the case to this point than if the security for costs issue had been raised earlier.
[90] Overall, and balancing the interests of justice, in my view security for costs is not appropriate.
Result
[91] As a result of the conclusion I have reached at [71], the Trustee’s application to strike out Rosemary’s second cause of action should be declined. Further, as a result of the conclusions I have reached at [80] and [81], the Trustee’s application to strike out the whole proceeding for want of prosecution should be declined. Finally, as a result of the conclusions I have reached at [87] to [90], the Trustee’s application for an order for security for costs against Rosemary should also be declined.
Orders
[92]I make the following orders:
(a)the Trustee’s application to strike out Rosemary’s second cause of action under r 15.1(1)(a), (b) and (d) of the High Court Rules is declined;
(b)the Trustee’s application to strike out the whole proceeding for want of prosecution under r 15(2)(a) of the High Court Rules is declined;
(c)the Trustee’s application for an order for security for costs against Rosemary under r 5.45 of the High Court Rules is declined.
Costs
[93] As costs should follow the event and Rosemary has been the successful party in relation to all three of the Trustee’s applications being declined, costs are awarded to Rosemary on a 2B basis, together with disbursements.
Associate Judge Taylor
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