Easton v New Zealand Guardian Trust Company Limited [2016] NZCA 243 (2 June 2016)

Last Updated: 18 June 2016

IN THE COURT OF APPEAL OF NEW ZEALAND
CA228/2016 [2016] NZCA 243
BETWEEN	IAN CHARLES EASTON Appellant
AND	THE NEW ZEALAND GUARDIAN TRUST COMPANY LIMITED Respondent

Hearing:	26 May 2016
Court:	Cooper, Clifford and Katz JJ
Counsel:	J O Upton QC and P J Reardon for Appellant L J Taylor QC for Respondent
Judgment:	2 June 2016 at 11.30 am

JUDGMENT OF THE COURT

1. The appeal is dismissed.
2. The appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.

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REASONS OF THE COURT

(Given by Cooper J)

[1] Mr Easton appeals against a judgment of Ellis J declining his application for leave to amend the statement of claim in a civil proceeding, the trial of which is scheduled to commence in the High Court at Wellington on 13 June 2016.^[1]
[2] As noted in the High Court judgment, there have been a number of iterations of Mr Easton’s claim.^[2] The date for the close of pleadings was initially set at 21 August 2015. It was extended by consent to 25 September 2015 to allow Mr Easton to brief a new forensic accountant. The first amended statement of claim was filed accordingly in September 2015. Then, in November 2015, Mr Easton advised that he wished to make a further amendment. The New Zealand Guardian Trust Company (the NZGT) consented to a second extension of the close of pleadings date until 11 December 2015, when the second amended statement of claim was filed. The application now subject to appeal was for leave to file a proposed third amended statement of claim.
[3] Prior to the currently proposed third amended statement of claim, the essence of Mr Easton’s allegations was that the NZGT had breached its duties as a trustee by, amongst other things:

• (a) proposing to pay tax to the Inland Revenue Department on the basis of financial accounts “acknowledged to be inappropriate, based on a wrong structure and flawed methodology, and disadvantageous to [Mr Easton] and the Trust”;
• (b) seeking to sell farm property relevant to the claim when it was unnecessary to do so because alternative arrangements could be made to pay outstanding tax;

[4] The application for leave to file the third amended statement of claim would have added new allegations for the first time. Some of those allegations are no longer pursued, and Mr Upton QC for Mr Easton has confirmed that only two new allegations are now sought to be added. They would allege:

29. As the taxpayer/landlord with prime responsibility to manage the tax affairs of the entities it failed to promptly calculate and pay provisional tax as it fell due.
30. (Alternatively) If it was not able to, or refused to, pay such tax, it failed to promptly advise the plaintiff to that effect, explain the position to him, ensure that he was fully informed and that alternatives were in place to meet tax obligations as they fell due.

[5] Mr Upton conceded in this Court that the proposed new pleading would in fact state, for the first time, the real dispute between the parties. He effectively conceded that the statement of claim as it has stood to this point, failed to do so.
[6] The notice of appeal alleged that the Judge had misdirected herself by failing to examine each proposed amendment separately. By giving a single set of reasons for rejecting all of the proposed amendments, she had misdirected herself. At the hearing of the appeal, Mr Upton acknowledged that the Judge’s decision was discretionary in nature, but he maintained that she had failed to consider the overall interests of justice and, in the result, had made a decision which is “plainly wrong”. A discretionary decision properly so characterised may of course be reversed on appeal.^[3]
[7] We do not accept the criticism that the Judge did not express reasons for failing to accept those amendments now sought to be pursued. We consider that her reasoning at [22] is clearly germane to the remaining new allegations in [29] and [30] of the proposed third amended statement of claim. We note in particular her observations that:^[4]

... although the amendment involves no fresh cause of action, strictly so called, the allegations set out above are said to constitute new and discrete breaches of trust. In that regard I am unable to accept the submission by Mr Upton QC that they merely articulate matters that were implicitly included in the earlier pleading. Why that is not so can most clearly be seen from the point made by Mr Taylor QC that the new tax allegation appears directly to contradict the existing tax pleading. In other words the original claim was (and remains) that [the NZGT] was in breach of trust for wishing to pay the outstanding tax. The new pleading is that [the NZGT] should pay the outstanding tax.

[8] Further, at [24] the Judge accepted a submission made by Mr Taylor QC for the NZGT that the proposed amendments would possibly require further discovery and would certainly require additional evidence and hearing time.^[5] Finally, the Judge’s observation that the reasons given for the late amendment were “less than compelling” can readily be applied to [29] and [30] of the proposed third amended statement of claim as well as the other amendments previously proposed.^[6] The Judge’s conclusion that Mr Easton has had ample time prior to the close of pleadings to raise any new matters that might have arisen from discovery and inspection of documents can also be related to the amendments now sought to be pursued.^[7]
[9] In saying that, we do not overlook Mr Upton’s submission that Mr Easton only became aware of the potential new allegations when he received expert advice on 18 December 2015. An expert previously instructed had withdrawn in June 2015 because of a potential conflict. Until that stage, and on the basis of the first expert’s advice, Mr Easton had been intending to go to trial alleging that the NZGT had perpetuated an unnecessarily complex accounting structure by continuing tax arrangements made by a predecessor trustee, Mr Larsen, which had resulted in an unnecessarily high tax calculation. A new expert was instructed, Mr McGlinn. However, according to the notice of appeal, Mr McGlinn’s “mature views on this matter” were not communicated until 18 December 2015. At that stage, Mr Upton was overseas and a draft third amended statement of claim was not available until February 2016. An extension of time had been granted to enable Mr Easton’s evidence to be provided in February 2016. Mr Upton submitted the proposed amendments to the statement of claim were necessary simply to bring the pleadings into line with the evidence that the new expert would be able to provide to the Court.
[10] That is a line of argument which essentially relies on Mr Easton’s failure to comply with dates set by the Court for the finalisation of the pleadings. It was open to the Judge to conclude, as she did, that there was no proper justification for the late attempt to alter the substance of the claim.
[11] The evidence on which Mr Easton seeks to rely to establish the new allegations is not only that of Mr McGlinn, there is also a proposed brief from Mr Chapman, a Wellington solicitor to be called as an expert expressing opinions about the NZGT’s conduct. Mr Taylor submitted that both further factual evidence and expert evidence would be necessary to deal with the issues now raised. We accept that is so, given the changed nature of the case which the NZGT will have to answer. We also accept Mr Taylor’s submission that additional discovery might be necessary.
[12] Mr Upton submitted that if the proposed amendment is not allowed it is possible that Mr Easton would simply discontinue the present claim and begin again making the allegations now sought to be advanced. If that course is necessary to ensure that the “real issues” are those which are litigated, that will simply be a reflection of the fact that Mr Easton has not previously got his house in order. We do not see that as a basis upon which to conclude that Ellis J erred by declining the application for leave.

Result

[13] The appeal is dismissed.
[14] The appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.

Solicitors:
Lawler & Co, Auckland for Appellant
Carlile Dowling, Napier for Respondent

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^[1] Easton v The New Zealand Guardian Trust Co Ltd [2016] NZHC 798 [High Court judgment].

^[2] At [16].

^[3] Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32].

^[4] High Court judgment, above n 1, at [22].

^[5] At [24].

^[6] At [26].

^[7] Ibid.