Burnside v Burnside [2016] NZHC 843 (29 April 2016)

Last Updated: 13 May 2016

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2015-441-043 [2016] NZHC 843

UNDER	the Trustee Act 1956
IN THE MATTER OF	the estate of William James Burnside
BETWEEN	ALEXANDER CRAIG BURNSIDE Plaintiff
AND	ROBERT JAMES BURNSIDE Defendant

Hearing:	14 April 2016
Counsel:	C J Kelly for the Plaintiff and the Counterclaim Defendant Alexander Burnside H Cull QC and L C Ord for the Defendant
Judgment:	29 April 2016

_{JUDGMENT OF ASSOCIATE JUDGE SMITH}

[1] The plaintiff and the defendant are brothers. They are the two trustees in the estate of their father, the late Mr William Burnside, who died on 11 July 2003.

[2] In addition to the plaintiff (Alec) and the defendant (Robert), the late Mr Burnside left a widow (Ms Shirley Burnside) and three daughters, Maree Paterson (Maree), Julia Lynne Burnside (Lynne), and Wendy Lorraine Wilson (Wendy).

[3] There was a substantial estate which included two farm properties, a commercial property in Hastings, shares in a company called Burnside Forests Ltd (Burnside Forests), and a substantial investment in bonds, shares and fixed deposits (the W&K Fund). One of the farms was left to Alec, and the other was left to

_Robert.

ALEXANDER CRAIG BURNSIDE v ROBERT JAMES BURNSIDE [2016] NZHC 843 [29 April 2016]

[4] There were various other assets in the estate, including shares in

Ravensdown Fertiliser Co-operative Ltd (Ravensdown).

[5] The late William Burnside’s last will, made in November 2002, appointed Alec and Robert as executors and trustees, together with Mr Matthew Magill. Mr Magill resigned as a trustee in or about March 2005. Thereafter, Alec and Robert have been the sole trustees.

[6] Alec and Robert have fallen out. Alec says that the relationship between he and his brother has become so dysfunctional that they cannot continue to work together as trustees of the estate. In June 2015 Robert filed this proceeding, in which he seeks an order under s 51 of the Trustee Act 1956 removing Robert and himself as trustees, and appointing Mr Todd Hansen, solicitor, and Mr Anthony Mossman, accountant, both of Hastings, as trustees.

[7] Robert has filed a statement of defence and counterclaim in which he contends that he has always worked in the manner Alec has demanded, namely through Alec’s legal representative. He denies the allegation that the relationship between he and Alec is dysfunctional, and contends that certain actions of Alec’s (or Alec’s inaction) have caused or contributed to the problems between them.

[8] In a counterclaim, Robert seeks directions under the Trustee Act 1956 relating to the estate’s shares in Burnside Forests and Ravensdown. He contends that he is entitled to have all of the Burnside shares and part of the Ravensdown shares transferred to himself, but Alec has wrongfully obstructed the transfers. Alec denies those allegations, saying that there are complex legal and factual issues which need to be resolved before either parcel of shares can be transferred to Robert.

[9] Alec says that the level of dysfunction between Robert and himself, and between Robert and other family members, has now reached the point where it is urgent that new trustees be appointed to manage the estate assets. He expresses concern that the W&K fund is not being properly managed. He says that the appointment of new trustees has become sufficiently urgent that it should not be

delayed until Court hearing time can be found to hear the claim and counterclaim together.

[10] On 25 February 2016, Alec applied for orders directing that his claim for the removal and replacement of the trustees be determined first, at a separate hearing, and that the issues raised by Robert in his counterclaim be dealt with at a later hearing if necessary.

[11] Robert has filed a notice opposing the separation of claim and counterclaim.

[12] I now give judgment on Alec’s application for an order directing that his

claim be heard in advance of Robert’s counterclaim.

Background

[13] The late Mr Burnside did not mention the Burnside Forests shares or the Ravensdown shares in his last will, except to express the wish that Alec and Robert should both be appointed directors of Burnside Forests to represent his (50 per cent) shareholding in Burnside Forests. However the late Mr Burnside made a codicil to his will on 13 February 2003, in which he left his 50 per cent shareholding in Burnside Forests to Robert.

[14] Burnside Forests’ sole substantial asset was a pine forest on leased land near Taupo. The codicil provided that the Burnside Forests shares were not to be transferred to Robert until completion of the harvest of the mature pine trees then growing on the land.

[15] Some of the family members contended that the late Mr Burnside’s will and codicil did not effect a fair distribution of his assets. Those claims were eventually resolved by a Deed of Family Arrangement entered into on 8 April 2004 (the Deed).

[16] The Deed modified the late Mr Burnside’s will and codicil in a number of respects. First, as to the ownership of the estate’s 50 per cent shareholding in Burnside Forests, cl 19 of the Deed provided:

The provisions of clause 1 of the Codicil are to be modified, and it is agreed that, if within 12 months of the completion of harvest the directors of Burnside Forests Limited in their absolute discretion elect to sell the shareholding in Burnside Forests Limited owned by the Estate, the net proceeds of such sale shall be distributed to Wendy, Lynne and Maree as tenants in common in equal shares, but if they do not so elect the provisions of clause 1 of the Codicil shall stand.

[17] Clause 15 of the Deed set out the family members’ agreement on how the net proceeds of the harvest of the pine trees on the leased land were to be divided. The first $650,000 of the net income was to be divided into 13 parts, to be paid in agreed shares to Wendy, Lynne, Maree and Robert. The next $75,000 of net income from the harvest was to be paid to Lynne, and any net income over $725,000 was to be paid to the late Mr Burnside’s widow Shirley, Wendy, Lynne and Maree.

[18] The directors of Burnside Forests at the date of the deed would have included Mr Patrick Clark, whose family interests own the other 50 per cent of Burnside Forests. It is not obvious why Mr Clark would have been entitled to participate in any decision as to whether the estate’s shareholding should or should not be sold, but that is not a point which needs to be resolved: it is common ground that there was no election to sell the estate’s 50 per cent shareholding within the twelve month period referred to in cl 19. The practical effect of that is that the bequest of the Burnside Forests shares to Robert stands.

[19] Alec does not challenge Robert’s entitlement to the Burnside Forests shares, but he contends that the intention of the codicil and cl 15 of the Deed was that the shares were not to be transferred to Robert until the proceeds of the pine forest harvest had been fully distributed to the family members who are entitled to those proceeds under cl 15 of the Deed. Alec says that has not yet occurred.

[20] There is a difficulty with the drafting of cl 15 of the Deed, in that the family members who entered into the Deed were not, and would not be, the owners of the net proceeds of the pine forest harvest they purported to agree to divide. The owner was Burnside Forests, and any distribution of the net proceeds from the harvest to the family members would presumably have to be paid by Burnside Forests by way of dividend to its shareholders, with the estate’s dividend then being distributed to the family members in accordance with cl 15 of the Deed.

[21] There is also an issue over exactly what were the net proceeds of the relevant harvest. That is a matter on which expert accounting evidence may be necessary.

[22] Substantial part payments have been paid on account under cl 15 of the Deed,¹ but Robert has expressed concern over Burnside Forests’ ability to fund any greater dividend, having regard to the company’s ongoing expenses and the need for directors who authorise a distribution to their company’s shareholders to certify that, in their opinion, the company will, immediately after the distribution, satisfy the solvency test prescribed by the Companies Act 1993. He has declined to participate

in authorising any additional dividend, saying that doing so would or might place him in breach of his duties as a director of Burnside Forests.

[23] The issue over the Ravensdown shares is whether the shares are part of the late Mr Burnside’s residuary estate, or whether the terms on which the shares were issued were such that they effectively “attach” to the relevant farm. In the latter case, Robert would be entitled to the Ravensdown shares which “attached” to the farm which was devised to him, and Alec would be entitled to the shares attached to the farm that he inherited.

[24] Robert says that there was an agreement between the brothers that the Ravensdown shares would be treated as attaching to their respective farms, but when it became apparent that the majority of the shares would be apportioned to the farm he had inherited, Alec refused to complete the transfer. Alec says that there was no more than an informal, non-binding understanding to that effect, reached at a time when he understood that the Ravensdown shares had no significant value.

[25] From fairly early in the piece, Alec and Robert had had difficulty working together. Both were appointed directors of Burnside Forests after their father’s death, but before long Alec resigned as a director. Thereafter the two directors of

_{Burnside Forests have been Robert and Mr Patrick Clark, representing the Clark}

¹ $213,775 had been paid to the entitled family members by May 2005, and a further $450,000 was paid by way of dividend to the estate solicitors in March 2006. Robert declined to agree to distribute that sum to the entitled family members unless and until his siblings provided him with an indemnity against future claims, but this Court ordered that the $450,000, less reasonable solicitors costs, be distributed to the entitled family members in accordance with cl 15 of the Deed (Martin & Ors v Burnside and Burnside HC Napier CIV-2009-441-230, 7 July

2016).

family interests. There have been a number of arguments and disputes between Alec and Robert, and it is not necessary to refer to all of them in this judgment. Suffice for present purposes to say that the relationship between the two brothers has deteriorated to the point where Alec has asked that Robert communicate with him only through his solicitor.

[26] In his affidavit, Robert now accepts that the relationship between he and his brother is dysfunctional, although he says that, if the issues relating to the Burnside Forests and Ravensdown shares can be promptly resolved, he can and will continue to act as trustee with Alec.

The parties’ respective positions on Alec’s application

[27] Alec says that Robert’s counterclaim raises factual and legal issues which are both complex and unrelated to the question of whether Alec and Robert can and should remain in office as trustees. He expresses concern that there will be substantial delays if the claim and counterclaim are heard together, and in the meantime the estate (including the trusts created by the Deed) are not being properly administered. He expresses particular concern over the W&K Fund, presently valued at approximately $2.4 million. He contends that it is essential that new trustees be appointed as soon as possible, so that proper advice can be obtained on the appropriateness of the W&K Fund investments, and decisions can be made (in an atmosphere which is not affected by the dysfunctional relationship between Alec and Robert) on the difficult issues which remain over the Burnside Forests shares and the correct allocation of the Ravensdown share parcels.

[28] Alec contends that the matters in the counterclaim raise issues of detail and questions of law which would require a longer hearing, and cause undesirable delay in dealing with the important first question of the replacement of trustees. No substantially greater costs will be incurred if the counterclaim is deferred for a later hearing; indeed, if the proposed new trustees are appointed they may be able to resolve the counterclaim issues with Robert without the need for a hearing.

[29] Robert opposes separate hearings for the claim and counterclaim. He contends that there is a presumption against splitting a trial or hearing, and that the

burden lies on Alec as applicant for such an order to show good cause why claim and counterclaim should be separated.

[30] He alleges that Alec is wrongly refusing to execute transfers of the Ravensdown and Burnside Forests shares. He further contends that one of the consequences of any order removing him as a trustee of the estate would be that he would no longer be entitled to be a director of Burnside Forests (under the Burnside Forests constitution the holder of the estate’s 50 per cent shareholding in Burnside Forests is entitled to appoint and remove one director representing the estate’s interest). Robert denies that the replacement of the trustees is a discrete issue, saying that it does or may affect his beneficial entitlement in the estate (or the entitlements of his children), and that claim and counterclaim should be heard together.

The applicable legal principles

[31] The relevant rule is r 5.58 of the High Court Rules:

5.58 Place of trial of counterclaim

(1) A counterclaim must be tried at the same place as the statement of claim in the original proceeding and either simultaneously or immediately afterwards.

(2) Despite subclause (1), if it appears to the court that a counterclaim and the statement of claim can more fairly or conveniently be tried separately, it may, subject to such conditions as it thinks fit, make an order that the counterclaim be tried at some other place or time.

(3) Subject to subclauses (1) and (2), after a counterclaim has been served it must proceed in the same manner as if the defendant had commenced an independent proceeding against the plaintiff.

[32] Mr Kelly referred in his submissions to rr 10.4 and 10.15 of the High Court Rules. Rule 10.4 provides that the Court may order separate trials of causes of action, and may direct the sequence of those separate trials when the justice of the case so requires. The rule also includes broad provision for the Court to make any supplementary order which may be just in directing separate trials of causes of action.

[33] Rule 10.15 provides that, whether or not the decision will dispose of the proceeding, the Court may make orders for the decision of any question separately from any other question, before, at, or after any trial or further trial in the proceeding. The rule also provides that the Court may make an order for the formulation of the question for decision, and if thought necessary, the statement of a case.

[34] I do not consider that the matters relevant to the exercise of the Court’s discretion on an application under r 5.58 are significantly different from those which are often considered relevant under rr 10.4 and 10.15. In those circumstances I will treat the application as one made under r 5.58.

[35] Rule 5.58 creates a presumption that claim and counterclaim are to be tried together.² The onus is on the applicant (in this case Alec) to show that the claim and counterclaim could be tried more conveniently or fairly if tried separately.

[36] In Talyancich v Cole,³ the application for separate trials was rejected. Among the factors considered relevant by Chambers J was whether there would be any significant overlap between the issues raised in the claim and in the counterclaim, and whether there would likely be any saving in trial time, and therefore costs, if the claim and the counterclaim were tried separately. Chambers J also accepted that, in circumstances where discretionary relief had been sought in the claim, it would not be appropriate to hear the claim for discretionary relief without also hearing the matters raised in the counterclaim.

[37] In Turners & Growers Ltd v Zespri Group Ltd, White J noted:⁴

The starting point therefore is the assumption that all matters in issue are to be determined in one trial because that would normally be the most expeditious and efficient manner for dealing with a proceeding: Clear Communications Limited v Telecom Corporation of New Zealand Limited at

_334. ⁵ _{Consequently the burden of displacing the presumption rests on the}

² Talyancich v Cole (1999) 14 PRNZ 195 (HC), referred to in McCabe v McCabe [2014] NZHC

_{632 at [45]-[46].}

³ _{Talyancich v Cole, above n 2.}

⁴ _{Turners & Growers Ltd v Zespri Group HC Auckland CIV-2009-404-4392, 5 May 2010 at [10].}

⁵ Clear Communications Limited v Telecom Corporation of New Zealand Limited (1998) 12

PRNZ 333 (HC).

party contending for split trials. The burden has been described as “heavy” or “not insignificant”: Clear Communications Limited v Telecom Corporation of New Zealand Limited at 335 and KPMG New Zealand v Gemmell at [20]. ⁶

[38] His Honour then listed the following criteria which had been taken into account in other cases on the question of whether separate hearings should be ordered:⁷

(a) the likelihood of delay in finally resolving the proceeding; (b) the probable length of the hearings if there is a split trial;

(c) whether a decision one way or the other on the separate questions would end the litigation;

(d) the impact on the length of any subsequent hearing;

(e) a balancing of the advantages to the parties and the public interest in shortening litigation as against any disadvantages asserted by parties opposing a split trial;

(f) demarcation difficulties in defining issues to be addressed at the first trial;

(g) resulting difficulties of issues estoppel;

(h) inadvertent disqualification of a Judge who has expressed views at the first trial on matters for decision at the second trial;

(i) inadvertent findings at the first trial upon matters that are for full evidence and argument at the second hearing;

_{(j) the need to recall some witnesses at the second hearing;}

⁶ _{KPMG New Zealand v Gemmell HC Auckland CIV-2008-404-4288, 27 March 2009.}

⁷ Turners & Growers Ltd v Zespri Group, above n 4, at [11].

(k) the duplication of time involved for the Court and counsel

“coming up to speed” again for a second hearing;

(l) the prospect of multiple appeals.

(m) a second round of discovery or other interlocutories and amended pleadings following the first trial;

(n) rostering difficulties in ensuring that the same Judge is available for the second hearing.

[39] In Goodship v Minister of Fisheries,⁸ this Court held that an order for separate trials would not be made if the matters to be traversed in each trial might substantially overlap, if there were a risk of res judicata or conflicting findings, or if substantially more Court time would be taken by separate trials. Similar factors were considered relevant in Allison v KPMG Peat Marwick.⁹

[40] Finally counsel have both referred to the judgment of Kós J in Haden v Attorney-General,¹⁰ in which the Judge listed five questions which he considered relevant to applications made under r 10.15. The questions were:

(1) will there be difficult demarcation questions between those issues to be addressed at the first trial and those left for the second?

(2) will the separate question bring the proceedings to an end? (3) what potential time saving does the separate question offer? (4) how will appeals be dealt with?

(5) are there any other practical considerations tending one way or the

_other?

⁸ _{Goodship v Minister of Fisheries [2001] NZAR 274 at [13].}

⁹ _{Allison v KPMG Peat Marwick HC Auckland CP1063/90, 20 May 1992.}

¹⁰ Haden v Attorney-General (2011) 22 PRNZ 1 (HC).

Counsel’s submissions

Mr Kelly

[41] Mr Kelly notes that Robert’s counterclaim relates to two specific items of trust property, namely the Ravensdown shares and the shares in Burnside Forests. He submits that the issues associated with those items are complex, and that complexity provides substantial support for the view that the trustees replacement claim should be heard separately. Aspects of the counterclaim will require a detailed examination of the history of the relevant Burnside Forests transactions.

[42] None of that history will be relevant to the issue of the appointment of replacement trustees. Alec’s claims are concerned only with the question of whether the dysfunctional relationship between Alec and Robert (or between Robert and other family members) is bad enough that the appointment of new trustees is required to protect the beneficiaries’ interests. Furthermore, the counterclaim is a claim by Robert personally, not as trustee.

[43] Mr Kelly submits that it is not necessary to resolve Robert’s counterclaims to determine who should be the trustees. The relevant matters in considering who should be trustees are the interests of the beneficiaries overall, and the proper administration of the trust estate. Personal claims to individual assets are not relevant to that question.

[44] Mr Kelly refutes any suggestion that the application to have Robert and Alec replaced as trustees is designed to prevent Robert pursuing his claim to the shares in Burnside Forests. He submits that Alec’s concern is to protect the estate assets from the impact of dysfunctional relationships with Robert; the dispute over the Burnside Forests shareholding is just one example of that dysfunctional relationship.

[45] At the hearing, Mr Kelly advised that his instruction is that Alec accepts that when the distributions to family members which are required by cl 15 of the Deed have been authorised by Robert and paid, the estate’s 50 per cent shareholding in Burnside Forests will be transferred to Robert. As for Robert’s concern that any new trustees who may be appointed will remove Robert as director of Burnside Forests,

Mr Kelly confirmed that Alec’s application has not been motivated by any desire to bring that about. He submits that the Court could if necessary make an order protecting Robert’s position in that respect by directing that the new trustees are not to exercise the power of appointing a new director of Burnside Forests, and are not to sell the estate’s shares in Burnside Forests without first obtaining the consent of Robert or the Court.

[46] Addressing each of the considerations listed by Kós J in Haden, Mr Kelly submits that there will be no difficult demarcation issue if the claim is heard separately, in advance of the counterclaim. The hearing of the claim will address the need to break the current deadlock between the trustees, and the issue over the ownership of specific shares is not directly relevant to that.

[47] On the second issue posed by Kós J (whether the hearing of a separate question will or may bring the proceeding to an end), Mr Kelly submits that there may be no need to consider the share ownership issues once independent trustees have been appointed. Those trustees can review the issue with Robert, and reach suitable arrangements. Mr Kelly acknowledges that Robert may not be willing to accept the view reached by any new trustees that may be appointed, and that it may be necessary to proceed to a further hearing in relation to the shares. But there will be better prospects of the matter being resolved amicably, without the need for a further Court hearing, if new trustees are appointed. They will be able to review the issues from a neutral and professional perspective, and any discussions with Robert will not be affected by any history of animosity such as exists between Robert and Alec.

[48] Mr Kelly submits that the hearing of the issues relating to the shares (especially the Burnside Forests shares) is likely to be very time consuming. There may be a need to cross-examine witnesses, including Mr Clark. Mr Kelly estimates that a hearing of the issues arising out of the counterclaim could well occupy two days of hearing time. By contrast, the question of the replacement of the trustees should be able to be dealt with in half a day (or at least no more than one day). Three days would be required if claim and counterclaim were heard together.

[49] On the fourth factor identified by Kós J in Haden (how will appeals be dealt with?), Mr Kelly acknowledges that it is generally undesirable to have separate appeals from two separate hearings. He refers to the Judge’s observation in Haden that it may be desirable to make it a condition of granting a r 10.15 application that the hearing of appeals be postponed until determination of all issues in the

proceeding.¹¹

[50] On the “catch all” question of whether there are other practical considerations pointing one way or the other, Mr Kelly submits that the administration of the estate is “essentially on auto-pilot” at present, due to the inability of the trustees to work together. Referring to the W&K Fund, he submits that there is a dispute as to whether the funds under administration have increased or decreased in value as a result of the trustees’ inability to agree to instruct financial advisers. Whatever might be the position on increase or decrease in value, Mr Kelly submits that the present situation is not desirable, and should not be allowed to continue indefinitely.

[51] Mr Kelly submits that the primary consideration must be the best interests of the beneficiaries and the proper administration of the trust estate. The appointment of independent trustees now will not prevent Robert from continuing his claim to the specific parcels of shares should he see fit to do so.

Ms Cull

[52] For Robert, Ms Cull submits that the burden on Alec of proving that separate hearings are appropriate is not insignificant.¹² She refers to the presumption that all matters in issue will be heard in the one hearing, and proposes as an appropriate criterion for any order directing separate trials that the applicant must establish good, preponderant reasons in favour of separate trials.

[53] Ms Cull submits that if the application for a separate hearing of the claim were granted, and new trustees were appointed, those new trustees would themselves

_{have to make a “judicial” determination on the issues which are the subject of the}

¹¹ Haden v The Attorney-General & Ors, above n 10 at [50(d)], citing Commerce Commission v

_{Air New Zealand Ltd HC Auckland CIV-2008-404-8352, 24 August 2011.}

¹² Citing Clear Communications Ltd v Telecom Corporation of New Zealand Ltd, above n 5.

counterclaim. In that event the parties would be diverted from the real issues, which would have to be litigated in a new proceeding. She submits that would be unduly expensive, burdensome and detrimental to Robert.

[54] In her written submissions, Ms Cull submitted that Alec’s real object was to obstruct and delay the transfer of the estate’s Burnside Forests shares to Robert. Removing Robert as a trustee in the estate would facilitate the removal of Robert as a director of Burnside Forests, and his replacement by a new director who would or might be more amenable to finalising and paying out any remaining net profit on the relevant harvest.

[55] Ms Cull further submitted that Alec, in seeking equitable relief in his claim, is obliged to come to Court with clean hands. The effect of the application for removal of Robert as a trustee would be to deprive Robert of any role in the management of Burnside Forests, and delay the transfer or vesting of Burnside Forests shares in him. The Court should not condone intentions of that sort by granting the application. She submitted that the application to remove Robert as a trustee was no more than a device to ensure that Robert cannot be a director, and that the issues he raises in his

counterclaim will be delayed to suit Alec’s purpose.¹³

[56] Ms Cull submits that there will be no time saving if separate hearings of claim and counterclaim are directed. A separate hearing of the trustee removal application will not bring to an end the substantive issues between the parties. Further pleadings in a new proceeding will be necessary to resolve the issues.

[57] Ms Cull further submits that it is appropriate that the supervisory jurisdiction of the Court over the matters raised by Robert in his counterclaim should be exercised without further delay, to assist vesting the beneficial interests in the shares in Robert as the rightful owner. She submits that it is in the interests of all the family

_{that the Burnside Forests and Ravensdown share issues be resolved and determined}

¹³ As noted at para [45] above, Mr Kelly advised at the hearing that his instruction is that Alec has no intention of depriving Robert of his shareholding in Burnside Forests or his directorship of Burnside Forests. It appears that that position had not previously been made clear to Ms Cull or her client.

once and for all. She submits that while Alec has received his inheritance, he has been obstructing Robert from receiving all of his.

[58] Finally, Ms Cull submits that no new trustee should be put in the unenviable position of having to make a determination on the meaning of the relevant provisions of the will, the codicil, or the deed. Those issues are already before the Court in this proceeding, and there is nothing to be gained by asking new trustees to spend more time grappling with these issues when they will likely have to be resolved by the Court in any event.

Discussion and conclusions

[59] I am not persuaded that Alec has produced sufficient evidence to displace the presumption that claim and counterclaim should be heard together (or consecutively before the same Judge). I have reached that view for the following reasons:

(1) I am not persuaded that there will be any savings in costs or time for the parties if the claim is the subject of a prior hearing. I accept Ms Cull’s submission that there will be potentially significant costs in the new trustees “getting up to speed”. Both are professional men who will presumably be charging for their time, whereas Alec and Robert have been acting as trustees without remuneration. I also accept Ms Cull’s submission that the track record of disharmony within this family leaves no room for confidence that the new trustees will be able to negotiate a resolution of Robert’s counterclaim issues with him and with any other necessary parties. Alec acknowledges that the issues on the counterclaim are complex, and it is not unlikely that any new trustees would have to come back to the Court for directions similar to those now sought by Robert in his counterclaim. Mr Kelly submits that if an order is made first replacing the trustees it is likely to be easier to obtain a resolution of the counterclaim issues, but I think it is just as likely that resolution of the Burnside Forests and Ravensdown share issues (including the question of whether the relevant family members are entitled to a further distribution under cl

15 of the Deed) will render the application to replace the trustees unnecessary. There are only a limited number of issues remaining to be resolved in the estate, and if the parties have the Court’s direction on at least the most contentious of those issues, the perceived need for the replacement of the trustees may fall away.

(2) As for possible time savings, a three day fixture can be allocated to hear claim and counterclaim together in August of this year. The availability of a fixture that early is a powerful pointer in favour of keeping claim and counterclaim together.

(3) As noted, there are a limited number of steps to be completed to wind up the estate. Robert’s claims relating to the Burnside Forests shares and the Ravensdown shares remain to be resolved, as does the associated issue of whether further monies are due to the estate by way of dividends from Burnside Forests before Robert is entitled to have the shares transferred to him. Those issues are already before the Court, in this proceeding. It appears that the only other matters to be attended to by the trustees relate to the W&K Fund. Under the amendments made in the Deed, the distribution of the capital of the W&K Fund is to occur on the distribution of the capital of the death of Ms Shirley Burnside. The capital and income is then to be distributed in equal shares among the grandchildren who were living at the late Mr Burnside’s death, who (at the date of Ms Shirley Burnside’s death) had reached the age of 25. In respect of any qualifying grandchildren who had not reached the age of 25 at the date of Ms Shirley Burnside’s death, their share would be paid to their parents, to be held by them in trust for the grandchildren.

So it appears that the role of the trustees in administering the W&K Fund will effectively come to an end on the death of Ms Shirley Burnside. She is now in her late 80s, and is said to be in poor health.

No issues have been raised over the administration of the W&K Fund by the trustees which in my view require that a decision be made on the replacement of the trustees before claim and counterclaim can be heard together in August. Alec and one of the deceased’s grandchildren have expressed some concern over the administration of the W&K Fund, but the concerns expressed do not appear to me to be sufficiently substantial to justify an early, separate hearing. The W&K Fund has been managed with the assistance of a stockbroker, Mr Paul Clothier from Forsyth Barr, and all investment instructions are also referred to Alec (Mr Clothier has provided a letter dated 31

July 2015 confirming that he requires “confirmation from both trustees of the estate, namely you Robert and your brother Alec, before completing any transaction”).

Some criticism has been levelled at the breakdown of the investments of the W&K Fund. As at November 2015 (when his affidavit was sworn), Robert says that the W&K Fund was invested in cash funds (23 per cent), shares (32 per cent), and staggered fixed term investments (the balance). In an affidavit sworn in June 2015, one of the grandchildren who supports the claim for the replacement of the trustees contends that at least 50 per cent should be invested in “the growth market”. But it is not suggested that there is an imminent danger that the assets of the W&K Fund will or may be dissipated.

There is no need for me to do more on this application than note that the fund appears to have been managed well enough over a number of years without any apparently significant complaints from the rest of the family. Indeed, Alec himself has expressed his appreciation for Mr Clothier’s work. In a letter date 10 July 2013, forwarded to Robert, Alec said:

“Paul Clothier has been Dads and our family share broker for six years now and his performance has been excellent...the NZ sharemarket downturn and the world financial crisis 2008 was almost totally avoided. I met up with [Mr Clothier] before the downturn hit, we both felt the

world financial markets were way out of line [Mr Clothier] organised some non-exposed investments for the trustees to consider e.g. interest, government bonds etc.”

The parties have apparently been content to allow Robert, assisted by Mr Clothier, to manage the W&K Fund investments for many years, and Mr Kelly has not pointed to any decision relating to the W&K Fund which needs to be made urgently, which might not be competently handled by Robert and Alec, assisted by Mr Clothier.

(4) Turning to the criteria considered by Kós J in Haden, I do not think it is possible to say that there would be no demarcation difficulties between the claim and counterclaim issues if there were an early hearing of the claim. Alec relies on the apparent state of disharmony within the family (particularly between the trustees), and contends that the remaining trusts cannot be properly administered in the best interests of the beneficiaries unless new trustees are appointed. It appears that Robert will be defending his position by contending that the state of disharmony was not of his making, relying (in part) on his contention that Alec has wrongfully obstructed the transfer to him of the Burnside Forests shares and the Ravensdown shares.

I do not think it can be safely said at this stage that Robert will not contend on the claim for removal of the trustees that, while it may be appropriate for the Court to remove Alec as trustee, he, Robert, should remain. The possibility of such an argument being run in opposition to the claim makes it impossible to say that a substantial part of the evidence relating to Robert’s claims will not also be given in opposition to the claim. Therefore, the possibility of overlapping evidence and issues cannot in my view be discounted.

(5) Turning to the second factor considered by Kós J in Haden (will the separate question bring the proceedings to an end?), the answer is clearly no. Hearing the claim first will not resolve all of the issues.

(6) The third factor considered by Kós J was whether there would be a potential time saving if the separate question were heard first. I have already dealt with this. A fixture can be allocated for hearing claim and counterclaim together in August 2016, and I am not persuaded that any time saving which might follow if the claim were heard (on its own) a month or two before then would be sufficient to tip the scales in favour of granting the application.

(7) The next consideration is how appeals would be dealt with if the Court were to direct separate hearings. I accept that this might be dealt with in the way Mr Kelly submitted, namely by making it a condition of any order directing separate hearings that all appeals would be deferred until judgment has been given on both hearings. But again, I do not consider that this consideration is significant when weighed against the various factors discussed above.

[60] The decisive considerations, in my view, are as follows. A fixture can be allocated for the hearing of claim and counterclaim together (or consecutively), without too much further delay. There would be a significant likelihood of overlapping evidence and issues if there were two hearings. And, in circumstances where the major contentious issues which are holding up the administration of the estate appear to be the issues relating to the Burnside Forests and Ravensdown shareholding, it will be better for the parties to get on and obtain a judgment on those issues.

[61] The application for a direction that the claim be heard separately in advance of the counterclaim is refused.

Directions

[62] I make the following directions:

(1) a three day fixture is to be allocated for the hearing of both claim and counterclaim, commencing in August 2016;

(2) any amended statement of defence and/or counterclaim is to be filed and served by Robert within 10 working days of the date of this judgment;

(3) Alec is to file his reply to the affirmative allegations in any amended statement of defence Robert may file, and his statement of defence to any amended counterclaim Robert may file, within 10 working days of service of any such amended statement of defence and/or counterclaim;

(4) A teleconference is to be convened on the first practicable date after the date which is 20 working days from the date of this judgment. The purpose of the teleconference will be to give such directions as may then be necessary to ensure that claim and counterclaim will be ready for trial in August 2016. Counsel are to file a joint memorandum (or separate memoranda if they cannot agree) setting out their proposals for the disposal of any outstanding interlocutory matters, and their proposed pre-trial directions. The memorandum is to be filed not later than three working days before the conference;

(5) the costs of the application are reserved.

Associate Judge Smith

Solicitors:

Ord Legal, Wellington for the defendant