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High Court of New Zealand Decisions |
Last Updated: 6 January 2020
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
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CIV-2018-404-000320
[2019] NZHC 3474 |
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UNDER
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Rule 7.51 High Court Rules
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IN THE MATTER
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of The Valerie Geard Trust and CIV-2012- 404-993
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BETWEEN
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PAULINE JANICE HARRISON
Plaintiff
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AND
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ADRIENNE HARRISON
First Defendant
GRAEME ROSS HARRISON
Second Defendant
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CIV-2018-404-002681
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UNDER
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Section 66 of the Trustee Act 1956, Part 19 High Court Rules and the
inherent
jurisdiction of the High Court
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IN THE MATTER
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of The Valerie Geard Trust
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BETWEEN
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ADRIENNE HARRISON and GRAEME
ROSS HARRISON as trustees of The Valerie Geard Trust
Applicants
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AND
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PAULINE JANICE HARRISON
Respondent
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Hearing:
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14, 15 and 16 October 2019
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Appearances:
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Ms P J Harrison in person
P M Webb for A Harrison and G R Harrison R A Rose for ChildFund
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Judgment:
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20 December 2019
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PAULINE JANICE HARRISON v ADRIENNE HARRISON [2019] NZHC 3474 [20 December 2019]
JUDGMENT OF BREWER J
This judgment was delivered by me on 20 December 2019 at 1:00 pm pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
Introduction
[1] This judgment determines the following two proceedings:
(a) Pauline Harrison v Adrienne Harrison and Graeme Ross Harrison (CIV-2018-404-320) (“the 320 proceeding”), being a claim for relief under r 7.51 of the High Court Rules in respect of the interlocutory orders made by Toogood J in Valerie Geard Family Trust v Harrison;1 and
(b) Adrienne Harrison and Graeme Ross Harrison v Pauline Harrison (CIV-2018-404-2681) (“the 2681 proceeding), being an application under s 66 of the Trustee Act 1956 for orders for distribution and the winding up of the Valerie Geard Trust.
[2] The 320 proceeding and the 2681 proceeding were consolidated by Associate Judge PJ Andrew on 11 December 2018.
Background
[3] I take the background of these proceedings from the succinct summary of Toogood J:2
[1] On 18 October 2005, a terminally ill Valerie Margaret Geard settled a family trust (“the Valerie Geard Trust” or “the Trust”) appointing the first defendant (her brother Graeme Harrison) and the second defendant (her sister- in-law Adrienne Harrison) as trustees. The final beneficiaries of the Trust
1 Valerie Geard Family Trust v Harrison [2013] NZHC 385.
2 Valerie Geard Family Trust v Harrison, above n 1.
were Mrs Geard’s siblings who then comprised Graeme Harrison, Brian Harrison, Malcolm Harrison and the second plaintiff Pauline Harrison. The discretionary beneficiaries included Mrs Geard, her husband David, the final beneficiaries, and Child Fund New Zealand Limited.
[2] At the time of the settlement of the Trust, Mrs Geard signed a memorandum which included an indication that she wished her brother Malcolm to be the primary beneficiary of the Trust. The memorandum included also a wish that her husband should be able to continue to reside in the home he shared with Mrs Geard for a sufficient period of time to ensure an orderly transition to an alternative property following Mrs Geard’s death. The memorandum also expressed wishes as to how the Trust funds should be applied on the death of Mrs Geard’s brother, Malcolm Harrison.
[3] Mrs Geard also executed a Will on 18 October 2005, appointing Graeme and Adrienne Harrison to be the executors and trustees of the Will, making specific bequests in favour of her husband and her sister Pauline, and bequeathing the residue of her estate to the trustees of the Valerie Geard Trust.
[4] Mrs Geard died on 3 March 2006. Malcolm Harrison, the intended primary beneficiary of the Trust, died on 2 November 2007.
The 320 proceeding
[4] Ms Pauline Harrison is convinced her brother, Graeme Harrison, and sister-in- law, Adrienne Harrison, have breached their obligations as trustees by keeping and using the Trust’s property for their own benefit to the exclusion of herself and her brother, Brian Harrison. She sued them and Toogood J had to decide issues of costs and security for costs.
[5] Without going into the background, I record that Toogood J directed Ms Pauline Harrison to pay $3,854 by way of costs on an unsuccessful application by her to disqualify counsel.3
[6] On the matter of security for costs, Toogood J directed that Ms Pauline Harrison pay security for costs in the sum of $25,000.4
[7] I will at this point address the principal difficulty I have had in trying to identify and resolve the legal issues which are in contest between the parties. That difficulty is the aggressive and obsessive attitude of Ms Pauline Harrison to this litigation. Ms Pauline Harrison represents herself. I reproduce Toogood J’s appraisal:
3 At [24].
4 At [33].
[31] [Mr Graeme Harrison’s and Mrs Adrienne Harrison’s] careful and detailed response to the allegations of misfeasance are to be contrasted with the wide-ranging, unfocused, exaggerated and inherently implausible allegations made by [Ms Pauline Harrison]. Unsubstantiated allegations of deceit and misleading conduct by [Mr Graeme Harrison and Mrs Adrienne Harrison] and legal practitioners, and the attacks on judicial officers, which are contained in [Ms Pauline Harrison’s] memorandum, give me no confidence that [Ms Pauline Harrison] has a meritorious claim. Furthermore, it is apparent from the approach which [Ms Pauline Harrison] has taken to the interlocutory issues which have arisen so far, that she is incapable of addressing the real issues arising in the litigation with any proper focus. Given that [Ms Pauline Harrison] is acting in person, there is a real risk, in my view, that the substantive hearing would occupy far more time than Mr Parmenter’s estimate of two days.
[8] I am sorry to say that my experience has been entirely consistent with Toogood J’s observations.
[9] Ms Pauline Harrison’s response to Toogood J’s orders was to challenge them under r 7.51 of the High Court Rules 2016. This provides:
Order may be rescinded if fraudulently or improperly obtained
(1) A Judge may rescind any order that has been fraudulently or improperly obtained.
(2) The Judge may grant any further relief by way of costs that the interests of justice require.
(3) This rule does not limit any other remedies of a party who has been adversely affected by an order that has been fraudulently or improperly obtained.
[10] In her 26 page statement of claim, Ms Pauline Harrison pleads:
MATTERS OF LAW
(i) minute dated 20 July 2012
(ii) and interlocutory [costs and security for costs] judgment CIV-2012- 404-993 [2013) NZHC 385 dated 1 March 2013
as to:
(a) Costs and security for costs.
(b) Refusal to remove lawyers R. Parmenter and P. Macky of Macky Roberton Limited in the substantive court;
CAUSE OF ACTION
(footnotes omitted)
[11] The hearing commenced on 14 October 2019. Ms Pauline Harrison had provided the Court with a lot of material by way of submission and authorities. She had also provided an affidavit sworn on 21 June 2018. It ran to 23 pages and exhibited 22 documents. It set out Ms Pauline Harrison’s reasons for suing Mr and Mrs Harrison and repeated many of the matters she had put to Toogood J. The best summary I can attempt of her position (combining submission, assertion, opinion and evidence) is that Mr and Mrs Harrison are fraudsters and they deceived Toogood J. The first paragraphs of Ms Pauline Harrison’s affidavit illustrate this:
by the operation of law when the trustees removed the Certainty-of-Subject Matter from the Trust.
$2,025,000.00 property and they are defrauding me. He has his own share of the Trust yet he and his non-beneficiary spouse are robbing my legal entitlement, wanting everything for themselves. That is filthy greed and fraud.
The hearing
[12] There was a number of matters to be resolved at the start of the hearing. One was an application by Ms Pauline Harrison that the 320 proceeding be heard separately from the 2681 proceeding as opposed to simultaneously.6 In my Minute of 9 October 2019, I had commented:
[11] The purpose of consolidating proceedings is to allow matters common to both proceedings to be determined efficiently and without duplication. There may be force in Ms P Harrison’s submission that whether Toogood J’s interlocutory orders were obtained fraudulently or improperly is a distinct issue from whether the Trust should be wound up. On the other hand, Ms P Harrison’s objection to the Trust being wound up is founded in her allegations of fraudulent and improper actions on the part of the trustees.
[13] I concluded my Minute by saying I would address this matter with Ms Pauline Harrison and counsel at the commencement of the trial.
[14] When the case was called Ms Pauline Harrison immediately told me she needed headphones because she has impaired hearing. That was a matter I had addressed in my Minute of 9 October 2019 and I had directed the Court provide headphones at the trial. I adjourned for the headphones to be provided.
5 This is a legal maxim to the effect that a valid cause of action cannot arise out of fraud.
6 In her memorandum of 8 October 2019.
[15] When I returned to Court neither Ms Pauline Harrison nor her daughter, Ms Angela Harrison (acting as McKenzie friend), were present. I recorded the following in a Bench Note:7
- [2] At the outset, Ms P Harrison complained that she had not been provided with headphones as she had requested. Ms P Harrison is hard of hearing. I had previously directed that Ms P Harrison be assisted with hearing devices and so I adjourned to enable them to be provided. I am advised by the court-taker they were provided, although Ms P Harrison does not like the way they operate in the courtroom environment.
[3] I was also informed during the adjournment by the court-taker that Ms P Harrison and her daughter had engaged counsel for the other parties in heated terms and, without any criticism of counsel at all because I understand there were no heated responses by them, Ms P Harrison and her daughter left the courtroom and waited outside. I was told they did not want to come back. I instructed the court-taker to advise Ms P Harrison and her daughter that I was coming back to Court and that if they wished to continue to be involved in the proceedings they needed to come back into Court and talk to me. I asked the court-taker to advise Ms P Harrison and her daughter that if they chose not to participate further in the case then I would carry on in their absence.
[4] The court-taker told me, prior to resuming, that they are not happy and they have gone down to the registry office to complain. I have come back to Court and neither is present. We will just have to see what happens after this.
[16] I discussed how to proceed with Mr Webb for Mr and Mrs Harrison and with Ms Rose for ChildFund.8 I then invited Mr Webb to proceed with Mr and Mrs Harrison’s application in the 2681 proceeding.9 However, I made the point that the actions of the trustees were relevant both to the 320 proceeding and to Ms Pauline Harrison’s opposition to the 2681 proceeding. I said:10
And here there are allegations of misuse of trust property and so I will be asking to be shown the trust accounting or other documents that are put forward by your clients to show how the trust affairs have been administered. What seemed to me to be the crucial allegation by Ms P Harrison was what happened to the proceeds of the sale of the property, so I will want you to take me to the evidence as to what happened to the proceeds of the sale of the property.
9 I directed a transcript of my exchanges with the parties during oral submissions be prepared.
10 At 13.
[17] Mr Webb called Mrs Adrienne Harrison to give evidence. Mrs Harrison was still in the witness box at the luncheon adjournment. Neither Ms Pauline Harrison nor Ms Angela Harrison had returned to Court prior to then.
[18] When Court resumed after the luncheon adjournment Ms Pauline Harrison and Ms Angela Harrison returned to the courtroom.
[19] There was a discussion between Ms Angela Harrison and myself over the efficacy of the headphones supplied by the Court. Essentially, I was told the headphones did not work for Ms Pauline Harrison. Ms Angela Harrison also tried to address me on substantive matters which I would not hear her on because she did not have the right to act as an advocate in her role as McKenzie friend.11
[20] Ms Pauline Harrison addressed me and spoke at some length about her case. There was then an exchange between us which indicated to me that Ms Pauline Harrison could hear me to a reasonable extent:12
THE COURT:
Pause please. Pause please. Now, Mrs Harrison, why are you telling me this?
MS P HARRISON:
Because I am telling you this because that trust has been vested and these people...
THE COURT:
Just pause.
MS P HARRISON:
... are defrauding it.
THE COURT:
Pause. When I ask you why are you telling me this, what I mean is what do you think you gain by telling me? What do you think that I ...
MS P HARRISON:
Because ...
THE COURT:
No, no, pause. What do you think that I as a Judge should do because you are standing there telling me this?
11 See Craig v Slater (McKenzie friend) [2017] NZHC 874, [NZAR] 649 at [2].
12 At 32-35.
MS P HARRISON:
Do the law. There is the law to guide you. There is the law that says that when that trust vested, do what the law states and it goes to the final beneficiaries. It doesn’t go up to a greedy organisation. It doesn’t go up to greedy trustees and also you can’t go back to the trust after it’s wound up.
THE COURT:
Let me explain something to you. Just because you say it...
MS P HARRISON:
No.
THE COURT:
... doesn’t make it ...
MS P HARRISON:
No, sir, I challenge you. The law tells me. You are under the law and you cannot say to me it’s only in my imagination or anything and I can’t tell you. I have the law beside me. I have the law beside me.
THE COURT:
But you have to have ...
MS P HARRISON:
It’s a subject matter.
THE COURT:
But you have to have the facts as well.
MS P HARRISON:
Look, sir, it’s a subject matter ...
THE COURT:
So, what I ...
MS P HARRISON:
... and may not interfere with that trust. It’s been vested. And you cannot sit back. It’s been channelled out, all that money of that trust has been channelled out into an illegal...
THE COURT:
Mrs Harrison, I am going to ask you to sit down and I am going to carry on with the case. I have heard what you have had to say but at the moment I am listening to what is known as evidence and it is the evidence I have to listen to at the moment.
MS P HARRISON:
It’s a very serious subject. The certainty of subject matter ...
THE COURT:
Mrs Harrison...
MS P HARRISON:
... of that trust ...
THE COURT:
Mrs Harrison...
MS P HARRISON:
... has been channelled out and ...
THE COURT:
Mrs Harrison...
MS P HARRISON:
... it cannot be assisted in this court.
THE COURT:
Mrs Harrison, I require you to sit down.
MS P HARRISON:
I am not listening.
THE COURT:
Now, Mr Webb, do you have any further questions...
MS P HARRISON:
They have betrayed my sister’s trust.
THE COURT:
... for your client?
[21] Mr Webb had no more questions for Mrs Adrienne Harrison. I said I would give Ms Pauline Harrison the right to ask questions of her. At this point the McKenzie friend, Ms Angela Harrison, became involved:13
MCKENZIE FRIEND:
She needs a lawyer, sir.
THE COURT:
Well, she has had every opportunity. Now...
MCKENZIE FRIEND:
Sir!
THE COURT:
There was a...
MCKENZIE FRIEND:
Sir, the High Court Rules says an incapacitated person, and the rule of law, she is entitled to be properly represented.
THE COURT:
Please don’t shout at me.
13 At 36-38.
MCKENZIE FRIEND:
Sir!
THE COURT:
Please...
MCKENZIE FRIEND:
My mother has her rights under the rule of law.
THE COURT:
Please don’t shout at me. This is a court of law.
MCKENZIE FRIEND:
Yes, exactly.
THE COURT:
There is a couple of things that I need you and your mother to know. One is that if you shout at me or at a witness I will simply disqualify you from taking further part in the case. There are rules here. They apply to everybody. One is that you don’t shout at the Judge, you don’t shout at the witnesses, and you are polite. That is just necessary for the court to conduct its business. Now, the second point is that at this stage I am going to give your mother the chance to ask questions of Mrs Adrienne Harrison, and she may do that so long as she doesn’t shout and so long as she is polite. Now, Ms Rose here tells me that when your mother tried the headphones on before they were possibly around the wrong way, so I think we should try to put the headphones on again, this time making sure they are on the right way, and your mother can come forward and we will see if the headphones work and that will help her.
[22] After some further exchanges with Ms Angela Harrison it seemed that Ms Pauline Harrison did not want to ask any questions of Mrs Adrienne Harrison. However, Ms Pauline Harrison then indicated she did want to ask questions:
MS P HARRISON:
Can I ask a few questions, sir?
THE COURT:
I thought you didn’t want to.
MS P HARRISON:
I can hardly hear. I can hear on the phone. It’s a very strange thing. I can hear on the phone but I cannot hear in these courtrooms without the aid for my ears.
THE COURT:
Alright, let’s try again with the headphones.
MS P HARRISON:
I can’t. Those are only like a child’s toy. It’s blurry and everything.
THE COURT:
Ms Rose...
MS P HARRISON:
I’ve had enough trouble with my ears without strange noises walking through them, sir. Listen, sir! There is the rule of law.
THE COURT:
Yes, yes, yes, I know that.
MS P HARRISON:
No! There is the rule of law and I will stand up for my rights.
THE COURT:
Please ...
MS P HARRISON:
My rights as in that trust deed and it’s been vested...
THE COURT:
Please ...
MS P HARRISON:
... and no-one...
THE COURT:
... stand up for your rights without shouting.
MS P HARRISON:
You are ignoring the law. Now, they proceeded to Toogood Justice false information and he was influenced by them. They did it to the same with Rhys Harrison and he was influenced...
THE COURT:
I will try one more time.
MS P HARRISON:
This is a fraud on the court. Where did the $680,000 go to? Where did the
$680,000 go to from the sale of the trust property?
THE COURT:
Alright, so Ms Adrienne Harrison?
MS ADRIENNE HARRISON:
50% of it went into paying lawyer’s fees, the rest of it was...
MS P HARRISON:
I said where did, what account did the $680,000 go to? Maybe I can answer you.
MS ADRIENNE HARRISON:
No, you don’t have to answer for me, I will address the Judge. 50% of it went into the payment of lawyer’s fees, the balance of it went into the trust account.
MS P HARRISON:
Which one? Which trust account? Come on, tell the whole truth.
MS ADRIENNE HARRISON:
The Valerie Geard Waiheke Trust.
MS P HARRISON:
You lie.
THE COURT:
Alright, stop.
MS P HARRISON:
Waiheke...
THE COURT:
Stop. Stop. I said stop.
MS P HARRISON:
Alright then.
THE COURT:
Now, this is what’s going to...
MS P HARRISON:
Well, you answer me...
THE COURT:
I said stop.
MS P HARRISON:
Where did that money go to?
THE COURT:
I said stop.
MS P HARRISON:
She is lying.
[23] At this point I adjourned the Court and said I would decide the rest of the case on the papers. As I left I was followed by the continuing assertions of Ms Pauline Harrison and Ms Angela Harrison:
MS P HARRISON:
It didn’t go into the Valerie Geard Trust.
MCKENZIE FRIEND:
The Waiheke Trust is an unlawful trust and that is fraud, and you know it. So, it went into the Waiheke. You fraudsters.
MS P HARRISON:
It didn’t go into the Valerie Geard Trust whatsoever. You made a contempt of court.
[Counsel leave courtroom]
Discussion
[24] The settling of a family trust generally vests legal ownership of assets in trustees whose duty it is to deal with the assets in accordance with the terms of the trust.14 It is not uncommon for family trusts to give rise to family discord and thence to litigation.
[25] Judges are familiar with cases where lay people who are trustees of family trusts do not really understand their duties as trustees. They may feel entitled to remuneration or to trust assets to which they are not entitled. They may intermingle trust assets and their own assets impermissibly. They may wrongly prefer one beneficiary over another. In more rare cases they may deal with trust assets dishonestly.
[26] Judges are also (and increasingly) familiar with lay litigants in trust dispute cases. Judges are not surprised if lay litigants with grievances against family trustees lack objectivity. Almost invariably their pleadings and submissions will lack legal and procedural coherence.
[27] In cases such as these, Judges do their best to help the parties identify and address the real issues between them. This can be difficult, especially where one party is represented by lawyers. The Judge must be impartial. He or she cannot give legal advice to the lay litigant and cannot, metaphorically, step down from the Bench to assist them.
[28] In this case, my intention was to give Ms Pauline Harrison her “day in court”, try to confine questions and evidence to the relevant issues, and to be vigilant for signs of the matters I discuss at [25].
[29] The truncated hearing means I have less evidence to assess than I would otherwise have had. But Ms Pauline Harrison’s views are apparent from the written material she has filed and I have Mrs Adrienne Harrison’s evidence, including her
14 Family trusts are subject to the same rules as other types of trust. See Nicola Peart “Equity in Family Law” in Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at [41.4.3(1)].
answers to the questions I asked. The issues are quite straightforward and I do not feel at a disadvantage deciding them.15
[30] Ms Pauline Harrison’s claim for relief under r 7.51 of the High Court Rules in the 320 proceeding does not succeed.
[31] To succeed, Ms Pauline Harrison had to prove that Mr and Mrs Harrison acted fraudulently.16 That is to say, that they intentionally misused the Court processes to obtain the costs and security for costs orders made by Toogood J. The courts will generally do what they can to compensate for the fact that a plaintiff is a lay litigant when reading and interpreting their claims. However, where any plaintiff alleges fraud, particularly as grounds for revisiting court orders, they must show a prima facie case for credible grounds to make out fraud, with a higher obligation to particularise their claims than generally applies.17
[32] Ms Pauline Harrison made many allegations. I will not summarise them. I have, for this purpose, had regard to her affidavits of 21 June 2018 and 7 June 2019 as her evidence. I have also had regard to the evidence of Mrs Adrienne Harrison.
[33] Ms Pauline Harrison’s case is that because Mr and Mrs Harrison acted fraudulently as trustees their fraud carried over in the matters before Toogood J and so they deceived the Judge and duped him into making his orders.
[34] I find the premise is wrong. I will discuss Mrs Adrienne Harrison’s evidence when I determine the 2681 proceeding. But I accept it. I find there was no fraud by Mr and Mrs Harrison in the exercise of their duties as trustees of the Trust. They acted properly and carefully and in conditions of great difficulty owing to Ms Pauline Harrison’s hostility.
15 In one of my minutes of 14 October 2019 I directed the registry to provide the parties with the transcript of evidence and gave Ms Pauline Harrison the opportunity to file final submissions. She filed 55 pages of submissions dated 6 November 2019 and a further 22 pages of submissions dated 11 November 2019 in reply to submissions on behalf of ChildFund.
16 See Elvidge v ASB Bank Ltd [2015] NZHC 44 at [134]; Yang v Ko HC Auckland CIV-2005-404- 4583, 31 July 2007 at [24]; and Spence v Lynch [2015] NZHC 609 at [2].
17 See Iles v Z [2019] NZHC 1396 at [30]; citing Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2012] NZSC 94; [2013] 1 NZLR 804 at [32]–[33].
Decision
[35] Ms Pauline Harrison’s claim for relief in the 320 proceeding is dismissed.
The 2681 proceeding
[36] Section 66 of the Trustee Act allows a trustee to apply to the Court for directions regarding the exercise of their powers, duties and discretions as a trustee, or approval for a proposed course of action.
[37] Ms Adrienne Harrison and Mr Graeme Ross Harrison are the trustees of the Trust. They seek, primarily, an order:
1.1 Giving directions to the Applicants as trustees of The Valerie Geard Trust (“the Trust”) as to the final distribution or other application or distribution of the whole or any part of [any] property settled on the Trust for the benefit of any surviving beneficiary of the Trust, and/or such other directions as the Court may deem to be just.
[38] The grounds on which the directions are sought are principally that Ms Pauline Harrison’s continuing litigation makes it impossible for them to continue to exercise their responsibilities as trustees and the assets of the Trust are being depleted by the costs of the litigations. Mr and Mrs Harrison also, quite rightly, perceive that if they exercise their powers as trustees to distribute the Trust estate and wind it up there will be further litigation challenges by Ms Pauline Harrison.
[39] In their affidavit in support of their application for directions,18 Mr and Mrs Harrison set the scene:
8. The respondent is Graeme’s sister. We note that we have been faced with litigation brought by the respondent in one form or another for more than 10 years on a variety of fronts to do with the Trust and in respect to another trust we were advised to create by resettlement. That resettlement was held by the Court to be without effect but otherwise the respondent has been unsuccessful. The respondent’s legal action has caused us considerable personal stress and difficulty and has diminished the trust estate by more than $250,000.
18 Sworn on 14 November 2018.
[40] At the time of the settlement of the Trust its primary asset was the settlor’s property at Mt Royal Avenue, Mt Albert. The settlor’s wishes included that her brother, Malcolm Harrison, be the primary beneficiary of the Trust. Malcolm Harrison died on 2 November 2007. The trustees, utilising the proceeds of the sale of the settlor’s former home, had previously acquired a property at Causeway Road, Waiheke Island (the Waiheke property) for Malcolm Harrison’s use.
[41] After Malcolm Harrison’s death the Waiheke property was put into a condition for renting and used as a rental to gain income for the Trust. Eventually, the Waiheke property was sold for $680,000 and the net proceeds paid into an ASB account. The balance now in the ASB account is about $230,000. Mrs Adrienne Harrison gave evidence that in excess of $300,000 has been spent in legal fees for litigation involving Ms Pauline Harrison. There is also an ASB current account containing about $1,500.
[42] The position currently regarding beneficiaries of the Trust is:
[43] Mr and Mrs Harrison’s proposal for distribution and winding up of the Trust is:
Ms Pauline Harrison’s opposition
[44] Ms Pauline Harrison’s opposition to the application for directions is not accompanied by any counter-application, such as an application that Mr and Mrs Harrison be replaced as trustees. Her opposition is simply tied to her allegations of fraud on the part of the trustees.
[45] The Court has an equitable supervisory jurisdiction in respect of trusts.19 If I accepted Ms Pauline Harrison’s allegations then I would take action to preserve the Trust’s remaining assets and cause an inquiry to be made into the use by Mr and Mrs Harrison of the Trust’s assets. I would do this by removing Mr and Mrs Harrison as trustees and appointing independent trustees.
[46] A chief concern of Ms Pauline Harrison is the creation of a related trust, the Valerie Geard Waiheke Trust (“the Waiheke Trust”). She thinks this was a fraudulent act designed to steal money from the Trust. She also contends that the transfer of funds to the Waiheke Trust in effect wound up the Trust and so its assets should have
been distributed. She further points to the Trust’s ASB investment account being still in the name of the Waiheke Trust as proof that Mr and Mrs Harrison are fraudulently operating an “illegal trust” to the detriment of herself and the other beneficiaries of the Trust.
[47] There is nothing in any of these allegations.
[48] In 2009, acting on legal advice and in response to acrimony with Ms Pauline Harrison, Mr and Mrs Harrison as trustees of the Trust resettled the Waiheke property on the Waiheke Trust. The intention was that Mr and Mrs Harrison would be the beneficiaries of the Waiheke Trust during their lifetimes and upon the death of the survivor of them the trust fund would be held for ChildFund.20
[49] Ms Pauline Harrison then commenced the proceeding in which Toogood J later gave his interlocutory judgment awarding costs and ordering security for costs. In that proceeding Ms Pauline Harrison sued Mr and Mrs Harrison as trustees of the Trust, pleading that Mr and Mrs Harrison had acted in breach of their obligations as trustees by keeping and using the trust property for their own benefit to the exclusion of herself and her brother, Brian Harrison.
[50] In 2015 Mr and Mrs Harrison, as trustees of the Waiheke Trust, applied to the Court to determine whether Ms Pauline Harrison and Ms Angela Harrison had an interest in the assets of the Waiheke Trust. Ms Pauline Harrison and Ms Angela Harrison were named as defendants. The case was determined by Faire J.21
[51] Justice Faire held that the resettlement of the Waiheke property on the Waiheke Trust was ineffective:
[82] The legal authorities are clear that wherever self-dealing occurred, the court must invalidate the transaction in question. The conclusion is that both trustees’ signatures on the resolution are invalid; a situation which cannot be corrected by severing Mr Harrison’s signature. It follows that the resettlement
20 This was in reliance upon Mrs Valerie Geard’s memorandum of wishes of 18 October 2005 in which she said: “I express the wish that on my brother Malcolm’s death, that the trust fund be applied for the benefit of my brother and trustee, Graeme Ross Harrison, or should he predecease my brother Malcolm, then for the benefit of my said husband and ChildFund New Zealand Ltd”.
21 Harrison v Harrison [2015] NZHC 2935.
is ineffective, with the result that the property at 19 Causeway Road, Waiheke remains subject to the Valerie Geard Trust.
[83] The first and second defendants did not seek any monetary damages from the plaintiffs. The only practical consequence of my finding that the resettlement is invalid is that the property at 19 Causeway Road, Waiheke will go back to being held by the Valerie Geard Trust, of which the plaintiffs are still trustees.
[52] Mr and Mrs Harrison had opened a bank account with ASB in the name of the Waiheke Trust. They continued to use it for the Trust but did not change the name of the account.
[53] The Trust did not cease to exist. All that happened was that Mr and Mrs Harrison as trustees of the Trust purported to resettle the principal asset of the Trust (the Waiheke property) on the Waiheke Trust. Justice Faire held that the resettlement was ineffective. The Waiheke property remained an asset of the Trust. Mr and Mrs Harrison have treated it as such.
[54] In her affidavit of 21 June 2018 filed in the 320 proceeding, Ms Pauline Harrison made allegations that Mr and Mrs Harrison intermingled Trust funds with their own money and wrongly used Trust money for their own purposes. At paragraphs 51 and 63 of her affidavit she set out tables of cheques and transactions in support of her allegations.
[55] At the hearing Mrs Adrienne Harrison was taken through the relevant transactions and explained them. I was impressed by her grasp of the detail and her evident frankness. If Mrs Adrienne Harrison could not explain an item, she said so. If she was unsure, she said so. My overall conclusion is that the affairs of the Trust have been properly and competently handled. I am satisfied there is no evidence of fraud or improper dealing with the assets of the Trust.
[56] Directions are sought under s 66 of the Trustee Act to approve the proposed course of action. Where directions are given and adhered to trustees will be deemed to have discharged their duty as regards their subject matter.22 An application for directions engages the Court’s broad equitable jurisdiction, under which a trustee may
22 Trustee Act 1956, s 69.
seek approval of a proposal to wind up a trust and distribute its assets or for the Court to make a particular direction to do so.23 The scope of the Court’s jurisdiction to give particular directions will be determined by the terms on which the trustees seek directions.24 Here, the trustees seek directions in broad terms, though they provide a specific proposal.
[57] I am satisfied that the Trust should be wound up. Its assets are being depleted by continual litigation. Mrs Valerie Geard’s wish was that the Trust be maintained after her death, for the benefit of her siblings, Malcolm Harrison in particular and Mr Graeme Harrison following Malcolm’s death. That wish is being frustrated. I have no doubt that litigation will continue. Between the date of setting this proceeding down for hearing and the date of this judgment Ms Pauline Harrison has filed two further proceedings against Mr and Mrs Harrison as trustees of the Trust.
[58] In its submissions filed on 30 October 2019, ChildFund, as I had directed in my Minute of 14 October 2019, addresses the issue of proportionality.
[59] ChildFund submits it is wrong and disproportionate to depart from Mrs Geard’s Memorandum of Wishes to make substantial distributions to persons other than those named in the Memorandum of Wishes:
27. Counsel submit that it is wrong for the Court (or the Trustees as appropriate) to depart from Ms Geard’s MOW simply because the [Trust’s] Deed includes additional persons as Final Beneficiaries – on a class rather than named basis – in circumstances where Ms Geard had a particularly strong relationship and connection with the 4 persons named in her MOW.
[60] ChildFund:
(a) Submits Ms Pauline Harrison should not benefit as proposed because:
(i) she benefitted under Ms Valerie Geard’s Will;
23 See Gailey v Gordon [2003] 2 NZLR 192 (HC).
24 At [33]–[34].
(ii) she is not a named principal beneficiary in the Memorandum of Wishes;
(iii) her actions in litigating against the trustees have greatly reduced the Trust’s funds; and
(iv) she is bankrupt and unlikely to pay costs awarded against her in favour of the Trust.
(b) Submits Mr Graeme Harrison should not benefit as proposed because as a trustee:
(i) he has not sought damages from the solicitor who gave the trustees the advice (found unlawful by Faire J) to resettle the Waiheke property on the Waiheke Trust; and
(ii) he has not sought earlier to wind up the Trust thus causing the Trust’s funds to be diminished through incurring ongoing legal costs.
(c) Submits:
61.2 any simple proportionate division of the [Trust’s] estate among multiple beneficiaries is likely to be detrimental to ChildFund. That is because any such division will effectively see ChildFund sharing losses to the [Trust] estate which have been caused by others’ actions/inactions in circumstances where it does not also owe fiduciary duties to any other party/interested person and/or has not caused the [Trust] undue litigation expense.
[61] Ms Pauline Harrison filed submissions in response to ChildFund’s. In them she submits that Mrs Valerie Geard’s objective was to provide financial security for her siblings and that ChildFund is merely a discretionary beneficiary. Ms Pauline Harrison points out that she was successful in the proceeding decided by Faire J, thereby retaining for the Trust its principal asset.
[62] I am somewhat surprised by the submissions on behalf of ChildFund. It took no steps in the proceeding to oppose the trustees’ proposal but now seeks to do so through submission. The submissions criticise the trustees for not giving reasons for the decision behind the proposals, but those criticisms are made beyond the point the trustees could have addressed them in evidence.
[63] The Trust is a family trust. No member of the family has taken issue with the proposed distributions and winding up of the Trust. Ms Pauline Harrison’s opposition was on a different basis. ChildFund is the only legal person named in the Trust’s Deed which is not a member of the family. It is only a discretionary beneficiary.
[64] This does not mean the Court will “rubber stamp” a proposal by trustees of a family trust where none of the beneficiaries oppose it.25 The proposal must be consistent with the trusts conferred by the settlor and with the powers of the trustees.
[65] In this case the settlor, Mrs Geard, made her siblings the final beneficiaries of the Trust. They are also discretionary beneficiaries as are, relevantly, her husband and ChildFund.
[66] The Trust’s Deed defines “Vesting Day” as the earlier of 80 years from the date of the Deed or such date as the trustees by deed appoint.
[67] The Deed provides that on the Vesting Day the final beneficiaries take the Trust’s assets equally, and the children of any deceased final beneficiary take the deceased’s share.
[68] Mrs Geard’s Memorandum of Wishes, signed on the same day as the Trust’s Deed and her Will, must be taken into account, though not to the point of unilaterally overriding all other considerations.26 In her Memorandum Mrs Geard set out her objectives:
25 See Tamlin v Edgar [2011] EWHC 3949 at [25].
The objective of the documentation of my wishes is to give present and future Trustees of my Family Trust a clear indication of my intent and wishes when I established the Family Trust for the benefit of my family in future years.
It is my intention to ensure that both present and future members of my family, being my siblings and in particular my brother Malcolm Armstrong Harrison, have as much financial security as possible for the future. I see this security coming from returns earned on investments, rather than eroding the capital base itself except where the use of capital is necessary.
It is my intention that whoever be the Trustee maintains the Trust for the benefit of the Beneficiaries and in particular my siblings after my death. The Trust should only be wound up with the consent of my family and after the Trustees and my siblings have sought professional advice.
[69] Mrs Geard stated she wished to assist family members “on such terms as the Trustees shall in their absolute discretion determine”.
[70] Finally, Mrs Geard set out the following under the heading “Administration”:
[71] The wishes of Mrs Geard have been adhered to, with the sad frustration of the depletion of the Trust’s assets through the litigations.
[72] ChildFund is a discretionary beneficiary. It can have no expectation that the Trust’s discretion will be exercised in its favour. It does not feature in Mrs Geard’s
Memorandum of Wishes as occupying a place of favour above those of her family members.
[73] In my view, the proposed distributions to family members are consistent with Mrs Geard’s wishes and with the Trust. This includes providing for Ms Pauline Harrison. Although her actions have depleted the resources of the Trust substantially, she remains a family member in the class which Mrs Geard primarily sought to provide for in her Memorandum of Wishes. That is the approach proposed by the trustees, who consider it accords with the wishes and intentions of the settlor and with their obligations under the Trust.
[74] However, the proposed appointment to ChildFund of $50,000 in addition to the appointment of $50,000 made in 2017 elevates ChildFund beyond the position it occupies in Mrs Geard’s Memorandum of Wishes. The assets left in the Trust amount to only around $230,000 and will be depleted by the further costs of this litigation.
Decision
[75] I approve the proposed distribution to David Geard of $20,000.
[76] I do not approve the additional distribution of $50,000 to ChildFund. I leave it to the discretion of the trustees to decide what, if any, further provision should be made for ChildFund.
[77] I direct the Trust be wound up and the assets, once all due expenses have been paid, be paid in three equal parts: one part to Graeme Harrison; one part to Pauline Harrison; and, one part to the children of Brian Harrison.27
[78] The mechanism for the winding up shall be by the trustees by deed declaring the date for the vesting day and distributing the residue on that day. I make a direction accordingly.
[79] The vesting day so declared shall not be later than 3April 2020.
27 Subject to my direction at [81].
[80] I reserve leave to the trustees to apply to extend the vesting date beyond 3 April 2020 if such proves necessary.
Costs
[81] The Trust is entitled to costs in the 320 and the 2681 proceedings against Ms Pauline Harrison. But I am aware she is bankrupt.28 There can be no argument that Ms Pauline Harrison would ordinarily be liable to pay costs on at least a 2B basis. Mr Webb submits that a 50 percent uplift is appropriate. That might well be right, but I would have to give Ms Pauline Harrison a chance to make submissions on increased costs and I think that would cause undue delay and further expense. In the exercise of my discretion I direct that the division of the residue directed in [77] be modified to this extent: a sum equal to 2B costs in the 320 and 2681 proceedings shall be deducted from the portion that would otherwise be paid to Ms Pauline Harrison; one half of that sum shall be added to the portions of Graeme Harrison and the children of Brian Harrison.
[82] ChildFund seeks costs to be paid by the Trust. I award costs on a 2B basis but excluding the preparation of the submissions filed on 30 October 2019. I consider those submissions went well beyond what was appropriate for a discretionary beneficiary which had taken no steps beyond filing a notice of appearance and attending at the hearing.
Application for order under s 166 Senior Courts Act 2016
[83] In his submissions of 30 September 2019, Mr Webb said the trustees seek an extended order under s 166 of the Senior Courts Act 2016 restricting Ms Pauline Harrison from bringing any civil proceeding in respect of the Trust or issues related to the Trust. That is outside the scope of this proceeding. A separate and formal application will have to be made.
Brewer J
Solicitors:
Birdsey & Associates (North Shore City) for A Harrison and G R Harrison Bell Gully (Auckland) for ChildFund
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URL: http://www.nzlii.org/nz/cases/NZHC/2019/3474.html
