Erceg v Erceg

• Jurisdiction: New Zealand
• Judge: Elias CJ,William Young,Glazebrook,Arnold,O'Regan JJ
• Judgment Date: 08 March 2017
• Neutral Citation: [2017] NZSC 28
• Docket Number: SC 17/2016
• Court: Supreme Court
• Date: 08 March 2017

BETWEEN

Ivan Vladimir Joseph Erceg

Appellant

and

Lynette Therese Erceg and Darryl Edward Gregory As Trustees Of Acorn Foundation Trust

First Respondents

Lynette Therese Erceg and Darryl Edward Gregory As Trustees Of Independent Group Trust

Second Respondents

[2017] NZSC 28

Court:

Elias CJ, William Young, Glazebrook, Arnold and O'Regan JJ

SC 17/2016

IN THE SUPREME COURT OF NEW ZEALAND

Appeal against a Court of Appeal (“CA”) decision which upheld a High Court (“HC”) finding that the appellant's interest as a final beneficiary of two trusts and his right to seek information about the trusts in his capacity as a discretionary beneficiary amounted to property for the purposes of s101 Insolvency Act 2006 (“IA”) (status of bankrupt's property on adjudication) and therefore vested in the Official Assignee (“OA”) on the appellant's bankruptcy — the CA also found that the HC had been correct to exercise discretion against ordering disclosure of any trust documents to the appellant but overturned the HC finding that the appellant did not have standing due to his bankruptcy — the appellant was a discretionary beneficiary and final beneficiary of two trusts which were settled by his brother — he had sought disclosure of confidential information about operation of the trusts, the business transactions they had entered into, the identity of the beneficiaries, what beneficiaries had received by way of distributions from each trust and the trustees' reasons for decisions they had made — whether the Court's role was limited to reviewing the trustees' discretion — whether disclosure should be ordered — whether the bankruptcy of a discretionary beneficiary meant they lacked standing.

Counsel:

C R Carruthers QC and R B Hucker for Appellant

G M Coumbe QC and F C Monteiro for Respondents

• A The appeal is dismissed.

• B The appellant must pay to the respondents costs of $25,000 plus reasonable disbursements (to be fixed by the Registrar in the absence of agreement between the parties). We certify for two counsel.

JUDGMENT OF THE COURT

REASONS

(Given by O'Regan J)

Table of Contents

	Para No.
The issue	[1]
Background	[2]
What does the appellant seek?	[9]
Is the Court's role limited to reviewing the trustees' discretion?	[14]
What is the jurisdiction to require disclosure?	[20]
Schmidt v Rosewood Trust Ltd	[22]
Foreman v Kingstone	[35]
Court of Appeal decision in the present case	[42]
Erceg 1	[49]
The supervisory jurisdiction	[50]
Appellate standard	[63]
The present application	[71]
Documents that are sought	[72]
The context for the request and the objective of the beneficiary making the request	[74]
The nature of the interest held by the appellant	[83]
Personal or commercial confidentiality	[87]
Practical difficulty	[92]
Disclosure of reasons	[93]
Impact on other beneficiaries if disclosure is made	[94]
Impact on settlor and third party	[95]
Protecting confidentiality	[96]
Safeguards on use of the documentation	[97]
Our approach	[98]
Standing	[104]
Result	[113]
Costs	[114]
Schedule: Documents sought by the appellant

The issue

1 This appeal raises for consideration the approach the courts should take to an application by a beneficiary for an order directing trustees to disclose to the beneficiary information relating to a trust.

Background

2 The appellant, Ivan Erceg, was a discretionary beneficiary and final beneficiary of two trusts, the Acorn Foundation Trust and the Independent Group Trust. The trusts were settled by the appellant's brother, Michael Erceg, in 2004 and 2002 respectively. Michael Erceg died in a helicopter crash in 2005. Shares in Independent Liquor (NZ) Limited (ILNZ), a successful business associated with Michael Erceg, were transferred to the trusts prior to Michael Erceg's death.

3 The trustees sold the trusts' shareholding in ILNZ in December 2006. Both trusts were wound up in December 2010. At the time, the appellant was an undischarged bankrupt, having been adjudicated bankrupt on 2 February 2010. The appellant was discharged from bankruptcy on 12 May 2014, but his bankruptcy has not, as yet, been annulled.

4 Mr Gregory, a trustee of both trusts, gave evidence about the appellant's status as a beneficiary of each of the trusts. Mr Gregory's evidence was that the appellant was not a named beneficiary of either trust. He was one of a class (among a number of classes) of primary discretionary beneficiaries specified in the trust deed for the Acorn Foundation Trust. He was also one of a class (among a number of classes) of secondary discretionary beneficiaries specified in the trust deed for the Independent Group Trust. He was also one of a class of final beneficiaries specified in the trust deeds for both trusts.

5 In September 2014, the appellant filed a statement of claim in the High Court seeking a declaration that he was a beneficiary of the trusts and an order requiring the trustees to provide him copies of certain documents relating to the trusts. As the trustees admitted the appellant was a beneficiary of those trusts, that aspect of the case fell away and the sole focus of the case became the appellant's attempt to obtain copies of the trust documents.

6 The appellant sought summary judgment against the trustees and the trustees sought summary judgment against the appellant or, alternatively, an order striking out of his statement of claim. The applications were heard together by Courtney J who dismissed the appellant's application and entered summary judgment in favour of the trustees. 1 Courtney J found that the appellant's interest as a final beneficiary of the trusts 2 and his right to seek information about the trusts in his capacity as a

discretionary beneficiary 3 amounted to property for the purposes of s 101 of the Insolvency Act 2006, and therefore vested in the Official Assignee on the appellant's bankruptcy. That property had not re-vested in the appellant and he therefore did not have standing to bring the proceeding. 4 However, in case she was found to be wrong on that point, she went on to consider whether the appellant would have been entitled to the order he sought in the event that he had standing. 5 She concluded that she would have, in that event, exercised her discretion against requiring the trustees to provide copies of documents about the trusts to the appellant

7 The appellant appealed to the Court of Appeal, which dismissed his appeal. 6 The Court of Appeal reversed the finding of the High Court Judge as to standing, but found that she had been correct to exercise her discretion against ordering disclosure of any trust documents to the appellant.

8 This Court granted leave to the appellant to appeal, the approved question being: “Should the conclusion that disclosure not be made/re quired be set aside?” 7 The trustees gave notice that they supported the judgment of the Court of Appeal on other grounds, namely on the basis that the appellant did not have standing to seek the orders requiring the trustees to provide copies of documents to him. We will deal first with the merits of the application for orders requiring the trustees to give copies of trust documents to the appellant, before considering the standing issue.

What does the appellant seek?

9 In his statement of claim, the appellant sought an order requiring the trustees to provide nine categories of documents. These were listed in the schedule to the judgment of the Court of Appeal and for ease of reference we reproduce that schedule at the end of this judgment.

10 As is apparent from that schedule, the disclosure sought by the appellant was extensive. It involved the inevitable disclosure of confidential information about the

operation of the trusts, the business transactions they had entered into, the identity of the beneficiaries, what beneficiaries had received by way of distributions from each trust and the trustees' reasons for decisions they had made. There was nothing in the statement of claim to indicate that the appellant was prepared to accept some lesser disclosure, although there was a specific reference to the fact that the appellant was prepared to provide undertakings of confidentiality including an undertaking to provide access to the documents solely to his professional advisors

11 In this Court, counsel for the appellant, Mr Carruthers QC, proposed in his oral submissions that the Court should consider an incremental process, under which certain “core” documents should be disclosed (subject to confidentiality undertakings) with provision to allow for further applications to the Court if, on reading the disclosed documents, it became apparent that further information was required. Mr Carruthers described “core” documents in his written submissions as consisting of “at least the trust deed and accounts or other documents as to the existence of trust property and documents to ensure that the trustees have exercised their powers in accordance with the trust deed”.

12 In his oral submissions, Mr Carruthers also proposed conditions as to confidentiality which had not been proposed in the lower Courts, although there had been before the Court of Appeal a proposed protocol which was designed to achieve similar objectives.

13 The confidentiality conditions proposed by Mr Carruthers in this Court had the following features:

• (a) documents would initially be provided to the appellant's solicitors and counsel;

• (b) the documents would be available for inspection by the appellant in the presence of his solicitors or counsel;

• (c) the documents would not be further copied; 8

• (d) the documents may be made available to experts consulted by the appellant's solicitors or counsel, under the supervision of the solicitors or...