Justitiae Trustee Company Ltd v NZF Nominees Ltd

JurisdictionNew Zealand
CourtHigh Court
JudgeGordon J
Judgment Date30 March 2021
Neutral Citation[2021] NZHC 659
Docket NumberCIV-2019-404-1954

[2021] NZHC 659

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA

TĀMAKI MAKAURAU ROHE

Gordon J

CIV-2019-404-1954

Between
Justitiae Trustee Company Limited
Plaintiff
and
NZF Nominees Limited
Defendant
Appearances:

B D Gray QC, R B Hucker and R Selby for the Plaintiff

No appearance by or on behalf of the Defendant

M V Robinson and A van Ammers for Fairlight Forestry Ltd and Clive Bradbury (Interested Parties) K Glover for Clayton Bradbury (Interested Party)

S Gollin for De Havilland Investments Ltd and Heather Bradbury (Interested Parties)

Companies, Trusts — application under s68 Trustee Act 1956 to review acts and decisions of trustee — assignment of legal title of an undivided one-half share as tenant in common in the Trust Assets was binding on the trust — requirements for valid appointment of a director — bare trustee's duty — whether shareholders could exercise the powers of the board until replacement directors were appointed or the board could again act — whether the onus was on the trustee to justify their actions — Companies Act 1993

The issues were: whether assignment was binding on the trust; whether H was appointed a director in 2018 or 2019; whether Justitiae could have discharged the powers of the NZF Board pending appointment of a new director and whether Gough applied.

The Court held that Justitae's claims did not fall under s68 TA because there was no relevant statutory power conferred by the TA that was exercised by NZF. Section 68 TA gave the Court a very limited power to review the decisions of trustees in the exercise of any power conferred by the TA, not the exercise of any power conferred by the trust deed. Neither s15(1)(1) TA (miscellaneous powers in respect of property) nor s47(1)(b) TA (vesting of trust property in new or continuing trustees) applied. Section 15(1)(a) TA did not confer powers, it referred to powers already conferred. Section 47(1)(b) TA provided for the vesting of trust property in a new trustee. It did not confer any powers. If s68 TA did apply, then the onus for review was on Justitiae and not on any of defendants, s68(1) TA (court may require the trustee to appear before it, and to substantiate and uphold the grounds of the act or omission) did not alter the ordinary incidence of the onus lying on the applicant for review under s68 TA.

H took no steps to act as a director until her appointment in August 2019. Section 159 CA (notice of change of directors) did not mean that the resignation was ineffective prior to the records being updated.

Justitiae cited English cases in support of its proposition that the shareholders could exercise the powers of the board until replacement directors were appointed or the board could again act. Justitiae had not cited any New Zealand authority in which the principle had been endorsed or applied. Even if that principle had once been part of New Zealand law, it would not have survived the passing of the CA which made it clear that the duty and powers to manage the business and affairs of a company lay with its directors, except to the extent the company's constitution provided otherwise. Section 154 CA (Court may appoint directors) provided a remedy for shareholders where a company was without directors. Even if shareholders could exercise directors powers, the reality was that the shareholders (as opposed to Justitiae on its own) would not have done so.

The Assignment had assigned legal title not trust powers or mere expectancies. The Trust Assets were divisible, there was nothing in the Trust Deed restricting distribution. The principles in Gough applied, the assignment was effective to vest legal title to an undivided half share in the Trust Assets in Fairlight, to be held as a tenant in common. Justitate's causes of action were without merit.

The application was dismissed.

JUDGMENT OF Gordon J

This judgment was delivered by me

on 30 March 2021 at 2 pm, pursuant to

r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Introduction
1

This case is a sequel to the long-running tax litigation arising out of what was known as the Trinity tax scheme. 1 The plaintiff, Justitiae Trustee Co Ltd (Justitiae) is associated with Garry Muir, a tax lawyer involved in the construction of the Trinity tax scheme, and his family. On the other side of the dispute the interested parties are associated with Clive Bradbury, a commercial lawyer involved in the Trinity tax scheme, and his family. 2 Garry and Clive were formerly partners in the law firm Bradbury & Muir. As will become apparent, the two families have fallen out.

2

Justitiae and Fairlight Forestry Ltd 3 (Fairlight) (the latter associated with the Bradbury family interests) are the two beneficiaries of a trust, which was part of a private investment scheme set up by Garry and Clive. The Trust is essentially a private investment vehicle held by a nominee.

3

The proceeding arises out of the execution of a Deed of Assignment (Assignment) on 24 June 2019, which assigned legal title to Fairlight of an undivided one-half share as tenant in common in the Trust Assets at the time held on trust for Fairlight by the Trustee under the Trust Deed. The principal issue is whether the Assignment is binding on the trust concerned. The various legal issues raised are all connected to this principal issue.

4

Justitiae brings its claims under s 68 of the Trustee Act 1956 (the Act). The parties rely on affidavit evidence. There was no cross-examination on the affidavits.

Background and parties
5

The R & A Trust (the Trust) was settled on 14 November 2008, by R & A Nominees (Anguilla) Inc (Anguilla). Garry and Clive were the directors and shareholders of Anguilla. They have joint power of appointment of the Trustees of the

Trust. On 10 July 2009, Anguilla retired, and Garry and Clive appointed the defendant, NZF Nominees Ltd (NZF), as Trustee. 4 NZF is owned in equal shares by Justitiae and De Havilland Investments Ltd (DHIL)
6

The Trust Deed of 14 November 2008 provides that the Trustee holds the Trust Assets “on a bare trust and as nominee” as to 50 per cent for each of its two beneficiaries Justitiae and, initially, DHIL. Fairlight was subsequently substituted for DHIL. There is no issue over that.

7

The directors of Justitiae are Garry's son Nicholas Muir (a qualified lawyer) and Catherine Odgers (also a qualified lawyer who was appointed as an independent director on 3 June 2018). Heather Heazlewood (Garry's sister) was a director from 3 January 2015 until 8 August 2019. Nicholas says that Garry's wife, Sum Muir-Fong (Lily) is the ultimate beneficial owner of Justitiae and that it is a bare trustee with a duty to follow her instructions.

8

The directors of DHIL are Clive, Heather Bradbury 5 (Clive's wife) and one other person. The directors of Fairlight are Heather Bradbury and Selina Thomson, (who is Heather and Clive's daughter). I will refer to Fairlight, Clive and Clayton collectively as the Bradbury defendants. I will refer to DHIL and Heather Bradbury separately.

9

The current directors of NZF are Clive and Heather Heazlewood. Clayton was formerly a director having been appointed in August 2012. He became sole director in January 2015 after Garry resigned his directorship. There is an issue as to whether Heather Heazlewood was a director of NZF as at 24 June 2019 when the Assignment was executed. There is also an issue as to when Clayton's resignation as director was effective.

10

In that regard, the Bradbury defendants say that Clayton's letter of resignation as sole director of NZF dated 1 May 2018 expressed to be effective immediately,

resulted in Clayton becoming Trustee of the Trust in his personal capacity. Justitiae disagrees and says the resignation was ineffective. Clayton formally accepted appointment as Trustee of the Trust on 30 April 2019
11

On 29 May 2019, Clive was appointed director of NZF. Justitiae says Heather Heazlewood was also a director at that time, having been appointed on 1 May 2018. The Bradbury defendants disagree and say she was not appointed until 2 August 2019.

12

On 24 June 2019, Clayton (the Bradbury defendants say acting in his capacity as Trustee of the Trust) and Clive (the Bradbury defendants say as the sole director of NZF) executed the Assignment in favour of Fairlight. Pursuant to the Assignment, Clayton and NZF jointly and severally transferred to Fairlight all their “rights, title and interest in the undivided one-half share as tenant in common in the Trust Assets currently held on trust for Fairlight by the Trustee under the Trust Deed”. In other words, they transferred legal title. The Assignment did not address Justitiae's beneficial interest in the other undivided half share in the Trust Assets or the Trustee's legal interest in that undivided half share.

13

Justitiae says that the Assignment had the effect of making each power granted to NZF into two powers, one belonging to each beneficiary, and then to ‘grant’ those powers to Fairlight, free of the Trust obligations attached to them. This, Justitiae says, threatened the tax-exempt status of Trinity. 6 The Bradbury defendants do not accept that this was the effect of the Assignment.

14

On 18 September 2019, Lang J granted a without notice application by Justitiae for interim relief preventing NZF and any other party from taking any steps pursuant to the Assignment or pursuant to a default notice that Fairlight had issued to Trinity.

15

Also on 18 September 2019, Lang J directed service on: Trinity, DHIL, Fairlight, Clive, Clayton and Heather Bradbury. Justitiae subsequently sought leave

to discontinue against Trinity. That application was granted by judgment dated 11 March 2020. 7
Terms of the Trust Deed (of the R & A Trust)
16

Clause 1 of the Trust Deed vests 50 per cent of the Trust's Assets in Justitiae (including its successors or assigns) and 50 per cent in...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT