INSIGHT LEGAL TRUSTEE COMPANY LIMITED V STOKES & ORS COA CA511/2012

INSIGHT LEGAL TRUSTEE COMPANY LIMITED V STOKES & ORS COA CA511/2012 [9 May 2013]IN THE COURT OF APPEAL OF NEW ZEALANDCA511/2012[2013] NZCA 148BETWEEN INSIGHT LEGAL TRUSTEE COMPANYLIMITED AND GRAHAME HEENAN ASTRUSTEES OF THE R M COLEBROOKFAMILY TRUSTFirst AppellantsAND ELAINE COLEBROOKESecond AppellantAND BRYAN STOKES, ALEXANDRASTROKES AND OWEN WILLIAMS ASTRUSTEES OF THE STOKES FAMILYTRUSTRespondentsHearing: 19 March 2013Court: Ellen France, Randerson and Harrison JJCounsel: J M McCartney QC and P G Watts for AppellantsA J Steele and J P Scott for RespondentsJudgment: 9 May 2013 at 2.30 pmJUDGMENT OF THE COURTA The appeal is allowed. The judgment in the High Court is set aside.B The cross-appeal is dismissed.C The proceeding is remitted to the High Court for determination of the issues as set out in [64].D The respondents are directed to file an amended statement of claim on the terms set out in [65].E The respondents are to pay one set of costs to the first appellants for a standard appeal on a band A basis and usual disbursements.REASONS OF THE COURT(Given by Harrison J)Table of ContentsPara NoIntroduction [1]Facts [5]The Stokes' claim [18]Issues [31](a) Capacity [31](i) High Court [31](ii) RMCFT's appeal grounds [34](b) Consent [51](c) Indemnity [57]Decision [60]Result [63]Introduction[1] The Stokes Family Trust (the Stokes) signed an agreement to sell their residential property in Bucklands Beach Road, Auckland to a purchaser described as"E M Colebrook or nominee". The sale price was $1.8 million. Elaine Colebrooksigned the agreement as "E M Colebrook". However, Mrs Colebrook failed to settle on the due date. The Stokes cancelled and resold the property at a substantial loss. They obtained judgment against Mrs Colebrook for the shortfall of $943,033.36. She is insolvent and unable to pay.[2] That story is not uncommon. However, a different dimension is introduced by the fact that when she signed the agreement Mrs Colebrook was a trustee of the R M Colebrook Family Trust (the RMCFT). The other trustee was her sister, Shona Carr. After learning of this fact, the Stokes issued a proceeding against the trustees of the RMCFT for $943,033.36, alleging that (a) Mrs Colebrook signed theagreement in her capacity as a trustee of the RMCFT; (b) she was acting with the authority of and as agent for Ms Carr; and (c) the Stokes had a consequential right ofrecovery against the trust's assets.[3] Ellis J found for the Stokes on all three elements following a trial in the High Court.1 The RMCFT trustees now appeal.[4] Before examining the merits, we must record a central feature of the argument in this Court. While the Stokes support Ellis J's primary finding of fact oncapacity, they concede that the second finding on agency cannot be sustained. So, in order to resist the substance of the RMCFT's appeal, the Stokes have cross-appealed seeking to uphold the judgment on other grounds. In fairness to Ellis J, we aresatisfied that this situation has arisen largely as a result of the way the Stokes' casewas pleaded and argued at trial.Facts[5] The undisputed background facts and findings can be narrated as follows.[6] Mrs Colebrook was previously married to Alan Colebrook. While together, the couple settled two mirror trusts. One was the RMCFT; the other was the ElaineMargaret Colebrook Family Trust (the EMCFT). Following the Colebrooks'separation in 2007, Mrs Colebrook and Ms Carr effectively assumed control of theRMCFT's assets and made investments on its behalf. Ellis J found that as between them Mrs Colebrook was the dominant figure with Ms Carr consenting to whatever investment proposals her sister suggested.2[7] Starting in July 2003, the RMCFT purchased a number of rental properties in Auckland, Hamilton and Fiji.3 Originally the two family trusts owned 50 per cent each of the former matrimonial home in Clovelly Road, also in Bucklands Beach. After the Colebrooks' separation, the EMCFT's interest was transferred to the1 Stokes v Insight Legal Trustee Company Ltd [2012] NZHC 1822.2 At [17].3 All references in this judgment to the RMCFT's assets are of course to those owned by thetrustees subject to the relevant beneficial interests.RMCFT. The Clovelly Road property was also rented because at the material time Mrs Colebrook and her new partner, Grahame Heenan, lived in Pauanui on the Coromandel Peninsula and periodically in Fiji.[8] Prior to Mrs Colebrook's entry into the Bucklands Beach Road agreement,the RMCFT trustees signed at least six agreements to purchase investment propertiesin the name of "EM Colebrook or nominee".[9] In December 2006 the RMCFT entered into an unconditional agreement to sell the Clovelly Road property for $1.85 million. Mrs Colebrook signed for the trustees. Settlement of the sale was deferred for a year, to 20 December 2007. While in Fiji on 31 August 2007, Mrs Colebrook signed the Bucklands Beach Road agreement, with settlement also agreed for 20 December 2007. Plainly Mrs Colebrook intended that the sale and purchase transactions should settle simultaneously.[10] Mrs Colebrook said that when signing the Bucklands Beach Road agreement she had not made up her mind on the appropriate purchasing entity: the property would be owned either jointly by her and Mr Heenan or by a new trust to be set up for that purpose. She said she intended to pay for her share by borrowing the deposit of $90,000 from a third party, then applying the sum of $241,000 owing to her by the RMCFT together with a loan to be arranged of up to $600,000. Mr Heenan said he intended to contribute $1 million, borrowed against his equity in another property.[11] Ms Carr learned of Mrs Colebrook's entry into the Bucklands Beach Roadagreement from their mother after Mrs Colebrook had signed. She said she was never asked and did not consent to the acquisition in her capacity as a RMCFT trustee.[12] In early September 2007 Ms Carr along with Mrs Colebrook signed an application to New Zealand Home Bonds Ltd in the names of both Mrs Colebrook and the RMCFT to borrow $90,000. This sum was the deposit payable on the Bucklands Beach Road purchase. According to Ms Carr, the RMCFT signed as guarantor and she consented because she knew the trust owed Mrs Colebrook"several hundred thousand dollars". New Zealand Home Bonds granted theapplication; the advance of $90,000 was secured by a mortgage over the Clovelly Road property. The charge was not registered but was the subject of a caveat lodged against the title.[13] Other than borrowing the deposit, neither Mrs Colebrook nor Mr Heenan took any steps to raise funds to settle the Bucklands Beach Road agreement. Both accepted that an entity other than the RMCFT would have experienced difficulty in securing funds to settle the Bucklands Beach Road agreement on 20 December 2007. According to Ellis J, "they appeared utterly sanguine"4 about the prospect of incurring a 12 per cent penalty interest liability for late settlement.[14] These aspects of the conveyancing arrangements relating to the settlement of both agreements attracted attention in evidence and in the judgment:(a) On 17 and 18 December 2007 Mrs Colebrook and Ms Carr signed a Client Authority and Instruction form for a proposed electronic transaction for the Bucklands Beach Road purchase. They signed as"Trustees of E M Colebrook Trust". That trust was not in existence.(b) On 19 December 2007 the solicitors acting for Mrs Colebrook or the RMCFT prepared two settlement statements for the two transactions.Both were addressed to "the Trustees, E M Colebrook Family Trust".The address given was the Fiji address used by the RMCFT.(c) The Clovelly Road settlement statement showed that the New Zealand Home Bonds loan was to be repaid from the settlement sum of $1,917,838, with a balance remaining after that payment and all other disbursements of $1,721,000.53.(d) The Bucklands Beach Road settlement statement showed that the amount required to settle was $1,709,698.74, with a small sum for legal costs and disbursements, and that the balance of $1,721,000.534 At [30].from Clovelly Road was to be applied to meet the purchase price. A small residue of $10,477.54 was to be paid to the RMCFT.[15] While Mrs Colebrook, Ms Carr and Mr Heenan asserted that these referencesto the "E M Colebrook Trust" or the "E M Colebrook Family Trust" were to whatwas to be a new and separate trust formed to acquire the Bucklands Beach Road property, Ellis J found that no steps were taken to set it up despite the fact that when these conveyancing documents were prepared and signed the agreed settlement date was only two days away.5[16] The Clovelly Road agreement never settled because the purchaser defaulted. Apart from applying the forfeited five per cent deposit, the RMCFT was without a practical right of recourse. In the High Court it was common ground that this default caused the failure to settle the Bucklands Beach Road agreement,6 regardless of the identification of the purchaser. On appeal the Stokes did not emphasise thiscommonality between the parties. But it could be construed as the RMCFT'sacceptance that it was to provide most if not all the funds necessary to purchase the Bucklands Beach Road property.[17] Finally, in March 2008 Mrs Colebrook and Ms Carr in their capacities as RMCFT trustees signed a new agreement to purchase the Bucklands Beach Road property for $1.73 million. The agreement was expressly conditional on the sale of the Clovelly Road property. A further deposit of $10,000 and penalty interest of $20,000 was payable. However, the condition was never satisfied. Mrs Colebrook later repaid the New Zealand Home Bonds loan from funds due to her from the RMCFT.The Stokes' claim[18] The Stokes' claim was pleaded with simplicity. It alleged these three distinct elements:5 At [36].6 At [37].(a) Mrs Colebrook entered into the Bucklands Beach Road agreement in her capacity as trustee for the RMCFT;(b) Mrs Colebrook was acting with the authority of and as agent for the other RMCFT trustees; and(c) the Stokes were entitled to an equitable lien over the RMCFT's assetsbecause of Mrs Colebrook's right to an indemnity for her liabilityincurred when signing the agreement.[19] After observing that there was no real difference between the parties on the third element,7 Ellis J combined the first two elements into what she identified as the central issue: that is, whether Mrs Colebrook was acting on the RMCFT's behalfwhen signing the Bucklands Beach Road agreement.8 In accepting a submission bythe RMCFT's then counsel that the Stokes could only succeed on this issue by proving that Mrs Colebrook was acting as the trust's undisclosed agent,9 the Judge considered that she was required to make findings that Mrs Colebrook (a) intendedto act on the RMCFT's behalf when entering into the agreement;10 and (b) was acting as agent with the inferred actual but undisclosed authority of the trust when signing the agreement.11 The Judge made both findings in the Stokes' favour.[20] Ms McCartney QC, who did not appear for the RMCFT in the High Court, challenges the evidential foundation for each finding. However, Mr Steele accepts that the Stokes face a different and more fundamental obstacle to upholding the second finding. In this Court he acknowledges that one trustee cannot act on anothertrustee's behalf when performing duties which are personal to the trustee in thatcapacity; and that trustees must exercise their trust powers personally and unanimously, precluding delegation even to co-trustees.12 Accordingly, as a matter7 At [8].8 At [9].9 At [9]–[12].10 At [42]–[52].11 At [53]–[68].12 Commissioner of Inland Revenue v Newmarket Trustees Ltd [2012] NZCA 351, [2012] 3 NZLR207 at [49] and [51]; Niak v Macdonald [2001] 3 NZLR 334 (CA) at [16] and [18]; Messeena vCarr (1870) 9 LR Eq 260 (Ch); and Visini v Cadman [2012] NZCA 122, (2012) 21 PRNZ 70.of law, Ellis J's second finding based on agency principles cannot stand as a discreteground for judgment.[21] Nevertheless, Mr Steele seeks to support the judgment on a different conceptual premise – that is, Ms Carr in fact consented to the RMCFT's purchase ofBucklands Beach Road. Ms McCartney rightly emphasises that, because the Stokes never pleaded actual consent, Ellis J did not make findings upon it. Mr Steele counters that the Stokes did not intend to rely on agency principles to support their claim in the High Court and the Judge's second finding arose as a result of amisunderstanding.[22] Whatever counsel may have intended, we are satisfied that the Stokes pleaded reliance on agency led to the trial proceeding on a different basis from that argued on appeal. Mr Steele's written submissions disclose that in opening at trial he saidnothing expressly about consent but referred instead to the broader legal premises that either (a) Ms Carr ratified Mrs Colebrook's entry into the agreement (theconcept of ratification is more easily applicable to an agency than a trust relationship); or (b) Mrs Colebrook already enjoyed her sister's mandate or authority. The RMCFT's reliance on the undisclosed agency rule affirmed its understandingthat the Stokes' claim was based on agency but it contributed to the course that was followed in the High Court.[23] In closing at trial Mr Steele sought to counter the applicability of the undisclosed agency rule. He submitted that, apart from liability assumed through the relationship of agent and principal, trustees can bind themselves where one trusteesubsequently ratifies, authorises or consents to the other's acts. This was the firsttime Mr Steele had raised subsequent consent. However, he did not apply for leave to amend the Stokes' statement of claim to formalise this critical change in direction, although the RMCFT's counsel did not apparently object to Mr Steele's new line ofargument. Nor did Mr Steele cross-examine Ms Carr on the basis that she had consented to the purchase in her capacity as a RMCFT trustee.[24] Against this background, Ellis J referred to Mr Steele's submission aboutsubsequent consent or ratification.13 However, that reference was in the context of rejecting the possibility of ratification where the undisclosed agency rule was engaged.[25] The Judge then observed:[60] That said, however, it is not clear (and the issue was not addressed before me) whether the dicta to which I have referred would strictly apply where the contract concerned remains, in reality, contingent on the consent of the principal. That is conceivably the case here because the 31 August agreement was conditional on the purchaser obtaining finance for the deposit. That condition was fulfilled only when Ms Carr consented to the Trust making the application to Home Bonds and to Clovelly Rd being used as security. Had she refused, the agreement would not, in all probability, have become unconditional. It is arguable therefore that by consenting to the deposit Ms Carr also authorised the underlying transaction with no issue of retrospectivity arising.[61] I do not, however, intend to decide the matter on that basis. ....(Footnote omitted.)[26] These passages and the pleadings reveal the extent to which the case proceeded to trial on the basis of some confusion and misunderstanding. First, theStokes' pleadings relied expressly on agency. Second, the RMCFT's defence wasdirected to countering that reliance by raising the undisclosed agency rule. Third, the allegation of Ms Carr's subsequent consent was not pleaded and was notexpressly raised until Mr Steele's closing address. While the Judge was alive to theconsent issue, it is hardly surprising that she did not make an express finding on it given the absence of a proper pleading and directed cross-examination.[27] A further complication is introduced by Ms McCartney's submission that thethird element of liability as pleaded by the Stokes was not made out. She submits that Mrs Colebrook is not entitled to an indemnity out of the RMCFT's assets even if Ms Carr did subsequently consent to the Bucklands Beach Road purchase. As we have noted, this issue was not in dispute in the High Court. Ellis J accordingly assumed that Mrs Colebrook was entitled to an indemnity from the trust's assets,concluding:13 At [57]–[58].[74] I therefore find that in entering the Bucklands Beach Rd agreement Mrs Colebrook was acting as the undisclosed agent of the RMCFT. The Trustees of the RMCFT were accordingly personally liable for the failure to settle that agreement on 20 December 2007. As Trustee, Mrs Colebrook is entitled, in turn, to look to the [RMCFT] to indemnify her. As I have said, once that point is reached it is not disputed that the equitable lien over theRMCFT's property to which this gives rise may be subrogated to the plaintiffs.(Footnote omitted.)[28] In this respect we note that judgment was delivered on 25 July 2012. The Stokes already have judgment against Mrs Colebrook for the sum of $943,033.36.14In the circumstances, we construe Ellis J's judgment as a declaration that the Stokes are entitled to execute the judgment against the assets of RMCFT.[29] Thus, in summary, the cases as presented on appeal diverge significantlyfrom those advanced at trial in conformity with the Stokes' pleading. By sequential reference to the three critical elements of the Stokes' claim:(a) The primary question of whether Mrs Colebrook entered into the Bucklands Beach Road agreement in her capacity as a trustee of the RMCFT remains alive.(b) However, the question is not now whether Mrs Colebrook acted with Ms Carr's authority and as her agent but whether Ms Carr in her capacity as trustee consented to the agreement.(c) The RMCFT now disputes the Stokes' entitlement to an equitable lienover the RMCFT assets if the first two elements are determined in theStokes' favour.[30] We shall consider each of these three elements in the same order.14 See at [1] above.Issues(a) Capacity(i) High Court[31] The first element of the Stokes' claim was to prove that Mrs Colebrook signed the Bucklands Beach Road agreement in her capacity as trustee of the RMCFT. As noted, Mrs Colebrook signed as "E M Colebrook or nominee". Shenever nominated another purchaser. So Ellis J approached the claim by enquiring whether at the time of signing Mrs Colebrook intended that she would settle the purchase in her own capacity or as a trustee of the RMCFT.15 She carried out her factual inquiry by reference to these two possibilities.[32] Ellis J was satisfied that Mrs Colebrook never intended nor contemplated that she would be the ultimate purchaser of Bucklands Beach Road in her own right, whether alone or with Mr Heenan. The Judge relied on these findings:(a) Mrs Colebrook had never owned any property including her former family home at Clovelly Road in her own name, and a new relationship with Mr Heenan would not have caused her to change this practice.16(b) Mrs Colebrook was totally inactive in finding finance for the three and a half months between signing the Bucklands Beach Road agreement and the due date of settlement. Even allowing for the prospect of the RMCFT's repayment of her advance of $241,000 fromthe sale of Clovelly Road, Mrs Colebrook and Mr Heenan would have needed to raise an additional $1.6 million to settle. Their failure to take any steps for this purpose was consistent with RMCFT'sintention to take title.1715 At [42].16 At [43].17 At [44].(c) Mrs Colebrook and Mr Heenan did not believe, as late as two working days before Christmas, that they would have been able to obtain mortgage finance of $1.6 million. In particular, they had not sought registered valuations of the property or instructed a mortgage broker. And their disclaimer of concern about the prospect of paying penalty interest at 12 per cent on $1.6 million for an indefinite period was not believable.18[33] After negating the possibility that Mrs Colebrook intended to settle in her own right, Ellis J found that in signing the agreement she positively intended to bind the RMCFT to settle the Bucklands Beach Road purchase for these reasons:19(a) Mrs Colebrook's invariable practice was to enter into agreements forsale and purchase for and on behalf of the RMCFT wherever she or her nominee were named as the purchaser;20(b) settlement of the Clovelly Road and Bucklands Beach Roadagreements was "highly intertwined", showing an unequivocalintention to substitute the Bucklands Beach Road property for the Clovelly Road property in the RMCFT corpus: in particular the settlement dates of both were deliberately synchronised, the trust'sinterests in Clovelly Road provided a security for the deposit borrowed for Bucklands Beach Road, and the proceeds of sale of Clovelly Road almost exactly matched the amount required to settle the purchase of Bucklands Beach Road;21 and(c) the settlement statements prepared by the RMCFT's solicitors for both transactions were consistent with an intention to fund the trust'sacquisition of the Bucklands Beach Road property from the proceeds of sale from the Clovelly Road property.2218 At [45].19 At [46].20 At [47].21 At [48].22 At [50].(ii) RMCFT's appeal grounds[34] Ms McCartney has mounted a sustained challenge to Ellis J's findings on anumber of fronts. We shall address each separately.[35] First, Ms McCartney takes issue with the Judge's stated framework for herfactual inquiry that:[42] As I have said, the gist of Mrs Colebrook's evidence was that, at thetime she signed the agreement, she had not made up her mind who the ultimate purchaser of Bucklands Beach Rd would be. I am prepared to accept that she may have been considering establishing a completely new Trust entity that could later be nominated for that purpose. But the reality was, however, that there was no such entity in existence at the relevant timeand the possibility that a suitable "nominee" might subsequently becomeavailable is not the point. Rather, the only question must be whether Mrs Colebrook intended that, if and when push came to shove, it was she or the RMCFT who would settle the transaction.[36] Ms McCartney submits that the second part of this passage is inconsistentwith the first; that the Judge's pithy reference to "... if and when push came toshove ..." postulates an incorrect test of intention. Instead of inquiring as to Mrs Colebrook's state of intention on 31 August 2007, the Judge's words suggestthat she was taking into account subsequent financial difficulties such as the global financial crisis which might have come into play.[37] We reject this analysis. Three possible purchasing entities were identified in the evidence – Mrs Colebrook in her own right; Mrs Colebrook and Ms Carr as trustees of the RMCFT; and a new trust, as then unknown or unformed. Ms McCartney's submission that Mrs Colebrook's intention throughout was toestablish a completely new trust entity appears to rule out her reliance on the first possibility.[38] What is plain is that whichever of the three options was chosen, by signing the contract on 31 August 2007 without an express limitation on her liability, Mrs Colebrook would always be personally liable to the Stokes. The only question was one of capacity. Did Mrs Colebrook intend to sign in her own right; that is, by buying the property legally and beneficially for herself? Or did she intend to taketitle, along with at least one other in the capacity of trustees, owning the property for the benefit of others?[39] Ellis J's stated terms of inquiry into Mrs Colebrook's intended capacity whensigning do not suggest any inconsistency. She accepted that Mrs Colebrook may have contemplated forming a new trust to purchase. But that event was no more than a possibility or contingency at 31 August 2007.23 The Judge was accordingly inquiring into Mrs Colebrook's intention if that contingency did not occur. And, as we shall discuss, she was entitled to take into account later events in deciding that issue.[40] Second, Ms McCartney submits that Ellis J wrongly assumed that Mrs Colebrook would not be personally liable for non-performance if the RMCFTtrustees were themselves found liable. She relies on the Judge's use of the phrasethat Mrs Colebrook had "no intention of binding herself personally".24[41] We have largely answered this submission. Whatever Mrs Colebrook might have contemplated on 31 August 2007, she had neither formed a new trust nor appointed trustees to take title to Bucklands Beach Road. As we have noted, Mrs Colebrook's liability to the Stokes could only have been either as legal orbeneficial purchaser in her own right or as acting in exercise of her powers of trustee, intending to apply trust assets to satisfy the purchase price. All the Judge was saying was that she was satisfied Mrs Colebrook did not intend to act in the former capacity.[42] Third, Ms McCartney submits the Judge erred in failing to address the likelihood that Mrs Colebrook used the reference to "or nominee" with a view tonominating a new trust entity as the purchaser. Instead, she says, the Judge gave undue weight to Mrs Colebrook's entry into some six agreements for sale and purchase on the RMCFT's behalf which similarly described the purchaser as "E M Colebrook or nominee".23 At [72].24 At [44].[43] We do not accept this submission. Ellis J acknowledged that Mrs Colebrook may have considered forming a new trust and appointing new trustees who could be nominated as purchasers of the Bucklands Beach Road property. However, that was not the point. Mrs Colebrook's practice of signing agreements as "E M Colebrook or nominee" when purchasing properties for the RMCFT was available as evidence that she used the same phrase to describe the same capacity in which she signed on this occasion.[44] Fourth, Ms McCartney submits that Mrs Colebrook and Mr Heenan gave uncontradicted evidence that, consistent with their intention to live together in a new family home, each intended to contribute substantially to the purchase price of Bucklands Beach Road. She submits that the Judge simply ignored this evidence.[45] We do not agree. Ellis J was not bound to accept at face value what Mrs Colebrook and Mr Heenan said. Mr Steele challenged both on their financial arrangements for settling the purchase of the Bucklands Beach Road property. Plainly the Stokes did not accept what they said. Mrs Colebrook and Mr Heenan'sprolonged inactivity undermined their assertions. Their evidence conveyed an element of implausibility. The Judge regarded Mrs Colebrook as an unsatisfactorywitness, referring to her credibility as "somewhat wanting".25 She had a proper factual basis for rejecting Mrs Colebrook's evidence and that of Mr Heenan on this subject.[46] Fifth, Ms McCartney submits that the various facts upon which the Judge relied in finding that from 31 August 2007 Mrs Colebrook's primary intention was tosubstitute the Bucklands Beach Road property for the Clovelly Road property in the RMCFT corpus are equally consistent with an intention to purchase through a new trust entity. However, after reviewing those facts, separately and together, we are satisfied that Mrs Colebrook's failures to take any steps whatsoever to form a trust and appoint new trustees or to raise substantial borrowings before 20 December 2007 together with other available evidence provided a sound evidential foundationfor the Judge's conclusions. The inferences drawn were plainly open to her.25 At [59].[47] Determination of the Stokes' claim was always going to be significantly, ifnot decisively, influenced by an evidential contest at trial. A judicial assessment of reliability and credibility was necessary. The trial Judge enjoyed the real benefit of seeing and hearing the witnesses. We are not prepared to interfere with her careful findings based on a first hand evaluation of the evidence.[48] Sixth and finally, Ms McCartney submits that Ellis J erred in determining the question of capacity by taking into account evidence of events subsequent to 31 August 2007. She says that this case did not fall within the recognised exception allowing admission of post-contractual evidence which might provide objective guidance in interpreting the meaning of an instrument.26 Here, she says, Mrs Colebrook's post-contract conduct and the documents do not provide that degree of objective guidance.[49] This submission is misconceived. Mrs Colebrook's post-contract conduct was relevant to determining her subjective intention as to the capacity in which she signed. Evidence of subsequent events is unquestionably relevant and admissible for that purpose. The qualified prohibition on admission of post-contract evidence as an aid to interpretation of a disputed contractual provision, sometimes referred to as the parole evidence rule, has no place here. The provisions of the Bucklands Beach Road agreement were not in contention; and the evidence of subsequent conduct was not intended to show what the parties meant or may have meant by a disputed contractual provision.[50] Despite Ms McCartney's careful and comprehensive submissions, we are notsatisfied that Ellis J erred in finding that Mrs Colebrook signed the Bucklands Beach Road agreement in her capacity as a RMCFT trustee with the intention of binding the trust to settle.(b) Consent[51] The second element of the Stokes' claim is proof that Ms Carr, acting in her capacity as a RMCFT trustee, later consented to Mrs Colebrook's purchase of26 Gibbons Holdings Ltd v Wholesale Distributors Ltd [2007] NZSC 37, [2008] 1 NZLR 277.Bucklands Beach Road in the same capacity.27 Ellis J found that Ms Carr did not specifically authorise Mrs Colebrook to sign beforehand;28 the Judge's finding wasexpressed in negative terms – that she was not prepared to conclude to the contrary and with an express reference to Mrs Colebrook's credibility difficulties. We accept,however, that Ms Carr's evidence on this issue was largely unchallenged at trial.[52] So the only question is whether Ms Carr later consented. As noted, Ellis J did allude briefly to the possibility of Ms Carr's consent to Mrs Colebrook's acquisition on the RMCFT's behalf by signing the mortgage application to New Zealand Home Bonds.29 But she did not determine the point because it was not in issue before her. Nevertheless, Mr Steele submits that we should make primary findings to this end. He says that we should do so because Ms Carr's evidence lacked plausibility andcredibility.[53] However, Mr Steele's submission directly contradicts his position at trial. Inclosing he unequivocally disclaimed any suggestion of dishonesty or fabrication. Instead, he contended that her evidence should not be accepted because of its unreliability and its foundation upon what Mrs Colebrook had said.[54] Mr Steele's duty as trial counsel at trial was clear:30 if he intended to suggest that Ms Carr was not being truthful, he had an obligation to tax her directly. In particular, he would have had to explore with Ms Carr the two events on which the Stokes now rely to establish retrospective consent (a) by applying to New Zealand Home Bonds for the deposit loan and offering Clovelly Road, the trust property, as security; and (b) by signing the Client Authority and Instruction form to facilitate taking title to Bucklands Beach Road as trustee for the RMCFT.[55] Ellis J had apparent misgivings about aspects of Ms Carr's evidence,particularly her misunderstanding of the legal effect of some documents – even though she is a solicitor – and her informal approach towards discharging her functions as trustee. However, without a specific pleading of subsequent consent27 Messeena v Carr, above n 12, at 262; and Visini v Cadman, above n 12, at [17].28 At [59].29 At [60]–[61].30 Evidence Act 2006, s 92.and the benefit of focussed cross-examination on this critical element, we are not in a position to make what would be first instance findings. The evidence is incomplete and unsatisfactory. And Ms McCartney advises that the RMCFT would wish to call at least two further witnesses in rebuttal.[56] In summary, given the current state of the pleadings and the incomplete state of the evidence available from the trial record, we are unable to find that Ms Carr acting in her capacity as a RMCFT trustee gave retrospective consent to Mrs Colebrook's purchase of the Bucklands Beach Road property in the samecapacity.(c) Indemnity[57] The third element of the Stokes' claim, assuming the first two wereestablished, is proof that Mrs Colebrook is entitled to a right of indemnity from thetrust's assets for her liability on non-performance and the Stokes are entitled to besubrogated to that right by claiming an equitable lien over the RMCFT's assets.[58] The RMCFT conceded this element at trial. But on appeal Ms McCartney effectively withdraws that concession. She says both Mrs Colebrook and Ms Carr would have acted in breach of their duties as trustees – in Mrs Colebrook's case byfailing to inform and consult with Ms Carr in relation to the acquisition and in Ms Carr's case by subsequently consenting to Mrs Colebrook's unilateral entry intothe Bucklands Beach Road agreement, intending that the property be held on trust for the RMCFT, without turning her mind to the merits of the transaction andwhether it was in the beneficiaries' best interests. Ms McCartney relies on theStokes' own case that Ms Carr left to Mrs Colebrook all decisions relating to thelatter's purchase of the Bucklands Beach Road property. As a result, Ms Carr failed to exercise her discretionary power as trustee properly or at all; and Mrs Colebrook is not entitled to an indemnity out of the RMCFT's assets for her liability to theStokes, and their right of subrogation is of no value.[59] On its face, this defence is unattractive and faces obvious difficulties, both legal and factual. One consequence, if it succeeded, may be to expose Ms Carr tocontingent personal liability to the RMCFT. Ms McCartney would be required at trial to run an argument adverse to the interests of both her clients Mrs Colebrook and Ms Carr. However, the argument was never considered in the High Court and understandably Ellis J made no findings upon it.Decision[60] In the result, Ellis J made a finding on only the first, albeit threshold, element of the three elements of the Stokes' claim now in dispute. The Stokes have failed to prove the second element of their claim. In the normal course, the RMCFT's appealwould be allowed and the High Court judgment set aside.[61] However, we are satisfied that that result would lead to a real risk of an injustice. The Stokes would be deprived of an opportunity to argue and have determined their claim that Ms Carr consented to Mrs Colebrook's purchase ofBucklands Beach Road for the RMCFT because of a failure to plead this essential element of the claim.[62] In the circumstances we are satisfied that the proper course is to remit the proceeding to the High Court for determination of that issue with a direction that the Stokes file an amended statement of claim within 30 days.31 That course isappropriate to enable proper adjudication of the merits of the Stokes' claim.32 Norwould it prejudice the RMCFT, providing the trust's right is preserved to deny theallegation of consent and plead an affirmative defence of breach of duty – it must also be given the benefit of an order for costs.Result[63] The appeal is allowed. The judgment given in the High Court is set aside. The cross-appeal is dismissed.31 Court of Appeal (Civil) Rules 2005, r 48(2).32 Judicature Act 1908, s 62; see McGechan on Procedure (online looseleaf ed, Brookers) at[HR7.77.03].[64] The proceeding is remitted to the High Court for determination of the issues of whether (a) Ms Carr consented to Mrs Colebrook's purchase of the BucklandsBeach Road property for and on behalf of the RMCFT; and (b) if so, whether Mrs Colebrook is entitled to an indemnity from the assets of the RMCFT for her liability to the Stokes. The High Court finding that Mrs Colebrook signed the Bucklands Beach Road agreement in her capacity as a trustee of the RMCFT is upheld.[65] The Stokes are directed to file an amended statement of claim in the High Court within 30 days, with leave reserved to the RMCFT to file a statement of defence pleading affirmatively that Mrs Colebrook is not entitled to be indemnified for her liability, if any, from the assets of the RMCFT.[66] Costs must follow the event. The Stokes are to pay one set of costs to the RMCFT for a standard appeal on a band A basis and usual disbursements. We are unaware of whether an order for costs has been made in the High Court which must in any event determine all costs issues arising there.Solicitors:Insight Legal, Warkworth for AppellantsMartelli McKegg, Auckland for Respondents