LEGLER v FORMANNOIJ [2021] NZHC 2759

LEGLER v FORMANNOIJ [2021] NZHC 2759 [18 October 2021]IN THE HIGH COURT OF NEW ZEALANDWHANGAREI REGISTRYI TE KŌTI MATUA O AOTEAROAWHANGĀREI-TERENGA-PARĀOA ROHECIV-2020-488-000032[2021] NZHC 2759IN THE MATTER OF the Kaahu TrustUNDER Part 18 of the High Court Rules 2016BETWEEN LI KARI LEGLER, LAILA SUN LEGLERKLAUI and KEN LEGLERPlaintiffsAND MARIA GUILLAUMINA CORNELIAJOHANNA FORMANNOIJFirst DefendantKAAHU TRUSTEE LIMITEDSecond DefendantHearing: 13 October 2021Appearances(via VMR):DR Bigio QC and JWH Little for PlaintiffsJD McBride and R Woods for DefendantsJudgment: 18 October 2021JUDGMENT OF DOWNS J(Undertaking to pay damages)This judgment was delivered by me on Monday, 18 October 2021 at 11 ampursuant to r 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors/Counsel:TGT Legal, Auckland.Martelli McKegg, Auckland.DR Bigio QC, Auckland.JWH Little, Auckland.JD McBride, Auckland.R Woods, Auckland.A long run-up[1] ... best explains why I recall my stay and interim relief orders and make themconditional on an undertaking to pay damages.[2] Ricco Legler died 2017 leaving his wife, Maria Formannoij; three adultchildren from an earlier marriage, Li, Laila and Ken Legler;1 and two family trusts:Kaahu Trust2 and Horowai Family Trust.3 Kaahu existed primarily to benefit Riccoand Maria.4 Horowai existed primarily to benefit the children. Each trust hassubstantial assets.[3] Ricco's death left Kaahu with two trustees: Maria and another. The otherresigned. Maria appointed Kaahu Trustee Ltd5 as a trustee, then herself resigned.[4] The children challenged their stepmother's appointment of Kaahu Trustee.They alleged Maria committed a fraud on a power, meaning she appointedKaahu Trustee with an improper purpose.[5] On 8 July 2020, the children obtained an interim injunction, without notice,from Brewer J. The injunction prevented Maria and Kaahu Trustee from exercising"any dispositive powers" in relation to trust property.6[6] The children did not provide an undertaking to pay damages, nor informBrewer J they were not doing so. It is unlikely these omissions were sinister, for, thechildren served the papers on a Pickwick basis (making them readily discoverable).But, the omissions were serious. To compound matters, the children certified theapplication contained "all relevant information" when, plainly, it did not. Again, thechildren did not inform Brewer J they were not providing an undertaking. Nor did the1 The children.2 Kaahu.3 Horowai.4 I use Christian names to avoid confusion given Ricco's children are parties.5 Kaahu Trustee.6 Minute of Brewer J at [5].children seek exemption from r 7.54 of the High Court Rules 2016.7 This rule makesan undertaking mandatory when someone seeks an interim injunction.[7] All this escaped attention, presumably because duty Judges are very busy andthings happened quickly.[8] The interim injunction was later varied by agreement.[9] The children's challenge to Maria's appointment of Kaahu Trustee failed attrial. On 2 June 2021, I found instead for Maria and Kaahu Trustee.8 So, I rescindedinterim relief.[10] The children then filed an appeal to the Court of Appeal. On 2 July 2021, andover opposition, I stayed my judgment and restored interim relief pending appeal.9I did so assuming the children had given an undertaking to pay damages because(a) not giving an undertaking is exceptional, hence record worthy; and (b) Brewer J'sdecision said nothing about this topic (because it had not been drawn to his attention).[11] From 16 July 2020, I received a flurry of memoranda. Maria's andKaahu Trustee's barrister, Mr McBride, had discovered the unfortunate combinationat [6]. I directed Maria and Kaahu Trustee to file an application identifying, exactly,what they wanted. They did. Maria and Kaahu Trustee applied for orders that:(a) The plaintiffs must comply with any order for the payment of damagesto compensate the defendants for any damage sustained through theinterim injunction granted by Brewer J on 8 July 2020; and(b) The plaintiffs must comply with any order for the payment of damagesto compensate the defendants for any damage sustained through theinterim injunction granted by Downs J on 2 July 2021.[12] In later written submissions:7 Caselaw is divided on whether an exemption is possible; see A C Beck and othersMcGechan on Procedure (looseleaf ed. Thomson Reuters, Wellington) at [HR7.54.01].8 Legler v Formannoij [2021] NZHC 1271.9 My Minute of 2 July 2021.(a) Maria and Kaahu Trustee argued an undertaking to pay damages isautomatically implied when interim relief is granted. In support,Mr McBride relied on English case law.(b) On behalf of the children, Mr Bigio QC argued there was no jurisdictionto now require the children to provide an undertaking; English case lawwas distinguishable; and in any event, no undertaking should berequired (given the facts).[13] I called on Mr Bigio first at the hearing. I said the parties' submissions weresomewhat off-point, and things could be dealt with much more simply. I explainedthat given the sequence set out in this judgment and my "fundamentalmisapprehension" an undertaking to pay damages had been given, I was inclined torecall the orders I made 2 July and require an undertaking.[14] Mr Bigio very responsibly accepted: (a) the children had been "in error" beforeBrewer J; (b) I could recall my orders; and (c) now require an undertaking as acondition of the stay and interim relief. However, Mr Bigio argued an undertakingwas not necessary. I reserved my decision, which I said I would release within a week.[15] The next day, Mr Bigio filed and served this helpful memorandum:May it please the Court:1. Your Honour advised yesterday that the Court was of the understandingat the time the plaintiffs' stay application was heard that an undertakingas to damages given by the plaintiffs had been in place. Counsel for theplaintiffs was unaware at the time the application was heard of thiscircumstance, and accepts that had your Honour been appraised of thesituation, submissions on the appropriateness of an undertaking wouldhave been sought by your Honour and formed part of the decision makingprocess.2. Following yesterday's hearing, counsel has taken instructions. Theplaintiffs wish to bring the issue to a close by providing an undertakingto the Court, confined to the position of the trustee, to support thecontinuation of the current order.3. Counsel for the plaintiffs proposes a draft form of undertaking for theCourt's consideration, as follows:"We will comply with any order for the payment of damages tocompensate the trustee of the Kaahu Trust (either the first orsecond defendant, as the case may be), in its or her capacity assuch, for any damage sustained to the trust property from thedate of this undertaking through the order granted by the Courton 2 July 2021."4. The plaintiffs remain opposed to an undertaking that would extend toMs Formannoij in her personal capacity as a beneficiary. She is not aparty to the proceeding in that capacity and, as discussed yesterday, anundertaking could only be for the purpose of protecting the trustee of theKaahu Trust.5. To the extent that it is still pursued by the defendants, the plaintiffscontinue to oppose the retrospective imposition / implication of anundertaking in respect of the spent orders made by Brewer J in July 2020for the reasons set out in the written submissions.So, the only issue for adjudication is how the undertaking is framed.[16] I am not persuaded the proposed undertaking is sufficiently broad. Courtscannot foresee all ends, hence the breadth of the language in r 7.54, namely that theapplicant "will comply with any order for the payment of damages to compensate theother party for any damage sustained through the injunction". There is no reason whythe undertaking should not use this language and good reason why it should. After all,the children are now doing only what they ought to have done before Brewer J in themiddle of last year.[17] For completeness, Mr Bigio expressed concern at the hearing an undertakingcould be "weaponised" given intra-familial acrimony. The answer to this submissionis twofold. First, an undertaking to pay damages is the orthodox, presumptive "price"of an interim injunction. Second, Kaahu now exists primarily for Maria's benefit. Theinterim injunction prevents the trust disposing of property to benefit her.10An undertaking to pay damages is, therefore, proper.Result[18] I recall the stay and interim relief orders I made 2 July 2021. I re-issue themconditional on the children providing an undertaking to pay damages in accordancewith r 7.54 on or before 5 pm, Thursday 21 October 2021.10 I do not overlook Maria may sell the home "Mokomoko" by dint of an agreed variation.Costs[19] I think I am right to say costs in relation to the stay application are still to bedetermined. So too, obviously, costs in relation to this application. I am inclined toaward the children scale costs in relation to the stay application. But, I am inclined toaward Maria and Kaahu Trustee increased costs (50 percent) in relation to thisapplication even though I have approached matters a little differently than them. Ifthe parties disagree, they may file memoranda of not more than seven pages each:(a) Maria and Kaahu Trustee on or before 8 November 2021.(b) The children on or before 15 November 2021.(c) Maria and Kaahu Trustee, strictly in reply, 22 November 2021...Downs J