SMITH v PENNEY & ANOR [2013] NZHC 2988 ]

SMITH v PENNEY & ANOR [2013] NZHC 2988 [12 November 2013 ]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2013-404-003064[2013] NZHC 2988BETWEEN NIGEL PHILIP SMITH (in his capacity asa trustee of the Maria Charles FamilyTrust)PlaintiffAND STEPHEN CHARLES PENNEY (in hispersonal capacity and in his capacity as atrustee of the Maria Charles Family Trust)First DefendantDONNA MARIA SIMUNOVICH (in herpersonal capacity and in her capacity as atrustee of the Maria Charles Family Trust)Second DefendantHearing: 11 and 18 October 2013Appearances: M Heard and F Whyte for the PlaintiffW Templeton and S McNabe for the First DefendantS McCabe for the Second DefendantJudgment: 12 November 2013[RESERVED] JUDGMENT OF WYLIE JThis judgment was delivered by Justice Wylieon 12 November 2013 at 3.30 pmPursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Introduction[1] The first defendant, Mr Penney, seeks to set aside or vary a judgment entered against him by Associate Judge Christiansen on 8 August 2013.[2] The application is opposed by the plaintiff, Mr Smith, and by the second defendant, Ms Simunovich.[3] The application was expressed to be made pursuant to r 10.9 of the High Court Rules. This was in error. Mr Penney did not appear at the hearing. The judgment given by Associate Judge Christiansen was given by way of summary judgment under r 12.2. The relevant rule in such circumstances is r 12.14. It provides as follows:12.14 Setting aside judgmentA judgment given against a party who does not appear at the hearing of an application for judgment under rule 12.2 may be set aside or varied by the court on any terms it thinks just if it appears to the court that there has been or may have been a miscarriage of justice.[4] This application raises a short point — was there, or may there have been, a miscarriage of justice?Background[5] Mr Smith was at all relevant times the independent trustee of a family trustknown as the Maria Charles Family Trust ("the trust"). The first and seconddefendants were his co-trustees.[6] The defendants are the ultimate beneficiaries of the trust. When it was settled, they were married. However, they separated in or about July 2008, and their marriage was finally dissolved in December 2010.[7] The trust owns a number of light industrial buildings and residential properties. The majority of the buildings are leased and this generates an income for the trust.[8] Following the dissolution of the defendants' marriage, it was proposed thatthe light industrial properties would be resettled on a new trust to be settled by Mr Penney, and that the residential properties would be resettled on a new trust to be settled by Ms Simunovich.[9] A matrimonial property agreement recording the proposed resettlements and dealing with other items of relationship property and matters in dispute was signed by the defendants on 28 September 2011, following the filing of proceedings and a lengthy mediation where both parties were represented by experienced counsel. Each of the defendants agreed to take various steps to implement the agreement. Inter alia, they agreed to co-operate to procure Mr Smith's agreement to theresettlements proposed by them. They also agreed to appoint an accountant to prepare a balance sheet and report for the trust, and to make recommendations as tohow the trust's assets/liabilities might be settled between them. The accountant was to provide Mr Penney and Ms Simunovich with his report in draft prior to finalising his balance sheet and resulting recommendations, so as to afford them the opportunity to comment on any material item.[10] A draft balance sheet was prepared by the accountant. Ms Simunovich did not accept it. She was concerned about major items of expenditure debited to her in the draft accounts. The parties were unable to resolve this impasse. As a result, no final balance sheet has yet been prepared and no recommendations have been made. Neither Mr Penney nor the Ms Simunovich has been able to agree on their separateentitlements arising out of the division of their relationship property and the trust'sassets. Resettlement of the trust properties has not, to date, occurred.[11] Mr Penney, however, proceeded as though the agreement had been finalised and the trust properties resettled. Without recourse to his co-trustees, he took it uponhimself to lease some of the trust's light industrial properties. He failed to account to the trust for the rental generated as a result.[12] Mr Smith became concerned that Mr Penney was taking matters into his own hands. He considered that Mr Penney was breaching his duties as a trustee, and that he was failing to pay over the trust income which belonged to it. He wrote toMr Penney and/or his advisors on a number of occasions reminding Mr Penney of his responsibilities. Mr Penney ignored the reminders. Indeed, in one memorable email to his own advisors dated 6 June 2012, he set out various tenancyarrangements he had made in respect of some of the trust's properties, and went onto say (in much more colourful language) that he did not care what Ms Simunovichwanted and that "they" would not be getting any of the money that he had "coming in".[13] Faced with intransigence by Mr Penney, Mr Smith commenced the current proceedings. He sought various orders against Mr Penney, including the following:(a) An order directing Mr Penney to pay to the trust all rental and otherincome from the trust's properties that he had received;(b) An order requiring Mr Penney to deliver up to Mr Smith and Ms Simunovich all records concerning the leasing of the trust'sproperties; and(c) An order requiring Mr Penney to refer to his co-trustees all decisions he had made dealing with trust properties, comply with decisions made by his co-trustees in accordance with the trust deed, and not to make decisions dealing with trust properties in his sole discretion.An order was also sought under s 51 of the Trustee Act 1956 substituting new trustees in place of the existing trustees.[14] The proceedings were filed in June 2013. Mr Smith gave notice that he intended to proceed by way of summary judgment in relation to that part of the statement of claim noted in [13](a)–(c) above.[15] Mr Smith was unable to effect service on Mr Penney. As a result, on 4 July 2013, Mr Smith applied, on a without notice basis, for an order for substituted service.[16] On 9 July 2013, Associate Judge Christiansen made an order in accordance with this application. He was satisfied, on the basis of various affidavits filed, that Mr Smith had taken reasonable steps to try and serve Mr Penney, that the documents had been brought to the attention of Mr Penney, and that Mr Penney had taken steps to avoid service. He directed that, in lieu of personal service, the documents could be served by leaving copies of the documents with any person found at a property occupied by Mr Penney, or affixing them to the front door of the property, and also by emailing copies of the documents to Mr Penney at an email address used by him.[17] Mr Penney was then served in accordance with the order made as to substituted service.[18] The summary judgment application came before Associate Judge Sargisson on 18 July 2013. Mr Penney had taken no steps. Ms Simunovich did not oppose the application for summary judgment against Mr Penney. Rather, she supported it.[19] Associate Judge Sargisson was unable to deal with the matter on the day and she relisted it for hearing in the summary judgment list.[20] The application was heard on 7 August 2013 by Associate Judge Christiansen. Mr Heard and Mr Whyte appeared for Mr Smith, and Ms McCabe for Ms Simunovich. There was no appearance either by or for Mr Penney.[21] Associate Judge Christiansen was satisfied on the affidavits filed that substituted service had been effected in the terms authorised by the Court. Heconsidered a memorandum filed and submissions advanced in support of Mr Smith'sapplication. He found that it was clear from the evidence that Mr Penney had been receiving but not accounting for trust income. He noted that the evidence suggested that this had been done by Mr Penney notwithstanding that he knew that he should not be doing it. He made orders requiring Mr Penney to pay to the trust all rentalincome he had received from the trust's properties, to deliver up to Mr Smith and to Ms Simunovich, as Mr Penney's co-trustees, all records concerning the leasing of thetrust's properties, and to refer to all trustees of the trust all decisions to be made inrelation to trust property, to comply with directions made by the trustees inaccordance with the trust deed, and not to purport to make decisions dealing with trust property in his sole discretion. He recorded that if Mr Penney believed he was entitled to be reimbursed for monies he had spent on the rental properties, he could make a claim for those monies to the trust. The Judge directed that all remaining matters raised by the statement of claim were to be dealt with under Part 18 of the Trustee Act, and that the proceeding was to be called again for this purpose on 10 September 2013. He made timetable orders in this regard, inter alia, requiring Mr Penney to file and serve a statement of defence within one week of the date of delivery of the judgment. Finally, he made an order fixing costs on an indemnity basis against Mr Penney.[22] In the event, Mr Penney breached the orders made by the Court. He only filed a statement of defence on 26 August 2013, some time after the date fixed in the timetable directions. On the same day, he applied to set aside Associate JudgeChristiansen's judgment. He did not account promptly to the trust. When he didfinally account to the trust, he did not do so fully. Rather, he deducted monies hesaid were spent on the trust's properties. He did not pay the indemnity costs ordered.Mr Penney's Affidavits[23] Mr Penney has belatedly filed voluminous documentation, contained in four separate affidavits.[24] In brief, Mr Penney has asserted that Associate Judge Christiansen'sjudgment was factually incorrect, and he has objected to various of the orders made. However, he has stated that he is prepared to account for rental income, provided that Ms Simunovich also accounts for what he has asserted is an unauthorised loan she has received from the trust. He referred to the matrimonial property agreement, and stated that he was proposing to transfer his share of the properties owned by the trust to a new trust known as the Nikolas and Petra Trust, which he had settled in March 2011. He asserted however that Mr Smith was not prepared to agree to resettlement of the trust properties, and that he was biased in Ms Simunovich'sfavour. He noted that the accountant referred to in the agreement had prepared a draft report, but that Ms Simunovich had refused to accept the figures in that report.He then said that the accountant's report was "not to stop" resettlement of the trust'sassets. He acknowledged that he was advised that he could apply for specific performance of the matrimonial property agreement. He asserted that Ms Simunovich had been and continues to hold up finalisation of the report from the accountant by not agreeing to the draft, which, in effect, has prevented the trust from being able to finalise its accounts, and precluded the trustees from signing off on the resettlements.[25] Mr Penney then asserted that he has maintained the relevant trust properties and that he has been excluded from carrying out his duties as a trustee of the trust. He acknowledged that he has leased certain of the trust properties, in particular, a property in Dryden Place and a property at Green Mount Drive. He said that the rental received from the trust properties has been used to maintain the properties, and further, that he also borrowed money from his mother to finance repairs to the trust properties. Mr Penney produced a schedule, detailing monies he said he has paid out to maintain the properties, and rental he said has been collected. Total expenses in respect of the Dryden Place properties are said to be $57,930.18 and total income received from those properties is said to be $49,833.42. The property at Green Mount Drive is said to have resulted in rental collected of $11,250, against total expenses of $18,252.50. As a result, Mr Penney asserted that he is owed $15,099,26 by the trust.[26] Various reasons were advanced by Mr Penney for his failure to take any steps to oppose the summary judgment application, and for his failure to attend before Associate Judge Christiansen.[27] As is unfortunately not atypical in disputes between parties following amatrimonial break up, there were a host of other "tit for tat" assertions made byMr Penney in his affidavits. I do not deal with these assertions. They are irrelevant to the matter in issue in this proceeding.Submissions[28] Mr Templeton, in what can appropriately be described as evolving submissions made on behalf of Mr Penney, noted that, in its terms, the matrimonialproperty agreement was due to be settled promptly. He argued that it was clearly anticipated by both parties that Mr Smith's agreement would be forthcoming, andthat the final accountancy report and other matters needing attention were not a bar to settlement. He argued that Mr Penney was entitled to treat the agreement as having been completed, and to organise his affairs accordingly. In his submissions in reply, Mr Templeton developed this argument to suggest that Mr Penney had a beneficial or equitable interest arising from the September 2011 agreement, and thatthe relevant circumstances supported an "institutional constructive trust", and/or an "equitable estoppel" in favour of Mr Penney and the Nikolas and Petra Trust.[29] In the alternative, Mr Templeton argued that Mr Penney was entitled to set off against any monies he might owe to the trust as a trustee, such monies as he had spent on maintaining the trust properties. He argued that his client had a statutory right to reimburse himself under ss 15 and 38 of the Trustee Act.[30] Mr Templeton was particularly critical of the order made requiring Mr Penney to pay indemnity costs. He said that there was a resulting unfairness to Mr Penney.[31] Although the application was initially advanced as an application to set aside the judgment, ultimately, Mr Templeton advised me that his client is aggrieved by the order requiring him to account to the trust for the gross rentals received. Mr Templeton sought to vary the order to require that Mr Penney should only be required to account for the net rentals received, after deduction of all expenses said to have been incurred in relation to the trust's properties.[32] Mr Heard, for Mr Smith, argued that Mr Penney had no good excuse for failing to appear at the initial hearing, and further, that he had no defence to Mr Smith's claims. He submitted that the properties in issue were and are the trust'sproperties, that Mr Penney arranged leases/tenancies of those properties, purportedly in the name of the Nikolas and Petra Trust and without the consent of his co-trustees,and that he ensured that income generated from the trust's properties was paid at hisdirection, rather than to the trust's account. He submitted that Mr Penney did notdispute these essential facts, and that, in any event, they were clear from the evidence and correspondence which was before Associate Judge Christiansen.[33] Further, Mr Heard argued that no set off could be available. He referred to the various invoices produced by Mr Penney, detailing work carried out on the properties, and noted that those invoices were all in the name of the Nikolas and Petra Trust, and not in Mr Smith's name. He argued that there could be no set off,either as a matter of fact, or as a matter of law. He also noted that Associate Judge Christiansen reserved to Mr Penney the right to seek reimbursement from the trust.[34] In relation to Associate Judge Christiansen's direction that Mr Penney pay indemnity costs, he observed that the first defendant had subsequently written to Mr Penney, offering to settle the costs claim on the basis of costs calculated on a 2B basis.[35] Ms McCabe, on behalf of Ms Simunovich, adopted the submissions made by Mr Heard. She also confirmed that her client has indicated that she will accept costs on a 2B basis, and that she will not seek to enforce the costs order made by the Associate Judge.Analysis[36] The expression "miscarriage of justice" used in r 12.14 gives the court a widejurisdiction, enabling it to consider all matters which might properly be said to impeach the judgment obtained. As a result, the power to set aside or vary judgments under the rule can be exercised as the justice of the case requires.1[37] The Court of Appeal in Russell v Cox accepted that there are three matters which are usually likely to be of central importance. 2 McMullin J noted as follows:3Mr Woodhouse drew our attention to the observations of McCarthy J inPaterson v Wellington Free Kindergarten Association Inc [1966] NZLR 975,1 Equiticorp Finance Group Ltd v Cheah [1989] 3 NZLR 1 (CA) and (PC) at 8.2 Russell v Cox [1983] NZLR 654 (CA); see also Garry Deenning Ltd v Wright [1989] 1 NZLR 45 (HC) at 49.3 At 659.a case to which R 236 was applicable. McCarthy J, delivering the judgment of this Court, said:"In approaching an application to set aside a judgment which complies with the rule, the Court is not limited in the considerations to which it may have regard, but three have long been considered of dominant importance. This was accepted by the Chief Justice in the Court below and by all counsel in this Court. They are, 1. That the defendant has a substantial ground of defence; 2. That the delay is reasonably explained; 3. That the plaintiff will not suffer irreparable injury if the judgment is set aside: Atwood v Chichester (1878) 3 QBD 722; Hovell v Ngakapa (1895) 13 NZLR 298; Trengrove v Inangahua Hospital Board [1956] NZLR 587. But, whilst it appears from these cases that delay, if reasonably explained and if it does not create irreparable injury, is not of itself a good reason for refusing to set aside, we do not doubt that where the delay is substantial, as it is here, the Court can more readily conclude that injury would be caused".We think that in the light of Evans v Bartlam the passage to which reference has just been made should be read as doing no more than emphasising three matters which, as a matter of common sense and practice, the Court will generally regard as of importance in deciding whether it is just to set aside a judgment. But it should not be regarded as laying down a general rule that an application to set aside a judgment must satisfy these conditions as a necessary prerequisite to the exercise of the discretion; it should be taken as doing no more than highlight factors which on any application to set aside a judgment may generally be regarded as relevant to an inquiry which will determine where the justice of the case will lie.[38] I consider each consideration in turn. I then consider where the justice of the case lies.Does Mr Penney have substantial grounds of defence?[39] There is no dispute as to the factual basis on which the judgment was obtained. It is common ground that the properties dealt with by Mr Penney were trust properties, that he arranged leases/tenancies of those properties in the name of the Nikolas and Petra Trust, and that he did so without the consent of his co-trustees. Further, it is common ground that Mr Penney directed that the income generated by the leasing of those properties should be paid to the Nikolas and Petra Trust, ratherthan to the trust's bank account. It is also not in dispute that Mr Penney is one of the beneficiaries of the Nikolas and Petra Trust.[40] It is trite law that a trustee has, inter alia, duties requiring him or her toadhere to the terms of the trust, to act in the beneficiaries' best interests, and not toprofit personally from the trusteeship. A classic illustration of the latter principle is the decision of the House of Lords in Boardman v Phipps,4 where it was held that it is an inflexible rule of a court of equity that a person in a fiduciary position is not, unless otherwise expressly provided, entitled to make a profit, nor to put himself or herself in a position where his/her interest and duty conflict.[41] There can be no doubt but that Mr Penney has breached his obligations as a trustee of the trust. He has acted unilaterally in dealing with trust property. He has failed to adhere to the terms of the trust, and he has failed to act in the interests of all beneficiaries of the trust. He has appropriated to the Nikolas and Petra Trust, monies which should properly have gone to the trust. He has put himself in a position where there is an irreconcilable conflict between his personal interests and those of the trust and its beneficiaries.[42] It cannot be asserted that Mr Penney is entitled to ignore his duties as a trustee, and pre-empt a resettlement of the trust, in anticipation of finalisation of the matrimonial property agreement. Execution of that agreement by both Mr Penney and Ms Simunovich gave Mr Penney rights vis à vis Ms Simunovich. If he considered that she was in breach of the agreement, he could have commenced proceedings against her. The agreement did not, however, give him any rights as against the trust. Indeed, the agreement in effect acknowledged this. It assumed thatMr Smith's agreement to the proposed resettlements was necessary. The partiesagreed to try and obtain his agreement. Mr Smith has quite properly required that trust accounts be finalised, and that a final tax return for the trust be prepared, prior to agreeing to the proposed resettlements. This has not happened. There was no agreement, binding on the trust, until Mr Smith agreed and all other matters required to be attended to were completed.[43] A vendor of land can be held to be a constructive trustee in favour of the purchaser in the period between the signing of the contract for sale and registration of the transfer. The constructive trust arises on the basis of the parties' intention that4 Boardman v Phipps [1967] 2 AC 46.the property will eventually pass from the vendor to the purchaser.5 As the Court of Appeal noted in Bevin v Smith,6 a constructive trust in such circumstances rests onthe equitable doctrine of conversion, which considers "that is done which ought to bedone".[44] There is, however, no authority of which I am aware, or to which Mr Templeton could refer me, which suggests that a person on whose new trust a resettlement may occur, can unilaterally pre-empt the resettlement agreement which does not of itself bind the original trust, take the original trust's property, andappropriate any income generated by it, prior to resettlement.[45] I reject the argument advanced by Mr Templeton that Mr Penney was entitledto treat the trust's properties as his own, or that there was an institutional constructive trust in Mr Penney's favour which entitled him to breach his duties as a trustee and appropriate the trust's property.[46] Nor, in my judgment, is Mr Penney entitled to a set off in respect of such monies as may have been spent on the trust properties.[47] A set off can be available where a defendant has a cross claim for a sum of money which is so closely connected with the claim against him or her, that it would be unjust to allow the plaintiff to have judgment without bringing the cross claim to account.7[48] Here, Mr Smith sought to require that Mr Penney account to the trust for monies Mr Penney appropriated from the trust in breach of his duties as a trustee. Mr Penney now claims that he was entitled to set off monies said to have been spenton the trust's properties to ensure that they could be leased.[49] As is noted in Derham on the Law of Set-Off, there have been judicial statements which suggest that equitable set off, in principle, may be open to a trustee5 See generally, Butler, Equity & Trusts in New Zealand (2nd ed, Brookers, 2009) at 347-348.6 Bevin v Smith [1994] 3 NZLR 648 (CA) at 659.7 Laws of New Zealand, Set-off and Counterclaim, at [24].who is obliged to account for a trust fund.8 However, the circumstances must be such as to support a set off.[50] On his own affidavits, Mr Penney has no cross claim against the trust. Such monies as have been spent on the trust properties have been spent by the Nikolas and Petra Trust. This is clear from the invoices which Mr Penney has produced. Mr Smith has not sought to require that the Nikolas and Petra Trust account to the Trust. The order which Mr Smith sought and obtained against Mr Penney is not and cannot be affected by any cross claim.[51] The Supreme Court has held that there is room for the Court to exercise its discretion to allow an errant fiduciary some measure of allowance or recompense for his or her efforts and enterprise in generating a profit, notwithstanding that the profit was generated in breach of trust, if it would be unjust not to do so.9 The Court, however, drew a distinction between who voluntarily accept trusteeships and those who are fiduciaries by operation of law and who do not assume the mantle of trusteeship voluntarily. Tipping J, for the majority, noted as follows:[133] It is also appropriate to mention the decision of the House of Lords inGuinness Plc v Saunders. This case was discussed in some detail in Estate Realties, and involved the general rule that those who voluntarily accept fiduciary obligations are not entitled to any remuneration nor any profit, save that which is expressly allowed to them by the instrument creating the obligation. Guinness Plc v Saunders was a case where a single asset (a sumof money) rather than a business or similar venture was in issue[134] The rigour of the rule which applies to those who expressly accept trusteeships or similar fiduciary obligations should not necessarily be applied to those upon whom a fiduciary obligation is imposed. They, necessarily, have no express basis upon which they may claim any remuneration or reward for the profit which they have generated and which equity requires them to disgorge to their beneficiaries. It is not in accordance with the generally flexible approach of equity to deny fiduciaries of an involuntary kind any chance of profit sharing or remuneration by means of the rigid application of a rule designed to apply to voluntary trustees.(footnotes omitted)8 See Derham on the Law of Set-Off (4th ed, Oxford University Press, Oxford, 2010), at [10.13] –referring to Roxborough v Rothmans of Pall Mall Australia Limited (2001) 208 CLR 516 at [67] and Pardoe v Price (1847) 153 ER 1266 at 1269.9 Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433, Elias CJ dissenting.The Court noted that even where fiduciary duties are imposed involuntarily, all relevant circumstances must be taken into account, and the more reprehensible afiduciary's conduct is, the less inclined the Court will be to make any allowance, or to be liberal in the amount awarded.10[52] Here, the following are relevant:(a) Mr Penney was voluntarily a trustee of the trust. The rule which requires him to disgorge all monies acquired by him in breach of trust applies rigorously in such circumstances.(b) A single asset is involved — namely the sum of money which should have been paid to the trust.(c) Mr Penney knowingly breached the trust and appropriated trust monies.(d) Mr Penney did not himself incur any of the alleged expenditure said to have been necessary to get the properties ready for leasing. He does say that he did expend personal time and effort on the project, but he did not endeavour to quantify the cost of such work as he personally undertook. He said in his third affidavit that he did notcharge "the trust" (presumably the Nikolas and Petra Trust) for hislabour, although he estimated that he had spent in excess of two thousand hours over a period of six years on the properties.(e) Associate Judge Christiansen reserved to Mr Penney the right to go back to the trustees, seeking reimbursement for such monies as were alleged to have been spent on the properties.[53] Mr Templeton referred to ss 15 and 38 of the Trustee Act.10 At [122].[54] Section 15 of the Act provides that a trustee can expend monies subject to the trust on the repair, maintenance, upkeep or renovation of trust property, whether or not the work is necessary for the purpose of the salvage of the property. Section 38(2) provides that a trustee may reimburse himself or herself or pay or discharge out of trust property, all expenses reasonably incurred in or about the execution of the trusts or powers.[55] The difficulty in the present case is that the direct expenditure was incurred by the Nikolas and Petra Trust. It has not been incurred by Mr Penney. In their terms, ss 15 and 38(2) cannot apply.[56] I conclude that Mr Penney has no defence to the claim made against him by Mr Smith.Is the delay reasonably explained?[57] Mr Penney detailed in his affidavits why he did not respond to the various papers which were ultimately served on him. He deposed that as at 22 August 2013, he had only just read Associate Judge Christiansen's judgment. In his secondaffidavit he stated that when the process server called at his house, his son was in hospital, and that he was spending most of his non-working hours at hospital with his son. He said that he was "not much interested in anything else that was going on including the disputes over the trust". He asserted that he was not aware of thehearing before Associate Judge Christiansen until after it had occurred, and that immediately he became aware of the result, he consulted new lawyers, and gave them instructions to take various legal steps on his behalf.[58] Mr Penney acknowledged that his partner told him people were trying to serve documents on him. Further, the affidavit evidence make it clear that email copies of the documents were sent to Mr Penney. Mr Penney did not deny having received the papers by email. In fact, he said nothing at all about the documents having been served by email in accordance with the order for substituted service made by the Court.[59] Notwithstanding his son's illness, it would have been open to him to file aproforma notice of opposition, and sought an extension of time within which to file a notice of opposition, and an adjournment of any hearing. It is likely that the Court (and perhaps Mr Smith) would have been sympathetic to an extension of time.Alternatively, his solicitors could have contacted the plaintiff's solicitors. No stepswere taken by Mr Penney, and his explanations, while perhaps understandable at a personal level, do not, in my view, excuse his failure to take any steps at all.Any irreparable injury to plaintiff?[60] It cannot be asserted that Mr Smith will suffer any irreparable harm, in the event the judgment were to be varied or set aside. I accept that Mr Smith has been put to considerable time and expense in order to obtain the judgment, including the cost and effort of obtaining the order for substituted service, and in attending to service as directed by the Court. However, Mr Smith can properly expect to be reimbursed for any out of pockets. Insofar as I am aware, the trust is solvent, it has significant assets, and any claim Mr Smith might make for reimbursement of his reasonable out of pockets could be met.[61] I am not persuaded that there would be any irreparable damage to Mr Smith, were the judgment to be set aside or varied.Indemnity Costs[62] I turn briefly to deal with the arguments raised in relation to indemnity costs.[63] In my view, the costs order made by Associate Judge Christiansen was appropriate. Mr Penney's approach to this matter has been misconceived from theoutset. He wantonly disregarded his duties as a trustee. His actions in misappropriating trust property for the benefit of a new trust of which he is a beneficiary were manifestly inappropriate. He resisted service and then took no steps when the proceedings were ultimately served on him. In my judgment, there was every justification for an award of indemnity costs, pursuant to r 14.6(4)(f). In any event, any complaint in regard to the award of indemnity costs is overtaken by the offers made by Mr Smith, and by Ms Simunovich, to accept costs on a 2B basis.Discretion — the justice of the case[64] As I have noted, r 12.14 confers a discretion on the Court.[65] In the circumstances, I am not satisfied that it is appropriate to exercise that discretion in Mr Penney's favour. In my view, there was no defence reasonablyavailable to him. He has no proper explanation for his failure to oppose the application or to appear before Associate Judge Christiansen. There has been no miscarriage of justice, and in my view, there is simply no proper basis for either setting aside, or varying, the orders made by Associate Judge Christiansen.[66] Mr Penney's application is dismissed.Appointment of New Trustees[67] In a separate judgment, issued on 18 October 2013, I appointed new trustees to the trust. I appointed a Mr Irving and a Mr Taylor. I indicated that I would briefly set out my reasons for that decision in this judgment.[68] It was common ground between all parties that new trustees should be appointed. There was a dispute as to the identity of one of the new trustees. Mr Penney took issue with the proposed appointment of Mr Taylor. He suggested that a Mr Ross should be appointed as one of the new trustees.[69] I considered the various papers filed in regard to this issue by the parties. Mr Taylor had the requisite expertise to act as a trustee. He indicated that he was prepared to accept appointment. It was clear that initially there was no objection by Mr Penney to Mr Taylor's appointment. There was nothing in Mr Taylor's conductwhich suggested that he is in any way biased, or that he had any disqualifying interest in the matter. He is a lawyer, and in my view, it was appropriate that a lawyer be appointed as one of the two new trustees given the circumstances which have arisen in this case, the decisions which will be required to be made, and given that the other new trustee is an accountant. Inter alia, the new trustees will have to consider what (if any) steps they should take to remedy any breaches of the trust thatmay have occurred, to ensure that the trust's accounts can be put in order, and to seethat the trust can comply with its obligations to the Inland Revenue Department. The joint expertise of a lawyer and an accountant were, in my view, likely to be in the best interests of the trust and its beneficiaries.[70] I reached the conclusion that Mr Penney's initial objection to Mr Taylor'sappointment was misplaced.[71] In any event, ultimately Mr Penney, through Mr Templeton, agreed to abide the decision of the Court. For the reasons I have briefly summarised, Mr Taylor was, in my view, the appropriate appointment.Result[72] The orders made by Associate Judge Christiansen, and reinforced by Venning J on 10 September 2013 are confirmed. Mr Penney is currently in breach of those orders and therefore in contempt of court. I direct that he has 10 working days to purge his contempt. If the contempt continues thereafter, it is open to the new trustees to come back before the Court to seek further orders.Costs[73] Mr Smith and Ms Simunovich are entitled to an award of costs in their favour in regard to this application. In that regard I make the following directions:(a) Any applications for costs are to be filed within 10 working days of the date of release of this judgment;(b) Any response from Mr Penney is to filed within a further 10 working days.I will then deal with the issue of costs on the papers, unless I require the assistance of counsel._________________________Wylie J