ROBERT LEE AS TRUSTEE OF THE ESTATE OF J G LEE v GREGORY LEE [2019] NZSC 124 [8 November 2019]

ROBERT LEE AS TRUSTEE OF THE ESTATE OF J G LEE v GREGORY LEE [2019] NZSC 124[8 November 2019]IN THE SUPREME COURT OF NEW ZEALANDI TE KŌTI MANA NUISC 81/2019[2019] NZSC 124BETWEEN ROBERT LEE AS TRUSTEE OF THEESTATE OF J G LEEApplicantAND GREGORY LEEFirst RespondentGREGORY LEE AND JANE LOIS LEE ASTRUSTEES OF THE LEEROY FAMILYTRUSTSecond RespondentsCourt: Glazebrook, O'Regan and Ellen France JJCounsel: Applicant in personD A T Chambers QC and A H H Choi for RespondentsJudgment: 8 November 2019JUDGMENT OF THE COURTA The application for leave to appeal is dismissed.B The applicant must pay costs of $2,500 to the respondents.____________________________________________________________________REASONSIntroduction[1] In a judgment delivered on 30 July 2019 the Court of Appeal dismissed anappeal by the applicant (Mr Lee) against a decision of the High Court requiring himto provide security for costs.1 The Court directed security for costs in the sum of1 Lee v Lee [2019] NZCA 345 (Stevens, Venning and Dunningham JJ) [CA judgment].$75,000 be provided to the satisfaction of the Registrar. Mr Lee now seeks leave toappeal from that decision to this Court.Background[2] The present application arises in the context of a family dispute betweenMr Lee and his brother Gregory Lee, the first respondent, involving the transfer ofshares in their parents' company, High Duty Plastics Limited (HDP). Mr Lee filed astatement of claim in the High Court in late September 2011 on behalf of himself andhis sister in their capacity as trustees of the estate of their late mother. The proceedingchallenges transactions through which shares in HDP were transferred to the firstrespondent. The statement of claim alleges three causes of action, namely that: thefirst respondent exercised undue influence over his parents, in particular, in 2000 toprocure the transfer of shares in HDP to himself at an undervalue; that the firstrespondent acted in breach of the fiduciary duty he owed to his parents as shareholdersin HDP; and/or that the first respondent obtained the shares through an unconscionablebargain. The relief sought includes an account of profits and that the transfer of theshares be set aside.[3] In his statement of defence and counterclaim of November 2011, the firstrespondent accepted the shares were transferred to him but, in essence, says that thisoccurred as part of an estate planning exercise reflected in a deed of trust signed inOctober 1997.[4] The claim has a chequered history.2 It was initially struck out on limitationgrounds.3 The decision to strike out the claim was reversed by the Court of Appeal inNovember 2015.4 There have also been various other interlocutory applications,including in relation to security for costs which was initially set at $150,000.5 Theproceedings were stayed for a period to allow security to be provided in the form of amortgage over a property occupied by Mr Lee and owned by the RB and JG LeeFamily Trust. The sum of $150,000 imposed by way of security for costs was2 The history is set out in more detail in the CA judgment, above n 1, at [3]–[17].3 Lee v Lee [2012] NZHC 3283. The decision of Associate Judge Christiansen was upheld byCollins J on review: Lee v Lee [2013] NZHC 1069.4 Lee v Lee [2015] NZCA 514, [2016] NZAR 61.5 Lee v Lee [2016] NZHC 1073 (Associate Judge Christiansen).subsequently reduced by Paul Davison J on review to $75,000 to reflect the fact thatthe trial was to be split between liability and quantum.6 Paul Davison J directed thatsecurity for that sum be provided by way of a registrable second mortgage over theproperty. Again, the proceedings were stayed pending provision of security for costs.7[5] No mortgage was provided by Mr Lee. He said that his fellow trustee wouldnot agree to a mortgage. Eventually, Mr Lee obtained leave to appeal from the Courtof Appeal from the decision of Paul Davison J relating to security for costs.8[6] On appeal, the Court of Appeal determined that the plaintiff estate was notimpecunious. The Court's assessment was that the claim's prospects of success wereweak. In these circumstances, the Court considered that there was a potential injusticeto the respondents if, as Mr Lee contended, he should be able to pursue the proceedingwithout security and with no costs consequences should the claim fail. The Courtnoted also that while the sum of $75,000 was appropriate, the High Court should nothave directed the Trust to provide security by way of mortgage. Rather, theappropriate order was that the plaintiffs provide security in the sum of $75,000 to thesatisfaction of the Registrar.Proposed appeal[7] The key points Mr Lee seeks to raise on the proposed appeal can besummarised in this way. First, he wishes to argue he has no means to pay security and,further, that the absence of means is as a result of the transactions he challenges(particularly, the sale of shares in HDP at what Mr Lee says was a significantundervalue). Next, Mr Lee's case is that his claim has merit. He refers to aspects ofthe evidence he says support this assessment and relies also on the failure of the Courtof Appeal to address his reliance on Re Rose.9 Mr Lee wishes to argue that Re Rosesupports his argument that the relevant transaction is the transfer of HDP shares in2000 and not the 1997 transaction. As a result, Mr Lee contends that a worthy claim6 Lee v Lee [2017] NZHC 431.7 Edwards J subsequently refused an application by the respondents to lift the stay to allow the trialto proceed and an application by the applicant to vary the order for security. An unless order wasmade: Lee v Lee [2017] NZHC 712.8 Leave to appeal was declined in the High Court: Lee v Lee [2017] NZHC 1503, but granted by theCourt of Appeal: Lee v Lee [2018] NZCA 282.9 Re Rose [1952] Ch 499 (CA).is otherwise stifled because he will be unable to pay security. In this respect, thesubmission is that the approach taken by the Court of Appeal is contrary to theframework set out by this Court in relation to security for costs on an appeal inReekie v Attorney-General.10 Mr Lee refers in particular to the observation in Reekiethat "applications for security for first instance proceedings call for carefulconsideration and judges are slow to make an order for security which will stifle aclaim".11Assessment[8] Mr Lee does not challenge the principles relating to the setting of security forcosts at first instance as outlined in A S McLachlan Ltd v MEL Network Ltd. ThisCourt may wish to consider those principles at some point but the present case is notan appropriate vehicle for that consideration. No question of general or publicimportance accordingly arises.12 Rather, the matters raised are specific to theparticular factual circumstances. Further, as the Court of Appeal noted, Mr Lee is botha beneficiary and trustee of a trust that owns "valuable property".13 And, as the Courtobserved, Mr Lee's assessment of the merits of the case suggested it was in hisinterests to pursue the proceedings as he is also a beneficiary of his mother's estate.14In those circumstances, we do not consider a risk of a miscarriage of justice arises ifthe appeal is not heard.15[9] The applicant must pay costs of $2,500 to the respondents.Solicitors:Lance Lawson, Rotorua for Respondents10 Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737.11 At [3] citing the review of the jurisdiction in A S McLachlan Ltd v MEL Network Ltd (2002)16 PRNZ 747 (CA).12 Senior Courts Act 2016, s 74(2)(a).13 CA judgment, above n 1, at [77].14 At [77]. We understand that the relief sought includes the transfer of all the HDP shares to theestate of JG Lee.15 Senior Courts Act, s 74(2)(b); and Junior Farms Ltd v Hampton Securities Ltd (in liq) [2006]NZSC 60, (2006) 18 PRNZ 369.