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Agreement for Sale and Purchase, Cases, Settlors, Sham trust, Trustee liability, Trustees, Trusts

Round 7 and counting

Some cases will never settle.  Stokes v Insight Legal is one of them.  In this most recent trip to the High Court the defendants (Insight Legal et al) have sought leave to appeal the High Court decision Stokes v Insight Legal [2014] NZHC 2475.  This decision was largely procedural and related to matters that had been referred back to the High Court by the Court of Appeal.

The current questions before the court are whether the High Court correctly interpreted the remittal back to that court from the Court of Appeal and whether Ellis J should have recused herself from hearing an earlier application for review of a decision of Associate Judge Doogue.

Given the number of times the matter has been before the courts, a succinct summary is not possible.  However, the following passages from this judgment provide a useful recap and disposition of the matter in hand:

“[18] The first and fundamental question raised by the proposed appeal is the proper interpretation of the remittance back. As is necessarily obvious from my decision, I firmly share Keane J’s view of what was meant and consider that, read in context, the terms of the remittance back are clear.

[19] It seems to me that there are, as well, further impediments to the defendants’ position. In particular, the affirmative (failure to mitigate) defence sought now to be advanced seems to me to bear no relationship to the amended statement of claim. The plaintiffs have already obtained judgment against Mrs Colebrook for the full amount of their loss in the 2010 proceedings. She did not raise a defence of failure to mitigate then and nor did she appeal.

[20] Rather, what the plaintiffs seek in the 2011 proceedings is “a declaration that they are entitled to be subrogated into Mrs Colebrook’s right of indemnity against the assets of the RM Colebrook Family Trust”.9 The later proceedings are thus predicated on the outcome of the earlier, namely the existence and quantum of Mrs Colebrook’s judgment debt. Unsurprisingly, those matters are not denied in the latest iteration of the statement of defence.

[21] Put another way, any failure by the SFT to mitigate its losses has no bearing on the answers to the second and third questions articulated by the Court of Appeal (and recorded at [8](b) and (c) above).

[22] On any analysis, therefore, it does not seem to me to be obviously open to the defendants (if it gets to that point) to relitigate the quantum of damages that have been found to be owed by Mrs Colebrook.

[23] All that said, however, there are two points in the defendants’ favour (in terms of the question of the “seriously arguable” limb of the test governing the grant of leave to appeal).

[24] First, I accept that the words ‘if any” in [65] of the Court of Appeal’s judgment seem somewhat obscure. Although when read in context it seems to me to be tolerably clear what was meant (ie if it is found that Ms Carr consented), there is certainly some room for argument in that regard.

[25] Secondly, there is the fact that Associate Judge Doogue has (twice) taken a more expansive view of the matter. In itself that suggests that the serious arguability threshold is crossed.

[26] In terms of the interests affected by the proposed appeal they are necessarily private in nature. But I accept that the money at issue is not insignificant for private individuals. More importantly, however, this appears to me to be an unusual case where the grant of leave would add little burden to the parties or to the Court, in terms of cost and delay. More particularly, the plaintiffs have already filed a substantive appeal from Peters J’s decision and thus there appears to be no immediate prospect of achieving finality in the litigation. Moreover, it should be a relatively straightforward matter for the Court of Appeal to answer the question posed by the proposed appeal, namely what was the intended ambit of their referral back.”

Accordingly, leave was granted.  However, Ellis J did not allow the appeal regarding the decision not to recuse herself, noting as follows at [28] that:

“… The wider reasons for recusal advanced by Ms McCartney QC – namely that because I had formed an adverse view of Mrs Colebrook’s credibility at trial and had found against the defendants – had no bearing on the issue of the Court’s jurisdiction, which is the issue with which I was concerned in the review judgment. The suggestion that my assessment of Mrs Colebrook as a witness meant that I could not or did not bring an open mind to that (purely legal) issue is provocative at best.”





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